EXHIBIT 99.2
SECURITIES PURCHASE AGREEMENT
between
BPI PACKAGING TECHNOLOGIES, INC.,
and
DGJ, L.L.C.
Dated as of January 27, 1999
List of Schedules
4.4 Governmental Approvals
4.5(b) Stock Rights, Options, Warrants, Etc.
4.5(c) Reservation of Shares
4.6 Subsidiaries
4.7(a) (i) Financial Statements
4.7(a) (ii) Pro Forma Balance Sheet
4.7(a) (iii) Projections
4.8 Material Adverse Change
4.10 Certain Developments
4.11 Intellectual Property Rights
4.13 Assets Used in Business and Not Owned By Company
4.14 Litigation and Other Proceedings
4.15 Tax Returns and Reports
4.16 Defaults
4.20 Broker's Fees
4.21 Environmental Matters
4.25 Accounts Receivable
4.26 Contracts and Commitments
4.29 Insurance
4.30 Related Agreements
7.10(h) Indebtedness Under Agreements
7.26 Conflicts of Interest
Exhibits
A. Form of Note
B. Form of Common Stock Purchase Warrant
C. Form of Legal Opinion of Counsel to the Company
D. Form of Equipment Lease
E. Form of Security Agreement
F. Form of Patent and Trademark Security Agreement
G. Description of the Real Estate
H. Certificate of Designation for Series C Preferred Stock
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made as of the
27th day of January, 1999, by and between BPI Packaging Technologies, Inc., a
Delaware corporation with its principal place of business located at 000
Xxxxxxxx Xxxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxxxxx 00000 (the "Company"), and DGJ,
L.L.C., a Delaware limited liability company, with its principal office located
at 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxxxx 00000 (the
"Investor").
1. DEFINITIONS.
For all purposes of this Agreement the following terms shall have the
meanings set forth herein or elsewhere in the provisions hereof:
Affiliate. Affiliate means any Person directly or indirectly controlling,
controlled by or under direct or indirect common control with the Company (or
any other specified Person) and shall include (a) any Person who is an executive
officer, director or beneficial holder of at least 5% of the outstanding capital
stock of the Company (or such other specified Person), (b) any Person of which
the Company (or such other specified Person) or an Affiliate (as defined in
clause (a) above) of the Company (or such other specified Person) shall,
directly or indirectly, either beneficially own at least 5% of the outstanding
equity securities or constitute at least a 5% equity participant, and (c) in the
case of a specified Person who is an individual, Family Members of such Person;
provided, however, that an Investor shall not be an Affiliate of the Company or
any of its Subsidiaries for the purposes of this Agreement.
Agreement. Agreement means this Securities Purchase Agreement.
Articles. Articles shall include the articles or certificate of
incorporation, statute, constitution, joint venture or partnership agreement, or
articles or other charter of any Person other than an individual, each as from
time to time amended or modified.
Assets. Assets means all of the assets and properties of the Company,
whether real, personal, tangible or intangible and whether presently existing or
hereafter acquired.
Cash Flow. Cash Flow means for any period, net income for such period,
less any nonrecurring or extraordinary items of gain, plus the aggregate amounts
deducted in determining such net income in respect of the deferred portion of
the provision for income taxes and depreciation, amortization and similar
non-cash charges.
Closing. See Section 2.3.
Closing Date. See Section 2.3.
Code. Code means the Internal Revenue Code of 1986, as amended.
Commission. See Section 12.1.
Common Stock. Common Stock means the Company's voting common stock, par
value $.01 per share.
Company. Company means BPI Packaging Technologies, Inc., a Delaware
corporation.
Consolidated or consolidated. Consolidated or consolidated means, with
reference to any term defined herein, that term as applied to the accounts of
the Company and all of its Subsidiaries.
Current Assets. Current Assets of a Person means all assets of such Person
that would be classified as the current assets of a company conducting a
business the same as or similar to that of such Person, after deducting adequate
reserves in each case in which a reserve is proper.
Current Liabilities. Current Liabilities means (i) all Indebtedness of a
Person that by its terms is payable on demand or matures within one year from
the date of determination (excluding any Funded Indebtedness that is included
within clause (ii) of this definition), (ii) all amounts required to be paid or
prepaid by such Person with respect to any Funded Indebtedness within one year
after such date of determination, and (iii) all other items (including, without
limitation, taxes accrued as estimated) that would be included as current
liabilities of such Person.
Debt Service. Debt Service means with respect to any calendar quarter the
total of all payments for borrowed money due in such calendar quarter plus all
payments for equipment rental due in such calendar quarter.
Default. Default means an event or condition that with the passage of time
or giving of notice, or both, would become an (i) Event of Default under this
Agreement, the Warrant, or any of the other Financing Agreements or (ii) event
of default under any of the Related Agreements as defined therein.
Demand Registration. See Section 12.2(a).
Distribution. Distribution means (a) the declaration or payment by the
Company, any of its Subsidiaries, or any specified Person of any dividend,
either in cash or in property, on or in respect of any shares of any class of
capital stock of the Company, any Subsidiary of the Company that is not directly
or indirectly wholly owned by the Company, or any other specified Person, other
than dividends that, subject to restrictions contained in this Agreement on
issuances of capital stock of the Company, are payable solely in shares of the
capital stock of the payor; (b) the purchase, redemption, or other retirement of
any shares of any class of capital stock of the Company, any Subsidiary of the
Company that is not wholly owned directly or indirectly by the Company, or other
specified Person, directly or indirectly or otherwise; or (c) any other
distribution on or in respect of any shares of any class of capital stock of the
Company, any Subsidiary of the Company that is not wholly owned directly or
indirectly by the Company, or other specified Person.
EBITDA. EBITDA means, for any Person for the period of determination, such
Person's net earnings for such period plus amounts deducted in the computation
thereof for: (i) interest expense, (ii) Federal, state and local income taxes,
(iii) depreciation, and (iv) amortization of intangibles.
Equity. Equity means, with respect to a Person that is a corporation, the
sum of such Person's stated capital, additional paid in capital, and retained
earnings and, if such corporation is an obligor on a Note, the outstanding
principal balance of such Note.
Equipment Lease Agreement. Equipment Lease Agreement means the agreement
in substantially the form of Exhibit D hereto pursuant to which the Company will
lease certain equipment from the Investor.
ERISA. ERISA means the Employee Retirement Income Security Act of 1974,
any successor statute of similar import, and the rules and regulations
thereunder, collectively and as from time to time amended and in effect.
Events of Default. See Section 10.1.
Exchange Act. Exchange Act means the Securities Exchange Act of 1934, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at any time.
Factoring Agreement. Factoring Agreement means the Factoring Agreement
between the Company and the Lender.
Family Members. Family Members means, as applied to any individual, any
parent, spouse, child, spouse of a child, brother or sister of such individual,
and each trust (including revocable trusts) created for the benefit of one or
more of such Persons and each custodian of property of one or more such Persons.
Financial Statements. See Section 4.7(a).
Financing Agreements. Financing Agreements shall include this Agreement,
the Note, the Warrant, the Security Documents, the Loan Agreement, the Factoring
Agreement, the Equipment Lease Agreement, and any and every other present or
future agreement from time to time entered into between the Company and Investor
or any other holder of the Securities that relates to this Agreement or is
stated to be a Financing Agreement, as from time to time amended or modified,
and all statements, reports or certificates delivered by or on behalf of the
Company to the Investor or any other holder of the Securities in connection
herewith or therewith.
Fiscal Year. Fiscal Year means the Company's accounting year ending on
December 31 of each calendar year.
Franklin Indebtedness. Franklin Indebtedness means the Indebtedness of the
Company to the Lender under the Loan Agreement and any indebtedness under the
Factoring Agreement.
Funded Indebtedness. Funded Indebtedness means all Indebtedness of a
Person that matures more than one year from the date of determination or matures
within one year of such date but is renewable or extendable, at the option of
such Person, to a date more than one year from such date or that arises under a
revolving credit or other similar agreement that obligates the lender or lenders
to extend credit during a period of more than one year from such date of
determination, including, without limitation, all amounts of Funded Indebtedness
required to be paid or prepaid within one year from the date of determination.
Generally Accepted Accounting Principles, generally accepted accounting
principles or GAAP. Generally Accepted Accounting Principles, generally accepted
accounting principles or GAAP means accounting principles that are (a)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors and successors that, unless
specified herein to the contrary, are in effect from time to time, (b) applied
with respect to any Person on a basis consistent with prior periods, and (c)
such that a certified public accountant would, insofar as the use of accounting
principles is pertinent, be in a position to deliver an unqualified opinion as
to financial statements in which such principles have been properly applied.
Holder. See Section 12.1.
Indebtedness. Indebtedness means all obligations, contingent or otherwise,
that should be classified on the obligor's balance sheet as liabilities,
including without limitation all contingent liabilities, lease obligations that
are required to be capitalized, and all guarantees, endorsements, and contingent
obligations in respect of Indebtedness of others.
Indemnified Party. See Section 12.8(c).
Indemnifying Party. See Section 12.8(c).
Investments. Investments shall include (a) any share of capital stock,
evidence of Indebtedness, or other security issued by any other Person, (b) any
loan, advance, or extension of credit to, or contribution to the capital of, any
other Person, (c) any purchase of the securities or business or integral part of
the business of any other Person, or commitment to make such purchase, and (d)
any other investment of any kind in any other Person; provided, however, that
the term "Investment" shall not include (i) trade and customer accounts
receivable for services rendered in the ordinary course of business and payable
in accordance with customary trade terms, and all letters of credit or other
instruments securing the same, (ii) to the extent permitted hereunder, advances
to employees for reasonable travel expenses, drawing accounts and similar
expenditures, (iii) capital stock or other securities acquired in connection
with the satisfaction or enforcement of Indebtedness or claims due or owing to
the Company or as security for any such Indebtedness or claim, or (iv) any
investment of the kind described in clauses (a) through (c) of this definition
in any wholly owned Subsidiary of the Person making such investment.
Investor. Investor means DGJ, L.L.C. and its successors and assigns.
Leases. Leases means all leases of real and personal property entered into
or assumed by the Company.
Lender. Lender means Franklin Capital Corporation and its successors and
assigns.
Lien. Lien means (a) any encumbrance, mortgage, pledge, lien, charge, or
other claim or security interest of any kind upon any property or assets of any
kind of a Person, or upon the income or profits therefrom, (b) any acquisition
of or agreement to have an option or other right to acquire any property or
assets upon conditional sale or other title retention agreement, device, or
arrangement (including any capitalized lease), or (c) any sale, assignment,
pledge, or other transfer for security of any accounts, general intangibles, or
chattel paper, with or without recourse, or any agreement or option with respect
to any of the foregoing.
Loan Agreement. Loan Agreement means the Revolving Credit Agreement and
the exhibits thereto and all instruments, documents and agreements executed or
delivered in connection therewith between the Company (and its Affiliates) and
the Senior Lender, including, without limitation, all promissory notes,
guarantees, security agreements, pledge agreements, assignments, deeds of trust,
mortgages, letters of credit, and other instruments and agreements executed
pursuant thereto or in connection therewith, including all amendments,
supplements, extensions, renewals, restatements, replacements, or refinancings
thereof, or other modifications (in whole or in part, without limitations as to
amount, terms, conditions, covenants, or other provisions) thereof from time to
time.
Majority Holders. Majority Holders means, unless otherwise specifically
provided in this Agreement, the holder or holders at the relevant time
(excluding the Company and its Subsidiaries) of, initially, (a) in the case of
the Note (or in the case of any subdivision or partial assignment of any Note),
more than 50% in outstanding principal amount of the outstanding Note and the
outstanding resulting Notes for as long as any Note or resulting Notes are
outstanding, and (b) after payment in full of the principal of and interest on
the Note, in the case of the Warrant and Warrant Stock, more than 50% of the sum
of the number of shares of Warrant Stock then issuable upon exercise of the
outstanding Warrant plus the number of then issued and outstanding shares of
Warrant Stock.
Maximum Rate. See Section 3.6(b).
Note. Note means the Company's $3,200,000 6% senior subordinated note
issued to the Investor pursuant to Section 2.1(a) hereof in substantially the
form of Exhibit A hereto and any other Notes transferred to any other holders
pursuant to Section 14 hereof. The terms Note and Notes will be used
interchangeably throughout this Agreement.
Patent and Trademark Security Agreement. Patent and Trademark Security
Agreement means the agreement in substantially the form of Exhibit F hereto.
Permitted Indebtedness. See Section 7.10.
Permitted Liens. See Section 7.11.
Person. Person means an individual, partnership, corporation, limited
liability company, association, trust, joint venture, unincorporated
organization, and any government, governmental department or agency or political
subdivision thereof.
Piggyback Registration. See Section 12.3(a).
Pro Forma Balance Sheet. See Section 4.7(a).
Projections. See Section 4.7(a).
Pro Rata Portion. Following the Closing an Investor's Pro Rata Portion
shall be the percentage determined by dividing the aggregate outstanding
principal amount of the Note held by such Investor by the aggregate outstanding
principal balance of all Notes.
Purchase Price. See Section 2.2.
Real Estate. Real Estate means the real property owned by the Company and
all improvements and fixtures thereon and the all real property leased by the
Company and all leasehold improvements thereon owned or leased by the Company,
as more fully described in Exhibit G hereto.
Registered. See Section 12.1.
Registrable Securities. See Section 12.1.
Registration. See Section 12.1.
Registration Expenses. See Section 12.7(a).
Related Agreements. See Section 4.30.
Restricted Payment. Restricted Payment means any payment either in cash or
in property to any Affiliate of the Company in respect of any Indebtedness owed
by or other obligation of the Company to such Affiliate, other than any payments
specifically excluded from Restricted Payments by other Sections of this
Agreement.
Restricted Securities. See Section 14.1.
Rights. See Section 4.11.
Securities. Securities means the Note, the Series C Preferred Stock and
the Warrant.
Securities Act. Securities Act means the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
Securities Laws. See Section 7.22.
Security Agreement. Security Agreement means the Security Agreement dated
as of the Closing Date between the Company and the Investor in substantially the
form of Exhibit E hereto.
Security Documents. Security Documents means the Security Agreement and
the Patent and Trademark Security Agreement.
Series C Preferred Stock. Series C Preferred Stock means 1,629,930 shares
of Series C Preferred Stock of the Company described in Exhibit H hereto to be
issued to the Investor pursuant to Section 2.2 hereof.
Stockholders Meeting. See Section 2.5.
Subsidiary or Subsidiaries. Subsidiary means any Person of which the
Company or other specified Person now or hereafter shall at the time own
directly or indirectly through a Subsidiary at least a majority of the
outstanding capital stock (or other shares or forms of beneficial interest)
entitled to vote generally.
Tangible Net Worth. Tangible Net Worth means, with respect to any Person
and any period, all amounts which would be included under stockholders' equity
on a balance sheet of such Person, during such period, minus the amount of any
intangible items such as, but not limited to, goodwill (including amounts,
however characterized, representing the cost of acquisition of businesses and
investments in excess of underlying tangible assets), trademarks, trade names,
service marks, copyrights, patents, licenses, unamortized debt discounts,
organizational expenses, marketing expenses and deferred research and
development costs.
Transfer Notice. See Section 14.2.
Underwriters' Maximum Number. See Section 12.1.
Unfunded Vested Accrued Benefits. Unfunded Vested Accrued Benefits means
with respect to any employee benefit plan of a Person at any time, the amount
(if any) by which the present value of all vested nonforfeitable accrued
benefits under such employee benefit plan exceeds the fair market value of all
employee benefit plan assets allocable to such benefits, all determined as of
the then most recent valuation date for such employee benefit plan, using the
actuarial assumptions in effect under such employee benefit plan.
Warrant. Warrant means the Common Stock Purchase Warrant of the Company
issued to the Investor pursuant to Section 2.1(b) hereof in substantially the
form of Exhibit B.
Warrant Stock. Warrant Stock means Common Stock issued or issuable upon
exercise of any Warrant including Common Stock issued in respect of outstanding
Warrant Stock upon any recapitalization, stock dividend, stock split,
reclassification or similar event.
2. SALE AND PURCHASE OF SECURITIES; SECURITY.
2.1 Sale and Purchase of Securities. Subject to all of the terms and
conditions hereof and in reliance on the representations and warranties set
forth or referred to herein, the Company agrees to issue and sell to the
Investor, and the Investor agrees to purchase from the Company, the securities
listed below:
(a) A Note in the aggregate principal amount of $3,200,000;
(b) The Common Stock Purchase Warrant, substantially in the form of
Exhibit B hereto, for the purchase of an aggregate of eighty million
(80,000,000) shares, with such amount subject to adjustment as provided in the
Warrant; and
(c) 1,629,930 shares of Series C Preferred Stock.
2.2 Purchase Price. The aggregate purchase price for the Securities is
$3,200,200 (the "Purchase Price"). The parties hereto agree that the aggregate
purchase price for the Note to be purchased by the Investor is $3,200,000; the
purchase price and the fair market value of the Warrant on the Closing Date is
$100 and will be treated and reported as such by both parties for federal,
state, and local tax purposes; and the purchase price and the fair market value
of the 1,629,930 shares of Series C Preferred Stock to be purchased by the
Investor is $100 and will be treated and reported as such by both parties for
federal, state and local tax purposes. The Investor may retain up to $1,000,000
for up to thirty (30) days for payments to be made directly to unsecured
creditors of the Company, as contemplated by Section 2.4 hereof.
2.3 Closing. The closing of the purchase and sale of the Securities (the
"Closing") will take place at the offices of Xxxxxx & Coff, 00 Xxxx Xxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx 00000 on January 27, 1999 or such other place and date
as the parties hereto may agree upon (the "Closing Date"). The Note, Series C
Preferred Stock and the Warrant will be issued to the Investor or any nominee
specified by an Investor on or before the Closing Date and registered in the
Investor's name or the names of such specified nominees in the Company's
records.
2.4 Use of Proceeds. The Company agrees that it will use the proceeds from
the sale of the Securities hereunder solely to (i) provide working capital for
use by the Company in the ordinary course of its business, (ii) to pay down
certain accounts payable, including outstanding judgments of trade creditors,
and (iii) pay expenses of the Company in connection with the transactions
contemplated by this Agreement and the Related Agreements. Payments of proceeds
to unsecured creditors shall be made by the Investor directly to any such
unsecured creditors, and shall not be paid by the Company directly to such
unsecured creditors unless otherwise agreed by the Investor.
2.5 Reservation. At or before the Closing, the Company shall take all
actions necessary to reserve for future issuance upon exercise of the Warrant
all remaining authorized but unissued shares of Common Stock. As promptly as
practicable after the Closing Date, the Company shall take such action as may be
necessary and proper to call a meeting of its stockholders (the
"Stockholders Meeting") to approve an amendment to the Company's Certificate of
Incorporation increasing the Company's authorized Common Stock to one hundred
fifty million (150,000,000) shares. Promptly after such approval, the Company
will take all actions necessary to reserve for future issuance all shares of
Common Stock issuable upon exercise of the Warrant.
3. PRINCIPAL AND INTEREST PAYMENTS ON NOTE.
3.1 Principal Repayment. Unless the principal amount of the Note shall
earlier be prepaid or becomes payable pursuant to the terms thereof or of any
other Financing Agreement, the entire principal balance of the Note shall become
due and payable in full on the earliest of (a) February 1, 2004, (b) an Event of
Default, (c) the sale of 50% or more of the Company's assets, (d) the merger or
consolidation of the Company with another Person or Persons, (e) the purchase of
50% or more of the shares of the Common Stock by a Person who was not a
stockholder immediately after the Closing, or (f) a primary public offering of
the Company's securities in excess of Ten Million Dollars ($10,000,000).
3.2 Optional Prepayments. The Company may prepay from time to time after
the Closing Date without penalty all or any portion (in any multiple of
$250,000) of the principal amount of the Note provided that the Company gives
the holders from time to time of such Note not less than two (2) business days'
prior written notice of the date and amount of such optional prepayment. The
principal amount of the Note designated for prepayment in any notice of optional
prepayment given pursuant to this Section 3.2 shall become due and payable on
the date fixed for prepayment in such notice, together with all accrued and
unpaid interest thereon, and any applicable prepayment premium.
3.3 Application of Payments or Prepayments. Each repayment or prepayment
of less than the entire unpaid amount of all outstanding Notes shall be applied
pro rata to all outstanding Notes according to the respective unpaid principal
amounts thereof.
3.4 Presentation or Surrender of Note. The Company may, as a condition to
making any prepayment of a Note, require the holder thereof to present such Note
at the place specified in the Note for payment of the principal thereof, for
notation thereon of the amount and date of such prepayment, or, if such Note is
prepaid in full, to surrender the same to the Company.
3.5 No Reborrowing. No payments or prepayments of principal on the Note
may be reborrowed under the Note.
3.6 Interest Payments.
(a) The unpaid principal amount of the Note outstanding from time to
time shall bear interest at a rate equal to 6% per annum (payable monthly in
arrears on the first business day of each month, commencing on March 1, 1999,
and at the maturity of the Note), provided, however, that from the occurrence of
an Event of Default and during the continuation thereof the unpaid principal
amount of the Note, and, to the extent permitted by applicable law, overdue
interest on the Note, shall bear interest at a rate equal to 15% per annum,
compounded monthly and payable on demand. Interest shall be calculated on the
basis of the actual number of days elapsed and a 360 day year.
(b) It is not intended by the holders of the Note, and nothing
contained in this Agreement or any Note shall be deemed, to establish or require
the payment of a rate of interest in excess of the maximum rate permitted by
applicable federal, state, or other law (the "Maximum Rate") and, to prevent
such an occurrence, any agreement that may now or hereafter be in effect
between the Company and the holders of the Note regarding the payment of fees or
interest to such holders are hereby limited by the provisions of this Section
3.6(b). If, in any month, the effective interest rate applicable to the
principal outstanding under the Note, absent the Maximum Rate limitation
contained herein, would have exceeded the Maximum Rate, then the effective
interest rate for that month shall be the Maximum Rate, and, if in the future
months, such effective interest rate would otherwise be less than the Maximum
Rate, then the effective interest rate for such month shall be increased to the
Maximum Rate until such time as the amount of interest paid hereunder equals the
amount of interest that would have been paid if the same had not been limited by
the Maximum Rate. If, upon payment in full of the principal outstanding under
the Note, the total amount of interest paid or accrued under the terms of this
Agreement is less than the total amount of interest which would have been paid
or accrued had the interest not been limited hereby to the Maximum Rate, then
the Company shall, to the extent permitted by such applicable federal, state, or
other law, pay to the holders of the Note an amount equal to the excess, if any,
of (i) the lesser of (A) the amount of interest which would have been charged if
the Maximum Rate had, at all times, been in effect with respect to the Note and
(B) the amount of interest that would have accrued had the effective interest
rate applicable with respect to the Note at all times not been limited hereunder
by the Maximum Rate over (ii) the amount of interest actually paid or accrued
under this Agreement. If the holders of the Note receive, collect, or apply as
interest any sum in excess of the Maximum Rate, such excess amount shall be
applied to the reduction of principal outstanding under the Note (without regard
to any minimum prepayment amount) and if no such principal is then outstanding,
such excess or part thereof remaining, shall be paid to the Company.
4. REPRESENTATIONS AND WARRANTIES.
To induce the Investor to enter into this Agreement and the Financing
Agreements and to purchase the Securities, Company hereby represents and
warrants to the Investor that:
4.1 Organization and Good Standing. The Company is duly organized and
existing in good standing in the State of Delaware, is qualified as a foreign
corporation to do business in the State of Massachusetts, and has made
application to qualify to do business as a foreign corporation in all other
jurisdictions in which the nature of its business or assets or other properties
makes such qualification necessary, except where the failure to do so would not
have a material adverse effect on the Company. The Company has the corporate
power to own its assets or other properties and to carry on its business as now
conducted and as proposed to be conducted.
4.2 Authorization. The execution, delivery, and performance by the Company
of this Agreement, the other Financing Agreements, the Warrant, and each of the
Related Agreements to which the Company is a party or by which it is bound or
subject, and the issuance and sale by the Company of the Securities and at least
30,937,500 shares of the Warrant Stock hereunder (all shares of Warrant Stock
upon approval of the proposed amendment to the Company's Certificate of
Incorporation at the Stockholders Meeting), (a) are within the Company's
corporate power and authority, (b) have been duly authorized by all necessary
corporate proceedings, and (c) do not conflict with or result in any breach of
any provision or the creation of any Lien upon any of the property of the
Company pursuant to the Articles or by-laws of the Company or any law,
regulation, order, judgment, writ, injunction, license, permit, agreement,
indenture, or instrument to which the Company is a party or by which it is
bound, the non-compliance with which would materially adversely affect the
business, properties, operations, financial condition, or prospects of the
Company.
4.3 Enforceability. The execution and delivery by the Company of this
Agreement, the other Financing Agreements, the Warrant, and each of the Related
Agreements to which the Company is a party and the issuance and sale of the
Securities and Warrant Stock hereunder, will
result in legally binding obligations of the Company enforceable against it in
accordance with the respective terms and provisions hereof and thereof, except
to the extent (a) such enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws relating to or affecting
generally the enforcement of creditors' rights, (b) the availability of the
remedy of specific performance or injunctive or other equitable relief is
subject to the discretion of the court before which any proceeding therefor may
be brought, (c) the enforceability of the indemnities contained in Section 12 of
this Agreement may be limited under federal and state securities laws and (d)
that issuance of not more than 49,062,500 shares of Warrant Stock will require
prior stockholders approval of an amendment to the Company's Certificate of
Incorporation increasing the Company's authorized shares by that amount.
4.4 Approvals, No Violations. Except as set forth in Schedule 4.4 hereto,
the execution, delivery, and performance by the Company of this Agreement, the
other Financing Agreements, the Warrant, and each of the Related Agreements to
which the Company is a party, and the issuance and sale of the Securities and
Warrant Stock hereunder and under the Warrant, do not require the approval or
consent of, or any filing with, any governmental authority or agency, or any
other Person, including, without limitation, any filing under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976.
4.5 Capitalization.
(a) Capital Stock. The authorized capital stock of the Company
consists solely of 60,000,000 shares of the Company's voting Common Stock, par
value $.01 per share, of which 21,495,621 shares are issued and outstanding, and
2,000,000 shares of preferred stock, of which 223,375 shares of Series A
Preferred Stock are issued and outstanding and 146,695 shares of Series B
Preferred Stock are issued and outstanding. On the Closing Date, the Company
will have 21,163,496 outstanding shares of Common Stock, and 60,000,000 shares
of Common Stock reserved for issuance, 223,375 outstanding shares of Series A
Preferred Stock, 146,695 outstanding shares of Series B Preferred Stock and
1,629,930 outstanding shares of Series C Preferred Stock. All such outstanding
shares of the Company's capital stock will be duly authorized, fully paid, and
non-assessable.
(b) Options. Other than as created pursuant to this Agreement, or as
disclosed on Schedule 4.5(b) hereto, the Company does not have outstanding any
agreements, rights (either preemptive or other), subscriptions, options,
warrants, calls, commitments, agreements, conversion or other rights of any
character, contingent or otherwise, to purchase or otherwise acquire from the
Company at any time, or upon the happening of any stated event, any shares of
capital stock of the Company or any securities convertible into or exchangeable
for its capital stock.
(c) Reservation of Shares. Except as described in Schedule 4.5(c),
sufficient shares of authorized but unissued Common Stock of the Company have
been reserved by appropriate corporate action in connection with the prospective
exercise of the Warrant, any other agreements, rights, or options disclosed on
Schedule 4.5(b), and the issuance of either the Warrant or the shares of Warrant
Stock will not require any further corporate action by the stockholders or
directors of the Company, will not be subject to preemptive rights in any
present or future stockholders of the Company, and will not conflict with any
provision of any law, regulation, order, judgment, writ, injunction, license,
permit, agreement, indenture, or instrument to which the Company is a party or
by which it is bound, and the Common Stock that will be issued upon exercise of
any Warrant in accordance with its terms will be duly authorized, issued, fully
paid, and non-assessable.
4.6 Subsidiaries. Except as set forth on Schedule 4.6, the Company does
not have any Subsidiaries.
4.7 Reports and Financial Statements.
(a) The Company has previously furnished the Investor with complete
and correct copies of the following:
(i) the balance sheets of the Company as of December 31, 1997,
February 28, 1997 and February 23, 1996, and the related statements of income,
retained earnings, and cash flow for the years then ended, certified by the
Company's independent certified public accountant; the Company's unaudited
balance sheet and related statements of income, retained earnings, and cash flow
for the interim periods ended September 30, 1998, and August 29, 1997; and the
Company's unaudited balance sheet and statement of income for the month ended
November 27, 1998, each attached hereto as Schedule 4.7(a)(i) (collectively the
"Financial Statements");
(ii) the pro forma consolidated balance sheet of the Company
at the Closing Date, taking into account all transactions contemplated by this
Agreement and the Related Agreements, such balance sheet being attached hereto
as Schedule 4.7(a)(ii) (the "Pro Forma Balance Sheet"); and
(iii) the projections of the Company's future performance
dated as of the Closing Date and attached hereto as Schedule 4.7(a)(iii) (the
"Projections").
(b) Except as specifically noted therein or in Section 7.1, each of
the Financial Statements delivered under Section 4.7(a)(i) hereof was prepared
in accordance with generally accepted accounting principles consistently applied
(except that the unaudited financial statements do not contain footnotes, and
are subject to normal and customary year end adjustments consistent with past
practice); each of the balance sheets included in such Financial Statements
fairly presents in all material respects the financial condition of the Company
as of the close of business on the date thereof, and each of the statements of
income and retained earnings and changes in financial position included in such
Financial Statements fairly presents in all material respects the results of
operations of the Company for the Fiscal Years and periods then ended.
(c) The Pro Forma Balance Sheet and the Projections have been
prepared by management of the Company on a reasonable basis consistent with the
historical financial statements of the Company except for the pro forma
adjustments specified therein, and the Company is not aware of any fact that
casts doubt on the reasonableness or completeness thereof, or the accuracy of
the historical or actual amounts or the calculations included therein. The
Company does not and will not, upon completion of the transactions contemplated
by this Agreement, have any material liabilities, contingent or otherwise, that
are not referred to in the Pro Forma Balance Sheet, the December 31, 1997
balance sheet included in the Financial Statements or in the notes to the
December 31, 1997 Financial Statements. The Company will attain cash from
operations for the fourth quarter of fiscal year 1998 in an amount at least
equal to the amount set forth in the Projections.
(d) The Projections constitute a reasonable basis for the assessment
of the future performance of the Company during the periods indicated therein,
and all material assumptions used in the preparation thereof are set forth in
the notes thereto.
4.8 Material Adverse Change. Except as described in Schedule 4.8, there
has been no material adverse change in the business, properties, prospects, or
financial or legal condition of the Company since September 30, 1998. Prior to
and at the Closing Date, the Company will not have conducted any business or
incurred any liabilities other than those arising in the ordinary course of the
Company's business and in connection with the transactions contemplated by this
Agreement or the Related Agreements.
4.9 Indebtedness and Liens. The Company does not and after giving effect
to the transactions to be consummated at the Closing will not have any
Indebtedness or Liens upon any of its properties other than Permitted
Indebtedness and Permitted Liens.
4.10 Absence of Certain Developments. Except as provided in this Agreement
or as disclosed on Schedule 4.10 , since September 30, 1998, the Company has not
(i) issued any bonds, debentures, notes, shares of capital stock, or other
corporate securities; (ii) borrowed any amount or incurred or become subject to
any liabilities (absolute or contingent) other than in the ordinary course of
business; (iii) discharged or satisfied any lien or encumbrance or paid any
obligation or liability (absolute or contingent) other than in the ordinary
course of business; (iv) purchased or redeemed any shares of its capital stock;
(v) mortgaged, pledged, or subjected to lien, charge, or any other encumbrance,
any of its assets, tangible or intangible, except liens of current taxes not yet
due and payable; (vi) sold, assigned, or transferred any of its tangible assets
except inventory in the ordinary course of business, or canceled any debts or
claims; (vii) sold, assigned, or transferred any patents, licenses, permits,
trademarks, trade names, copyrights, trade secrets, or other intangible assets;
(viii) suffered any extraordinary loss or waived any right to any amount in
excess of $10,000, whether or not in the ordinary course of business and
consistent with past practice; (ix) entered into any transaction other than in
the ordinary course of business; (x) made any individual or series of related
capital expenditures in excess of $50,000; or (xi) made any charitable
contributions or pledges. Except as disclosed in Schedule 4.10, since September
30, 1998, the Company has not made any Distribution to any Person.
4.11 Intellectual Property Rights. Except as set forth in Schedule 4.11,
the Company has and holds title to, or has valid and enforceable licenses of or
other rights to use all franchises, patents, patent applications, patent
licenses, patent rights, trademarks, trademark rights, trademark applications,
trade names, trade name rights, copyrights, service marks, licenses, permits,
authorizations, proprietary software, and other intellectual property rights
(collectively, the "Rights"), as are necessary for the conduct of its business
as currently conducted or currently proposed to be conducted, except to the
extent that the failure to have any of the Rights would not have a material
adverse effect on the business, assets, or financial condition of the Company.
All of the Rights are in full force and effect, and the Company is in
substantial compliance with the Rights without any known conflict with the valid
rights of others that could affect or impair in a material manner the business,
assets, or financial condition of the Company.
4.12 Solvency. After giving effect to the transactions contemplated by
this Agreement, the other Financing Agreements, and the Related Agreements, the
Company (i) is not insolvent, (ii) has assets having a fair saleable value in
excess of the amount required to pay its liabilities on its existing debts as
they become absolute and matured, and (iii) is not left with unreasonably small
capital with which to engage in its anticipated business for the next twelve
(12) months based on current estimates by management. On a consolidated basis
the Company has not, and after giving effect to this Agreement, the other
Financing Agreements, and the Related Agreements (including without limitation
the Loan Agreement) will not have, incurred Indebtedness and other obligations
of any kind whatsoever beyond its anticipated ability to pay such Indebtedness
and other obligations as they mature.
4.13 Title to Assets. The Company owns all of the assets reflected on the
Pro Forma Balance Sheet or on the December 31, 1997 balance sheet included in
the Financial Statements (except property and assets sold or otherwise disposed
of in the ordinary course of business before the Closing Date), which include
any assets used or useful in the operation of the Company's business, other than
leased real estate listed on Exhibit G and leased equipment listed on Schedule
4.13, and such other items as are listed on Schedule 4.13. Upon consummation of
the transactions contemplated hereby, the Company will enjoy peaceful and
undisturbed possession of leased properties with respect to which it is the
lessee, all such leases will be valid and in full force and effect, and the
Company will have performed all obligations required to be performed by them
with respect to all such leases.
4.14 Litigation. There is no litigation, at law or in equity, or any
proceeding or investigation before or by any court, board, or other governmental
or administrative agency or any arbitrator pending or, to the knowledge of the
Company, threatened which, individually or in the aggregate, is reasonably
likely to result in any final judgment or liability that, after giving effect to
any applicable insurance, could result in any material adverse change in the
business, assets, or financial or legal condition of the Company or that seeks
to enjoin the consummation of, or that questions the validity of, any of the
transactions contemplated by this Agreement, the Securities, the other Financing
Agreements, or the Related Agreements, except for the matters set forth on
Schedule 4.14 hereto, all of which are fully covered by insurance except for
customary deductibles and to the extent otherwise disclosed therein. No
judgment, decree, or order of any court, board, or other governmental or
administrative agency or arbitrator has been issued against or binds the Company
that has or may have any material adverse effect on the business, assets, or
financial or legal condition of the Company. During the past five years, the
Company and its Affiliates (a) have had no personal injury-related claims,
except those set forth on Schedule 4.14, each of which involves a claim for less
than $100,000 and is fully covered by insurance, subject to applicable
deductibles, and (b) have had no other product liability claims that involved
payments (whether in settlement or otherwise) in the aggregate in excess of
$25,000.
4.15 Taxes. Except as set forth on Schedule 4.15, the Company has filed
all tax returns and reports that are required to be filed with any foreign,
federal, state, or local governmental authority or agency and has paid, or made
adequate provision for the payment of, all assessments received and all taxes
that have or may become due under applicable foreign, federal, state, or local
governmental law or regulations with respect to the periods in respect of which
such returns and reports were filed. The Company knows of no additional actual
or proposed assessments against it since the date of such returns and reports in
an aggregate amount above $150,000, and there will be no additional assessments
for which adequate reserves appearing on the Pro Forma Balance Sheet have not
been established. The Company has made adequate provision for all current taxes.
4.16 Defaults. Other than as described in Schedule 4.16, the Company is
not in default under or in violation of any provisions of its Articles or
by-laws or any law, regulation, order, decree, judgment, writ, injunction,
license, permit, or any franchise, contract, agreement, lease, indenture,
understanding, or other instrument to which it is a party or by which it or its
property is bound, that could affect adversely the business, assets, or
financial condition of the Company.
4.17 Burdensome Obligations. The Company is not a party to or bound by any
agreement, contract, deed, lease, indenture, or other instrument that is so
unusual or burdensome as in the foreseeable future to affect or impair
materially and adversely the business, assets, or financial or legal condition
of the Company, before and after giving effect to the transactions contemplated
in this Agreement, the other Financing Agreements, and the Related Agreements.
4.18 ERISA. Each employee benefit plan complies in all material respects
with all applicable requirements of law and regulation. No employee benefit plan
established, assumed, or maintained by the Company or to which the Company has
made contributions, which is subject to Part 3 of Subtitle B of Title I of ERISA
or Section 412 of the Code, had a contribution failure sufficient to give rise
to a lien under Section 302(f) of ERISA, an accumulated funding deficiency (as
such term is defined in Section 302 of ERISA or Section 412 of the Code),
whether or not waived, as of the last day of the most recent fiscal year of such
plan heretofore ended. No liability to the Pension Benefit Guaranty Corporation
(other than required insurance premiums, all of that have been paid) has been
incurred by the Company with respect to any such plan and there has not been any
reportable event within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder, or any other event or condition, which presents a
material risk of termination of any such plan by the Pension Benefit Guaranty
Corporation and no steps have been instituted to terminate any plan. Neither the
Company nor any other entity, which by reason of common control is treated
together with the Company as a single employer within the meaning of Section 414
of the Code, (i) has withdrawn from any pension plan subject to Title IV of
ERISA (or instituted steps to do so), (ii) failed to make contributions to an
employee benefit plan when due, or (iii) has any contingent liability with
respect to any post retirement benefit under a welfare plan (as defined in ERISA
Section 3(i) other than liability for continuation coverage described in Part 6
of Title I of ERISA. Neither any such plan nor any trust created thereunder, nor
any trustee or administrator thereof, has engaged in a prohibited transaction
(as such term is defined in Section 4975 of the Code or Section 406 of ERISA)
that could subject any such plan, trust, trustee, or administrator or the
Company to any tax or penalty on prohibited transactions imposed under said
Section 4975 of ERISA. No material liability has been incurred with respect to
any multiemployer plan, within the meaning of Section 4001(a)(3) of ERISA, as a
result of the complete or partial withdrawal by the Company from such a
multiemployer plan under Section 4201 or 4204 of ERISA; nor has the Company been
notified by any such multiemployer plan that such multiemployer plan is in
reorganization or insolvency under and within the meaning of Section 4241 or
4245 of ERISA or that such multiemployer plan intends to terminate or has been
terminated under Section 4041A of ERISA.
4.19 Governmental Regulations. The Company is not and will not become a
"holding company", or a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company", as such terms are defined in the Public
Utility Holding Company Act of 1935; nor is it a "registered investment
company", or an "affiliated person" or a "principal underwriter" of a
"registered investment company", as such terms are defined in the Investment
Company Act of 1940, as amended.
4.20 Certain Fees. Except as set forth on Schedule 4.20, no broker's,
finder's, or placement fee or commission is or will be payable with respect to
the offer, issue, and sale of the Securities or the Warrant Stock, or the
consummation of the transactions contemplated under this Agreement or the
Related Agreements.
4.21 Environmental Protection. Except as set forth on Schedule 4.21
hereto, the Company has obtained all material permits, licenses, and other
authorizations and has filed all material reports and maintained all records
which are required under federal, state, and local laws relating to pollution or
protection of the environment, including laws relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of chemicals, pollutants, contaminants or hazardous or toxic materials
or wastes ("Environmental Laws"). Except as set forth on Schedule 4.21 hereto,
the Company is in full compliance with all terms and conditions of the required
permits, licenses and authorizations, and is also in full compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in those laws or
contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder. Except as set forth on Schedule 4.21 hereto, the Company is
not aware of, nor has the Company received notice of, any alleged past, present
or future events, conditions, circumstances, activities, practices, incidents,
actions, or plans which may interfere with or prevent continued compliance by
the Company with Environmental Laws, or which may give rise to any common law or
legal liability, or otherwise form the basis of any claim, action, suit,
proceeding, hearing, or investigation, based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling, or the emission, discharge, release, or threatened release into the
environment, of any chemical, pollutant, contaminant, or hazardous or toxic
material or waste either on or off the Real Estate or which may require a
material expenditure in order to maintain compliance with Environmental Laws.
There are no underground storage tanks on the Real Estate. The Company has given
copies to the Investor of all environmental reports, audits, and other documents
of which it is aware assessing compliance with Environmental Laws of the Company
or the Real Estate.
4.22 Representations and Warranties Under Related Agreements. All material
representations and warranties made by the Company in any of the Related
Agreements or in the certificates delivered in connection therewith are true and
correct in all material respects as of the date hereof with the same force and
effect as though made on and as of the date hereof, and such representations and
warranties are hereby confirmed to the Investor and made representations and
warranties of the Company hereunder to the Investor as fully as if set forth
herein. To the best of the Company's knowledge, all representations and
warranties made in the Related Agreements by or on behalf of any party thereto
other than the Company are true and correct in all material respects.
4.23 Disclosure. No representation, warranty, or statement made in this
Agreement, the other Financing Agreements, any Related Agreement, or any
agreement, instrument, certificate, statement, or document furnished by or on
behalf of the Company in connection herewith or therewith contains any untrue
statement of material fact or omits to state a material fact necessary in order
to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading.
4.24 Liens.
(a) No financing statement that names the Company as a debtor has
been filed in any jurisdiction in the United States pursuant to Article 9 of the
Uniform Commercial Code of any State (and the Company has not signed any
financing statement or any security agreement authorizing any secured party
thereunder to file any such financing statement in any such jurisdiction) other
than those financing statements or security agreements with respect to liens,
security interests, and other encumbrances permitted by Section 7.11 hereof,
which will not be released prior to or concurrently with the Closing.
(b) No mortgages, chattel mortgages, assignments, statements of
assignment, security agreements, mortgages, or deeds of trust have been filed by
any Person or Persons with respect to any part of the property or assets of the
Company, except for mortgages and security agreements which are permitted by the
provisions of Section 7.11 hereof, which will not be released prior to or
concurrently with the Closing.
4.25 Accounts Receivable. Except as listed in Schedule 4.25, all accounts
receivable of the Company result from bona fide sales of merchandise or services
delivered or provided by the Company, arose in the ordinary course of the
Company's business, are not subject to any setoff or counterclaim, and do not
represent any obligations of any employees, stockholders, officers, or
directors of the Company nor their Family Members nor any Person, firm, or
corporation in which they or any of them have a financial interest. None of the
accounts receivable of the Company are payable by or on behalf of the United
States Government or any agency, department, authority, commission,
instrumentality, or other subdivision thereof.
4.26 Contracts and Commitments. Except for contracts or commitments
subject to cancellation without liability to the Company on not more than thirty
(30) days notice, and except as listed in Schedule 4.26 hereto, the Company is
not obligated (for present or future obligations), under the terms of any
written or oral contract, commitment, or understanding relating to the conduct
of its business or the operation of its assets (other than this Agreement, the
other Financing Agreements, and the Related Agreements), including, but not
limited to, the following:
(i) any contracts for the employment or compensation of any officer,
director, employee, consultant, or agent relating to the present or future
position of such Person;
(ii) any contracts for the purchase of materials, furniture,
fixtures, supplies, or inventories, or for the purchase or lease of equipment
not in the ordinary course of business;
(iii) any contracts for the future performance of services;
(iv) any contracts respecting employee benefits, including bonus,
pension, profit sharing, vacation, hospitalization, insurance, deferred
compensation, retirement, stock option, stock bonus, or stock purchase plans;
(v) any leases and subleases in which the Company is a party,
assignee or sublessee;
(vi) any contracts requiring the Company to indemnify, hold
harmless, or insure any Person against any losses, damages, liabilities, or
claims of any kind;
(vii) any contracts relating to the borrowing of money to or from
the Company, or relating to the guaranty by the Company of any obligation for
the borrowing of money; and
(viii) any contracts containing a covenant limiting the right of the
Company to compete in any line of business or with any Person, firm, or
corporation in any location or area.
All of the contracts or agreements to which the Company is a party or by which
it is bound establish valid and legal rights and responsibilities that are
binding upon and enforceable against the Company and to the Company's knowledge,
the other parties thereto, or their successors or assigns, if any, and to the
Company's knowledge, none of the other parties thereto are in default
thereunder.
4.27 Compliance With Law. The Company is in compliance in all material
respects with and has not received any notices of non-compliance with respect
to, any and all federal, state, and local statutes, ordinances, rules, or
regulations, including without limitation those relating to zoning, occupational
safety and health, equal employment opportunities, and labor relations in the
jurisdictions in which it does business, except such as have not and are not
reasonably likely to have a material adverse effect on the Company, its assets,
operations or business. The Company is not in default or material violation of,
any rule, regulation, statute, or ordinance applicable to it or any of its
operations, properties, or assets, or with respect to any license, permit,
privilege, right, certificate, order, or authority from any governmental or
quasi-governmental agency that is necessary to lawfully conduct and continue to
conduct its businesses as presently conducted, except
such as have not and are not reasonably likely to have a material adverse effect
on the Company, its assets, operations or business.
4.28 Securities Filings. The Company has filed all required forms, reports
and documents (including all prospectuses and all registration statements) with
the Commission required to be filed by it pursuant to the federal securities
laws and the Commission's rules and regulations promulgated thereunder, all of
which have complied in all material respects with all applicable requirements,
including those of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder. None of such SEC filings, including the
financial statements included therein, at the time filed, contained any untrue
statement of 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.
4.29 Insurance. Schedule 4.29 hereto sets forth all insurance policies
held by the Company, and with respect to each policy, sets forth the name of the
insurer, the kind of insurance, the period of the policy, the amount of coverage
provided, a statement of the deductible, if any, and the premium. All of such
policies are in full force and effect, the premiums therefor, to the extent due
and payable, have been paid in full, and the Company is not in default under any
of such policies. These insurance policies, in the opinion of the Company,
provide adequate enforceable coverage for all normal and customary liability and
casualty risks of the Company in light of the experience of the Company and the
practice and usages of the industry in which the Company is engaged.
4.30 Related Agreements. The Company has furnished the Investor with
complete and correct copies of the agreements set forth on Schedule 4.30 and all
appendices, schedules, and exhibits thereto including, without limitation, the
Loan Agreement (collectively, all such agreements listed on Schedule 4.30 being
the "Related Agreements"). This Agreement, the other Financing Agreements, the
Warrant, the Security Documents, and the Related Agreements are the only
agreements relating to the transactions contemplated hereby to which the Company
is a party. The Company is not, and after giving effect to the transactions
contemplated by this Agreement, will not be in default of any of its obligations
under this Agreement, the other Financing Agreements, the Warrant, or any
Related Agreement, and, to the best of the Company's knowledge, no other party
to any Related Agreement is in default thereunder.
4.31 Tax Status. The Company is taxed as a C-corporation under the Code.
4.32 Labor Matters. The Company is not a party to any collective
bargaining agreements. There is no unfair labor practice complaint pending or,
to the best of the Company's knowledge, threatened against the Company before
the National Labor Relations Board and no grievance or arbitration proceeding
arising out of or under such collective bargaining agreements so pending or
threatened. There is no strike, labor dispute, slowdown, or stoppage pending or,
to the best of the Company's knowledge, threatened with respect to the Company,
and to the best of the Company's knowledge, no union organizing activity is
taking place with respect to the Company or its employees.
5. INVESTMENT REPRESENTATION. The Investor is an accredited investor as defined
in Regulation D, Rule 501, promulgated by the Commission. The Investor hereby
represents and warrants to the Company that it is acquiring the Securities for
investment, and not with a view to selling or otherwise distributing the
Securities, other than in a transaction that is exempt from the registration
requirements of the Securities Act or in a transactions pursuant to Section 12
of this Agreement or in accordance with the terms of the Securities; provided,
however, that the disposition of each Investor's property shall at all times be
and remain in such Investor's control,
subject to the provisions of Section 14 hereof. Notwithstanding the foregoing,
nothing contained in this Section 5 shall preclude the Investor from selling one
or more parts of or participation interests in the Securities, this Agreement,
and the other Financing Agreements to other institutional investors or venture
capital firms on such terms as the Investor and the purchasers of such
participation interests may agree, provided that no such sale shall be conducted
in a manner that would constitute a public distribution under the Securities
Act, and that any such sale shall comply with the terms of the Agreement Among
Warrant holders and the Company. Further notwithstanding the foregoing, each
Investor may transfer its interest in this Agreement, the Securities, and the
other Financing Agreements at any time to any of its Affiliates.
6. CONDITIONS TO PURCHASE.
The Investor's obligation to purchase the Securities pursuant to this
Agreement is subject to compliance by the Company with its agreements contained
herein, and to the satisfaction, on or before the Closing Date, of the following
conditions:
6.1 Articles, Bylaws, and Good Standing Certificates. The Investor shall
have received (i) a copy, certified by a duly authorized officer of the Company
to be true and complete as of the Closing Date, of the Articles and the by-laws
of the Company, (ii) a certificate, dated not more than ten (10) days prior to
the Closing Date, of the Secretary of the State of Delaware certifying the
Company's good standing in such state, and (iii) a certificate, dated not more
than ten (10) days before the Closing Date, of the Secretary of the Commonwealth
of Massachusetts certifying the Company's qualification to do business in such
state as a foreign corporation.
6.2 Proof of Corporate Action. The Investor shall have received from the
Company copies, certified by a duly authorized officer thereof to be true and
complete as of the Closing Date, of the records of all corporate action taken to
authorize the execution, delivery, and performance of this Agreement, the Note,
the Warrant, the other Financing Agreements, and the other Related Agreements to
which the Company is a party.
6.3 Incumbency Certificate. The Investor shall have received from the
Company an incumbency certificate, dated the Closing Date, signed by a duly
authorized officer of the Company, and giving the name and bearing a specimen
signature of each individual who shall be authorized to sign, in the name and on
behalf of the Company, this Agreement, the Note, the Warrant, the other
Financing Agreements, and each of the Related Agreements to which the Company is
or is to become a party, and to give notices and to take other action on behalf
of the Company under each of such documents.
6.4 Legal Opinions. The Investor shall have received from counsel to the
Company, a favorable opinion, substantially in the form of Exhibit C hereto,
covering such other matters with respect to the transactions contemplated by
this Agreement, the other Financing Agreements, the Warrant, and the Related
Agreements as the Investor may reasonably request.
6.5 Representations and Warranties; Certificates. The representations and
warranties contained or incorporated by reference herein shall be true and
correct on and as of the Closing Date with the same force and effect as though
made on and as of such Closing Date; no event or condition shall have occurred
or would result from the issuance of any of the Securities that would be a
Default or Event of Default; the Company shall have performed and complied with
all conditions and agreements required to be performed or complied with by them
prior to the Closing; and the Investor shall have received on the Closing Date a
certificate to the effect of each of the foregoing matters signed by Xxxx X.
Xxxxxx, C. Xxxx Xxxxxxxxx and Xxxxx X. Xxxxxxxxxx, on behalf of the Company.
Such certificate shall also confirm to the Investor that all representations and
warranties made by the Company in the Loan Agreement and the other agreements,
instruments, and documents evidencing the Franklin Indebtedness are true and
correct as of the Closing Date.
6.6 Legality; Governmental Authorization. The purchase of the Securities
shall not be prohibited by any law or governmental order or regulation, and
shall not subject Investor to any penalty, special tax, or other onerous
condition. All necessary consents, approvals, licenses, permits, orders, and
authorizations of, or registrations, declarations, and filings with, any
governmental or administrative agency or of or with any other Person with
respect to any of the transactions contemplated by this Agreement, the Note, the
Warrant, the Series C Preferred Stock, the Financing Agreements, or any of the
Related Agreements shall have been duly obtained or made and shall be in full
force and effect.
6.7 Securities. The Investor shall have received certificates or
instruments evidencing the Note, the Series C Preferred Stock and the Warrant,
executed by the Company, and upon such receipt and satisfaction of all of the
other conditions set forth in this Section 6, the Investor shall deliver to the
Company the sum of $3,200,200, constituting the Purchase Price for the Note, the
Series C Preferred Stock and Warrant, which amount is to be reduced by the fees
contemplated by Section 6.10 hereof.
6.8 Financing Agreements. This Agreement, the other Financing Agreements,
and all exhibits thereto that are agreements or instruments, and all other
agreements, documents, and instruments required to be executed or delivered
hereunder shall have been executed and delivered by each of the parties thereto.
Each of the foregoing agreements, exhibits, documents, and instruments shall be
in form and substance satisfactory to the Investor in its sole discretion.
6.9 General. All instruments and legal, governmental, administrative, and
corporate proceedings in connection with the transactions contemplated by this
Agreement, the other Financing Agreements, the Related Agreements and the
Securities shall be satisfactory in form and substance to the Investor in its
sole discretion, and the Investor shall have received copies of all documents,
agreements, and instruments, including without limitation records of corporate
or other proceedings and opinions of counsel, that the Investor may have
requested in connection therewith.
6.10 Fees and Expenses. The Investor shall have received a document
preparation fee of $250,000 and an equipment financing fee of $250,000, and
shall have been reimbursed for all of its reasonable expenses as provided in
Section 15 hereof, including reimbursement of its counsel's reasonable fees and
expenses incurred in connection with the transactions contemplated herein and
the preparation of this Agreement and its exhibits and schedules.
6.11 Related Agreements. Each of the Related Agreements, including without
limitation the Loan Agreement, shall have been executed and delivered by each of
the parties thereto in a form satisfactory to Investor in its sole discretion,
and each of the Related Agreements shall be in full force and effect and no term
or condition thereof shall have been amended, modified or waived except with
Investor's prior written consent. All covenants, agreements, and conditions
contained in the Related Agreements that are to be performed or complied with on
or prior to the Closing Date shall have been performed or satisfied in all
material respects at the sole discretion of the Investor. The Company shall have
delivered to the Investor complete copies of all agreements and instruments
(including all exhibits and schedules thereto) executed and delivered in
connection with the closing under the Loan Agreement.
6.12 Due Diligence. The Investor shall have completed its due diligence
investigation of the Company and its plans, books, records, financial
statements, assets, liabilities, contracts,
commitments, and all other information about the Company and the results of such
investigation shall have been satisfactory to the Investor in its sole
discretion.
6.13 Material Adverse Change. There shall have occurred no material
adverse change in the business, properties, or financial condition of the
Company since September 30, 1998.
6.14 Approvals. The terms and conditions of this Agreement, the
Securities, the other Financing Agreements, and the Related Agreements and of
the transactions contemplated by each shall have been approved by the Investor's
Board of Managers.
6.15 Insurance. The Company shall have delivered to the Investor
certificates of insurance and, if requested by the Investor, copies of insurance
policies covering risks, including product liability, normally insured against
by companies in businesses similar to the Company's business, which policies
shall provide such coverage in such amounts and with such insurers as may be
reasonably acceptable to the Investor.
6.16 Use of Proceeds. The proceeds of the Senior Indebtedness, and the
proceeds of the purchase of the Securities hereunder shall be used for working
capital and repayment of debt, as specifically permitted in this Agreement, and
the Investor shall be satisfied that after giving effect to such payment the
Company shall have sufficient working capital to continue to conduct its
business in the ordinary course without incurring additional Indebtedness or
issuing additional equity securities.
6.17 Employment or Consulting Agreements. Each of Xxxxxxxxx Xxxxxx,
Xxxxx X. Xxxxxxxxxx, Xxxxxxx X. Nurse, C. Xxxx Xxxxxxxxx and Xxxx X. Xxxxxx
and the Company shall have entered into employment or consulting agreements
reasonably satisfactory to the Investor.
6.18 Lender. The Lender shall have consented in writing, on terms and
conditions satisfactory to the Investor in its sole discretion, to the Company's
execution, delivery, and performance of this Agreement and the other Financing
Agreements and Related Agreements.
6.19 Amendments. The Company and the Board of Directors shall have taken
such actions as may be necessary to amend the Company's by-laws to permit the
consummation of the transactions contemplated by this Agreement, including,
without limitation, amendments of the Company's by-laws to increase the number
of directors to seven (7).
6.20 Other Actions. The Company and its Board of Directors shall have
taken all other actions that the Investor deems reasonably necessary to conclude
the transactions contemplated by this Agreement and its Exhibits and the Related
Agreements.
6.21 Security Documents. The Security Documents, and the appropriate
financing statements and other documents and instruments pertaining thereto and
necessary to enable Investor to perfect its security interests thereunder, shall
have been duly executed by the Company and filed or recorded, or delivered for
recording, as applicable, in all appropriate filing offices or other locations
necessary for the perfection of such interests, and all other actions necessary
for the perfection of such security interests shall have been duly taken. The
Security Documents and this Agreement shall create first priority liens in favor
of the Investor in all of the Assets.
6.22 Intercreditor Agreement. The Investor shall have entered into an
Intercreditor Agreement with the Lender upon such terms as are satisfactory to
the Investor in its sole discretion.
6.23 Closing Date Net Worth; Capital Expenditures. The Company shall have
demonstrated to the satisfaction of the Investor before the Closing Date that
the net worth of the Company, determined, after giving effect to the
transactions contemplated by this Agreement, the Loan Agreement, the Financing
Agreements and the other Related Agreements is not less than Four Million Five
Hundred Thousand Dollars ($4,500,000). At or before the Closing, the Company
shall present the Investor with a detailed capital expenditure budget for the
fiscal year ending December 31, 1999, and such budget must be satisfactory to
the Investor in its sole discretion.
6.24 Broker's Fees. The Company shall have paid all fees incurred by the
Company or the Investor in connection with this Agreement other than the
$100,000 fee of Xxxx Xxxxxx, which is to be paid by the Investor, or any of the
Financing Agreements for broker's or finder's fees or commissions or similar
items, including those amounts set forth on Schedule 4.20.
6.25 Source and Uses. The Company shall have provided the Investor with a
schedule illustrating the sources of funds from the transactions contemplated by
this Agreement and from the Franklin Indebtedness and the uses of such funds.
6.26 Board Representation. The Company shall have taken such actions as
may be necessary and appropriate, so that the Board of Directors of the Company
shall consist of Xxxx X. Xxxxxx, Xxxxxxxxx Xxxxxx, Xxxxx X. Xxxx, Xxxx X. Xxxxxx
and Xxxxx X. Xxxxxxx.
6.27 Settlement with Unsecured Creditors. The Company shall have settled
its debts to unsecured creditors in a fashion satisfactory to the Investor in
its sole discretion.
7. COVENANTS APPLICABLE TO THE COMPANY WHILE THE NOTE IS OUTSTANDING.
The Company covenants that, as long as any of the Indebtedness of the
Company with respect to the Note has not been paid in full, the Company will
comply with the following provisions:
7.1 Records and Accounts. The Company will keep true and accurate records
and books of account in which full, true, and correct entries will be made and
the Company shall maintain adequate accounts and reserves for all taxes
(including income taxes), all depreciation, depletion, obsolescence, and
amortization of its properties, all contingencies, and all other reserves, in
each case in accordance with Generally Accepted Accounting Principles, except
that the Company's interim financial statements vary from GAAP in that they may
not incorporate all of the required disclosures, either on the face of the
statements or in footnotes thereto, that are required by GAAP, and do not
include separate statements of changes in stockholders equity and cash flow.
7.2 Corporate Existence; Maintenance of Properties; Business. The Company
will, and will cause each of its Subsidiaries to, preserve and keep in full
force and effect its corporate existence, rights, and franchises. The Company
will, and will cause each of its Subsidiaries to, maintain all of its properties
used or useful in the conduct of its business in good condition, repair and
working order and cause to be made all necessary repairs, renewals,
replacements, betterments, and improvements thereof, all as in the judgment of
the Company may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 7.2 shall prevent the Company from
discontinuing the operation and maintenance of any of such properties if such
discontinuance is, in the reasonable judgment of the Company, desirable in the
conduct of its business and does not in the aggregate materially adversely
affect the business of the Company and its Subsidiaries.
7.3 Insurance; Life Insurance. The Company and its Subsidiaries will
maintain with financially sound and reputable insurance companies, funds, or
underwriters insurance of the kinds, covering the risks and in the relative
proportionate amounts usually carried by reasonable and prudent companies
conducting businesses similar to that of the Company and its Subsidiaries.
7.4 Taxes. The Company will, and will cause each of its Subsidiaries, if
any, to, pay and discharge, or cause to be paid and discharged, before the same
shall become overdue, all taxes, assessments, and other governmental charges
imposed upon the Company and its Subsidiaries and their real properties, sales
and activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies, which if unpaid might by
law become a lien or charge upon any of their properties; provided, however,
that any such tax, assessment, charge, levy, or claim need not be paid if the
validity or amount thereof shall currently be contested in good faith by
appropriate proceedings and if the Company or its Subsidiaries, as the case may
be, shall have set aside on its books adequate reserves with respect thereto;
and provided, further, that the Company and its Subsidiaries will pay or cause
to be paid all such taxes, assessments, charges, levies, or claims forthwith
upon the commencement of proceedings to foreclose any lien that may have
attached as security therefor.
7.5 Inspection of Properties and Books. The Company shall permit the
Investor or any of the Investor's officers or representatives to visit and
inspect any of the properties of the Company or its Subsidiaries, to examine the
books of account of the Company and its Subsidiaries (and to make copies thereof
and extracts therefrom), and to discuss the affairs, finances, and accounts of
the Company and its Subsidiaries with, and to be advised as to the same by,
their respective officers, all at such reasonable times and intervals as the
Investor may reasonably request.
7.6 Compliance with Laws, Contracts, Licenses, and Permits. The Company
will, and will cause each of its Subsidiaries to, comply with (i) all applicable
material laws and regulations wherever its business is conducted, (ii) the
provisions of its Articles and by-laws, (iii) all agreements and instruments by
which it or any of its properties may be bound, and (iv) all applicable decrees,
orders, and judgments. If at any time, any authorization, consent, approval,
permit, or license from any officer, agency, or instrumentality of any
government shall become necessary or required in order that the Company may
fulfill any of its obligations hereunder, the Company will immediately take or
cause to be taken all reasonable steps within the power of the Company to obtain
such authorization, consent, approval, permit, or license and furnish the
Investor with evidence thereof.
7.7 Plans. The Company (i) will not, and will not allow any of its
Subsidiaries to, permit, or take any action that would result in, the aggregate
present value of the Unfunded Vested Accrued Benefits under all employee benefit
plans of the Company and its Subsidiaries to exceed $50,000; (ii) will furnish
to the Investor a copy of any actuarial statement related to any pension plan
required to be submitted under Section 103(d) of ERISA, no later than the date
on which such statement is submitted to the Department of Labor or the Internal
Revenue Service; (iii) will furnish to the Investor forthwith, a copy of (x) any
notice of pension plan termination sent to the Pension Benefit Guaranty
Corporation under Section 4041(a) of ERISA or (y) any notice, report or demand
sent or received by a pension plan under Sections 4041, 4042, 4043, 4063, 4065,
4066 and 4068 of ERISA; (iv) will not, without the Investor's written consent
request a waiver from the funding standards or extension of the amortization
periods required by Sections 303 and 304 of ERISA or Section 412 of the Code;
(v) make a complete or partial withdrawal (within the meaning or Section 4201 of
ERISA) from any multiemployer plan.
7.8 Further Assurances. The Company will cooperate with the Investor and
execute such further instruments and documents as the Investor shall reasonably
request to carry out to the
Investor's satisfaction the transactions contemplated by this Agreement and the
other Financing Agreements. Without limiting the foregoing sentence, the Company
shall make such amendments to its by-laws as the Investor may from time to time
request to permit the implementation of the Investor's rights under this
Agreement and any of the other Financing Agreements.
7.9 Notices. The Company shall promptly give the Investor copies of all
notices given pursuant to any Related Agreement that it receives from or gives
to any other party to such Related Agreement.
7.10 Restrictions on Indebtedness. The Company will not, and will not
permit any Subsidiary to, create, incur, assume, guarantee, or be or remain
liable, contingently or otherwise, with respect to any Indebtedness other than
the following ("Permitted Indebtedness"):
(a) Indebtedness to the Investor;
(b) The Franklin Indebtedness;
(c) Current Liabilities incurred in the ordinary course of business
not incurred through the borrowing of money or the obtaining of credit, except
for credit on an open account basis customarily extended in connection with
purchases of goods and services in the ordinary course of business;
(d) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials, and supplies to the extent
that payment therefor shall not at the time be required to be made in accordance
with the provisions of Section 7.4 hereof;
(e) Indebtedness in respect of judgments or awards that have been in
force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Company shall at
the time in good faith be prosecuting an appeal or proceedings for review and in
respect of which a stay of execution shall have been obtained pending such
appeal or review;
(f) Endorsements for collection, deposit, or negotiation and
warranties of products or services, in each case incurred in the ordinary course
of business;
(g) Indebtedness incurred in connection with the acquisition, after
the date hereof, of any real or personal property by the Company, provided that
(i) the principal amount of such Indebtedness shall not exceed in any case 90%
of the cost, to the Company, of the real or personal property so acquired and
(ii) the aggregate annual principal payments on all such Indebtedness shall not
exceed $15,000; or
(h) Indebtedness under or in respect of agreements or instruments
other than those listed in this Section 7.10 that are existing on the date of
this Agreement listed and described on Schedule 7.10(h) hereto.
7.11 Restriction on Liens. The Company will not, and will not permit any
Subsidiary to, create, incur, or suffer to be created or incurred or to exist
any lien, encumbrance, mortgage, pledge, charge, restriction, or other security
interest of any kind upon any of its property or assets of any character whether
now owned or hereafter acquired, or upon the income or profits therefrom; or
transfer any of such property or assets or the income or profits therefrom for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to payment of its general creditors; or
acquire, or agree or have an option to acquire, any
property or assets upon conditional sale or other title retention or purchase
money security agreement, device or arrangement; or suffer to exist for a period
of more than 30 days after the same shall have been incurred any Indebtedness or
claim or demand against it which if unpaid might by law or upon bankruptcy or
insolvency, or otherwise, be given any priority whatsoever over its general
creditors; or sell, assign, pledge, or otherwise transfer any accounts, contract
rights, general intangibles or chattel paper, with or without recourse;
provided, however, that the Company and any Subsidiary may create or incur or
suffer to be created or incurred or to exist any of the following ("Permitted
Liens"):
(a) Liens to secure taxes, assessments and other government charges
or claims for labor, material, or supplies in respect of obligations not overdue
or not required to be made in accordance with Section 7.4 hereof;
(b) Deposits or pledges made in connection with, or to secure
payment of, workmen's compensation, unemployment insurance, old age pensions, or
other social security obligations;
(c) Liens in respect of judgments or awards, the Indebtedness with
respect to which is permitted by Section 7.10(e);
(d) Liens of carriers, warehousemen, mechanics, and materialmen, and
other like liens, in existence less than 120 days from the date of creation
thereof in respect of obligations not overdue or to the extent payment therefor
is not required in accordance with Section 7.16(a) hereof;
(e) Purchase money security interests in or purchase money mortgages
on real or personal property acquired after the date hereof to secure purchase
money Indebtedness of the type and amount permitted by Section 7.10(g), incurred
in connection with the acquisition of such property, which security interests or
mortgages cover only the real or personal property so acquired;
(f) Liens securing obligations to the Investor; and
(g) Liens securing the Franklin Indebtedness.
7.12 Distributions and Restricted Payments. The Company shall not make any
Distributions or Restricted Payments except that it may make payments of
principal and interest on the Note as provided in Section 3 hereof, and that the
Company may make payments on dividends with respect to its Series A Preferred
Stock and Series B Preferred Stock if such payments are required by the
Certificates of Designation with respect thereto.
7.13 Merger, Consolidation, or Sale of Assets. Without the consent of the
Majority Holders, the Company will not, and will not permit any Subsidiary to,
become a party to any merger or consolidation, or sell, lease, sublease, or
otherwise transfer or dispose of any of all or any substantial part of its
assets other than (i) sales of inventory and equipment in the ordinary course of
business, (ii) the merger or consolidation of one or more of its wholly-owned
Subsidiaries with and into the Company, or (iii) the merger or consolidation of
two or more wholly-owned Subsidiaries with each other.
7.14 Investments. The Company will not have outstanding or acquire or
commit itself to acquire or hold any Investment except:
(i) investments in direct obligation of the United States of America
or any instrumentality or agency thereof, the payment or guarantee of which
constitutes a full faith and credit obligation of the United States of America,
in either case, maturing in twelve (12) months or less from the date of
acquisition;
(ii) commercial paper maturing within 270 days from the date of
issue thereof and having, at the date of acquisition thereof and throughout the
period it is held by the Company, the highest rating by Xxxxx'x Investors
Services, Inc., Standard & Poors Corporation, or any other nationally recognized
credit rating agency; and
(iii) certificates of deposit maturing within one (1) year from the
date of acquisition thereof issued by a bank or trust company having capital,
surplus and undivided profits aggregating at least one hundred million dollars
($100,000,000) and whose long term certificates of deposit are rated AA or
better by Standard & Poor's Corporation, Xxxxx'x Investors Services, Inc., or
any other nationally recognized credit rating agency.
7.15 Amendment of Related Agreements. The Company shall not agree to any
amendment or modification of, or grant any waiver or fail to enforce any of its
rights pursuant to, any of the Related Agreements without obtaining the prior
written consent of the Majority Holders.
7.16 Satisfaction of Obligations to Others.
(a) Liens. The Company will timely pay and discharge, or cause to be
paid and discharged, before the same shall become in arrears, all claims for
labor, materials, or supplies that if unpaid might by law become a lien or
charge upon any of its property, except such of said items as are being in good
faith appropriately contested by it and as to which the Company has maintained
adequate reserves on its books.
(b) Other Obligations. In addition to those claims specified in
subsection (a) of this Section 7.16, the Company will pay all other obligations
and debts that it incurs pursuant to any contract or agreement, whether oral or
written, express or implied, as such debts and obligations become due, except
that with respect to trade payable the Company will not be in violation of this
covenant if the Company is overdue in the payment of trade payable so long as
none of such trade payable are more than 60 days overdue (except trade payables
being contested in good faith). Without limiting the generality of the
foregoing, the Company will comply with all provisions of all contracts to which
it is or may become a party or otherwise bound.
7.17 Capital Expenditures. The Company will not incur in any Fiscal Year
expenditures for fixed or capital assets (including amounts payable for
capitalized lease obligations other than those in existence as of the date of
this Agreement) in excess of $50,000 in the aggregate without the prior written
consent of the Majority Holders.
7.18 Change of Corporate Name or Address. The Company shall notify the
Investor at least 30 days before making any change in its corporate name or any
other name under which it conducts its business or making or any change in the
address of its chief executive offices.
7.19 Restrictions on Guarantees. Neither the Company nor any of its
Subsidiaries will directly or indirectly guarantee, endorse (other than for
collection or deposit in the ordinary course of business), discount or sell with
recourse, agree (contingently or otherwise) to purchase, repurchase, or
otherwise acquire or supply or advance funds (whether by way of loan, stock
purchase, capital contribution, or otherwise) in respect of, or become, or be or
remain liable with
respect to, directly or indirectly, any indebtedness, obligation, liability, or
dividend of any other Person.
7.20 [Intentionally deleted]
7.21 Additional Covenants Regarding Common Stock, Series C Preferred Stock
and the Warrant.
(a) The Company shall keep reserved the total number of shares of
Warrant Stock issuable at any time (which number shall be increased or decreased
in accordance with the terms set forth in the Warrant) upon exercise of the
Warrant. The Company agrees to perform and observe all obligations with respect
to the Warrant (all the terms of which are hereby incorporated herein by this
reference).
(b) Except as otherwise provided for herein, the Company shall not
amend its Articles of Incorporation or by-laws without the prior written consent
of the Majority Holders.
7.22 Securities Laws Requirements. The Company shall file with the
Commission and every state securities agency in which such a filing is or may be
required (and deliver a copy of each such filing to the Investor), all reports
and other documents, instruments, and exhibits required to be filed by it under
the Securities Act, the Exchange Act, the Trust Indenture Act of 1939, any
successor laws to any of the foregoing, and any state securities law
(collectively, "Securities Laws") or any other applicable law. The Company will
take such steps, execute such documents, and reports, and supply such
information and take such other actions as Investor or its assigns shall request
to permit the sale of any Note, Common Stock, Series C Preferred Stock, Warrant,
or shares of Warrant Stock held by the Investor or its assigns pursuant to the
exemptions provided by Rules 144 or 144A promulgated under the Securities Act or
any other exemption at any time available under any of the Securities Laws.
7.23 Prohibited Agreements. The Company shall not enter into any agreement
having the effect of limiting or restricting its right to make payments of
principal and interest under the Note, or perform any other obligation imposed
on it by this Agreement or any other Financing Agreement, except as provided in
the Loan Agreement as in effect on the date hereof.
7.24 Compensation. Except as set forth in the employment and consulting
agreements referred to in Section 6.17 hereof, the Company shall not pay or
become obligated to pay any bonus, commission, consulting fees, or other
compensation payments to any officer or their Family Members unless such amounts
are approved in advance by the Company's Board of Directors.
7.25 Margin Securities. The Company will not use any proceeds from the
sale of the Note, the Series C Preferred Stock, the Warrant or the Warrant
Stock, directly or indirectly, for the purposes of purchasing or carrying any
"margin securities" within the meaning of Regulation G or T promulgated by the
Board of Governors of the Federal Reserve Board or for the purpose of arranging
for the extension of credit secured, directly or indirectly, in whole or in part
by collateral that includes any "margin securities".
7.26 No Conflicts of Interest. The Company shall not make any payments or
transfer any property, through payment of dividends or otherwise, to any
officer, director, employee, stockholder of the Company or any Affiliate or
Family Member of any such person, without the prior written consent of the Board
of Directors. Except as set forth in Schedule 7.26, the Company shall conduct
its business in such a manner that no officer, director, employee, or
stockholder of the Company, or any Affiliate or Family Member of any such
Person, or the Company, shall have any
direct or indirect interest (a) in any entity that does business with the
Company, (b) in any property, asset, or right that is used by the Company in the
conduct of its business, or (c) in any contractual relationship with the
Company, except for this Agreement, the Note, the Warrant, the other Financing
Agreements, the Related Agreements, and all other agreements, documents, and
instruments contemplated by the foregoing, other than as an employee, unless the
transaction with respect to which any such Person has an interest has been
approved and authorized by the Company's Board of Directors. For the purpose of
this Section 7.26, there shall be disregarded any interest that arises solely
from the ownership of less than a five percent (5%) equity interest in a
corporation whose stock is regularly traded on any national securities exchange
or in the over-the-counter market.
7.27 Subsidiaries. The Company shall not incorporate or acquire any
Subsidiary, nor shall the Company enter into any transaction with any
Subsidiary, without the prior written consent of the Board of Directors. The
Company shall not, directly or through a Subsidiary enter into any line of
business not directly related to the businesses conducted by the Company on the
date of this Agreement without receiving the prior written consent of the Board
of Directors.
7.28 Certain Fees. Neither the Company nor any Subsidiary shall enter into
any consulting, brokerage, advisory, or similar agreements with any Person, nor
shall the Company or any Subsidiary pay any consulting, brokerage, advisory, or
other similar fees for services (excluding, however, accounting and legal
services) in excess of $50,000 in the aggregate in any Fiscal Year, without
having obtained the prior written consent of the Board of Directors.
7.29 Leases. The Company shall not enter into any operating lease as the
lessee or renew or extend any such lease of real or personal property if the
rental and other payments payable thereunder during any year would exceed
$50,000 without obtaining the prior written consent of the Board of Directors.
7.30 Employee Loans. The Company shall not make any loans or advances
(other than reasonable, necessary, and properly documented travel and expense
advances generally available to employees of the Company) to any officer or
stockholder of the Company or to any Family Member of such officer or
stockholder without the prior written consent of the Majority Holders. The
Company may make loans and advances (other than the aforesaid travel and expense
advances) to employees who are not officers or stockholders of the Company,
provided that the aggregate amount of all such advances shall not at any time
exceed $5,000 without the Majority Holders' prior written consent.
7.31 Loan Agreement Covenants. The Company shall at all times comply with
all of the covenants and conditions, including, without limitation, the
financial covenants, contained in the Loan Agreement or other lending agreements
that the Company enters into with any other lender. The Company shall deliver to
the Investor all the borrowing base reports and other compliance certificates it
delivers to the Lender and any other lenders with which it has lending
agreements concurrently with such delivery.
7.32 Tangible Net Worth. The Company shall not permit Tangible Net Worth
for any calendar quarter to be less than the amount set opposite the pertinent
time period based upon its consolidated internally prepared or audited financial
statements:
Calendar Minimum
Year Tangible Net Worth
---- ------------------
1999 $4,500,000
2000 $4,750,000
2001 $5,000,000
2002 $5,500,000
2003 $6,000,000
7.33 Cash Flow Coverage. The Company shall not permit the ratio of its
Cash Flow to Debt Service for any fiscal quarter after the quarter ended March
31, 1999 to be less than 1.75 to 1.
7.34 Current Ratio. The Company shall not permit the ratio of consolidated
current assets of the Company to consolidated current liabilities of the Company
to be less than the amounts set forth below:
Calendar Quarter
Ending Minimum Ratio
------ -------------
June 30, 1999 1 to 1
September 30, 1999 1.25 to 1
December 31, 1999 1.5 to 1
and thereafter
7.35 Accounts Payable. The Company shall not permit its accounts payable
that are more than 60 days past due from the originally scheduled payment date
to exceed 10% of the Company's total accounts payable.
7.36 Required Revenue. The Company will generate monthly revenue of not
less than $1,000,000 for each month beginning February 1, 1999; $1,250,000 for
each month in the quarter beginning April 1, 1999; $1,750,000 for each month in
the quarter beginning June 1, 1999; and $2,000,000 for each month thereafter.
8. COVENANTS APPLICABLE TO THE COMPANY WHILE THE WARRANT OR SHARES OF WARRANT
STOCK ARE OUTSTANDING
The Company covenants that, notwithstanding the payment in full of the
Note, as long as the Warrant or any shares of Warrant Stock remain outstanding,
the Company will comply with the following provisions:
8.1 General. The Company will comply with the provisions of Section 7.
8.2 Dilution Protection. The Company will not and will not permit any of
its Subsidiaries to (a) issue, sell, give away, transfer, pledge, mortgage,
assign, or otherwise dispose of, (b) grant any rights (either preemptive or
other) or options to subscribe for or purchase, or (c) enter into any agreements
or issue any warrants providing for the issuance of, any of the capital stock of
the Company or any of its Subsidiaries or any stock or any securities
convertible into or exchangeable for any of the capital stock of the Company or
any of its Subsidiaries except for the Warrant and the Warrant Stock. The
Company will not transfer, pledge, mortgage, assign or otherwise dispose of any
of its capital stock except for the pledge of its stock with respect to the
Franklin Indebtedness. Except as contemplated hereby, the Company will not and
will not permit any of its Subsidiaries to authorize any additional classes or
series of capital stock nor will the Company increase the number of shares of
authorized capital stock from that set forth in Section 2.5(a) hereof.
8.3 Board Representation. The Company will take such action as may be
necessary or appropriate to appoint additional members to the Company's Board of
Directors so that at least a majority of the Directors are appointed by the
Investor, or such lesser number of Directors as is proportionate to the
percentage of Common Stock beneficially owned by the Investor. The Company shall
take such actions in connection therewith as may be necessary and appropriate,
including the actions required by Rule 14f-1 under the Exchange Act, as promptly
as practicable, but in no event later than February 15, 1999.
8.4 Stockholders' Meeting. Promptly after the Closing Date, but in no
event later than May 1, 1999, the Company will hold the Stockholders' Meeting to
approve an amendment to the Company's Certificate of Incorporation increasing
the Company's authorized Common Stock to 150,000,000 shares.
9. INFORMATION AND REPORTS; MEETINGS.
The Company hereby agrees that so long as any Securities or shares of
Warrant Stock are outstanding:
9.1 Annual Statements. As soon as available and in any event within 120
days after the close of each Fiscal Year of the Company commencing with the
Fiscal Year ending December 31, 1998, the Company will deliver to the Investor
consolidated and consolidating balance sheets and statements of income, retained
earnings, and cash flow of the Company and its Subsidiaries audited by one of
the independent certified public accounting firms commonly known as a "Big Five"
accounting firm, or another firm reasonably satisfactory to the Investor,
showing the financial condition of the Company and its Subsidiaries as of the
close of such Fiscal Year and the results of the Company's operations during
such Fiscal Year and certified by such firm to have been prepared in accordance
with generally accepted accounting principles consistently applied.
9.2 Quarterly and Monthly Statements. As soon as available and in any
event within 30 days after the end of:
(a) each month commencing with the month ending January 31, 1999,
the Company will deliver to the Investor monthly financial statements of the
Company and its Subsidiaries as of the end of each such month and year to date,
and
(b) each quarter commencing with the quarter ending March 31, 1999,
the Company will deliver to the Investor quarterly financial statements of the
Company and its Subsidiaries as of the end of such quarter and year to date.
Such monthly or quarterly financial statements shall include consolidated and
consolidating internal, unaudited balance sheets, income statements, statements
of cash flows, and statements of backlogs and shall be verified and attested by
the Chief Financial Officer. Together with such financial statements, the
Company will deliver to the Investor a reconciliation of the items in such
financial statement against the financial statements for the same period in the
prior Fiscal Year and against budget for such period delivered to the Investor
pursuant to Section 9.3 hereof and a management report from the Company's
President highlighting significant operational and financial events in narrative
form.
9.3 Projections. The Company will deliver to the Investor, not less than
30 days prior to the beginning of each Fiscal Year of the Company, a budget for
such Fiscal Year and each month, including a balance sheet, income statement,
and statement of cash flows. Such budget shall be
accompanied by an annual projection including income statements, balance sheets,
and statements of cash flows covering such Fiscal Year and the succeeding three
Fiscal Years.
9.4 Officers' Certificates. Together with delivery of consolidated and
consolidating financial statements of the Company and its Subsidiaries pursuant
to Sections 9.1 and 9.2 above, the Company will deliver to the Investor a
certificate of the Chief Financial Officer of the Company, (a) that the annual
statements have been prepared in accordance with generally accepted accounting
principles consistently applied and the annual and monthly statements present
fairly in all material respects the financial position of the Company and its
Subsidiaries as of the dates specified and the results of their operations and
changes in financial position with respect to the periods specified (subject in
the case of interim financial statements only to normal year-end audit
adjustments), (b) setting forth computations demonstrating compliance with the
financial covenants in the Loan Agreement, and (c) to the effect that such
officer has caused the provisions of this Agreement, the Securities, the other
Financing Agreements, and the related Agreements to be reviewed and has no
knowledge of any Default or Event of Default hereunder or thereunder, or if such
officer has such knowledge, specifying such Default or Event of Default and the
nature thereof, and what action the Company has taken, is taking or proposes to
take with respect thereto.
9.5 Notice of Litigation, Default. The Company will promptly give notice
to the Investor of any litigation, investigations, or any administrative
proceeding to which the Company or any of its Subsidiaries may hereafter become
a party or are subject that, after giving effect to applicable insurance, may
result in any material adverse change in the business, assets, or financial
condition of the Company or its Subsidiaries. Forthwith upon any officer of the
Company's obtaining knowledge of any Default or Event of Default hereunder or
any exhibit hereto, any default or event of default under any other Financing
Agreement, any Related Agreement, or any agreement relating to any Indebtedness
of the Company or any of its Subsidiaries for borrowed money, or any material
adverse change in the Company's or any Subsidiary's business, properties,
assets, or condition, financial or otherwise, the Company will furnish a notice
specifying the nature and period of existence thereof and what action the
Company has taken, is taking or proposes to take with respect thereto. Promptly
after the receipt thereof, the Company will provide the Investor with copies of
any reports upon adequacies and inadequacies in accounting controls submitted to
the Company by its independent accountants.
9.6 Board of Directors and Stockholders.
(a) Board Membership. Except as hereinafter provided and for as long
as the Note, the Series C Preferred Stock, the Warrant, or any shares of Warrant
Stock shall be outstanding, the Company's Board of Directors shall be composed
of seven (7) members, four (4) of whom may be designated by the Investor for as
long as the Investor shall own (or have the right to acquire upon execution of
the Warrant) fifty percent (50%) or more of the issued and outstanding shares of
Common Stock.
(b) Annual Meetings. Within 90 days after the financial statements
required by Section 9.1 hereof are furnished to the Investor and on not less
than 30 days' prior written notice to all holders of Securities, the Company
will hold an annual meeting of its stockholders at which the principal
executive, financial, and operations officers of the Company will present a
review of, and will discuss with those in attendance, in reasonable detail, the
general affairs, management, financial condition, results of operations, and
business prospects of the Company. The Company will allow each holder of
Securities to attend such meeting.
9.7 Other Information. From time to time upon any Investor's request or
upon the request of any representative designated by the Majority Holders, the
Company will furnish to any
authorized officer or representative of such Person such information regarding
the business, affairs, prospects, and financial condition of the Company and its
Subsidiaries as such officer or representative may reasonably request. Each such
officer or representative shall have the right during normal business hours upon
reasonable prior notice to examine the books and records of the Company and its
Subsidiaries, to make copies, notes and abstracts therefrom, and to make an
independent examination of the books and records of the Company and its
Subsidiaries.
9.8 Confidentiality. The Investor will hold in confidence all proprietary
or confidential information of the Company provided or made available to the
Investor pursuant to this Section 9 until such time as (i) such information has
been publicly disclosed (other than as a consequence of any breach by the
Investor of its confidentiality obligations hereunder), or (ii) disclosure is
required by judicial or administrative order or process. Notwithstanding the
foregoing sentence, the Investor may disclose such proprietary and confidential
information to its officers, directors, employees, and professional advisors,
who shall be subject to the restrictions of this Section.
10. DEFAULTS.
10.1 Events of Default. Holders of the Securities and the shares of
Warrant Stock will be entitled to exercise the remedies provided by Section 10.2
hereof in accordance with the terms thereof if any one or more of the following
events (the "Events of Default") shall occur:
(a) the Company shall fail to make any payment of principal or
interest on the Note as the same shall become due, whether at scheduled maturity
or by acceleration or otherwise; or
(b) the Company shall (i) fail to perform or observe any covenant,
agreement or provision set forth in this Agreement or any covenant, agreement,
or provision to be performed or observed by it under any other Financing
Agreement or the Warrant, and such failure shall not be cured to the Majority
Holders' reasonable satisfaction within 30 days after the earlier of receipt of
notice from the Majority Holders or the Company's knowledge of such default,
provided that if the Company timely commenced implementing a cure of such
default and continues to pursue such cure in good faith but cannot, in the
opinion of such Majority Holders, effect the cure within 30 days, the Company
may have an additional 30 days to complete such cure to the satisfaction of such
Majority Holders; or
(c) any representation or warranty made by the Company to the
Investor in connection with this Agreement or any other Financing Agreement or
the Warrant or any amendment to any of the foregoing shall prove to have been
false in any material respect on the date as of which it was made; or
(d) there shall occur an "Event of Default" under and as defined in
the Loan Agreement, or there shall occur any other "Default" or "Event of
Default" under any of the other Financing Agreements or Related Agreements as
defined therein; or
(e) a final judgment that in the aggregate with other outstanding
final judgments against the Company or any of its Subsidiaries exceeds $50,000
shall be rendered against such Person if, within 30 days after entry thereof,
such judgment shall not have been discharged, dismissed, bonded, or stayed
pending appeal; or
(f) the Company or any of its Subsidiaries shall
(i) commence a voluntary case under Title 11 of the United
States Code as from time to time in effect, or authorize, by appropriate
proceedings of its board of directors or other governing body, the commencement
of such a voluntary case;
(ii) have filed against it a petition commencing an
involuntary case under said Title 11 and such petition shall not have been
dismissed within 60 days;
(iii) seek relief as a debtor under any applicable law, other
than said Title 11, of any jurisdiction relating to the liquidation or
reorganization of debtors or to the modification or alteration of the rights of
creditors, or consent to or acquiesce in such relief;
(iv) have entered against it an order by a court of competent
jurisdiction (x) finding it to be bankrupt or insolvent, (y) ordering or
approving its liquidation, reorganization or any modification or alteration of
the rights of its creditors, or (z) assuming custody of, or appointing a
receiver or other custodian for, all or a substantial part of its property; or
(v) make an assignment for the benefit of, or enter into a
composition with, its creditors, or appoint or consent to the appointment of a
receiver or other custodian for all or a substantial part of its property; or
(g) there shall have occurred, in the sole judgment of the Majority
Holders a material adverse change in the Company's business, assets,
liabilities, or financial or legal condition or prospects; or
(h) the Company's stockholders shall fail to approve an amendment to
the Certificate of Incorporation of the Company to authorize sufficient shares
of Common Stock to permit the full exercise of the Warrant on or before May 1,
1999 or the Company shall have failed to file the Certificate of Amendment with
respect thereto on the date of such meeting and reserve such additional shares
for issuance upon exercise of the Warrant.
10.2 Remedies. Upon the occurrence of any of the Events of Default under
Section 10.1 hereof, in each and every such case, the Majority Holders may,
without notice to the Company, (i) proceed to protect and enforce its or their
rights by suit in equity, action at law, and/or other appropriate proceeding
either for specific performance of any covenant, provision, or condition
contained or incorporated by reference in this Agreement or in the Company's
Articles or Certificate of Designations, or in aid of the exercise of any power
granted in this Agreement or in the Company's Articles or Certificate of
Designations, (ii) exercise any other remedy or right available to the Investor
under any of the Financing Agreements or at law or equity, and/or (iii) (unless
there shall have occurred an Event of Default under Section 10.l(g) hereof, in
which case the unpaid balance of the Note shall automatically become due and
payable) may, without notice to the Company, declare all or any part of the
unpaid principal amount of the Note then outstanding to be forthwith due and
payable, and thereupon such unpaid principal amount or part thereof, together
with interest accrued thereon and all other sums, if any, payable under this
Agreement or the Note shall become so due and payable without presentation,
presentment, protest, or further demand or notice of any kind, all of which are
hereby expressly waived, and such holder or holders may proceed to enforce
payment of such amount or part thereof in accordance with the terms of this
Agreement and the Financing Agreements.
10.3 Waivers. In connection with the occurrence of any Events of Default
or the exercise of any remedy available to the Majority Holders in the event of
the occurrence of any Event of Default, the Company hereby waives, to the extent
not prohibited by applicable law, (a) all presentments, demands for performance,
notices of nonperformance (except to the extent
specifically required by the provisions hereof), (b) any requirement of
diligence or promptness on the part of any holder of Securities or shares of
Warrant Stock in the enforcement of its rights under the provisions of this
Agreement, the Articles of the Company, the Certificate of Designations, or any
other Financing Agreement, and (c) any and all notices of every kind and
description that maybe required to be given by any statute or rule of law.
10.4 Course of Dealing. No course of dealing between the Company on the
one hand, and the Investor or any holder of Securities or shares of Warrant
Stock on the other hand, shall operate as a waiver of any of the Investor's or
such holders' rights under this Agreement, any other Financing Agreement, or the
Securities. No delay or omission in exercising any right under this Agreement,
any other Financing Agreement, or the Securities shall operate as a waiver of
such right or any other right. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right or remedy on any other occasion.
10.5 Remedies Not Exclusive. Each of the remedies hereunder that are
available to the Majority Holders are cumulative and not exclusive, and such
Majority Holders may exercise any or all such remedies at such time and in such
manner as such Majority Holders may determine in their sole discretion.
11. SUBSEQUENT HOLDERS OF SECURITIES.
Whether or not any express assignment has been made in this Agreement, the
provisions of this Agreement, the Warrant, and the other Financing Agreements
that are for the Investor's benefit as the holder of any Securities or shares of
Warrant Stock are also for the benefit of, and enforceable by, all subsequent
holders of Securities or shares of Warrant Stock, except any holder of
Securities or shares of Warrant Stock that have been sold pursuant to an
effective registration statement under the Securities Act or pursuant to Rule
144 or Rule 144A (or similar successor rules) under such Act, and except as
otherwise expressly provided herein. No shares of Warrant Stock that have been
sold pursuant to an effective registration statement under the Securities Act or
pursuant to Rule 144 or Rule 144A (or similar successor rules) under such Act
shall be deemed to be outstanding shares of Warrant Stock for any purposes of
this Agreement.
12. REGISTRATION RIGHTS.
12.1 Definitions. As used in this Section 12:
Commission means the Securities and Exchange Commission.
Holder means the Investor and all Persons to whom any Registrable
Securities are transferred in accordance with the provisions hereof. A Holder
shall, for all purposes of this Section 13, unless the context shall otherwise
require, be deemed to hold, at any particular time, all shares of Warrant Stock
issuable upon exercise of the Warrant held of record by such Holder at such
time.
Registered and registration refer to a registration effected by preparing
and filing a registration statement in compliance with the Securities Act and
the declaration or ordering by the Commission of effectiveness of such
registration statement.
Registrable Securities means, at any particular time, all shares of
Warrant Stock issuable upon exercise of the Warrant at such time or issued and
outstanding at such time (and which shall not previously have been sold pursuant
to a registration or Rule 144 or Rule 144A under the Securities Act).
Underwriters' Maximum Number means for any Piggyback Registration, Demand
Registration, or other registration that is an underwritten registration, that
number of securities to which such registration should, in the opinion of the
managing underwriters of such registration in the light of marketing factors, be
limited.
12.2 Demand Registration.
(a) Request for Demand Registration.
(i) Subject to the limitations contained in the following
paragraphs of this Section 12.2, the Holders of 51% or more of all Registrable
Securities outstanding may at any time give to the Company, pursuant to this
clause, (i) a written request for the registration by the Company under the
Securities Act of all or any part of the Registrable Securities of such Holders
(such registration being herein called a "Demand Registration"). Within ten (10)
days after the receipt by the Company of any such written request, the Company
will give written notice of such registration request to all Holders of
Registrable Securities.
(ii) Subject to the limitations contained in the following
paragraphs of this Section 12.2, after the receipt of such written request for a
Demand Registration, (A) the Company will be obligated and required to include
in such Demand Registration all Registrable Securities with respect to which the
Company shall receive from Holders of Registrable Securities, within 30 days
after the date on which the Company shall have given to all Holders a written
notice of registration request pursuant to Section 12.2(a)(i) hereof, the
written requests of such Holders for inclusion in such Demand Registration, and
(B) the Company will use its best efforts in good faith to effect promptly the
registration of all such Registrable Securities. All written requests made by
Holders of Registrable Securities pursuant to this clause (ii) will specify the
number of shares of Registrable Securities to be registered and will also
specify the intended method of disposition thereof. Such method of disposition
shall, in any case, be an underwritten offering if an underwritten offering is
requested by Holders of 51% or more of the Registrable Securities to be included
in such Demand Registration.
(b) Limitations on Demand Registration.
(i) The Holders of Registrable Securities may require the
Company to effect two (2) Demand Registrations; provided that (a) the Company
may not be required to effect any Demand Registrations pursuant to Section
12.2(a) hereof more frequently than once during any twelve (12) month period;
and (b) the Registrable Securities requested to be registered in any Demand
Registration must equal at least 30% of the Registrable Securities.
(ii) Any registration initiated by Holders of Registrable
Securities as a Demand Registration pursuant to Section 12.2(a) hereof shall not
count as a Demand Registration for purposes of Section 12.2(b) (i) hereof unless
and until such registration shall have become effective and all Registrable
Securities specified in the Holders' written request under Section 12(a)(i) of
this Agreement shall have been actually sold pursuant to the registration
statement filed by the Company with the Commission to effect such Demand
Registration.
(iii) The Company shall not be obligated or required to effect
the Demand Registration of any Registrable Securities pursuant to Section
12.2(a) hereof during the period commencing on the date falling 30 days prior to
the Company's estimated date of filing of, and ending on the date 180 days
following the effective date of, any registration statement pertaining to any
underwritten registration initiated by the Company, for the account of the
Company, if the written request of Holders for such Demand Registration pursuant
to Section 12.2(a)(i) hereof shall
have been received by the Company after the Company shall have given to all
Holders of Registrable Securities a written notice stating that the Company is
commencing an underwritten registration initiated by the Company; provided,
however, that the Company will use its best efforts in good faith to cause any
such registration statement to be filed and to become effective as expeditiously
as shall be reasonably possible.
(c) Priority on Demand Registrations. If the managing underwriters
in any Demand Registration shall give written advice to the Company and the
Holders of Registrable Securities to be included in such registration of an
Underwriters' Maximum Number, then: (i) the Company will be obligated and
required to include in such registration that number of Registrable Securities
requested by the Holders thereof to be included in such registration which does
not exceed the Underwriters' Maximum Number, and such number of Registrable
Securities shall be allocated pro rata among the Holders of such Registrable
Securities on the basis of the number of Registrable Securities requested to be
included therein by each such Holder; (ii) if the Underwriters' Maximum Number
exceeds the number of Registrable Securities requested by the Holders thereof to
be included in such registration, then the Company will be entitled to include
in such registration that number of securities which shall have been requested
by the Company to be included in such registration for the account of the
Company and which shall not be greater than such excess; and (iii) if the
Underwriters' Maximum Number exceeds the sum of the number of Registrable
Securities that the Company shall be required to include in such Demand
Registration and the number of securities that the Company proposes to offer and
sell for its own account in such registration, then the Company may include in
such registration that number of other securities which Persons (other than the
Holders as such) shall have requested be included in such registration and which
shall not be greater than such excess. Neither the Company nor any of its
security holders (other than Holders of Registrable Securities) shall be
entitled to include any securities in any underwritten Demand Registration
unless the Company or such security holders (as the case maybe) shall have
agreed in writing to sell such securities on the same terms and conditions as
shall apply to the Registrable Securities to be included in such Demand
Registration.
(d) Selection of Underwriters. If any Demand Registration is an
underwritten offering the investment bankers and managing underwriters in such
registration will be selected by the Company, subject to the approval of Holders
of 51% or more of the Registrable Securities to be included in such registration
(which approval will not be unreasonably withheld or delayed).
12.3 Piggyback Registrations.
(a) Rights to Piggyback.
(i) If (and on each occasion that) the Company proposes to
register any of its securities under the Securities Act either for the Company's
own account or for the account of any of its security holders (each such
registration not withdrawn or abandoned prior to the effective date thereof
being herein called a "Piggyback Registration"), the Company will give written
notice to all Holders of Registrable Securities of such proposal not later than
the earlier to occur of (A) the tenth day following the receipt by the Company
of notice of exercise of any registration rights by any Persons, and (B) 30 days
prior to the anticipated filing date of such Piggyback Registration.
(ii) Subject to the provisions contained in paragraphs (b) and
(c) of this Section 12.3 and in the last sentence of this clause (ii), (A) the
Company will be obligated and required to include in each Piggyback Registration
all Registrable Securities with respect to which the Company shall receive from
Holders of Registrable Securities, within 15 days after the date on which the
Company shall have given written notice of such Piggyback Registration to all
Holders of Registrable Securities pursuant to Section 12.3(a)(i) hereof, the
written requests of such Holders
for inclusion in such Piggyback Registration, and (B) the Company will use its
best efforts in good faith to effect promptly the registration of all such
Registrable Securities. The Holders of Registrable Securities shall be permitted
to withdraw all or any part of the Registrable Securities of such Holders from
any Piggyback Registration at any time prior to the effective date of such
Piggyback Registration. The Company will not be obligated or required to include
any Registrable Securities in any registration effected solely to implement an
employee benefit plan or a transaction to which Rule 145 of the Commission is
applicable.
(b) Priority on Primary Registrations. If a Piggyback Registration
is an underwritten primary registration initiated by the Company, and the
managing underwriters shall give written advice to the Company of an
Underwriters' Maximum Number, then: (i) the Company will be obligated and
required to include in such registration that number of Registrable Securities
which shall have been requested by the Holders thereof to be included in such
registration and which shall not be more than 40% of the Underwriters' Maximum
Number, and such number of Registrable Securities shall be allocated pro rata
among the Holders of such Registrable Securities on the basis of the number of
Registrable Securities requested to be included therein by each such Holder;
(ii) the Company shall be entitled to include in such registration that number
of securities which the Company proposes to offer and sell for its own account
in such registration and which does not exceed the difference between the
Underwriters' Maximum Number and the number of Registrable Securities that the
Company shall be required to include in such registration; and (iii) if the
Underwriters' Maximum Number exceeds the sum of the number of Registrable
Securities which the Company shall be required to include in such registration
and the number of securities which the Company proposes to offer and sell for
its own account in such registration, then the Company may include in such
registration that number of other securities which Persons shall have requested
be included in such registration and which shall not be greater than such
excess.
(c) Priority on Secondary Registrations. If any Piggyback
Registration is an underwritten secondary registration initiated by holders of
the Company's securities, and the managing underwriters shall give written
advice to the Company of an Underwriters' Maximum Number for such registration,
then: (i) the Company will be obligated and required to include in such
registration that number of Registrable Securities which shall have been
requested by the Holders thereof to be included in such registration and which
shall not be more than 40% of the Underwriters' Maximum Number, and such number
of Registrable Securities shall be allocated pro rata among the Holders of such
Registrable Securities on the basis of the number of Registrable Securities
requested to be included therein by each such Holder, (ii) the holders
initiating such Piggyback Registration shall be entitled to include in such
registration that number of securities which they proposed to offer and sell for
their own account and which does not exceed the difference between the
Underwriters' Maximum Number and the number of Registrable Securities which the
Company shall be required to include in such registration; and (i) if the
Underwriters' Maximum Number exceeds the sum of the number of Registrable
Securities which the Company shall be required to include in such registration
and the number of securities to be included in such registration by holders
initiating such registration, then the Company may include in such registration
that number of securities for its own account which shall not be greater than
such excess.
(d) Selection of Underwriters. In any Piggyback Registration, the
Company shall (unless the Company shall otherwise agree) have the right to
select the investment bankers and managing underwriters in such registration.
12.4 Lockup Agreements.
(a) Restrictions on Public Sale by Holders of Registrable
Securities. Each Holder of Registrable Securities, any of whose Registrable
Securities are included in any underwritten registration of the Company's
securities, if the Company or the managing underwriters so request in connection
with such registration, will not, without the prior written consent of the
Company or such underwriters, effect any public sale or other distribution of
any equity securities of the Company, including any sale pursuant to Rule 144,
during the seven (7) days prior to, and during the 180 day period commencing on,
the effective date of such underwritten registration, except in connection with
such underwritten registration; provided that each officer and director of the
Company and each other Person who is also an affiliate of the Company shall
enter into similar agreements.
(b) Restrictions on Public Sale by Company. The Company agrees not
to effect any public sale or other distribution of its equity securities, or any
securities convertible into or exchangeable or exercisable for such equity
securities, during the period commencing on the seventh day prior to, and ending
on the one hundred and eightieth day following, the effective date of any
underwritten Piggyback Registration, except in connection with any such
underwritten registration and except for any offering registered on Form S-8 (or
any successor form).
12.5 Registration Procedures. If (and on each occasion that) the Company
shall become obligated to effect any registration of any Registrable Securities
hereunder, the Company will use its best efforts in good faith to effect
promptly the registration of such Registrable Securities under the Securities
Act and to permit the public offering and sale of such Registrable Securities in
accordance with the intended method of disposition thereof, and, in connection
therewith, the Company, as expeditiously as shall be reasonably possible, will:
(a) prepare and file with the Commission a registration statement
with respect to such Registrable Securities, and use its best efforts in good
faith to cause such registration statement to become and remain effective as
provided herein;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus included in such
registration statement as maybe necessary or advisable to comply in all material
respects with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement or as may
be necessary to keep such registration statement effective and current, but for
no longer than nine (9) months subsequent to the effective date of such
registration;
(c) furnish to each seller of Registrable Securities such number of
copies of such registration statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus included in such
registration statement (including each preliminary prospectus), and such other
documents as any such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities held by such seller;
(d) enter into such customary agreements and take all such other
action in connection therewith as the Holders of 51% or more of the Registrable
Securities being registered reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(e) use its best efforts in good faith to register and qualify the
Registrable Securities covered by such registration statement under such
securities or Blue Sky laws of such jurisdictions as any seller shall reasonably
request and do any and all such other acts and things as may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities held by such seller; provided,
however, that the
Company shall not be required in connection therewith to qualify to do business
or file a general consent to service of process in any such jurisdiction; and
(f) furnish to each prospective seller a signed counterpart,
addressed to the prospective sellers, of (i) an opinion of counsel for the
Company, dated the effective date of the registration statement, and (ii) a
"comfort" letter signed by the independent public accountants who have certified
the Company's financial statements included in the registration statement,
covering substantially the same matters with respect to the registration
statement (and the prospectus included therein) and (in the case of the
"comfort" letter) with respect to events subsequent to the date of the financial
statements, as are customarily covered (at the time of such registration) in
opinions of issuer's counsel and in "comfort" letters delivered to the
underwriters in underwritten public offerings of securities.
12.6 Cooperation by Prospective Sellers.
(a) Each prospective seller of Registrable Securities will furnish
to the Company in writing such information as the Company may reasonably require
from such seller, and otherwise reasonably cooperate with the Company in
connection with any registration statement with respect to such Registrable
Securities.
(b) The failure of any prospective seller of Registrable Securities
to furnish any information or documents in accordance with any provision
contained in this Section 12 shall not affect the obligations of the Company
under this Section 12 to any remaining sellers who furnish such information and
documents unless in the reasonable opinion of counsel to the Company or the
underwriters, such failure impairs or may impair the viability of the offering
or the legality of the registration statement or the underlying offering.
(c) The Holders of Registrable Securities included in any
registration statement will not (until further notice) effect sales thereof
after receipt of telegraphic or written notice from the Company to suspend sales
to permit the Company to correct or update such registration statement or
prospectus; but the obligations of the Company with respect to maintaining any
registration statement current and effective shall be extended by a period of
days equal to the period such suspension is in effect.
(d) At the end of any period during which the Company is obligated
to keep any registration statement current and effective as provided by Section
12.5 hereof (and any extensions thereof required by the preceding paragraph (c)
of this Section 12.6), the Holders of Registrable Securities included in such
registration statement shall discontinue sales of shares pursuant to such
registration statement upon receipt of notice from the Company of its intention
to remove from registration the shares covered by such registration statement
which remain unsold, and such Holders shall notify the Company of the number of
shares registered which remain unsold promptly after receipt of such notice from
the Company.
(e) No Holder shall have any right to obtain or seek an injunction
or other judicial order restraining or otherwise delaying any registration under
Section 12.2 or 12.3 hereof as a result of any controversy or dispute that might
arise with respect to the interpretation or implementation of this Section 12.
12.7 Registration Expenses.
(a) All costs and expenses incurred or sustained in connection with
or arising out of each registration pursuant to Sections 12.2 and 12.3 hereof
(including any registration that is not declared effective by the Commission for
any reason), including, without limitation, all registration and filings fees,
fees and expenses of compliance with securities or Blue Sky laws (including
reasonable fees and disbursements of counsel for the underwriters in connection
with the Blue Sky qualification of Registrable Securities), printing expenses,
messenger, telephone and delivery expenses, fees, and disbursements of counsel
for the Company, fees and disbursements of all independent certified public
accountants (including the expenses relating to the preparation and delivery of
any special audit or "cold comfort" letters required by or incident to such
registration), and fees and disbursements of underwriters (excluding discounts
and commissions), the reasonable fees and expenses of any special experts
retained by the Company of its own initiative or at the request of the managing
underwriters in connection with such registration, the fees and expenses of all
(if any) other Persons retained by the Company, and the fees and disbursement of
one counsel for the selling Holders (all such costs and expenses being herein
called, collectively, the "Registration Expenses"), will be borne and paid by
the Company. The Company will, in any case, pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit and the fees and expenses incurred in connection with the listing of the
securities to be registered on each securities exchange on which similar
securities of the Company are then listed.
(b) The Company will not bear the cost of nor pay for any stock
transfer taxes imposed in respect of the transfer of any Registrable Securities
to any purchaser thereof by any Holder of Registrable Securities in connection
with any registration of Registrable Securities pursuant to this Section 12.
(c) To the extent that Registration Expenses incident to any
registration are, under the terms of this Section 12, not required to be paid by
the Company, each Holder of Registrable Securities included in such registration
will pay all Registration Expenses which are clearly solely attributable to the
registration of such Holder's Registrable Securities so included in such
registration, and all other Registration Expenses not so attributable to one
Holder will be borne and paid by all sellers of securities included in such
registration in proportion to the number of securities so included by each such
seller.
12.8 Indemnification.
(a) Indemnification by Company. The Company will indemnify each
Holder requesting or joining in a registration and each underwriter of the
securities so registered, the officers, directors and partners of each such
Person and each Person who controls any thereof (within the meaning of the
Securities Act) against any and all claims, losses, damages, and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of any material fact contained in any prospectus,
offering circular or other document incident to any registration, qualification
or compliance (or in any related registration statement, notification or the
like) or any omission (or alleged omission) to state therein any 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
promulgated under the Securities Act applicable to the Company and relating to
any action or inaction required of the Company in connection with any such
registration, qualification or compliance, and the Company will reimburse each
such Holder, underwriter, officer, director, partner and controlling Person for
any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such claim, loss, damage or liability arises out of or is
based on any untrue statement or omission based upon written information
furnished to the Company in an instrument duly executed by such Holder,
underwriter, officer, director, partner or controlling Person and stated to be
specifically for use in such prospectus, offering circular or other document.
(b) Indemnification by Each Holder. Each Holder requesting or
joining in a registration will indemnify each underwriter of the securities so
registered, the Company and its officers and directors and each Person, if any,
who controls any thereof (within the meaning of the Securities Act) and their
respective successors in title and assigns against any and all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of any material fact
contained in any prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related registration
statement, notification or the like) or any omission (or alleged omission) to
state therein any material fact required to be stated therein or necessary to
make the statement therein not misleading, and such Holder will reimburse each
underwriter, the Company and each other Person indemnified pursuant to this
paragraph (b) for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action; provided, however, that this paragraph (b) shall apply only
if (and only to the extent that) such statement or omission was made in reliance
upon written information furnished to such underwriter or the Company in an
instrument duly executed by any such Holder and stated to be specifically for
use in such prospectus, offering circular or other document (or related
registration statement, notification or the like) or any amendment or supplement
thereto.
(c) Indemnification Proceedings. Each party entitled to
indemnification pursuant to this Section 12.8 (the indemnified party) shall give
notice to the party required to provide indemnification pursuant to this Section
12.8 (the indemnifying party) promptly after such indemnified party acquires
actual knowledge of any claim as to which indemnity may be sought, and shall
permit the indemnifying party (at its expense) to assume the defense of any
claim or any litigation resulting therefrom; provided that counsel for the
indemnifying party, who shall conduct the defense of such claim or litigation,
shall be acceptable to the indemnified party, and the indemnified party may
participate in such defense at such party's expense; and provided, further, that
the failure by any indemnified party to give notice as provided in this
paragraph (c) shall not relieve the indemnifying party of its obligations under
this Section 12.8 except to the extent that the failure results in a failure of
actual notice to the indemnifying party and such indemnifying party is damaged
solely as a result of the failure to give notice. No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation. The reimbursement required by this
Section 12.8 shall be made by periodic payments during the course of the
investigation or defense, as and when bills are received or expenses incurred.
12.9 Contribution in Lieu of Indemnification. If the indemnification
provided for in Section 12.8 hereof is unavailable to a party that would have
been an indemnified party under any such section in respect of any losses,
claims, damages or liabilities (or actions in respect thereof) referred to
therein, then each party that would have been an indemnifying party thereunder
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof). The relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or
such indemnified party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company agrees
that it would not be just and equitable if contribution pursuant to this Section
12.9 were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to above in
this Section 12.9. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this Section 12.9 shall include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
12.10 Rule 144 Requirements. From time to time after the earlier to occur
of (a) the ninetieth day following the date on which there shall first become
effective a registration statement filed by the Company under the Securities
Act, or (b) the date on which the Company shall register a class of securities
under Section 12 of the Exchange Act, the Company will make every effort in good
faith to make publicly available and available to the Holders of Registrable
Securities, pursuant to Rule 144 of the Commission under the Securities Act,
such information as shall be necessary to enable the Holders of Registrable
Securities to make sales of Registrable Securities pursuant to that Rule. The
Company will furnish to any Holder of Registrable Securities, upon request made
by such Holder at any time after the undertaking of the Company in the preceding
sentence shall have first become effective, a written statement signed by the
Company, addressed to such Holder, describing briefly the action the Company has
taken or proposes to take to comply with the current public information
requirements of Rule 144. The Company will, at the request of any Holder of
Registrable Securities, upon receipt from such Holder of a certificate
certifying (i) that such Holder has held such Registrable Securities for a
period of not less than three (3) consecutive years, (ii) that such Holder has
not been an affiliate (as defined in Rule 144) of the Company for more than the
preceding three (3) months, and (iii) as to such other matters as may be
appropriate in accordance with such Rule, remove from the stock certificates
representing such Registrable Securities that portion of any restrictive legend
which relates to the registration provisions of the Securities Act.
12.11 Participation in Underwritten Registrations. No Person may
participate in any underwritten registration pursuant to this Section 12 unless
such Person (a) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Persons entitled, under the
provisions hereof, to approve such arrangements, and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents as are customary for such underwritten registrations and
reasonably required by the terms of such underwriting arrangements. Any Holder
of Registrable Securities to be included in any underwritten registration shall
be entitled at any time to withdraw such Registrable Securities from such
registration prior to its effective date in the event that such Holder shall
disapprove of any of the terms of the related underwriting agreement.
12.12 Miscellaneous.
(a) No Inconsistent Agreements. The Company will not, at any time
after the date hereof, enter into any agreement or contract (whether written or
oral) with respect to any of its securities which prevents the Company from
complying in any respect with the registration rights granted by the Company to
Holders of Registrable Securities hereunder.
(b) Amendments and Waivers. The provisions of this Section 12
including the provisions of this subparagraph (b), may not be amended, modified,
or supplemented, and any
waiver or consent to or any departure from any of the provisions of this Section
12 may not be given and shall not become or be effective, unless and until (in
each case) the Company shall have received the written consent of the Holders of
51% or more of all Registrable Securities for any such amendment, modification,
supplement, waiver or consent.
(c) Registrable Securities Held by the Company. Whenever the consent
or approval of Holders of Registrable Securities is required pursuant to this
Section 12, Registrable Securities held by the Company shall not be counted in
determining whether such consent or approval was duly and properly given by such
Holders.
(d) Term. The agreements of the Company contained in this Section 12
shall continue in full force and effect so long as any Holder holds any
Registrable Securities.
13. REGISTRATION AND TRANSFER OF SECURITIES.
13.1 Exchange of Warrant. On surrender for exchange of any Warrant,
properly endorsed, to the Company, the Company at its expense will issue and
deliver to or on the order of the holder thereof a new warrant or warrants of
like tenor, in the name of such holder or, upon payment by such holder of any
applicable transfer taxes, as such holder may direct, calling in the aggregate
on the face or faces thereof for the number of shares of Common Stock called for
on the face or faces of the Warrant so surrendered. Such new Warrant shall be
exercisable for Common Stock. The Company will pay shipping and insurance
charges, from and to each holder's principal office, upon any transfer, exchange
or conversion provided for in this Section 13.1.
13.2 Transfer, Exchange and Conversion of Common Stock and Series C
Preferred Stock. The Company shall keep at its principal office a register in
which shall be entered the names and addresses of the holders of the Common
Stock and Series C Preferred Stock and the particulars of the respective Common
Stock and Series C Preferred Stock held by them and of all transfers or
conversions of Common Stock and Series C Preferred Stock. Upon surrender at such
office of any certificate representing shares of Common Stock or Series C
Preferred Stock for registration of exchange or (subject to compliance with the
applicable provisions of this Agreement) transfer or conversion, the Company
shall issue, at its expense, one or more new certificates, in such denomination
or denominations as may be requested, for shares of Common Stock or Series C
Preferred Stock, as may be requested, and registered as such holder may request.
Any certificate representing shares of Common Stock or Series C Preferred Stock
surrendered for registration of transfer shall be duly endorsed, or accompanied
by a written instrument of transfer duly executed by the holder of such
certificate or his attorney duly authorized in writing. The Company will pay
shipping and insurance charges, from and to each holder's principal office, upon
any transfer, exchange or conversion provided for in this Section 13.2.
13.3 Registration, Transfer and Exchange of Notes.
(a) The Company shall keep at its principal office a register in
which shall be entered the names and addresses of the registered holders of
Notes issued by it and particulars of the respective Notes held by them and of
all transfers of such Notes. References to the "holder" or "holder of record" of
any Note shall mean the payee thereof unless the payee shall have presented such
Note to the Company for transfer and the transferee shall have been entered in
said register as a subsequent holder, in which case the terms shall mean such
subsequent holder. The ownership of any of the Notes shall be proven by such
register.
(b) The holder of any of the Notes may at any time and from time to
time prior to maturity or prepayment thereof in full surrender any Note held by
it for exchange or transfer at said office of the Company. Within a reasonable
time thereafter and without expense (other than transfer taxes, if any) to such
holder, the Company shall issue, at its expense, in exchange therefor another
Note or Notes, dated the date to which interest has been paid on the surrendered
Note, for the same aggregate principal amount as the unpaid principal amount of
the Note or Notes so surrendered, having the same maturity and rate of interest,
containing the same provisions and subject to the same terms and conditions as
the Note or Note so surrendered. Each such new Note shall be in the
denominations and registered in the name of such person or persons as the holder
of such surrendered Note or Notes may designate in writing, and such exchange
shall be made in a manner such that no additional or lesser amount of principal
or interest shall result. The Company will pay shipping and insurance charges,
from and to each holder's principal office, involved in the exchange or transfer
of any Note.
(c) Each Note issued hereunder, whether originally or in
substitution for, or upon transfer or exchange of, any Note shall be registered
on the date of execution thereof by the Company. The registered holder of record
shall be deemed to be the owner of the Note for all purposes of this Agreement.
All notices given hereunder to the holder of record shall be deemed validly
given if given in the manner specified in Section 16 hereof.
13.4 Replacement of Securities. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Note or certificate evidencing Common Stock, Series C Preferred Stock or the
Warrant, and, in the case of any such loss, theft, or destruction, upon delivery
of an indemnity bond in such reasonable amount as the Company may determine (or,
in the case of any Security or share of Warrant Stock held by the Investor or
another institutional holder, upon delivery of an unsecured indemnity agreement
from the Investor or such other holder reasonably satisfactory to the Company),
or, in the case of any such mutilation, upon the surrender of such Security or
stock certificate for cancellation to the Company at its principal office, the
Company, at its own expense, will execute and deliver, in lieu thereof, a new
Note, certificate or Warrant of like tenor, dated in the case of any Note so
that there will be no loss of interest accrual. Any Security in lieu of which
any such new security has been so executed and delivered by the Company shall
not be deemed to be outstanding for any purpose of this Agreement.
14. RESTRICTIONS ON TRANSFER.
14.1 General Restriction. Subject to Section 5 of this Agreement, the
Note, the Series C Preferred Stock, the Warrant and the Warrant Stock, and all
securities issued in exchange therefor or upon conversion or exercise thereof
(the "Restricted Securities"), shall be transferable only upon satisfaction of
the conditions set forth in this Section 14.
14.2 Notice of Transfer. Prior to any transfer of any Restricted
Securities, the holder thereof shall be required to give written notice to the
Company describing in reasonable detail the manner and terms of the proposed
transfer and the proposed transferee (the "Transfer Notice"), accompanied by (a)
an opinion of counsel reasonably acceptable to the Company, that such transfer
may be effected without registration of such Restricted Securities under the
Securities Act, and (b) the written agreement of the proposed transferee to be
bound by all of the provisions of Section 13.
14.3 Restrictive Legends. Except as otherwise permitted by this Section
14, each Note shall bear the legend substantially similar to the legend set
forth on the Note attached as Exhibit A hereto and each certificate evidencing
Series C Preferred Stock, the Warrant and each certificate
evidencing Warrant Stock shall bear the legend substantially similar to that set
forth on the Warrant attached as Exhibit B hereto.
14.4 Termination of Restrictions. The restrictions imposed by this Section
14 upon the transferability of Restricted Securities shall terminate as to any
particular Restricted Securities when such Restricted Securities shall have been
effectively registered under the Securities Act or sold pursuant to Rule 144 or
Rule 144A under the Securities Act. Whenever any of such restrictions shall
terminate as to any Restricted Securities, the holder thereof shall be entitled
to receive from the Company, at the Company's expense, a new Warrant or Note or
certificates evidencing Series C Preferred Stock or Warrant Stock without such
legends.
15. EXPENSES; INDEMNITY.
(a) If the transactions contemplated by this Agreement shall be
consummated, the Company hereby agrees to pay on demand all reasonable
out-of-pocket expenses incurred by the Investor in connection with such
transactions hereunder, and in connection with any amendments or waivers
(whether or not the same become effective) hereof or thereof and all
out-of-pocket expenses incurred by any holder of any Security issued hereunder
in connection with the enforcement of any rights hereunder, under any other
Financing Agreement, under the Articles of the Company, or with respect to any
Security, including without limitation (i) the cost and expenses (including the
Investor's reasonable attorney's fees and expenses) of negotiating, preparing,
and duplicating this Agreement, each Financing Agreement, the Related Agreements
and the Securities; (ii) the cost of delivering to each Investor's principal
office, the Securities sold to the Investor hereunder and any Securities
delivered to the Investor in exchange therefor or upon any exercise, conversion
or substitution thereof; (iii) each Investor's reasonable expenses related to
the business of the Company, including reasonable travel, food, and lodging
expenses incurred to attend meetings related to the business of the Company and
meetings of the Company's Board of Directors or expenses to exercise inspection
rights provided in this Agreement; (iv) all taxes (other than taxes determined
with respect to income), including any recording fees and filings fees and
documentary stamp and similar taxes at any time payable in respect of this
Agreement, any other Financing Agreement, the Related Agreements or the issuance
of any of the Securities; and (v) the reasonable fees and disbursements of
counsel for any holder of Restricted Securities in connection with all opinions
rendered by such counsel pursuant to Section 14 hereof.
(b) The Company hereby further jointly and severally agrees to indemnify,
exonerate and hold the Investor and each of the Investor's stockholders,
partners, officers, directors, members, managers, employees and agents free and
harmless from and against any and all actions, causes of action, suits, losses,
liabilities, damages and expenses, including, without limitation, reasonable
attorneys' fees and disbursements, incurred in any capacity by any of the
indemnitees as a result of or relating to (a) any transaction financed or to be
financed in whole or in part directly or indirectly with proceeds from the sale
of any of the Securities, or (b) the execution, delivery, performance, or
enforcement of this Agreement (including, without limitation, any failure by the
Company to comply with any of its covenants hereunder), or any instrument
contemplated hereby or thereby, except for any such indemnified liabilities
arising from any indemnitee's gross negligence or willful misconduct.
(c) The Company hereby indemnifies the Investor against and agrees that it
will hold the Investor harmless from any claim, demand, or liability for any
broker's, finder's or placement fees or incentive fees alleged to have been
incurred by it in connection with the transactions contemplated by this
Agreement, the other Financing Agreements, or the Related Agreements.
(d) Except to the extent otherwise expressly provided herein, the Company
shall pay on demand interest at a rate of 10% per annum (which, to avoid double
counting, shall not apply to the extent the Company is obligated to pay any
other default interest under this Agreement or any Financing Agreement) on all
overdue amounts payable under this Agreement until such amounts shall be paid in
full.
(e) The obligations of the Company under this Section 15 shall survive
payment or transfer of the Securities or shares of Warrant Stock.
16. NOTICES.
Any notice of other communication in connection with this Agreement, any
other Financing Agreement or the Securities shall be deemed to be delivered if
in writing (or in the form of a telex or telecopy) addressed as provided below
and if either (a) actually delivered, telexed, or telecopied to said address or
(b) in the case of a letter, three business days shall have elapsed after the
same shall have been deposited in the United States mails, postage prepaid and
registered or certified:
If to the Company, to it to the attention of the Chief Executive Officer,
or at such other address as such Person shall have specified by notice actually
received by the addressor; or
If to the Investor, then to each Investor's address set forth on page 1
hereof, to the attention of its President or Manager, or at such other address
as the Investor shall have specified by notice actually received by the
addressor; or
If to any other holder of record of any Security, to it at its address set
forth in the applicable register referred to in Section 13 hereof.
17. SURVIVAL AND TERMINATION OF COVENANTS.
All covenants, agreements, representations and warranties made herein or
in any other document referred to herein or delivered to the Investor pursuant
hereto shall be deemed to have been relied on by the Investor, notwithstanding
any investigation made by the Investor or on the Investor's behalf, and shall
survive the execution and delivery to the Investor hereof and of the Securities
and shares of Warrant Stock.
18. AMENDMENTS AND WAIVERS.
Any term of this Agreement, the Securities, the other Financing Agreements
or any of the Related Agreements may be amended and the observance of any term
of this Agreement may be waived (either generally or in a particular instance
and either retroactively or prospectively) only with the written consent of the
Company and the Majority Holders with respect to any provision of this Agreement
which by its terms operates for the benefit of such holders; provided, however,
that (a) without the prior written consent of each holder of a Warrant and
Warrant Stock with respect to whom such amendment or waiver is made, no such
amendment or waiver shall extend the scheduled date of any required repurchase
of such respective Securities held by such holder or reduce the repurchase price
payable thereon, (b) without the prior written consent of each holder of Notes
with respect to whom such amendment or waiver is made, no such amendment or
waiver shall extend the fixed maturity or reduce the principal amount of, or
reduce the rate or extend the time of payment of interest on, or reduce the
amount or extend the time of payment of any principal or premium payable on any
prepayment of, any Note with respect to whom such amendment or waiver is made,
(c) without the written consent of the aforesaid percentage of Securities,
reduce the
aforesaid percentage of Securities the holders of which are required to consent
to any such amendment or waiver, or (d) without the written consent of the
percentage of the holders of each Security required to exercise the remedies
provided in Section 10.2 hereof, increase such required percentage. Any
amendment or waiver effected in accordance with this Section 18 shall be binding
upon the Company and each holder of any Security sold pursuant to this
Agreement.
19. MISCELLANEOUS.
(a) Accounting Principles. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, the same shall be done in accordance with GAAP. As
long as the Company shall have any Subsidiary, the Company's financial
statements and other financial requirements under this Agreement shall be
reported on a consolidated basis.
(b) Integration. This Agreement, the Financing Agreements and the Related
Agreements set forth the entire understanding of the parties hereto with respect
to the transactions contemplated hereby and supersede any prior written or oral
understandings with respect thereto.
(c) Severability. The invalidity or unenforceability of any term or
provision hereof shall not affect the validity or enforceability of any other
term or provision hereof.
(d) Headings. The headings in this Agreement are for convenience of
reference only and shall not alter or otherwise affect the meaning hereof.
(e) Counterparts; Facsimile Signature. This Agreement may be executed in
any number of counterparts which together shall constitute one instrument.
Signatures to this Agreement or any of the other Financing Agreements or Related
Agreements may be given by facsimile or other electronic transmission, and such
signatures shall be fully binding on the party sending the same.
(f) Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of Illinois without
giving effect to any choice or conflict of law provision or rule that would
cause the application of the domestic substantive laws of any other State.
(g) Binding Effect. This Agreement, the other Financing Agreements and the
Related Agreements shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns.
(h) Publicity. Following its purchase of the Securities the Investor, at
its sole expense, may place in such publications as it may select such
"tombstone" or other informational announcements, advertisements, or articles as
it may deem appropriate describing the transactions concluded hereunder.
(i) Survival. All representations and warranties contained in this
Agreement, any other Financing Agreement, and the Related Agreements shall
survive the Closing.
(j) Subordination. The Investor agrees that it will subordinate its rights
under the Note to any subsequent financing on terms reasonably satisfactory to
the Investor.
20. WAIVER OF JURY TRIAL.
TO THE FULLEST EXTENT PERMITTED BY LAW, AS SEPARATELY BARGAINED-FOR
CONSIDERATION TO THE INVESTOR, THE COMPANY HEREBY WAIVES RIGHT TO TRIAL BY JURY
(WHICH THE INVESTOR ALSO WAIVE) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM
OF ANY KIND ARISING OUT OF OR RELATING TO ANY OF THIS AGREEMENT, THE FINANCING
AGREEMENTS, THE RELATED AGREEMENTS, THE SECURITIES OR THE INVESTOR'S CONDUCT IN
RESPECT OF ANY OF THE FOREGOING. THE COMPANY AND THE INVESTOR HEREBY EXPRESSLY
ACKNOWLEDGE THE INCLUSION OF THIS JURY TRIAL WAIVER THROUGH THE INITIALS OF
THEIR DULY AUTHORIZED REPRESENTATIVES:
21. RIGHTS OFFERING.
On or before the date nine months after the Closing, the Company shall use
reasonable efforts to register a rights offering with the Commission and to
offer rights to stockholders other than Affiliates of the Company and the
Investor to purchase up to 15 million (15,000,000) shares of Common Stock at a
price of $.04 per share, pro rata according to their ownership of Common Stock.
The Investor agrees that it will cooperate with the Company in such rights
offering and not take any action intended to prevent the consummation thereof.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, this Securities Purchase Agreement has been duly
executed as of the day and year specified at the beginning hereof.
BPI PACKAGING TECHNOLOGIES, INC.
By: /s/ C. Xxxx Xxxxxxxxx
----------------------------
Title: Chairman and Chief Executive Officer
DGJ, L.L.C.
By: /s/ Xxxx X. Ediden
----------------------------
Title: President
Schedule 4.4
Governmental Approvals
1. The Company will amend its Certificate of Incorporation to increase the
number of its authorized shares of Common Stock to One Hundred Fifty Million
(150,000,000) shares, provided that stockholder approval for such increase is
obtained.
2. The Company will file a Form D federally for an exemption from
securities registration in connection with the issuance of the Warrant and Note
as contemplated in the Agreement.
3. The Company intends to file a preliminary proxy with the Securities and
Exchange Commission to seek stockholder approval to amend its Certificate of
Incorporation to authorize additional shares of Common Stock for reservation and
issuance of the shares underlying the Warrant.
4. Any loan transaction in the Commonwealth of Massachusetts in which the
interest rate and other charges and fees exceeds 20% per annum requires a filing
of notice with the Attorney General of the Commonwealth of Massachusetts.
5. Approval under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976
may be required upon exercise of the Warrant.
Schedule 4.5(b)
Stock, Rights, Options, Warrants, Etc.
Warrants
1. Warrant issued to Newport Capital Partners to purchase up to 109,422 share of
the Company's Common Stock at a price of $1.10 per share exercisable until
November 2002.
2. Warrant issued to CIT Group/Equipment Financing, Inc. to purchase up to
200,000 shares of the Company's Common Stock at a price of $1.25 per share
exercisable until June 30, 2001.
3. Upon the closing of and as commission for the transaction contemplated under
this Agreement, the Company shall issue to Global Broker Systems, Inc. a warrant
to purchase up to 500,000 shares of the Company's shares of Common Stock at an
exercise price of $0.20 per share exercisable until 48 months from the closing
date of this Agreement.
4. Warrants to purchase up to an aggregate of 1,767,000 shares of the Company's
Common Stock at an exercise price of $1.25 per share and expiration dates from
February 19, 2001 to June 18, 2001 were issued to 14 investors in a private
placement ("Private Placement Warrants"). Pursuant to the terms of the Private
Placement Warrants, in the event that the Company announces the receipt of a
contract for the purchase of goods and/or services resulting in revenues to the
Company of $5,000,000 or more, then the exercise price of such Private Placement
Warrants shall be reduced to $1.05 per share for a period of 15 days after such
announcement. The Company has been informed by the placement agent in the
foregoing private placements that the exercise price of the warrants issued to
Xxxxxx Xxxxx, one of the investors therein, to purchase up to 283,333 shares of
Common Stock may be at the election of Xx. Xxxxx adjusted to equal the exercise
price of any warrants issued thereafter.
5. See Schedule 4.14, Item 6.
Options
As of June 30, 1998, there were outstanding options to purchase 621,917
shares of Common Stock granted under the Company's 1990, 1993 and 1996 stock
option plans.
Schedule 4.5(c)
Reservation of Shares
As of the date hereof, the Company's authorized shares are insufficient
for issuance of all of the shares upon exercise of the Warrant (the "Warrant
Shares") and, thus, the issuance of all the Warrant Shares is subject to and
conditioned upon approval by the Company's stockholders of an amendment to the
Company's Certificate of Incorporation, authorizing additional shares of Common
Stock, of which there can be no assurance of approval.
Schedule 4.6
Subsidiaries
The Company has two (2) wholly-owned subsidiaries: Market Media, Inc.
and RC America, Inc. The Company has suspended operations of each of the
subsidiaries.
Schedule 4.7(a)(i)
Financial Statements
See attached.
Schedule 4.7(a)(ii)
Pro Forma Balance Sheet
See attached.
Schedule 4.7(a)(iii)
Projections
See attached.
Schedule 4.8
Material Adverse Change
The Company is in default of its obligations with respect to many of its
secured and unsecured creditors (See Schedule 4.14 and Schedule 4.16)
Schedule 4.10
Certain Developments
None.
Schedule 4.11
Intellectual Property Rights
None.
Schedule 4.13
Assets Used in Business and Not Owned by Company
See attached.
Schedule 4.14
Litigation and Other Proceedings
1. Attached is a list of credit (secured and unsecured) litigation against
the Company. Additionally, a Statement of Small Claim and Notice of Trial
was filed on December 16, 1998 by Piping Systems, Inc. for unpaid invoice
totaling $135.00 for services performed on the Company's fire protection
system.
2. Xxxxxx X. Xxxxxxxxx, though his attorney, has sent correspondence to the
Company suggesting that he may file a lawsuit against the Company past due
severance pay equal to two years' base salary allegedly owed him by the
Company upon his resignation. As of the date hereof, no claim has been
filed by Xx. Xxxxxxxxx against the Company.
On June 29, 1998, the Company sent written notice to Xxxxxx Xxxxxxxxx
proposing to terminate his employment with the Company for "cause". Xx.
Xxxxxxxxx sent a letter the subsequent day disputing the termination but
resigning as President and Chairman of the Company. Xx. Xxxxxxxxx'x
employment agreement provides for the payment of five (5) years' base
salary if his employment is terminated without "cause" as defined in the
employment agreement.
3. Xxxxxxx X. Xxxx, Administratrix of the Estate of Xxxx X Xxxx, filed a
complaint against the Company on or about December 1997. The plaintiff,
the administratrix of a former temporary employee of the Company, has
alleged counts of wrongful death, conscious pain and suffering, gross
negligence and willful, wanton and reckless conduct relating to an
accident which occurred during Xx. Xxxx'x employment. The plaintiff
alleges damages of up to $3,000,000.00. The Company has a Commercial
General Liability Policy with The United States Fire Insurance Company
with a per occurrence limit of $1,000,000. United States Fire Insurance
Company has retained counsel for the Company to defend against the
plaintiffs claims.
5. Newport Capital Partners ("Newport") has sent a letter to the Company
stating that upon the closing of the transaction contemplated under this
Agreement, Newport will be entitled to receive from the Company for
financial advisory service rendered a fee of 1% of the gross proceeds of
line of credit provided.
6. See also Schedule 4.15.
7. The Company entered into an agreement with each of the Brantrock Group
("Brantrock") and Percival Trading S.P. (together with Brantrock, the
"Financial Advisors") pursuant to which the Financial Advisors would
provide financial advisory services to the Company. The Financial
Advisors each claim that pursuant to terms of their respective
agreements, they are each owed options to purchase the greater of (i)
1,000,000 shares of Common Stock, or (ii) 5% of the number of fully
diluted shares of Common Stock outstanding at
the time of the exercise of such options. The Company disputes such claims
and believes that it does not owe any options to the Financial Advisors.
As of the Closing Date, the Company will have entered into a settlement
agreement with Brantrock in which Brantrock releases the Company from any
further duties, liabilities or obligations to Brantrock or any of the
other Warrant Holders (as defined in the Settlement Agreement by and
between Brantrock and the Company). In return, the Company agrees to pay
Brantrock an amount equal to $100,000 in installments and to issue a
warrant to Brantrock to purchase up to 5,000,000 shares of Common Stock at
a price of $.04 per share, subject to adjustment according to the terms of
such warrant, as set forth in the letter attached hereto.
8. The Company has received a letter from an attorney representing Xxxxxx
Xxxxxxx stating that Xx. Xxxxxxx suffered injuries when she tripped and
fell on a raised advertisement tile which the Company may have installed
at a Win Xxxxx store in Georgia. Although the Company believes that it is
not responsible for the injuries incurred by Xx. Xxxxxxx, it has insurance
in place which covers approximately $6,000,000 per personal injury claim.
9. The Company has received correspondence from Lehmacher, a German-based
manufacturing entity, stating that the Company owes Lehmacher
approximately 300,000 deutsche marks, the balance due from the sale of
machinery to the Company. The Company is currently inquiring with
Lehmacher into the substance of such a claim but believes that it owes,
at the most, 166,000 deutsche marks is due, which has been recognized
under accrued expenses in the Company's Financial Statements. The
balance represents the amount allegedly due for purchase commitment for
machinery and parts.
13
Schedule 4.15
Taxes
The Company has received a Notice of Assessment from the Massachusetts
Department of Revenue of a tax liability in the amount of approximately $150,000
resulting from sales tax assessed on the Company's purchase of manufacturing
equipment from 1992 to 1994. The Company believes that it does not owe such tax
and intends to dispute this notice. Additionally, the Company believes that it
has not yet filed a sales tax return for its fiscal year 1997.
The Company has not yet filed its federal and state income tax reports for
its Fiscal Year 1998. The Company did not realize income for its Fiscal Year
1998 and, therefore, believes that it will not incur any fines for its late
filing.
Schedule 4.16
Defaults
1. The Company is in default with respect to its obligations with many of its
secured and unsecured creditors (See Schedule 4.14).
2. The Company is also in default with respect to its obligations under all
of the leases listed in Schedule 4.13 except with regard to the Citicorp
Lease referenced therein.
3. The Company is in violation of the terms of certain of its previous
private placements to file within a specified term a registration
statement with the Securities and Exchange Commission relating to the
registration of the shares of Common Stock (the "Shares") and shares of
Common Stock underlying warrants (the "Warrant Shares") issued in such
private placements. The Shares and the Warrant Shares issued in such
private placements totaled 6,641,125 and 1,767,000, respectively.
4. The Company currently owes $67,517.37 in overdue premiums to Harvard
Pilgrim Healthcare. The Company has reached a verbal agreement with
Harvard Pilgrim Healthcare to pay down the overdue balance in monthly
installments.
5. The Company currently owes overdue premium payments of approximately
$14,728 to First Union for Workers Compensation insurance. The Company is
currently sending weekly payments of approximately $2,500.00 to First
Union to pay down all past moneys owed and believes that all overdue
premium amounts will be made paid in full in approximately one month.
Schedule 4.20
Broker's Fees
1. Upon the closing of and as commission for the transaction contemplated
under this Agreement (the "Closing"), the Company shall pay or issue to Global
Broker Systems, Inc. the following:
a) $200,000 in cash, $100,000 payable on the closing date and
$100,000 payable in 16 equal weekly installments; and
b) A warrant to purchase up to 500,000 shares of the Company's
shares of Common Stock at an exercise price of $0.20 per share
at any time for a period of up to 48 months from the closing
date.
2. Newport Capital Partners ("Newport") has sent a letter to the Company
stating that upon the Closing, Newport will be entitled to receive from the
Company for financial advisory services rendered a fee of 1% of the gross
proceeds of the line of credit provided.
Schedule 4.21
Environmental Matters
Although the Company has not conducted any environmental investigations or
studies relating to its premises, the Company has not received any notices from
any governmental agency that it is not in compliance with Environmental Laws.
By way of information, the following documents have been forwarded to the
Investor for its review:
Annual Source Registration 1992 for BPI Environmental, Inc. conducted
by Woodman Engineering, Inc.
BWP AQ 02 Major and Non-Major Comprehensive Plan Approval Application.
City of Taunton Industrial User Permit.
Schedule 4.25
Accounts Receivable
None.
Schedule 4.26
Contracts and Commitments
(i) (a) The Company entered into an employment agreement in 1993 with C. Xxxx
Xxxxxxxxx which expires on June 30, 1999.
(b) See also Schedule 4.14.
(c) The Company entered into an employment arrangement by letter
agreement with X. Xxxxx in February 1997 pursuant to which the Company
agreed to pay Xx. Xxxxx $150,000 per annum and issued to Xx. Xxxxx
options to purchase up to 25,000 shares of Common Stock at $1.05 per
share to be issued upon Xx. Xxxxx'x acceptance of the employment letter.
Furthermore, the Company agreed to grant to Xx. Xxxxx options to purchase
up to 75,000 shares of Common Stock at $1.25 per share on the one year
anniversary date of the letter agreement if Xx. Xxxxx met certain
performance goals. The letter agreement stated that the Company would
enter into a "Key Management Employee" contract with Xx. Xxxxx which
would provide for 24 months of full salary if Xx. Xxxxx was terminated as
a result of a change in control of the Company, but would provide no
severance pay if Xx. Xxxxx was terminated for cause. The Company never
entered into a Key Management Agreement with Xx. Xxxxx and the Company
has terminated Xx. Xxxxx'x employment. The Company believes that Xx.
Xxxxx is not entitled to any options or any other consideration under
such letter arrangement.
(ii) The Company has received an invoice in the amount of $300,000 from Solway
International LTD regarding purchase of a Uteco Usimeca Centre Surface
Slitter Rewinder.
(iii) The Company has entered into supply agreements with various customer
pursuant to which the Company will provide its HANDI-SAC(TM) product to
such customers as indicated on the attached list.
(iv) See the attached BPI Employee Handbook and the Administrative Services
Agreement with Automatic Data Processing Prototype 401(k) Plan.
(v) See Exhibit G of the Securities Purchase Agreement and Schedule 4.13.
(vi) None.
(vii) In August 1998, the Company entered into an agreement with the Patriot
Funding Division of United Credit Corporation ("Patriot") pursuant to
which Patriot provided for the factoring of the receivables of the
Company and the borrowing of additional funds on behalf of the Company.
(viii) None.
20
Schedule 4.29
Insurance
1. See attached.
2. See schedule 4.15, Item 4 and Item 5.
Schedule 4.30
Related Agreements
o Promissory Note signed by BPI Technologies, Inc. ("BPI") in favor of
DGJ, L.L.C. ("DGJ")
o Common Stock Purchase Warrant
o Equipment Lease by and between BPI and DGJ
o Security Agreement between BPI and DGJ
o Patent and Trademark Security Agreement between BPI and DGJ
o Landlord's Waiver/Estoppel
o Fina Oil and Chemical Company ("Fina") Settlement Agreement
o Fina Subordination Agreement
o Equistar Chemicals, LP ("Equistar") Settlement Agreement
o Equistar Subordination Agreement
o Settlement Agreement for each secured creditor of record
o General Mutual Release for each secured creditor of record
o Employment Agreement between BPI and Beresford
o Employment Agreement between BPI and Nurse
o Employment Agreement between BPI and Xxxxxxx
o Employment Agreement between BPI and Koehlinger
o Consulting Agreement between BPI and Xxxxxx
o Factoring Agreement
o Inventory Guaranty Agreement
o Authorization Certificate for Franklin Capital Corporation ("Franklin")
o Xxxx of Sale and Assignment for each lessor
o Security Agreement between Franklin and BPI
o Accounts Validity Agreement
o Promissory Note signed by BPI in favor of Franklin
o Pledge Agreement with C. Xxxx Xxxxxxxxx
o Agreement between C. Xxxx Xxxxxxxxx, Xxxx Xxxxxx and DGJ pertaining to
Voting Matters.
Schedule 7.10(h)
Indebtedness Under Agreements
None.
Schedule 7.26
Conflicts of Interest
None.
EXHIBIT A
PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND SHALL NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT. FURTHERMORE, THIS NOTE
CAN BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE SECURITIES PURCHASE AGREEMENT (AS HEREINAFTER DEFINED), A
COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF THE COMPANY AND WILL BE FURNISHED WITHOUT CHARGE TO THE HOLDER OF THIS
NOTE UPON WRITTEN REQUEST.
No. N-1
SECURED NOTE DUE January 27, 2004
$3,200,000 January 27, 1999
BPI Packaging Technologies, Inc., a Delaware corporation (the "Company"), for
value received, hereby promises to pay to the order of DGJ, L.L.C. ("Investor"),
or registered assigns the principal amount of Three Million Two Hundred Thousand
Dollars ($3,200,000) or registered dollars on February 1, 2004, or the earlier
occurrence of one of the events set forth in Sections 3.1 (b) through (f) of the
Securities Purchase Agreement dated as of the date hereof, between the Company
and the Investor (the "Securities Purchase Agreement"), (or earlier whether by
acceleration or otherwise). The Company also agrees to pay interest on the
unpaid principal amount hereof from the date hereof until such principal amount
shall have become due and payable (whether at maturity or otherwise) at the rate
of 6% per annum (computed on the basis of actual number of days elapsed and a
360-day year). Interest shall be payable monthly in arrears on the first
business day of each month, commencing March 1, 1999, and at maturity. The
Company also agrees to pay, on demand, interest at the rate of 15% per annum on
any overdue principal and, to the extent permitted by applicable law, any
overdue interest, until the obligation of the Company with respect to the
payment thereof shall be discharged. In the event that all or any portion of the
principal amount of the Note is repaid prior to maturity, regardless of whether
such repayment is a voluntary prepayment or results from the exercise of the
Investor's remedies pursuant to the Securities Purchase Agreement, such
prepayment shall not include a prepayment premium.
All payments of principal and interest hereof shall be made in lawful money of
the United States of America upon presentation hereof to the account of the
holder hereof at the principal office of Investor at 000 Xxxxxxx Xxxxxx, Xxxxx
000, Xxxxxxxx Xxxx, Xxxxxxxx 00000, or at such other place as the holder hereof
shall have designated to the Company in writing.
This Note is the Note of the Company for $3,200,000 in original authorized
principal amount issued pursuant to the Securities Purchase Agreement. The
holder of this Note is entitled to enforce the provisions of such Securities
Purchase Agreement and Exhibits thereto and to enjoy the benefits thereof. This
Note is secured pursuant to a Security Agreement dated as of the date hereof,
executed and delivered by the Company pursuant to the Securities Purchase
Agreement.
The Company may at its election prepay this Note, in whole or in part, and the
maturity hereof may be accelerated by the holder of this Note or by holders of a
percentage of the Notes outstanding following an Event of Default, all as
provided in such Securities Purchase Agreement, to which reference is made for
the terms and conditions of such provisions as to prepayment and acceleration.
Transfer of this Note is registrable on the note register of the Company upon
presentation at the principal office of the Company accompanied by a written
instrument of transfer in form satisfactory to the Company duly executed by, or
on behalf of, the holder hereof. This Note may also be exchanged at such office
for one or more Notes in any authorized denominations (multiples of $50,000.00),
as requested by the holder, of a like aggregate unpaid principal amount.
Prior to due presentment for registration of transfer, the Company and any agent
of the Company may treat the person in whose name this Note is registered as the
owner hereof for the purpose of receiving payment of principal and interest as
herein provided and for all other purposes.
The obligations of the Company under this Note are subject to the terms of a
certain Intercreditor Agreement dated January 27, 1999 between the Lender, the
Investor and Franklin Capital Corporation.
This Note shall be deemed to take effect as a sealed instrument under the laws
of the State of Illinois and for all purposes shall be construed in accordance
with such laws.
BPI PACKAGING TECHNOLOGIES, INC.
By: _________________________
Name: C. Xxxx Xxxxxxxxx
Title: Chairman and Chief Executive Officer
EXHIBIT B
Right to Purchase Shares of Common Stock
of
BPI PACKAGING TECHNOLOGIES, INC.
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND SHALL
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SUCH ACT OR APPLICABLE STATE SECURITIES LAWS. FURTHERMORE, THIS
WARRANT SHALL NOT BE SOLD OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE
CONDITIONS SPECIFIED IN SECTION 14 OF THE AGREEMENT REFERRED TO HEREINAFTER, A
COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL
OFFICE OF BPI PACKAGING TECHNOLOGIES, INC., AND WILL BE FURNISHED WITHOUT CHARGE
TO THE HOLDER OF THIS WARRANT UPON WRITTEN REQUEST.
No. W - 1999-1
----------------------------------
Common Stock Purchase Warrant
BPI Packaging Technologies, Inc., a Delaware corporation (the ACompany@)
hereby certifies that, for value received, DGJ, L.L.C. (the AInvestor@) or its
successors or assigns, is entitled, subject to the terms set forth below, to
purchase from the Company at any time or from time to time after the date hereof
eighty million (80,000,000) fully paid and non-assessable shares of Common Stock
(as defined in Section 13 hereof), at an initial purchase price per share of
$.04 (such price per share as adjusted from time to time as provided herein is
referred to herein as the AExercise Price@). The number and character of such
shares of Common Stock and the Exercise Price are subject to adjustment as
provided herein. For purposes of determining the number of shares of Common
Stock issuable to the Investor, all computations hereunder shall be made on a
fully diluted basis after giving effect to the exercise of all outstanding
warrants, options, rights, agreements, or other commitments or obligations of
any kind of the Company to issue shares of Common Stock that exist, whether or
not then exercisable, on any date the Investor exercises this Warrant.
This Warrant is issued pursuant to the Securities Purchase Agreement (the
AAgreement@), dated as of January 27, 1999, between the Company and the
Investor, a copy of which is on file at the principal office of the Company. The
holder of this Warrant shall be entitled to all of the benefits of the Agreement
as provided therein.
1. DEFINITIONS.
Terms defined in the Agreement and not otherwise defined herein are used
herein with the meanings so defined. Certain terms are used in this Warrant as
specifically defined in Section 13 hereof.
2. EXERCISE OF WARRANT.
2.1 Exercise. This Warrant may be exercised as provided by the Agreement
by the holder at any time from and after the date hereof, by surrender of this
Warrant, with the form of subscription at the end hereof duly executed by such
holder, to the Company at its principal office, accompanied by payment, by
certified or official bank check payable to the order of the Company in the
amount obtained by multiplying the number of shares of Common Stock for which
this Warrant is then exercisable by the Exercise Price then in effect. If the
Warrant is not exercised in full, the Company, at its expense, will forthwith
issue and deliver to or upon the order of the holder hereof (the
"Warrantholder") a new Warrant or Warrants of like tenor, in the name of the
holder hereof or as such holder (upon payment by such holder of any applicable
transfer taxes) may request, calling in the aggregate on the face or faces
thereof for the number of shares of Common Stock equal (without giving effect to
any adjustment therein) to the number of such shares called for on the face of
this Warrant minus the number of such shares (without giving effect to any
adjustment therein) for which this Warrant shall have been exercised.
2.2 Net Issue Exercise. In lieu of exercising this Warrant pursuant to
Section 2.1, this Warrant may be exercised by the Warrantholder by the surrender
of this Warrant to the Company, with a duly executed Exercise Form marked to
reflect Net Issue Exercise and specifying the number of Warrant Shares to be
purchased, during normal business hours on any business day during the exercise
period. The Company agrees that such Warrant Shares shall be deemed to be issued
to the Warrantholder as the record holder of such Warrant Shares as of the close
of business on the date on which this Warrant shall have been surrendered as
aforesaid. Upon such exercise, the Warrantholder shall be entitled to receive
shares equal to the value of this Warrant (or the portion thereof being
cancelled) by surrender of this Warrant to the Company together with notice of
such election, in which event the Company shall issue to Warrantholder a number
of shares of the Company's Common Stock computed as of the date of surrender of
this Warrant to the company using the following formula:
X = Y(A-B)/A
Where:
X = the number of shares of Common Stock to be issued to
Warrantholder under this Section 2.2;
Y = the number of shares of Common Stock otherwise purchasable
under this Warrant (at the date of such calculation) or, if only a
portion of this Warrant is being exercised, the number of Warrant
Shares being exercised;
A = the Current Market Price of one share of the Company's
Common Stock (at the date of such calculation); and
B = the Exercise Price (as adjusted to the date of such
calculation).
Current Market Price. For purposes of this Section 2.2,
Current Market Price of one share of the Company's Common Stock
shall mean, as of any date:
the average of the daily closing prices per share of the
Company's Common Stock on the principal national securities
exchange or on The Nasdaq Stock Market's ("Nasdaq") National
Market, on which the Common
Stock is listed or admitted to trading, for the five (5)
trading days ending on the second trading day before such
date, or
if not listed or traded on any such exchange or market,
the average of the last reported sale price per share on the
Nasdaq SmallCap Market for the five (5) trading days ending on
the second trading day before such date, or
if not listed or traded on any such exchange or Nasdaq,
the average of the bid and asked prices per share as reported
in the "pink sheets" published by the National Quotation
Bureau, Inc. for the five (5) trading days ending on the
second trading day before such date, or
if such quotations are not available, the fair market
value per share of the Company's Common Stock on the date such
notice was received by the Company as reasonably determined by
the Board of Directors of the Company.
2.3 Stock Receivable upon Exercise. The shares of Common Stock receivable
upon exercise of this Warrant shall be shares of the Company=s voting Common
Stock, par value $.01 per share.
2.4 Termination of the Warrant. Unless previously exercised, this Warrant
shall terminate on January 27, 2009.
2.5. Warrant Agent. If a bank or trust company shall have been appointed
as trustee for the holder of the Warrant pursuant to Section 6.2 hereof, such
bank or trust company shall have all the powers and duties of a warrant agent
appointed pursuant to Section 14 hereof and shall accept, in its own name for
the account of the Company or such successor entity as may be entitled thereto,
all amounts otherwise payable to the Company or such successor, as the case may
be, on exercise of this Warrant pursuant to this Section 2.
3. REGISTRATION RIGHTS.
3.1 Registration Rights. The holder of this Warrant has the right to cause
the Company to register shares of Warrant Stock, and any shares issued upon
exercise hereof, under the Securities Act and any blue sky or securities laws of
an jurisdictions within the United States at the time and in the manner
specified in the Agreement.
4. DELIVERY OF STOCK CERTIFICATES ON EXERCISE.
As soon as practicable after the exercise of this Warrant in full or in
part, and in any event within ten (10) days thereafter, the Company at its
expense (including the payment by it of any applicable issue taxes) will cause
to be issued in the name of and delivered to the holder hereof, or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct, a certificate or certificates for the number of fully paid and
non-assessable shares of Common Stock (or Other Securities) to which such holder
shall be entitled on such exercise, together with any other stock or other
securities and property (including cash, where applicable) to which such holder
is entitled upon such exercise.
4.1 Fractional Shares. In the event that the exercise of this Warrant, in
full or in part, results in the issuance of any fractional share of Common
Stock, then in such event the holder of
this Warrant shall be entitled to cash equal to the fair market value of such
fractional share as determined in good faith by the Company=s Board of
Directors.
5. ADJUSTMENT FOR DIVIDENDS, DISTRIBUTIONS, RECLASSIFICATIONS AND FOR
CERTAIN SALES.
5.1 Dividends, Distributions and Reclassifications. In case at any time or
from time to time, the holders of Common Stock shall have received, or (on or
after the record date fixed for the determination of stockholders eligible to
receive) shall have become entitled to receive, without payment therefor:
(a) other or additional stock or other securities or property (other than
cash) by way of dividend; or
(b) other or additional (or less) stock or other securities or property
(including cash) by way of spin-off, split-up, reclassification,
recapitalization, combination of shares, or similar corporate restructuring;
other than additional shares of Common Stock issued as a stock dividend or in a
stock-split (adjustments in respect of which are provided for in Section 7
hereof), then and in each such case the holder of this Warrant, on the exercise
hereof as provided in Section 2 hereof, shall be entitled to receive the amount
of stock and other securities and property (including cash in the case referred
to in subsection (b) of this Section 5) that such holder would have received
prior to or would have held on the date of such exercise if on the date hereof
he had been the holder of record of the number of shares of Common Stock called
for on the face of this Warrant and had thereafter, during the period from the
date hereof to and including the date of such exercise, retained such shares and
all such other or additional stock and other securities and property (including
cash in the case referred to in subsection (b) of this Section 5) receivable by
such holder as aforesaid during such period, giving effect to all further
adjustments called for during such period by Sections 6 and 7 hereof.
5.2 Adjustment for Issue or Sale at Less than Exercise Price. Other than
as set forth in Section 5.1, if at any time the Company shall issue or sell
shares of its Common Stock for a consideration per share less than the Exercise
Price then in effect, then and in each such case the holder of this Warrant
shall be entitled to receive, in lieu of the shares of Common Stock theretofore
receivable upon the exercise of this Warrant, a number of shares of Common Stock
determined by (a) dividing the Exercise Price per share at the time in effect by
a Pro Forma Adjusted Purchase Price per share to be computed as provided below,
and (b) multiplying the resulting quotient by the number of shares of Common
Stock then issuable upon exercise of this Warrant. Such Pro Forma Adjusted
Purchase Price shall be computed by dividing
(i) the sum of (x) the result obtained by multiplying the number of
shares of Common Stock of the Company outstanding immediately prior to
such issue or sale by the Exercise Price per share at the time in effect,
and (y) the consideration, if any, received by the Company upon such issue
or sale, by
(ii) the number of shares of Common Stock of the Company outstanding
immediately after such issue or sale.
6. ADJUSTMENT FOR REORGANIZATION, CONSOLIDATION, MERGER.
6.1 Certain Adjustments. In case at any time or from time to time, the
Company shall (i) effect a capital reorganization, reclassification, or
recapitalization, (ii) consolidate with or merge into any other Person, or (iii)
transfer all or substantially all of its properties or assets to any other
Person under any plan or arrangement contemplating the dissolution of the
Company, then in each such case, the holder of this Warrant, on the exercise
hereof as provided in Section 2 hereof and payment of the Exercise Price, at any
time after the consummation of such reorganization, recapitalization,
consolidation, or merger or the effective date of such dissolution, as the case
may be, shall receive, in lieu of the Common Stock (or Other Securities)
issuable on such exercise prior to such consummation or effective date, the
stock and other securities and property (including cash) to which such holder
would have been entitled upon such consummation or in connection with such
dissolution, as the case may be, if such holder had so exercised this Warrant
immediately prior thereto, all subject to further adjustment thereafter as
provided in Sections 5 and 7 hereof.
6.2 Appointment of Trustee for Warrant Holders Upon Dissolution. In the
event
of any dissolution of the Company following the transfer of all or substantially
all of its properties or assets, the Company, prior to such dissolution, shall,
at its expense, deliver or cause to be delivered the stock and other securities
and property (including cash, where applicable) receivable by the holders of the
Warrant after the effective date of such dissolution pursuant to this Section 6
to a bank or trust company having an office in Boston, Massachusetts, as trustee
for the holder or holders of the Warrant.
6.3 Continuation of Terms. Upon any reorganization, consolidation, merger,
or transfer (and any dissolution following any transfer) referred to in this
Section 6, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and
property receivable on the exercise of this Warrant after the consummation of
such reorganization, consolidation, or merger or the effective date of
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the Person acquiring all or substantially all of the
properties or assets of the Company, whether or not such Person shall have
expressly assumed the terms of this Warrant as provided herein.
7. ADJUSTMENTS FOR ISSUANCE OF COMMON STOCK AND AMOUNT OF OUTSTANDING
COMMON STOCK.
7.1 General. If at any time there shall occur any stock split, stock
dividend, reverse stock split, or other subdivision of the Company=s Common
Stock (AStock Event@), then the number of shares of Common Stock to be received
by the holder of this Warrant shall be appropriately adjusted such that the
proportion of the number of shares issuable hereunder to the total number of
shares of the Company (on a fully diluted basis) prior to such Stock Event is
equal to the proportion of the number of shares issuable hereunder after such
Stock Event to the total number of shares of the Company (on a fully diluted
basis) after such Stock Event. No adjustment to the Exercise Price shall be made
in connection with any adjustment of the number of shares of Common Stock
receivable upon exercise of this Warrant, except that the Exercise Price shall
be proportionately decreased upon the occurrence of any stock split or other
subdivision of the Common Stock. The Rights Offering contemplated by Section 21
of the Agreement shall not trigger the adjustments hereunder.
7.2 Other Issuances of Common Stock. Unless the holder of this Warrant
shall otherwise agree, if at any time there shall be any increase in the number
of shares of Common
Stock outstanding or which the Company is obligated to issue, or covered by any
option, warrant, or convertible security which is outstanding or which the
Company is obligated to issue, then the number of shares of Common Stock to be
received by the holder of this Warrant shall be adjusted to that number
determined by multiplying the number of shares of Common Stock purchasable
hereunder prior thereto by a fraction (i) the numerator of which shall be the
number of shares of Common Stock outstanding or which the Company is obligated
to issue, or covered by options, warrants, or convertible securities which the
Company is obligated to issue, immediately after such increase, and (ii) the
denominator of which shall be the number of shares of Common Stock outstanding
or which the Company is obligated to issue, or covered by options, warrants, or
convertible securities which are outstanding or which the Company is obligated
to issue, immediately prior to such increase. Thereupon, the Exercise Price
shall be correspondingly reduced so that the aggregate Exercise Price shall be
correspondingly reduced so that the aggregate Exercise Price for all shares of
Common Stock covered hereby shall remain unchanged. The provisions of this
Section 7.2 shall not apply to any issuance of additional Common Stock for which
an adjustment is provided under Section 7.1 hereof.
7.3 Other Securities. In case any Other Securities shall have been issued,
or shall then be subject to issue upon the conversion or exchange of any stock
(or Other Securities as defined in Section 13 hereof) of the Company (or any
other issuer of Other Securities or any other entity referred to in Section 6
hereof) or to subscription, purchase, or other acquisition pursuant to any
rights or options granted by the Company (or such other issuer or entity), the
holder hereof shall be entitled to receive upon exercise hereof such amount of
Other Securities (in lieu of or in addition to Common Stock) as is determined in
accordance with the terms hereof, treating all references to Common Stock herein
as references to Other Securities to the extent applicable, and the
computations, adjustments, and readjustments provided for in this Section 7 with
respect to the number of shares of Common Stock issuable upon exercise of this
Warrant shall be made as nearly as possible in the manner so provided and
applied to determine the amount of Other Securities from time to time receivable
on the exercise of the Warrant, so as to provide the holder of the Warrant with
the benefits intended by this Section 7 and the other provisions of this
Warrant.
8. PREEMPTIVE RIGHTS.
In the event the Company hereafter issues additional Common Stock, or
securities convertible into Common Stock, grants any rights or options to
subscribe for or purchase any such securities, or enters into any agreements or
issues any warrants providing for the issuance of any such securities, then each
Warrant holder shall have the preemptive right to subscribe for and to purchase,
at the same price such securities, rights, options or warrants shall be issued
or granted to any other Person, an amount of such securities, rights, option,
agreement or warrants equal to that amount sufficient to preserve the percentage
interest in the Company beneficially owned by the Warrant holder. Such right may
be exercised for not more than thirty (30) days after notice of such right is
received by the Warrant holder. The Investor's rights under this Section 8 shall
terminate at such time as the Investor beneficially owns Common Stock
representing an amount less than thirty percent (30%) of the shares of Common
Stock issuable upon exercise of this Warrant.
9. NO DILUTION OR IMPAIRMENT.
The Company will not, by amendment of its Articles or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of the Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate to protect the
rights of the holder of the Warrant against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (i) will not increase the par value of any shares of stock
receivable on the exercise of the Warrant above the amount payable therefor on
such exercise, (ii) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
non-assessable shares of stock on the exercise of the Warrant from time to time
outstanding, (iii) will comply in all respects with the provisions of Sections 7
or 9 (as the case may be) and Section 9 of the Agreement except to the extent
such compliance may be waived by the Holder, and (iv) will not transfer all or
substantially all of its properties and assets to any other entity (corporate or
otherwise), or consolidate with or merge into any other entity or permit any
such entity to consolidate with or merge into the Company (if the Company is not
the surviving entity), unless such other entity shall expressly assume in
writing and will be bound by all the terms of this Warrant and the Agreement.
10. ACCOUNTANTS= CERTIFICATE AS TO ADJUSTMENTS.
In each case of any event that may require any adjustment or readjustment
in the shares of Common Stock issuable on the exercise of this Warrant, the
Company at its expense will promptly cause independent certified public
accountants selected by the Board of Directors to compute such adjustment or
readjustment, if any, in accordance with the terms of this Warrant and prepare a
certificate setting forth such adjustment or readjustment, or stating the
reasons why no adjustment or readjustment is being made, and showing, in detail,
the facts upon which any such adjustment or readjustment is based, including a
statement of (i) the number of shares of the Company=s Common Stock then
outstanding on a fully diluted basis, and (ii) the number of shares of Common
Stock to be received upon exercise of this Warrant, in effect immediately prior
to such adjustment or readjustment and as adjusted and readjusted (if required
by Section 7) on account thereof. The Company will promptly mail a copy of each
such certificate to each holder of a Warrant, and will, on the written request
at any time of any holder of a Warrant, furnish to such holder a like
certificate setting forth the calculations used to determine such adjustment or
readjustment.
11. NOTICES OF RECORD DATE.
In the event of:
(a) any taking by the Company of a record of the holders of any
class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right;
or
(b) any capital reorganization of the Company, any reclassification
or recapitalization of the capital stock of the Company or any transfer of
all or substantially all the assets of the Company to or any consolidation
or merger of the Company with or into any other Person; or
(c) any voluntary or involuntary dissolution, winding-up of the
Company, or liquidation; or
(d) any proposed issue or grant by the Company of any shares of
stock of any class or any other securities, or any right or option to
subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities (other than the issue of Common Stock on the
exercise of this Warrant),
then, and in each such event, the Company will mail or cause to be mailed to the
holder of this Warrant a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution, or right, and
stating the amount and character of such dividend, distribution, or right, (ii)
the date on which any such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation, or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Common Stock (or Other Securities) shall be entitled to exchange their
shares of Common Stock (or Other Securities) for securities or other property
deliverable on such reorganization, reclassification, recapitalization,
transfer, consolidation, merger, dissolution, liquidation, or winding-up, and
(iii) the amount and character of any stock or other securities, or rights or
options with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the Persons or class of Persons to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed at
least thirty (30) days prior to the date specified in such notice on which any
such action is to be taken.
12. RESERVATION OF STOCK ISSUANCE ON EXERCISE OF WARRANT.
The Company will at all times reserve and keep available, solely for
issuance and delivery on the exercise of the Warrant, a number of shares of its
Common Stock equal to the total number of shares of Common Stock from time to
time issuable upon exercise of the Warrant, and, from time to time, will take
all steps necessary to amend its Articles to provide sufficient reserves of
shares of Common Stock issuable upon exercise of the Warrant.
13. DEFINITIONS.
As used herein the following terms, unless the context otherwise
requires, have the
following respective meanings:
13.1 The term ACompany@ shall include BPI Packaging Technologies, Inc.,
and any corporation that succeeds to or assumes the obligations of the Company
hereunder.
13.2 The term ACommon Stock@ means (i) the Company=s voting Common Stock,
par value $.01 per share, (ii) any other capital stock of any class or classes
(however designated) of the Company, the holders of which shall have the right,
without limitation as to amount, either to all or to a share of the balance of
current dividends and liquidating dividends after the payment of dividends and
distributions on any shares entitled to preference, and (iii) any other
securities into which or for which any of the securities described in clauses
(i) or (ii) above have been converted or exchanged pursuant to a plan of
recapitalization, reorganization, merger, sale of assets, or otherwise.
13.3 The term AOther Securities@ refers to any capital stock (other than
Common Stock) and other securities of the Company or any other entity (corporate
or otherwise) (i) which the holder of this Warrant at any time shall be entitled
to receive, or shall have received, on the exercise of this Warrant, in lieu of
or in addition to Common Stock, or (ii) which at any time shall be issuable or
shall have been issued in exchange for or in replacement of Common Stock or
Other Securities, in each case pursuant to Section 5 or 6 hereof.
14. WARRANT AGENT.
The Company may, by written notice to the holder of this Warrant, appoint
an agent having an office in Boston, Massachusetts, for the purpose of issuing
common Stock on the exercise of this Warrant pursuant to Section 2 hereof, and
exchanging or replacing this Warrant pursuant to the Agreement, or any of the
foregoing, and thereafter any such issuance, exchange or replacement, as the
case may be, shall be made at such office by such agent.
15. REMEDIES.
The Company stipulates that the remedies at law of the holder of this
Warrant in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise.
16. NOTICES.
All notices and other communications from the Company to the holder of
this Warrant shall be mailed by first class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company in
writing by such holder or, until any such holder furnishes to the Company an
address, then to, and at the address of, the last holder of this Warrant who has
so furnished an address to the Company.
17. MISCELLANEOUS.
In case any provision of this Warrant shall be invalid, illegal or
unenforceable, or partially invalid, illegal or unenforceable, the provision
shall be enforced to the extent, if any, that it may legally be enforced and the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby. This Warrant and any term hereof may be
changed, waived, discharged or terminated only by a statement in writing signed
by the party against which enforcement of such change, waiver, discharge or
termination is sought. This Warrant shall be governed by and construed in
accordance with the domestic substantive laws (and not the conflict of law
rules) of the State of Delaware. The headings in this Warrant are for purposes
of reference only, and shall not limit or otherwise affect any of the terms
hereof. This Warrant shall take effect as an instrument under seal.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer and its corporate seal to be impressed hereon and
attested by its Secretary.
ATTEST: BPI PACKAGING TECHNOLOGIES, INC.
/s/ Xxxx Xxxxxxx
----------------------
Secretary By: /s/ C. Xxxx Xxxxxxxxx
-----------------------------
Name: C. Xxxx Xxxxxxxxx
Title: Chairman and Chief
Executive Officer
[CORPORATE SEAL]
Dated as of January 27, 1999
FORM OF SUBSCRIPTION TO PURCHASE
(To Be Executed by the Holder if the Holder Desires to Exercise Warrants
Evidenced by the Foregoing Warrant)
To: BPI PACKAGING TECHNOLOGIES, INC.
The undersigned hereby irrevocably elects to exercise _____ Warrants
evidenced by the foregoing Warrant for, and to purchase thereunder, ____ shares
of Common Stock issuable upon exercise of said Warrants and delivery of
$_____________ in cash, and any applicable taxes payable by the undersigned
pursuant to such warrant.
The undersigned requests that certificates for such shares be issued in
the name of
__________________________________
__________________________________
__________________________________
(Please print name and address)
If said number of Warrants shall not be all the Warrants evidenced by the
foregoing Warrant Certificate, the undersigned requests that a new Warrant
Certificate evidencing the Warrants not so exercised be issued in the name of
and delivered to
__________________________________
__________________________________
__________________________________
(Please print name and address)
Dated: ______________, ____ Name of Holder
(Print)
By: _____________________________
Name:
Title:
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, ________________________________ hereby sells, assigns
and transfers to each assignee set forth below all of the rights of the
undersigned in and to the number of Warrants (as defined in and evidenced by the
foregoing Warrant) set opposite the name of such assignee below and in and to
the foregoing Warrant with respect to said Warrants and the shares of Common
Stock issuable upon exercise of said Warrants:
Number
Name of Assignee Address of Warrants
---------------- ------- -----------
_________________ ___________________ ___________
_________________ ___________________ ___________
_________________ ___________________ ___________
_________________ ___________________ ___________
If the total of said Warrants shall not be all the Warrants evidenced by
the foregoing Warrant, the undersigned requests that a new Warrant Certificate
evidencing the Warrants not so assigned be issued in the name of and delivered
to the undersigned.
Name of Holder
(Print): ________________________
Dated: ____________, ____ By: _______________________________
Name:
Title:
EXHIBIT C
[LETTERHEAD OF XXXXX XXXXX, ET AL]
January ____, 1999
DGJ, L.L.C.
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
Re: BPI Packaging Technologies, Inc.
Gentlemen:
We have acted as counsel to BPI Packaging Technologies, Inc., a Delaware
corporation and its subsidiaries (the "Company") in connection with the
Securities Purchase Agreement dated as of January ___, 1999 (the "Agreement") by
and between the Company and DGJ, L.L.C. (the "Investor").
This opinion is delivered to you pursuant to Section 6.4 of the Agreement.
Capitalized terms used herein and not otherwise defined shall have the meanings
given them in the Agreement.
In connection with this opinion, we have (i) investigated such questions
of law, (ii) examined such documents and records of the Company, certificates of
public officials and other documents, and (iii) received such information from
officers or representatives of the Company as we have deemed necessary or
appropriate for the purposes of this opinion.
We have examined, among others, the following documents and instruments
(the "Documents"):
(a) An executed copy of the Agreement;
(b) The executed Warrant;
(c) An executed copy of the Loan Agreement and executed copies of each
exhibit thereto requiring execution;
(d) The executed Note;
(e) An executed copy of the Security Agreement;
(f) An executed copy of the Equipment Lease Agreement;
(g) An executed copy of the Patent and Trademark Security Agreement;
(h) Executed copies of all other Financing Agreements and Related
Agreements;
(i) The Company's Articles of Incorporation and by-laws; and
(j) Such other agreement, documents, and instruments as we have deemed
appropriate.
Based upon the foregoing, and subject to the qualifications and
assumptions set forth herein, we are of the opinion that:
1. The Company is a duly incorporated and validly existing corporation in
good standing under the laws of the State of Delaware. The Company is qualified
as a foreign corporation to do business in the Commonwealth of Massachusetts and
is qualified or has applied to qualify as a foreign corporation in all other
jurisdictions in which it conducts its business.
2. The execution, delivery, and performance by the Company of the
Documents are within the Company's corporate powers, have been duly authorized
by all necessary corporate action, and do not contravene (a) the Company's
Articles or by-laws, (b) any law, rule or regulation applicable to the Company,
or (c) any contractual or legal restriction affecting the Company. The Documents
have been duly executed and delivered on behalf of the Company.
3. No authorization, approval, or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for (a)
the due execution, delivery, and performance by the Company of the Documents,
(b) the exercise by the Investor of its rights and remedies under the Agreement,
or the Financing Agreements, except for any UCC financing statement filings and
any required filings with the Commission or state securities regulatory
authorities in connection with the exercise of the Investor's registration
rights under Section 12 of the Agreement. The Company has obtained all other
consents, if any, necessary for the execution, delivery, and performance of the
Documents.
4. We have no knowledge, after due inquiry, of any actual or threatened
proceedings before any court, governmental entity or agency, or arbitrator that
may materially and adversely affect the financial condition or business
operations of the Company or its properties.
5. The Agreement, each of the Financing Agreements, the Loan Agreement,
and each of the other Related Agreements, are the legal, valid, and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except in each case as the enforceability thereof may be
(a) limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforceability of creditors' rights generally, and (b)
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
6. The Warrant has been duly and validly issued in the name of the
Investor.
7. Except as set forth in the Agreement, the shares of Common Stock
issuable upon exercise of the Warrant have been duly authorized and reserved for
issuance, and upon issuance, in compliance with the terms of the Warrant, such
shares will be validly issued, fully paid, and nonassessable.
8. The authorized capital stock of the Company is as described in Schedule
4.5(a) of the Agreement, and the record ownership thereof is as set forth in
Section 4.5(a) of the Agreement. All outstanding shares of the Company's capital
stock have been duly and validly issued and are fully paid and nonassessable.
Other than the Warrant and __________, to the best of our knowledge after due
inquiry there are no outstanding options, warrants, or conversion, preemptive,
subscription, or other rights to purchase or acquire any shares of the capital
stock of the Company or any of its Subsidiaries. All of the issued and
outstanding shares of the capital stock of the Company are free and clear of any
pledges or other encumbrances or any restrictions on transfer other than those
imposed by the Agreement, the exhibits to each, and applicable state and federal
securities laws and regulations.
9. It is not necessary in connection with the offer, sale, and delivery of
the Note, the Warrant, and the Warrant Stock to register any of the foregoing
instruments or securities under the Securities Act, as now in effect, or to
register or qualify under any state securities laws. No registration of any
class of debt or equity securities of the Company is or will be required under
the Exchange Act, as now in effect, after the consummation of the transactions
contemplated by the Agreement.
We have assumed the Investor's due execution and delivery, pursuant to due
authorization, of the Agreement and the Financing Agreements to which it is a
signatory.
We have also assumed that the signatures on all documents reviewed by us
are genuine (except signatures by, or purported to be by, officers or other
representatives of the Company) and that any copies of such documents conform to
the originals thereof.
We do not express any opinion herein concerning any law other than Federal
law and the laws of the State of Delaware and, with respect to paragraph 1
above, the Commonwealth of Massachusetts.
This opinion is furnished for the benefit of and may be relied upon by the
Investor and by any Person claiming an interest in the Securities by, through or
under the Investor. This opinion may not be relied upon by any other entity or
Person without, in each instance, obtaining our prior written consent.
XXXXX XXXXX et al.
_________________________________
EXHIBIT D
Lease Number: ___________
EQUIPMENT LEASE
THIS EQUIPMENT LEASE (the "Lease") is entered into as of the 27th day of
January, 1999, between DGJ, L.L.C., a Delaware limited liability company, with
its principal place of business located at 000 Xxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxxx Xxxx, Xxxxxxxx 00000 ("Lessor") and BPI Packaging Technologies, Inc., a
Delaware corporation, with its principal place of business located at 000
Xxxxxxxx Xxxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxxxxx 00000 ("Lessee").
W I T N E S S E T H:
WHEREAS, Lessor and Lessee desire to enter into an agreement for the
leasing of certain equipment described herein on the terms and subject to the
conditions contained herein;
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. LEASE. Lessor shall lease to Lessee, and Lessee hereby accepts and
leases from Lessor, the personal property described on Schedule A attached
hereto and made a part hereof (hereinafter, together with all replacement parts,
repairs, additions and accessories incorporated therein and/or affixed thereto,
the "Equipment") on the terms and subject to the conditions hereinafter set
forth. All prior leases relating to the Equipment between Lessee and other
Lessors are hereby terminated.
2. TERM. The initial term of this Lease shall commence on the date hereof
and terminate on the first annual (1st) anniversary of the date hereof, unless
terminated sooner as hereinafter set forth. Thereafter, the term of this Lease
shall be automatically renewed for successive one (1) year periods, unless
either party gives written notice of its intention not to renew to the other
party, not less than thirty (30) days prior to the expiration of any such one
(1) year term.
3. RENT. The rent for the Equipment shall be One Hundred Two Thousand and
No/100 Dollars ($102,000.00) per month and One Million Two Hundred Twenty-Four
Thousand ($1,224,000.00) per year payable monthly in advance. The first payment
of rent shall be due on the first day of the month after the effective date of
this Lease and shall be a pro rata portion of the monthly rent. Thereafter, rent
shall be paid on the first (1st) day of each successive month during any term
hereof, or any extension or renewal thereof. Lessee shall pay Lessor said rent
at the office of Lessor set forth in the preamble of this Lease, or at such
other place as Lessor may from time to time designate in writing.
4. CONDITION OF EQUIPMENT, DELIVERY, INSTALLATION, AND TECHNICAL
ASSISTANCE.
(a) Condition of Equipment. The Lessee acknowledges that the Equipment
being leased hereunder is being leased "as is, where is," and Lessee agrees to
accept and lease such Equipment at its own risk. LESSOR MAKES NO WARRANTIES,
EXPRESS OR IMPLIED, AS TO THE CONDITION, MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR ANY OTHER MATTER CONCERNING THE EQUIPMENT.
(b) Delivery of Equipment. To the extent the Equipment is not otherwise
located at the Lessee's premises at 000 Xxxxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxxxxxxx
(the "Premises"), Lessor shall, at Lessee's expense, pack the Equipment and
deliver the Equipment to Lessee at the Lessee's premises. Lessee shall, at its
expense, be responsible for unpacking, installing, and connecting the Equipment
at the Lessee's premises.
(c) Losses. Lessor shall not be liable for any losses or damages of any
kind (whether incidental, consequential or otherwise) suffered by Lessee or by
any other person or entity, including, without limitation, damages resulting
from business interruption and injury to persons or property, resulting from
non-delivery or late delivery, installation, failure or faulty operation,
condition, suitability or use of the Equipment.
5. MAINTENANCE OF THE EQUIPMENT. During the term of this Lease and any
extension or renewal thereof, Lessee shall, at its expense, maintain the
Equipment in good condition and repair and in safe working order, ordinary wear
and tear resulting from proper use thereof excepted. Lessee shall be responsible
for all costs associated with the repair and maintenance of the Equipment. There
shall be no abatement of rent during any time the Equipment is under repair or
is not operating. Not in limitation of the foregoing, Lessee shall be solely
responsible for the following: (i) the addition of safety devices and guards to,
or the repair or replacement of missing, outdated or deficient safety devices
and guards on, the Equipment, or otherwise ensuring the compliance and condition
of the Equipment or the Premises, as may be necessary to meet any and all
applicable governmental safety standards, in effect on the date hereof and at
all times hereafter, including without limitation, all safety standards under
OSHA regulations; (ii) the compliance with all governmental regulations with
respect to the affixation of prominently displaced legible warning labels on the
Equipment; and (iii) ensuring that all persons using or affected by the
Equipment are properly trained and supervised and are provided with adequate
safety equipment.
6. USE OF EQUIPMENT, LOCATION AND ACCESS.
(a) Use and Location. The Equipment shall be used exclusively for the
manufacture of products sold by Lessee. Lessee shall maintain and operate the
Equipment exclusively at the Premises and shall not remove the Equipment
therefrom without the prior written consent of Lessor.
(b) Access. Lessee shall provide Lessor access, during normal business
hours, to the Equipment, to any meters attached to or provided with the
Equipment, and to all maintenance and other records concerning the Equipment,
including, without limitation, all records concerning the compliance with
governmental safety standards.
7. EXPENSES, TAXES, INSURANCE, AND RISK OF LOSS.
(a) Expenses and Taxes. Except as otherwise herein specifically provided,
Lessee shall pay all costs and expenses of every character related to the
purchase, sale, ownership, delivery, leasing, possession, use, operation or sale
of the Equipment, including, without limitation, all license and registration
fees, repairs, maintenance, taxes, assessments, governmental and other charges
imposed upon the Equipment. Such amounts shall be paid as additional rent
hereunder.
(b) Insurance. Lessee, at its sole cost and expense, will procure and
maintain: (i) insurance against any risk of loss or theft of or damage from any
and every cause to the Equipment, for the
full replacement value thereof; (ii) public liability and property damage
insurance; and (iii) personal injury and products liability insurance, in forms
and amounts reasonably satisfactory to Lessor. Such policy or policies shall not
be subject to cancellation or modification with less than thirty (30) days
notice to Lessor. Lessee shall provide Lessor with a certificate of insurance,
naming Lessor as an additional insured as its interest may appear, within ten
(10) days of the commencement of this Lease and any and all certificates of
renewal not less than thirty (30) days prior to the renewal of any such policy
or policies. Lessee shall be responsible for procuring such other or additional
insurance as it may deem desirable or appropriate to protect its interests or
obligations hereunder.
(c) Risk of Loss. Until the Equipment is returned to Lessor upon the
termination of this Lease, Lessee hereby assumes and shall bear the entire risk
of loss, damage to, theft of, or destruction of the Equipment for any cause
whatsoever ("Loss or Damage") whether or not such Loss or Damage is covered by
insurance. Such risk of loss shall pass to Lessee upon Lessor's commencement of
delivery of the Equipment to Lessee or upon the effective date hereof, if no
such delivery is required. No such Loss or Damage shall relieve Lessee of any of
its obligations under this Lease. Lessee shall immediately notify Lessor of any
accident or event of loss involving the Equipment.
8. INDEMNIFICATION AND WAIVER.
(a) Indemnity. Lessee for itself and for its successors, assigns,
stockholders, officers, directors, employees, and representatives, hereby
indemnifies and agrees to defend and hold Lessor and its successors, assigns,
members, stockholders, officers, directors, employees, and representatives,
harmless from and against any and all claims (including, without limitation,
claims of personal injury or property damage), actions, liabilities, losses and
costs (including, without limitation, reasonable attorneys' fees and expenses),
arising out of, resulting from or in any way attributable to the use or
operation of the Equipment, while in Lessee's possession, or any devices,
materials or things to which the products manufactured with the Equipment are
made a part, notwithstanding the subsequent transfer of such products, devices,
materials or things to any third party, regardless of whether Lessor or others
may be wholly, concurrently, partially, jointly or solely negligent or otherwise
at fault. This subparagraph shall survive the termination of this Lease.
(b) Waiver. Lessee, for itself and its insurance carriers, forever waives
any workers compensation lien, if any, and subrogation rights against Lessor,
its successors, assigns, stockholders, officers, directors, employees, or
representatives, for any personal injuries arising out of, resulting from or in
any way attributable to the use or operation of the Equipment, occurring on or
after the date the Equipment is or was first delivered to or put in service by
Lessee. Further, Lessee, for itself and its insurance carriers, covenants and
agrees not to threaten or bring action or suit against Lessor, its successors,
assigns, members, stockholders, officers, directors, employees, or
representatives, for any losses, liabilities, damages, costs or expenses,
including, without limitation, reasonable attorneys' fees and expenses that
Lessee may incur on or after the date hereof arising out of, resulting from or
in any way attributable to the use or operation of the Equipment. This
subparagraph shall survive the termination of this Lease.
9. SURRENDER AND RETURN OF EQUIPMENT; STORAGE. Upon the expiration or the
earlier termination of this Lease as provided herein, Lessee shall make
available the Equipment, in good condition and repair and in working order, by
disconnecting the Equipment and providing Lessor or Lessor's authorized
representatives, access to Lessee's facilities at such time or times as
requested by Lessor to enable Lessor to package and remove the Equipment from
Lessee's facility. Upon Lessor's request, subsequent to the termination or
expiration hereof, Lessee shall store the Equipment upon its Premises for so
long as may be requested by Lessor, at no charge to Lessor.
10. DEFAULT. It shall be an event of default hereunder if: (i) Lessee
fails to pay any rent or other charges due hereunder when due and such failure
shall continue for five (5) days; (ii) Lessee fails to perform any other
covenant herein and such failure shall continue for ten (10) days after written
notice thereof by Lessor to Lessee; (iii) Lessee shall cease to do business as a
going concern; (iv) a petition is filed by or against Lessee under the United
States Bankruptcy Code or any amendment thereto (including a petition for
reorganization or an arrangement), which if involuntary is not discharged within
ninety (90) days; (v) Lessee makes a general assignment for the benefit of its
creditors; (vi) Lessee sells, transfers or disposes of all or substantially all
of its assets or property; (vii) Lessee attempts to remove, sell, transfer,
encumber, sublet or part with possession of the Equipment; or (viii) upon any
Event of Default under that certain Securities Purchase Agreement dated as of
the date hereof between Lessor and Lessee or any Related Document (as defined
therein). In the event of the occurrence of a default: (1) all sums to become
due hereunder for the then-remaining term of this Lease shall, at Lessor's
option, become due and payable forthwith; or (2) the Equipment shall upon
Lessor's demand be surrendered in accordance with Paragraph 9 or Lessor and/or
its agents may, without notice or liability or legal process, enter into any
premises under the control of Lessee, or any agent of Lessee, where the
Equipment may be or where Lessor believes the Equipment to be, and repossesses
all or any part of the Equipment, discontinue and separate all thereof from any
other property and using all force necessary or permitted by applicable law to
do so. Lessee hereby expressly waives all further rights to possession of the
Equipment and all claims for injuries suffered through or caused by such
repossession. Should any legal proceedings be instituted by Lessor to recover
any moneys due or to become due hereunder and/or for possession of any or all of
the Equipment, Lessee shall pay all expenses incurred by Lessor in exercising or
attempting to exercise its rights, powers and remedies herein conferred or now
or hereafter existing, at law or in equity, or in collecting or attempting to
collect moneys due or to become due under the Lease, including, without
limitation, reasonable attorneys' fees and expenses.
To the extent permitted by applicable law, Lessee waives any and all
rights and remedies conferred upon a lessee by Sections 2A-401 and 2A-402, and
Sections 2A-508 through 2A-522 of the Illinois Uniform Commercial Code,
including, but not limited to, Lessee's rights to: (a) cancel, terminate,
repudiate or rescind this Lease; (b) suspend performance of any of its
obligations; (c) reject the Equipment or revoke acceptance of the Equipment
after Lessee shall have executed and delivered to Lessor the Delivery and
Acceptance Certificate for the Equipment; (d) recover damages or rent or the
Equipment from Lessor for any breach of warranty or for any other reason, or
deduct any damages from any rent or other sums due Lessor; (e) claim a security
interest in the Equipment in Lessee's possession or control for any reason; (f)
sell or otherwise dispose of the Equipment, or claim any expenses in connection
therewith; (g) deduct from rental payments or any other sums due hereunder all
or any part of any claimed damages resulting from Lessor's default under this
Lease; (h) accept partial delivery of the Equipment; (i) "cover" by making any
purchase or lease of other equipment in substitution for the equipment due from
Lessor hereunder; (j) recover from the Lessor or any Assignee any general,
special, incidental or consequential damages, for any reason whatsoever; and (k)
specific performance, replevin or the like for any of the Equipment.
To the extent permitted by applicable law, Lessee hereby waives any rights
now or hereafter conferred by statute or otherwise which may require Lessor to
sell, lease or otherwise use the Equipment in mitigation of Lessor's damages, as
set forth in this Section or which may otherwise limit or modify any of Lessor's
rights or remedies under this Section.
11. OWNERSHIP, PERSONAL PROPERTY, AND FURTHER ASSURANCES. The Equipment
is, and shall at all times during the term hereof remain, the sole and exclusive
property of Lessor. Lessee shall have no right, title or interest to the
Equipment except as expressly set forth
in this Lease. Lessee shall not part with possession or control of the Equipment
or sell, pledge, mortgage, otherwise encumber, or allow any financing statements
to be filed against the Equipment or any part thereof or any interest under this
Lease. The Equipment shall remain personal property regardless of whether it
becomes affixed or attached to real property. Lessee shall execute and deliver
to Lessor, upon Lessor's request, such instruments and assurances as Lessor
deems necessary or advisable for the confirmation or recordation of this Lease
and Lessor's rights in the Equipment. Where so provided by law, Lessor may
execute and file an appropriate Financing Statement on Lessee's behalf. After
payment in full of all amounts due hereunder or upon the termination of this
Lease and the return of the Equipment to Lessor, Lessor agrees to execute a
release of any Financing Statement filed against the Equipment and Lessee. If
Lessor has put a label or any other identifying xxxx on the Equipment, Lessee
shall not remove the same, without the prior written consent of Lessor.
12. ASSIGNMENT. Lessee shall not assign or pledge this Lease or any
interest therein, or sublet or lend the Equipment, without the prior written
consent of Lessor. Lessor may assign this Lease without notice and the assignee
shall succeed to the rights of Lessor. Lessee is precluded from asserting
against any such assignee of Lessor any defense, set-off, counterclaim or action
which Lessee may have against Lessor. Upon notification of such assignment, all
payments required hereunder shall be made in accordance with Lessor's
directions.
13. GENERAL PROVISIONS.
(a) Entire Agreement; Severability. This Lease constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all discussions, negotiations and agreements among the
parties, whether written or oral, prior to or contemporaneous with the date
hereof. If any provision of this Lease is found invalid, unenforceable or in
violation of any law by a court of competent jurisdiction, such provision shall
be modified only to the extent necessary to enable such provision to be valid
and enforceable, without affecting the remaining portions of this Lease, which
shall remain in full force and effect. No representation, inducement, agreement,
promise or understanding altering, modifying, taking from or adding to the terms
and conditions hereof shall have any force or effect unless the same is in
writing and validly executed by the parties hereto.
(b) Governing Law. This Lease shall be governed by and construed in
accordance with the laws of the State of Illinois. The parties hereto consent
and submit to the jurisdiction of any local, state or federal court located in
Xxxx County, Illinois for purposes of resolving any disputes arising hereunder
and said courts shall have the exclusive jurisdiction to adjudicate the rights
and obligations of the parties arising out of or relating in any manner to this
Lease. In the event that it becomes necessary to bring legal action to enforce
any of the provisions of this Lease, the prevailing party shall, in addition to
any other rights at law or in equity, be entitled to recover its expenses of
such action, including, without limitation, attorneys' fees and expenses, from
the nonprevailing party.
(c) Waiver. Except to the extent specifically set forth herein, no waiver,
forbearance or failure by any party of its right to enforce any provision of
this Lease shall constitute a waiver or estoppel of such party's right to
enforce any other provision of this Lease or such party's right to enforce such
provision in the future.
(d) Notices. Any notice or other communication required or permitted under
this Lease shall be valid and effective only if given by written instrument that
is personally delivered or sent by telegraph, telecopier, or registered or
certified mail, postage prepaid, addressed in accordance
with the addresses set forth in the preamble of this Lease. Any party may change
the address at which it is to be given notice by giving notice to the other
party as provided in this subparagraph 13(d).
(e) Successors and Assigns. This Lease shall be binding upon and inure to
the benefit of the parties hereto and their respective permitted successors and
assigns.
(f) Headings. The paragraph headings in this Lease are for reference
purposes only and are not intended to limit or restrict, expand or otherwise
affect the meaning or interpretation of the provisions of this Lease.
(g) Counterparts. This Lease may be executed in one or more counterparts
which, when taken together, shall constitute one and the same Agreement. Any
party may execute and deliver this Lease by executing and delivering any such
counterpart.
IN WITNESS WHEREOF, the parties have duly executed this Equipment Lease as
of the date first above written.
BPI Packaging Technologies, Inc.
By: ____________________________________
Title: Chairman and Chief Executive Officer
DGJ, L.L.C.
By: ____________________________________
Title: President
SCHEDULE A
LEASED EQUIPMENT
___________________________
___________________________
___________________________
EXHIBIT E
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of January 27, 1999 between BPI
PACKAGING TECHNOLOGIES, INC., a Delaware corporation having its chief executive
office and principal place of business at 000 Xxxxxxxx Xxxxxx, Xxxxx Xxxxxxx,
Xxxxxxxxxxxxx 00000 (the "Company"), and DGJ, L.L.C., a Delaware limited
liability company with its principal place of business at 000 Xxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxxxx 00000 (collectively, the "Secured Party").
1. GRANT OF SECURITY INTEREST, ETC.
The Company hereby grants to the Secured Party a continuing security
interest in and lien on the properties, assets, and rights of the Company set
forth on Exhibit A attached hereto and incorporated herein by this reference,
wherever located and whether now owned or hereafter acquired or arising, and all
proceeds and products thereof (all such properties, assets, rights, proceeds and
products hereinafter sometimes called, collectively, the "Collateral").
2. OBLIGATIONS SECURED.
The Collateral hereunder constitutes and will constitute continuing
security for all the obligations of the Company to the Secured Party and its
successors and assigns, now existing or hereafter arising, direct or indirect,
absolute or contingent, due or to become due, matured or unmatured, liquidated
or unliquidated, arising by contract, operation of law or otherwise, including,
without limitation, all obligations to make payments now existing or hereafter
arising under the Securities Purchase Agreement, dated as of January 27, 1999,
between the Company and the Secured Party (the "Securities Purchase Agreement"),
the notes executed and delivered by the Company to the Secured Party in the
principal amount of $3,200,000 in connection therewith (the "Note"), in each
case as such instrument is originally executed on the date hereof or as
modified, amended, supplemented or extended, and all obligations of the Company
to the Secured Party, arising out of any extension, refinancing or refunding of
any of the foregoing obligations (all of the foregoing hereinafter collectively
referred to as the "Obligations").
3. PRO-RATA SECURITY, APPLICATION OF PROCEEDS OF COLLATERAL.
All amounts owing with respect to the Obligations shall be secured pro
rata by the Collateral without distinction as to whether some Obligations are
then due and payable and other Obligations are not then due and payable. Upon
any realization upon the Collateral by the Secured Party, whether by receipt of
insurance proceeds pursuant to Section 7 or otherwise, the Company and the
Secured Party agree that the proceeds thereof shall be applied (a) first, to the
payment of expenses incurred with respect to maintenance and protection of the
Collateral pursuant to Section 4 and of expenses incurred pursuant to Section 11
with respect to the sale of or realization upon, any of the Collateral or the
perfection, enforcement or protection of the rights of the Secured Party
(including reasonable attorneys' fees and expenses of every kind, including,
without limitation, reasonable allocated costs of staff counsel) and (b) second,
to all amounts of interest, expenses, and fees outstanding which constitute the
Obligations. Proceeds applied to the payment of the Obligations shall be applied
first to interest, expenses, and fees due with respect to the Obligations and
then to the principal amounts of the Obligations. The Company and the Secured
Party agree that all amounts received with respect to any of the Obligations,
whether by realization on the
Collateral or otherwise, shall be applied to the payment of the Obligations in
accordance with the provisions of this Section 3.
4. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
(a) Real Property. The Company represents to the Secured Party that the
real property listed on Schedule 4(a) hereto constitutes all of the real
property that the Company owns or leases. The Company agrees to notify the
Secured Party of any other real property that the Company may hereafter acquire
or lease. The Company agrees that it will execute and deliver to the Secured
Party mortgages and other instruments and file the same in the appropriate
recording offices at such times as any mortgageable right, title, or interest is
acquired in the future by the Company in any other real property. All such
mortgages and other instruments shall secure all of the Obligations pro rata and
shall be on terms and conditions satisfactory to the Secured Party as evidenced
by its written consent thereto.
(b) Certificates of Title; Location of Collateral. The Company represents
and warrants to the Secured Party that Collateral for which certificates of
title are required will be titled in the jurisdictions listed in Schedule 4(b)
attached hereto. Collateral for which no certificate of title is required but
for which registration under motor vehicle laws is required will be registered
in the jurisdictions listed in Schedule 4(b). Collateral for which no
registration or certificate of title is required will be located at the offices
of the Company listed on Schedule 4(b). The Company will not permit any
Collateral to be removed from the locations specified on Schedule 4(b) (except
for temporary periods in the normal and customary use thereof) without the prior
written consent of the Secured Party.
(c) Location of Chief Executive Office. The Company represents to the
Secured Party that the location of the Company's chief executive office and the
location where the books and records of the Company are kept is 000 Xxxxxxxx
Xxxxxx, Xxxxx Xxxxxxx, Xxxxxxxxxxxxx 00000. The Company agrees that it will not
change the location of its chief executive office or the location where its
books and records are kept and will advise the Secured Party as to any change in
the location (except for temporary changes in the normal and customary use
thereof) of any property comprising a part of the Collateral.
(d) Ownership of Collateral.
(i) The Company represents that it is the owner of the Collateral free
from any adverse lien, security interest or encumbrance, except as
permitted by the Securities Purchase Agreement.
(ii) Except for the security interests herein granted and except as
permitted in the Securities Purchase Agreement as originally executed,
the Company shall be the owner of the collateral free of any lien,
security interest, or encumbrance and the Company shall defend the same
against all claims and demands of all persons at any time claiming the
same or any interest therein adverse to the Secured Party. Except as
otherwise permitted in the Securities Purchase Agreement, the Company
shall not pledge, mortgage, or create or suffer to exist a security
interest in the Collateral in favor of any person other than the Secured
Party.
(e) Sales or Disposition of Collateral. Except as permitted by the
Securities Purchase Agreement as originally executed, and except for sales from
inventories of finished goods in the
ordinary course of the Company's business, the Company will not sell or offer to
sell or otherwise transfer the Collateral or any interest therein.
(f) Insurance. The Company shall have and maintain at all times with
respect to the Collateral such insurance as is required by the Securities
Purchase Agreement, such insurance to be payable to the Secured Party and to the
Company as their interests may appear. All policies of insurance shall provide
for ten (10) days' written minimum cancellation notice to the Secured Party. In
the event of failure to provide and maintain insurance as herein provided, the
Secured Party may, at its option, provide such insurance, and the Company hereby
promises to pay to the Secured Party on demand the amount of any disbursements
made by the Secured Party for such purpose. The Company shall furnish to the
Secured Party certificates or other evidence satisfactory to the Secured Party
of compliance with the foregoing insurance provisions. The Secured Party may act
as attorney for the Company in obtaining, adjusting, settling, and canceling
such insurance and endorsing any drafts. Any amounts collected or received under
any such policies shall be applied by the Secured Party to the Obligations in
accordance with the provisions of Section 3, or at the option of the Secured
Party, the same may be released to the Company, but such application or release
shall not cure or waive any default hereunder and no amount so released shall be
deemed a payment on any Obligation secured hereby.
(g) Maintenance of Collateral. The Company will keep the Collateral in
good order and repair and will not use the same in violation of law or any
policy of insurance thereon. The Secured Party may inspect the Collateral at any
reasonable time, wherever located. Except as otherwise provided in Section 7.4
of the Securities Purchase Agreement, the Company will pay promptly when due all
taxes and assessments upon the Collateral or for its use or operation or upon
this agreement. In its discretion, the Secured Party may discharge taxes and
other encumbrances at any time levied or placed on the Collateral which remain
unpaid in violation of the Securities Purchase Agreement as originally executed,
make repairs thereof and pay any necessary filing fees. The Company agrees to
reimburse the Secured Party on demand for any and all expenditures so made, and
until paid the amount thereof shall be a debt secured by the Collateral. The
Secured Party shall have no obligation to the Company to make any such
expenditures, nor shall the making thereof relieve the Company of any default.
(h) Further Assurance By the Company. The Company agrees to execute and
deliver to the Secured Party from time to time at its request all documents and
instruments, including financial statements, and to take all action as the
Secured Party may reasonably deem necessary or proper to perfect or otherwise
protect the security interest and lien created hereby.
5. CONCERNING FINANCING STATEMENTS.
The Company shall do, make, execute, and deliver all such additional and
further acts, things, deeds, assurances and instruments the Secured Party may
reasonably require more completely to vest in and assure to the Secured Party
its rights under or in any of the Collateral, including without limitation
execution and delivery of financing statements which the Secured Party deems
appropriate to perfect and continue the security interests hereby granted; and
the Company irrevocably authorizes the Secured Party or its designee, at the
Company's expense, to file such financing statements with respect hereto, with
or without the Company's signature, as the Secured Party may deem appropriate,
and appoint the Secured Party as the Company's attorney-in-fact to execute such
financing statements. The Company expressly agrees to deliver to the Secured
Party any and all certificates of title, together with fully completed
applications for title, issued under any motor vehicle registration or like law
with respect to any Collateral.
6. SECURITIES AS COLLATERAL.
The Secured Party may at any time, at its option, transfer to itself or
any nominee any securities constituting Collateral, receive any income thereon
and hold such income as additional Collateral or apply it to the Obligations.
Whether or not the Obligations are due, the Secured Party may demand, xxx for,
collect, or make any settlement or compromise it deems desirable with respect to
the Collateral. Regardless of the adequacy of the Collateral or any other
security for the Obligations, any deposits or other sums credited by or due from
the Secured Party to the Company may at any time be applied to or set off
against any of the Obligations. The Secured Party and all present and future
holders of and participants in the Obligations hereby agree that the amount of
any such setoff shall be applied as provided in Section 3 hereof.
7. REMEDIES.
Upon the occurrence of any Default or Event of Default as defined in the
Securities Purchase Agreement (whether or not any acceleration of the maturity
of the amount due in respect of any of the Obligations shall have occurred), to
the fullest extent permitted by applicable law:
(a) The Secured Party shall have, in addition to all other rights and
remedies given it by any instrument or other agreement evidencing, or executed
and delivered in connection with, any of the Obligations and otherwise allowed
by law, the rights and remedies of a secured party under the Uniform Commercial
Code as enacted in any jurisdiction in which the Collateral may be located, and
without limiting the generality of the foregoing, the Secured Party may, without
(to the fullest extent permitted by law) demand of performance or advertisement
or notice of intention to sell or of time or place of sale or of redemption or
other notice or demand whatsoever, (except that the Secured Party shall give to
the Company at least five (5) days' notice of the time and place of any proposed
sale or other disposition), all of which are hereby expressly waived to the
fullest extent permitted by law, sell at public or private sale or otherwise
realize upon, at the location designated by the Secured Party, the whole or from
time to time any part of the Collateral in or upon which the Secured Party shall
have a security interest or lien hereunder, or any interest which the Company
may have therein, and after deducting from the proceeds of sale or other
disposition of the Collateral all expenses (including all reasonable expenses
for legal services) as provided in Section 11, shall apply the residue of such
proceeds toward the payment of the Obligations in accordance with Section 3 of
this Agreement, the Company remaining liable for any deficiency remaining unpaid
after such application. If notice of any sale or other disposition is required
by law to be given to the Company, the Company hereby agrees that a notice given
as provided herein shall be reasonable notice of such sale or other disposition.
The Company also agrees to assemble the Collateral at such place or places as
the Secured Party reasonably designates by written notice. At such sale or other
disposition the Secured Party may itself, and any other person or entity owed
any Obligation may itself, purchase the whole or any part of the Collateral
sold, free from any right of redemption on the part of the Company, which right
is hereby waived and released to the fullest extent permitted by law.
(b) Furthermore, without limiting the generality of any of the rights and
remedies conferred upon the Secured Party under Section 7(a) hereof, the Secured
Party to the fullest extent permitted by law, may enter upon the premises of the
Company, exclude the Company therefrom and take immediate possession of the
Collateral, either personally or by means of a receiver appointed by a court
therefor, using all necessary force to do so, and may, at its option, use,
operate, manage and control the Collateral in any lawful manner and may collect
and receive all rents, income, revenue, earnings, issues and profits therefrom,
and may maintain, repair, renovate, alter, or remove the Collateral as the
Secured Party may determine in its discretion, and any such moneys so collected
or received by the Secured Party shall be applied to, or may be accumulated for
application upon, the Obligations in accordance with this Agreement.
The Secured Party agrees that it will give notice to the Company of any
enforcement action taken by it pursuant to this Section 7 promptly after
commencing such action.
8. MARSHALLING.
The Secured Party shall not be required to marshal any present or future
security for (including but not limited to this Agreement and the Collateral
subject to the security interest created hereby), or guaranties of, the
Obligations or any of them, or to resort to such security or guaranties in any
particular order; and all of its rights hereunder and in respect of such
securities and guaranties shall be cumulative and in addition to all other
rights, however existing or arising. To the extent that it lawfully may, the
Company hereby agrees that it will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Secured Party's rights under this Agreement or under which any of the
Obligations is outstanding or by which any of the Obligations is secured or
guaranteed, and to the extent that it lawfully may the Company hereby
irrevocably waives the benefits of all such laws.
9. COMPANY'S OBLIGATIONS NOT AFFECTED.
To the extent permitted by law, the obligations of the Company under this
Security Agreement shall remain in full force and effect without regard to, and
shall not be impaired by (a) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of the Company,
to the extent permitted by law; (b) any exercise or nonexercise, or any waiver,
by the Secured Party of any right, remedy, power or privilege under or in
respect of any of the Obligations or any security therefor (including this
Agreement); (c) any amendment to or modification of this Agreement or any
instrument evidencing any of the Obligations or pursuant to which any of them
were issued; (d) any amendment to or modification of any instrument or agreement
(other than this Agreement) securing any of the Obligations; or (e) the taking
of additional security for or any guaranty of any of the Obligations or the
release or discharge or termination of any security or guaranty for any of the
Obligations; and whether or not the Company shall have notice or knowledge of
any of the foregoing.
10. NO WAIVER.
No failure on the part of the Secured Party to exercise, and no delay in
exercising, any right, remedy or power hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise by the Secured Party of any
right, remedy or power hereunder preclude any other or future exercise of any
other right, remedy or power. Each and every right, remedy and power hereby
granted to the Secured Party or the future holders of any of the Obligations or
allowed to any of them by law or other agreement, including without limitation
the Securities Purchase Agreement, the Note, or any other document evidencing
security therefor, shall be cumulative and not exclusive of any other and,
subject to the provisions of this Agreement, may be exercised by the Secured
Party or the future holders of any of the Obligations from time to time.
11. EXPENSES.
The Company agrees to pay, on demand, all reasonable costs and expenses
(including reasonable attorneys' fees and expenses for legal services of every
kind, including, without limitation, reasonable allocated costs of staff
counsel) of the Secured Party incidental to the sale of, or realization upon,
any of the Collateral or in any way relating to the perfection, enforcement or
protection of the rights of the Secured Party hereunder. The Secured Party may
at any time apply to the payment of all such costs and expenses all moneys of
the Company or other proceeds arising from its possession or disposition of all
or any portion of the Collateral.
12. CONSENTS, AMENDMENTS, WAIVERS.
Any term of this Agreement may be amended and the performance or
observance by the Company of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by a written instrument signed by the Company and the Secured Party.
13. GOVERNING LAW.
Except as otherwise required by the laws of any jurisdiction in which any
Collateral is located, this Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
14. PARTIES IN INTEREST.
All terms of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of the
parties hereto, including without limitation any future holder of the Note and
any institutional lender who becomes a participant in or holder of any of the
Obligations, by amendment to the Securities Purchase Agreement or otherwise,
provided that the Company may not assign or transfer its rights hereunder
without the prior written consent of the Secured Party and the Secured Party may
not assign or transfer its rights hereunder unless the assignee confirms in
writing its agreement to be bound by the provisions of this Agreement.
15. TERMINATION.
Upon payment in full of the principal balance of the Note and all accrued
unpaid interest thereon in accordance with its terms, this Agreement shall
terminate and the Company shall be entitled to the return, at the Company's
expense, of such Collateral in the possession or control of the Secured Party as
has not theretofore been disposed of pursuant to the provisions hereof.
16. NOTICES.
Except as otherwise expressly provided herein, all notices and other
communications made or required to be given pursuant to this Agreement shall be
in writing and mailed by first-class mail, postage prepaid, or sent by telegraph
or telex and confirmed by letter, addressed as follows:
Notices in writing to the Purchaser, other than notices of routine requests and
like administrative matters, shall be directed as follows:
(a) if to the Company at:
BPI Packaging Technologies, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: President
Telephone Number: 508/000-0000
Facsimile Number: 508/822-6872
or at such other addresses for notice as the Company shall last have furnished
in writing to the Secured Party;
(b) if to the Secured Party at:
DGJ, L.L.C.
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxx
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
or at such address for notice as the Secured Party shall last have furnished in
writing to the person giving the notice.
Any such notice or demand shall be deemed to have been duly given or made and to
have become effective (i) if delivered by hand to a responsible officer of the
party to which it is directed, at time of the receipt thereof by such officer,
(ii) if sent by registered or certified first-class mail, postage pre-paid,
three business days after the posting thereof, and (iii) if sent by telex or
cable, at the time of dispatch thereof, if in normal business hours in the state
where received or otherwise at the opening of business on the following business
day.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement to be
duly executed as an instrument under seal by their authorized representatives as
of the date first written above.
BPI PACKAGING TECHNOLOGIES, INC.
By: ____________________________________
Title: Chairman and Chief Executive Officer
DGJ, L.L.C.
By: ____________________________________
Title: President
Schedule 4(a) to Security Agreement
Real Property
NONE
Schedule 4(b) to Security Agreement
Location of Collateral
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Exhibit A to Security Agreement
Description of Collateral
All assets of any kind or type, now existing or hereafter arising, whether now
owned or whereafter acquired, and wherever located, including but not limited
to, all inventory, accounts, claims for money, instruments, documents, chattel
paper, goods, equipment and general intangibles, fixtures, investment property
and any and all additions, accessions, replacements and substitutions to or for
any of the above and all proceeds and products of the above, and including the
following:
(a) all inventory of the Company;
(b) all accounts of the Company;
(c) all claims for moneys and contract rights of the Company that are due
or are to become due;
(d) all instruments, negotiable or other documents (including, without
limitation, documents of title), policies and certificates of insurance, money,
chattel paper, deposits, warehouse receipts and things in action of the Company;
(e) all goods, equipment and machinery of the Company (including, without
limitation, motor vehicles and aircraft), together with any and all attachments,
parts, repairs and accessories now or hereafter affixed thereto or used in
connection therewith, and any warranty claims or settlements or resolutions for
defective items;
(f) all general intangibles of the Company, including, without limitation,
licenses, trademarks, corporate and trade names, copyrights, goodwill, patents
and patent applications; and
(g) any and all additions, accessions, replacements and substitutions to
or for any of the foregoing and any and all proceeds and products of any of the
foregoing.
EXHIBIT F
PATENT AND TRADEMARK SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of January 27, 1999 between BPI
PACKAGING TECHNOLOGIES, INC., a Delaware corporation having its chief executive
office and principal place of business at 000 Xxxxxxxx Xxxxxx, Xxxxx Xxxxxxx,
Xxxxxxxxxxxxx 00000 (the "Grantor"), and DGJ, L.L.C., a Delaware limited
liability company, with its principal place of business at 000 Xxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxx Xxxx, Xxxxxxxx 00000 (collectively, the "Secured Party").
Capitalized terms not otherwise defined herein have the meanings set forth in
that certain Securities Purchase Agreement, dated as of January 27, 1999 between
Grantor and Secured Party (as amended, modified, supplemented or restated from
time to time, the "Securities Purchase Agreement").
R E C I T A L S:
WHEREAS, pursuant to the Securities Purchase Agreement, Grantor is
granting a security interest to the Secured Party in certain collateral,
including, without limitation, the patents identified on Schedule A hereto (the
"Subject Patents") and trademarks identified on Schedule A hereto (the "Subject
Trademarks").
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which are
hereby acknowledged, Grantor and the Secured Party hereby agree as follows:
1. Grant of Security Interest. As security for the prompt and complete
payment and performance in full of the Obligations, as such term is defined in
the Security Agreement, by and among the Grantor and the Secured Party, dated of
even date herewith, Grantor hereby assigns, pledges, and transfers to the
Secured Party, and grants to the Secured Party, for the benefit of the Secured
Party, a security interest in and continuing lien upon all of Grantor's right,
title, and interest in the Subject Patents and the Subject Trademarks, together
with the following ("Proceeds"): all royalties, income, payments, claims,
damages, and proceeds of suit, including any claim of Grantor against third
parties for any (i) past, present or future infringement or dilution of any
Subject Patent or any Subject Trademark or (ii) injury to the goodwill
associated with any Subject Trademark or Subject Trademark registration) whether
now owned or existing or hereafter acquired or arising, and wherever located.
2. Representations and Warranties. Grantor hereby represents and warrants
to the Secured Party:
(a) Schedule A hereto contains a true, accurate and complete list of all
of Grantor's patent registrations issued by, and patent applications filed with,
the United States Patent and Trademark Office which are, in each case, material
to Grantor's business.
(b) Schedule B hereto contains a true, accurate and complete list of all
of Grantor's trademark and service xxxx registrations issued by, and trademark
and service xxxx applications filed with, the United States Patent and Trademark
Office which are, in each case, material to Grantor's business.
3. Covenants. Grantor covenants and agrees as follows:
(a) It will notify the Secured Party no later than ninety (90) days after
it (i) acquires any United States patent or files any application therefor which
is not included on Schedule A hereto or (ii) acquires any United States
registered trademark or service xxxx or files any application therefor which is
not included on Schedule A hereto. If the Secured Party so requests, Grantor
will deliver to the Secured Party an Amendment to Schedule A describing such
letter patent, trademark, service xxxx or application and file this Agreement,
together with such Amendment to such Schedule, with the United States Patent and
Trademark Office.
(b) Upon the written request of Secured Party, and at the sole expense of
the Grantor, Grantor shall promptly and duly execute and deliver any and all
additional documents, including, without limitation, UCC-1 financing statements,
and take such further action as Secured Party may reasonably deem desirable to
obtain the full benefit of this Agreement.
4. Incorporation of Securities Purchase Agreement.
Grantor hereby acknowledges and affirms that the rights and remedies of
the Secured Party with respect to the lien on and security interest in the
Subject Patents and the Subject Trademarks made and granted hereby are more
fully set forth in the Securities Purchase Agreement, the terms and provisions
of which are incorporated herein by this reference as if fully set forth herein.
5. Miscellaneous.
(a) This Agreement may not be changed, waived, or terminated except in
accordance with the amendment provisions of the Securities Purchase Agreement.
(b) This Agreement may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officer as of the date first
written above.
BPI PACKAGING TECHNOLOGIES, INC.
By: ____________________________________
Title: Chairman and Chief Executive Officer
DGJ, L.L.C.
By: ____________________________________
Title: President
STATE OF ILLINOIS )
) ss.
COUNTY OF XXXX )
On the 27th day of January, 1999, before me personally came C. Xxxx
Xxxxxxxxx, personally known to me to be the person described in and who executed
the foregoing instrument as Chairman and Chief Financial Officer of BPI
PACKAGING TECHNOLOGIES, INC., the corporation described in and which executed
the foregoing instrument; that the said instrument was signed on behalf of said
corporation by order of its Board of Directors; that he signed his name thereto
by like order; and that he acknowledged said instrument to be the free act and
deed of said corporation.
____________________________
Xxxxxxx X. Xxxxxx
Notary Public
Seal
PATENT AND TRADEMARK SECURITY AGREEMENT
SCHEDULE A
GRANTOR: BPI PACKAGING TECHNOLOGIES, INC..
I. U.S. PATENTS
Date
Title Inventor Patent Issued
----- -------- ------ ------
II. U.S. PATENT APPLICATIONS
Date
Title Inventor Patent Filed
----- -------- ------ -----
PATENT AND TRADEMARK SECURITY AGREEMENT
SCHEDULE B
GRANTOR: BPI PACKAGING TECHNOLOGIES, INC..
I. U.S. REGISTERED TRADEMARKS AND SERVICE MARKS
Date
Xxxx Class(es) Reg # Issued
---- --------- ----- ------
II. U.S. TRADEMARK AND SERVICE XXXX APPLICATIONS
Date
Xxxx Class(es) Filing # Filed
---- --------- -------- -----
EXHIBIT G
Description of Leased Real Estate
The Company has entered into lease agreement with Maxaldan Realty L.P.,
dated October 1, 1995, whereby the Company leases Building No. 3. and 82,780
square feet of manufacturing space plus second story office space and loading
docks in Building No. 1 at 000-000 Xxxxxxxx Xxxxxx, Xxxxx Xxxxxxx, XX. The lease
commenced on January 1, 1996 and ends on December 31, 2007. For the period from
January 1, 1996 through July 31, 1997, the Company shall pay rent in the amount
of $532,167.20 payable at the rate of $28,008.80 per month. The Company shall
also pay rent in the amount of $378,265 for the initial twelve year term payable
at the rate of $2,626,84 per month, subject to adjustment as provided in the
lease. Effective August 1, 1997, the rent shall be adjusted at each anniversary
of the lease commencement date in accordance with the terms of the lease.
EXHIBIT H
BPI PACKAGING TECHNOLOGIES, INC.
AMENDED CERTIFICATE OF DESIGNATION OF SERIES C PREFERRED STOCK
SETTING FORTH THE POWERS, PREFERENCES, RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF SUCH
SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware, BPI Packaging Technologies, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of
the Corporation by paragraph 4 of the Certificate of Incorporation of the
Corporation, as amended (the "Certificate of Incorporation"), and in accordance
with the provisions of Section 151 of the General Corporation law of the State
of Delaware, the Board of Directors of the Corporation on January 27, 1999,
adopted the following resolution increasing the number of shares of Preferred
Stock designated as Series C Preferred Stock and amend the rights of such
series:
RESOLVED that, pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the General Corporation Law of the State
of Delaware and the provisions of the Certificate of Incorporation, the number
of shares of Preferred Stock designated as Series C Preferred Stock are
increased and the voting powers, preferences and relative, participating,
optional and other special rights, qualifications, limitations and restrictions
of the shares of Preferred Stock designated as Series C Preferred Stock are
amended as follows:
1. Designation. That the number of shares of the Corporation's Preferred Stock
that has been designated as Series C Preferred Stock be increased from
thirty-six thousand six hundred and seventy-four (36,674) to one million, six
hundred twenty-nine thousand, nine hundred thirty (1,629,930). As used herein,
the term "Preferred Stock" used without reference to the Series C Preferred
Stock means the Series A Preferred Stock and the Series B Convertible Preferred
Stock previously authorized by the Corporation's Board of Directors as evidenced
in a Certificate of Designation recorded with the Delaware Secretary of State on
May 24, 1991 and a Certificate of Designation recorded with the Delaware
Secretary of State on October 3, 1990, as amended by a Certificate of Amendment
of Certificate of Designation recorded on June 24, 1991, respectively
(hereinafter referred to as the "Series A Preferred Stock" and the "Series B
Convertible Preferred Stock"), the Series C Preferred Stock, and such series of
preferred stock issued, authorized and designated by a vote or votes of the
Board of Directors from time to time in the future, share for share alike and
without distinction as to class, except as otherwise expressly provided for or
as the context otherwise requires.
2. Liquidation, Dissolution or Winding Up.
(a) Treatment at Liquidation, Dissolution or Winding Up. In the event of
any liquidation, dissolution or winding up of the Corporation, whether voluntary
or involuntary, or in the event of its insolvency, before any distribution or
payment is made to any holders of any shares of Common Stock or any other class
or series of capital stock of the Corporation designated to be junior to the
Series C Preferred Stock, and subject to the liquidation right and preferences
of any class or series of preferred stock designated to be senior to or on a
parity with the Series C Preferred Stock, including the Series A Preferred Stock
and the Series B Convertible Preferred Stock, holders of each share of Series C
Preferred Stock shall be entitled to be paid first out of the assets of the
Corporation available for distribution to holders of the Corporation's capital
stock of all classes whether such assets are capital, surplus or earnings, in an
amount equal to a fraction, the numerator of which shall equal one hundred
dollars ($100.00), and the denominator of which shall equal the number of
designated shares of Series C Preferred Stock.
If, upon liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, the assets to be distributed among the holders
of the Preferred Stock shall be insufficient to permit payment in full to the
holders of the Preferred Stock of the full preferential amounts as provided in
Certificates of Designation of the Corporation as described in Section 1 herein
and as provided for in this Section 2, then the entire assets of the Corporation
to be so distributed shall be distributed ratably among the holders of the
Preferred Stock entitled to receive a distribution under such provisions in
accordance with the applicable preferential amount set forth in such
Certificates or this Section.
After such payment shall have been made in full to the holders of the
Preferred Stock or funds necessary for such payment shall have been set aside by
the Corporation in trust for the account of holders of the Preferred Stock and
so as to be available for such payment, the remaining assets available for
distribution shall be distributed ratably among the holders of the Common Stock
(subject to the liquidation rights and preferences of any other class or series
of Preferred Stock designated to be senior to, or on a parity with, the Common
Stock).
(b) Distributions Other than Cash. Whenever the distribution provided for
in this Section 2 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the Board of Directors of the Corporation.
3. Voting Power. The Series C Preferred Stock has no current voting rights.
However, upon an Event of Default of the Securities Purchase Agreement, dated
January 27, 1999 between the Corporation and DGJ, L.L.C., (as defined therein),
or while an Event of Default has not been cured, except as otherwise required by
law, the Certificate of Incorporation of the Corporation, as amended, or any
statement of resolution establishing a series, the holders of the Series C
Preferred Stock will be entitled to vote with the holders of the Common Stock on
each matter submitted to a vote of the Corporation's stockholders as a single
class, with each share of Series C Preferred Stock having thirty (30) votes per
one (1) vote of each share of Common Stock, as equitably adjusted for stock
splits, stock dividends, combinations, reorganizations, reclassifications or
other similar events, and shall be entitled to notice of any stockholders'
meeting in accordance with the by-laws of the Corporation.
4. Restrictions and Limitations. The Corporation shall not amend its Certificate
of Incorporation without the approval, by vote or written consent, by the
holders of at least a majority of the then outstanding shares of Series C
Preferred Stock, each share of Series C Preferred Stock to
be entitled to one vote in each instance, if such amendment would change any of
the rights, preferences, privileges of or limitations provided for herein for
the benefit of the Series C Preferred Stock or materially adversely affect the
rights of the holders of the Series C Preferred Stock. Without limiting the
generality of the preceding sentence, the Corporation will not amend its
Certificate of Incorporation or file a Certificate of Designation without the
approval by the holders of at least a majority of the outstanding shares of the
Series C Preferred Stock, voting separately as a class, if such amendment would
reduce the amount payable to the holders of Series C Preferred Stock upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation or create a class of securities with liquidation or dividend rights
senior to or on parity with the Series C Preferred Stock.
5. Optional Redemption.
(a) Option to Redeem. If the Promissory Note, dated January 27, 1999,
signed by the Corporation in favor of DGJ, L.L.C. is has been retired in its
entirety, the Corporation, at its option, may elect to redeem all or a portion
of the outstanding shares of Series C Preferred Stock, at a price of $100.00
plus accrued interest at a rate of six percent (6%) per annum commencing on
January 27, 1999 for all designated shares (the "Redemption Price") on not less
than 30 nor more than 60 days' written notice.
In the event the Corporation elects to effect a partial redemption of the
Series C Preferred Stock, the Corporation, at its option, may effect such
redemption pro rata from all holders of the Series C Preferred Stock, by lot, or
based on criteria the Corporation deems appropriate in its sole discretion, as
designated by the Corporation's Board of Directors.
(b) Adjustments. The Redemption Price shall be subject to equitable
adjustment whenever there shall occur a stock split, stock dividend,
combination, reorganization, reclassification or other similar event involving a
change in the capital structure of the Series C Preferred Stock.
(c) Redemption Notice. Written notice of the redemption (the "Redemption
Notice") shall be mailed, postage prepaid, to each holder of record of the
Series C Preferred Stock which is to be redeemed, at its address shown on the
records of the Corporation's transfer agent. The Redemption Notice shall contain
the following information:
(i) The number of shares of Series C Preferred Stock held by the
holder which shall be redeemed by the Corporation and the total number of shares
of Series C Preferred Stock held by all holders to be so redeemed;
(ii) The Redemption Date and the applicable Redemption Price; and
(iii) That the holder is to surrender to the Corporation, at the
place of designation therein, its certificate or certificates representing the
shares of Series C Preferred Stock to be redeemed.
Prior to the Redemption Date, the Corporation shall provide the funds for
the payment of the Redemption Price for the shares of Series C Preferred Stock
to be redeemed by depositing the amount thereof in trust for such purpose with a
bank or trust company doing business in New York or Massachusetts and having a
capital surplus of at least $5,000,000. Such bank or trust company hereinafter
referred to as the "Redemption Agent." Following such appointment and prior to
any redemption, the Corporation shall deliver to the Redemption Agent
irrevocable written instructions
authorizing the Redemption Agent, on behalf and at the expense of the
Corporation, to cause such notice of redemption to be duly mailed as herein
provided as soon as practicable after receipt of such irrevocable instructions
and in accordance with the above provisions. All funds necessary for the
redemption shall be deposited with the Redemption Agent in trust for at least
two (2) business days prior to the Redemption Date, for the pro rata benefit of
the holders of the shares so called for redemption, so as to be and continue to
be available therefor. Neither failure to mail any such notice to one or more
such holders nor any default in any notice shall affect the sufficiency of the
proceedings for redemption as to other holders.
(iv) Surrender of Certificates. Each holder of Series C Preferred
Stock to be redeemed shall surrender the certificate or certificates
representing such shares to the Corporation at the place designated in the
Redemption Notice, and thereupon the applicable Redemption Price for such shares
as set forth in this Section 5 shall be paid to the order or the person whose
name appears on such certificate or certificates and each surrendered
certificate shall be canceled and retired. In the event some but not all of the
shares of Series C Preferred Stock represented by a certificate or certificates
surrendered by a holder are being redeemed, the Corporation shall execute and
deliver to or to the order of the holder, at the expense of the Corporation, a
new certificate representing the number of shares of Series C Preferred Stock
which were not redeemed.
(v) Rights in Redemption; Default; Unclaimed Funds. If notice of
redemption shall have been given as hereinbefore provided, and the Corporation
shall not default in the payment of the Redemption Price, then each holder of
shares called for redemption shall be entitled to all preferences and relative
and other rights accorded by this resolution until and including the data prior
to the Redemption Date. If the Corporation shall default in making payment or
delivery as aforesaid on the Redemption Date, then each holder of the shares
called for redemption shall be entitled to all preferences and relative and
other rights accorded by this Certificate until and including the date prior to
the date (the "Final Redemption Date") when the Corporation makes payment or
delivery as aforesaid to the holders of the Series C Preferred Stock. From and
after the Redemption Date or, if the Corporation shall default in making payment
or delivery as aforesaid, the Final Redemption Date, the shares called for
redemption shall no longer be deemed to be outstanding, and all rights of the
holders of such shares shall cease and terminate, except for the right of the
holders of such shares, upon surrender of certificates therefore, to receive
amounts to be paid hereunder. The deposit of moneys in trust with the Redemption
Agent shall be irrevocable except that the Corporation shall be entitled to
receive from the Redemption Agent the interest or other earnings, if any, earned
on any moneys so deposited in trust, and the holders of any shares redeemed
shall have no claim to such interest or other earnings, and any balance of
moneys so deposited by the Corporation and unclaimed by the holders of the
Preferred Stock entitled thereto at the expiration of two (2) years from the
Redemption Date (or the Final Redemption Date, as applicable) shall be repaid,
together with any interest or other earnings thereon, to the Corporation, and
after any such repayment, the holders of the shares entitled to the funds so
repaid to the Corporation shall look only to the Corporation for such payment,
without interest.
6. Notices of Record Data. In the event of
(a) any taking by the Corporation of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization, reclassification, recapitalization of
capital stock, merger or consolidation, or any transfer of all or substantially
all of the assets of the Corporation to any other corporation, or any other
entity or person, or
(c) any voluntary or involuntary dissolution, liquidation or winding up of
the Corporation, then and in each such event the Corporation shall mail or cause
to be mailed to each holder of Series C Preferred Stock a notice specifying (i)
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right and a description of such dividend, distribution
or right, (ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding up is expected to become effective, and (iii) the time, if any, that is
to be fixed, as to when the holders of record of Common Stock (or other
securities) shall be entitled to exchange their shares of Common Stock (or other
securities) for securities or other property deliverable upon such
reorganization, reclassification, recapitalization, transfer, consolidation,
merger, dissolution, liquidation or winding up. Such notice shall be mailed by
first class mail (postage prepaid) at least ten (10) days prior to the date
specified in such notice on which such action is to be taken.
[Signature Page Follows]
IN WITNESS WHEREOF, BPI PACKAGING TECHNOLOGIES, INC. has caused
this Certificate of Designation to be duly executed in its corporate name by
a duly authorized officer on this 27th day of January, 1999.
BPI PACKAGING TECHNOLOGIES, INC.
By: __________________________
Its: President
ATTEST:
By: __________________
Its: Secretary
