Exhibit 10.6
SECURITIES PURCHASE AGREEMENT (NOTES AND WARRANTS)
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of November
8, 2006, by and among Maritime Logistics US Holdings Inc., a Delaware
corporation, with headquarters located at 000 Xxxxxxxxx, Xxxxxxxxxx, Xxx Xxxxxx
("XXX" or the "COMPANY"), and the investors listed on the Schedule of Buyers
attached hereto (individually, a "BUYER" and collectively, the "BUYERS").
WHEREAS:
A. The Company and each Buyer is executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Section 4(2) of the Securities Act of 1933, as amended (the "1933 ACT"), and
Rule 506 of Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the 1933 Act.
B. Prior to the Closing (as defined below) and immediately following
the consummation of the Share Exchange (as defined below), the Company will
cause ShellCo (as defined below) to authorize a new series of its senior secured
convertible notes, which notes shall be convertible into ShellCo's common stock,
par value $0.001 per share (the "COMMON STOCK") in accordance with the terms of
such notes. "SHELLCO" is a corporation organized under the laws of the state of
Delaware which has made a filing with the SEC on Form 10-SB, a subsidiary of
which ("MERGER SUB") will be merged effective prior to Closing with and into the
Company, with the Company continuing as the surviving entity, pursuant to the
terms of Section 6(o) (the "MERGER"). ShellCo has indicated its intention to
change its name to Summit Global Logistics, Inc. after the Merger and to effect
a reverse split in respect of its Common Stock in which each 11.226 shares of
Common Stock prior to such reverse split shall be exchanged for one share of
Common Stock after such reverse split (the "REVERSE SPLIT").
C. The Buyers, severally, and not jointly, wish to purchase, and the
Company wishes ShellCo to sell, upon the terms and conditions stated in this
Agreement, (i) secured convertible notes, in the form attached hereto as EXHIBIT
A, in an aggregate original principal amount of $65,000,000 (as amended,
restated, supplemented and/or modified from time to time in accordance with the
provisions thereof, collectively, the "NOTES") and (ii) warrants, in
substantially the form attached hereto as EXHIBIT B (as amended, restated,
supplemented and/or modified from time to time in accordance with the provisions
thereof, the "WARRANTS"), to acquire up to that number of shares of Common Stock
equal to the quotient of (a) 40% of the original aggregate principal amount of
the Notes purchased by the Buyers at Closing (as defined in Section 1(a))
divided by the Conversion Price (as defined in the Notes) as of the Closing (the
shares of Common Stock issuable upon exercise of the Warrants, the "WARRANT
SHARES").
D. Contemporaneously with the Closing (as defined below), the Buyers
and ShellCo will execute and deliver a Registration Rights Agreement,
substantially in the form attached hereto as EXHIBIT C (as amended, restated,
supplemented and/or modified from time to time in accordance with the provisions
thereof, the "REGISTRATION RIGHTS AGREEMENT"), pursuant to which ShellCo shall
agree to provide certain registration rights in respect of the shares of Common
Stock into which the Notes are convertible (the "CONVERSION SHARES") and the
Warrant
Shares under the 1933 Act and the rules and regulations promulgated thereunder,
and applicable state securities laws.
E. The Notes, the Conversion Shares, the Warrants and the Warrant
Shares collectively are referred to herein as the "Securities".
F. The Notes will rank senior to all outstanding and future
indebtedness of ShellCo, subject to Permitted Indebtedness (as defined in the
Notes) and will be secured by a second priority perfected security interest in
substantially all of the assets of ShellCo and the Company and in substantially
all of the shares of capital stock and all the assets of each of ShellCo's and
the Company's current and future Subsidiaries (as defined below) other than the
escrowed funds referenced in subsection (x) of the definition of Permitted
Indebtedness set forth in Section 28 of the Note and the Subsidiaries organized
outside the United States of America, any of the States thereof or the District
of Columbia (collectively, the "FOREIGN SUBSIDIARIES"), as evidenced by the
Pledge Agreement in the form attached hereto as EXHIBIT D (as the same may be
amended, restated, supplemented and/or modified from time to time in accordance
with the provisions thereof, the "PLEDGE AGREEMENT") and the Security Agreement
in the form attached hereto as EXHIBIT E (as the same may be amended, restated,
supplemented and/or modified from time to time in accordance with the provisions
thereof, the "SECURITY AGREEMENT") and the Guaranty from the Company and each
Subsidiary (other than Foreign Subsidiaries) in the form attached hereto as
EXHIBIT F (as the same may be amended, restated, supplemented and/or modified
from time to time in accordance with the provisions thereof, the "GUARANTY", and
together with the Pledge Agreement and the Security Agreement, as each may be
amended, restated, supplemented and/or modified from time to time in accordance
with the provisions thereof, collectively the "SECURITY DOCUMENTS").
G. In connection with the Merger and the Acquisitions (as defined
below), (i) ShellCo shall issue shares of Common Stock (the "MANAGEMENT
RESTRICTED STOCK") to certain members of management of ShellCo, the Company,
Targets (as defined below) and their Subsidiaries (the "MANAGEMENT MEMBERS"),
and (ii) each Management Member will execute and deliver a lockup agreement, the
form of which is attached hereto as Exhibits G-1, G-2 and G-3 (as the same may
be amended, restated, supplemented and/or modified from time to time in
accordance with the provisions thereof, the "LOCKUP AGREEMENTS"), pursuant to
which the resale of the Management Restricted Stock shall be limited.
H. Contemporaneously herewith, the Company is entering into a
securities purchase agreement, by and among the Company and the buyers listed on
the Schedule of Buyers attached thereto (the "COMMON PIPE BUYERS"), (the "COMMON
PIPE SECURITIES PURCHASE Agreement"), wherein the Company agrees, upon the terms
and subject to the conditions of the Common PIPE Securities Purchase Agreement,
to cause ShellCo to issue and sell to the Common PIPE Buyers (i) no less than
30,000 shares (after giving effect to the Reverse Split ) of Common Stock of
ShellCo (the "COMMON PIPE COMMON SHARES"), and (ii) certain warrants (the
"COMMON PIPE WARRANTS"), which will be exercisable to purchase additional shares
of Common Stock (as exercised, the "COMMON PIPE WARRANT SHARES") in accordance
with the terms of the Common PIPE Warrants.
I. Contemporaneously with the Closing, the Common PIPE Buyers and
ShellCo will execute and deliver a Registration Rights Agreement (as amended,
restated, supplemented and/or
2
modified from time to time in accordance with the provisions thereof, the
"COMMON PIPE REGISTRATION RIGHTS AGREEMENT"), pursuant to which ShellCo will
agree to provide certain registration rights in respect of the Common PIPE
Common Shares and Common PIPE Warrant Shares under the 1933 Act and the rules
and regulations promulgated thereunder, and applicable state securities laws.
J. The Common PIPE Common Shares, Common PIPE Warrants and Common PIPE
Warrant Shares collectively are referred to herein as the "COMMON PIPE
SECURITIES", and the offering thereof, the "COMMON PIPE OFFERING".
K. Immediately prior to the Closing, ShellCo shall enter into a joinder
agreement, pursuant to which ShellCo shall, among other things, join this
Agreement, affirm the representations and warranties hereunder and agree to
perform the obligations and covenants of the Company hereunder in the form
attached hereto as EXHIBIT H (as the same may be amended, restated, supplemented
and/or modified from time to time in accordance with the provisions thereof, the
"JOINDER AGREEMENT"). The Company's obligations hereunder, are subject to the
satisfaction of the condition that ShellCo enter into the Joinder Agreement.
L. Contemporaneously with the Closing, ShellCo will enter into a loan
agreement, by and among ShellCo, the Company, Seamaster Logistics, Inc.,
Amerussia Shipping Company Inc., Fashion Marketing Inc., FMI International LLC,
FMI International Corp. (West), FMI International Corp., Freight Management LLC,
FMI Trucking, Inc., FMI Express Corp., Clare Freight, Los Angeles, Inc., Tug New
York, Inc., Summit Global Logistics, Inc., TUG USA, Inc., AMR Investments Inc.
and FMI Holdco I, LLC and the lenders listed on the schedule of lenders thereto
and Fortress Credit Corp. as administrative agent (as the same may be amended,
restated, supplemented and/or modified from time to time in accordance with the
provisions thereof, the "SENIOR LOAN AGREEMENT"; such loans evidenced thereby,
the "SENIOR LOAN") under which ShellCo and certain of its subsidiaries shall
have the ability to obtain term loans up to the maximum principal amount of
$55,000,000 and revolving loans up to a maximum principal amount which shall not
exceed $10,000,000 at any one time, in each case, upon the terms and subject to
the conditions set forth in the Senior Loan Agreement. The Senior Loan and the
obligations related thereto shall rank senior to the Notes and shall be secured
by a first priority perfected security interest in substantially all of the
assets of ShellCo and substantially all of the assets of each of ShellCo's
subsidiaries (other than Foreign Subsidiaries), including, without limitation
the stock of each Subsidiary that is not a Foreign Subsidiary and 65% of the
voting stock and each first-tier Foreign Subsidiary. The respective priorities
and preferences of the Notes and the Senior Loan in respect of the Collateral
(as defined in the Security Documents (as defined below)) are set forth in
detail in that certain Intercreditor and Subordination Agreement by and between
Fortress Credit Corp., as collateral agent for the lenders under the Senior Loan
Agreement, and the Collateral Agent (as defined below) to be dated as of the
Closing Date, substantially in the form attached hereto as Exhibit I (as the
same may be amended, restated, supplemented and/or modified from time to time in
accordance with the provisions thereof, the "INTERCREDITOR AGREEMENT").
M. Contemporaneously with, and as a condition, to the Closing, and with
certain of the proceeds of the transactions contemplated hereby, ShellCo shall
acquire, directly or indirectly, all (or substantially all) of the equity of
each of (i) FMI Holdco I, LLC, a Delaware limited liability company
headquartered at 000 Xxxxxxx Xxxx., Xxxxxxxx, Xxx Xxxxxx 00000 and
3
certain of its parent companies (collectively, "FMI"), (ii) Clare Freight, Los
Angeles, Inc. a California corporation headquartered at 00000 Xxxxxx Xxx., Xxxx
xx Xxxxxxxx, XX 00000, and (iii) TUG New York, Inc., a New York corporation
headquartered at 00 Xxxxxxxxxxx Xxx., Xxxxxxxx, XX 00000 (together with Clare
Freight, Los Angeles, Inc., the "TUG COMPANIES" and together with FMI, the
"TARGETS") and substantially all of the assets of the TUG Logistics group of
companies, including TUG Logistics, Inc., a California corporation headquartered
at 00000 Xxxxxx Xxx., Xxxx xx Xxxxxxxx, XX 00000, TUG Logistics (Miami), Inc. a
Florida corporation headquartered at 0000 XX 00 Xxx., Xxxxx 000, Xxxxx, XX
00000, and Glare Logistics, Inc., a California corporation headquartered at
00000 Xxxxx Xxxxxx Xxx., Xxxxxx, Xxx Xxxxxxx, XX 00000 (collectively, the "TUG
ASSETS", and the acquisition of the TUG Assets and the Targets, collectively,
the "ACQUISITIONS").
NOW, THEREFORE, the Company and each Buyer hereby agree as follows:
1. PURCHASE AND SALE OF NOTES AND WARRANTS.
(a) PURCHASE NOTES AND WARRANTS. Subject to the satisfaction
(or waiver) of the conditions set forth in Sections 6 and 7 below, the Company
shall cause ShellCo to issue and sell to each Buyer, and each Buyer severally,
but not jointly, agrees to purchase from ShellCo on the Closing Date (as defined
below), (x) the principal amount of Notes set forth opposite such Buyer's name
in column (3) on the Schedule of Buyers and (y) the related Warrants to acquire
up to that number of Warrant Shares set forth opposite such Buyer's name in
column (4) on the Schedule of Buyers (the "CLOSING").
(b) CLOSING. The date and time of the Closing (the "CLOSING
DATE") shall be 10:00 a.m., New York City time, on the first day other than
Saturday, Sunday or other day on which commercial banks in the City of New York
are authorized or required by law to remain closed (a "BUSINESS DAY") following
the satisfaction (or waiver) and notification of the Company of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6 and 7 below (or
such later or earlier date as is mutually agreed to by the Company and Buyers
holding the right to purchase at least 80% of the aggregate principal amount of
the Notes). The Closing shall occur on the Closing Date at the offices of
Xxxxxxx Xxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
(c) PURCHASE PRICE. The aggregate purchase price for the Notes
and the Warrants to be purchased by each such Buyer at the Closing (the
"PURCHASE PRICE") shall be the amount set forth opposite such Buyer's name in
column (5) of the Schedule of Buyers. Each Buyer shall pay $1,000 for each
$1,000 of principal amount of Notes and related Warrants to be purchased by such
Buyer at the Closing.
(d) FORM OF PAYMENT. On the Closing Date, (i) each Buyer shall
pay its respective Purchase Price to ShellCo and/or to one or more designees of
ShellCo for the Notes and Warrants to be issued and sold to such Buyer at the
Closing, by wire transfer of immediately available funds in accordance with the
Company's or ShellCo's written wire instructions, less any amount withheld
pursuant to Section 4(f), and (ii) the Company shall cause ShellCo to deliver to
each Buyer the Notes (allocated in the principal amounts as such Buyer shall
request) representing such principal amount of the Notes which such Buyer is
then purchasing hereunder along with warrants representing the Warrants
(allocated in the amounts as such Buyer shall
4
request) which such Buyer is purchasing, in each case duly executed on behalf of
ShellCo and registered in the name of such Buyer or, subject to compliance with
applicable securities laws, its designee.
2. BUYER'S REPRESENTATIONS AND WARRANTIES. Each Buyer represents and
warrants, severally and not jointly, as of the date of this Agreement and on the
Closing Date, with respect to only itself that:
(a) NO PUBLIC SALE OR DISTRIBUTION. Such Buyer is acquiring
the Notes, and the Warrants, and upon conversion of the Notes and exercise of
the Warrants will acquire the Conversion Shares issuable upon conversion of the
Notes and the Warrant Shares issuable upon exercise thereof, in the ordinary
course of business, for its own account and not with a view towards, or for
resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act and such Buyer does
not have a present arrangement to effect any distribution of the Securities to
or through any person or entity; PROVIDED, HOWEVER, that by making the
representations herein, such Buyer does not agree to hold any of the Securities
for any minimum or other specific term and reserves the right to dispose of the
Securities at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act and pursuant to the applicable
terms of the Transaction Documents (as defined in Section 3(b)). Such Buyer is
acquiring the Securities hereunder in the ordinary course of its business. Such
Buyer does not presently have any agreement or understanding, directly or
indirectly, with any Person (as defined in Section 3(p)) to distribute any of
the Securities.
(b) ACCREDITED INVESTOR STATUS. Such Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Such Buyer understands that the
Securities are being offered and sold to it in reliance on specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying, and ShellCo will rely, upon, among other
things, the truth and accuracy of, and such Buyer's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
such Buyer set forth herein in order to determine the availability of such
exemptions and the eligibility of such Buyer to acquire the Securities.
(d) INFORMATION. Such Buyer and its advisors, if any, have
been furnished with all materials relating to the business, finances and
operations of the Company and the Targets and materials relating to the offer
and sale of the Securities which have been requested by such Buyer. Such Buyer
and its advisors, if any, have been afforded the opportunity to ask questions of
the Company. Neither such inquiries nor any other due diligence investigations
conducted by such Buyer or its advisors, if any, or its representatives shall
modify, amend or affect such Buyer's right to rely on the Company's
representations and warranties contained herein. Such Buyer understands that its
investment in the Securities involves a high degree of risk and is able to
afford a complete loss of such investment. Such Buyer has sought such
accounting, legal and tax advice as it has considered necessary to make an
informed investment decision in respect of its acquisition of the Securities.
5
(e) NO GOVERNMENTAL REVIEW. Such Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
(f) TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Securities have not been
and are not being registered under the 1933 Act or any state securities laws,
and may not be offered for sale, sold, assigned or transferred unless (A)
subsequently registered thereunder, (B) such Buyer shall have delivered to
ShellCo an opinion of counsel, in a form reasonably acceptable to ShellCo, to
the effect that such Securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration, or (C)
such Buyer provides ShellCo with assurance reasonably acceptable to ShellCo that
such Securities can be sold, assigned or transferred pursuant to Rule 144 or
Rule 144A promulgated under the 1933 Act, as amended, (or a successor rule
thereto) (collectively, "RULE 144"); (ii) any sale of the Securities made in
reliance on Rule 144 may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale of the Securities under
circumstances in which the seller (or the Person through whom the sale is made)
may be deemed to be an underwriter (as that term is defined in the 0000 Xxx) may
require compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) none of ShellCo, the Company or any
other Person is under any obligation to register the Securities under the 1933
Act or any state securities laws or to comply with the terms and conditions of
any exemption thereunder. Notwithstanding the foregoing, and subject to
compliance with applicable securities laws, the Securities may be pledged in
connection with a bona fide margin account or other loan or financing
arrangement secured by the Securities and such pledge of Securities shall not be
deemed to be a transfer, sale or assignment of the Securities hereunder, unless
required by law, and no Buyer effecting a pledge of Securities shall be required
to provide ShellCo with any notice thereof or otherwise make any delivery to
ShellCo or the Company pursuant to this Agreement or any other Transaction
Document, including without limitation, this Section 2(f).
(g) LEGENDS. Such Buyer understands that the certificates or
other instruments representing the Notes and the Warrants and the stock
certificates representing the Conversion Shares and the Warrant Shares, except
as set forth below, shall bear any legend as required by the "blue sky" laws of
any state and a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of such certificates):
[NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN] THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE
OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE
ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES
6
ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER, IN A GENERALLY
ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID
ACT OR (II) UNLESS SOLD PURSUANT TO, AND IN ACCORDANCE WITH,
RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE
FOREGOING, SUBJECT TO COMPLIANCE WITH APPLICABLE SECURITIES
LAWS, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT
SECURED BY THE SECURITIES. THIS INSTRUMENT IS SUBJECT TO THE
TERMS OF A SECURITIES PURCHASE AGREEMENT (NOTES AND WARRANTS),
DATED AS OF NOVEMBER 8, 2006, BY AND AMONG MARITIME LOGISTICS
US HOLDINGS INC., THE BUYERS LISTED THEREIN AND AEROBIC
CREATIONS, INC. PURSUANT TO THAT CERTAIN JOINDER AGREEMENT,
DATED AS OF NOVEMBER 8, 2006, AND AN INTERCREDITOR AGREEMENT
BY AND BETWEEN LAW DEBENTURE TRUST COMPANY OF NEW YORK, ON
BEHALF OF THE HOLDER OF THIS NOTE AND OF THE OTHER NOTES, AND
FORTRESS CREDIT CORP. AS AGENT (OR ANY SUCCESSOR OR
REPLACEMENT AGENT), DATED AS OF NOVEMBER 8, 2006 (AS THE SAME
MAY BE AMENDED, SUPPLEMENTED, RESTATED, NOVATED OR REPLACED
(INCLUDING IN CONNECTION WITH REPLACEMENT SENIOR FINANCING)
FROM TIME TO TIME, THE "INTERCREDITOR AGREEMENT").
The legend set forth above shall be removed and ShellCo shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped or, in the case of Conversion Shares or Warrant Shares, issue to such
holder by electronic delivery at the applicable balance account at The
Depository Trust Company ("DTC"), if, unless otherwise required by state
securities laws, (i) such Securities are registered for resale under the 1933
Act, provided that (A) upon receipt of notice from ShellCo that the applicable
registration statement is not, or no longer is effective in respect of the
resale of such Securities, the Holder will not transfer such Securities (other
than pursuant to clauses 2(g)(ii) or 2(g)(iii) below) until ShellCo notifies the
Holder that the applicable registration statement becomes effective (again), and
(B) the Holder hereby agrees to indemnify severally and not jointly and hold
ShellCo harmless against any claim of securities laws violations in respect of
any such transfer (from and after the date the Holder receives the first notice
described in Section 2(g)(i)(A) above through the date on which such Holder
receives the second notice described in Section 2(g)(i)(A) above) by such Holder
of any Security as to which such legend has been removed, (ii) in connection
with a sale, assignment or other transfer, such holder provides ShellCo with an
opinion of counsel reasonably satisfactory to ShellCo, in a generally acceptable
form, to the effect that such sale, assignment or transfer of the Securities may
be made without registration under the applicable requirements of the 1933 Act
and that such legend is no longer required, or (iii) such holder provides
ShellCo with assurances reasonably acceptable to ShellCo that the Securities can
be sold, assigned or transferred pursuant
7
to Rule 144 or Rule 144A, and such Holder delivers the legended Securities to
ShellCo or ShellCo's transfer agent.
(h) VALIDITY; ENFORCEMENT. This Agreement has been, and, when
the other Transaction Documents (as defined below) to which such Buyer is a
party are executed and delivered in accordance with the terms and conditions
contemplated hereby and thereby, such documents shall have been duly and validly
authorized, executed and delivered on behalf of such Buyer and shall constitute
the legal, valid and binding obligations of such Buyer enforceable against such
Buyer in accordance with their respective terms, except as such enforceability
may be limited by general principles of equity or to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer, moratorium,
liquidation and other similar laws relating to, or affecting generally, the
enforcement of applicable creditors' rights and remedies.
(i) NO CONFLICTS. The execution, delivery and performance by
such Buyer of this Agreement and the other Transaction Documents to which such
Buyer is a party and the consummation by such Buyer of the transactions
contemplated hereby and thereby will not (i) result in a violation of any
organizational documents of such Buyer or (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument to which
such Buyer is a party, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws) applicable to such Buyer or by which any property or asset of the Buyer is
bound or affected, except in the case of clauses (ii) and (iii) above, for such
conflicts, defaults, rights or violations which would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of such Buyer to perform its obligations hereunder or under any of the
other Transaction Documents. Each Buyer agrees that it has independently, based
on such documents and information it deemed appropriate, made its decision to
enter into this Agreement and purchase the Notes and Warrants.
(j) RESIDENCY. Such Buyer is a resident of that jurisdiction
specified below its address on the Schedule of Buyers.
(k) PLACEMENT AGENT. Such Buyer understands that Xxxxxx &
Xxxxxxx, LLC (the "AGENT") has acted solely as the agent of the Company in this
placement of the Securities, and that the Agent makes no representation or
warranty with regard to the merits of this transaction or as to the accuracy of
any information such Buyer may have received in connection therewith. Such Buyer
acknowledges that it has not relied on any information prepared by the Agent or
advice furnished by or on behalf of the Agent. Such Buyer agrees that it has,
independently and without reliance on Agent, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of
ShellCo, the Company and the Targets and has made its own decision to enter into
this Agreement and purchase the applicable Securities.
8
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each of the Buyers on the date hereof and on the
Closing Date that:
(a) ORGANIZATION AND QUALIFICATION. Set forth on SCHEDULE 3(A)
is a true and correct list of the entities in which the Company or any Target,
directly or indirectly, owns capital stock or holds an equity or similar
interest, together with their respective jurisdictions of organization and the
percentage of the outstanding capital stock or other equity interests of such
entity that is held by the Company or such Target or any of their respective
Subsidiaries. SCHEDULE 3(A) also sets forth a true and correct corporate
structure of ShellCo and its Subsidiaries immediately following the Closing,
giving pro forma effect to the Acquisitions. Other than with respect to the
entities listed on SCHEDULE 3(A), neither the Company or any Target, directly or
indirectly, owns any securities or beneficial ownership interests in any other
Person (including through joint ventures or partnership arrangements) or has any
investment in any other Person. The Company and its "SUBSIDIARIES" (which for
purposes of this Agreement means any entity in which the Company or ShellCo,
directly or indirectly, owns any of the capital stock, equity or similar
interests or voting power of such entity at the date of this Agreement or any
time hereafter, and each of the Targets and their respective subsidiaries) other
than the Foreign Subsidiaries are entities duly organized and validly existing
and in good standing under the laws of the jurisdiction in which they are
formed, and have the requisite power and authority to own their properties and
to carry on their business as now being conducted. To the knowledge of the
Company, each of the Foreign Subsidiaries are entities duly organized and
validly existing and, to the extent legally applicable, in good standing under
the laws of the jurisdiction in which they are formed, and have the requisite
power and authority to own their properties and to carry on their business as
now being conducted, except where failure to be so organized, existing, in good
standing, and/or have such requisite power and authority would not, individually
or in the aggregate, have a Material Adverse Effect. Each of the Company and the
Subsidiaries is duly qualified as a foreign entity to do business and, to the
extent legally applicable, is in good standing in every jurisdiction in which
its ownership of property or the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to be so
qualified or be in good standing would not have a Material Adverse Effect. As
used in this Agreement, "MATERIAL ADVERSE EFFECT" means any material adverse
effect on the business, properties, assets, operations, results of operations or
condition (financial or otherwise) of the Company and its Subsidiaries, taken as
a whole, or on the transactions contemplated hereby and the other Transaction
Documents or by the agreements and instruments to be entered into in connection
herewith or therewith, or on the authority or ability of the Company or any
Subsidiary to perform its obligations under the Transaction Documents (as
defined below). Except as set forth in SCHEDULE 3(A), the Company and each
Target holds all right, title and interest in and to 100% of the capital stock,
equity or similar interests of each of its respective Subsidiaries, in each
case, free and clear of any Liens (as defined below) other than Permitted Liens
(as defined in the Notes) including any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of free and
clear ownership by a current holder other than as set forth in the Intercreditor
Agreement, and no such Subsidiary owns capital stock or holds an equity or
similar interest in any other Person. As used in this Agreement, "LIEN" means,
with respect of any asset, any mortgage, lien, pledge, hypothecation, charge,
security interest, encumbrance or adverse claim of any kind and any restrictive
covenant, condition, restriction or exception of any kind that has the practical
effect of creating a mortgage, lien,
9
pledge, hypothecation, charge, security interest, encumbrance or adverse claim
of any kind (including any of the foregoing created by, arising under or
evidenced by any conditional sale or other title retention agreement, the
interest of a lessor with respect to a "Capital Lease" (in accordance with
generally accepted accounting principles), or any financing lease having
substantially the same economic effect as any of the foregoing).
(b) AUTHORIZATION; ENFORCEMENT; VALIDITY. The Company has the
requisite corporate power and authority to enter into and perform its
obligations under (i) this Agreement, the Guaranty and each of the other
agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement to which it is a party (such
documents, and together with the Notes, the Warrants, the Registration Rights
Agreement, the Security Documents, the Transfer Agent Instructions, the
Intercreditor Agreement and each of the other agreements to be entered into in
connection with the transactions contemplated by this Agreement, as amended,
restated, supplemented and/or modified from time to time in accordance with the
provisions thereof, collectively, the "TRANSACTION DOCUMENTS") and (ii) the
Acquisition Documents (as defined in Section 3(ii)) and to consummate the
transactions contemplated herein and therein in accordance with the terms hereof
and thereof. The execution and delivery of the Transaction Documents and the
Acquisition Documents (to which the Company is a party) by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby,
have been duly authorized by the board of directors of the Company (the "BOARD
OF DIRECTORS") and other than as set forth in Section 3(e) hereof, no further
filing, consent or authorization is required by the Company, its stockholders or
the Board of Directors. To the extent that a person that is a Subsidiary of the
Company on the date hereof is a party to or bound by a Transaction Document or
an Acquisition Document, such Subsidiary has the requisite power and authority
to enter into and perform its obligations under such Transaction Document or
Acquisition Document and the execution and delivery of such Transaction Document
by such Subsidiary and the consummation by such Subsidiary of the transactions
contemplated thereby have been duly authorized by the board of directors or
equivalent body of such Subsidiary and no further consent or authorization is
required by such Subsidiary, its equity holders or its board of directors or
equivalent body. This Agreement, the other Transaction Documents and the
Acquisition Documents to which the Company and, if applicable, its Subsidiaries
(existing on the date hereof) is a party have been duly executed and delivered
by the Company, and constitute the legal, valid and binding obligations of such
parties enforceable against such parties in accordance with their respective
terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance or transfer, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of applicable creditors' rights and
remedies. As of the Closing, the Transaction Documents and the Acquisition
Documents dated after the date of this Agreement and on or prior to the date of
the Closing shall have been duly executed and delivered by the Company and, if
applicable, those Persons who are Subsidiaries of the Company on the date
hereof, and shall constitute the valid and binding obligations of such parties,
enforceable against such parties in accordance with their terms except as
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.
10
(c) OFFER OF SECURITIES. Subject to the accuracy of Buyer's
representations and warranties hereunder, the offer by the Company and ShellCo
of the Securities is exempt from registration under the 1933 Act.
(d) NO CONFLICTS. The execution, delivery and performance of
the Transaction Documents by the Company, and if applicable its Subsidiaries,
and the consummation by such parties of the transactions contemplated hereby and
thereby and the granting of a security interest in the Collateral will not (i)
result in a violation of any certificate of incorporation, certificate of
formation, any certificate of designations or other constituent documents of the
Company or any of the Subsidiaries, any capital stock of the Company or any of
the Subsidiaries or bylaws of the Company or any of the Subsidiaries or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) in any respect under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or other
remedy in respect of, any agreement, indenture or instrument to which the
Company or any of the Subsidiaries is a party, or (iii) result in a violation of
any Requirements of Law, except in the case of clauses (i) (in respect of the
Foreign Subsidiaries), (ii) and (iii) of this Section 3(d), for such conflicts,
defaults, rights or violations which would not, individually or in the
aggregate, have a Material Adverse Effect. As used in this Agreement, (A)
"REQUIREMENTS OF LAW" means, as to any Person, any United States or foreign law,
statute, treaty, rule, regulation, right, privilege, qualification, license or
franchise or determination of an arbitrator or a court or other Governmental
Entity, in each case applicable or binding upon such Person or any of its
property or to which such Person or any of its property is subject or pertaining
to any or all of the transactions contemplated or referred to herein and (B)
"GOVERNMENTAL ENTITY" means the government of any nation, state, city, locality
or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
(e) CONSENTS. Neither the Company nor any of the Subsidiaries
is required to obtain any consent, authorization or order of, or make any filing
or registration with, any court, governmental agency or any regulatory or
self-regulatory agency or any other Person in order for it to execute, deliver
or perform any of its obligations under or contemplated by the Transaction
Documents to which it is a party, in each case in accordance with the terms
hereof or thereof, except for the following consents, authorizations, orders,
filings and registrations: (i) the filing of appropriate UCC financing
statements with the appropriate states and other authorities pursuant to the
Pledge Agreement and the Security Agreement; (ii) the Perfection Requirements
(as defined in the Security Agreement); (iii) the current report on Form 8-K
required to be filed after Closing by ShellCo pursuant to Section 4(h) of this
Agreement; (iv) the filing of the Schedule 14C relating to the Reverse Split
among other things; (v) the Form D filing required to be made following the
Closing by ShellCo with the SEC; (vi) filings required by applicable state
securities laws; and (vii) the registration statement and related state
securities law filings required by the Registration Rights Agreement. All
consents, authorizations, orders, filings and registrations which the Company is
required to have obtained prior to the date hereof pursuant to the preceding
sentence have been obtained or effected. Notwithstanding the first two sentences
of this Section 3(e), to the extent that any Foreign Subsidiary is required to
obtain any consent, authorization or order, or make any filing or registration,
but has not done so, such failure shall
11
not constitute a default hereunder or under the other Transaction Documents if
such failure(s), individually or in the aggregate, would not have a Material
Adverse Effect.
(f) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF SECURITIES.
The Company acknowledges and agrees that each Buyer is acting solely in the
capacity of an arm's length purchaser in respect of the Transaction Documents
and the transactions contemplated hereby and thereby and that, except as set
forth on SCHEDULE 3(F), no Buyer is (i) an officer or director of the Company,
(ii) an "affiliate" of the Company (as defined in Rule 144) or (iii) to the
knowledge of the Company, a "beneficial owner" of more than 10% of the shares of
Common Stock (as defined for purposes of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended (the "1934 Act")). The Company further acknowledges
that, except as set forth on SCHEDULE 3(F), to the knowledge of the Company, no
Buyer is acting as a financial advisor or fiduciary of any of ShellCo, the
Company or any Subsidiary (or in any similar capacity) in respect of the
Transaction Documents and the transactions contemplated hereby and thereby, and
any advice given by a Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to such Buyer's purchase of the
Securities. The Company further represents to each Buyer that the decision of
the Company and each of the Subsidiaries to enter into the Transaction Documents
to which such Person is a party has been based solely on the independent
evaluation by the Company, such Subsidiaries and their respective
representatives.
(g) NO GENERAL SOLICITATION; PLACEMENT AGENT'S FEES. None of
the Company, any of its Affiliates, or to the knowledge of the Company, any
Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offer or sale of the Securities. The Company shall be
responsible for the payment of any placement agent's fees, financial advisory
fees, or brokers' commissions (other than for persons engaged by any Buyer or
its investment advisor) relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold each Buyer harmless
against, any liability, loss or expense (including, without limitation,
attorneys' fees and out-of-pocket expenses) arising in connection with any such
claim. The Company acknowledges that it has engaged the Agent as placement agent
in connection with the sale of the Securities. Other than the Agent, the fees
and expenses of whom shall be borne by the Company or ShellCo (pursuant to that
certain Placement Agent Agreement between Agent and the Company dated August 22,
2006), the Company has not engaged any placement agent or other agent in
connection with the sale of the Securities.
(h) NO INTEGRATED OFFERING. None of the Company, the
Subsidiaries, any of their Affiliates, nor, to the knowledge of the Company, any
Person acting on their behalf has made, directly or indirectly, any offers or
sales of any security or solicited any offers to buy any security, under
circumstances that would require registration of any of the Securities under the
1933 Act or cause this offering of the Securities to be integrated with prior or
concurrent offerings by the Company for purposes of the 1933 Act or any
applicable stockholder approval provisions, including, without limitation, under
the rules and regulations of any exchange or automated quotation system on which
any of the securities of the Company are listed or designated other than the
Common PIPE Offering and the Acquisitions, which Common PIPE Offering and the
Acquisitions have been undertaken only in such a manner as to not adversely
affect the exemption from registration enjoyed by the sale of the Securities
pursuant to this
12
Agreement. None of the Company, the Subsidiaries, their Affiliates or any Person
acting on their behalf will take any action or steps referred to in the
preceding sentence that would require registration of any of the Securities
under the 1933 Act or cause the offering of the Securities to be integrated with
other offerings. As used in this Agreement, "AFFILIATE" means any Person who is
an "AFFILIATE" as defined in Rule 12b-2 of the General Rules and Regulations
under the 1934 Act.
(i) APPLICATION OF TAKEOVER PROTECTIONS; RIGHTS AGREEMENT. The
Company and the Board of Directors have taken all necessary action, if any, in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Certificate of Incorporation
(as defined in Section 3(o)) or the laws of Delaware which is or could become
applicable to any Buyer as a result of the transactions contemplated by this
Agreement, including, without limitation, ShellCo's issuance of the Securities
and any Buyer's ownership of the Securities. The Company has not adopted a
stockholder rights plan or similar arrangement relating to accumulations of
beneficial ownership of its Common Stock or a change in control of the Company.
(j) FINANCIAL STATEMENTS. The consolidated financial
statements of the Company and each of the Targets have been prepared in
accordance with United States generally accepted accounting principles ("GAAP")
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company, or such Target, as
applicable, as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments that, to the Company's knowledge, are not
material, individually or in the aggregate. Except for liabilities and
obligations incurred in the ordinary course of business and consistent with past
practice, liabilities and obligations reflected on or reserved against in the
June 30, 2006 interim consolidated balance sheets of the Company or in the June
30, 2006 interim consolidated balance sheets of any Target, as applicable,
prepared in accordance with GAAP delivered pursuant to Section 7(q) (the
"BALANCE SHEETS") and as otherwise contemplated hereby or disclosed herein or in
the disclosure schedules to this Agreement (the "DISCLOSURE SCHEDULES"), since
July 1, 2006, inclusive of such date, none of the Company or any Target has
incurred any liabilities or obligations that would be required to be reflected
or reserved against in a balance sheet of the Company or such Target, as
applicable, prepared in accordance with the principles used in the preparation
of the Balance Sheets. None of the Company or, to the Company's knowledge, any
stockholder, officer or director of the Company has issued any press release or
made any other public statement or communication on behalf of the Company or
otherwise relating to the Company or any of its Subsidiaries that contains any
untrue statement of a material fact or omits any statement of material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(k) ABSENCE OF CERTAIN CHANGES. Since June 30, 2006, there has
been no change or development in the business, properties, operations, condition
(financial or otherwise) results of operations or prospects of the Company or
any Subsidiary that has had or could
13
reasonably be expected to have a Material Adverse Effect. Except as set forth on
SCHEDULE 3(K), since June 30, 2006, (and before giving effect to the
transactions contemplated under the Transaction Documents) none of the Company
or any Target has (i) declared or paid any dividends other than as would have
been permitted under the Notes, (ii) sold any assets, individually or in the
aggregate, in excess of $300,000 outside of the ordinary course of business,
(iii) had capital expenditures, individually or in the aggregate, in excess of
$300,000 or (iv) waived any material rights in respect of any Indebtedness or
other rights in excess of $300,000 owed to it. None of the Company or any Target
has taken any steps to seek protection pursuant to any bankruptcy law nor does
the Company have any knowledge or reason to believe that its creditors or the
creditors of any Target intend to initiate involuntary bankruptcy proceedings or
any actual knowledge of any fact which would reasonably lead a creditor to do
so. Neither the Company nor any Subsidiary of the Company is as of the date
hereof, and after giving effect to the transactions contemplated hereby to occur
at the Closing will be, Insolvent (as defined below). For purposes of this
Section 3(k), "INSOLVENT" means, in respect of any Person, (i) the present fair
saleable value of such Person's assets (and including as assets for this purpose
at a fair valuation all rights of subrogation, contribution or indemnification
arising pursuant to any guarantees given by such Person) is less than the amount
required to pay such Person's (after giving effect to the Acquisitions) total
Indebtedness (as defined in Section 3(p)), (ii) such Person is unable to pay its
debts and liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured, (iii) such Person intends at any time
to incur or believes that it will at any time incur debts that would be beyond
its ability to pay as such debts mature or (iv) such Person has unreasonably
small capital with which to conduct the business in which it is engaged as such
business is now conducted and is proposed to be conducted.
(l) CONDUCT OF BUSINESS; REGULATORY PERMITS. None of the
Company or any Subsidiary is in violation of any term of or in default under its
certificate of incorporation, certificate of formation, any certificate of
designations of any outstanding series of preferred stock of such company or
Bylaws or their organizational charter or other constituent documents or bylaws,
respectively except for such violations or defaults in the case of Foreign
Subsidiaries which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. None of the Company or any
Subsidiary is in violation of any judgment, decree or order or any statute,
ordinance, rule or regulation applicable to such entity, and none of the Company
or any Subsidiary will conduct its respective business in violation of any of
the foregoing, except for such violations and/or possible violations which would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company and each Subsidiary possess all certificates,
authorizations and permits issued by the appropriate regulatory authorities
necessary to conduct their respective businesses, except where the failure to
possess such certificates, authorizations or permits would not have,
individually or in the aggregate, a Material Adverse Effect, and none of the
Company or any Subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or permit
except where such proceedings, revocation or modification would not have a
Material Adverse Effect.
(m) FOREIGN CORRUPT PRACTICES. None of the Company or any
Subsidiary, nor any director, officer, agent, employee or other Person acting on
behalf of any of them has, in the course of its actions for, or on behalf of,
such entity (i) used any corporate funds for any
14
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; (ii) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (iii)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (iv) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee; except for such actions referred to in
clauses (i) through (iv) which, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(n) TRANSACTIONS WITH AFFILIATES. Except as set forth in
SCHEDULE 3(N) hereto, other than the issuance of restricted stock and the other
arrangements disclosed on SCHEDULE 3(N), none of the officers, directors or
employees of any of the Company or any Subsidiary is presently a party to any
transaction with any of the Company or any Subsidiary (other than for ordinary
course services as employees, officers or directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any such officer, director or employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any such officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
(o) EQUITY CAPITALIZATION. As of the date hereof and before
giving effect to the Merger, the Acquisitions, and the financings contemplated
in the Transaction Documents, the authorized capital stock of the Company
consists of one million shares of Common Stock, all of which, as of the date
hereof, are issued and outstanding. All of such outstanding shares of Common
Stock of the Company have been validly issued and are fully paid and
nonassessable. Except as disclosed in SCHEDULE 3(O): (i) none of the Company's
capital stock is subject to preemptive rights or any other similar rights or any
Liens suffered or permitted by the Company; (ii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, or
exercisable or exchangeable for, any capital stock of the Company or any of its
Subsidiaries, or contracts, commitments, understandings or arrangements by which
the Company or any of its Subsidiaries is or may become bound to issue
additional capital stock of the Company or any of its Subsidiaries or options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, or exercisable
or exchangeable for, any capital stock of the Company or any of its
Subsidiaries; (iii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other agreements, documents or instruments
evidencing Indebtedness of the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries is or may become bound except for such
Indebtedness which (x) will be paid or satisfied in full substantially
concurrently with the Closing with the proceeds of the purchase of securities
hereunder, of the Common PIPE Offering, and under the Senior Loan Agreement or
(y) constitutes Permitted Indebtedness (as defined in the Notes); (iv) there are
no financing statements securing obligations in any material amounts, either
singly or in the aggregate, filed in connection with the Company or any of its
Subsidiaries other than financing statements evidencing Permitted Liens; (v)
there are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except pursuant to the Registration Rights Agreement and the
Common PIPE Registration Rights Agreement and registration rights
15
the Company has agreed to provide to the Agent, the existing shareholders listed
on Schedule 2(b) to the Registration Rights Agreement, certain members of
management and the current holders of ShellCo Common Stock); (vi) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of such Subsidiaries; (vii) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities; (viii) the Company does not have any stock appreciation rights
or "phantom stock" plans or agreements or any similar plan or agreement; (ix)
all the Company's outstanding options and warrants shall be cancelled at
Closing; and (x) no securities of the Company or any Subsidiary are listed or
quoted on any stock exchange or automated quotation system. All of the Company's
outstanding options and warrants shall be canceled at Closing. Immediately after
giving effect to the Merger, (i) all of the Company's issued and outstanding
stock shall be owned by ShellCo and (ii) all other securities issued by the
Company (including, without limitation, any securities disclosed in SCHEDULE
3(O)) shall have been exchanged for shares of ShellCo's Common Stock. The
Company has made available to the Buyers true, correct and complete copies of
the Company's Certificate of Incorporation, as amended and as in effect on the
date hereof (the "CERTIFICATE OF INCORPORATION"), and the Company's Bylaws, as
amended and as in effect on the date hereof (the "BYLAWS"), and all agreements
relating to securities convertible into, or exercisable or exchangeable for,
shares of Common Stock and the material rights of the holders thereof in respect
thereof.
(p) INDEBTEDNESS AND OTHER CONTRACTS. Except as disclosed in
SCHEDULE 3(P), none of the Company or any Subsidiary (i) has any outstanding
Indebtedness (as defined below) except for Permitted Indebtedness and such
Indebtedness which will be paid or satisfied in full substantially concurrently
with Closing with the proceeds of the purchase of securities hereunder, of the
Common PIPE Offering, and under the Senior Loan Agreement, (ii) is a party to
any contract, agreement or instrument, the violation of which, or default under
which, by the other party(ies) to such contract, agreement or instrument could
reasonably be expected to result in a Material Adverse Effect, (iii) is in
violation of any term of or in default under any contract, agreement or
instrument relating to any Indebtedness, except where such violations and
defaults would not result, individually or in the aggregate, in a Material
Adverse Effect, or (iv) is a party to any contract, agreement or instrument
relating to any Indebtedness, the performance of which, in the judgment of the
Company's officers, could be reasonably expected to have a Material Adverse
Effect. Immediately after giving effect to the Merger, none of ShellCo, the
Company, any Target, or Subsidiary shall have any outstanding Indebtedness,
other than the Notes, the Permitted Senior Indebtedness (as defined in the
Notes) and the Permitted Indebtedness (as defined in the Notes). For purposes of
this Agreement: (x) "INDEBTEDNESS" of any Person means, without duplication (A)
all indebtedness for borrowed money, (B) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services, including
(without limitation) "capital leases" in accordance with generally accepted
accounting principles (other than trade payables entered into in the ordinary
course of business), (C) all reimbursement or payment obligations in respect of
letters of credit, surety bonds and other similar instruments, (D) all
obligations evidenced by notes, bonds, debentures or similar instruments,
including obligations so evidenced incurred in connection with the acquisition
of property, assets or businesses, (E) all indebtedness created or arising under
any conditional sale or other title
16
retention agreement, or incurred as financing, in either case in respect of any
property or assets acquired with the proceeds of such indebtedness (even though
the rights and remedies of the seller or bank under such agreement in the event
of default are limited to repossession or sale of such property), (F) all
monetary obligations under any leasing or similar arrangement which, in
connection with generally accepted accounting principles, consistently applied
for the periods covered thereby, is classified as a capital lease, (G) all
indebtedness referred to in clauses (A) through (F) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in any property or assets (including
accounts and contract rights) owned by any Person, even though the Person which
owns such assets or property has not assumed or become liable for the payment of
such indebtedness, and (H) all Contingent Obligations in respect of indebtedness
or obligations of others of the kinds referred to in clauses (A) through (G)
above; (y) "CONTINGENT OBLIGATION" means, as to any Person, any direct or
indirect liability, contingent or otherwise, of that Person in respect of any
indebtedness, lease, dividend or other obligation of another Person if the
primary purpose or intent of the Person incurring such liability, or the primary
effect thereof, is to provide assurance to the obligee of such liability that
such liability will be paid or discharged, or that any agreements relating
thereto will be complied with, or that the holders of such liability will be
protected (in whole or in part) against loss in respect thereof; and (z)
"PERSON" means an individual, a limited liability company, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization or a
government or any department or agency thereof.
(q) ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation that if adversely determined, individually
or in the aggregate, would have a Material Adverse Effect before or by, any
court, public board, government agency, self-regulatory organization or body
pending or, to the knowledge of the Company, threatened against or affecting the
Company, any Subsidiary, any of their respective officers or directors, or the
Common Stock.
(r) INSURANCE. The Company and each Subsidiary is insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which such entities are engaged. None of the
Company or any Subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not have a Material Adverse Effect.
(s) EMPLOYEE RELATIONS.
(i) None of the Company or any Subsidiary is a party to
any collective bargaining agreement or employs any member of a union. The
Company and its Subsidiaries believe that the Company's relations with its
employees and the relations of its Subsidiaries with their respective
Subsidiaries are good. No executive officer (as defined in Rule 3b-7 promulgated
under the 0000 Xxx) of the Company or any Subsidiary has notified the Company or
such Subsidiary that such officer intends to leave the Company or Subsidiary, as
applicable, or otherwise intends to terminate such officer's employment with the
Company or Subsidiary. To the knowledge of the Company, no executive officer of
the Company or any Subsidiary is, or is now expected to be, in violation of any
material term of any employment contract,
17
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant and the continued employment of each such executive officer does not
subject the Company or any Subsidiary to any liability in respect of any of the
foregoing matters except such violations and/or liabilities that would not
individually or in the aggregate be reasonably expected to have a Material
Adverse Effect.
(ii) The Company and the Subsidiaries are in compliance
with all federal, state, local and foreign laws and regulations respecting
labor, employment and employment practices and benefits, terms and conditions of
employment and wages and hours, except where failure to be in compliance
therewith would not result, either individually or in the aggregate, in a
Material Adverse Effect.
(t) TITLE. The Company and the Subsidiaries (other than the
Foreign Subsidiaries) have good and marketable title in fee simple to all real
property and good and valid title to all personal property owned by them which
is material to the business of the Company or Subsidiary, as applicable, in each
case free and clear of all Liens except for Permitted Liens (as defined in the
Notes). To the knowledge of the Company, (i) none of the Foreign Subsidiaries
owns fee simple interest in any real property (or the equivalent thereof under
applicable law) and (ii) each of the Foreign Subsidiaries has good and valid
title to all personal property owned by them which is material to the business
of such Subsidiary, except where failure to have good and valid title,
individually or in the aggregate, would not be reasonably expected to have a
Material Adverse Effect, free and clear of all Liens other than Permitted Liens.
Except as set forth on SCHEDULE 3(T), any real property and facilities held
under lease by the Company or any of the Subsidiaries are held by the applicable
entity under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and such Subsidiaries. Where
failures to have such valid, subsisting and enforceable lease(s) exist, such
failures, in the aggregate, would not have a Material Adverse Effect.
(u) INTELLECTUAL PROPERTY RIGHTS. The Company and the
Subsidiaries (other than Foreign Subsidiaries) own or possess and, to the
knowledge of the Company, the Foreign Subsidiaries own or possess, adequate
rights or licenses to use all trademarks, trade names, service marks and all
applications and registrations therefor, patents, patent rights, copyrights,
original works of authorship, inventions, licenses, approvals, governmental
authorizations, trade secrets and other intellectual property rights
("INTELLECTUAL PROPERTY RIGHTS") necessary to conduct their respective
businesses as now conducted. Except as set forth on SCHEDULE 3(U), none of the
Company's or the Subsidiaries' registered, or applied for, Intellectual Property
Rights have expired or terminated or have been abandoned, or are expected to
expire or terminate or expected to be abandoned, within three years from the
date of this Agreement. The terminations, expirations or abandonments of such
registered, or applied for, Intellectual Property Rights would not, in the
aggregate, have a Material Adverse Effect. The Company does not have any
knowledge of any infringement by the Company or any of the Subsidiaries of
Intellectual Property Rights of others except of such infringement that would
not have a Material Adverse Effect. Except as set forth on SCHEDULE 3(U), there
is no claim, action or proceeding being made or brought, or to the knowledge of
the Company, being threatened, against the Company or any Subsidiary regarding
their respective Intellectual Property Rights and any such claims, actions and
proceedings being made, brought or threatened would not in the aggregate, have a
Material
18
Adverse Effect. The Company is unaware of any facts or circumstances which might
give rise to any of the foregoing infringements or claims, actions or
proceedings which would, individually or in the aggregate, have a Material
Adverse Effect. The Company and the Subsidiaries have taken reasonable security
measures to protect the secrecy, confidentiality and value of all of their
Intellectual Property Rights.
(v) ENVIRONMENTAL LAWS. The Company and the Subsidiaries (i)
are in compliance with any and all Environmental Laws (as hereinafter defined),
(ii) have received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective businesses,
(iii) are in compliance with all terms and conditions of any such permit,
license or approval and (iv) to the Company's knowledge, there are no events,
conditions or circumstances reasonably likely to result in liability of the
Company or any Subsidiary pursuant to Environmental Laws, except where, in the
foregoing clauses (i) through (iv) the failure to so comply with such
Environmental Laws, permits, licenses or other approvals or to obtain such
permits, licenses or approvals would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect. The term
"ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws relating to
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or toxic
or hazardous substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous Materials,
as well as all authorizations, codes, decrees, demands or demand letters,
injunctions, judgments, licenses, notices or notice letters, orders, permits,
plans or regulations issued, entered, promulgated or approved thereunder.
(w) SUBSIDIARY RIGHTS. The Company or one of its Subsidiaries
has the unrestricted right to vote, and (subject to limitations imposed by
applicable law) to receive dividends and distributions on, all capital
securities of its Subsidiaries owned by the Company or such Subsidiary,
respectively, subject to the Transaction Documents and the Senior Loan
Documents. Each Target or one of their respective Subsidiaries has the
unrestricted right to vote, and (subject to limitations imposed by applicable
law) to receive dividends and distributions on, all capital securities of its
Subsidiaries as owned by such Target or such Subsidiary, subject to the
Transaction Documents and the Senior Loan Documents.
(x) TAX STATUS. Except as set forth on SCHEDULE 3(X), the
Company and each Subsidiary (i) has made or filed all foreign, federal, state
and local income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and for which the Company has made appropriate
reserves on its books and (iii) has set aside on its books provision reasonably
adequate for the payment of all taxes for periods subsequent to the periods to
which such returns, reports or declarations apply. Except as set forth on
SCHEDULE 3(X), there are no material unpaid taxes claimed to be due by the
taxing authority of any jurisdiction, and the officers of the Company know of no
basis for any such claim. Each of the claims set forth on SCHEDULE 3(X) is being
contested in good faith or would not be expected, individually or in the
aggregate, to have a Material Adverse Effect. Except as
19
set forth on SCHEDULE 3(X), no liens have been filed securing taxes and other
governmental assessments and charges and no claims are being asserted by or
against the Company or any of the Subsidiaries in respect of any taxes (other
than liens for taxes not yet due and payable) or other governmental assessments
or charges. Except as set forth on SCHEDULE 3(X), none of the Company or any of
the Subsidiaries has received notice of assessment or proposed assessment of any
taxes claimed to be owed by it or any other Person on its behalf. Except as
disclosed on SCHEDULE 3(X), none of the Company or any of the Subsidiaries is a
party to any tax sharing or tax indemnity agreement or any other agreement of a
similar nature that remains in effect. None of the items set forth on SCHEDULE
3(X) would, individually or in the aggregate, have a Material Adverse Effect.
Each of the Company and the Subsidiaries has complied in all material respects
with all applicable legal requirements relating to the payment and withholding
of taxes and, within the time and in the manner prescribed by law, has withheld
from wages, fees and other payments and paid over to the proper governmental or
regulatory authorities all amounts required.
(y) INTERNAL ACCOUNTING CONTROLS. The Company and each of the
Subsidiaries maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of consolidated financial statements
in conformity with GAAP and to maintain asset and liability accountability,
(iii) access to assets or incurrence of liabilities is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets and liabilities is compared with the existing
assets and liabilities at reasonable intervals and appropriate action is taken
in respect of any difference.
(z) DISCLOSURE. Each of this Agreement (including the
Schedules hereto), the other Transaction Documents and that certain Private
Placement Memorandum dated October 23, 2006 (including the various attachments
thereto), furnished by or on behalf of the Company regarding the Company, the
Targets, their respective businesses and the transactions contemplated hereby is
true and correct in all material respects and does not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each press release issued by the
Company or its Subsidiaries (other than the Foreign Subsidiaries) during the
twelve (12) months preceding the date of this Agreement did not at the time of
release contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. To the knowledge of the Company, no press release issued
by any Foreign Subsidiary during the twelve (12) months preceding the date of
this Agreement at the time of release contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists in respect of the Company or any
of its Subsidiaries (other than the Foreign Subsidiaries) or its or their
business,
20
properties, operations or financial condition, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed. To the knowledge of the
Company, no event or circumstance has occurred or information exists in respect
of any of the Foreign Subsidiaries or its business, properties, operations or
financial condition, which, under applicable Requirements of Law, requires
public disclosure or announcement by such Person or its parent company but which
has not been so publicly announced or disclosed except where such failure would
not reasonably be expected to have a Material Adverse Effect.
(aa) OTC BULLETIN BOARD. The Common Stock is designated for
quotation on the National Association of Securities Dealers Inc.'s OTC Bulletin
Board (the "INITIAL PRINCIPAL MARKET"). At all times since such designation,
ShellCo has complied with the rules of the Initial Principal Market.
(bb) U.S. REAL PROPERTY HOLDING CORPORATION. The Company is
not, nor has it ever been, a U.S. real property holding corporation within the
meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the
Company shall so certify upon any Buyer's request.
(cc) NO OTHER AGREEMENTS. As of the Closing Date, the Company
has not, directly or indirectly, made any agreements with any Buyers relating to
the terms or conditions of the transactions contemplated by the Transaction
Documents except as set forth in the Transaction Documents.
(dd) ACQUISITION DOCUMENTS. To the Company's best knowledge,
the representations and warranties of each Target in the transaction documents
applicable to such Target in connection with the Acquisitions (the "ACQUISITION
DOCUMENTS"), are true and correct in all material respects (except for those
representations and warranties that are qualified by materiality, which are true
and correct in all respects) as of the date when made (except for
representations and warranties that speak as of a specific date, each of are
true and correct as of such date). The Company does not have any reason to
believe that such representations and warranties shall not be true and correct
in all material respects (except for those representations and warranties that
are qualified by materiality, which are expected to continue to be true and
correct in all respects) as of the Closing Date as though made at that time.
(ee) REGULATIONS T, U AND X. Neither the Company nor any other
Subsidiary is and will be engaged in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of Regulation
T, U or X of the Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect), and no proceeds of any Note will be used
to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock.
(ff) ERISA.
(i) Except as listed on SCHEDULE 3(FF) hereto, none of
the Company, ShellCo or any of their respective Subsidiaries or any of
their ERISA Affiliates maintains or contributes to, or within the
preceding six (6) years has maintained or contributed to, any Employee
Benefit Plan. Neither the Company, ShellCo nor any of their respective
Subsidiaries have any current labor problems or disputes that have
resulted in, or which such Person reasonably believes could be expected
to have, a Material Adverse Effect on the Company or ShellCo. No
Employee Benefit Plan has an accumulated or waived funding deficiency
or permitted decrease which would create a
21
deficiency in its funding standard account or has applied for an
extension of any amortization period within the meaning of Section 412
of the Internal Revenue Code of 1986, as amended (or any successor
statute thereto) and the regulations thereunder (the "CODE") as of the
date hereof, and no Lien imposed under the Code or ERISA exists or is
likely to arise on account of any Employee Benefit Plan within the
meaning of Section 412 of the Code.
(ii) Liabilities under any Employee Benefit Plan of
ShellCo or any of its Subsidiaries have been appropriately reflected on
the financial statements of ShellCo and its Subsidiaries in accordance
with GAAP.
(iii) All of the Employee Benefit Plans are and have
been established and administered in all respects in accordance with
all applicable laws, regulations or orders with respect thereto, no
such failure to comply therewith has, or could be reasonably expected
to have, a Material Adverse Effect on ShellCo or the Company. To the
extent that any Employee Benefit Plan maintained by ShellCo or any of
its Subsidiaries is intended to qualify for favorable tax treatment
under any applicable law, regulation or order, to the knowledge of the
ShellCo and the Subsidiaries, no fact or circumstance exists that could
reasonably be expected to adversely affect the tax-exempt status of
such Employee Benefit Plan.
(iv) All obligations regarding the Employee Benefit
Plans have been satisfied to the extent due and owing on the date
hereof, there are no outstanding defaults or violations by any party to
any Employee Benefit Plan and no taxes, penalties or fees are owing
under any of the Employee Benefit Plans where such obligations,
defaults, violations, unpaid taxes, unpaid penalties or unpaid fees
have or could reasonably be expected to have a Material Adverse Effect
on ShellCo or the Company. Except as set forth on SCHEDULE (FF),
neither the Company, ShellCo or any ERISA Affiliate has incurred any
withdrawal liability under ERISA with respect to any Multiemployer
Plan, or is aware of any facts indicating that it or any of its ERISA
Affiliates may in the future incur any such withdrawal liability, that
has, or could reasonably be expected to have, a Material Adverse Effect
on ShellCo or the Company.
(v) ShellCo and each of its Subsidiaries have made
available to the Buyers true, correct and complete copies of all
material Employee Benefit Plans as amended as of the date hereof, as
requested by any Buyer.
(vi) Each Employee Benefit Plan is fully funded to the
extent required by any applicable law, regulation or order.
(vii) Except as disclosed in SCHEDULE (EE) or as
required by any applicable law, including, without limitation, the
Consolidated Omnibus Budget Reconciliation Act of 1986 or any similar
state law, regulation or order, none of the Employee Benefit Plans
provides health and welfare benefits to retired employees or to the
beneficiaries or dependents of retired employees.
(viii) As used in this Agreement, "EMPLOYEE BENEFIT
PLAN" means an employee benefit plan (other than a Multiemployer Plan)
covered by Title IV of
22
ERISA and maintained (or that was maintained at any time during the six
(6) calendar years preceding the date of any borrowing hereunder) for
employees of any Loan Party or any of its ERISA Affiliates; "ERISA"
means the Employee Retirement Income Security Act of 1974, as amended,
and any successor statute of similar import, and regulations
thereunder, in each case, as in effect from time to time. References to
sections of ERISA shall be construed also to refer to any successor
sections; and "ERISA AFFILIATE" means (a) any Person subject to ERISA
whose employees are treated as employed by the same employer as the
employees of Parent or any of its Subsidiaries under Code Section
414(b), (b) any trade or business subject to ERISA whose employees are
treated as employed by the same employer as the employees of Parent or
any of its Subsidiaries under Code Section 414(c), (c) solely for
purposes of Section 302 of ERISA and Section 412 of the Code, any
organization subject to ERISA that is a member of an affiliated service
group of which Parent or any of its Subsidiaries is a member under Code
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and
Section 412 of the Code, any Person subject to ERISA that is a party to
an arrangement with Parent or any of its Subsidiaries and whose
employees are aggregated with the employees of Parent or any of its
Subsidiaries under Code Section 414(o).
(gg) ANTI-TERRORISM LAWS AND ANTI-MONEY LAUNDERING LAWS.
(i) None of the Company or its Subsidiaries is, and
after making due inquiry no Person who owns a controlling interest in
or otherwise controls the Company or any of its Subsidiaries is or is
anticipated to be, (i) listed on the Specially Designated Nationals and
Blocked Persons List maintained by the Office of Foreign Assets Control
("OFAC"), Department of the Treasury, and/or on any other similar list
(collectively, the "LISTS") maintained by the OFAC pursuant to any
authorizing statute, Executive Order or regulation (collectively, "OFAC
LAWS AND REGULATIONS"); or (ii) a Person (a "DESIGNATED PERSON") either
(A) included within the term "designated national" as defined in the
Cuban Assets Control Regulations, 31 C.F.R. Part 515, or (B) designated
under Sections 1(a), 1(b), 1(c) or 1(d) of Executive Order No. 13224,
66 Fed. Reg. 49079 (published September 25, 2001) or similarly
designated under any related enabling legislation or any other similar
Executive Orders (collectively, the "EXECUTIVE ORDERS").
(ii) None of the Company or its Subsidiaries (x) is a
Person or entity with which any Buyer is prohibited from dealing or
otherwise engaging in any transaction by any OFAC Laws and Regulations
and the Executive Orders (collectively, the "ANTI-TERRORISM LAW") or
(ii) is a Person or entity that commits, threatens or conspires to
commit or supports "terrorism" as defined in the Executive Orders or
(y) is affiliated or associated with a Person or entity listed in the
preceding clause (x) or clause (y). To the knowledge of the Company,
none of the Company or its Subsidiaries or Affiliates, nor any brokers
or other agents acting in any capacity in connection with the
securities being offered in connection herewith (A) deals in, or
otherwise engages in any transaction relating to, any property or
interests in property blocked pursuant to the Executive Orders or (B)
engages in or conspires to engage in any transaction that evades or
avoids, or has the purpose of evading or avoiding, or attempts to
violate, any of the prohibitions set forth in any Anti-Terrorism Law.
23
(iii) To the knowledge of the Company after due
inquiry, none of the Company or its Subsidiaries nor any holder of a
direct or indirect interest in the Company or any of its Subsidiaries
(x) is under investigation by any governmental authority for, or has
been charged with, or convicted of, money laundering under 18 U.S.C.
xx.xx. 1956 and 1957, drug trafficking, terrorist-related activities or
other money laundering predicate crimes, or any violation of the Bank
Secrecy Act (31 U.S.C. Section 5311 et. seq.), and its implementing
regulations, Title 31 Part 103 of the U.S. Code of Federal Regulations
(the "BSA"), (y) has been assessed civil penalties under any all
applicable laws, regulations and government guidance on the prevention
and detection of money laundering, including 18 U.S.C. Section 1956 and
1957, (the "ANTI-MONEY LAUNDERING LAWS"), or (z) has had any of its
funds seized or forfeited in an action under any Anti-Money Laundering
Laws.
4. COVENANTS.
(a) BEST EFFORTS. Each party shall use its best efforts timely
to satisfy each of the covenants and the conditions to be satisfied by it as
provided in Sections 5, 6 and 7 of this Agreement.
(b) FORM D AND BLUE SKY. The Company agrees to cause ShellCo
to timely file a Form D in respect of the Securities as required under
Regulation D and to provide a copy thereof to each Buyer promptly upon request
after such filing. The Company shall, on or before the Closing Date, take such
action, or cause ShellCo to take such action, as the Company shall reasonably
determine is necessary in order to obtain an exemption for or to qualify the
Securities for sale to the Buyers at the Closing pursuant to this Agreement
under applicable securities or "Blue Sky" laws of the states of the United
States (or to obtain an exemption from such qualification), and shall upon
request provide evidence of any such action so taken to the Buyers on or prior
to the Closing Date.
(c) REPORTING STATUS. Until the later of the date on which (i)
the Investors (as defined in the Registration Rights Agreement) shall have sold
all the Conversion Shares and Warrant Shares and (ii) none of the Notes or
Warrants is outstanding (the "REPORTING PERIOD"), the Company shall cause
ShellCo to timely file all reports required to be filed with the SEC pursuant to
the 1934 Act, provided that prior to the filing of the registration statement
with the SEC as required by the Registration Rights Agreement, compliance with
the current public information requirements of Rule 144(c) thereunder shall be
sufficient. The Company shall not permit ShellCo to terminate its status as an
issuer required to file reports under the 1934 Act, even if the 1934 Act or the
rules and regulations thereunder would permit such termination.
(d) USE OF PROCEEDS. The Company will use the proceeds from
the sale of the Securities for general corporate purposes, including general and
administrative expenses and for the purposes set forth on SCHEDULE 4(D) (and not
for the redemption or repurchase of any of its or its Subsidiaries' equity
securities). For clarification purposes only, the acquisition of securities in a
Permitted Acquisition (as defined in the Notes) pursuant to which the applicable
acquisition target becomes a Subsidiary (or a joint venture partner) shall not
be prohibited by this Section 4(d).
24
(e) FINANCIAL INFORMATION. The Company agrees to cause ShellCo
to send the following to each Investor during the Reporting Period (i) unless
the following are filed with the SEC through XXXXX and are promptly (and in any
event, within two business hours) available to the public through the XXXXX
system, within three (3) Business Days after the filing thereof with the SEC, a
copy of its Annual Reports on Form 10-K or 10KSB, its Quarterly Reports on Form
10-Q or 10-QSB or any other interim reports or any consolidated balance sheets,
income statements, stockholders' equity statements and/or cash flow statements
filed with the SEC for any period other than annual, any Current Reports on Form
8-K and any registration statements (other than on Form S-8) or amendments filed
pursuant to the 1933 Act, (ii) promptly and in any event, within one (1)
Business Day after the release thereof (unless such press release is available
on PR Newswire or Business Wire), facsimile or e-mailed copies of all press
releases issued by ShellCo, the Company or any of their respective Subsidiaries,
and (iii) copies of any notices and other information made available or given to
the stockholders of ShellCo or the Company generally, contemporaneously with the
making available or giving thereof to the stockholders.
(f) FEES. Subject to Section 8 below, at Closing, the Company
shall pay an expense allowance to Xxxxxx Xxxxxx & Co., L.P. (a Buyer) or its
designee(s) (in addition to any other expense amounts paid to any Buyer prior to
the date of this Agreement) for all reasonable costs and expenses incurred in
connection with the transactions contemplated by the Transaction Documents
(including all reasonable legal fees and disbursements in connection therewith,
documentation and implementation of the transactions contemplated by the
Transaction Documents and due diligence in connection therewith), in an amount
not to exceed $100,000 (in addition to any other expense amounts paid to any
Buyer prior to the date of this Agreement), which amount shall be withheld by
such Buyer from its Purchase Price at the Closing. The Company and ShellCo, as
applicable, shall pay any placement agent's fees, financial advisory fees, or
broker's commissions (other than for Persons engaged by any Buyer) relating to
or arising out of the transactions contemplated hereby, including, without
limitation, any fees or commissions payable to the Agent. The Company shall pay,
or cause ShellCo to pay, and hold, or cause ShellCo to hold, each Buyer harmless
against, any liability, loss or expense (including, without limitation,
reasonable attorney's fees and out-of-pocket expenses) arising in connection
with any claim relating to any such payment. Except as otherwise set forth in
the Transaction Documents, each party to this Agreement shall bear its own
expenses in connection with the sale of the Securities to the Buyers.
(g) PLEDGE OF SECURITIES. The Company on behalf of itself and
ShellCo acknowledges and agrees, subject to compliance with applicable
securities laws, that the Securities may be pledged by an Investor in connection
with a bona fide margin agreement or other loan or financing arrangement that is
secured by the Securities. Except as otherwise required by applicable securities
laws, the pledge of Securities shall not be deemed to be a transfer, sale or
assignment of the Securities hereunder, and no Investor effecting a pledge of
Securities shall be required to provide the Company or ShellCo with any notice
thereof or otherwise make any delivery to the Company or ShellCo pursuant to
this Agreement or any other Transaction Document, including, without limitation,
Section 2(f); provided that an Investor and its pledgee shall be required to
comply with the provisions of Section 2(f) in order to effect a sale, transfer
or assignment of Securities to such pledgee. The Company hereby agrees to
execute and deliver, and to cause ShellCo to execute and deliver such
documentation as a pledgee of the
25
Securities may reasonably request in connection with a pledge of the Securities
to such pledgee by an Investor.
(h) DISCLOSURE OF TRANSACTIONS AND OTHER MATERIAL INFORMATION.
On or before 8:30 a.m., New York City time, on the first Business Day following
the Closing Date, the Company shall cause ShellCo to file a press release (the
"PRESS RELEASE") describing the material terms of the transactions contemplated
by the Transaction Documents. The Company shall cause ShellCo to file, as a
"small business issuer" (as defined in Item 10(a) of Regulation SB under the
1934 Act), a Current Report on Form 8-K describing the terms of the transactions
contemplated by the Transaction Documents on or prior to the date required by
the 1934 Act and attaching the material Transaction Documents (including,
without limitation, this Agreement (and all schedules to this Agreement), the
form of the Notes, the form of the Warrants, the Registration Rights Agreement
and the Security Documents) as exhibits to such filing, if and to the extent
required by the 1934 Act (including all attachments, the "8-K FILING"). From and
after the filing of the 8-K Filing with the SEC, no Buyer shall be in possession
of any material, nonpublic information received from ShellCo, the Company, any
of their respective Subsidiaries or any of its respective officers, directors,
employees or agents, that is not disclosed in a 8-K Filing. The Company shall
not, and shall cause ShellCo and each of their Subsidiaries and each of their
respective officers, directors, employees and agents, not to, provide any Buyer
with any material, nonpublic information regarding ShellCo, the Company or any
of their Subsidiaries from and after the filing of the 8-K Filing with the SEC
without the express written consent of such Buyer. If a Buyer has, or believes
it has, received from the Company or ShellCo any such material, nonpublic
information regarding ShellCo, the Company or any of the Subsidiaries, it shall
provide ShellCo and the Company with written notice thereof. The Company shall,
or shall cause ShellCo to, within four (4) Trading Days (as defined in the
Notes) of receipt of such notice, make public disclosure of such material,
nonpublic information unless the Company has in good faith determined that the
matters relating to such notice do not constitute material non-public
information about the Company. In the event of a breach of the foregoing
covenant by ShellCo, the Company, any of their Subsidiaries, or any of their
respective officers, directors, employees and agents, in addition to any other
remedy provided herein or in the Transaction Documents, a Buyer shall have the
right to make a public disclosure, in the form of a press release, public
advertisement or otherwise, of such material, nonpublic information with the
prior approval by ShellCo or the Company. No Buyer shall have any liability to
ShellCo, the Company, any of their Subsidiaries, or any of their respective
officers, directors, employees, stockholders or agents for any such disclosure.
Subject to the foregoing, none of ShellCo, the Company, any of their
Subsidiaries or any Buyer shall issue any press releases or any other public
statements in respect of the transactions contemplated hereby; PROVIDED,
HOWEVER, that ShellCo and the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure in
respect of such transactions (i) in substantial conformity with the 8-K Filing
and contemporaneously therewith and (ii) as is required by applicable
Requirements of Law.
(i) TRANSACTIONS WITH AFFILIATES. From the date of this
Agreement until the first date following the Closing Date on which no Notes or
Warrants are outstanding, the Company shall not, and shall cause each of its
Subsidiaries not to, without the prior written consent of the Holders
representing a majority of the aggregate amount of the Notes then outstanding
(the "REQUIRED HOLDERS"); PROVIDED, HOWEVER, that any Note that is held by an
26
Affiliate of the Company shall not be deemed to be outstanding for the purposes
of the determination of Required Holders enter into, amend, modify or supplement
any material transaction, contract, agreement, instrument, commitment,
understanding or other arrangement with any of its or any Subsidiary's officers,
directors, Persons who were officers or directors at any time during the
previous two years, stockholders, or Affiliates of the Company or any of its
Subsidiaries, or with any individual related by blood, marriage or adoption to
any such individual or with any entity in which any such entity or individual
owns a beneficial interest, unless such agreement, amendment, modification or
supplement is (A) entered into pursuant to arm's length negotiation or (B)
customary employment arrangements and benefit programs on reasonable terms.
(j) ADDITIONAL NOTES; VARIABLE SECURITIES; DILUTIVE ISSUANCES.
For so long as any Buyer beneficially owns any Securities, the Company shall
cause ShellCo not to issue any Notes or other securities that would cause a
breach or default under the Notes. For so long as any Notes or Warrants remain
outstanding, the Company shall cause ShellCo not to, in any manner, issue or
sell any rights, warrants or options to subscribe for or purchase Common Stock
or directly or indirectly convertible into or exchangeable or exercisable for
Common Stock at a price which varies or may vary with the market price of the
Common Stock, including by way of one or more reset(s) to any fixed price,
unless the conversion, exchange or exercise price of any such security cannot be
less than the then applicable Conversion Price (as defined in the Notes) in
respect of the Common Stock into which any Note is convertible or the then
applicable Exercise Price (as defined in the Warrants) in respect of the Common
Stock into which any Warrant is exercisable. Notwithstanding the foregoing
sentence, ShellCo is permitted hereby to issue the Notes and Warrants provided
for hereby and the Warrants under the Common PIPE, which provide in certain
circumstances for adjustments to their exercise and conversion prices, as
applicable. For so long as any Notes or Warrants remain outstanding or until
such time as Stockholder Approval has been obtained, the Company shall cause
ShellCo not to, in any manner, enter into or affect any Dilutive Issuances (as
defined in the Notes) if the effect of such Dilutive Issuance is to cause
ShellCo to be required to issue upon conversion of any Note or exercise of any
Warrant any shares of Common Stock in excess of that number of shares of Common
Stock which ShellCo may issue upon conversion of the Notes and exercise of the
Warrants without breaching ShellCo's obligations under the rules or regulations
of the Principal Market or the stock exchange or automated quotation system upon
which ShellCo's shares of Common Stock are traded, including, without
limitation, any and all discounted issuance rules, if applicable. As used
herein, "STOCKHOLDER APPROVAL" shall mean the affirmative vote by stockholders
holding no less than a majority of the voting power of the Common Stock
approving resolutions providing for the Company's issuance of all of the
Securities as described in the Transaction Documents in accordance with
applicable law and the rules and regulations of the Principal Market. "PRINCIPAL
MARKET" shall mean the Initial Principal Market or other Eligible Market on
which the Common Stock is designated for quotation or listed and principally
trades.
(k) CORPORATE EXISTENCE. So long as any Buyer beneficially
owns any Notes or Warrants, as applicable, the Company shall cause ShellCo not
to be party to any Fundamental Transaction (as defined in the Notes) unless
ShellCo is in compliance with the applicable provisions governing Fundamental
Transactions set forth in the Notes and the Warrants.
27
(l) RESERVATION OF SHARES. For as long as any Buyer owns any
Notes or Warrants, and contingent on the effectiveness of the Reverse Split, the
Company shall cause ShellCo to take all actions necessary to at all times after
the Closing Date have authorized, and reserved for the purpose of issuance, no
less than 130% of the sum of (i) the number of shares of Common Stock issuable
upon conversion of all of the Notes issued at Closing, (ii) the number of shares
of Common Stock issuable upon exercise of the Warrants issued at the Closing,
and (iii) the number of shares of Common Stock issuable upon exercise of the
Common PIPE Warrants (without taking into account any limitations on the
conversion of the Notes or exercise of the Warrants or Common PIPE Warrants set
forth in the Notes, Warrants and Common PIPE Warrants, respectively).
(m) CONDUCT OF BUSINESS. The business of ShellCo, the Company
and their Subsidiaries shall not be conducted in violation of Requirements of
Law, except where such violations would not result, either individually or in
the aggregate, in a Material Adverse Effect.
(n) COMPLIANCE WITH NOTES COVENANTS. From the date of this
Agreement until the first date following the Closing Date on which no Notes are
outstanding, the Company shall comply with and not violate or breach, and shall
cause the Subsidiaries, as applicable, to comply with and not violate or breach,
the covenants and agreements set forth in Section 14 of the Notes as the same
may hereafter be amended, being incorporated herein and made a part hereof.
(o) NO ADDITIONAL REGISTERED SECURITIES. From the Closing Date
until the date that is ninety (90) Trading Days following the Effective Date (as
defined in the Registration Rights Agreement), neither ShellCo nor the Company
will file a registration statement under the 1933 Act, or allow any such
registration statement to become effective, in respect of any securities other
than the Registration Statement contemplated by the Registration Rights
Agreement and the registration rights agreement in respect of the Common PIPE
Offering and/or a registration statement on Form S-8.
(p) INTEGRATION. None of ShellCo, the Company, any of their
affiliates (as defined in Rule 501(b) under the 0000 Xxx) or any person acting
on behalf of ShellCo, the Company or such affiliate will sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the 1933 Act) including the Common PIPE Securities which will be
integrated with the sale of the Securities or the Conversion Shares in a manner
which would require the registration under the 1933 Act of the Securities or
require stockholder approval under the rules and regulations of the applicable
Principal Market and the Company will take all action that is appropriate or
necessary to assure that its offerings of other securities (other than the
Common PIPE Securities) will not be integrated for purposes of the 1933 Act or
the rules and regulations of the applicable Principal Market with the issuance
of Securities contemplated hereby.
(q) NO INCONSISTENT AGREEMENT OR ACTIONS. From the date of
this Agreement until the first date following the Closing Date on which no Notes
are outstanding, the Company and its Subsidiaries shall not enter into any
contract, agreement or understanding (other than the Senior Loan Documents)
which limit or restrict the Company's or any of its Subsidiaries' ability to
perform under, or take any other voluntary action to avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed by it
under, this Agreement or any of the other Transaction Documents.
28
(r) COLLATERAL AGENT.
(i) Each Buyer hereby (x) appoints Law Debenture Trust Company
of New York, as the collateral agent for such Buyer hereunder (the "COLLATERAL
AGENT"), and (y) each Buyer hereby authorizes the Collateral Agent (and its
officers, directors, employees and agents) in such capacity to take any and all
such actions on its behalf with respect to the Collateral (as defined in the
Security Documents) and the Obligations in accordance with the terms of this
Agreement, the Guaranty, the Security Agreement and the Pledge Agreement. The
Collateral Agent shall not have, by reason hereof or any of the other
Transaction Documents, a fiduciary relationship in respect of any Buyer. Neither
the Collateral Agent nor any of its officers, directors, employees and agents
shall have any liability to any Buyer for any action taken or omitted to be
taken in connection herewith or therewith except to the extent caused by its own
gross negligence or willful misconduct, and each Buyer agrees to defend,
protect, indemnify and hold harmless the Collateral Agent and all of its
officers, directors, employees and agents (collectively, the "CA INDEMNITEES")
from and against any losses, damages, liabilities, obligations, penalties,
actions, judgments, suits, fees, costs and expenses (including, without
limitation, reasonable attorneys' fees, costs and expenses) incurred by such CA
Indemnitee, whether direct, indirect or consequential, arising from or in
connection with the performance by such CA Indemnitee of the duties and
obligations of Collateral Agent pursuant hereto, to the Guaranty, to the
Security Agreement and/or to the Pledge Agreement.
(ii) The Collateral Agent may resign from the performance of
all its functions and duties hereunder at any time by giving at least fifteen
(15) Business Days' prior written notice to the Company and each holder of the
Notes. Such resignation shall take effect upon the acceptance by a successor
Collateral Agent of appointment as provided below. Upon any such notice of
resignation, the holders of a majority of the outstanding principal under the
Notes shall appoint a successor Collateral Agent. Upon the acceptance of the
appointment as Collateral Agent, such successor Collateral Agent shall succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Collateral Agent, and the retiring Collateral Agent shall be discharged
from its duties and obligations under this Agreement. After any Collateral
Agent's resignation hereunder, the provisions of this Section 4(r) shall inure
to its benefit. If a successor Collateral Agent shall not have been so appointed
within said fifteen (15) Business Day period, the retiring Collateral Agent
shall then appoint a successor Collateral Agent who shall serve until such time,
if any, as the holders of a majority of the outstanding principal under the
Notes appoint a successor Collateral Agent as provided above.
(iii) Without limiting the generality of the foregoing, each
Buyer hereby irrevocably appoints and authorizes Collateral Agent to execute and
deliver the Intercreditor Agreement, the Security Agreement and the Pledge
Agreement (on substantially the terms set forth in the forms of such documents
attached as exhibits hereto) for and on behalf of such Buyer and to perform all
of the obligations and duties of Collateral Agent provided for therein and under
the Guaranty, and each Buyer shall be bound by the terms of the Intercreditor
Agreement, the Guaranty, the Security Agreement and the Pledge Agreement as if
such Buyer were an original signatory thereto. As to (x) any matters not
expressly provided for by this Agreement and the other Transaction Documents
(including, without limitation, enforcement of any security interests) and (y)
any amendments, consents or waivers of any Transaction Document, the Collateral
Agent shall not be required to exercise any discretion or take any
29
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Holders, and such instructions of the Required Holders shall be
binding upon all Holders.
(iv) The Collateral Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement or in the
other Transaction Documents. The duties of the Collateral Agent shall be
mechanical and administrative in nature. The Collateral Agent shall not have by
reason of this Agreement or any other Transaction Document a fiduciary
relationship in respect of any Holder. Nothing in this Agreement or any other
Transaction Document, express or implied, is intended to or shall be construed
to impose upon the Collateral Agent any obligations in respect of this Agreement
or any other Transaction Document except as expressly set forth herein or
therein.
(v) If ShellCo or Fortress Credit Corp. (or any successor or
replacement agent under the Senior Loan Agreement) seeks the consent or approval
of the Required Holders to the taking or refraining from taking any action
hereunder, ShellCo shall send notice thereof to each Holder. Any such consents
shall be solicited and tabulated by ShellCo, or a solicitation and/or tabulation
agent engaged by ShellCo, subject to the Collateral Agent's right to receive all
such consents and satisfy itself as to (x) the authenticity of such consents (y)
receipt of such consents from Holders representing a sufficient principal amount
of Notes, and (z) any other matters that the Collateral Agent, in its sole
discretion deems necessary or advisable. It shall not be necessary for such
Holders to approve the particular form of any proposed amendment or waiver, but
it shall be sufficient if the written consents of the Required Holders reflect
the approval of the substance thereof. ShellCo shall provide the Collateral
Agent, and is permitted hereby to provide Fortress Credit Corp. (or any
successor or replacement agent under the Senior Loan Agreement), with copies of
any such written consent(s).
(vi) The Collateral Agent shall promptly notify each Holder
any time that the Required Holders have instructed the Collateral Agent to act
or refrain from acting pursuant hereto. ShellCo or Fortress Credit Corp. (or any
successor or replacement agent under the Senior Loan Agreement) or the
Collateral Agent may at any time request instructions from the Holders in
respect of any actions or approvals which by the terms of this Agreement or of
any of the other Transaction Documents the Collateral Agent is permitted or
required to take or to grant, and if such instructions are promptly requested,
the Collateral Agent shall be absolutely entitled to refrain from taking any
action or to withhold any approval under any of the Transaction Documents until
it shall have received such instructions from the Required Holders. Without
limiting the foregoing, no Holder shall have any right of action whatsoever
against the Collateral Agent as a result of the Collateral Agent acting or
refraining from acting under this Agreement or any of the other Transaction
Documents in accordance with the instructions of the Required Holders unless
consent of all Holders is required by the terms of such document.
(s) OTC BULLETIN BOARD. The Company shall cause ShellCo to use best
efforts to comply with the rules of the Principal Market and to cause all of the
Registrable Securities (as defined in the Registration Rights Agreement) covered
by a Registration Statement (as defined in the Registration Rights Agreement) to
be quoted thereon, unless listed or quoted on another Eligible Market. The
Company shall cause ShellCo to promptly secure the listing of all of the
Registrable Securities upon each national securities exchange and automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of
30
issuance) and shall cause ShellCo to maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all Registrable Securities from
time to time issuable under the terms of the Transaction Documents. The Company
shall cause ShellCo and its Subsidiaries not to take any action which would be
reasonably expected to result in the suspension or termination of trading of the
Common Stock on the Principal Market. The Company shall cause ShellCo to pay all
fees and expenses in connection with satisfying its obligations under this
Section 4(s).
(t) GUARANTY. On or prior to the Closing, the Company and each
Subsidiary (other than any Foreign Subsidiary) shall execute a Guaranty in the
form attached hereto as EXHIBIT F and shall execute and deliver the Pledge
Agreement and the Security Agreement, in the form attached hereto as EXHIBIT D
and EXHIBIT E, respectively. In addition, if ShellCo, the Company or any other
Grantor (as defined in the Security Documents) shall hereafter own, create or
acquire any other Subsidiary that is not a Grantor hereunder or a party to a
Guaranty, then the Company, ShellCo or such other Grantor shall promptly notify
the Collateral Agent thereof and ShellCo, the Company or such other such Grantor
shall cause such Subsidiary (other than any Foreign Subsidiary) to become a
party to a Guaranty and a party to the Pledge Agreement and the Security
Agreement and to duly execute and/or deliver resolutions, incumbency
certificates, opinions of counsel and other documents, in form and substance
reasonably acceptable to the Collateral Agent or as the Collateral Agent shall
reasonably request in respect thereof.
(u) REGULATION M. The Company will not take any action prohibited by
Regulation M under the 1934 Act, in connection with the distribution of the
Securities contemplated hereby.
(v) GENERAL SOLICITATION. None of the Company, any of its Affiliates or
any person acting within the scope of their delegated authority on behalf of the
Company or such affiliate will solicit any offer to buy or offer or sell the
Securities by means of any form of general solicitation or general advertising
within the meaning of Regulation D, including: (i) any advertisement, article,
notice or other communication published in any newspaper, magazine or similar
medium or broadcast over television or radio; and (ii) any seminar or meeting
whose attendees have been invited by any general solicitation or general
advertising.
(w) LIEN SEARCHES. Prior to the Closing Date, the Company shall have
delivered or caused to be delivered to each Buyer (A) copies of UCC financing
statement search results listing any and all effective financing statements
filed in any applicable jurisdiction (in which a secured party required to file
a financing statement to perfect its security interest in the assets of the
Company, ShellCo or any Subsidiary (other than Foreign Subsidiaries) that name
the Company, ShellCo, Merger Sub, or any such Subsidiary as a debtor to perfect
an interest in any of the assets thereof, together with copies of such financing
statements, none of which financing statements, except for any financing
statements filed in respect of the escrowed funds referenced in subsection (xiv)
of the definition of Permitted Indebtedness set forth in Section 28 of the Note,
Permitted Senior Indebtedness, Permitted Priority Indebtedness, the Permitted
Liens (as defined in the Notes), and as otherwise agreed to in writing by the
Buyers, shall cover any of the Collateral, and the results of searches for any
effective tax liens and judgment liens filed against any such Person or its
property in any applicable jurisdiction, which results, except as otherwise
agreed to in writing by the Buyers, shall not show any such effective tax liens
(other than those permitted to exist under the Note) or judgment liens other
than as set forth in SCHEDULE
31
4(W); and (B) a perfection certificate, duly completed and executed by the
Company and each of the Subsidiaries (other than the Foreign Subsidiaries), in
form and substance reasonably satisfactory to the Buyers.
5. REGISTERS; TRANSFER AGENT INSTRUCTIONS.
(a) REGISTERS. The Company shall cause ShellCo to maintain at
its principal executive offices (or such other office or agency of ShellCo as it
may designate), a register for the Notes and a register for the Warrants, in
which ShellCo shall record the name and address of the Person in whose name the
Notes or the Warrants, respectively, have been issued (including the name and
address of each transferee), the principal amount of Notes held by such Person,
the number of Conversion Shares issuable upon conversion of the Notes, and
Warrant Shares issuable upon exercise of the Warrants held by such Person. The
Company shall cause ShellCo to keep the registers open and available at all
times during business hours for inspection of any Buyer or its legal
representatives.
(b) TRANSFER AGENT INSTRUCTIONS. The Company shall cause
ShellCo to issue instructions to its transfer agent in the form attached hereto
as EXHIBIT J, and any subsequent transfer agent, to issue certificates or credit
shares to the applicable balance accounts at DTC, registered in the name of each
Buyer or its respective nominee(s), for the Conversion Shares and the Warrant
Shares issued at the Closing or upon conversion of the Notes or exercise of the
Warrants in such amounts as specified from time to time by each Buyer to ShellCo
upon conversion of the Notes or exercise of the Warrants in the form of EXHIBIT
J attached hereto (the "TRANSFER AGENT INSTRUCTIONS"). The Company warrants that
no instruction other than the Irrevocable Transfer Agent Instructions referred
to in this Section 5(b), and stop transfer instructions to give effect to
Section 2(g) including in the event that the Registration Statement ceases to be
effective under the Securities Act of 1933, will be given by ShellCo to its
transfer agent, and that the Securities shall otherwise be freely transferable
on the books and records of ShellCo, subject to compliance with applicable
securities law, as and to the extent provided in this Agreement and the other
Transaction Documents. If a Buyer effects a sale, assignment or transfer of the
Securities in accordance with Section 2(f), the Company shall cause ShellCo to
permit the transfer and shall promptly instruct its transfer agent to issue one
or more certificates or credit shares to the applicable balance accounts at DTC
in such name and in such denominations as specified by such Buyer to effect such
sale, transfer or assignment. In the event that such sale, assignment or
transfer involves Conversion Shares or Warrant Shares sold, assigned or
transferred pursuant to an effective registration statement or pursuant to Rule
144, and Buyer provides evidence of compliance with Rule 144 reasonably
acceptable to ShellCo, the transfer agent shall, subject to compliance with
applicable securities laws, issue such Securities to the Buyer, assignee or
transferee, as the case may be, without any restrictive legend. The Company
acknowledges on behalf of itself and ShellCo that a breach by it of its
obligations hereunder will cause irreparable harm to affected Buyers.
Accordingly, the Company acknowledges on behalf of itself and ShellCo that the
remedy at law for a breach of its obligations under this Section 5(b) will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company or ShellCo of the provisions of this Section 5(b), that any affected
Buyers shall be entitled, in addition to all other available remedies, to an
order and/or injunction restraining any breach and requiring immediate issuance
and transfer, without the necessity of showing economic loss and without any
bond or other security being required.
32
6. CONDITIONS TO THE COMPANY'S AND SHELLCO'S OBLIGATION TO SELL. The
obligation of the Company and ShellCo hereunder to issue and sell the Notes and
the related Warrants to each Buyer at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, reasonably satisfactory to the Company and ShellCo, provided that
these conditions are for the Company's and ShellCo's benefit and may be waived
by the Company and ShellCo at any time in their sole discretion by providing
each Buyer with prior written notice thereof:
(a) Each Buyer and Collateral Agent shall have executed each
of the Transaction Documents to which it is a party and delivered the same to
the Company, and/or ShellCo, as applicable.
(b) Each Buyer shall have delivered to ShellCo or its
designee(s) the Purchase Price (less the amounts withheld pursuant to Section
4(f)) for the Notes and the related Warrants being purchased by such Buyer at
the Closing by wire transfer of immediately available funds pursuant to the wire
instructions provided by ShellCo.
(c) The representations and warranties of such Buyer shall be
true and correct in all material respects (except for those representations and
warranties that are qualified by materiality or Material Adverse Effect, which
shall be true and correct in all respects) as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, each of which shall be true and
correct as of such date), and such Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Buyer at or prior to the Closing Date. For clarification purposes only, the
conditions set forth in Sections 6(a) and (b) must be satisfied in all respects,
or waived as provided for in this Section 6.
(d) ShellCo shall have executed and delivered the Joinder
Agreement.
(e) The Merger shall have been consummated.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The obligation of
each Buyer hereunder to purchase the Notes and the related Warrants at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for each Buyer's
sole benefit and may be waived by such Buyer at any time in its sole discretion
by providing the Company and ShellCo with prior written notice thereof:
(a) Each of the Company, ShellCo and each of their
Subsidiaries, to the extent each is a party thereto, shall have executed and
delivered to such Buyer (i) each of the Transaction Documents, (ii) the Notes
(in such principal amounts as such Buyer shall request) being purchased by such
Buyer at the Closing pursuant to this Agreement and (iii) the Warrants (in such
denominations as such Buyer shall request) being purchased by such Buyer at the
Closing pursuant to this Agreement.
33
(b) ShellCo shall have delivered to such Buyer a copy of the
Transfer Agent Instructions, in the form of EXHIBIT J attached hereto, which
instructions shall have been delivered to and acknowledged in writing by
ShellCo's transfer agent.
(c) Such Buyer shall have received the opinions of Xxxxx
Xxxxxxx Xxxxxxx Israels LLP, the Company's and ShellCo's outside counsel,
Xxxxxxxxxx, Hyatt & Xxxxxx, FMI International Inc.'s outside counsel and the Law
Offices of Xxxxxxx X. Xx & Associates, the Tug Companies' outside counsel, each
dated as of the Closing Date, in substantially the form of EXHIBIT K attached
hereto.
(d) The Company and ShellCo shall have delivered to such Buyer
a copy of a certificate evidencing incorporation, partnership or the formation,
as applicable, and good standing of the Company, ShellCo and each of the
Subsidiaries (other than the Foreign Subsidiaries) in such entity's jurisdiction
of formation issued by the Secretary of State (or comparable office) of such
jurisdiction, as of a date within the 30 days prior to the Closing Date, which
in the case of the Company and ShellCo shall be certified by the Secretary of
State of the State of Delaware.
(e) The Company and ShellCo shall have delivered to such Buyer
a certificate evidencing the Company's, each Target's and ShellCo's
qualification as a foreign entity and good standing issued by the Secretary of
State of the State (or comparable office) of each jurisdiction in which ShellCo,
the Company or such Target is required to qualify as a foreign entity, each as
of a date within 30 days prior to the Closing Date.
(f) The Board of Directors shall have adopted resolutions
consistent with Section 3(b) above and in a form reasonably acceptable to such
Buyer (the "RESOLUTIONS").
(g) The Company, ShellCo and each entity which is a Subsidiary
of the Company immediately prior to the Closing shall have delivered to deliver
to such Buyer a secretary's certificate in the form attached hereto as EXHIBIT
L, executed by the secretary of such Person and dated as of the Closing Date,
certifying (A) that the attached resolutions adopted by the board of directors
of such Person in connection with the Transaction Documents are true, complete
and correct and remain unamended and in full force and effect, (B) that the
attached certificate of incorporation or certificate of formation of such
Person, certified as of a date within 30 days of the Closing Date, by the
secretary of state of the state of the jurisdiction of its organization, is
true, complete and correct and remains unamended and in full force and effect,
(C) that the attached bylaws or limited liability company agreement or operating
agreement of such Person are true, complete and correct and remain unamended and
in full force and effect and (D) as to the incumbency and specimen signature of
each officer of such Person executing this Agreement, the other Transaction
Documents and any other document delivered in connection herewith on behalf of
such Person.
(h) The representations and warranties of the Company, ShellCo
and any Subsidiary set forth in this Agreement or any other Transaction Document
shall be true and correct in all material respects (except for those
representations and warranties that are qualified by materiality or Material
Adverse Effect, which shall be true and correct in all respects) as of the date
when made and as of the Closing Date as though made at that time (except for
representations and warranties which speak as of a specific date, each of which
shall be true and
34
correct as of such date) and the Company, ShellCo or each Subsidiary, as
applicable, shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by such entity
at or prior to the Closing Date. Such Buyer shall have received a certificate
delivered and executed by the President of each of the Company and ShellCo,
dated as of the Closing Date, to the foregoing effect and as to such other
matters as may be reasonably requested by such Buyer in the form attached hereto
as EXHIBIT M.
(i) ShellCo shall have delivered to such Buyer a copy of a
letter from ShellCo's transfer agent certifying the number of shares of Common
Stock outstanding as of a date within the five (5) Business Days prior to the
Closing Date.
(j) The Company and ShellCo shall have (i) obtained all
governmental, regulatory or third party consents and approvals, if any, and (ii)
made all filings under all applicable federal and state securities laws (to the
extent such filings must be made on or prior to the Closing Date in each case)
necessary to consummate the issuance and the sale of the Securities.
(k) On or prior to Closing ShellCo, Fortress Credit Corp., the
Company and certain Subsidiaries party to the Senior Loan Agreement shall have
entered into the Senior Loan Agreement on the terms set forth on EXHIBIT O, and
Fortress Credit Corp., the Company, ShellCo and the Collateral Agent shall have
entered into and delivered the Intercreditor Agreement in the form of EXHIBIT I,
and each Buyer shall have received copies of each Senior Lien Creditor Agreement
(as defined in the Intercreditor Agreement) in effect on the Closing Date,
certified by the Company as being true, correct and complete.
(l) The Company shall have filed such financing statements and
other documents in such offices as the Collateral Agent may request to perfect
the security interests granted under the Security Agreement and the Pledge
Agreement (it being understood that the Collateral Agent shall not file a
financing statement in respect of ShellCo until the Security Agreement has been
fully executed).
(m) The Company shall have delivered or caused to be delivered
to such Buyer (A) a perfection certificate, duly completed and executed by the
Company and each of its Subsidiaries, in form and substance reasonably
satisfactory to the Buyers and (B) copies of UCC financing statement search
results listing any and all effective financing statements filed in any
applicable jurisdiction (in which a secured party is required to have filed a
financing statement to perfect its security interest in the assets of Company,
ShellCo, any Target or any of their Subsidiaries, other than the Foreign
Subsidiaries that name the Company, ShellCo, any Target or any of their
respective Subsidiaries (other than the Foreign Subsidiaries) as a debtor to
perfect an interest in any of the assets thereof, together with copies of such
financing statements, none of which financing statements, except for any
financing statements filed in respect of the escrowed funds referenced in
subsection (x) of the definition of Permitted Indebtedness set forth in
subsection 28 of the Notes, Permitted Senior Indebtedness, the Permitted Liens
and as otherwise agreed to in writing by the Buyers, shall cover any of the
Collateral and the results of searches for any effective tax liens and judgment
liens filed against any such Person or its property in any applicable
jurisdiction, which results, except as otherwise agreed to in writing by the
Buyers, shall not show any such effective liens (other than those tax and or
judgment liens described on
35
SCHEDULE 3(X) which liens would not, individually or in the aggregate, have a
Material Adverse Effect).
(n) The Company and each non-Foreign Subsidiary holding equity
interests shall have delivered a Pledge Agreement duly executed by the Company
and such Subsidiaries, together with evidence that any original stock
certificates, certificate or other instrument or document evidencing or
representing the equity interests subject to such Pledge Agreement have been
delivered to the agent under the Senior Loan Agreement, and the Company shall
have delivered to the Collateral Agent of undated instruments of transfer as the
Collateral Agent may request representing (A) one hundred (100%) percent of the
common stock of the Company's or such Subsidiaries' Subsidiaries (other than
those representing the shares of AmeRussia and SeaMaster Hong Kong) and (B)
sixty five (65%) percent of the common stock of AmeRussia and SeaMaster Hong
Kong.
(o) The Company shall have delivered a second mortgage, duly
executed by each applicable Guarantor in respect of the leased real property
located at 3178 and 0000 Xxxxxx Xxxxx, Xxxx Xxxx, Xxxxxxxxxx and 000 Xxxxxxx
Xxxxx, Xxxxxxxx, Xxx Xxxxxx.
(p) The Company shall have delivered a Title Insurance Policy
or bring-down of the existing Title Insurance Policy in respect of the second
mortgages listed in Section 7(o), dated as of the Closing Date.
(q) The Company shall have delivered a UCC filing
authorization letter duly executed by the Company and each non-Foreign
Subsidiary, together with appropriate UCC financing statements, in each case
duly filed in such office or offices as may be necessary or, in the opinion of
the Collateral Agent, desirable to perfect the liens and security interests
purported to be created by the Security Agreement and Pledge Agreement.
(r) The Company shall have delivered all releases,
terminations, registrations, filings and such other documents as the Collateral
Agent may reasonably request to evidence and effectuate the termination by the
Existing Lenders (as defined in the Senior Loan Agreement) of their financing
arrangements with the Company or any non-Foreign Subsidairy (other than as to
certain letters of credit issued in connection with such financing arrangements
on terms and conditions satisfactory to the Collateral Agent) and the
termination and release by them, of any interest in and to any assets and
properties of the Company or such Subsidiary (other than certain cash collateral
pledged to GMAC on the Closing Date) duly authorized, executed and delivered by
it, including, but not limited to, (A) the authorization by or on behalf of the
Existing Lenders for the agent under the Senior Loan Agreement to file UCC
discharge and termination statements for all UCC financing statements previously
filed by any of them or their predecessors, as secured party and the Company or
any non-Foreign Subsidiary, as debtor and (B) satisfactions and discharges of
any mortgage, deed of trust, deed to secure debt or similar instruments by the
Company or any non-Foreign Subsidairy in favor of any of the Existing Lenders,
in form acceptable for recording with the appropriate Governmental Authority,
and the Collateral Agent is hereby authorized to file all such UCC discharge and
termination statements.
(s) The Company shall have delivered such opinion letters of
counsel to the Company in respect of the effectiveness of the Merger as of the
Closing Date.
36
(t) The Company shall have delivered a certificate of an
officer of the Company and each non-Foreign Subsidiary certifying as to the
Solvency of the Company or such Subsidiary.
(u) The Company shall have delivered a pro forma balance sheet
of ShellCo and its Subsidiaries reflecting the initial transactions contemplated
hereunder, including, but not limited to, (A) the consummation of the
Acquisitions and the other transactions contemplated by the Acquisition
Documents (B) the consummation of the Merger, (C) the loans provided pursuant to
the Senior Loan Agreement and the use of the proceeds thereof and (D) the
issuance of the Notes on the Closing Date and use of the proceeds thereof,
accompanied by a certificate, dated the Closing Date, of the chief financial
officer of the Company stating that such pro forma balance sheet represents the
reasonable, good faith opinion of such officer as to the subject matter thereof
as of the date of such certificate.
(v) The Company shall have delivered evidence satisfactory to
the Buyers of the insurance coverage required by Section 3(r) and the terms of
the Security Agreement, including evidence as to the naming of the Collateral
Agent as a named insured or loss payee thereunder.
(w) All proceedings in connection with the issuance of the
Notes and the other transactions contemplated by this Agreement and the other
Transaction Documents, and all documents incidental hereto and thereto, shall be
reasonably satisfactory to the Buyers, and the Buyers shall have received all
such information and such counterpart originals or certified or other copies of
such documents as the Collateral Agent may reasonably request.
(x) The Common Stock (i) shall be designated for quotation or
listed on an Eligible Market and (ii) shall not have been suspended, as of the
Closing Date, by the SEC or such Eligible Market from trading on such Eligible
Market nor shall suspension by the SEC or such Eligible Market have been
threatened, as of the Closing Date, either (A) in writing by the SEC or such
Eligible Market or (B) by falling below any minimum maintenance requirements of
such Eligible Market.
(y) The Company or ShellCo shall have filed a Certificate of
Merger with the Delaware Secretary of State whereby Merger Sub will be merged
with and into the Company, pursuant to which the holders of equity securities of
the Company will receive, in the aggregate, 12,854,893 shares of Common Stock
(prior to giving effect to the Reverse Split) (the "SHARE EXCHANGE"), and, the
shareholders of the Company, immediately prior to the Merger, will own, on a
fully-diluted basis following completion of the Merger, not less than 51% of
ShellCo's common equity.
(z) The Company shall have delivered to each Buyer a copy of
the consolidated audited financial statements of the Company and a copy of the
consolidated audited financial statements of the Targets prepared in accordance
with GAAP for the periods ended December 31, 2004 and December 31, 2005
(provided that in the case of Tug, no balance sheet shall be provided as of
December 31, 2004), which financial statements shall contain an opinion of such
auditor prepared in accordance with generally accepted auditing standards (which
opinion shall be without (x) a "going concern" qualification or exception or (y)
any qualification or exception as to the scope of such audit. ShellCo shall have
delivered to each Buyer a copy of
37
the consolidated pro forma financial statements of ShellCo for the periods ended
the periods ended December 31, 2004 and December 31, 2005, which financial
statements shall contain an opinion of such auditor prepared in accordance with
generally accepted auditing standards (which opinion shall be without any
qualification or exception as to the scope of such audit).
(aa) Each executive officer and officer of ShellCo who assumes
the duties of any such executive officer after the date hereof shall have
entered into employment agreements with the Company and ShellCo in the form of
EXHIBIT N and the Lockup Agreement in the form of EXHIBIT G.
(bb) Since June 30, 2006, there shall not have developed,
occurred, or come into effect or existence any change, or any development
involving a prospective change, in or affecting the position of the Company or
ShellCo or any Target, financial or otherwise, that has had, or would be
expected to have, a Material Adverse Effect.
(cc) ShellCo shall have executed and delivered a joinder
agreement to this Agreement, in the form of EXHIBIT H, dated as of the Closing
Date (the "JOINDER AGREEMENT"), to the effect that upon the Closing (i) each of
the representations and warranties made by the Company set forth in Section 3
hereof, MUTATIS MUTANDIS, shall be true and correct as if each reference to the
Company in such representations and warranties was a reference to ShellCo
(unless otherwise expressly provided therein), (ii) ShellCo assumes all
covenants and obligations of ShellCo set forth herein and (iii) ShellCo assumes
all covenants and obligations of the Company set forth herein (including,
without limitation, all indemnification obligations) as if each obligation of
the Company and each reference thereto contained elsewhere herein was an
obligation of and a reference to ShellCo. These requirements shall be amended to
reflect the requirements set forth in the Senior Loan in respect of financial
statements of the Company and Targets.
(dd) The Merger shall have been consummated, on terms and
conditions satisfactory to the Buyer, prior to or contemporaneously with the
occurrence of the Closing Date.
(ee) The Company shall not have made any public announcement
regarding the transactions contemplated by the Agreement prior to the Closing.
(ff) The Company shall have delivered to such Buyer such other
documents relating to the transactions contemplated by this Agreement as such
Buyer or its counsel may reasonably request.
8. TERMINATION. In the event that the Closing shall not have occurred
in respect of a Buyer on or before the fifth (5th) Business Day from the date
hereof due to the Company's or such Buyer's failure to satisfy the conditions
set forth in Sections 6 and 7 above (and the nonbreaching party's failure to
waive such unsatisfied condition(s)), the nonbreaching party shall have the
option to terminate this Agreement in respect of such breaching party at the
close of business on such date without liability of any party to any other
party; PROVIDED, HOWEVER, if this Agreement is terminated pursuant to this
Section 8 (other than due to a breach by Xxxxxx Xxxxxx & Co., L.P.), the Company
shall remain obligated to reimburse Xxxxxx Xxxxxx & Co., L.P. for the expenses
described in Section 4(f).
38
9. MISCELLANEOUS.
(a) GOVERNING LAW; JURISDICTION; JURY TRIAL. All questions
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by the internal laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdictions) that would cause
the application of the laws of any jurisdictions other than the State of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in The City of New York, Borough of Manhattan,
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address for such notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. The Company hereby appoints
Corporation Service Company as its agent for service of process in New York.
EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO
REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED
HEREBY.
(b) COUNTERPARTS. This Agreement may be executed in two or
more identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
(c) HEADINGS. The headings of this Agreement are for
convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes
all other prior oral or written agreements between the Buyers, the Company,
their affiliates and Persons acting on their behalf in respect of the matters
discussed herein, and this Agreement, the Transaction Documents and the
instruments referenced herein contain the entire understanding of the parties in
respect of the matters covered herein and therein and, except as specifically
set forth herein or therein, none of the Company, ShellCo, their respective
Subsidiaries nor any Buyer makes any representation, warranty, covenant or
undertaking in respect of such matters. No provision of this Agreement may be
amended other than by an instrument in writing signed
39
by the Company, ShellCo and the Required Holders, and any amendment to this
Agreement made in conformity with the provisions of this Section 9(e) shall be
binding on all Buyers and holders of Securities as applicable. No provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought. No such amendment shall be effective to the
extent that it applies to less than all of the holders of the applicable
Securities then outstanding. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Documents unless the same consideration also is offered to
all of the parties to the Transaction Documents, holders of Notes or holders of
the Warrants, as the case may be. The Company has not, directly or indirectly,
made any agreements with any Buyers relating to the terms or conditions of the
transactions contemplated by the Transaction Documents except as set forth in
the Transaction Documents. Without limiting the foregoing, the Company confirms
that, except as set forth in this Agreement and the applicable Transaction
Documents and the documents relating to the Common PIPE Securities, if a buyer
of Common PIPE Securities, no Buyer has made any commitment or promise or has
any other obligation to provide any financing to the Company or otherwise.
(f) NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally provided same is on a Business Day and, if
not, on the next Business Day; (ii) upon receipt, when sent by facsimile
(provided that confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party) provided same is on a Business
Day and, if not, on the next Business Day; (iii) one (1) Business Day after
deposit with an overnight courier service, in each case properly addressed to
the party to receive the same; or (iv) if sent by certified mail, return receipt
requested, when received or three (3) days after deposited in the mails,
whichever occurs first. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Maritime Logistics US Holdings Inc.
000 Xxxxxxxxx
Xxxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxxx
with a copy to:
Xxxxx Xxxxxxx Berlack Israels LLP
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx XxXxxxxxx, Esq.
Xxxx X. Xxxxxxx, Xx., Esq.
40
If to a Buyer, to its address and facsimile number set forth on the Schedule of
Buyers, with copies to such Buyer's representatives as set forth on the Schedule
of Buyers,
with a copy (for informational purposes only) to:
Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
or to such other address and/or facsimile number and/or to the attention of such
other Person as the recipient party has specified by written notice given to
each other party five (5) days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by an overnight courier service shall be rebuttable evidence of
personal service, receipt by facsimile or receipt from an overnight courier
service in accordance with clause (i), (ii) or (iii) above, respectively.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
permitted assigns, including any purchasers of the Notes or the Warrants. The
Company shall not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Required Holders, including by way of a
Fundamental Transaction (unless the Company is in compliance with the applicable
provisions governing Fundamental Transactions set forth in the Notes and the
Warrants). Subject to compliance with applicable securities laws, a Buyer may
assign some or all of its rights hereunder and under the other Transaction
Documents without the consent of the Company, in which event such assignee shall
be deemed to be a Buyer hereunder and thereunder in respect of such assigned
rights provided that the Collateral Agent and/or Buyer provide Company and
ShellCo with written notice of such assignment within ten (10) Business Days
after such assignment is consummated.
(h) NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other Person except to the extent set forth in Section 9(k).
(i) SURVIVAL. Unless this Agreement is terminated under
Section 8, the representations and warranties of the Company and the Buyers
contained in Sections 2 and 3, and the agreements and covenants set forth in
Sections 4, 5, 8 and 9 shall survive the Closing and the delivery, conversion
and exercise of the Securities, as applicable. Each Buyer shall be responsible
only for its own representations, warranties, agreements and covenants
hereunder.
(j) FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as any other party may reasonably request
41
in order to carry out the intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated hereby.
(k) INDEMNIFICATION.
(i) In consideration of each Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, unless this Agreement is terminated under Section 8 hereof, the
Company on behalf of itself and ShellCo, shall defend, protect, indemnify and
hold harmless each Buyer and each other holder of the Securities and all of
their stockholders, partners, members, officers, directors, employees and direct
or indirect investors and any of the foregoing Persons' agents or other
representatives (including, without limitation, those retained in connection
with the transactions contemplated by this Agreement) (collectively, the
"INDEMNITEES") from and against any and all actions, causes of action, suits,
claims, losses, costs, penalties, fees, liabilities and damages, and expenses in
connection therewith (irrespective of whether any such Indemnitee is a party to
the action for which indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"),
incurred by any Indemnitee as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made by the
Company or ShellCo in any Transaction Document or any other certificate,
instrument or document contemplated hereby or thereby, (b) any breach of any
covenant, agreement or obligation of the Company or ShellCo contained in any
Transaction Document or any other certificate, instrument or document
contemplated hereby or thereby or (c) any investigation, cause of action, suit
or claim brought or made against such Indemnitee by a third party (including for
these purposes a derivative action brought on behalf of the Company or ShellCo)
and arising out of or resulting from (i) the execution, delivery, performance or
enforcement of any Transaction Document or any other certificate, instrument or
document contemplated hereby or thereby, (ii) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of the
issuance of the Securities, or (iii) the status of such Buyer or holder of the
Securities as an investor in the Company or ShellCo pursuant to the transactions
contemplated by the Transaction Documents. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the Company
shall make the maximum contribution to the payment and satisfaction of each of
the Indemnified Liabilities which is permissible under applicable law provided
that the Company shall not be obligated to indemnify such Buyer or Collateral
Agent for any Indemnified Liabilities caused by the gross negligence or willful
misconduct of any Buyer or Collateral Agent.
(ii) Without limiting Section 9(k)(i) hereof, the
Company and each non-Foreign Subsidiary, jointly and severally, defend,
indemnify, and hold harmless the Indemnitees against any and all Environmental
Liabilities and costs and all other claims, demands, penalties, fines, liability
(including strict liability), losses, damages, costs and expenses (including
without limitation, reasonable legal fees and expenses, consultant fees and
laboratory fees), arising out of (A) any releases or threatened releases (x) at
any property presently or formerly owned or operated by the Company or any
Subsidiary of the Company, or any predecessor in interest, or (y) of any
Hazardous Materials generated and disposed of by any the Company or any
Subsidiary of the Company, or any predecessor in interest; (B) any violations of
Environmental Laws; (C) any Environmental cause of action relating to the
Company or any
42
Subsidiary of any the Company, or any predecessor in interest; (D) any personal
injury (including wrongful death) or property damage (real or personal) arising
out of exposure to Hazardous Materials used, handled, generated, transported or
disposed by the Company or any Subsidiary of the Company, or any predecessor in
interest; and (E) any breach of any warranty or representation regarding
environmental matters made by the Company in Section 3(v). Notwithstanding the
foregoing, the Company and its Subsidiaries shall not have any obligation to any
Indemnitee under this subsection (ii) regarding any potential environmental
matter covered hereunder which is caused by the gross negligence or willful
misconduct of such Indemnitee, as determined by a final non-appeallable judgment
of a court of competent jurisdiction.
(iii) Promptly after receipt by Indemnitee under this
Section 9(k) of notice of the commencement of any action or proceeding
(including any governmental action or proceeding) involving an Indemnified
Liability, such Indemnitee shall, if a claim in respect thereof is to be made
against any indemnifying party under this Section 9(k), deliver to the
indemnifying party a written notice of the commencement thereof, and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnitee, as the case
may be; PROVIDED, HOWEVER, that an Indemnitee shall have the right to retain its
own counsel with the fees and expenses of not more than one counsel for such
Indemnitee to be paid by the indemnifying party, if, in the reasonable opinion
of counsel retained by the indemnifying party, the representation by such
counsel of the Indemnitee and the indemnifying party would be inappropriate due
to actual or potential differing interests between such Indemnitee and any other
party represented by such counsel in such proceeding. In the case of an
Indemnitee, legal counsel referred to in the immediately preceding sentence
shall be selected by Required Holders, to which the claim relates. The
Indemnitee shall cooperate fully with the indemnifying party in connection with
any negotiation or defense of any such action or claim by the indemnifying party
and shall furnish to the indemnifying party all information reasonably available
to the Indemnitee which relates to such action or claim. The indemnifying party
shall keep the Indemnitee reasonably apprised at all times as to the status of
the defense or any settlement negotiations in respect thereof. No indemnifying
party shall be liable for any settlement of any action, claim or proceeding
effected without its prior written consent; PROVIDED, HOWEVER, that the
indemnifying party shall not unreasonably withhold, delay or condition its
consent. No indemnifying party shall, without the prior written consent of the
Indemnitee, consent to entry of any judgment or enter into any settlement or
other compromise which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnitee of a release from all
liability in respect to such claim or litigation, and such settlement shall not
include any admission as to fault on the part of the Indemnitee. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnitee in respect of all third parties,
firms or corporations relating to the matter for which indemnification has been
made. The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnitee under this Section 9(k),
except to the extent that the indemnifying party is materially prejudiced in its
ability to defend such action.
43
(iv) The indemnification required by this Section 9(k)
shall be made by periodic payments of the amount thereof during the course of
the investigation or defense, as and when bills are received or Indemnified
Liabilities are incurred.
(v) (iii) The indemnity agreements contained herein
shall be in addition to (A) any cause of action or similar right of the
Indemnitee against the indemnifying party or others, and (B) any liabilities the
indemnifying party may be subject to pursuant to the law.
(l) NO STRICT CONSTRUCTION. The language used in the
Transaction Documents will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be applied
against any party.
(m) REMEDIES. Each Buyer and each holder of the Securities
shall have all rights and remedies set forth in the Transaction Documents and
all rights and remedies which such holders have been granted at any time under
any other agreement or contract and all of the rights which such holders have
under any law. Any Person having any rights under any provision of this
Agreement shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by law.
Furthermore, the Company recognizes on behalf of itself and ShellCo that in the
event that it fails to perform, observe, or discharge any or all of its
obligations under the Transaction Documents, any remedy at law may prove to be
inadequate relief to the Buyers. The Company therefore agrees that the Buyers
shall be entitled to seek temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages and without posting a bond
or other security.
(n) RESCISSION AND WITHDRAWAL RIGHT. Notwithstanding anything
to the contrary contained in (and without limiting any similar provisions of)
the Transaction Documents, whenever any Buyer exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Buyer may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights
(o) PAYMENT SET ASIDE. To the extent that the Company or
ShellCo makes a payment or payments to the Buyers hereunder or pursuant to any
of the other Transaction Documents or the Buyers or the Collateral Agent, as
applicable, enforce or exercise their rights hereunder or thereunder, and such
payment or payments or the proceeds of such enforcement or exercise or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, foreign, state
or federal law, common law or equitable cause of action), then to the extent of
any such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
(p) INDEPENDENT NATURE OF BUYERS' OBLIGATIONS AND RIGHTS. The
obligations of each Buyer under any Transaction Document are several and not
joint with the obligations of any
44
other Buyer, and no Buyer shall be responsible in any way for the performance of
the obligations of any other Buyer under any Transaction Document. Nothing
contained herein or in any other Transaction Document, and no action taken by
any Buyer pursuant hereto or thereto, shall be deemed to constitute the Buyers
as a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Buyers are in any way acting in concert or as a
group in respect of such obligations or the transactions contemplated by the
Transaction Documents and the Company acknowledges on behalf of itself and
ShellCo that the Buyers are not acting in concert or as a group in respect of
such obligations or the transactions contemplated by the Transaction Documents.
Each Buyer confirms that it has independently participated in the negotiation of
the transaction contemplated by this Agreement and the Transaction Documents
with the advice of its own counsel and advisors, that it has independently
determined to enter into the transactions contemplated hereby and thereby, that
it is not relying on any advice from or evaluation by any other Buyer, and that
it is not acting in concert with any other Buyer in making its purchase of
Securities hereunder or in monitoring its investment in ShellCo. The Buyers and,
to its knowledge, the Company agree that no action taken by any Buyer pursuant
hereto or to the other Transaction Documents, shall be deemed to constitute the
Buyers as a partnership, an association, a joint venture or any other kind of
entity or group, or create a presumption that the Buyers are in any way acting
in concert or would deem such Buyers to be members of a "group" for purposes of
Section 13(d) of the 1934 Act. The Buyers each confirm that they have not agreed
to act together for the purpose of acquiring, holding, voting or disposing of
equity securities of ShellCo. The Company has elected to provide all Buyers with
the same terms and Transaction Documents for the convenience of the Company and
not because it was required or requested to do so by any of the Buyers. The
Company acknowledges on behalf of itself and ShellCo that such procedure in
respect of the Transaction Documents in no way creates a presumption that the
Buyers are in any way acting in concert or as a "group" for purposes of Section
13(d) of the 1934 Act in respect of the Transaction Documents or the
transactions contemplated hereby or thereby. Except as otherwise set forth
herein or in the Transaction Documents, each Buyer shall be entitled to
independently protect and enforce its rights, including, without limitation, the
rights arising out of this Agreement, or out of the Registration Rights
Agreement, its Note, its Warrant and the right of set-off under the Guaranties,
and it shall not be necessary for any other Buyer to be joined as an additional
party in any proceeding for such purpose.
(q) INTERCREDITOR AGREEMENT. This Agreement and each of the
provisions hereof shall be subject to the Intercreditor Agreement.
(r) DEFINITIONS: For purposes of this Securities Purchase
Agreement and the Notes, the following terms shall have the following meanings:
"CONSOLIDATED EBITDA" means, with respect to any Person for
any period, (i) the Consolidated Net Income of such Person and its Subsidiaries
for such period, plus (ii) without duplication, the sum of all or a portion of
the following amounts of such Person and its Subsidiaries for such period
determined on a consolidated basis in accordance with GAAP, in each case to the
extent deducted in determining Consolidated Net Income of such Person for such
period: (a) Consolidated Net Interest Expense, (b) income tax expense paid or
accrued by such Person and its Subsidiaries, (c) depreciation expense, (d)
amortization expense, and (e) cash payments to each of Xxxxxx Xxx and Xxxxxx Xx
pursuant to the TUG China Bonus Agreement
45
among Sea Master Hong Kong, Xxxxxx Xxx and Xxxxxx Xx not to exceed an aggregate
amount of $500,000 in any Fiscal Year.
"CONSOLIDATED INDEBTEDNESS" means, with respect to any Person
at any date, all Indebtedness of such Person and its Subsidiaries determined on
a consolidated basis in accordance with GAAP, and, in any event, with respect to
Shellco and its Subsidiaries, shall include, but not be limited to, (a) the
Indebtedness of Shellco evidenced by or arising under the Notes, (b) the
Obligations under the Senior Loan Agreement, (c) any obligations arising in
connection with any factoring arrangements or other arrangements involving the
sale of receivables, and (d) all Indebtedness arising in connection with any
letters of credit, banker's acceptances, bank guarantees or similar facilities;
PROVIDED, THAT, the term "Consolidated Indebtedness" shall include (i)
Contingent Obligations specified in clauses (c) and (d) of this definition and
(ii) other Contingent Obligations to the extent such other Contingent
Obligations are required to be included on the balance sheet of such Person in
accordance with GAAP consistently applied.
"CONSOLIDATED NET INTEREST EXPENSE" means, for any period, as
to any Person, as determined in accordance with GAAP, the amount equal to: (a)
total interest expense of such Person and its Subsidiaries on a consolidated
basis for such period, whether paid or accrued (including the interest component
of any Capitalized Lease for such period), and in any event, including, without
limitation, (1) all bank fees, commissions, discounts and other fees and charges
owed with respect to letters of credit or any factoring or similar arrangements,
(2) interest payable by addition to principal or in the form of property other
than cash and any other interest expense not payable in cash, (3) the costs or
fees for such period associated with hedging agreements (to the extent not
otherwise included in such total interest expense) and (4) the non-cash
component of the expense arising from the valuation of the Notes and warrants
issued pursuant to the Noteholder Documents and the PIPE Documents constituting
"embedded derivatives", MINUS (b) the sum of (i) any net payments received by
such Person and its Subsidiaries on a consolidated basis during such period as
interest income received in respect of its investments in cash, and (ii) gains
for such period on hedging agreements (to the extent not included in interest
income above and excluding any non-cash gains), PLUS (c) losses for such period
on hedging agreements (to the extent not deducted in the calculation of such
total interest expenses and excluding any non-cash losses).
"CONSOLIDATED NET INCOME" means, with respect to any Person
for any period, the net income (loss) of such Person and its Subsidiaries for
such period, determined on a consolidated basis and in accordance with GAAP, but
excluding from the determination of Consolidated Net Income (without
duplication) (a) any extraordinary or non-recurring (i) gains or (ii) non-cash
losses (and including in any event any non-cash losses from asset sales), (b)
non-cash restructuring charges, (c) non-cash write-offs of goodwill and other
intangible assets during such period which are required under Statement 142
issued by the Financial Accounting Standards Board and non-cash write-offs of
equipment during such period which are required under Statement 144 issued by
the Financial Accounting Standards Board, (d) non-cash gains or non-cash losses
due to foreign currency translation adjustments during such period which are
required under Statement 52 of the Financial Accounting Standards Board, (e) the
effect of any change in accounting principles adopted by (or applicable to) such
Person or its Subsidiaries after the date hereof (including any cumulative
effects resulting from changes in purchase
46
accounting principles, except as reflected in adjustments pursuant to clause (b)
of the definition of the term "GAAP" but only to the extent that the amendment
referred to therein has been executed and delivered by the parties hereto); and
(f) the net income (if positive) of any majority-owned Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by such
majority-owned Subsidiary to such Person or to any other majority-owned
Subsidiary of such Person is not at the time permitted by operation of the terms
of its charter or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to such majority-owned Subsidiary.
For the purpose of this definition, net income excludes any gain (or non-cash
loss) together with any related provision for taxes for such gain (or non-cash
loss) realized upon the sale or other disposition of any assets that are not
sold in the ordinary course of business (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or of any capital
stock of such Person or a Subsidiary of such Person.
"CONVERSION LIMITATIONS" shall mean conversion limitations.
"CURRENT VALUE" shall mean current value.
"FISCAL YEAR" means the fiscal year of Shellco and its
Subsidiaries ending on or about December 31 of each year.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any
Person for any period, the ratio of (a) Consolidated EBITDA of such Person and
its Subsidiaries for such period, to (b) the sum of (i) all principal of
Indebtedness of such Person and its Subsidiaries scheduled to be paid or prepaid
during such period without duplication, plus (ii) Consolidated Net Interest
Expense of such Person and its Subsidiaries for such period (provided, that, for
purposes of Section 14(l)(iii) hereof, Consolidated Net Interest Expense shall
not include the non-cash component of the expense arising from the valuation of
the Notes and warrants issued pursuant to the Noteholder Documents and the PIPE
Documents constituting "embedded derivatives"), plus (iii) income taxes paid or
payable by such Person and its Subsidiaries during such period plus (iv) cash
dividends or distributions paid by such Person and its Subsidiaries (other than,
in the case of Shellco or any Guarantor, dividends or distributions paid by
Shellco or any Guarantor to Shellco or any other Guarantor) during such period,
plus (v) capital expenditures made by such Person and its Subsidiaries during
such period to the extent not (A) financed by any Permitted Indebtedness or (B)
funded with the proceeds of any issuance of Equity Interests permitted under
Notes.
"INTELLECTUAL PROPERTY" has the meaning set forth in the
Security Agreement.
"MLI" means Maritime Logistics US Holdings Inc.
"NOTEHOLDER DOCUMENTS" means the Securities Purchase
Agreement, the Notes, and all agreements, documents and instruments executed
and/or delivered in connection therewith, as all of the foregoing now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
"PIPE DOCUMENTS" means the Securities Purchase Agreement
(Common Shares and Warrants), dated on or about the date hereof, between MLI and
the buyers party thereto, and all agreements, documents and instruments executed
and/or delivered in connection therewith,
47
as all of the foregoing now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
"PRINCIPAL AMOUNT" shall mean the Principal (as defined in the
Notes) amount.
"RECORD DATE" shall mean record date.
"REDEMPTION PERIOD END DATE" shall mean redemption period end
date.
"SOLVENT" means, with respect to any Person on a particular
date, that on such date i) the fair value of the property of such Person is not
less than the total amount of the liabilities of such Person (and including as
assets for this purpose at a fair valuation all rights of subrogation,
contribution or indemnification arising pursuant to any guarantees given by such
Person, to the extent such amount is readily ascertainable), ii) the present
fair salable value of the assets of such Person (and including as assets for
this purpose at a fair valuation all rights of subrogation, contribution or
indemnification arising pursuant to any guarantees given by such Person, to the
extent such amount is readily ascertainable) is not less than the amount that
will be required to pay the probable liability of such Person on its existing
debts as they become absolute and matured, iii) such Person is able to realize
upon its assets and pay its debts and other liabilities, contingent obligations
and other commitments as they mature in the normal course of business, iv) such
Person does not intend to, and does not believe that it will, incur debts or
liabilities beyond such Person's ability to pay as such debts and liabilities
mature, and v) such Person is not engaged in business or a transaction, and is
not about to engage in business or a transaction, for which such Person's
property would constitute unreasonably small capital.
[SIGNATURE PAGES FOLLOW]
48
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
COMPANY:
MARITIME LOGISTICS US HOLDINGS INC.
By:
--------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED as of the date first
written above solely as to Sections 4(r) and
4(t), and 7(k), 7(l), 7(n), 7(q), 7(r), 7(v)
and 7(w) and 9(g), 9(k) and 9(o) of this
Securities Purchase Agreement
By: LAW DEBENTURE TRUST
COMPANY OF NEW YORK
-------------------------------
Name:
Title:
49
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
BUYERS:
SILVER OAK CAPITAL, L.L.C.
By:
--------------------------------
Name:
Title:
50
IN WITNESS WHEREOF, each Buyer and the Company have caused their
respective signature page to this Securities Purchase Agreement to be duly
executed as of the date first written above.
BUYERS:
[INVESTOR NAME]
By:
--------------------------------
Name:
Title:
51
EXHIBITS
Exhibit A Form of Notes
Exhibit B Form of Warrant
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Pledge Agreement
Exhibit E Form of Security Agreement
Exhibit F Form of Guaranty
Exhibit G Form of Lockup Agreement
Exhibit H Form of Joinder Agreement
Exhibit I Form of Intercreditor Agreement
Exhibit J Form of Transfer Agent Instructions
Exhibit K Form of Opinions of Counsel
Exhibit L Form of Secretary's Certificate
Exhibit M Form of Officer's Certificate
Exhibit N Form of Employment Agreements
Exhibit O Form of Senior Loan Agreement
SCHEDULES
Schedule 3(a) Organization and Qualification
Schedule 3(f) Acknowledgement Regarding Buyer's Purchase of Securities
Schedule 3(k) Absence of Certain Changes
Schedule 3(n) Transactions with Affiliates
Schedule 3(o) Equity Capitalization; Debt
Schedule 3(p) Indebtedness and Other Contracts
Schedule 3(t) Title
Schedule 3(u) Intellectual Property Rights
Schedule 3(x) Tax Status
Schedule 3(ff) ERISA
Schedule 4(d) Use of Proceeds
FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT (NOTES AND WARRANTS)
THIS FIRST AMENDMENT TO SECURITIES PURCHASE AGREEMENT (NOTES AND
WARRANTS) dated as of January 5, 2007 (the "AMENDMENT"), is entered into by and
between Maritime Logistics US Holdings Inc. (the "COMPANY"), Aerobic Creations,
Inc. ("SHELLCO") and Law Debenture Trust Company of New York, in its capacity as
collateral agent for and on behalf of the Buyers (as defined below) (in such
capacity, "COLLATERAL AGENT"). Capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Agreement (as defined below).
WHEREAS, the Company, ShellCo, Collateral Agent and the investors listed
on the Schedule of Buyers attached to the Agreement (together with their
successors and assigns, the "BUYERS") have entered into that certain Securities
Purchase Agreement (Notes and Warrants) dated as of November 8, 2006 (as the
same now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, the "AGREEMENT").
WHEREAS, Company and ShellCo have requested that Buyers and Collateral
Agent amend the Agreement in certain respects as provided herein;
WHEREAS, the consent of the holders of the Notes representing a majority
of the aggregate amount of the Notes now outstanding (the "REQUIRED HOLDERS") is
required to amend the Agreement as provided herein;
WHEREAS, ShellCo solicited and obtained the consent of the Required
Holders to amend the Agreement as provided herein; and
WHEREAS, as a result of receiving the consent of the Required Holders to
the amendments set forth herein, the Collateral Agent has agreed to the
foregoing subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the other mutual
covenants contained herein, the receipt and sufficiency are hereby acknowledged,
the parties hereto agree as follows:
SECTION 1. AMENDMENT TO AGREEMENT. The following Section 9(s) is hereby
added to the Agreement in numerical order:
"(s) COMPLIANCE WITH FINANCIAL COVENANTS. Notwithstanding any
other provisions set forth in the Notes, except as otherwise
expressly provided herein, for the purposes of determining
compliance with the financial covenants set forth in 14(l) of
the Notes, a business, operating company or assets purchased as
part of an Acquisition or a Permitted Acquisition shall be
included in the calculation of such financial covenants as if
such Acquisitions or the Permitted Acquisition(s) had been
consummated on the first day of the applicable period (measured
for financial covenant purposes) during which such Acquisitions
or Permitted Acquisition(s) occurs."
1
SECTION 2. MISCELLANEOUS.
(a) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, be deemed to be an amendment or
modification of, or operate as a waiver of, any provision of the Agreement or
any right, power or remedy thereunder, nor constitute a waiver of any provision
of the Agreement or any other document, instrument and/or agreement executed or
delivered in connection therewith.
(b) This Amendment may be executed in any number of counterparts
(including by facsimile), and by the different parties hereto or thereto on the
same or separate counterparts, each of which shall be deemed to be an original
instrument but all of which together shall constitute one and the same
agreement. Each party agrees that it will be bound by its own facsimile
signature and that it accepts the facsimile signature of each other party. The
descriptive headings of the various sections of this Amendment are inserted for
convenience of reference only and shall not be deemed to affect the meaning or
construction of any of the provisions hereof or thereof. Whenever the context
and construction so require, all words herein and in the Agreement in the
singular number herein shall be deemed to have been used in the plural, and vice
versa, and the masculine gender shall include the feminine and neuter and the
neuter shall include the masculine and feminine.
(c) This Amendment and the Agreement may not be changed, amended,
restated, waived, supplemented, discharged, canceled, terminated or otherwise
modified orally or by any course of dealing or in any manner other than as
provided in the Agreement. This Amendment shall be considered part of the
Agreement.
(d) This Amendment and the Agreement constitute the final, entire
agreement and understanding between the parties with respect to the subject
matter hereof and thereof, may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements between the parties, shall be
binding upon and inure to the benefit of the successors and assigns of the
parties hereto and thereto and supersede all other prior agreements and
understandings, if any, relating to the subject matter hereof. There are no
unwritten oral agreements between the parties with respect to the subject matter
hereof or thereof.
(e) The validity of this Amendment, its construction, interpretation
and enforcement, the rights of the parties hereunder, shall be determined under,
governed by, and construed in accordance with the choice of law provisions set
forth in the Agreement.
REMAINDER OF PAGE INTENTIONALLY BLANK
2
SIGNATURE PAGE TO FIRST AMENDMENT TO
SECURITIES PURCHASE AGREEMENT (NOTES AND
WARRANTS)
IN WITNESS WHEREOF, the parties have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
COMPANY: MARITIME LOGISTICS US HOLDINGS INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
SHELLCO: AEROBIC CREATIONS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
COLLATERAL AGENT: LAW DEBENTURE TRUST COMPANY OF NEW YORK
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
