Exhibit 1
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CONVERTIBLE NOTE PURCHASE AGREEMENT
AMONG
BIO-PLEXUS, INC.,
THE PURCHASERS
LISTED ON EXHIBIT A HERETO
AND
APPALOOSA MANAGEMENT, L.P.,
as Collateral Agent
Dated as of April 28, 2000
TABLE OF CONTENTS
1. Issuance and Sale of Notes, Common Stock and $7 Warrants................1
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1.1. Definitions.............................................1
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1.2. Issuance, Purchase and Sale.............................1
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1.3. Closing.................................................2
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1.4. Deliveries by the Company...............................2
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1.5. Deliveries by the Purchasers............................3
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2. Representations and Warranties of the Company...........................3
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2.1. Organization; Subsidiaries..............................3
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2.2. Due Authorization.......................................4
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2.3. Capitalization..........................................4
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2.4. SEC Reports Correspondence..............................5
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2.5. Financial Statements....................................5
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2.6. Litigation..............................................5
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2.7. Title to Properties; Insurance..........................6
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2.8. Consents, etc...........................................6
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2.9. No Material Adverse Change..............................6
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2.10. Taxes...................................................7
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2.11. Compliance with ERISA...................................7
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2.12. Labor Relations.........................................8
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2.13. Intellectual Property Rights............................8
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2.14. Possession of Franchises, Licenses, Etc.................9
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2.15. Compliance with Laws....................................9
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2.16. Conflicting Agreements and Certificate
of Incorporation......................................9
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2.17. Suppliers...............................................9
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2.18. Products...............................................10
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2.19. Offering of the Securities.............................10
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2.20. Existing Indebtedness; Future Liens....................10
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2.21. Environmental Matters..................................10
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2.22. Solvency...............................................11
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2.23. Security Documents.....................................11
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2.24. Brokers or Finders.....................................11
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2.25. Holding Company Act and Investment Company Act.........11
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2.26. Related Party Transactions.............................11
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2.27. Year 2000..............................................11
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2.28. Disclosure.............................................12
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3. Representations and Warranties of the Purchasers.......................12
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3.1. Organization and Qualification.........................12
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3.2. Due Authorization......................................12
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3.3. Acquisition for Investment.............................13
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3.4. Offering of Securities.................................13
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3.5. Accredited Investor....................................13
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4. Registration, Exchange and Transfer of Notes...........................13
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4.1. The Note Register; Persons Deemed Owners...............13
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4.2. Issuance of New Notes Upon Exchange or Transfer........13
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5. Payment of Notes.......................................................14
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5.1. Home Office Payment....................................14
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5.2. Limitation on Interest.................................14
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5.3. Payment of Principal & Interest........................14
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6. Covenants of the Company...............................................15
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6.1. Maintenance of Office or Agency........................15
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6.2. Money for Security Payments to be Held in Trust........15
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6.3. Existence..............................................15
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6.4. Maintenance of Properties..............................16
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6.5. Payment of Taxes and Other Claims......................16
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6.6. Limitation on Indebtedness.............................16
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6.7. Limitation on Encumbrances.............................16
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6.8. Limitation on Related Party Transactions...............16
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6.9. Limitation on Dividends; Stock Issuances...............17
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6.10. Subsidiary Guarantees..................................17
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6.11. Additional Offerings of Securities.....................17
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6.12. Pledges of Intercompany Notes..........................18
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6.13. No Speculative Transactions............................18
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6.14. Restricted Investments.................................18
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6.15. Financial Covenants....................................18
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6.16. Sale-and-Leaseback Transactions........................18
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6.17. Line of Business.......................................18
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6.18. Sale of Assets.........................................19
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6.19. Indenture Relating to the Notes........................19
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6.20. Financial Statements and Information...................19
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6.21. Inspection.............................................20
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6.22. Compliance with Laws...................................21
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6.23. Supplemental Disclosure................................21
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6.24. Proceeds...............................................21
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6.25. Insurance; Damage to or Destruction of Collateral......22
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6.26. Rights of Required Holders to Designate Directors;
Board Composition....................................22
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6.27. Executive Officers.....................................23
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6.28. Board and Committee Notice Requirement.................23
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6.29. Reimbursement of Certain Expenses......................23
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6.30. Limitation of Agreements...............................24
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6.31. Reserved...............................................24
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6.32. Preparation of Quarterly Budgets.......................24
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6.33. Operations in Accordance with the Business Plan........24
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6.34. Operational Covenants..................................24
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7. Events of Default and Remedies.........................................24
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7.1. Events of Default and Remedies.........................24
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7.2. Default Rate...........................................26
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7.3. Acceleration of Maturity...............................27
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7.4. Other Remedies.........................................27
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7.5. Conduct No Waiver; Collection Expenses.................27
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7.6. Annulment of Acceleration..............................27
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7.7. Remedies Cumulative....................................27
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8. Redemption.............................................................28
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8.1. Optional Redemption....................................28
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8.2. Partial Redemption.....................................28
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8.3. Change of Control......................................28
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8.4. Redemption Procedures..................................28
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9. Conversion.............................................................29
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9.1. Holder's Option to Convert into Common Stock...........29
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9.2. Exercise of Conversion Privilege.......................29
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9.3. Fractions of Shares; Interest..........................30
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9.4. Reservation of Stock; Listing..........................30
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9.5. Rights.................................................30
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9.6. Adjustment of Conversion Ratio.........................30
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9.7. Merger or Consolidation................................33
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9.8. Notice of Certain Corporate Actions....................33
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9.9. Reports as to Adjustments..............................34
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10. The Collateral Agent...................................................34
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10.1. Appointment............................................34
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10.2. Delegation of Duties...................................34
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10.3. Exculpatory Provisions.................................34
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10.4. Reliance by the Collateral Agent.......................35
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10.5. Notice of Default......................................35
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10.6. Non-Reliance on Collateral Agent and Other
Purchasers...........................................35
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10.7. Indemnification........................................36
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10.8. Collateral Agent in its Individual Capacity............36
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10.9. Successor Collateral Agent.............................36
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11. Interpretation.........................................................37
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11.1. Definitions............................................37
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11.2. Accounting Principles..................................49
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12. Miscellaneous..........................................................49
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12.1. Payments; Indemnity....................................49
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12.2. Severability...........................................50
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12.3. Specific Enforcement...................................50
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12.4. Entire Agreement.......................................50
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12.5. Counterparts...........................................51
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12.6. Notices and other Communications.......................51
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12.7. Amendments.............................................52
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12.8. Successors and Assigns.................................52
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12.9. Expenses...............................................52
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12.10. Survival...............................................52
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12.11. Transfer of Notes and Common Stock.....................52
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12.12. GOVERNING LAW..........................................53
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12.13. Submission to Jurisdiction.............................53
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12.14. Service of Process.....................................53
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12.15. WAIVER OF JURY TRIAL...................................54
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12.16. Public Announcements...................................54
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12.17. Further Assurances.....................................54
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12.18. Substitution of Purchaser..............................54
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12.19. Signatures.............................................54
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THIS CONVERTIBLE NOTE PURCHASE AGREEMENT, dated as of April 28,
2000 (this "Agreement"), is made among BIO-PLEXUS, INC., a Connecticut
corporation (the "Company"), the purchasers listed on Exhibit A (each such
party, a "Purchaser" and, collectively, the "Purchasers"), and APPALOOSA
MANAGEMENT L.P., as Collateral Agent (the "Collateral Agent").
WHEREAS, the Company has previously issued to Appaloosa
Investment Limited Partnership I 7.5% Secured Note, 15% Secured Note and
Second 15% Secured Note (collectively, the "Bridge Notes");
WHEREAS, the Bridge Notes provide that, subject to the terms and
conditions specified therein, the parties thereto will enter into this
Agreement;
WHEREAS, upon the terms and subject to the conditions set forth
in this Agreement, the Purchasers wish to purchase from the Company, and
the Company wishes to issue and sell to the Purchasers, (i) Zero Coupon
Secured Convertible Notes, due April 28, 2005 (the "Notes"), in the form
attached hereto as Exhibit1.4i with an original issue price of $16.75
million (the "Issue Price"), (ii) an aggregate of 250,000 shares (the
"Shares") of Common Stock, no par value, of the Company (the "Common
Stock") and (iii) warrants to purchase 1,500,000 shares of Common Stock
with an exercise price of $7 per share in the form attached as Exhibit
1.4ii (the "$7 Warrants");
WHEREAS, the Notes shall be convertible (under the circumstances
described herein) into shares of Common Stock; and
WHEREAS, the Purchasers and the Company desire to provide for
such purchase and sale and to establish various rights and obligations in
connection therewith.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties and agreements herein set forth, the parties
hereto agree as follows:
1. Issuance and Sale of Notes, Common Stock and $7 Warrants.
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1.1. Definitions. Certain capitalized terms used in the Agreement
are defined in Section 11.1 hereof; references to a "Schedule" or an
"Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit
attached to this Agreement.
1.2. Issuance, Purchase and Sale. (a) Upon the terms and subject
to the conditions set forth herein, the Company is issuing and selling to
the Purchasers, and the Purchasers are purchasing from the Company, the
Notes, the Shares and the $7 Warrants for an aggregate cash purchase price
of $17.5 million (the "Purchase Price"). The Notes shall be in the form of
Exhibit 1.4(i).
(b) The parties agree that the fair market value of the Notes is
$16,700,000 , the fair market value of the Shares is $750,000 and the fair
market value of the $7 Warrants is $50,000. Each party agrees to file all
Tax Returns consistent with such allocation and to take no position
inconsistent with such allocation, unless required by Law.
(c) The parties hereto agree that, for purposes of Treas. Reg.
Sec. 1.1275-4(b)(3)(ii), (x) the comparable yield is 7.5% with respect to
the Notes, and (y) the projected payment schedule with respect to the Notes
will reflect the foregoing comparable yield.
1.3. Closing. The closing of the transactions contemplated hereby
(the "Closing") will take place simultaneously with the execution hereof at
the offices of Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, New York, New
York.
1.4. Deliveries by the Company. At the Closing, the Company is
delivering to each Purchaser (and to such other parties as otherwise set
forth below) the following:
(i) duly executed Notes in the amount set forth opposite
such Purchaser's name on Exhibit 1.4i;
(ii) duly executed $7 Warrants in the number set forth
opposite such Purchaser's name on Exhibit 1.4ii;
(iii) duly executed $3 Warrants in the number set forth
opposite such Purchaser's name on Exhibit 1.4iii;
(iv) an opinion of the Company's counsel, dated as of the
date hereof, addressed to such Purchaser in the form of Exhibit
1.4iv;
(v) an Officer's Certificate, dated as of the date hereof,
certifying that (A) the representations and warranties contained
in Section 2 hereof are true and correct and (B) the transactions
contemplated hereby and in the Transaction Documents have been
approved and adopted by the requisite vote of the stockholders of
the Company in accordance with applicable Law, the applicable
rules of NASDAQ and the Company's Certificate of Incorporation
and By-Laws at a properly called special meeting of the
stockholders of the Company;
(vi) a good standing certificate for the Company, dated no
earlier than seven days prior to the date hereof, from the
Secretary of State of the State of Connecticut;
(vii) a copy of the resolutions of the Board of Directors
adopting the execution of each of the Transaction Documents and
the performance of the transactions contemplated by the
Transaction Documents, which resolutions shall be certified as
true, correct and effective as of the date hereof by an officer
of the Company;
(viii) a duly executed copy of the Security Agreement in the
form attached hereto as Exhibits 1.4viiiA, and copies of any
other Collateral Documentation including Financing Statements
required to perfect the Holders' security interest in the
Collateral;
(ix) a duly executed copy of the Registration Rights
Agreement attached as Exhibit 1.4ix;
(x) an opinion from an independent valuation consultant or
appraiser reasonably satisfactory to the Purchasers in form and
substance reasonably satisfactory to the Purchasers supporting
the conclusions that, after giving effect to the transactions
contemplated by the Transaction Documents, the Company will not
be insolvent by the incurrence of Indebtedness incurred in
connection therewith, or be left with unreasonably small capital
with which to engage in its business, or have incurred debts
beyond its ability to pay such debts as they mature;
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(xi) a copy of the Company's employment agreement with ▇▇▇▇
▇▇▇▇, which employment agreement shall be in form and substance
reasonably satisfactory to the Purchasers and which shall be
certified as true, correct and effective as of the date hereof by
an officer of the Company;
(xii) copies of all of the Company's directors and officers
liability insurance policies, which insurance policies shall be
in form and substance reasonably satisfactory to the Purchasers
and which shall be certified as true, correct and effective as of
the date hereof by an officer of the Company;
(xiii) reimbursement of the Purchasers' costs and expenses
(including the reasonable fees and expenses of their counsel,
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇) incurred in connection
with the transactions contemplated by the Transaction Documents
to be paid as set forth in Section 1.5;
(xiv) evidence of repayment in full of the principal amount
of each of the Bridge Notes, plus all accrued and unpaid interest
due and payable thereon; and
(xv) such other instruments and documents as reasonably
requested by each Purchaser.
1.5. Deliveries by the Purchasers. At the Closing, each Purchaser
is delivering to the Restricted Account or to such other parties as
otherwise set forth below the amount set forth opposite such Purchaser's
name in Exhibit 1.5, such amount being equal to the pro-rata portion of the
Purchase Price allocable to such Purchaser for the Notes, the Shares and
the $7 Warrants being purchased by such Purchaser as set forth opposite
such Purchaser's name in Exhibit 1.5, less its costs and expenses
(including the fees and expenses of its counsel, Fried, Frank, Harris,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, which amounts shall be wire transferred by the
Collateral Agent, on behalf of the Company, in immediately available funds
to one or more accounts designated by such parties on or prior to the date
hereof).
2. Representations and Warranties of the Company.
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The Company represents and warrants to each Holder as follows:
2.1. Organization; Subsidiaries. (a) The Company is a corporation
duly organized and existing in good standing under the laws of the State of
Connecticut and has the corporate power to own its property and to carry on
its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary and where the failure to so
qualify could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect.
(b) The Company does not have any Subsidiaries. Except as set
forth on Schedule 2.1(b), the Company does not own, directly or indirectly,
or have the right or obligation to acquire, any interest in any business
association or other Person.
2.2. Due Authorization. (a) The Company has all right, power and
authority to enter into, deliver and perform the Transaction Documents and
to consummate the transactions contemplated thereby. The execution and
delivery of each Transaction Document by the Company and the performance
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by it of the transactions contemplated thereby (including, without
limitation, the issuance and sale of the Notes, the Shares, the $7
Warrants, the $3 Warrants and issuance of shares of Common Stock upon
conversion of the Notes and the exercise of the $7 Warrants and the $3
Warrants) and compliance by the Company with all the provisions of each
Transaction Document (as applicable) have been duly authorized by all
requisite corporate proceedings on the part of the Company (including,
without limitation, approval by the requisite vote of holders of the
outstanding Common Stock). Each of the Transaction Documents has been duly
executed and delivered on behalf of the Company, and each such Transaction
Document constitutes the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its respective
terms, except to the extent that such enforceability (i) may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally or (ii) is subject to general
principles of equity. The Shares and shares of Common Stock issuable upon
conversion of the Notes and exercise of the $7 Warrants and the $3 Warrants
have been validly reserved for issuance and, upon issuance, will be validly
issued and outstanding, fully paid and nonassessable.
(b) The Board of Directors has taken all necessary action so that
no "fair price," "moratorium," "control share acquisition," "interested
holder" or other similar anti-takeover statute or regulation (including,
without limitation, Sections 33-840 through 33-845 of the Connecticut
Business Corporation Act) or any applicable anti-takeover provision in the
Company's Certificate of Incorporation or By-Laws prohibits the
transactions contemplated by this Agreement. To the knowledge of the
Company, no other state takeover statute is applicable to the transactions
contemplated by this Agreement.
2.3. Capitalization. The authorized capital stock of the Company
consists of (i) 25,000,000 shares of Common Stock, of which, as of the date
hereof, 14,505,908 shares were issued and outstanding, 380,150 shares were
reserved for issuance upon the exercise of outstanding stock options
pursuant to the Company's option plans, and as of April 3, 2000, 3,958,244
shares were reserved for issuance upon the exercise of the outstanding
warrants, and 1,786,359 shares were reserved for issuance upon the
conversion of the Company's 6% Convertible Debentures, due 2004 (the
"Convertible Debentures") and (ii) 3,000,000 shares of Preferred Stock, no
par value (the "Preferred Stock"), of which, as of the date hereof, no
shares were issued and outstanding. All of the outstanding shares of Common
Stock are validly issued and are fully paid and nonassessable. No class of
Capital Stock of the Company is entitled to preemptive rights. Except as
set forth on Schedule 2.3, there are no outstanding options, warrants,
subscription rights, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, shares of any class
of Capital Stock of the Company, or Contracts, by which the Company is or
may become bound to issue additional shares of its Capital Stock or
options, warrants or other rights to purchase or acquire any shares of its
Capital Stock. Except as set forth on Schedule 2.3, no warrants, bonds,
debentures, notes or other Indebtedness or other security having the right
to vote (or convertible into or exercisable for securities having the right
to vote) on any matters on which stockholders of the Company may vote were
issued or outstanding. Except as set forth on Schedule 2.3 or as
contemplated by the Transaction Documents, the Company is not a party to,
and, to the Company's best knowledge, there is, and immediately after the
Closing, there will be, no agreement, restriction or encumbrance (such as a
preemptive or similar right of first refusal, right of first offer, proxy,
voting agreement, voting trust, registration rights agreement,
shareholders' agreement, etc., whether or not the Company is a party
thereto) with respect to the purchase, sale or voting of any shares of
Capital Stock of the Company (whether outstanding or issuable upon
conversion, exchange or exercise of outstanding securities) or other
securities of the Company pursuant to any provision of Law, the Certificate
of Incorporation or By-Laws, any agreement or otherwise. Except as set
forth on Schedule 2.3 or as contemplated by the Transaction Documents, no
Person has the right to nominate or elect one or more
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directors of the Company. Immediately following the transactions
contemplated hereby, the Company's capitalization will be as set forth in
Schedule 2.3. The Company has not declared or paid any dividend or made any
other distribution of cash, stock or other property to its stockholders
since January 1, 1996.
2.4. SEC Reports Correspondence. The Company has filed all proxy
statements, reports and other documents required to be filed by it under
the Exchange Act from and after January 1, 1995, and the Company has
furnished each Purchaser true and complete copies of all annual reports,
quarterly reports, proxy statements and other reports under the Exchange
Act filed by the Company from and after such date, each as filed with the
SEC (collectively, the "SEC Reports"). Each SEC Report was in compliance in
all material respects with the requirements of its respective report form
and did not on the date of filing contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and as of the
date hereof there is no fact or facts not disclosed in the SEC Reports that
relate specifically to the Company and that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The
Company has made available for inspection by each Purchaser copies of all
correspondence between the Company and the SEC from and after January 1,
1995.
2.5. Financial Statements. The financial statements (including
any related schedules and/or notes) included in the SEC Reports have been
prepared in accordance with GAAP consistently followed (except as indicated
in the notes thereto) throughout the periods involved and fairly present
the consolidated financial condition, results of operations, cash flows and
changes in stockholders' equity of the Company as of the respective dates
thereof and for the respective periods then ended (in each case subject, as
to interim statements, to changes resulting from year-end adjustments, none
of which was material in amount or effect). Except as set forth on Schedule
2.5, the Company is not subject to any Liabilities, except (i) Liabilities
in the respective amounts reflected or reserved against in the Company's
balance sheet as of December 31, 1999 included in the SEC Reports or (ii)
Liabilities incurred in the ordinary course of business since December 31,
1999 which could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
2.6. Litigation. (a) Except as set forth on Schedule 2.6, there
is no Litigation pending or, to the knowledge of the Company, threatened
against the Company or any of its properties or assets by or before any
court, arbitrator or other Governmental Entity.
(b) The Company is not in default under or in breach of any Order
of any court, arbitrator or other Governmental Entity, and the Company is
not subject to or a party to any Order of any court, arbitrator or other
Governmental Entity arising out of any claim, demand, notice, action, suit
or proceeding under any Law.
2.7. Title to Properties; Insurance. (a) Except as set forth on
Schedule 2.7(a), the Company has good and valid title to, or, in the case
of property leased by it as lessee, a valid and subsisting leasehold
interest in, its properties and assets, free of all Liens.
(b) Schedule 2.7(b) sets forth a complete and correct list of all
insurance coverage carried by the Company, the carrier and the terms and
amount of coverage. All of the material assets of the Company and all
aspects of the Company's business that are of insurable character are
covered by insurance with insurers against risks of liability, casualty and
fire and other losses and liabilities customarily obtained to cover
comparable businesses and assets in amounts, scope and coverage that are
consistent with prudent industry practice. The Company is not in default
with respect to its obligations under any such insurance policy maintained
by it. All such policies and other instruments are in full force
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and effect and no premiums with respect thereto are past due and owed. The
Company has not failed to give any notice or present any material claim
under any such insurance policy in due and timely fashion or as required by
any of such insurance policies. The Company has not otherwise, through any
act, omission or non-disclosure, jeopardized or impaired full recovery of
any claim under such policies, and there are no claims by the Company under
any of such policies to which any insurance company is denying liability or
defending under a reservation of rights or similar clause. The Company has
not received notice of any pending or threatened termination of any of such
policies or any premium increases for the current policy period with
respect to any of such policies and the consummation of the transactions
contemplated by the Transaction Documents will not result in any such
termination or premium increase.
2.8. Consents, etc. Except as set forth on Schedule 2.8, the
Company is not required to obtain any consent, approval or authorization
of, or to make any registration declaration or filing with, any
Governmental Entity or third party as a condition to or in connection with
the valid execution and delivery of any of the Transaction Documents
(including, without limitation, the issuance and sale of the Notes, the
Shares, the $7 Warrants and the $3 Warrants), or the performance by the
Company of its obligations in respect of any thereof, except for (i)
filings required pursuant to state and federal securities laws to effect
any registration of Securities pursuant to this Agreement and the
Registration Rights Agreement, (ii) the filing of the Financing Statements
and the Open-end Subordinate Mortgage, Security Agreement, dated as of the
date hereof, between the Company and the Collateral Agent (iii) filings to
be made with the U.S. Patent and Trademark Office or the U.S. Copyright
Office to perfect the Holders' first priority security interest in the
Intellectual Property constituting Collateral under the Collateral
Documentation, (iv) the filing on Form 8-K under the Exchange Act to report
the consummation of the transactions contemplated hereby and (v) the
approval of the stockholders of the Company, which approval has been
previously obtained.
2.9. No Material Adverse Change. Since December 31, 1999, no
event has occurred or failed to occur that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
2.10. Taxes. Except as set forth on Schedule 2.10:
(a) The Company (i) has timely filed all Tax Returns (including,
but not limited to, those filed on a consolidated, combined or unitary
basis) required to have been filed by the Company, all of which Tax Returns
are true, correct and complete in all material respects, (ii) has within
the time and manner prescribed by Law paid all Taxes required to be paid in
respect of the periods covered by such Tax Returns or otherwise due to any
Governmental Entity, (iii) has established and maintained on its books and
records, accruals and reserves that are adequate for the payment of all
Taxes not yet due and payable and attributable to any period preceding the
date hereof, and (iv) has not received notice of any deficiencies for any
Tax from any Governmental Entity against the Company, which deficiency has
not been satisfied. The Company is not the subject of any currently ongoing
audit or judicial or administrative proceeding relating to Taxes, nor is
any such audit pending or, to the Company's knowledge, threatened. With
respect to any taxable period ended prior to December 31, 1994, all Tax
Returns of the Company have been audited by the Internal Revenue Service or
are closed by the applicable statute of limitations. The accruals and
reserves for Taxes on the Company's balance sheet as of December 31, 1999
included in the SEC Reports are complete and adequate in all respects to
cover any and all Liabilities of the Company for Taxes through such date.
There are no Liens with respect to Taxes upon any of the properties or
assets, real or personal, tangible or intangible, of the Company (other
than Liens for Taxes not yet due). No claim has been made or threatened by
any Governmental Entity in a jurisdiction where the Company
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does not file Tax Returns that the Company is or may be subject to taxation
by such jurisdiction. The Company has not filed an election under Section
341(f) of the Code to be treated as a consenting corporation. The Company
is not or has not been a party to any Tax sharing agreement.
(b) The Company has duly withheld or collected all Taxes required
by Law to have been withheld or collected (including Taxes required by Law
to be withheld or collected in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third
party) and any such amounts required to be remitted to a Governmental
Entity have been timely remitted.
2.11. Compliance with ERISA. Schedule 2.11 sets forth a complete
and correct list of all (i) Benefit Plans, (ii) Employee Agreements,
including (in the case of each of (i) and (ii)) all amendments thereto, and
trust or funding agreements with respect thereto (excluding any grantor
trusts established to hold assets subject to the claims of the Company's
creditors) and (iii) summary plan descriptions and communications of any
material modifications to any employee or employees relating to any Benefit
Plan or Employee Agreement. Each Benefit Plan has been established and
operated in accordance with terms thereof and all other applicable Laws,
including but not limited to the Code and ERISA, and the Company and each
ERISA Affiliate are in compliance with the terms of each Employee
Agreement. Neither the Company nor any ERISA Affiliate presently sponsors,
maintains, contributes to, or is required to contribute to, nor has the
Company nor any ERISA Affiliate ever sponsored, maintained, contributed to,
or been required to contribute to, an "employee pension benefit plan"
(within the meaning of Section 3(2) of ERISA) which is subject to Title IV
of ERISA or Section 412 of the Code or a "multiemployer plan" (within the
meaning of Section 4001(a)(3) of ERISA). Neither the Company nor any ERISA
Affiliate has ever maintained or contributed to or been required to
maintain or contribute to any employee welfare benefit plan (within the
meaning of Section 3(1) of ERISA) which provides for post-retirement
medical, life insurance or other welfare-type benefits, and neither the
Company nor any ERISA Affiliate has any Liability for any such
post-retirement benefits to any present or former employee.
2.12. Labor Relations. Except as set forth in Schedule 2.12, no
unfair labor practice complaint or any complaint alleging sexual harassment
or sex, age, race or other employment discrimination has been brought
during the last three years against the Company before the National Labor
Relations Board, the Equal Employment Opportunity Commission or any other
Governmental Entity, nor is there any charge, investigation (formal or
informal) or complaint pending, or to the knowledge of the Company,
threatened, against the Company regarding any labor or employment matter.
There have been no governmental audits of the equal employment opportunity
practices of the Company and, to the knowledge of the Company, no
reasonable basis for any such audit exists. The Company (i) is in
compliance with all applicable Laws respecting employment, employment
practices, labor, terms and conditions of employment, collective bargaining
and wages and hours, and (ii) has withheld all amounts required by Law or
by agreement to be withheld from the wages, salaries and other payments to
its employees.
2.13. Intellectual Property Rights. Schedule 2.13(a) sets forth a
complete and correct list of all Intellectual Property of the Company (the
"Company Intellectual Property"). Except as set forth on Schedule 2.13(b),
the Company owns and possesses all right, title and interest in, or
possesses adequate licenses to (without the making of any payment to others
or the obligation to grant rights to others in exchange) all the Company
Intellectual Property, free and clear of any Liens, licenses or other
restrictions. The Company has the right to require the applicant of any
Company Intellectual Property which is an application, including but not
limited to patent applications, trademark applications, service ▇▇▇▇
applications, copyright applications, and mask work applications, to
transfer ownership to the Company of
7
the application and of the registration once it issues. All registered
patents, trademarks, service marks and copyrights listed on Schedule
2.13(a) are valid and subsisting and in full force and effect. The Company
Intellectual Property is all the Intellectual Property that is necessary
for the ownership, maintenance and operation of the Company's properties
and assets, the Company has the right to use all of the Company
Intellectual Property in all jurisdictions in which the Company conducts or
proposes to conduct its business, and the consummation of the transactions
contemplated hereby will not alter or impair any such rights. The Company
has no agreements to indemnify any Person for or against any interference,
infringement, misappropriation or other conflict with respect to any
Company Intellectual Property. Except as set forth in Schedule 2.13(b), no
third party has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Company Intellectual Property. The
Company has taken all reasonably necessary and desirable action to maintain
and protect each item of Company Intellectual Property. The validity,
ownership, enforceability, use or legality of the Company Intellectual
Property is not being questioned or opposed in any Litigation or Order to
which the Company, or any Person who has granted a license of Intellectual
Property to the Company, is a party or subject, nor, to the knowledge of
the Company, is any such Litigation or Order threatened. The conduct of the
Company as currently conducted and as currently proposed to be conducted
does not and will not infringe, interfere with, misappropriate or otherwise
come into conflict with any Intellectual Property of any other Person, and
the Company has not received any charge, complaint, claim, demand or notice
alleging any such infringement, interference, misappropriation or conflict
(including any claim that the Company must license or refrain from using
any Intellectual Property of any other Person). Except as set forth in
Schedule 2.13(b), the Company has not granted any licenses of Intellectual
Property to any Person.
2.14. Possession of Franchises, Licenses, Etc. The Company
possesses all franchises, certificates, licenses, permits and other
authorizations from Governmental Entities and other rights, free from
burdensome restrictions, that are necessary for the ownership, maintenance
and operation of its properties and assets, except for those the absence of
which could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect, and the Company is not in violation of
any such franchise, certificates, licenses, permits, authorizations and
rights.
2.15. Compliance with Laws. The Company is in compliance with all
applicable Laws including, without limitation, all rules, regulations and
other Laws of the Food and Drug Administration (the "FDA") relating to the
design, development, manufacturing, sales and distribution of safety
medical products and accessories, except where the failure to comply could
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. No Order has been issued nor any Law enacted which
prevents, nor does any Law prohibit the consummation of the transactions
contemplated by any of the Transaction Documents.
2.16. Conflicting Agreements and Certificate of Incorporation
Provisions. The Company has not entered into any Contract and the Company
is not subject to any Certificate of Incorporation or By-Law provision or
any Order that in any case could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. None of the
execution and delivery of any of the Transaction Documents, the issuance,
sale and delivery of the Notes, the Shares, the $7 Warrants or the $3
Warrants, and the fulfillment of or compliance with the terms and
provisions hereof or thereof will conflict with or result in a breach of
the terms, conditions, or provisions of, or give rise to a right of
termination under, or constitute a default under, or result in the creation
of any Lien, or result in any violation of, the Certificate of
Incorporation or By-Laws or other organizational documents of the Company
or any Contract of the Company. The Company has not defaulted under any
outstanding indenture or other debt instrument or with respect to the
payment of the principal of or interest on any
8
outstanding obligations for borrowed money, and the Company is not in
default under any of its Contracts except where such default could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
2.17. Suppliers. Except as set forth on Schedule 2.17, no Major
Supplier has during the last twelve months materially increased or, to the
knowledge of the Company, threatened to materially increase its prices or
materially decreased or limited or, to the knowledge of the Company,
threatened to materially decrease or limit its provision of services or
supplies to the Company. During the last twelve months, there has been no
termination, cancellation or limitation of, or any material change in, the
business relationships of the Company with any Major Supplier. To the
knowledge of the Company, there will not be any such change in relations
with any Major Supplier or the triggering of any right of termination,
cancellation or penalty or other payment by or to any Major Supplier in
connection with or as a result of the transactions contemplated by the
Transaction Documents that could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
2.18. Products. Except as set forth on Schedule 2.18, there are
no statements, citations or decisions by the FDA or any other Governmental
Entity stating that any product manufactured, sold, rented, leased,
designed, distributed or marketed at any time by the Company ("Products")
is defective or unsafe or fails to meet any standards promulgated by the
FDA or such Governmental Entity. Except as set forth on Schedule 2.18,
there is no (i) fact relating to any Product that, to the knowledge of the
Company, may impose upon the Company a duty to recall or retrofit such
Product or a duty to warn customers of a defect in such Product, (ii)
latent or overt design, manufacturing or other defect in any Product that
could, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect or (iii) Liability for warranty claims or returns
with respect to any Product that could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
2.19. Offering of the Securities. In connection with this
offering, neither the Company nor any Person acting on its behalf has
offered the Securities or any similar securities of the Company for sale
to, solicited any offers to buy the Securities or any similar securities of
the Company from or otherwise approached or negotiated with respect to the
Company with any Person other than the Purchasers and other "accredited
investors" (as defined in Rule 501(a) under the Securities Act). Neither
the Company nor any Person acting on its behalf has taken, or, except as
contemplated hereby, will take, any action (including, without limitation,
any offering of any securities of the Company under circumstances that
would require the integration of such offering with the offering of the
Securities under the Securities Act) that could reasonably be expected to
subject the offering, issuance or sale of the Securities to the
registration requirements of Section 5 of the Securities Act or violate the
provisions of any securities, "blue sky", or similar law of any applicable
jurisdiction.
2.20. Existing Indebtedness; Future Liens. (a) Schedule 2.20(a)
sets forth a complete and correct list of all outstanding Indebtedness of
the Company as of the date hereof. The Company has not defaulted, and no
waiver of default is currently in effect, in the payment of any principal
or interest on any such Indebtedness and no event or condition exists with
respect to any such Indebtedness that would permit (or that with notice or
the lapse of time, or both, would permit) one or more Persons to cause such
Indebtedness to become due and payable before its stated maturity or before
its regularly scheduled dates of payment. The Company has not received any
notice from any Person declaring or threatening to declare any Indebtedness
owed by the Company to such Person due and payable prior to the stated
maturity of such Indebtedness or before its regularly scheduled dates of
payment.
9
(b) Except as set forth on Schedule 2.20(b), the Company has not
agreed or consented to cause or permit in the future (upon the happening of
a contingency or otherwise) any of its property, whether now owned or
hereafter acquired, to be subject to any Lien (other than Permitted Liens).
2.21. Environmental Matters. The Company has no knowledge of any
claim and has not received any notice of any claim, and no proceeding has
been instituted raising any claim against the Company or any of its real
properties now or formerly owned, leased or operated by it or other assets,
alleging any damage to the environment or violation of any Environmental
Laws. Except as set forth on Schedule 2.21, (i) the Company has no
knowledge of any facts that would give rise to any claim, public or
private, of violation of Environmental Laws or damage to the environment
emanating from, occurring on or affecting real properties now or formerly
owned, leased or operated by the Company or to other assets or their use,
(ii) the Company has not stored any Hazardous Materials on real properties
now or formerly owned, leased or operated by it and has not disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws, and
(iii) all buildings on all real properties now owned, leased or operated by
the Company are in compliance with applicable Environmental Laws.
2.22. Solvency. The Company is not, and, after giving effect to
the issuance of the Notes and the sale of the Shares, the $7 Warrants and
the $3 Warrants and the application of the proceeds therefrom, will not be,
insolvent within the meaning of Title 11 of the United States Code or any
comparable state law provision.
2.23. Security Documents. Upon proper filing of the Financing
Statements (or assignments thereof) in the offices of the Secretary of
State of the State of Connecticut with respect to the Company (or
assignments thereof) and in the locations identified in the Security
Agreement, the Liens granted under the Transaction Documents shall, other
than as specifically provided therein, constitute a fully perfected
security interest in all right, title and interest of the Company in and to
the personal property or interests therein secured thereby prior to any
other security interests against such property or interests therein.
2.24. Brokers or Finders. Except for the fees payable to Pali
Capital LLC, no agent, broker, investment banker or other Person is or will
be entitled to any broker's fee or any other commission or similar fee from
the Company in connection with any of the transactions contemplated by this
Agreement.
2.25. Holding Company Act and Investment Company Act. The Company
is not: (i) a "public utility company" or a "holding company", or an
"affiliate" or a "subsidiary company" of a "holding company", or an
"affiliate" of such a "subsidiary company", as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended, or (ii) a
"public utility", as defined in the Federal Power Act, as amended, or (iii)
an "investment company" or an "affiliated person" thereof or an "affiliated
person" of any such "affiliated person", as such terms are defined in the
Investment Company Act of 1940, as amended.
2.26. Related Party Transactions. (a) Except as set forth on
Schedule 2.26, the Company has not entered into or been a party to any
transaction with any Related Party thereof except in the ordinary course
of, and pursuant to the reasonable requirements of, such Related Party's
business and upon fair and reasonable terms that are at least equivalent to
an arm's-length transaction with a Person not a Related Party.
10
(b) Except as set forth on Schedule 2.26, the Company has not
entered into any lending or borrowing transaction with any director,
officer or employee of the Company.
2.27. Year 2000. Except as could not reasonably be expected to
result in a Material Adverse Effect, the software, computers and other
hardware and systems used by the Company continue to (i) accurately process
date information after January 1, 2000, including, but not limited to,
accepting date input, providing date output and performing calculations on
dates or portions of dates, (ii) function accurately and without
interruption after January 1, 2000 without any change in operations
associated with the advent of the new century, (iii) respond to two digit
year date input in a way that resolves the ambiguity as to century in a
disclosed, defined and predetermined manner, and (iv) store and provide
output of date information in ways that are unambiguous as to century. The
Company has contacted its principal vendors and Major Suppliers and other
Persons with whom the Company has material business relationships, and each
of such vendors, Major Suppliers and other Persons has notified the Company
that its software, computers and other hardware and systems are Year 2000
compliant in all material respects to the extent affecting the Company. The
ability of such vendors, Major Suppliers and other Persons to identify and
resolve their own Year 2000 issues could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
2.28. Disclosure. None of the Transaction Documents and schedules
thereto and certificates furnished to any Purchaser by or on behalf of the
Company in connection with the transactions contemplated thereby contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein not misleading.
There is no fact or information relating to the Company that could
reasonably be expected to be Material to the Company that has not been
disclosed to the Purchasers.
3. Representations and Warranties of the Purchasers. Each Purchaser,
severally and not jointly, represents and warrants to the Company with
respect to such Purchaser as follows:
3.1. Organization and Qualification. Such Purchaser is duly
organized and existing in good standing under the laws of the state of its
formation and has the power to own its respective property and to carry on
its respective business as now being conducted. Such Purchaser is duly
qualified to do business and in good standing in every jurisdiction in
which the nature of the respective business conducted or property owned by
it makes such qualification necessary, except where the failure to so
qualify would not prevent consummation of the transactions contemplated
hereby or reasonably be expected to have a material adverse effect on such
Purchaser's ability to perform its obligations hereunder.
3.2. Due Authorization. Such Purchaser has all right, power and
authority to enter into, deliver and perform the Transaction Documents to
which it is a party and to consummate the transactions contemplated
thereby. Such Purchaser's execution and delivery of each Transaction
Document to which it is a party and the performance by such Purchaser of
the transactions contemplated thereby and compliance by such Purchaser with
all the provisions of each Transaction Document to which it is a party (as
applicable) have been duly authorized by all requisite proceedings on the
part of such Purchaser. Each of the Transaction Documents to which it is a
party has been duly executed and delivered on behalf of such Purchaser, and
each such Transaction Document constitutes the legal, valid and binding
obligation of such Purchaser, enforceable against such Purchaser in
accordance with its respective terms, except to the extent that such
enforceability (i) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors'
rights generally or (ii) is subject to general principles of equity.
11
3.3. Acquisition for Investment. Such Purchaser is acquiring the
Notes, the Shares, the $7 Warrants and the $3 Warrants being purchased by
it for its own account for the purpose of investment and not with a view to
or for sale in connection with any distribution thereof except in
compliance with all applicable securities Laws.
3.4. Offering of Securities. Such Purchaser has not been offered
the Securities for sale by any means of general solicitation or general
advertising including, but not limited to, any advertisements, articles,
notices or other communications published in any newspaper, magazine or
similar medium or broadcast over television or radio, or any seminar or
meeting whose attendees were invited by any general solicitation or general
advertising.
3.5. Accredited Investor. Such Purchaser is an "accredited
investor" within the meaning of Rule 501 promulgated under the Securities
Act.
4. Registration, Exchange and Transfer of Notes.
--------------------------------------------
4.1. The Note Register; Persons Deemed Owners. The Company shall
maintain, at its office designated for notices in accordance with Section
12.6, a register for the Notes (the "Note Register"), in which the Company
shall record the name and address of the Person in whose name each Note has
been issued and the name and address of each transferee and prior owner of
each Note. The Company shall deem and treat the Person in whose name a Note
is so registered as the Holder and owner thereof for all purposes and shall
not be affected by any notice to the contrary, until due presentment of
such Note for registration of transfer as provided in this Section 4.
4.2. Issuance of New Notes Upon Exchange or Transfer. Upon
surrender for exchange or registration of transfer of any Note at the
office of the Company designated for notices in accordance with Section
12.6, the Company shall execute and deliver, at its expense, one or more
new Notes as requested by the Holder of the surrendered Note, each dated
the date so surrendered, but in the same Accreted Value as such surrendered
Note, and registered in the name of such Person or Persons as shall be
designated in writing by such Holder. Every Note surrendered for
registration of transfer shall be duly endorsed, or be accompanied by a
written instrument of transfer duly executed, by the Holder of such Note or
by his attorney duly authorized in writing. The Company may also condition
the issuance of any new Note or Notes to a Person other than the Holder
thereof on the payment of a sum sufficient to cover any stamp Tax or other
governmental charge imposed in respect of such transfer.
5. Payment of Notes.
----------------
5.1. Home Office Payment. The Company will pay to each Holder or
any transferee thereof all sums becoming due on the Notes (including all
sums that become due on the Notes at the maturity thereof) (a) prior to the
date of execution of an indenture, if any (the "Indenture Date"), at the
account/address to be specified by such Holder or transferee for such
purpose by notice to the Company, by wire transfer of immediately available
funds, or at such other address or by such other method as such Holder or
transferee shall have designated by notice to the Company and (b) at any
time after the Indenture Date, by wire transfer to the Trustee, as
specified in the Indenture. Before selling or otherwise transferring any
Note, such Holder or transferee will make a notation thereon of the
aggregate amount of all payments, if any, of the Accreted Value thereof,
theretofore made.
5.2. Limitation on Interest. No provision of this Agreement or of
the Notes shall require the payment or permit the collection of interest in
excess of the maximum rate which is permitted by
12
Law. If any such excess interest is provided for herein or in the Notes, or
shall be adjudicated to be so provided for, then the Company shall not be
obligated to pay such interest in excess of the maximum rate permitted by
Law, and the right to demand payment of any such excess interest is hereby
waived, any other provisions in this Agreement or in the Notes to the
contrary notwithstanding.
5.3. Payment of Principal & Interest. (a) In lieu of paying
interest on the Notes on a current basis, the Accreted Value of the Notes
shall be due and payable on the Stated Maturity; provided, however, that if
any amount payable hereunder is not paid when due (including, without
limitation, payment of the Accreted Value under Section 7.2), then in each
such case the overdue amount shall bear interest at a rate of 15% per
annum, compounded semi-annually, which interest shall accrue from the date
such overdue amount was due to the date payment of such amount, including
interest thereon, has been made or duly provided for (including any
interest accruing during the pendency of any bankruptcy or similar
proceeding, whether or not a claim for post-petition interest is allowed as
a claim in any such bankruptcy or proceeding). All such interest shall be
payable on demand. The accrual of such interest on overdue amounts shall,
in the case of any late payment of the Accreted Value or Change of Control
Redemption Price, be in lieu of, and not in addition to, the continued
accrual of the Accreted Value.
(b) The "Accreted Value" of the Notes shall mean, as at any date,
an amount equal to the sum of (i) the Issue Price and (ii) the Accreted
Amount. The "Accreted Amount" of the Notes as at any date shall mean the
amount accrued on the Issue Price of the Notes based upon the accretion
rate, in effect from time to time as provided below (the "Accretion Rate").
For purposes of the foregoing, the Accretion Rate, in effect as at any
date, shall be determined as follows:
(i) from the date hereof up to and including the First
Adjustment Date, an amount equal to 15% per annum, compounded
semi-annually, computed on the basis of a 360-day year consisting
of twelve 30-day months;
(ii) from the day following the First Adjustment Date up to
and including the Second Adjustment Date, an amount equal to 12%
per annum, compounded semi-annually, computed on the basis of a
360-day year consisting of twelve 30-day months;
(iii) from the day following the Second Adjustment Date up
to and including the Third Adjustment Date, an amount equal to
10% per annum, compounded semi-annually, computed on the basis of
a 360-day year consisting of twelve 30-day months; and
(iv) from the day following the Third Adjustment Date up to
and including the Stated Maturity, an amount equal to 7.5% per
annum, compounded semi-annually, computed on the basis of a
360-day year consisting of twelve 30-day months.
6. Covenants of the Company. The Company covenants that at all times
from and after the date hereof:
6.1. Maintenance of Office or Agency. The Company shall maintain
in Vernon, Connecticut an office or agency where Notes may be presented or
surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company
in respect of the Notes may be served. The Company shall give prompt
written notice to the Holders of the location, and any change in the
location, of such office or agency. The Company may also from time to time
designate one or more other offices or agencies (in or outside Connecticut)
where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind
13
such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to
maintain an office or agency in Vernon, Connecticut for such purposes. The
Company shall give prompt written notice to the Holders of any such
designation or rescission and of any change in the location of any such
other office or agency.
6.2. Money for Security Payments to be Held in Trust. On or
before each date on which payments are due on the Notes, the Company shall
segregate and hold in trust for the benefit of the Persons entitled thereto
a sum sufficient to make such payments when such payments are due, until
such sums shall be paid to such Persons or otherwise disposed of as herein
provided.
6.3. Existence. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its
existence, Material rights (charter and statutory) and franchises and the
existence, Material rights and franchises of all of its Subsidiaries.
Neither the Company nor any of its Subsidiaries shall enter into any
transaction of acquisition of, or merger or consolidation or amalgamation
with, any other Person (including any Subsidiary or Affiliate of the
Company or any of its Subsidiaries), or sell, transfer or otherwise dispose
of ("Transfer") all or substantially all of its assets to any Person, or
liquidate, wind up or dissolve itself (or suffer any liquidation or
dissolution), or make any Material change in the present method of
conducting business or engage in any type of business other than of same
general type now conducted by it. The Company shall not, and shall not
permit any of its Subsidiaries to, amend or otherwise modify (i) the
Company's Certificate of Incorporation, (ii) the By-Laws or (iii) the
charter, by-laws or other organizational documents of any of the Company's
Subsidiaries.
6.4. Maintenance of Properties. The Company shall cause all
properties used or useful in the conduct of its business or the business of
any Subsidiary to be maintained and kept in good condition, repair and
working order and supplied with all necessary equipment and shall cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
nothing in this Section 6.4 shall prevent the Company from discontinuing
the operation or maintenance of any of such property if such discontinuance
is, in the reasonable, good faith judgment of the Company, desirable in the
conduct of its business or the business of any Subsidiary and not
disadvantageous in any Material respect to the Holders.
6.5. Payment of Taxes and Other Claims. The Company shall pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all Taxes levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any
of its Subsidiaries, and (ii) all lawful claims for labor, materials and
supplies that, if unpaid, might by Law become a Lien upon the property of
the Company or any of its Subsidiaries; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged
any such Tax amount, applicability or validity of which is being contested
in good faith by appropriate proceedings.
6.6. Limitation on Indebtedness. Except as forth on Schedule 6.6,
the Company shall not, and shall not permit any of its Subsidiaries to,
create, incur, assume or directly or indirectly guarantee or in any other
manner become directly or indirectly liable for the payment of any
Indebtedness (excluding Permitted Indebtedness and Indebtedness that is a
Guaranty of an Indebtedness of the Company or any of its Subsidiaries that
is otherwise Permitted Indebtedness).
6.7. Limitation on Encumbrances. Except as set forth on Schedule
6.7, the Company shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, create, incur, assume or otherwise suffer to
exist or cause or otherwise suffer to become effective any Lien in or on
any right, title
14
or interest to any property (real or personal) that constitutes all or any
portion of the Collateral (a "Restricted Encumbrance", which term excludes
the Lien created in favor of the Holders) unless such Restricted
Encumbrance is a Permitted Lien.
6.8. Limitation on Related Party Transactions. (a) The Company
shall not, and shall not permit any of its Subsidiaries to, enter into or
be a party to any transaction with any Related Parties (other than any of
the Holders or their Affiliates) except in the ordinary course of, and
pursuant to the reasonable requirements of, such Related Party's business
and upon fair and reasonable terms that are at least equivalent to an
arm's-length transaction with a Person that is not a Related Party. In
addition, if any such transaction or series of related transactions
involves payments in excess of $25,000 in the aggregate, the terms of such
transactions must be disclosed in advance to each Holder. All such
transactions existing as of the date hereof are set forth on Schedule 6.8.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, enter into any lending or borrowing transaction with any
director, officer or employee of the Company or any of its Subsidiaries.
(c) The Company shall not, and shall not permit any of its
Subsidiaries to, (i) enter into or adopt or amend any existing agreement or
arrangement relating to severance, (ii) enter into or adopt or amend any
existing severance plan, (iii) enter into or adopt or amend any Benefit
Plan or Employee Agreement or (iv) grant any bonus, salary increase,
severance or termination pay to, any employee, officer, director or
consultant other than in the ordinary course of business consistent with
past practice.
6.9. Limitation on Dividends; Stock Issuances. The Company shall
not offer or issue any shares of Preferred Stock or Common Stock for any
purpose whatsoever, except for shares of Common Stock issuable upon (i)
exercise of warrants issued to the Purchasers and its affiliates, (ii) the
conversion of the Notes and (iii) pursuant to Schedule 6.9. The Company
shall not declare any dividends on any shares of its Capital Stock, or make
any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, retirement, exchange or other
acquisition of any shares of its Capital Stock, whether now or hereafter
outstanding, or make any other distribution in respect thereof, either
directly or indirectly, whether in cash, securities, property or in
obligations of the Company or any of its Subsidiaries.
6.10. Subsidiary Guarantees. The Company shall cause its future
direct and indirect Subsidiaries organized under the laws of any state of
the United States (or the District of Columbia) to jointly and severally
guarantee the obligations of the Company under the Notes and this Agreement
pursuant to the form of Guarantee and Security Agreement attached as
Exhibit 6.10.
6.11. Additional Offerings of Securities. Prior to seeking
financing from any third party consisting of an issuance of Equity
Securities (the "Proposed Securities") by the Company on or after the date
hereof, the Company shall notify the Holders of a description in reasonable
detail of the Proposed Securities, the amount proposed to be issued and the
consideration the Company desires to receive therefor (the "Notice"), which
Notice shall constitute an offer to the Holders with respect to the
Proposed Securities on the terms set forth therein. The Holders and the
Company shall, for not less than 20 days after receipt of the Notice
(unless the Holders earlier indicate that they have no interest in
purchasing the Proposed Securities), discuss the possibility of any of the
Holders acquiring the Proposed Securities, after which (if any of the
Holders has not agreed to purchase the Proposed Securities on the terms set
forth in the Notice or such other terms as are mutually acceptable to the
Company and such Holder) the Company shall be permitted to seek and obtain
third-party investors to acquire the Proposed Securities, provided that the
15
closing of such acquisition by such third-party investor occurs within 90
days from the date of the Notice and provided, further, that the
acquisition of the Proposed Securities by such third-party investor is on
terms no more favorable to such third-party investor than those terms set
forth in the Notice. No Equity Securities shall be issued by the Company to
any Person unless the Company has first offered such Equity Securities to
the Holders in accordance with this Section 6.11. This Section 6.11 shall
not apply to the following issuances of securities: (i) pursuant to an
approved employee stock option plan, stock purchase plan, or similar
employee benefit program or agreement, where the primary purpose is not to
raise equity capital for the Company and (ii) the issuance of Equity
Securities as consideration in a business combination approved by each
member of the Board of Directors.
6.12. Pledges of Intercompany Notes. The Company shall, and shall
cause each of its Subsidiaries to, promptly pledge all Intercompany Notes
(and all security agreements and documents relating thereto) created after
the date hereof to the Collateral Agent as Collateral under the Collateral
Documentation. To the extent that, on or after the date hereof, the Company
makes any cash investment in any of its Subsidiaries (in accordance with
Section 6.14) that are organized under the Laws of and doing business in
the United States, such investment shall be required to be made in the form
of a loan, which shall be evidenced by an Intercompany Note and all such
Intercompany Notes shall be pledged by the Company to the Collateral Agent
as Collateral under the Collateral Documentation.
6.13. No Speculative Transactions. The Company shall not, and
shall not permit any of its Subsidiaries to, engage in any transaction
involving commodity options, futures contracts or similar transactions.
6.14. Restricted Investments. The Company shall not, or permit
any of its Subsidiaries to, directly or indirectly, make or cause or
permit, (i) any direct or indirect advance to, (ii) any loan or other
extension of credit to, (iii) any Guarantee of any Indebtedness of, (iv)
any capital contribution to, (v) any purchase or other acquisition of any
Equity Interests in, (vi) any purchase or other acquisition of assets
(other than in the ordinary course of business) from or (vii) any merger
with, any Person, including, without limitation, any of the Company's
Subsidiaries in each case other than Permitted Investments.
6.15. Financial Covenants. Until the Designation Event and the
new Chief Executive Officer and the Collateral Agent agree to a new set of
financial covenants, the Company shall maintain the financial covenants
specified in Schedule 6.15. From and after the occurrence of the
Designation Event, the Company and the Collateral Agent agree to negotiate
in good faith to establish a new set of financial covenants.
6.16. Sale-and-Leaseback Transactions. The Company shall not, and
shall not permit any of its Subsidiaries to, enter into any
Sale-and-Leaseback Transaction.
6.17. Line of Business. The Company shall not, and shall not
permit any of its Subsidiaries to, engage in any business if, as a result,
the general nature of the business in which the Company and its
Subsidiaries, taken as a whole, would then be engaged would be
substantially changed from the general nature of the business in which the
Company is engaged on the date of this Agreement.
6.18. Sale of Assets. The Company shall not, and shall not permit
any of its Subsidiaries to, Transfer any property or assets, unless the
property or asset that is the subject of such Transfer constitutes (i)
inventory held for sale, (ii) marketable securities available for sale, or
(iii) real estate, equipment, fixtures, supplies or materials no longer
required in the operation of the business of the
16
Company or such Subsidiary or that is obsolete, and, in the case of any
Transfer described in clause (i) or (iii), such Transfer is in the ordinary
course of business.
6.19. Indenture Relating to the Notes. Upon the written request
of the Required Holders, the Company, at its expense, shall cause to be
prepared, executed and delivered within 30 days after such request an
indenture (including a new form of note, any necessary related
documentation and, from time to time thereafter, any necessary supplements
thereto) (the "Indenture") with respect to the Notes, which Indenture shall
contain terms and provisions substantially the same as those set forth in
Sections 6, 8, 9 and 13 hereof and such other terms and provisions as are
required under the Trust Indenture Act of 1939 and such other items and
provisions as are customary in indentures relating to publicly traded
senior secured debt securities having a rating comparable to the rating
that the Notes would receive if rated by a nationally recognized rating
agency. In such event, the Company shall also appoint as trustee under the
Indenture a national banking association reasonably acceptable to the
Required Holders having its principal offices in New York, New York, and
having capital, surplus, and undivided profits of at least $50,000,000. In
connection with the execution of the Indenture, the Holders shall exchange
all outstanding Notes for new notes in the form contemplated by the
Indenture, and upon such exchange such new notes shall be deemed to be
"Notes" for purposes hereof.
6.20. Financial Statements and Information. The Company shall
furnish to each Holder: (a) as soon as practicable and in any event within
45 days after the end of each of the four quarters of each fiscal year and
within 90 days of the end of each fiscal year, (i) copies of the quarterly
and annual reports and of the other information, documents, and other
reports that the Company files or is required to file with the SEC pursuant
to the Exchange Act and of any other reports or information that the
Company delivers or makes available to any of its security holders, at the
time of filing such reports with the SEC or of delivery to the Company's
security holders, as the case may be (but in no event later than the time
such filing or delivery is required pursuant to the Exchange Act) or (ii)
as soon as practicable and in any event within 45 days after the end of
each of the four quarters of each fiscal year and within 90 days of the end
of each fiscal year, quarterly reports for the four quarters of each fiscal
year of the Company and annual reports which the Company would have been
required to file under any provision of the Exchange Act if it had a class
of securities listed on a national securities exchange or was otherwise
required to file such reports under the Exchange Act, within 15 Business
Days of when such report would have been filed under Section 13 of the
Exchange Act, together with copies of a consolidating balance sheet of the
Company and its Subsidiaries as of the end of each such accounting period
and of the related consolidating statements of income and cash flow for the
portion of the fiscal year then ended, all in reasonable detail and all
certified by the principal financial officer of the Company to present
fairly the information contained therein in accordance with GAAP (and in
the case of annual reports, including financial statements, audited and
certified by the Company's independent public accountants as required under
the Exchange Act); (b) within 90 days after the end of each fiscal year, a
written statement by the Company's independent certified public accountants
stating as to the Company and its Subsidiaries whether in connection with
their audit examination, any Default or Event of Default has come to their
attention; (c)(i) within 45 days after the end of the four quarters of the
Company's fiscal year and within 90 days after the end of the Company's
fiscal year, an Officers' Certificate setting forth computations in
reasonable detail showing, as at the end of such quarter or fiscal year, as
the case may be, the Company's compliance with Sections 6.6, 6.7, 6.13,
6.14 and 6.15, and (ii) within 30 days after the end of each fiscal
quarter, an Officers' Certificate stating that as of the date of such
certificate, based upon such examination or investigation and review of
this Agreement, as in the opinion of such signer is necessary to enable the
signer to express an informed opinion with respect thereto, to the best
knowledge of such signer, the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Agreement, and is not
in default in the performance or observance of
17
any of the terms, provisions and conditions hereof, and, to the best of
such signer's knowledge, no Default or Event of Default exists or has
existed during such period or, if a Default or Event of Default shall exist
or have existed, specifying all such defaults, and the nature and period of
existence thereof, and what action the Company has taken, is taking or
proposes to take with respect thereto; (d) promptly after becoming aware of
(i) the existence of a Default or Event of Default or any default under any
of the Collateral Documentation, (ii) any default or event of default under
any Indebtedness of the Company or any of its Subsidiaries, (iii) any
Litigation or proceeding affecting the Company or any of its Subsidiaries
in which the amount claimed is in excess of $50,000 or in which injunctive
relief is sought which if obtained could, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or (iv) any change
that has or could reasonably be expected to have a Material Adverse Effect,
an Officers' Certificate specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take with
respect thereto; and (e) such other information, including financial
statements and computations, relating to the performance of the provisions
of this Agreement and the affairs of the Company and any of its
Subsidiaries as each Holder may from time to time reasonably request. The
Company shall keep at its principal executive office a true copy of this
Agreement (as at the time in effect), and cause the same to be available
for inspection at said office, during normal business hours and after
reasonable notice to the Company by any Holder.
6.21. Inspection. (a) Any Holder shall have the right to visit
and inspect any of the properties of the Company or any of its
Subsidiaries, to examine the books of account and records of the Company or
any of its Subsidiaries, to be provided with copies and extracts therefrom,
to discuss the affairs, finances and accounts of the Company or any of its
Subsidiaries with, and to be advised as to the same by, its and their
officers and employees, and its and their independent public accountants
(and the Company authorizes such independent public accountants to discuss
the Company's or any of its Subsidiaries' financial matters with such
Holder and its representatives, regardless of whether any representative of
the Company is present, but provided that an officer of the Company will be
afforded a reasonable opportunity to be present at any such discussion),
all at such reasonable times and intervals during normal business hours,
and upon reasonable prior notice to the Company as such Holder and the
Company shall agree and at the expense of the Company (including the costs
incurred by such Holder in hiring accountants to conduct an audit). The
Company will likewise afford each Holder the opportunity to obtain any
information necessary to verify the accuracy of any of the representations
and warranties made by the Company hereunder or in any other Transaction
Document or compliance by the Company and its Subsidiaries with a covenant
made herein or in any other Transaction Document.
(b) By receipt of information under this Section 6.21, such
Holder agrees that all information (other than such information that is
publicly available or any other information that is in such Holder's
possession prior to any disclosure under this Section 6.21) provided to it
pursuant to this Section 6.21 shall be used by such Holder solely in
connection with its investment in the Company and for no other purpose, and
such Holder shall treat such information as confidential in accordance with
such reasonable internal procedures as it applies generally to information
of this kind and shall not disclose such information to any Person, except
(i) to any Governmental Entity having jurisdiction over such Holder in the
law or ordinary course of business, (ii) to any other Person pursuant to
subpoena or other process, whether legal, administrative or other (and such
Holder hereby agrees to provide the Company with prompt notice of any such
subpoena or other process), (iii) to such Holder's officers, directors,
trustees, employees, partners, legal counsel, financial advisors or
auditors or accountants who need access to such information in connection
with their duties, (iv) to any transferee or prospective purchaser of a
Note or interest therein who agrees to be bound by this paragraph, or (v)
to the extent necessary in the enforcement of each Holder's rights
hereunder and under the Notes during the continuance of a Default or Event
of Default.
18
6.22. Compliance with Laws. The Company shall, and shall cause
each of its Subsidiaries to, comply with all Laws, ordinances or
governmental rules or regulations to which each of them is subject, and
shall obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the ownership
of their respective properties or to the conduct of their respective
businesses. The Company shall timely file all proxy statements, reports and
other documents required to be filed by it under the Exchange Act and such
statements, reports and other documents shall be in compliance in all
Material respects with the requirements of its respective report form and
shall not on the date of filing contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
6.23. Supplemental Disclosure. From time to time as may be
requested by the Required Holders, the Company shall supplement each
Schedule hereto, or any representation herein or in any other Transaction
Document, with respect to any matter hereafter arising which, if existing
or occurring at the date of this Agreement, would have been required to be
set forth or described in such Schedule or as an exception to such
representation or which is necessary to correct any information in such
Schedule or representation which has been rendered inaccurate thereby (and,
in the case of any supplements to any Schedule, such Schedule shall be
appropriately marked to show changes made therein); provided that no such
supplement to any such Schedule or representation shall be or be deemed a
waiver of any Default or Event of Default resulting from the matters
disclosed therein; provided, further, that if such supplement discloses any
Default or Event of Default, the Company shall have 15 days to cure such
Default or Event of Default so long as such Default or Event of Default (i)
is not caused by the failure to pay amounts due under this Agreement and
(ii) the Collateral Manager believes that such Default or Event of Default
can be cured within such 15-day period.
6.24. Proceeds. The proceeds of the sale of the Notes, the Shares
and the $7 Warrants shall be placed in a restricted account (the
"Restricted Account"), and the disbursements of proceeds from the
Restricted Account shall be made in accordance with the procedures set
forth on Schedule 6.24 and in accordance with the terms of the Restricted
Account Agreement, dated as of the date hereof, by and among the Collateral
Agent, the Company and Savings Bank of Manchester. No part of the proceeds
from the sale of the Notes, the Shares and the $7 Warrants hereunder shall
be used, directly or indirectly, for the purpose of "purchasing" or
"carrying" any "margin stock" within the respective meanings of Regulation
U of the Board of Governors of the Federal Reserve System or for any
purpose which violates or would be inconsistent with the provisions of
Regulation T, U or X of such Board.
6.25. Insurance; Damage to or Destruction of Collateral. The
Company shall, and shall cause each of its Subsidiaries to, at its sole
cost and expense, maintain the policies of insurance described on Schedule
2.7(b) in form and with insurers reasonably acceptable to the Required
Holders. If the Company or any of its Subsidiaries at any time or times
hereafter shall fail to obtain or maintain any of the policies of insurance
required above or to pay all premiums relating thereto, the Collateral
Agent may (at the direction of the Required Holders) at any time or times
after ten days' written notice to the Company obtain and maintain such
policies of insurance and pay such premiums and take any other action with
respect thereto that the Required Holders deem advisable. By doing so, the
Collateral Agent and the Holders shall not be deemed to have waived any
Default or Event of Default arising from the Company's or any of its
Subsidiaries' failure to maintain such insurance or pay any premiums
therefor. Neither the Collateral Agent nor the Required Holders shall have
any obligation to obtain insurance for the Company or any of its
Subsidiaries or to pay any premiums therefor. All sums so disbursed,
including reasonable
19
attorneys' fees, court costs and other charges related
thereto, shall be payable on demand by the Company to the Collateral Agent
and shall be secured by the Collateral.
6.26. Rights of Required Holders to Designate Directors; Board
Composition. (a) Immediately after the Designation Event, the Company shall
expand the size of its Board of Directors from six to seven members and
shall at all times thereafter cause two individuals designated by the
Holders (any such individual so designated pursuant to this Section 6.26
from time to time, a "Purchaser Designee" and, together, the "Purchaser
Designees") to be appointed to the Board of Directors to fill the vacancies
created by such expansion, and the Company will take all necessary action
to cause a Purchaser Designee to be appointed to (i) each existing and
future committee of the Board of Directors, (ii) the board of directors or
governing body of any future Subsidiary of the Company (a "Subsidiary
Board") and (iii) each Committee of such Subsidiary Board. Thereafter, in
connection with any annual meeting of stockholders at which the term of a
Purchaser Designee is to expire, the Company will take all necessary action
to cause such Purchaser Designee to be elected to the Board of Directors.
In the event of any vacancy arising by reason of the resignation, death,
removal or inability to serve of any Purchaser Designee, the Holders shall
be entitled to designate a successor to fill such vacancy for the unexpired
term (and, thereafter, such successor shall be deemed a Purchaser Designee
for all purposes of this Section 6.26). Beginning on the date hereof, the
Company further agrees that the Holders shall be entitled to designate a
non-voting observer to attend and participate in (but not to vote at) all
meetings of the Board of Directors, each committee of the Board of
Directors, each Subsidiary Board and each committee of such Subsidiary
Board (the "Non-Voting Observer"); provided, however, that until the
Designation Event, the Board of Directors shall have the discretion to
exclude the Non-Voting Observer from any of the meetings of the Board of
Directors relating to the Company's relationship with any of the Holders or
the Collateral Agent. The Non-Voting Observer, if appointed, shall have the
same access to information concerning the business and operations of the
Company and its Subsidiaries at the same time as directors of the Company
and its Subsidiaries and shall be entitled to participate in discussions
and to consult with the Board of Directors and each Subsidiary Board
without voting, and the Board of Directors and each Subsidiary Board shall
give due consideration to the advice and recommendations of such Non-Voting
Observer.
(b) Without the prior written consent of the Holders, (i) the
Board of Directors shall not consist of more than seven members and (ii)
the Executive Committee of the Board of Directors shall not consist of more
than four members.
(c) Notwithstanding anything to the contrary contained herein,
after the Designation Event, so long as (i) the Holders (Y) in the
aggregate own at least 5% of the Common Stock (on a fully diluted basis) or
(Z) hold at least $10 million in the Issue Price of the Notes, (ii) there
has not been any change, event or development or series of changes, events
or developments that could or could reasonably be expected to have a
Material Adverse Effect, (iii) at least three individuals who are members
of the Board of Directors as of the date hereof remain members of the Board
of Directors, (iv) there is no material Litigation pending or threatened
against the Company and/or any Subsidiary, (v) the Board of Directors or
any Subsidiary Board has not failed to address in a timely fashion any
concerns raised by the Purchaser Designee(s) regarding the conduct of, or
breach of duty by, any officer or director of the Company or any Subsidiary
and (vi) the Company maintains officers and directors insurance policies
satisfactory to the Collateral Agent in its reasonable discretion, the
Holders agree that they shall use their reasonable efforts to appoint and
cause one Purchaser Designee to serve on the Board of Directors.
20
6.27. Executive Officers. (a) The Company shall promptly, but in
no event later than June 30, 2000, hire a new Chief Executive Officer to
replace the existing Chief Executive Officer, whose appointment shall be
approved by the Board of Directors and the Holders.
(b) Without the approval of the Board of Directors, which
approval shall include the affirmative vote of each of the Purchaser
Designees, the Company shall not make any change in, or appointment of, key
executive officers of the Company, including, without limitation, the Chief
Executive Officer, the Chief Financial Officer, Executive Vice President,
Chief Operating Officer, General Counsel or similar positions; provided,
that if there are no Purchaser Designees at the time of such event, the
approval of the Holders will be required.
6.28. Board and Committee Notice Requirement. In addition to any
requirements specified in the By-Laws of the Company, the Company shall
notify each Purchaser Designee and the Non-Voting Observer, by telecopy, of
(a) every meeting (or action by written consent) of the Board of Directors
and (b) every meeting (or action by written consent) of any Subsidiary
Board and of any committee of the Board of Directors or Subsidiary Board,
at least three days in advance of such meeting (or distribution of written
consents), or, if such notice under the circumstances is not practicable,
as soon before the meeting (or distribution) as is practicable.
6.29. Reimbursement of Certain Expenses. The Company shall, upon
request therefor, promptly reimburse each Purchaser Designee and the
Non-Voting Observer for all reasonable expenses incurred by them in
connection with their attendance at meetings of the Board of Directors, any
Subsidiary Board or of committees of any of the foregoing and any other
activities undertaken by them in their capacity as directors of the Company
or any Subsidiary or observer, as applicable. The foregoing shall be in
addition to, and not in lieu of (or in duplication of), any indemnification
or reimbursement obligations of the Company under the Certificate of
Incorporation of the Company or the By-Laws or by Law. The Non-Voting
Observer shall be entitled to indemnification from the Company and its
Subsidiaries to the maximum extent permitted by Law as though he or she
were a director of the Company or the Subsidiary.
6.30. Limitation of Agreements. The Company shall not, and shall
not permit any Subsidiaries to, enter into any Contract, or any amendment,
modification, extension or supplement to any of its existing Contract or
the By-Laws or Certificate of Incorporation of the Company, that prohibits
the Company from honoring and observing its obligations under the
Transaction Documents.
6.31. Reserved.
6.32. Preparation of Quarterly Budgets. The Company shall furnish
to the Collateral Agent as soon as practicable, but in any event no later
than 10 days before the end of each of the quarterly periods of each fiscal
year of the Company, an operating budget (each, a "Quarterly Budget")
approved and adopted by a majority of the Board of Directors (which
majority shall include the Purchaser Designees, if any) for the Company and
its Subsidiaries, taken as a whole, for the next quarterly period (provided
that the Company need not furnish the Collateral Agent with a Quarterly
Budget for the quarterly period commencing on April 1, 2000). Each
Quarterly Budget shall specify, among other things, the amount of funds
needed by the Company and its Subsidiaries in the next quarter to operate
the business of the Company and its Subsidiaries (the amount of such funds,
the "Quarterly Amount").
21
6.33. Operations in Accordance with the Business Plan. The
business and operations of the Company and its Subsidiaries shall be
conducted in accordance with the Quarterly Budget and a business plan of
the Company approved by the Collateral Agent.
6.34. Operational Covenants. The Company shall maintain the
covenants specified in Schedule 6.34.
7. Events of Default and Remedies.
-------------------------------
7.1. Events of Default and Remedies. "Event of Default", wherever
used herein, means any one of the following events (whatever the reason for
such Event of Default and whether it shall be voluntary or involuntary or
be effected by operation of law or pursuant to any Order of any court or
any Order, rule or regulation of any Governmental Entity) (or, if the
giving of notice or lapse of time or both is required, then, prior to such
notice or lapse of time, a "Default"):
(a) default in the payment of the Accreted Value of or premium,
if any, and interest in respect of any Note when it becomes due and
payable; or
(b) default in the performance of any agreement or covenant in,
or provision of, this Agreement, the Notes, or the other documents
executed and delivered in connection with this Agreement (including
any Transaction Document) and to which the Company or any of its
Subsidiaries is a party (other than a covenant or a default in whose
performance is elsewhere in this Section specifically dealt with), or
any representation or warranty made in any document executed and
delivered in connection with this Agreement (including any Transaction
Document) was false in any material respect on the date as of which
made or deemed made; or
(c) the Company or any of its Subsidiaries shall: (A) default in
any payment of principal of or interest on any Indebtedness (other
than the Notes and any intercompany debt) or in the payment of any
Guarantee, beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee was
created; or (B) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or Guarantee
or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause,
or to permit the holder or holders of such Indebtedness or beneficiary
or beneficiaries of such Guarantee (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such Indebtedness to become due
prior to its Stated Maturity, any applicable grace period having
expired, or such Guarantee to become payable, any applicable grace
period having expired, provided that the aggregate principal amount of
all such Indebtedness and Guarantee which would then become due or
payable as described in this Section 7.1(c) would equal or exceed
$500,000; or
(d) a final judgment or judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the
Company or any of its Subsidiaries and such judgment or judgments
remain undischarged for a period (during which execution shall not
effectively be stayed) of 60 days, provided that the aggregate of all
such judgments that are not covered by insurance under which the
Company or a Subsidiary is a beneficiary exceeds $500,000, or the
Required Holders shall determine that any Governmental Entity having
jurisdiction over the Company or any of its Subsidiaries including,
without limitation, the SEC, shall have taken or proposed to take any
action that the Required Holders believe could, individually or in the
22
aggregate, reasonably be expected to have a Material Adverse Effect or
that adversely affects the Holders' security interest in the
Collateral; or
(e) the Company or any of its Subsidiaries (i) is generally not
paying, or admits in writing its inability to pay, its debts as they
become due, (ii) files, or consents by answer or otherwise to the
filing against it of, a petition for relief or reorganization or
arrangement or any other petition in bankruptcy, for liquidation or to
take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any substantial
part of its property, (v) is adjudicated as insolvent or to be
liquidated, or (vi) takes corporate action for the purpose of any of
the foregoing; or
(f) a court or other Governmental Entity of competent
jurisdiction enters an Order appointing, without consent by the
Company or any of its Subsidiaries, a custodian, receiver, trustee or
other officer with similar powers with respect to it or with respect
to any substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take advantage
of any bankruptcy or insolvency law of any jurisdiction, or ordering
the dissolution, winding-up or liquidation of the Company or any of
its Subsidiaries, or any such petition shall be filed against the
Company or any of its Subsidiaries and such petition shall not be
dismissed within 60 days; or
(g) a court or other Governmental Entity of competent
jurisdiction enters a final judgment holding any of the documents
delivered in connection with this Agreement (including any Transaction
Document) to be invalid or unenforceable and such judgment remains
unstayed and in effect for a period of 20 consecutive days; or the
Company or any of its Subsidiaries shall assert, in any pleading filed
in such a court, that any of the documents delivered in connection
with this Agreement are invalid or unenforceable; or
(h) any provision of any Transaction Document shall for any
reason cease to be valid, binding and enforceable in accordance with
its terms (or the Company or any of its Subsidiaries shall challenge
the enforceability of any Transaction Document or shall assert in
writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Transaction Documents has
ceased to be or otherwise is not valid, binding and enforceable in
accordance with its terms), or any security interest created under any
Transaction Document shall cease to be a valid and perfected security
interest, or Lien in any of the Collateral purported to be covered
thereby; or
(i) the Company or any of its Subsidiaries shall default in the
payment of any amounts due pursuant to the terms of any document
executed and delivered by the Company or such Subsidiary in connection
with this Agreement (other than payments elsewhere in this Section
specifically dealt with); or
(j) there shall exist with respect to any Benefit Plan any
"prohibited transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code); (ii) there shall exist with respect to any
Benefit Plan that is a "defined benefit plan" (within the meaning of
Section 3(35) of ERISA) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA or Section 412 of the Code, whether or
not waived); (iii) a "reportable event" (within the meaning of Section
4043 of ERISA, but excluding any reportable event with respect to
which the 30-day
23
notice requirement of Section 4043 has been waived) shall occur, or
judicial or administrative proceedings shall have commenced, with respect
to any Benefit Plan that is a "defined benefit plan" (within the meaning of
Section 3(35) of ERISA), which reportable event or proceedings is, in the
reasonable opinion of the Holders, likely to result in the termination of
such Benefit Plan; (iv) there shall exist with respect to any Benefit Plan
that is a "multiemployer plan" (within the meaning of Section 4001(a)(3) of
ERISA) any "withdrawal liability" (within the meaning of Section 4201 of
ERISA); or (v) any Benefit Plan that is a "defined benefit plan" (within
the meaning of Section 3(35) of ERISA) shall terminate; and in the case of
each of clauses (i) through (v) above, such event or condition could
individually or in the aggregate with all other such events or conditions
have a Material Adverse Effect.
7.2. Default Rate. For so long as any Event of Default has
occurred and is continuing, all Notes then outstanding will bear interest
at a rate (the "Default Rate") equal to 15% per annum, compounded
semi-annually, computed on the basis of a 360-day year consisting of twelve
30-day months (including any interest accruing during the pendency of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowed as a claim in any such bankruptcy or proceeding). All
such interest shall be payable on demand.
7.3. Acceleration of Maturity. If any Event of Default (other
than an Event of Default specified in clause (e), (f), (g) or (h) of
Section 7.1) shall have occurred and be continuing, the Required Holders
may, by notice to the Company, declare the entire unpaid Accreted Value of,
and interest, if any, in respect of the Notes (to the full extent permitted
by applicable law) to be immediately due and payable (and such Accreted
Value shall be based on the Accreted Value of the Notes to the day prior to
such payment date), and upon such declaration all of such amount shall be
immediately due and payable, in each and every case without presentment,
demand, protest or further notice, all of which are hereby waived, anything
in the Notes or in this Agreement to the contrary notwithstanding; provided
that if an Event of Default under clause (e), (f), (g) or (h) of Section
7.1 shall have occurred, the entire unpaid Accreted Value of each Note (to
the full extent permitted by applicable law), shall immediately become due
and payable, without any declaration and without presentment, demand,
protest or further notice, all of which are hereby waived, anything in the
Notes or this Agreement to the contrary notwithstanding.
7.4. Other Remedies. If any Event of Default shall have occurred
and be continuing, from and including the date of such Event of Default to
but not including the date such Event of Default is cured or waived, each
Holder may enforce its rights by suit in equity, by action at law, or by
any other appropriate proceedings, whether for the specific performance (to
the extent permitted by Law) of any covenant or agreement contained in this
Agreement or the Notes or in aid of the exercise of any power granted in
this Agreement or the Notes, and each Holder may enforce the payment of any
Note held by such Holder and any of its other legal or equitable rights.
7.5. Conduct No Waiver; Collection Expenses. No course of dealing
on the part of any Holder, nor any delay or failure on the part of any
Holder to exercise any of its rights, shall operate as a waiver of such
right or otherwise prejudice any Holder's rights, powers and remedies. If
the Company fails to pay, when due, any payment in respect of any Note, the
Company will pay the Holder of such Note, to the extent permitted by Law,
on demand, all costs and expenses incurred by such Holder in the collection
of any amount due in respect of any Note hereunder, including reasonable
legal fees incurred by such Holder in enforcing its rights hereunder.
24
7.6. Annulment of Acceleration. If a declaration is made in
accordance with Section 7.2, then and in every such case, the Required
Holders may, by an instrument delivered to the Company, annul such
declaration and the consequences thereof.
7.7. Remedies Cumulative. No right or remedy conferred upon or
reserved to each Purchaser or the Collateral Agent or the Holders under
this Agreement is intended to be exclusive of any other right or remedy,
and every right and remedy shall be cumulative and in addition to every
other right and remedy given hereunder or now and hereafter existing under
applicable law. Every right and remedy given by this Agreement or by
applicable Law to each Holder or the Collateral Agent or the Holders may be
exercised from time to time and as often as may be deemed expedient by such
Holder or the Collateral Agent or the Holders.
8. Redemption.
----------
8.1. Optional Redemption. Subject to each Holder's right of
conversion set forth in Section 9, the Company shall have the right, at its
sole option and election made in accordance with Section 8.4 and subject to
Section 8.4, to redeem the Notes after April 28, 2002, in whole or in part,
at a redemption price of 145% of the Accreted Value of the Notes to the day
prior to the redemption date (the "Optional Redemption Price"); provided,
however, that if such redemption date occurs after April 28, 2003, the
Optional Redemption Price shall decrease to 110% of the Accreted Value of
the Notes on the day prior to the redemption date.
8.2. Partial Redemption. If less than all of the Notes at the
time outstanding are to be redeemed, the aggregate Accreted Value of the
Notes to be redeemed shall be prorated among the outstanding Notes;
provided, however, that in the event that the aggregate Accreted Value of
the Notes then outstanding is $1,000,000 or less, the Company shall be
required to redeem all of such outstanding Notes if it elects to redeem any
such Notes.
8.3. Change of Control. The Company shall make an offer, in
accordance with the procedures set forth in Section 8.4(b), to acquire the
Notes for cash at a redemption price of 110% of the Accreted Value of the
Notes on the day prior to the redemption date (the "Change of Control
Redemption Price"), in the event of (i) a Change of Control, a merger,
consolidation or other combination involving the Company, or (ii) a Change
of Control of a Subsidiary of the Company or a group of Subsidiaries of the
Company occurs and such Subsidiary or group of Subsidiaries, individually
or in the aggregate, together with their consolidated Subsidiaries and all
other Subsidiaries previously subject to a Change of Control, if any,
represent more than 50% of the revenues or net assets of the Company and
its Subsidiaries on a consolidated basis as of the last date of the
immediately preceding fiscal quarter of the Company or for the twelve month
period then ended.
8.4. Redemption Procedures. (a) Notice of any redemption of Notes
pursuant to Section 8.1 shall be mailed at least 30 but not more than 60
days prior to the date fixed for redemption to each Holder of a Note to be
redeemed, at such Holder's address as it appears in the Note Register. In
order to facilitate the redemption of Notes, the Board of Directors may fix
a record date for the determination of Notes to be redeemed which shall be
a date at least 20 days following the date of the notice.
(b) Promptly following a Change of Control (but in no event more
than five Business Days thereafter), the Company shall mail to each Holder,
at such Holder's address as it appears in the Note Register, notice of such
Change of Control, which notice shall set forth such Holder's right to
require the Company to redeem any or all Notes held by it. The Company
shall thereafter, during a period of 90 days
25
from the date of such notice, redeem any Note, in whole or in part, at the
option of the Holder thereof, upon at least five days' written notice to
the Company by such Holder specifying (i) the Accreted Value of Notes to be
redeemed and (ii) the redemption date.
(c) On the date of any redemption being made pursuant to Section
8.1, 8.2 or 8.3 that is specified in a notice given pursuant to this
Section 8.4, the Company shall wire transfer to such Holder the Optional
Redemption Price or the Change of Control Redemption Price, as the case may
be, for the Accreted Value of such Holder's Notes and premium, if any, so
redeemed.
9. Conversion.
----------
9.1. Holder's Option to Convert into Common Stock. Subject to the
provisions for adjustment hereinafter set forth, any Note or any portion of
the outstanding Accreted Value of such Note shall be convertible at the
option of the Holder thereof at any time after the Closing into fully paid
and nonassessable shares of Common Stock at a conversion price, determined
as hereinafter provided, in effect at the time of conversion.
The number of shares of Common Stock issuable upon conversion of
a Note shall be determined by dividing the Accreted Value of such Note or
portion thereof surrendered for conversion on the day prior to the
conversion date by the Conversion Price. The "Conversion Price" shall
initially be $3.00 per share, subject to adjustment as provided in this
Section 9.
9.2. Exercise of Conversion Privilege. (a) Conversion of the
Notes may be effected by any Holder thereof upon the surrender to the
Company at the office of the Company designated for notices in accordance
with Section 14.6 or at the office of any agent or agents of the Company,
as may be designated by the Board of Directors (the "Transfer Agent"), of
the Notes to be converted, accompanied by a written notice stating that
such Holder elects to convert all or a specified portion of the Accreted
Value of such Notes in accordance with the provisions of this Section 9 and
specifying the name or names in which such Holder wishes the certificate or
certificates for shares of Common Stock to be issued. In case any Holder's
notice shall specify a name or names other than that of such Holder, such
notice shall be accompanied by payment of all transfer Taxes payable upon
the issuance of shares of Common Stock in such name or names. Other than
such Taxes, the Company will pay any and all issue and other Taxes (other
than Taxes based on income) that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of Notes pursuant hereto.
As promptly as practicable, and in any event within five Business Days
after the surrender of such Notes and the receipt of such notice relating
thereto and, if applicable, payment of all transfer Taxes (or the
demonstration to the satisfaction of the Company that such Taxes have been
paid), the Company shall deliver or cause to be delivered (i) a certificate
or certificates representing the number of validly issued, fully paid and
nonassessable full shares of Common Stock to which the Holder of the Notes
being converted shall be entitled and (ii) if less than the entire Accreted
Value of any Note surrendered is being converted, a new Note in the
Accreted Value that remains outstanding upon such partial conversion. Such
conversion shall be deemed to have been made at the close of business on
the date of giving such notice so that the rights of any Holder thereof as
to the Note or Notes (or portion thereof) being converted shall cease
except for the right to receive shares of Common Stock in accordance
herewith, and the Person entitled to receive the shares of Common Stock
shall be treated for all purposes as having become the record holder of
such shares of Common Stock at such time, so long as such Holder's Notes
are delivered to the Company within two Business Days after the date of the
giving of notice.
26
(b) For the avoidance of doubt, both the Holders and the Company
acknowledge that the Holders' right to convert the Notes into Common Stock
remains in effect until any redemption and will not be suspended by any
notice of redemption.
9.3. Fractions of Shares; Interest. In connection with the
conversion of any Note into Common Stock, no fractional shares shall be
issued, but in lieu thereof the Company shall pay a cash adjustment in
respect of each fractional interest in an amount equal to such fractional
interest multiplied by the Current Market Price per share of Common Stock
on the Trading Day on which any Note is deemed to have been converted. If
more than one Note shall be surrendered for conversion by the same Holder
at the same time, the number of full shares of Common Stock issuable on
conversion thereof shall be computed on the basis of the aggregate Accreted
Value of Notes so surrendered, together with cash in lieu of any fractional
share of Common Stock.
9.4. Reservation of Stock; Listing. (a) The Company shall at all
times reserve and keep available for issuance upon the conversion of the
Notes, free from any preemptive rights, such number of its authorized but
unissued shares of Common Stock as will from time to time be sufficient to
permit the conversion of the aggregate Face Amount of the Notes into Common
Stock, and shall take all action required to increase the authorized number
of shares of Common Stock, if necessary, to permit the conversion of the
then Accreted Value of the Notes.
(b) If at the time of conversion, the Common Stock is listed on a
national securities exchange, or is designated as a "national market system
security" on the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ"), the Company shall take all action necessary to
cause the shares of Common Stock issuable upon conversion of the Notes to
be listed on such exchange, subject to official notice of issuance.
9.5. Rights. If the Company shall issue shares of Common Stock
upon conversion of any Notes as contemplated by this Section 9, the Company
shall issue together with each such share of Common Stock any rights issued
to holders of Common Stock, irrespective of whether such rights shall be
exercisable at such time, but only if such rights are issued and
outstanding and held by other holders of Common Stock at such time and have
not expired.
9.6. Adjustment of Conversion Ratio. The Conversion Price will be
subject to adjustment from time to time as follows:
(a) In case the Company shall at any time or from time to
time after the date hereof (A) pay a dividend, or make a distribution, on
the outstanding shares of Common Stock in shares of Common Stock, (B)
subdivide the outstanding shares of Common Stock; (C) combine the
outstanding shares of Common Stock into a smaller number of shares; or (D)
issue by reclassification of the shares of Common Stock any shares of
capital stock of the Company, then, and in each such case, the Conversion
Price in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the Holder of any
Note thereafter surrendered for conversion into Common Stock shall be
entitled to receive the number of shares of Common Stock of the Company
that such Holder would have owned or would have been entitled to receive
after the happening of any of the events described above, had such Notes
been surrendered for conversion immediately prior to the happening of such
event or the record date therefor, whichever is earlier. An adjustment made
pursuant to this clause (a) shall become effective (x) in the case of any
such dividend or distribution, immediately after the close of business on
the record date for the determination of holders of shares of Common Stock
entitled to receive such dividend or distribution, or (y) in the case of
such subdivision, reclassification or combination, at the close of business
27
on the day upon which such corporate action becomes effective. No
adjustment shall be made pursuant to this clause (a) in connection with any
transaction to which Section 9.7 applies.
(b) Except for issuances pursuant to Schedule 9.6(b), (i) if
at any time the Company shall issue shares of Common Stock (or rights,
warrants or other securities convertible into or exchangeable for shares of
Common Stock (collectively "Convertible Securities")) at a price per share
(or having a conversion price per share) less than the Conversion Price per
share of Common Stock as of the date of issuance of such shares (or, in the
case of Convertible Securities, less than the Conversion Price as of the
date of issuance of the Convertible Securities in respect of which shares
of Common Stock were issued), including, without limitation, any shares of
Common Stock issued by the Company upon the conversion of the Call
Debentures or (ii) if on any Conversion Date, there are Call Debentures
outstanding and the Ramius Conversion Price is below the Conversion Price
(regardless of whether any shares of Common Stock have been issued to
holders of the Call Debentures), then the Conversion Price shall be
adjusted by multiplying (A) the Conversion Price in effect on the day
immediately prior to such date by (B) a fraction, the numerator of which
shall be the sum of (1) the number of shares of Common Stock outstanding on
such date and (2) the number of shares of Common Stock purchasable with the
aggregate consideration receivable by the Company for the total number of
shares of Common Stock so issued (or into which the rights, warrants or
other convertible securities may convert), and the denominator of which
shall be the sum of (x) the number of shares of Common Stock outstanding on
such date and (y) the number of additional shares of Common Stock issued
(or into which the Convertible Securities may convert). Notwithstanding
anything to the contrary contained herein, (a) in calculating any
adjustment to the Conversion Price pursuant to clause (ii) above, once
shares of Common Stock are actually issued upon the conversion of the Call
Debentures, only those shares of Common Stock that remain issuable under
those Call Debentures which have not yet been converted shall be taken into
consideration and (b) on any date that the Company issues any shares of
Common Stock pursuant to the Call Debentures, the Company shall, on the
same date, deliver a notice to the Collateral Agent specifying whether any
adjustment to the Conversion Price will be required pursuant to this
Section 9.6 as a result of such issuance.
An adjustment made pursuant to this Section 9.6(b) shall be
made on the next Business Day following the date on which any such issuance
is made and shall be effective retroactively to the close of business on
the date of such issuance. For purposes of this Section 9.6(b), the
aggregate consideration receivable by the Company in connection with the
issuance of shares of Common Stock or of Convertible Securities shall be
deemed to be equal to the sum of the aggregate offering price (before
deduction of underwriting discounts or commissions and expenses payable to
third parties) of all such Common Stock and Convertible Securities plus the
minimum aggregate amount, if any, payable upon exercise or conversion of
any such Convertible Securities. The issuance or reissuance of any shares
of Common Stock (whether treasury shares or newly issued shares) pursuant
to (i) a dividend or distribution on, or subdivision, combination or
reclassification of, the outstanding shares of Common Stock requiring an
adjustment in the Conversion Price pursuant to Section 9.6(a) or (ii) any
stock option plan or program of the Company currently in effect involving
the grant of options to employees of the Company at the Current Market
Price shall not be deemed to constitute an issuance of Common Stock or
Convertible Securities by the Company to which this Section 9.6(b) applies.
No adjustment shall be made pursuant to this Section 9.6(b) in connection
with any transaction to which Section 9.7 applies.
(c) In case the Company shall at any time or from time to
time after the date hereof declare, order, pay or make a dividend or other
distribution (including, without limitation, any distribution of stock or
other securities or property or Convertible Securities of the Company or
any of its Subsidiaries by way of dividend or spinoff), on its Common
Stock, then, and in each such case, the Conversion Price shall be adjusted
by multiplying (1) the applicable Conversion Price on the day immediately
prior to the record date fixed for the determination of stockholders
entitled to receive such dividend or distribution by (2) a fraction, the
numerator of which shall be the average Current Market Price of the Common
Stock for the period of 20 Trading Days preceding such record date, and the
denominator of which shall be such average Current Market Price of the
Common Stock less the Fair Market Value per share of Common Stock (as
determined in good faith by the board of directors of the Company, a
certified resolution with respect to which shall be mailed to each Holder)
of such dividend or distribution. No adjustment shall be made pursuant to
this Section 9.6(c) in connection with any transaction to which Section 9.7
applies.
28
(d) In case a tender or exchange offer made by the Company
or any Affiliate of the Company for all or any portion of the Common Stock
shall expire and such tender or exchange offer shall involve the payment by
the Company or such Affiliate of consideration per share of Common Stock
having a Fair Market Value at the last time (the "Expiration Time") tenders
or exchanges may be made pursuant to such tender or exchange offer (as it
shall have been amended) that exceeds the Current Market Price per share of
Common Stock on the Trading Day next succeeding the Expiration Time, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the effectiveness of the Conversion Price reduction contemplated by this
subsection (d) by a fraction (which shall not be greater than one) of which
the numerator shall be the number of shares of Capital Stock outstanding
(including any tendered or exchanged shares) at the Expiration Time
multiplied by the Current Market Price per share of Common Stock on the
Trading Day next succeeding the Expiration Time and of which the
denominator shall be the sum of (i) the Fair Market Value of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender or exchange offer) of all
shares validly tendered or exchanged and not withdrawn as of the Expiration
Time (the shares deemed so accepted, up to any such maximum, being referred
to as the "Purchased Shares") and (ii) the product of the number of shares
of Capital Stock outstanding (less any Purchased Shares) at the Expiration
Time and the Current Market Price per share of Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction to become
retroactively effective immediately prior to the opening of business on the
day following the Expiration Time.
(e) For purposes of this Section 9.6, the number of shares
of Common Stock at any time outstanding shall not include any shares of
Common Stock then owned or held by or for the account of the Company.
(f) The term "dividend," as used in this Section 9.6, shall
mean a dividend or other distribution upon Capital Stock of the Company.
(g) Anything in this Section 9.6 to the contrary
notwithstanding, the Company shall not be required to give effect to any
adjustment in the Conversion Price unless and until the net effect of one
or more adjustments (each of which shall be carried forward), determined as
above provided, shall have resulted in a change of the Conversion Price by
at least one one-hundredth of one share of Common Stock, and when the
cumulative net effect of more than one adjustment so determined shall be to
change the Conversion Price by at least one one-hundredth of one share of
Common Stock, such change in Conversion Price shall thereupon be given
effect.
(h) The certificate of any firm of independent public
accountants of recognized national standing selected by the Board of
Directors (which may be the firm of independent public accountants
regularly employed by the Company) shall be presumptively correct for any
computation made under this Section 9.6.
(i) If the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment in the number of
shares of Common Stock issuable upon exercise of the right of conversion
granted by this Section 9.6 or in the Conversion Price then in effect shall
be required by reason of the taking of such record.
29
9.7. Merger or Consolidation. In the case of any
recapitalization, reorganization, reclassification, consolidation, merger,
sale of all or a substantial portion of the Company's assets to another
Person or other transaction which is effected in such a manner that holders
of Common Stock are entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in exchange for
Common Stock (each of the foregoing being referred to as a "Transaction"),
each Note then outstanding shall thereafter be convertible into, in lieu of
the Common Stock issuable upon such conversion prior to consummation of
such Transaction, the kind and amount of shares of stock and other
securities and property receivable (including cash) upon the consummation
of such Transaction by a holder of that number of shares of Common Stock
into which the Accreted Value of such Note was convertible immediately
prior to such Transaction. In each such case, the Company shall also make
appropriate provisions (in form and substance satisfactory to the Required
Holders) to insure that the provisions of this Section 9.6 shall thereafter
be applicable to the Notes (including, in the case of any such
consolidation, merger or sale in which the successor entity or purchasing
entity is other than the Company, an immediate adjustment of the Conversion
Price to the value for the Common Stock reflected by the terms of such
consolidation, merger or sale, and a corresponding immediate adjustment in
the number of shares of Common Stock acquirable and receivable upon
conversion of the Notes, in each case if the value so reflected is less
than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Company shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof,
the successor corporation (if other than the Company) resulting from
consolidation or merger or the corporation purchasing such assets assumes
by written instrument (in form reasonably satisfactory to the Required
Holders), the obligation to deliver to each such Holder such shares of
stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to acquire. In case securities or
property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all references in this Section 9 shall be
deemed to apply, so far as appropriate and nearly as may be, to such other
securities or property.
9.8. Notice of Certain Corporate Actions. In case at any time or
from time to time the Company shall pay any stock dividend or make any
other non-cash distribution to the holders of its Common Stock, or shall
offer for subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or any other right, or there shall
be any capital reorganization or reclassification of the Common Stock or
consolidation or merger of the Company with or into another corporation, or
any sale or conveyance to another corporation of the property of the
Company as an entirety or substantially as an entirety, or there shall be a
voluntary or involuntary dissolution, liquidation or winding up of the
Company, then, in any one or more of such cases, the Company shall give at
least 20 days' prior written notice (the time of mailing of such notice
shall be deemed to be the time of giving thereof) to the Holders of the
Notes at their addresses as shown in the Note Register as of the date on
which (i) a record shall be taken for such stock dividend, distribution or
subscription rights or (ii) such reorganization, reclassification,
consolidation, merger, sale or conveyance, dissolution, liquidation or
winding up shall take place, as the case may be, provided that in the case
of any Transaction to which Section 9.7 applies the Company shall give at
least 30 days' prior written notice as aforesaid. Such notice shall also
specify the date as of which the holders of the Common Stock of record
shall participate in such dividend, distribution or subscription rights or
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance or participate in such
dissolution, liquidation or winding up, as the case may be. Failure to give
such notice shall not invalidate any action so taken.
9.9. Reports as to Adjustments. Upon any adjustment of the
Conversion Price then in effect and any increase or decrease in the number
of shares of Common Stock issuable upon the operation
30
of the conversion provisions set forth in this Section 9, then, and in each
such case, the Company shall promptly deliver to each Holder and the
Transfer Agent of the Notes and Common Stock, a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Company setting
forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the
Conversion Price then in effect following such adjustment, and shall set
forth in reasonable detail the method of calculation of each and a brief
statement of the facts requiring such adjustment. Where appropriate, such
notice to any Holder may be given in advance and included as part of the
notice required under the provisions of Section 9.8.
10. The Collateral Agent.
--------------------
10.1. Appointment. Each Purchaser for itself and for future
Holders hereby irrevocably designates and appoints Appaloosa Management
L.P. as the Collateral Agent under this Agreement, and irrevocably
authorizes the Collateral Agent to take such action on such Purchaser's
behalf and any future Holder's behalf and to exercise such powers and
perform such duties as are expressly delegated to the Collateral Agent by
the terms of the Transaction Documents, together with such other powers as
are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Agreement, the Collateral Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or
any fiduciary relationship with any Purchaser or future Holder, and no
implied covenants, functions, responsibilities, duties, obligations or
Liabilities shall be read into this Agreement or any of the Transaction
Documents or otherwise exist against the Collateral Agent.
10.2. Delegation of Duties. The Collateral Agent may execute any
of its duties under the Transaction Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Collateral Agent shall not be
responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care, except as otherwise
provided in Section 10.3.
10.3. Exculpatory Provisions. Neither the Collateral Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact,
Affiliates or Subsidiaries shall be (i) liable for any action taken or
omitted to be taken by any of them under or in connection with the
Transaction Documents, or (ii) responsible in any manner to any of the
Purchasers or future Holders for any recitals, statements, representations
or warranties made by the Company or any of its Subsidiaries or any officer
thereof contained in the Transaction Documents or in any certificate,
report, statement or other document referred to or provided for in, or
received by the Collateral Agent under or in connection with, the
Transaction Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Transaction Documents or
for any failure of the Company or any of its Subsidiaries to perform its
obligation thereunder. The Collateral Agent shall not be under any
obligation to any Purchaser or future Holder to ascertain or to inquire as
to the observance or performance of any of the agreements contained in, or
conditions of, any Transaction Document, or to inspect the properties,
books or records of the Company or any of its Subsidiaries.
10.4. Reliance by the Collateral Agent. The Collateral Agent
shall be entitled to rely, and shall be fully protected in relying, upon
any Note, writing, resolution, notice, consent, certificate, affidavit,
letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Company), independent
accountants and other experts selected by the Collateral Agent. The
Collateral Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless a written notice of assignment, negotiation
or transfer thereof shall have been filed with the Collateral
31
Agent. The Collateral Agent shall be fully justified in failing or refusing
to take any action under any Transaction Document unless it shall first
receive such advice or concurrence of the Required Holders (or, where
unanimous consent of the Holders is expressly required hereunder or
thereunder, such Holders) as it deems appropriate or it shall first be
indemnified to its satisfaction by the Holders against any and all
Liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Collateral Agent shall in all cases
be fully protected in acting, or in refraining from acting, under any
Transaction Document in accordance with a request of the Required Holders,
and such request and any action taken or failure to act pursuant thereto
shall be binding upon all Purchasers and all future Holders of the Notes.
10.5. Notice of Default. The Collateral Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Collateral Agent has received written notice
from a Holder or the Company referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Collateral Agent receives such a notice,
the Collateral Agent shall promptly give notice thereof to all Holders. The
Collateral Agent shall take such action with respect to such Default or
Event of Default as shall be directed by the Required Holders, provided
that (i) the Collateral Agent shall not be required to take any action that
exposes the Collateral Agent to any Liability or that is contrary to this
Agreement or applicable Law and (ii) unless and until the Collateral Agent
shall have received such directions, the Collateral Agent may (but shall
not be obligated to) take such action, or refrain from taking such action,
with respect to such default or Event or Default as it shall deem advisable
in the best interests of the Holders.
10.6. Non-Reliance on Collateral Agent and Other Purchasers. Each
Purchaser for itself and all future Holders of the Notes acquired by such
Purchaser expressly acknowledges that neither the Collateral Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact,
Subsidiaries or Affiliates has made any representation or warranties to it
and that no act by the Collateral Agent hereafter taken, including any
review of the affairs of the Company and its Subsidiaries, shall be deemed
to constitute any representation or warranty by the Collateral Agent to any
such Purchaser or Holder. Each Purchaser for itself and all future Holders
of the Notes acquired by such Purchaser represents to the Collateral Agent
that it has, independently and without reliance upon the Collateral Agent
or any other Holder, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, operation, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries, and made its own
decision to make its investment hereunder and to enter into this Agreement.
Each Purchaser also represents for itself and all future Holders of the
Notes acquired by such Purchaser that it will, independently and without
reliance upon the Collateral Agent or any other Holder, and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under the Transaction Documents, and to make
such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Company and its Subsidiaries. Except for notices,
reports and other documents expressly required to be furnished to the
Holders by the Collateral Agent hereunder, the Collateral Agent shall not
have any duty or responsibility to provide any Holder with any credit or
other information concerning the business, financial condition, assets,
liabilities, net assets, properties, results of operations, value,
prospects and other condition or creditworthiness of the Company and its
Subsidiaries which may come into the possession of the Collateral Agent or
any of its officers, directors, employees, agents, attorneys-in-fact,
Affiliates or any of its Subsidiaries.
32
10.7. Indemnification. The Purchasers and the future Holders
jointly and severally agree to indemnify the Collateral Agent in its
capacity as such (to the extent not reimbursed by the Company and its
Subsidiaries and without limiting the obligation of the Company and its
Subsidiaries to do so), from and against any and all Liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever that may at any time be
imposed on, incurred by or asserted against the Collateral Agent in any way
relating to or arising out of the Transaction Documents or any documents
contemplated by or referred to herein or the transactions contemplated
hereby or any action taken or omitted by the Collateral Agent under or in
connection with any of the foregoing, provided that no Purchaser or future
Holder shall be liable for the payment of any portion of such Liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting solely from the Collateral Agent's
gross negligence or willful misconduct. The agreements contained in this
Section 10.7 shall survive the payment of the Notes and all other amounts
payable hereunder.
10.8. Collateral Agent in its Individual Capacity. The Collateral
Agent and its Affiliates and Subsidiaries may make loans to, accept
deposits from and generally engage in any kind of business with the Company
and its Subsidiaries as though the Collateral Agent were not the Collateral
Agent hereunder. With respect to its loans made or renewed by it or any
Note issued to it, the Collateral Agent shall have the same rights and
powers, duties and Liabilities under the Transaction Documents as any
Holder and may exercise the same as though it were not the Collateral Agent
and the terms "Purchaser", "Purchasers", "Holder" and "Holders" shall
include the Collateral Agent in its individual capacity.
10.9. Successor Collateral Agent. The Collateral Agent may resign
as Collateral Agent upon 30 days' notice to the Company (and the Company
shall promptly notify the Holders thereof). If the Collateral Agent shall
resign as Collateral Agent under the Transaction Documents, then the
Required Holders shall appoint a successor agent for the Holders whereupon
such successor agent shall succeed to the rights, powers and duties of the
Collateral Agent and the term "Collateral Agent" shall mean such successor
agent effective upon its appointment, and the former Collateral Agent's
rights, powers and duties as Collateral Agent shall be terminated, without
any other or further act or deed on the part of such former Collateral
Agent or any of the parties to this Agreement or any Holders of the Notes.
After any retiring Collateral Agent's resignation hereunder as Collateral
Agent, the provisions of this Section 10 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Collateral
Agent under the Transaction Documents.
11. Interpretation.
--------------
11.1. Definitions.
------------
"$3 Warrants" means warrants to purchase 200,000 shares of Common
Stock with an exercise price of $3 per share in the form attached hereto as
Exhibit 1.4iii.
"$7 Warrants" shall have the meaning ascribed thereto in the
Recitals.
"7.5% Secured Note" shall mean the 7.5% Secured Note in the
initial aggregate principal amount of $3,000,000 issued by the Company to
Appaloosa on October 21, 1999, as such 7.5% Secured note may be amended
from time to time.
33
"15% Secured Note" shall mean the 15% Secured Note in the initial
aggregate principal amount of $1,650,000 issued by the Company to Appaloosa
on January 5, 2000, as such 15% Secured Note may be amended form time to
time.
"Accreted Amount" shall have the meaning ascribed thereto in
Section 5.3.
"Accretion Rate" shall have the meaning ascribed thereto in
Section 5.3.
"Accreted Value" shall have the meaning ascribed thereto in
Section 5.3.
"Action" shall mean see ss. 12.1(b)(i).
"Agreement" shall have the meaning ascribed thereto in the
Preamble.
"Affiliate" shall have the respective meanings ascribed to such
term in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act. "Affiliate" shall also include partners of a Person. Notwithstanding
the foregoing, "Affiliate" shall not include the limited partners of any
Purchaser or Holder or any limited partners of a limited partner of any
Purchaser or Holder.
"Beneficially Own" with respect to any securities shall mean
having "beneficial ownership" of such securities (as determined pursuant to
Rule 13d-3 under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. "Beneficial
Owners" and "Beneficially Owned" shall have correlative meanings.
"Benefit Plan" shall mean each plan, program, policy, payroll
practice, commitment or other arrangement providing for compensation,
severance, termination pay, bonuses, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits of any
kind, whether formal or informal, funded or unfunded, written or oral and
whether or not legally binding, including, without limitation, each
"employee benefit plan" (within the meaning of Section 3(3) of ERISA), in
the case of each of the foregoing, maintained, sponsored or contributed to
by the Company or any ERISA Affiliate or pursuant to which the Company or
any ERISA Affiliate has or may have any Liability, but excluding individual
Employee Agreements.
"Board of Directors" shall mean the Board of Directors of the
Company.
"Bridge Notes" shall have the meaning ascribed thereto in the
Recitals.
"Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"By-Laws" shall mean the By-Laws of the Company as currently in
effect.
"Call Debentures" shall mean the Debentures issued under Section
1.4 of the Subscription Agreement.
"Capital Expenditures" shall mean expenditures made or
liabilities incurred for the acquisition of any fixed assets or
improvements, replacements, substitutions or additions thereto which have a
useful life of more than one year, including the total principal portion of
Capitalized Lease Obligations.
34
"Capital Stock" shall mean, in the case of the Company, any and
all shares (however designated) of the capital stock of the Company now or
hereafter outstanding.
"Capitalized Lease" shall mean, with respect to any Person, any
lease or any other agreement for the use of property which, in accordance
with GAAP, should be capitalized on the lessee's or user's balance sheet.
"Capitalized Lease Obligation" of any Person shall mean and
include, as of any date as of which the amount thereof is to be determined,
the amount of the liability capitalized or disclosed (or which should be
disclosed) in a balance sheet of such Person in respect of a Capitalized
Lease of such Person.
"Certificate of Incorporation" shall mean the Certificate of
Incorporation of the Company as currently in effect.
"Change of Control" shall mean:
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 35% or more of the
combined voting power of the then outstanding Voting Securities
of the Company, but excluding, for this purpose, any such
acquisition by (i) the Company or any of its Subsidiaries, (ii)
any Benefit Plan (or related trust) of the Company or any of its
Subsidiaries, or (iii) any corporation with respect to which,
following such acquisition, 50% or more of the combined voting
power of the then outstanding Voting Securities of such
corporation is then Beneficially Owned, directly or indirectly,
by individuals and entities who were the Beneficial Owners of
Voting Securities of the Company immediately prior to such
acquisition in substantially the same proportion as their
ownership, immediately prior to such acquisition, of the combined
voting power of the then outstanding Voting Securities of the
Company; or
(b) a reorganization, merger or consolidation, in each
case, with respect to which all or substantially all the Persons
who were the Beneficial Owners of the Voting Securities of the
Company immediately prior to such reorganization, merger or
consolidation do not, following such reorganization, merger or
consolidation Beneficially Own, directly or indirectly, more than
35% of the combined voting power of the then outstanding Voting
Securities of the corporation resulting from such reorganization,
merger or consolidation; or
(c) the Incumbent Board shall cease for any reason to
constitute at least 50% of the members of the Board of Directors;
or
(d) the sale, lease or other disposition of all or a
substantial part of the Company's assets in one transaction or a
series of related transactions.
"Change of Control Redemption Price" shall have the meaning
ascribed thereto in Section 8.3.
"Closing" shall have the meaning ascribed thereto in Section 1.3.
35
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall mean all real and personal property and
interests in real and personal property including, without limitation,
Intellectual Property, rights under leases and royalty rights and
agreements, now owned or hereafter acquired by the Company or its
Subsidiaries in or upon which a Lien is granted or made under the
Collateral Documentation.
"Collateral Agent" shall have the meaning ascribed thereto in the
Preamble.
"Collateral Documentation" shall mean the Guarantee and Security
Agreement, the Security Agreement, the Financing Statements, the
Intercompany Notes and the endorsements thereof to the Collateral Agent
(for the benefit of the Holders) or to the Holders, and all other deeds of
trust, assignments, endorsements, pledged stock, collateral assignments and
other instruments, documents, agreements or conveyances at any time
creating or evidencing Liens or assigning Liens to the Collateral Agent
(for the benefit of the Holders) or to the Holders, to secure the
obligations of the Company or any of its Subsidiaries under the Notes and
the Registration Rights Agreement.
"Commencement Date" shall have the meaning ascribed thereto in
Schedule 6.34.
"Common Stock" shall have the meaning ascribed thereto in the
Recitals.
"Company" shall have the meaning ascribed thereto in the
Preamble.
"Company Intellectual Property" shall have the meaning ascribed
thereto in Section 2.13.
"Consolidated" or "consolidated", when used with reference to any
financial term in this Agreement (but not when used with respect to any Tax
Return or Tax Liability), shall mean the aggregate for two or more Persons
of the amounts signified by such term for all such Persons, with
inter-company items eliminated and, with respect to earnings, after
eliminating the portion of earnings properly attributable to minority
interests, if any, in the capital stock of any such Person or attributable
to shares of preferred stock of any such Person not owned by any other such
Person.
"Contracts" shall mean all agreements, contracts, leases,
purchase orders, arrangements, commitments and licenses to which the
Company or any of its Subsidiaries is a party or by which the Company or
any of its Subsidiaries is bound.
"Conversion Date" shall mean the date on which a Holder delivers
a conversion notice to the Company in accordance with Section 9.2.
"Conversion Price" shall have the meaning ascribed thereto in
Section 9.1.
"Convertible Debentures" shall have the meaning ascribed thereto
in Section 2.3.
"Convertible Securities" shall have the meaning ascribed thereto
in Section 9.6(b).
"Current Market Price", when used with reference to shares of
Common Stock or other securities on any date, shall mean the closing price
per share of Common Stock or such other securities on such date and, when
used with reference to shares of Common Stock or other securities for any
period shall mean the average of the daily closing prices per share of
Common Stock or such other securities for such period. If the Common Stock
or such other securities are listed or admitted to trading on a national
securities exchange, the closing price shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in either case as
reported in
36
the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Common Stock or such other securities are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which
the Common Stock or such other securities are listed or admitted to trading
or, if the Common Stock or such other securities are not so listed on any
national securities exchange, as reported in the transaction reporting
system applicable to securities designated as a "national market system
security" or NASDAQ. If the Common Stock or such other securities are not
publicly held or so listed or designated, "Current Market Price" shall mean
the fair market value per share of Common Stock or of such other securities
as determined in good faith by the Board of Directors based on an opinion
of an independent investment banking firm with an established national
reputation with respect to the valuation of securities.
"Debentures" shall have the meaning ascribed thereto in the
Subscription Agreement.
"Default" shall have the meaning ascribed thereto in Section 7.1.
"Default Rate" shall have the meaning ascribed thereto in Section
7.2.
"Designation Event" shall mean the appointment of a Chief
Executive Officer of the Company, acceptable to the Holders, by the Board
of Directors, in accordance with Section 6.27 thereof.
"Employee Agreement" shall mean each management, employment,
severance, consulting, non-compete, confidentiality, or similar agreement
or Contract between the Company or any ERISA Affiliate and any employee
pursuant to which the Company or any ERISA Affiliate has or may have any
Liability.
"Environmental Laws" shall mean any and all Laws, permits,
concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or
the release of any materials into the environment, including but not
limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"Equity Interests" shall mean any capital stock, partnership
interest, joint venture interest or other equity interest or warrants,
options or other rights to acquire any capital stock, partnership interest,
joint venture interest or other equity interest.
"Equity Securities" shall mean, with respect to any Person,
shares of capital stock or other equity interest of such Person, and any
rights, options or warrants to purchase stock or other securities
exchangeable for or convertible into capital stock of or other equity
interest in such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" shall mean each business or entity which is a
member of a "controlled group of corporations," under "common control" or
an "affiliated service group" with the Company within the meaning of
Sections 414(b), (c) or (m) of the Code, or required to be aggregated with
the Company under Section 414(o) of the Code, or is under "common control"
with the Company, within the meaning of Section 4001(a)(14) of ERISA.
"Event of Default" shall have the meaning ascribed thereto in
Section 7.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in
37
effect at the time. Reference to a particular section of the Securities
Exchange Act of 1934, as amended, shall include reference to the comparable
section, if any, of any such successor federal statute.
"Expiration Time" shall have the meaning ascribed thereto in
Section 9.6(d).
"Fair Market Value" shall mean, as to shares of Common Stock or
any other securities of the Company or any other issuer that are publicly
traded, the average of the Current Market Prices of such shares or
securities during the period of five consecutive Trading Days preceding the
date as of that the Fair Market Value of such shares or securities is to be
determined. The "Fair Market Value" of any security which is not publicly
traded or of any other property shall mean the fair value thereof as
determined in good faith by the Board of Directors based on an opinion of
an independent investment banking firm with an established national
reputation with respect to the valuation of securities.
"FDA" shall have the meaning ascribed thereto in Section 2.15.
"Financing Statements" means Form UCC-1 financing statements to
be filed in all jurisdictions necessary or desirable in order to perfect
the Holders' security interest in the Collateral and shall include any Form
UCC-1 financing statements assigned to the Holders and filings to be made
in the U.S. Patent and Trademark Office and the U.S. Copyright Office.
"First Adjustment Date" shall mean the first date on which both
the Designation Event and the Commencement Date have occurred.
"GAAP" shall mean U.S. generally accepted accounting principles,
consistently applied.
"Governmental Entity" shall mean any supernational, national,
foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority.
"Guarantee and Security Agreement" shall mean the agreement, in
the form of Exhibit 6.10, to be entered into between the Collateral Agent
and the Company's future domestic Subsidiaries, providing for a security
interest in such domestic Subsidiaries' Collateral and Guarantees from such
Subsidiaries (as such agreement may be amended, supplemented, restated or
otherwise modified from time to time).
"Guaranty" or "Guarantee" by any Person shall mean all
obligations (other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) of any Person
guaranteeing, or in effect guaranteeing, any Indebtedness, dividend or
other obligation of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, including, without limitation, all
obligations incurred through an agreement, contingent or otherwise, by such
Person: (i) to purchase such Indebtedness or obligation or any property or
assets constituting security therefor, (ii) to advance or supply funds (x)
for the purchase or payment of such Indebtedness or obligation, (y) to
maintain working capital or other balance sheet condition or otherwise to
advance or make available funds for the purchase or payment of such
Indebtedness or obligation, (iii) to lease property or to purchase
securities or other property or services primarily for the purpose of
assuring the owner of such Indebtedness or obligation of the ability of the
primary obligor to make payment of such Indebtedness or obligation, or (iv)
otherwise to assure the owner of the Indebtedness or obligation of the
primary obligor against loss in respect thereof. For the purposes of any
computations made under this Agreement, a Guarantee in respect of any
Indebtedness for borrowed money shall be deemed to be Indebtedness equal to
the outstanding amount of the Indebtedness for borrowed money that has been
guaranteed, and a Guarantee in respect of any other
38
Liability or any dividend shall be deemed to be Indebtedness equal to the
maximum aggregate amount of such Liability or dividend.
"Hazardous Material" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health
or safety, the removal of which may be required or the generation,
manufacture, refining, production, processing, treatment, storage,
handling, transportation, transfer, use, disposal, release, discharge,
spillage, seepage, or filtration of which is or shall be restricted,
prohibited or penalized by any applicable law (including, without
limitation, asbestos, urea formaldehyde foam insulation and polychlorinated
biphenyls).
"Holder" shall mean, at any time of reference, a Person in whose
name a Note is registered in the Note Register at such time.
"Incumbent Board" shall mean the individuals who, immediately
after the Closing, constitute the Board of Directors; provided, however,
that any individual becoming a director subsequent to the Closing whose
election, or nomination for election by the Company's stockholders was
approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be deemed to be a member of the Incumbent Board.
"Indebtedness" shall mean, with respect to any Person, (i) all
obligations of such Person for borrowed money, or with respect to deposits
or advances of any kind, (ii) all obligations of such Person evidenced by
bonds, debentures, notes or similar instruments, (iii) all obligations of
such Person under conditional sale or other title retention agreements
relating to property purchased by such Person, (iv) all obligations of such
Person issued or assumed as the deferred purchase price of property or
services (other than accounts payable to suppliers and similar accrued
liabilities incurred in the ordinary course of business and paid in a
manner consistent with industry practice), (v) all Indebtedness of others
secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien or security
interest on property owned or acquired by such Person whether or not the
obligations secured thereby have been assumed, (vi) all Capitalized Lease
Obligations of such Person, (vii) all Guarantees of such Person, (viii) all
obligations (including, but not limited to, reimbursement obligations)
relating to the issuance of letters of credit for the account of such
Person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all obligations arising out of interest rate and currency swap
agreements, cap, floor and collar agreements, interest rate insurance,
currency spot and forward contracts and other agreements or arrangements
designed to provide protection against fluctuations in interest or currency
exchange rates.
"Indemnified Person" shall have the meaning ascribed thereto in
Section 12.1(b).
"Indenture" shall have the meaning ascribed thereto in Section
6.19.
"Indenture Date" shall have the meaning ascribed thereto in
Section 5.1.
"Intellectual Property" shall mean (a) Patents, (b) all
trademarks, service marks, trade dress, logos, trade names, domain names
and corporate names, together with all translations, adaptations,
derivations and combinations thereof and including all goodwill associated
therewith, and all applications, registrations and renewals in connection
therewith, (c) all copyrightable works, all copyrights and all
applications, registrations and renewals in connection therewith, (d) all
mask works and all applications, registrations and renewals in connection
therewith, (e) all trade secrets and confidential business information
(including ideas, research and development, know-how, formulas,
compositions, manufacturing
39
and production processes and techniques, technical data, designs, drawings,
specifications, customer and supplier lists, pricing and cost information
and business and marketing plans and proposals), (f) all computer software
(including data and related documentation), (g) all other proprietary
rights, (h) all copies and tangible embodiments of the foregoing (in
whatever form or medium), (i) all licenses, sublicenses, permissions or
agreements in connection with the foregoing and (j) all rights, now
existing or hereafter coming into existence, (I) to all income, royalties,
damages and other payments (including in respect of all past, present and
future infringements) now or hereafter due or payable under or with respect
to any of the foregoing, (II) to ▇▇▇ for all past, present and future
infringements with respect to any of the foregoing and (III) otherwise
accruing under or pertaining to any of the foregoing throughout the world.
"Intercompany Notes" shall mean any notes from the Subsidiaries
or Affiliates of the Company in favor of the Company, as the same may be
amended, modified or supplemented from time to time in accordance with
their terms, and all other promissory notes or other instruments evidencing
Indebtedness of Affiliates or Subsidiaries of the Company to the Company or
between the Company and its Affiliates.
"Issue Price" shall have the meaning ascribed thereto in the
Preamble.
"Law" shall include any foreign, federal, state, or local law,
statute, rule, regulation, Order or other restriction of any court or other
Governmental Entity.
"Liability" shall mean any debt, liability or obligation, whether
known or unknown, asserted or unasserted, accrued, absolute, contingent or
otherwise, whether due or to become due.
"Lien" shall mean, with respect to any Person, any mortgage,
lien, pledge, charge, security interest or other encumbrance, or any
interest or title of any vendor, lessor, lender or other secured party to
or of such Person under any conditional sale or other title retention
agreement or Capital Lease, upon or with respect to any property or asset
of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).
"Litigation" shall mean any claim, demand, notice, action, suit,
proceeding, arbitration, investigation, civil, criminal or administrative
action, audit, inquiry or hearing by or before any Governmental Entity or
private arbitration tribunal.
"Major Supplier" shall mean a supplier of $20,000 or more in
materials or services to the Company during the last twelve months.
"Material" shall mean material in relation to the properties,
business, prospects, operations, earnings, assets, Liabilities, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries
taken as a whole, whether or not in the ordinary course of business.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the properties, business, prospects, operations, earnings, assets,
Liabilities or the condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole, whether or not in the ordinary course of
business, (b) the ability of the Company or any of its Subsidiaries to
perform its obligations under any of the Transaction Documents to which it
is a party, (c) the validity or enforceability of any of the Transaction
Documents, (d) the rights, remedies, powers and privileges of the Holders
under any of the Transaction Documents or (e) the timely payment or
performance of the Secured Obligations.
40
"NASDAQ" shall have the meaning ascribed thereto in Section
9.4(b).
"Net Income" shall mean, with respect to any period, the net
income or net loss of the Company and its Subsidiaries in accordance with
GAAP on a consolidated basis as reflected in the financial statements
furnished to the Holders in accordance with Section 6.20.
"Non-Voting Observer" shall have the meaning ascribed thereto in
Section 6.26.
"Note Register" shall have the meaning ascribed thereto in
Section 4.1.
"Notes" shall have the meaning ascribed thereto in the Recitals.
"Notice" shall have the meaning ascribed thereto in Section 6.11.
"Officers' Certificate" shall mean a certificate signed by any
two officers of the Company, one of whom must be the Chairman of the Board
of Directors, the President, the Chief Executive Officer, the Treasurer or
a Vice President of the Company.
"Optional Redemption Price" shall have the meaning ascribed
thereto in Section 8.1.
"Order" shall mean any judgment, order, injunction, ruling,
decree, stipulation or award of any Governmental Entity or private
arbitration tribunal.
"Outstanding" or "outstanding" shall mean, when used with
reference to the Notes at a particular time, all Notes theretofore issued
as provided in this Agreement, except (i) Notes theretofore reported as
lost, stolen, damaged or destroyed, or surrendered for transfer, exchange
or replacement, in respect to which replacement Notes have been issued,
(ii) Notes theretofore paid in full, and (iii) Notes therefore canceled by
the Company, except that, for the purpose of determining whether Holders of
the requisite aggregate Accreted Value of Notes have made or concurred in
any waiver, consent, approval, notice or other communication under this
Agreement, Notes registered in the name of, or Beneficially Owned by, the
Company or any Subsidiary of any thereof, shall not be deemed to be
outstanding.
"Patents" shall mean, collectively, (a) all inventions (whether
patentable or unpatentable and whether or not reduced to practice) and all
improvements thereon, (b) all patents, patent applications and patent
disclosures, (c) all reissues, divisions, continuations, revisions
reexaminations, renewals, extensions and continuations-in-part thereof) and
(d) all rights, now existing or hereafter coming into existence, (i) to all
income, royalties, damages, and other payments (including in respect of all
past, present and future infringements) now or hereafter due or payable
under or with respect to any of the foregoing, (ii) to ▇▇▇ for all past,
present and future infringements with respect to any of the foregoing and
(iii) otherwise accruing under or pertaining to any of the foregoing
throughout the world, including all inventions and improvements described
or discussed in all such patents and patent applications.
"Permitted Indebtedness" means, without duplication, any of the
following Indebtedness of the Company or any of its Subsidiaries, as the
case may be: (i) Indebtedness and obligations under the Notes; (ii) any
Indebtedness and obligations outstanding on the date hereof, as set forth
on Schedule 6.6; (iii) Indebtedness of a domestic Subsidiary of the Company
to the Company as long as such Subsidiary has executed the Guarantee and
Security Agreement and such Indebtedness is evidenced by Intercompany Notes
and the Intercompany Notes are pledged to the Collateral Agent as
Collateral; or (iv) Indebtedness
41
incurred in the ordinary course of business and consistent with past
practice not to exceed $1,000 individually or in the aggregate.
"Permitted Investments" shall mean (a) direct obligations of the
United States of America, or of any of its agencies, or obligations
guaranteed as to principal and interest by the United States of America, or
of any of its agencies, in either case maturing not more than 90 days from
the date of acquisition of such obligation; (b) deposit accounts in, and
certificates of deposit, repurchase agreements or bankers acceptances of
any bank or trust company organized under the laws of the United States of
America or any state or licensed to conduct a banking or trust business in
the United States of America or any state and having capital, surplus and
undivided profits of at least $35,000,000, maturing not more than 90 days
from the date of acquisition; (c) commercial paper rated A-1 or better or
P-1 by Standard & Poor's Ratings Service, a division of The ▇▇▇▇▇▇-▇▇▇▇
Companies or ▇▇▇▇▇'▇ Investors Services, Inc., respectively, maturing not
more than 90 days from the date of acquisition; (d) money market funds
sponsored by commercial or investment banks unaffiliated with the Company
or any of its Subsidiaries; and (e) loans or advances of money by the
Company to its wholly owned domestic Subsidiaries that have executed the
Guarantee and Security Agreement as long as such loans or advances are
evidenced by Intercompany Notes and the Intercompany Notes are pledged to
the Collateral Agent as Collateral.
"Permitted Liens" means (i) Liens existing on the date hereof and
set forth on Schedule 6.7, all of which are subordinate to the Lien of the
Collateral Documentation (other than as set forth in Schedule 6.7); (ii)
Liens (other than any Lien imposed under ERISA or any Environmental Laws)
for Taxes, assessments or charges of any Governmental Entity for claims not
yet due or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted, and with respect
to which adequate reserves or other appropriate provisions are being
maintained in accordance with the provisions of GAAP and enforcement
thereof is stayed; (iii) Liens of landlords, carriers, warehousemen,
mechanics, materialmen and other Liens (other than any Lien imposed under
ERISA) not voluntarily granted for amounts not yet due or which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted, and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with the
provisions of GAAP, and enforcement thereof is stayed; (iv) Liens (other
than any Lien imposed under ERISA), incurred or deposited made in the
ordinary course of business including, without limitation, surety bonds and
appeal bonds, in connection with workers' compensation, unemployment
insurance and other types of social security benefits or to secure the
performance of tenders, bids, leases, contracts (other than for the
repayment of Indebtedness), statutory obligations and other similar
obligations or arising as a result of progress payments under government
contracts; (v) easements (including without limitation reciprocal easement
agreements and utility agreements), rights-of-way, covenants, consents,
reservations, encroachments, variations and other similar restrictions,
charges or encumbrances (whether or not recorded) and other Liens incurred
in the ordinary course of business, that do not secure Indebtedness or the
deferred purchase price of any asset and that do not interfere materially
with the ordinary conduct of the business of the Company or any Subsidiary
of the Company and that do not materially detract from the value of the
property to which they attach or materially impair the use thereof to the
Company or any Subsidiary of the Company; and (vi) building restrictions,
zoning laws and other statutes, laws, rules, regulations, ordinances and
restrictions, and any amendments thereto, now or at any time hereafter
adopted by any governmental authority having jurisdiction.
"Person" shall mean any individual, firm, corporation, limited
liability company, partnership, company or other entity, and shall include
any successor (by merger or otherwise) of such entity.
42
"Preferred Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Product Sales Revenues" shall mean sale of medical products
manufactured by the Company calculated in accordance with GAAP.
"Products" shall have the meaning ascribed thereto in Section
2.18.
"Proposed Securities" shall have the meaning ascribed thereto in
Section 6.11.
"Purchase Price" shall have the meaning ascribed thereto in
Section 1.2(a).
"Purchased Shares" shall have the meaning ascribed thereto in
Section 9.6(d).
"Purchaser" and "Purchasers" shall have the meaning ascribed
thereto in the Preamble.
"Purchaser Designee" and "Purchaser Designees" shall have the
meanings ascribed thereto in Section 6.26.
"Quarterly Amount" shall have the meaning ascribed thereto in
Section 6.32.
"Quarterly Budget" shall have the meaning ascribed thereto in
Section 6.32.
"Ramius Conversion Price" shall have the meaning ascribed to
"Conversion Price" in the Convertible Debentures issued under the
Subscription Agreement.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement, dated the date hereof, between the Purchasers and the
Company (as amended, supplemented, restated or otherwise modified from time
to time) with respect to the Notes.
"Related Parties" shall mean Affiliates of the Company or any of
its Subsidiaries and directors or officers of the Company or any of its
Subsidiaries (including any family members of such directors and officers).
"Required Holders" shall mean, at any time, the Holders of at
least 51% of the aggregate Accreted Value of the Notes at the time
outstanding (exclusive of Notes then owned by the Company or any of its
Affiliates).
"Restricted Account" shall have the meaning ascribed thereto in
Section 6.24.
"Restricted Encumbrance" shall have the meaning ascribed thereto
in Section 6.7.
"Sale-and-Leaseback Transaction" shall mean a transaction or
series of transactions pursuant to which the Company or any Subsidiary
shall Transfer to any Person (other than the Company or a Subsidiary) any
property, whether now owned or hereafter acquired, and, as part of the same
transaction or series of transactions, the Company or any Subsidiary shall
rent or lease as lessee (other than pursuant to a Capitalized Lease), or
similarly acquire the right to possession or use of, such property or one
or more properties which it intends to use for the same purpose or purposes
as such property.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC Reports" shall have the meaning ascribed thereto in Section
2.4.
43
"Second Adjustment Date" shall mean the date on which the Company
achieves Product Sales Revenues equal to or exceeding $15 million for the
trailing 12 month period.
"Second 15% Secured Note" shall mean the 15% Secured Note in the
initial aggregate principal amount of $2,200,000 issued by the Company to
Appaloosa on April 3, 2000, as such 15% Secured Note may be amended from
time to time.
"Secured Obligations" shall mean any and all obligations of the
Company or any of its Subsidiaries at any time and from time to time for
the performance of its agreements, covenants and undertakings under or in
respect of the Transaction Documents to which the Company or such
Subsidiary is a party.
"Securities" shall mean the Notes, the Shares, the Warrants and
the shares of Common Stock issuable upon the conversion of the Notes and
exercise of the Warrants.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Securities Act shall include
reference to the comparable section, if any, of such successor federal
statute.
"Security Agreement" shall mean the agreement, dated as of the
date hereof, between the Collateral Agent and the Company (as amended,
supplemented, restated or otherwise modified from time to time) providing
for a security interest in the Collateral.
"Semi-Annual Accrual Date" shall have the meaning ascribed
thereto in Section 5.3(a).
"Shares" shall have the meaning ascribed thereto in the Recitals.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, shall mean the date specified in such
Security as the fixed date on which the principal of such Security or such
installment of interest is due and payable.
"Subsidiary" means, with respect to any Person, (i) a corporation
a majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly,
owned by such Person, by one or more Subsidiaries of such Person or by such
Person and one or more Subsidiaries thereof, (ii) any other Person (other
than a corporation), including, without limitation, a joint venture, in
which such Person, one or more Subsidiaries thereof or such Person and one
or more Subsidiaries thereof, directly or indirectly, at the date of
determination thereof, has at least majority ownership interest entitled to
vote in the election of directors, managers or trustees thereof (or other
Persons performing similar functions), (iii) the management of which is
otherwise controlled, directly or indirectly, by such Person or (iv) any
other Person required to be consolidated with such Person in accordance
with generally accepted accounting principles. For purposes of this
definition (and for the determination of whether or not a Subsidiary is a
wholly owned Subsidiary of a Person), any directors' qualifying shares or
investment by foreign nationals mandated by applicable law shall be
disregarded in determining the ownership of a Subsidiary.
"Subsidiary Board" shall have the meaning ascribed thereto in
Section 6.26(a).
"Subscription Agreement" shall mean the Subscription Agreement,
dated as of April 21, 1999, between the Company and the undersigned
thereto, as such agreement may be amended and restated from time to time.
44
"Tax" and "Taxes" shall mean any federal, state, local or foreign
income, gross receipts, property, sales, use, value added, license, excise,
franchise, capital, net worth, estimated, withholding, employment, payroll,
premium, withholding, alternative or added minimum, ad valorem, inventory,
asset, gains, transfer or excise tax, or any other tax, levy, custom, duty,
impost, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalty or additions to tax,
imposed by any Governmental Entity and, including, without limitation, any
Taxes of another Person owing under a contract, as transferee or successor,
under Treas. Reg. ss. 1.1502-6 or analogous state, local or foreign law, or
otherwise.
"Tax Return" shall mean any return, report or similar statement
required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim
for refund, amended return or declaration of estimated Tax.
"Third Adjustment Date" shall mean the date on which the Company
achieves Product Sales Revenues equal to or exceeding $25 million for the
trailing 12 month period.
"Total Revenue" shall mean, with respect to any period, the total
revenues of the Company and its Subsidiaries in accordance with GAAP on a
consolidated basis as reflected in the financial statements furnished to
the Holders in accordance with Section 6.20.
"Trading Day" shall mean a Business Day or, if the Common Stock
is listed or admitted to trading on any national securities exchange, a day
on which such exchange is open for the transaction of business.
"Transaction" shall have the meaning ascribed thereto in Section
9.7.
"Transaction Documents" shall mean this Agreement, the Notes, the
$7 Warrants, the $3 Warrants, the Registration Rights Agreement, the
Security Agreement and the Guarantee and Security Agreement.
"Transfer" shall have the meaning ascribed thereto in Section
6.3.
"Transfer Agent" shall have the meaning ascribed thereto in
Section 9.2.
"Voting Securities" shall mean at any time shares of any class of
Capital Stock of the Company (or other corporation) which are then entitled
to vote generally in the election of directors of the Company (or such
other corporation).
11.2. Accounting Principles. The character or amount of any
asset, liability, capital account or reserve and of any item of income or
expense required to be determined pursuant to this Agreement, and any
consolidation or other accounting computation required to be made pursuant
to this Agreement, and the construction of any definition in this Agreement
containing a financial term shall be determined or made, as the case may
be, in accordance with GAAP, to the extent applicable, unless such
principles are inconsistent with the express requirements of this
Agreement.
12. Miscellaneous.
-------------
12.1. Payments; Indemnity. (a) The Company agrees that, so long
as any Holder shall hold any Notes, it will make all payments hereunder and
under the Notes in immediately available funds by
45
wire transfer on the date due in such manner as each Holder may reasonably
request in writing. Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of any Note that is due on a date other than a
Business Day shall be made on the next succeeding Business Day. If the date
for payment is extended to the next succeeding Business Day by reason of
the preceding sentence, the period of such extension will be included in
the computation of the interest payable on such next succeeding Business
Day.
(b) (i) The Company and its Subsidiaries shall jointly and
severally indemnify and hold harmless each Purchaser, each Holder and each
of their respective Affiliates, and each such Person's respective officers,
directors, partners, members, employees, attorneys, agents and
representatives (each, an "Indemnified Person") from and against any and
all suits, actions, proceedings, claims (collectively, "Actions"), damages,
losses, Liabilities and out-of-pocket expenses (including reasonable
attorneys' fees and disbursements and other costs of investigation or
defense, including those incurred upon any appeal) which may be instituted
or asserted against or incurred by any such Indemnified Person as the
result of credit having been extended, suspended or terminated under this
Agreement and the other Transaction Documents and the administration of
such credit, and in connection with or arising out of the transactions
contemplated hereunder and thereunder and any actions or failures to act in
connection therewith.
(ii) Upon receipt by any Indemnified Person of any Action
against such Indemnified Person with respect to which indemnity may be
sought under this Agreement or any other Transaction Document, such
Indemnified Person shall promptly notify the Company in writing, provided
that failure so to notify the Company shall not relieve the Company from
any Liability that the Company may have on account of this indemnity or
otherwise, except to the extent the Company shall have been materially
prejudiced by such failure. The Company shall, at its option, assume the
defense of any Action including the employment of counsel reasonably
satisfactory to such Indemnified Person. Any Indemnified Person shall have
the right to employ separate counsel in any such Action and participate in
the defense thereof but the fees and expenses of such counsel shall be at
the expense of such Indemnified Person, unless: (i) the Company has failed
promptly to assume the defense and employ counsel or (ii) the named parties
to such Action (including any impleaded parties) include such Indemnified
Person and the Company, and such Indemnified Person and the Company shall
have been advised by counsel that there may be one or more legal defenses
available to such Indemnified Person that are different from or in addition
to those available to the Company or there is or may be a conflict between
the Company and any Indemnified Person (in which case the Company may not
assume the defense). In the event that any Indemnified Person shall become
entitled to separate counsel under this Agreement or any other Transaction
Document, the Company shall not in such event be responsible hereunder for
the fees and expenses of more than one firm of separate counsel in
connection with any Action in the same jurisdiction, in addition to any
local counsel. In addition, the Company will not, without prior written
consent of such Indemnified Person, settle, compromise or consent to the
entry of any judgment in or otherwise seek to terminate any pending or
threatened Action in which indemnification may be sought hereunder (whether
or not any Indemnified Person is a party thereto) unless such settlement,
compromise, consent or termination includes an unconditional release of
such Indemnified Person from all liabilities and expenses arising out of
such Action.
(c) The Company shall bear all sales, documentary, transfer,
stamp or other similar Taxes and all filing fees and expenses incurred in
connection with the transactions contemplated by this Agreement and shall
indemnify and hold harmless each Indemnified Purchaser from and against any
such Taxes.
46
12.2. Severability. If any term, provision, covenant or
restriction of this Agreement or any Exhibit or Schedule hereto is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Agreement and such Exhibits and Schedules shall remain in full force and
effect and shall in no way be affected, impaired or invalidated. It is
hereby stipulated and declared to be the intention of the parties that they
would have executed the remaining terms, provisions, covenants and
restrictions without including any of such which may be hereafter declared
invalid, void or unenforceable.
12.3. Specific Enforcement. The Holders, on the one hand, and the
Company, on the other, acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the Holders shall be entitled to an
injunction to prevent breaches of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the
United States or any state thereof having jurisdiction, this being in
addition to any other remedy to which they may be entitled at Law or
equity.
12.4. Entire Agreement. The Transaction Documents (including the
Schedules and Exhibits hereto and thereto) contain the entire understanding
of the parties with respect to the transactions contemplated hereby and
thereby.
12.5. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been
signed by each party and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
12.6. Notices and other Communications. All notices, consents,
requests, instructions, approvals, financial statements, proxy statements,
reports and other communications provided for herein shall be deemed given,
if in writing and delivered personally, by telecopy or sent by registered
mail, postage prepaid, if to:
The Company, to:
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
The Purchasers, to each Purchaser's address
as set forth in the Note Register
47
The Collateral Agent, to:
Appaloosa Management, L.P.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Fried, Frank, Harris, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may, from time to time, designate in
a written notice given in a like manner.
12.7. Amendments. This Agreement may be amended as to the
Purchasers, any Holder and their respective successors and assigns, and the
Company may take any action herein prohibited, or omit to perform any act
required to be performed by it, if the Company shall obtain the written
consent of the Required Holders. This Agreement may not be waived, changed,
modified, or discharged orally, but only by an agreement in writing signed
by the party or parties against whom enforcement of any waiver, change,
modification or discharge is sought or by parties with the right to consent
to such waiver, change, modification or discharge on behalf of such party.
12.8. Successors and Assigns. All covenants and agreements
contained herein shall bind and inure to the benefit of the parties hereto
and their respective successors and assigns (including, without limitation,
any subsequent Holder of a Note).
12.9. Expenses. The Company agrees to pay to each Holder all
reasonable costs and expenses incurred by such Holder relating to any
future amendment or supplement to any of the Transaction Documents or any
of the Notes (or any proposal by the Company for such amendment or
supplement) whether or not consummated or any waiver or consent with
respect thereto (or any proposal for such waiver or consent) whether or not
consummated, and all costs and expenses of such Holder relating to the
enforcement of any of the Transaction Documents.
12.10. Survival. All covenants, agreements, representations and
warranties contained herein and in any certificates delivered pursuant
hereto in connection with the transactions contemplated hereby shall
survive the Closing and the delivery of the Transaction Documents,
regardless of any investigation made by or on behalf of any party; provided
that, all covenants, agreements, representations and warranties contained
herein shall terminate when all the Notes and amounts due hereunder have
been paid in full; provided, however, that notwithstanding anything to the
contrary contained herein, Sections 12.1(b), 12.6, 12.12, 12.13, 12.14 and
12.15 shall survive forever.
12.11. Transfer of Notes and Common Stock. Each Holder
understands and agrees that the Notes and the Shares have not been
registered under
48
the Securities Act or the securities laws of any state and that they may be
sold or otherwise disposed of only in one or more transactions registered
under the Securities Act and, where applicable, such laws or transactions
as to which an exemption from the registration requirements of the
Securities Act and, where applicable, such laws are available. Each Holder
acknowledges that, except as provided in the Registration Rights Agreement,
such Holder has no right to require the Company to register the Notes. Each
Holder understands and agrees that each Note or certificate representing
the Notes shall bear the following legends:
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT. FOR
INFORMATION REGARDING THE AMOUNT OF ORIGINAL ISSUE DISCOUNT, THE
ISSUE PRICE, ISSUE DATE, THE YIELD TO MATURITY OF THE SECURITY,
AND, FOR PURPOSES OF TREAS. REG. SEC. 1.1275-4(b)(3)(ii), THE
COMPARABLE YIELD AND PROJECTED PAYMENT SCHEDULE, CONTACT THE
COMPANYAT ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
THE TRANSFER OF THIS NOTE IS RESTRICTED BY AND PURSUANT TO THE
CONVERTIBLE NOTE PURCHASE AGREEMENT DATED AS OF APRIL 28, 2000, A
COPY OF WHICH IS ON FILE AT THE OFFICES OF THE COMPANY.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
12.12. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES
SHALL BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING
CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE
APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
12.13. Submission to Jurisdiction. If any Litigation shall be
brought by any Holder in order to enforce any right or remedy under this
Agreement or any of the Notes, the Company hereby consents and will submit,
and will cause each of its Subsidiaries to submit, to the jurisdiction of
any state or federal court of competent jurisdiction sitting within the
area comprising the Southern District of New York on the date of this
Agreement. The Company hereby irrevocably waives any objection, including,
but not limited to, any objection to the laying of venue or based on the
grounds of forum non conveniens, which it may now or hereafter have to the
bringing of any such Litigation in such jurisdiction.
12.14. Service of Process. Nothing herein shall affect the right
of any Holder to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Company in any
other jurisdiction.
12.15. WAIVER OF JURY TRIAL. The Company hereby waives any right
it may have to a trial by jury in respect of any action, proceeding or
litigation directly or indirectly arising out of, under or in connection
with, this Agreement and the Notes.
49
12.16. Public Announcements. Neither the Company nor any
Purchaser shall make any public statements, including, without limitation,
any press releases, with respect to this Agreement and the transactions
contemplated hereby without the prior written consent of the other party
(which consent shall not be unreasonably withheld) except as may be
required by Law. If a public statement is required to be made by Law, the
parties shall consult with each other in advance as to the contents and
timing thereof.
12.17. Further Assurances. Each of the Company and its
Subsidiaries agrees that it shall and shall cause each other to, at the
Company's expense and upon the reasonable request of the Collateral Agent,
duly execute and deliver, or cause to be duly executed and delivered, to
the Collateral Agent such further instruments, agreements and documents
(including, without limitation, financing statements under the Code,
security agreements in respect of Intellectual Property, stock powers
executed in blank and other items necessary or desirable in connection with
the perfection of Liens in the Collateral) and do and cause to be done such
further acts as may be necessary or proper in the reasonable opinion of the
Collateral Agent to carry out more effectively the provisions and purposes
of the Transaction Documents.
12.18. Substitution of Purchaser. Each Purchaser shall have the
right to substitute one of its Affiliates as the purchaser of the Notes, by
written notice to the Company, which notice shall be signed by both such
Purchaser and such Affiliate, shall contain such Affiliate's agreement to
be bound by this Agreement and shall contain a confirmation by such
Affiliate of the accuracy with respect to it of the representations set
forth in Section 3. Upon receipt of such notice, wherever the word
"Purchaser" is used in this Agreement (other than in this Section 14.17),
such word shall be deemed to refer to such Affiliate in lieu of the
Purchaser. In the event that such Affiliate is so substituted as a
purchaser hereunder and such Affiliate thereafter transfers to any
Purchaser all of the Notes then held by such Affiliate, upon receipt by the
Company of notice of such transfer, wherever the word "Purchaser" is used
in this Agreement (other than in this Section 14.17), such word shall no
longer be deemed to refer to such Affiliate, but shall refer to such
Purchaser, and such Purchaser shall have all the rights of an original
Holder of the Notes under this Agreement.
12.19. Signatures. This Agreement shall be effective upon
delivery of original signature pages or facsimile copies thereof executed
by each of the parties hereto.
50
IN WITNESS WHEREOF, the Company, the Purchasers and the
Collateral Agent have caused this Agreement to be executed and delivered by
their respective officers or partners thereunto duly authorized.
BIO-PLEXUS, INC.
By:/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Financial Officer and
Vice President of Finance
APPALOOSA MANAGEMENT L.P.,
as Collateral Agent
By: Appaloosa Partners Inc., its
General Partner
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
APPALOOSA INVESTMENT LIMITED
PARTNERSHIP I
By: Appaloosa Management L.P., its
General Partner
By: Appaloosa Partners Inc., its General
Partner
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
PALOMINO FUND LTD.
By: Appaloosa Management L.P., its
Investment Adviser
By: Appaloosa Partners Inc., its General
Partner
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
TERSK LLC
By: Appaloosa Management L.P., its
Managing Member
By: Appaloosa Partners Inc., its General
Partner
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
51
