EXHIBIT 10.53
THE NEPTUNE SOCIETY, INC.
DEBENTURE purchase and AMENDMENT AGREEMENT
This Debenture Purchase and Amendment Agreement (this "Agreement") is
effective as of July 31, 2003 (the "Effective Date"), by and between The Neptune
Society, Inc., a Florida corporation (the "Company"), CapEx, L.P., a Delaware
limited partnership ("CapEx"), and X.X. Xxxxx Investment Banking Corp., a New
York corporation ("DHB") (together with CapEx, the "Holders"). The Company and
the Holders are collectively referred to herein as the "Parties" and each a
"Party." Capitalized terms that are not defined herein shall have the meanings
set forth in the Debenture and Warrant Purchase Agreement dated November 24,
1999 between the Parties, the Debentures, or the Debenture and Warrant Amendment
Agreement dated effective December 31, 2001, between the Parties, as applicable.
RECITALS
1. The Company and the Holders are parties to a Debenture and Warrant
Purchase Agreement dated November 24, 1999, pursuant to which the
Company issued certain securities to CapEx and DHB (the "Debenture
Purchase Agreement");
2. The Company issued to CapEx pursuant to the Debenture Purchase
Agreement: (i) a Convertible Debenture dated December 24, 1999 in the
initial principal amount of $3,000,000 (the "CapEx Debenture"), due
February 24, 2005 and convertible into shares of the Company's common
stock, par value $0.002 ("Common Stock"); (ii) a Warrant initially
exercisable to purchase 120,000 shares of Common Stock at $5.21 per
share, subject to certain adjustments (the "CapEx Warrant No. 1"); and
(iii) a Warrant initially exercisable to purchase 120,000 shares of
Common Stock at $6.25 per share, subject to certain adjustments (the
"CapEx Warrant No. 2");
3. The Company issued to DHB pursuant to the Debenture Purchase
Agreement: (i) a Convertible Debenture dated December 24, 1999 in the
initial principal amount of $2,000,000 (the "DHB Debenture"), due
February 24, 2005, convertible into shares of Common Stock; (ii) a
Warrant exercisable to purchase 80,000 shares of Common Stock, at
$5.21 per share, subject to certain adjustments (the "DHB Warrant No.
1"); and (iii) a Warrant exercisable to purchase 80,000 shares of
Common Stock, at $6.25 per share, subject to certain adjustments (the
"DHB Warrant No. 2");
4. The Company and the Holders entered into that certain Debenture and
Warrant Amendment Agreement effective December 31, 2001 (the "First
Restructuring Agreement") to amend the terms of the CapEx Debenture
(the "CapEx Amended Debenture") and the DHB Debenture (the "DHB
Amended Debenture") (collectively, the "Amended Debentures") and to
amend the terms of the CapEx Warrant No. 1 and the CapEx Warrant No. 2
(the "Amended CapEx Warrants"), and the DHB Warrant No. 1 and the DHB
Warrant No. 2 (the "Amended DHB Warrants");
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5. The Company entered into certain transactions which triggered
adjustments to the effective conversion price of the Debentures and
the exercise price of the Warrants;
6. On May 21, 2002, the Company effected a 4-for-1 reverse stock split
(the "Reverse Stock Split"), as contemplated by the First
Restructuring Agreement and Warrant Amendment No. 1 to those certain
Warrants held by DHB and CapEx.
7. Neptune Society of America, Inc. (formerly, Lari Acquisition Company,
Inc.), a wholly -owned subsidiary of the Company, has an obligation to
pay to the Xxxxxxx Xxxxxxxxx Intervivos Trust as to its
Neptune/Heritage general partnership interest ("Xxxxxxxxx")
approximately $1.7 million due under the terms of that certain
promissory note dated March 31, 1999 in the amount of $19,000,000.00,
as modified by certain amendments dated August 1, 1999, July 14, 2000,
June 19, 2001, August 6, 2001 and December 27, 2001 (the "Xxxxxxxxx
Obligation");
8. The Company desires to borrow One Million Five Hundred Thousand
Dollars (US$1,500,000) from CapEx for the purposes of satisfying the
Xxxxxxxxx Obligation, and CapEx desires to advance the Company One
Million Five Hundred Thousand Dollars (US$1,500,000) for such purposes
(the "Additional Advance");
9. The Company and CapEx desire to amend and restate the CapEx Amended
Debenture in its entirety to reflect the Additional Advance, to
include in the accrued and outstanding interest of US$529,344 in the
principal amount of the debenture, to specify certain repayment terms
and to provide for certain additional changes;
10. The Company and DHB desire to amend and restate the DHB Amended
Debenture in its entirety to include in the accrued and outstanding
interest of US$352,896 in the principal amount of the debenture, to
specify certain repayment terms and to provide for certain additional
changes; and
11. The Parties desire to further specify the relationships among the
Parties on the terms and conditions set forth herein,
NOW, THEREFORE, in consideration of the above and the mutual promises
hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO ADVANCE ADDITIONAL FUNDS.
1.1 Loan to Company. Subject to the terms and conditions hereof, CapEx
agrees to loan to the Company and the Company agrees to borrow from CapEx the
Additional Advance of One Million Five Hundred Thousand Dollars (US$1,500,000).
The Additional Advance shall be evidenced by, and payable in accordance with the
terms and conditions of, the Amended and Restated Debenture issued to CapEx
under the terms of this Agreement.
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1.2 Additional Advance. On or before the Closing, CapEx shall wire One
Million Five Hundred Thousand Dollars (US$1,500,000) (the "Closing Funds") to
Xxxxx & Xxxxxx, LLP, as agent for Xxxxxxxxx (the "Xxxxxxxxx Agent") in partial
satisfaction of the Xxxxxxxxx Obligation, pursuant to the wire instructions set
forth in Exhibit A.
1.3 Payment of Xxxxxxxxx Obligation. The Company shall use the Additional
Advance for the sole purpose of paying the Xxxxxxxxx Obligation. The Company
shall pay the difference between the Additional Advance and the Xxxxxxxxx
Obligation from the Company's existing cash reserves. Payment of the Xxxxxxxxx
Obligation shall be made by the Company in full on the Closing Date or as
otherwise agreed by the Parties.
2. AGREEMENT TO AMEND AND RESTATE CONVERTIBLE DEBENTURES AND AMEND WARRANTS.
2.1 Amendment of Debentures. Subject to the terms and conditions hereof, at
Closing (as defined in Section 4.1 below), the Company and each of the Holders
hereby agree:
(a) the CapEx Amended Debenture shall be amended and restated in its
entirety and be replaced by the Amended and Restated Debenture in the
form attached as Exhibit B (the "Amended and Restated CapEx
Debenture"), and
(b) the DHB Amended Debenture shall be amended and restated in its
entirety and be replaced by the Amended and Restated Debenture in the
form attached as Exhibit C (the "Amended and Restated DHB Debenture").
The Amended and Restated CapEx Debenture and the Amended and Restated DHB
Debenture are referred to collectively as the "Amended and Restated Debentures."
In the event of any differences or disputes between the terms of this Agreement
and the terms of the Amended and Restated Debentures, the terms of the Amended
and Restated Debentures shall control.
2.2 Amendment of Warrants. The Amended CapEx Warrants and the Amended DHB
Warrants shall be amended as follows:
(a) The Expiry Date of the Amended CapEx Warrants and the Amended DHB
Warrants shall be July 31, 2007, rather than December 24, 2004.
(b) Each of the Amended CapEx Warrants shall be exercisable to
acquire 15,000 shares of Common Stock at an exercise price not to
exceed $3.00 per share. CapEx shall be entitled to purchase a
total of 30,000 shares of Common Stock if both of the Amended
CapEx Warrants are fully exercised.
(c) Each of the Amended DHB Warrants shall be exercisable to acquire
10,000 shares of Common Stock at an exercise price not to exceed
$3.00 per share. DHB shall be entitled to purchase a total of
20,000 shares of Common Stock if both of the Amended DHB Warrants
are fully exercised.
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(d) References to the First Restructuring Agreement and this
Agreement will be added immediately following the reference to
the Debenture Purchase Agreement in Paragraph 6(b).
The Company shall execute and deliver to (i) CapEx at Closing a Second Warrant
Amendment, in substantially the form attached hereto as Exhibit D, for each
Amended CapEx Warrant, and (ii) DHB at Closing a Second Warrant Amendment, in
substantially the form attached hereto as Exhibit E, for each Amended DHB
Warrant, reflecting the amendments set forth in this Section 2.2. In the event
of dispute between the terms of this Agreement and the terms of an Amended
Warrant, the language of the Amended Warrant, as amended, shall control.
2.3 Continuing Provisions. Except as otherwise provided in this Agreement
or in the Amended and Restated Debentures or Warrant Amendments, the remaining
terms, conditions, representations, warranties and covenants set forth in the
Debenture Purchase Agreement, the First Restructuring Agreement, the Warrants
and the Warrant Amendments shall be binding on the Company and the Holders. The
terms, conditions, representation, warranties and covenants in this Agreement
and the Amended and Restated Debentures shall likewise be binding on the Company
and the Holders.
2.4 Security Documents. The Parties hereby acknowledge and agree that (a)
those certain Security Agreements, each dated November 24, 1999, between CapEx,
as Agent, and each of the Company, Neptune Management Corp., Neptune Society of
America, Inc., and Heritage Alternatives, and (b) those certain Guaranty
Agreements, each dated November 24, 1999, between CapEx, as Agent, and each of
Neptune Management Corp., Neptune Society of America, Inc., and Heritage
Alternatives, executed as security for the repayment of the Debentures shall be
deemed to refer to the Amended and Restated Debentures and shall act as security
for the repayment of the Amended and Restated Debentures. To this effect, the
Parties and each of Neptune Management Corp., Neptune Society of America, Inc.,
and Heritage Alternatives shall sign a Security Agreement Amendment Agreement in
the form attached hereto as Exhibit F, and each of Neptune Management Corp.,
Neptune Society of America, Inc., and Heritage Alternatives shall acknowledge
and agree to the provisions of this Agreement. Further Trident Society, Inc.
shall execute a Guaranty Agreement and a Security Agreement in the form of
Exhibit G, and shall acknowledge and agree to the provisions of this Agreement.
3. RESTRUCTURING FEES.
3.1 Restructuring Fee - Common Stock.
(a) At Closing, the Company will issue the Holders a total of six
hundred thousand (600,000) shares of Common Stock as a restructuring fee (the
"Consideration Shares") in consideration of entering into this Agreement and
amending and restating Amended Debentures, under the terms provided herein, in
the amounts set out opposite the name of each Holder:
Holder Consideration Shares
------ --------------------
CapEx 400,000
DHB 200,000
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(b) Restructuring Fees - Additional Warrants. In consideration of the
Holders' agreement to amend and restate the Amended Debentures to, among other
things, delete the conversion option contained in Sections 2 and 3 of the
Amended Debentures and to allow prepayment of the Amended and Restated
Debentures, the Company shall issue (a) CapEx a warrant, in the form attached as
Exhibit H, exercisable to acquire a total of 1,000,000 shares of Common Stock at
an exercise price not to exceed $3.00 per share, and (b) DHB a warrant, in the
form attached as Exhibit I, exercisable to acquire a total of 666,667 shares of
Common Stock at an exercise price not to exceed $3.00 per share (together, the
"Additional Warrants"), with an Expiry Date of July 31, 2007. In the event of
any differences or dispute between the terms of this Agreement and the terms of
the Additional Warrants, the terms of the Additional Warrants shall control.
3.2 Registration of Shares. Within sixty (60) days of Closing, the Company
shall file with the Securities and Exchange Commission a registration statement
covering the resale of the Consideration Shares and all other non-registered
shares of Common Stock held by the Holders or are acquirable upon exercise of
convertible securities (including the shares to be issued upon exercise of the
Warrants and the Additional Warrants), which are not currently registered under
the Securities Act of 1933, as amended (the "Securities Act"), or are not
otherwise tradable without restriction under Rule 144(k) of the Securities Act.
The Company shall use its best efforts to cause such registration statement to
be declared effective within ninety (90) days of Closing, but in no case shall
the registration statement be declared effective later than one hundred fifty
(150) days after Closing. In the event the registration statement required by
this Section 3.2 is not declared effective within the one hundred fifty (150)
day period set forth herein, then the Company shall not be in default under this
Agreement or the Amended Debentures provided that the Company certifies to the
reasonable satisfaction of CapEx and DHB that (i) the Company has acted
diligently and used its reasonable best efforts to cause the registration
statement to be declared effective as soon as possible and (ii) the failure to
cause the registration statement to be declared effective has been caused by
delays on the part of the Securities and Exchange Commission staff in completing
its review of the registration statement, in which case the Company shall have
an additional thirty (30) days to have the registration statement declared
effective or such additional time as the Holders may determine at their sole
discretion. The Company shall make the foregoing certification in a writing
signed by the Company's Chief Executive Officer and Chief Financial Officer
setting forth all relevant details of the review process, including the specific
reasons that the registration statement has not been declared effective. The
Company shall keep the registration statement effective until the earlier of:
(a) that date that all Registrable Securities have been registered under the
Securities Act or have otherwise been sold to the public in an open-market
transaction under Rule 144; (b) the date that all Registrable Securities are
eligible for resale without restriction under Rule 144 or other applicable
exemption under the Securities Act; or (c) July 31, 2008. The registration of
shares pursuant to this Section 3.2 shall be governed by Sections 7.3, 7.4 and
7.5 of this Agreement.
3.3 First Right of Refusal Whenever the Board of Directors of the Company
shall authorize the issuance and/or sale of (a) shares of Common Stock, (b) any
other securities of the Company entitled to participate with the Common Stock in
a distribution of the Company's remaining assets (after distribution to all
holders of securities entitled to such distribution in
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priority to the holders of Common Stock), or (c) any rights, options or warrants
to purchase, or securities of any type whatsoever (except for stock options to
employees, officers or directors of the Corporation or any of its subsidiaries
pursuant to employee stock option plans approved of by Agent not to exceed 10%
of the issued and outstanding shares of Common Stock) that are, or may become,
convertible into, or otherwise exchangeable for, securities of the type referred
to in Section 3.3(a) or (b) (the securities described in (a), (b) and (c),
hereinafter collectively referred to as "Equity Securities"), the Equity
Securities shall first be ratably offered to the Holders effective on the date
of the authorization by the Board of Directors of such issuance (the "First
Rights"). The Holders (each, a "First Rightholder") shall be entitled to
exercise First Rights for that number of such Equity Securities equal to the
greater of (1) their aggregate percentage ownership interest in the Company's
issued and outstanding shares of Common Stock on the day prior to the issuance
("Pro Rata Interest"), or (2) their aggregate fully diluted percentage ownership
of shares of the Company's Common Stock on the day prior to the issuance ("Fully
Diluted Pro Rata Interest"). Immediately after Closing, CapEx's and DHB's Fully
Diluted Pro Rata Interest will be 14.94887931% and 9.36121885%, respectively,
based on 5,773,205 total shares issued and outstanding and 11,024,793 total
fully diluted shares immediately prior to the Closing of the transactions
contemplated by this Agreement, as reflected in Exhibit J attached hereto. The
Fully Diluted Pro Rata Interest held by each of CapEx and DHB shall be
determined based on the ratio calculated as follows:
(A) the number of shares of Common (A) the number of shares of issued
Common Stock owned by CapEx or and outstanding Common Stock, plus
Fully Diluted DHB, as applicable, plus (B) the divided by (B) the total number of shares
Pro Rata Interest = number of shares acquirable upon acquirable upon exercise of issued
exercise of convertible securities and outstanding convertible securities
(including convertible debentures, of the Corporation (including convertible
convertible notes, warrants and debentures, convertible notes, warrants
options) by CapEx or DHB, as warrants and options)
applicable
Each First Rightholder shall be entitled to exercise the First Rights provided
herein with respect to the whole of such Pro Rata Interest or Fully Diluted Pro
Rata Interest, as the case may be, or with respect to only a part thereof. The
Holders may elect to apply outstanding interest due under the Amended and
Restated Debentures towards the payment of the purchase price from such equity
upon exercise first right to participate, or may elect to participate by paying
cash. The Holders shall notify the Company of their election to participate, and
the means by which they elect to participate, within 10 days of being notified
of the Company's plans to offer an equity financing. The First Rights granted in
this Section 3.3 shall terminate immediately upon the later of (i) July 31, 2008
or (ii) the full and complete payment and satisfaction of each of the Amended
and Restated Debentures.
4. CLOSING; CONDITIONS TO CLOSING.
4.1 The closing of the transactions contemplated under this Agreement (the
"Closing") shall take place at 10:00 a.m. on July 31, 2003 at the offices of
Xxxx Xxxxx LLP, at such time or place as the Company and the Holders shall
mutually agree (such date being hereinafter referred to as the "Closing Date").
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4.2 At the Closing, upon and in consideration of the transactions
contemplated under this Agreement, the Parties agree as follows:
(a) the Company will execute (or cause to be executed) and deliver to
CapEx the Amended and Restated CapEx Amended Debenture, (ii) the Second Warrant
Amendment to the CapEx Warrant No. 1, (iii) the Second Warrant Amendment to
CapEx Warrant No. 2, (iv) the Additional Warrant to CapEx, (v) the Security
Agreement Amendment Agreements; and (vi) the Guaranty Agreement and the Security
Agreement of Trident Society, Inc.;
(b) CapEx will accept and acknowledge (i) the Amended and Restated
CapEx Amended Debenture, (ii) the Second Warrant Amendment to CapEx Warrant No.
1, (iii) the Second Warrant Amendment to CapEx Warrant No. 2, (iv) the
Additional Warrant to CapEx, (v) the Security Agreement Amendment Agreement; and
(vi) the Guaranty Agreement and the Security Agreement of Trident Society, Inc.;
(c) the Company will execute and deliver to DHB (i) the Amended and
Restated DHB Amended Debenture, (ii) the Second Warrant Amendment to the DHB
Warrant No. 1, (iii) the Second Warrant Amendment to DHB Warrant No. 2, and (iv)
the Additional Warrant to DHB;
(d) DHB will accept and acknowledge (i) the Amended and Restated DHB
Amended Debenture, (ii) the Second Warrant Amendment to the DHB Warrant No. 1,
(iii) the Second Warrant Amendment to DHB Warrant No. 2, and (iv) the Additional
Warrant to DHB;
(e) CapEx will deliver the CapEx Debenture and the Amended CapEx
Debenture for cancellation;
(f) DHB will deliver the DHB Debenture and the Amended DHB Debenture
for cancellation;
(g) CapEx will have wired the Closing Funds to the Xxxxxxxxx Agent for
the purpose of paying the Xxxxxxxxx Obligation;
(h) The Company will have wired funds to CapEx and DHB in
reimbursement of CapEx's and DHB's legal fees and costs incurred in connection
with this transaction in accordance with the provisions of Section 10.1 below;
(i) Each of Neptune Management Corp., Neptune Society of America,
Inc., and Heritage Alternatives shall execute and deliver a Security Agreement
Amendment Agreement and an acknowledgement and agreement to this Agreement;
(j) Trident Society, Inc. shall execute and deliver a Guaranty
Agreement, a Security Agreement, and an acknowledgement and agreement to this
Agreement; and
(k) The Holders will execute waivers of all defaults occurring through
the date of this Agreement in connection with the Purchase Agreement, the First
Restructuring Agreement, the Amended Debentures, the Amended CapEx Warrants, and
the Amended DHB Warrants, in the form of Exhibit K.
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4.3 Conditions to Closing - Holders.
(a) The Company shall have theretofore complied with all of its
covenants and agreements contained in this Agreement and all representations and
warranties of the Company contained in this Agreement shall in all material
respects be true;
(b) The Company shall have furnished to CapEx in form satisfactory to
CapEx a payoff statement from Xxxxxxxxx (i) setting forth the full amount
necessary to pay off the Xxxxxxxxx Obligation, (ii) containing a full release of
any and all liens and other security interests Xxxxxxxxx may have in any of the
assets, including real and personal property, of the Company and any and all
other claims on or interests in the Company which Xxxxxxxxx may have as a result
of or in connection with the Xxxxxxxxx Obligation or other obligations,
excepting Xxxxxxxxx'x equity interests in common shares of the Company, and
(iii) acknowledging that, after Closing and the payoff of the Xxxxxxxxx
Obligation, the Holders will be in the first lien position with regard to the
assets of the Company.
(c) The Company shall have furnished to CapEx in form satisfactory to
CapEx an officers' certificate in form satisfactory to CapEx that the Company is
not in default under any obligation to Consulting Commerce Distribution
AG/SA/LTD under the terms of that certain 13.75% Convertible Debenture Due March
31, 2004.
(d) The Company shall have furnished to CapEx, in form satisfactory to
CapEx, a letter from Xxxxxx & Xxxxxxx LLP setting forth the amount owed to
Xxxxxx & Whitney by the Company and subrogating any claim of Xxxxxx & Whitney's
on the assets of the Company and/or the subsidiaries to the interests of the
Holders in such assets;
(e) The Company shall have furnished to CapEx in form satisfactory to
CapEx an executed authorization by the Board of Directors of the Company
approving and authorizing the transactions contemplated by this Agreement.
(f) The Company shall have provided funds to reimburse CapEx and DHB
for their legal fees and costs incurred in connection with this transaction in
accordance with the provisions of Section 10.1 below.
4.4 Conditions to Closing - Company. The Holders shall have theretofore
complied with all of their covenants and agreements contained in this Agreement
and all representations and warranties of the Company contained in this
Agreement shall in all material respects be true.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each of the Holders as of the
Closing Date:
5.1 Organization, Subsidiaries, Good Standing, Qualification and Power and
Authority. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida. The Company and each of
Neptune Management Corp., Neptune Society of America, Inc., Heritage
Alternatives, Inc., and Trident Society, Inc. (each, a "Subsidiary" and
collectively the "Subsidiaries") has all requisite corporate power and authority
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(a) to execute and deliver this Agreement, the Amended and Restated
Debentures, the Additional Warrants, and the other agreements, instruments and
documents contemplated to be executed and delivered by it pursuant to this
Agreement (this Agreement, the Amended and Restated Debentures, the Additional
Warrants, and such other agreements instruments and documents being herein
sometimes collectively referred to as the "Transaction Documents"), (b) to issue
the Consideration Shares, (c) to issue the shares of the Company's Common Stock
issuable upon exercise of the Amended CapEx Warrants, the Amended DHB Warrants,
and the Additional Warrants (collectively, the "Warrant Shares"), and (d) to
carry out the other provisions of the Transaction Documents. The Company has no
material subsidiaries other than the Subsidiaries, where "material subsidiary"
is understood to refer to any subsidiary operating and/or in possession of or
control of assets.
5.2 Capitalization. All issued and outstanding shares of the Common Stock
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable. The issued and outstanding capital stock of the Company
immediately prior to the Closing will be as set forth on Exhibit J incorporated
by reference herein. Except as set forth on Exhibit J, there are no outstanding
(or deemed outstanding) options, warrants, convertible debentures, convertible
instruments, agreements or other rights to purchase or otherwise acquire upon
conversion, exchange or otherwise from the Company any of its securities. The
Consideration Shares, when issued at the Closing, will be duly authorized,
validly issued and fully paid and non-assessable. The Consideration Shares are
not subject to any statutory, contractual or other rights of first refusal or
other preferential rights.
5.3 Authorization; Binding Obligations. All corporate action on the part of
the Company, its officers, directors and shareholders necessary for the
authorization of the Transaction Documents and the performance of all of its
obligations thereunder and for the authorization, sale, issuance and delivery of
the Amended and Restated Debentures, the Consideration Shares, and the Warrant
Shares has been taken or will be taken prior to the Closing. The Warrant Shares
have been or will be, prior to the Closing, duly and validly reserved for
issuance and, when issued upon the exercise of the Amended CapEx Warrants, the
Amended DHB Warrants, and/or the Additional Warrants, as the case may be, will
be validly issued, fully paid and non-assessable. The Company has taken or will
take all such action as may be necessary to assure that an adequate number of
shares of Common Stock is authorized and reserved for issuance upon exercise of
the Amended CapEx Warrants, the Amended DHB Warrants, and/or the Additional
Warrants. This Agreement has been duly authorized and executed by the Company.
This Agreement, the Amended and Restated Debentures, the Additional Warrants,
and the other Transaction Documents will, once executed, constitute, valid,
legal and binding obligations of the Company enforceable in accordance with
their terms, except to such limitations as may result from any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the enforcement of creditors' rights generally.
5.4 Consents and Approvals. Except as required by the Securities Act, or
any state securities laws, no filings with, notices to, or approvals of any
governmental or regulatory body are required to be obtained or made by the
Company in connection with the consummation of the transactions contemplated
hereby.
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5.5 No Violations. The execution and delivery of the Transaction Documents
and the performance by the Company of its obligations hereunder and thereunder
(a) do not and will not conflict with or violate any provision of the Company's
Articles of Incorporation or bylaws, and (b) do not and will not (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in a violation of, or (iv) require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body or other third party pursuant to,
any law, statute, rule or regulation or any agreement or instrument or any
order, judgment or decree to which the Company is subject or by which any of its
assets are bound except for such consents which have been obtained by the
Company.
5.6 Rule 144. The Company has filed all reports and documents and has taken
all actions as may be necessary or useful in order to allow a holder of
Registrable Securities (as defined in Section 7 below) to sell any such
securities without registration in accordance with Rule 144 under the Securities
Act, if available.
5.7 Security Interests. Upon repayment of the Xxxxxxxxx Obligation, Holders
will have a valid and perfected first lien on the assets of the Company. None of
the transactions contemplated by this Agreement will impair or adversely affect
the Security Agreements and Guarantees given by the Company and its
Subsidiaries, as contemplated by Section 5.11 in the Amended and Restated
Debentures.
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE HOLDERS.
The Holders each, severally and not jointly, hereby represent, warrant and
covenant to the Company as of the Closing Date:
6.1 Requisite Power and Authority. Such Holder has all necessary power and
authority to execute and deliver this Agreement, the Amended and Restated
Debentures and the other Transaction Documents for which it has executed and
delivered and to carry out their provisions. All actions on such Holder's part
required for the lawful execution and delivery of this Agreement, the Amended
and Restated Debentures and any of the other Transaction Documents which it has
executed and delivered have been or will be effectively taken prior to the
Closing.
6.2 Investment Representations. Such Holder understands that none of the
Amended and Restated Debentures, the Consideration Shares, the Additional
Warrants and the Warrant Shares to be acquired by such Holder has yet been
registered under the Securities Act. Such Holder also understands that such
Amended and Restated Debentures, the Warrants, as amended by the Warrant
Amendments, and Consideration Shares are being offered and sold pursuant to an
exemption from registration contained in regulations under the Securities Act
based in part upon such Holder's representations contained in this Agreement.
(a) Acquisition for Own Account. Such Holder is acquiring the
Consideration Shares and the Additional Warrants for its own account for
investment only, and not with a view towards distribution in violation of
applicable securities laws.
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(b) Accredited Investor. Such Holder represents that it is an
"accredited investor" within the meaning of Rule 501(a) of Regulation D as
promulgated under the Securities Act.
(c) Non-Foreign Status. Such Holder certifies that it is not a
nonresident alien for purposes of income taxation (as such term is defined in
the Internal Revenue Code of 1986, as amended, and Income Tax Regulations).
(d) Financial Experience. Such Holder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Amended and Restated Debentures, the
Consideration Shares, the Additional Warrants and the Warrant Shares
(collectively, the "Securities") and it is able to bear the economic risk of
loss of its entire investment.
(e) Information. The Company has provided to such Holder the
opportunity to ask questions and receive answers concerning the terms and
conditions of the transactions contemplated in this Agreement and it has had
access to such information concerning the Company as it has considered necessary
or appropriate in connection with its investment decision to acquire the
Securities.
(f) Transfer Restrictions. Such Holder agrees that if it decides to
offer, sell or otherwise transfer any of the Securities, it will not offer, sell
or otherwise transfer any of such Securities directly or indirectly, unless:
(1) the sale is made pursuant to registration under the
Securities Act;
(2) the sale is made pursuant to the exemption from the
registration requirements under the Securities Act provided by Rule 144
thereunder and in accordance with any applicable state securities or "Blue Sky"
laws; or
(3) the Securities are sold in a transaction that does not
require registration under the Securities Act or any applicable state laws and
regulations governing the offer and sale of securities, and it has prior to such
sale furnished to the Company an opinion of counsel reasonably satisfactory to
the Company.
(g) Legends. Such Holder understands and agrees that the certificates
representing the Securities will bear a legend stating that such shares have not
been registered under the Securities Act or the securities laws of any state of
the United States and may not be offered for sale or sold unless registered
under the Securities Act and the securities laws of all applicable states of the
United States or an exemption from such registration requirements is available.
(h) Notations. Such Holder consents to the Company making a notation
on its records or giving instructions to any transfer agent of the Company in
order to implement the restrictions on transfer set forth and described herein.
6.3 Knowledge of Breach or Event of Default. As of the Closing Date, each
Holder acknowledges and confirms that it has no knowledge and is not aware of
any fact or
11
circumstance that would cause or constitute a breach of or an event of default
under the Purchase Agreement, the Amended Debentures, the Amended CapEx
Warrants, and the Amended DHB Warrants, other than as are cured by entering into
this Agreement, and each Holder agrees that it is the intent of the Parties,
without admitting any breach or event of default, to enter into this Agreement
for the purposes of curing any breaches or events of default which may have
arisen as a result of any Holder's knowledge of facts and circumstances as of
the Date of Closing.
7. REGISTRATION RIGHTS RELATING TO COMPANY SHARES.
7.1 Definitions. As used in this Section 7, the following terms shall have
the following respective meanings:
(a) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, (or any similar successor federal statute) and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(b) "Public Sale" means any sale of Registrable Securities to the
public pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker pursuant to the provisions of
Rule 144.
(c) "registers," "registered," and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement by the SEC.
(d) "Registrable Securities" shall mean (i) Consideration Shares, (ii)
Warrant Shares, and (iii) any Common Stock or Common Stock Equivalents issued as
a dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in Sections 7.1(d)(i) and 7.1(d)(ii),
provided, however, that Registrable Securities shall not include any such shares
or Equity Securities that have previously been registered under the Securities
Act or that have otherwise been sold to the public in an open-market transaction
under Rule 144.
(e) "Registration Expenses" shall mean all expenses incurred in
connection with effecting any registration pursuant to this Agreement, including
without limitation all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, expenses of any regular or special audits incident to or
required by any such registration, and the fees and expenses of one counsel for
the selling holders of Registrable Securities, but excluding Selling Expenses.
(f) "Rule 144" shall mean Rule 144 as promulgated by the SEC under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(g) "SEC" shall mean the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(h) "Securities Act" shall mean the Securities Act of 1933, as
amended, (or any similar successor federal statute) and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
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(i) "Selling Expenses" shall mean all stock transfer taxes,
underwriting discounts, expenses for special counsel of a selling stockholder
and selling commissions applicable to the sale of Registrable Securities.
7.2 Demand Registration.
(a) Request for Registration. Subject to Sections 7.2(b) and 7.2(e),
and in addition to the registration required pursuant to Section 3.2 above (the
"Initial Registration"), at any time commencing 6 months after the Closing, when
at least 150,000 unregistered Registrable Securities are outstanding (as
adjusted for stock splits or similar events), any Holder may, by notice (the
"Demand Notice") given by Agent, demand that the Company effect one (1)
registration under the Securities Act utilizing either (i) a registration on
Form X-0, Xxxx XX-0, if available, or any similar or successor form, or (ii) a
registration on Form S-3 or any similar or successor form, if available (a
"Demand Registration"). These Demand Registration rights are in addition to the
rights granted in the Purchase Agreement and the First Restructuring Agreement.
Notwithstanding the foregoing, rather than filing a registration statement
pursuant to this Section 7.2(a), upon exercise of a Demand Notice the Company at
its sole option shall have the right to purchase, or arrange for a third-party
to purchase, in cash all of the Registrable Securities subject to the Demand
Notice at a price per share equal to the fair market value of the Common Stock
as calculated using the weighted average closing price of the shares of Common
Stock during the five days immediately preceding the date of the Demand Note on
the National Association Securities Dealers over-the-counter bulletin board or
the primary market or exchange for such shares. The closing of the Company's (or
third party's) purchase of Registrable Securities pursuant to this Section
7.2(a) shall occur within thirty (30) days of the date of the Demand Notice.
(b) Deferral of Demand Registration. The Company shall use its best
efforts to file a registration statement with respect to a Demand Registration
demanded pursuant to Section 7.2(a) as soon as practicable and in any event
within 60 days after receipt of the Demand Notice; provided, however, that if
the Company selects an underwriter to distribute the Registrable Securities
covered by the Demand Registration as part of an offering of other securities of
the Company, and such underwriter determines in good faith that, and provides
Agent with a certificate (an "Underwriter Notice") of an officer of such
underwriter certifying that in its view such Demand Registration would be
materially detrimental to the Company or would negatively impact any other
material corporate transaction and concludes, as a result, that it is advisable
to defer the filing of such registration statement at such time, then the
Company shall have the right to defer such filing for the period during which
such registration would be detrimental; provided, however, that the Company may
not defer the filing for a period of more than 90 days following receipt of the
Demand Notice. In addition, and notwithstanding the Demand Notice, the Company
shall not be required to effect a registration statement if, within 10 days
after receiving any Demand Notice, the Company delivers a notice (a "Company
Registration Notice") to Agent of its intent to file a registration statement
within the following 60 days and does so file such registration within such time
period. In addition, the Company may, not more than once in each calendar year
and provided that in such calendar year neither an Underwriter Notice nor a
Company Registration Notice shall have been previously given, and no Demand
Notice shall have been given at any time prior thereto, be entitled to provide
to Agent a written notice (a "Company Deferral Notice") stating that the Company
has determined that it
13
would be materially detrimental to the Company or would negatively impact on
other material corporate transactions for Agent to give a Demand Notice within
the period of 60 days following the date of receipt of such Company Deferral
Notice, in which case, Agent shall not be permitted, during such 60 day period,
to give a Demand Notice. Notwithstanding anything to the contrary, the
provisions of this Section 7.2(b) shall apply only to a Demand Registration, and
not to the Initial Registration contemplated by Section 3.2 of this Agreement.
(c) Underwriting. The right of any Holder of Registrable Securities to
participate in an underwritten Demand Registration shall be conditioned upon
such Holder's participation in such underwriting in accordance with the terms
and conditions thereof, and Holder shall enter into an underwriting agreement in
customary form with the underwriter and the Company.
(d) Priorities. The Holders of Registrable Securities will have
absolute priority over any other securities proposed to be included in a
registered offering pursuant to Section 7.2(a) hereof. If other securities are
included in any Demand Registration that is not an underwritten offering, all
Registrable Securities included in such offering shall be sold prior to the sale
of any of such other securities. If the Registrable Securities are included in
any underwritten offering, and the managing underwriter for such offering
advises the Company that in its opinion the amount of the Registrable Securities
to be included, when given absolute priority over any other securities proposed
to be included in such underwritten offering as provided for in the first
sentence of this Section 7.2(d), exceeds the amount of securities which can be
sold in such offering without adversely affecting the marketability thereof
(including the price at which such securities are to be sold), such number of
Registrable Securities included in such registration shall be reduced, pro rata
among the holders thereof based on the percentage of the outstanding Common
Stock held by each such holder, by no more than 50% of the total number of
Registrable Securities held by the Holder (an "Underwriter's Cut-Back"). In no
event shall the Registrable Securities be subject to more than one Underwriter's
Cut-Back unless expressly agreed to in writing by the Holders.
(e) One Registration. Where the Company has effected the Initial
Registration and the Demand Registration, it shall have no obligation to effect
any further Demand Registrations; provided, however, that (i) where at any time
within two (2) years after such Demand Registration was made pursuant to Section
7.2 the time period within which any issue or trade of Registrable Securities is
required to be made under such registration has passed or will in 30 days pass,
the Holders shall have the right to demand (by notice given by Agent on their
behalf) that the Company effect a further registration (including, but not
limited to, a new Demand Registration) as may be required for registration of
the Registrable Securities or (ii) if such Demand Registration is subject to an
Underwriter's Cut-Back, the Holders shall have (effective 30 days after
completion of the offering in which the Underwriter's Cut-Back related) the
right to demand (by notice given by Agent on their behalf) that the Company
effect a further registration (including, but not limited to, a new Demand
Registration) as may be required for registration of the remaining Registrable
Securities held by such Holders.
7.3 Expenses of Registration. Except as provided in this Section 7.3, the
Company shall bear all Registration Expenses incurred in connection with the
Initial Registration and the Demand Registration. All Selling Expenses incurred
by the Company relating to Registrable
14
Securities included in any Initial Registration or Demand Registration shall be
reimbursed by Agent.
7.4 Registration Procedures. In the case of each registration effected by
the Company pursuant to this Agreement, the Company will keep Agent advised in
writing as to the initiation of such registration and as to the completion
thereof. The Company will use its reasonable efforts to:
(a) cause such registration to be declared effective by the SEC and,
in the case of the Initial Registration and a Demand Registration, keep such
registration effective for a period of two years or until the holders of
Registrable Securities included therein have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement (including post-effective amendments) as may be necessary
to comply with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all securities covered by such registration
statement;
(c) obtain appropriate qualifications of the securities covered by
such registration under state securities or "blue sky" laws in such
jurisdictions as may be requested by Agent;
(d) furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as Agent
from time to time may reasonably request;
(e) notify Agent at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of Agent, prepare and furnish to
Agent a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the Holders
of such shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in the
light of the circumstances then existing; cause all Registrable Securities
covered by such registration to be listed on each securities exchange or
inter-dealer quotation system on which similar securities issued by the Company
are then listed;
(f) provide a transfer agent and registrar for all Registrable
Securities covered by such registration and, if necessary, a CUSIP number for
all such Registrable Securities, in each case not later than the effective date
of such registration;
(g) otherwise comply with all applicable rules and regulations of the
SEC, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least 12 months,
but not more than 18 months, beginning with the first
15
month after the effective date of the registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the Securities Act;
and
(h) in connection with any underwritten registration, the Company will
enter into an underwriting agreement reasonably satisfactory to Agent containing
customary underwriting provisions, including indemnification and contribution
provisions.
7.5 Indemnification.
(a) The Company will indemnify Holders, each of Holders' officers and
directors, and each person controlling such Holder within the meaning of Section
15 of the Securities Act, with respect to each registration, qualification or
compliance effected pursuant to this Agreement or otherwise, against all
expenses, claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such indemnified person for any legal and
any other expenses reasonably incurred in connection with investigating and
defending or settling any such claim, loss, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
extent that any such claims, loss, damage, liability or expense arises out of or
is based on any untrue statement or omission based upon written information
furnished to the Company by Holder and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
7.5(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).
(b) Each of the Holders, to the extent it is a holder of Registrable
Securities included in any registration effected pursuant to this Section 7,
shall indemnify the Company, each of its directors, officers, agents, employees
and representatives, and each person who controls the Company within the meaning
of Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse such indemnified persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in strict
conformity with written information furnished to the Company by Agent on behalf
of such Holder; provided, however, that (x) such Holder shall not be liable
hereunder for any amounts in excess of the net proceeds received by such Holder
pursuant to such registration,
16
and (y) the obligations of such Holder hereunder shall not apply to amounts paid
in settlement of any such claims, losses, damages or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent has not been unreasonably withheld).
(c) Each party entitled to indemnification under this Section 7.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel selected by the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
7.5 to the extent such failure is not prejudicial. No Indemnifying Party in the
defense of any such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include an unconditional release of such Indemnified Party from
all liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 7.5 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in an underwriting agreement
entered into in connection with an underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
7.6 [Intentionally Deleted]
7.7 Other Obligations. With a view to making available the benefits of
certain rules and regulations of the SEC which may effectuate the registration
of Registrable Securities or
17
permit the sale of Registrable Securities to the public without registration,
the Company agrees to:
(a) exercise best efforts to cause the Company to be eligible to
utilize Form S-3 (or any similar form) for the registration of Registrable
Securities;
(b) at such time as any Registrable Securities are eligible for
transfer under Rule 144(k), upon the request of Agent on behalf of the holder of
such Registrable Securities, promptly remove any restrictive legend from the
certificates evidencing such securities, at no cost to Agent or such holder
where such holder is a Holder hereunder, and at the cost of Agent in any other
case;
(c) make and keep available public information as defined in Rule 144
under the Securities Act at all times from and after its initial registration
under the Securities Act;
(d) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements; and
(e) furnish Agent upon request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time
following the effective date of the first registration statement filed by the
Company under the Securities Act for an offering of its securities to the
general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents as a holder of Registrable Securities may reasonably request in
availing itself of any rule or regulation of the Commission (including Rule
144A) allowing a holder of Registrable Securities to sell any such securities
without registration.
7.8 Termination of Registration Rights. The right of Agent to request
inclusion of Registrable Securities in any registration pursuant to this Article
7 shall terminate at the date that is the earlier of: (a) that date that all
Registrable Securities have been registered under the Securities Act or have
otherwise been sold to the public in an open-market transaction under Rule 144;
(b) the date that all Registrable Securities are eligible for resale without
restriction under Rule 144 or other applicable exemption under the Securities
Act; or (c) July 31, 2008; provided, however, that where a Company Deferral
Notice has been given within 70 days prior to the date on which termination
would otherwise occur, it shall not occur for 60 days beyond the end of the 60
day period during which a Demand Notice cannot be given pursuant to Section
7.2(b).
8. COMPANY COVENANTS.
The Company covenants and agrees with the Holders that:
8.1 Reservation of Common Stock. The Company will reserve and keep
available that maximum number of its authorized but unissued Common Stock as may
be required for the issuance of the Warrant Shares.
18
8.2 Board Meetings. The Company shall hold meetings of the Board of
Directors no less frequently than four times per annum.
8.3 Board Meeting Attendance. Until such time as the Amended and Restated
Debentures shall have been repaid in full, Agent shall be entitled to receive
notice of and to have a representative attend all meetings (including telephonic
meetings) and all adjournments of meetings of the Board of Directors and any
committee thereof (including committees comprised of both directors and
non-directors). Failure to provide notice (on the same basis as is required for
all board members and in any event not less than three business days') of or to
permit such representative to attend such meeting shall constitute a material
breach of the provisions of this Agreement. Such representative shall sign a
confidentiality agreement as may reasonably be required by the Company to comply
with applicable law, including but not limited to Regulation FD as promulgated
by the SEC, and such representative shall have no voting rights at any such
meeting, but shall be entitled to participate fully in all discussions that take
place thereat.
8.4 Financial Statements. The Company shall deliver to Agent, within
forty-five (45) days of the end of each quarter, financial statements
(including, at a minimum, an income statement, a balance sheet, and a cash flow
statement) for the immediately preceding quarter, prepared in accordance with
generally accepted accounting principles, consistently applied, with a
certification from the Chief Financial Officer of the Company stating that such
financial statements are true and accurately reflect the financial condition of
the Company, and, so long as some principal remains unpaid under the Amended and
Restated Debentures, that the Company is in compliance with Section 5.18 and the
other covenants contained in the Amended and Restated Debentures. Failure to
timely deliver the financial statements and certification will constitute a
"Default Event" under the Amended and Restated Debentures.
8.5 Conversion of Trust Funds Into Insurance Policies. The Company shall
expeditiously move forward to convert the cash balances held in state-regulated
trust funds for the provision of services into insurance policies, except for
monies held in trust in the State of California; provided, however, that if
there is a Default Event under the Amended and Restated Debentures, the Company
shall also expeditiously pursue the conversion of monies held in trust in the
State of California into insurance policies.
8.6 Estoppel Letter. Within thirty (30) days after the Closing, the Company
shall deliver (or cause to be delivered) a letter in form satisfactory to CapEx
from Consulting Commerce Distribution AG/SA/LTD confirming that the Company is
not in default under the terms of that certain 13.75% Convertible Debenture Due
March 31, 2004 and agreeing that the interests of Consulting Commerce
Distribution AG/SA/LTD in the assets of the Company and/or its Subsidiaries
shall be subordinated to the interests of the Holders in such assets.
9. CAPEX AS AGENT FOR THE HOLDERS.
9.1 Ratification of CapEx as Agent. Each Holder hereby ratifies the
appointment of CapEx, L.P. as its agent (in such capacity, "Agent"), under the
terms set forth in Section 8 of the Debenture Purchase Agreement.
19
10. EXPENSE REIMBURSEMENT.
10.1 Reimbursement. The Company hereby agrees to reimburse Agent on behalf
of the Holders for all of its out-of-pocket expenses incurred in connection with
the transactions contemplated hereby, including all out-of-pocket expenses
(including filing fees and other third party charges) incurred in connection
with its third party due diligence costs, the preparation and negotiation of
this Agreement, the Amended and Restated Debentures, the Warrant Amendments, and
all other documents evidencing the transactions contemplated herein (including
reasonable attorneys' fees not to exceed $17,000).
11. MISCELLANEOUS.
11.1 Currency. Except as may be otherwise expressly provided, all dollar
amounts herein are references to United States dollars.
11.2 Governing Law. This Agreement shall be governed by the internal law,
and not the law of conflicts, of the State of Colorado.
11.3 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by or on behalf of the Holders
and the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
11.4 Successors and Assigns. Except as provided in Section 8.11 of the
Purchase Agreement, neither Holder shall be entitled to assign its rights under
this Agreement or any of the other Transaction Documents, without the consent of
the Company, which consent shall not be unreasonably withheld or delayed;
provided always, however, that no such consent shall be required for either
Holder to assign such rights to any person or group of persons controlling or
owning the majority of all beneficial interests in such Holder, any other entity
controlled by such person or persons, or an entity controlled by such Holder,
provided that such entity shall continue to be so controlled by such persons or
such Holder as applicable. The provisions hereof shall inure to the benefit of,
and be binding upon, the successors, permitted assigns, heirs, executors and
administrators of the parties hereto.
11.5 Entire Agreement; Amendment and Waiver. The Debenture Purchase
Agreement, the First Restructuring Agreement, this Agreement, the Schedules and
Exhibits hereto and the other documents expressly delivered pursuant hereto or
thereto supersede any other agreement, whether written or oral, that may have
been made or entered into by the parties hereto relating to the matters
contemplated hereby, and constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof,
and no party shall be liable or bound to any other in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth or incorporated by reference herein and therein. Neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated except by a
written instrument signed by the Company and the Holders.
20
11.6 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
11.7 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, and if not, then on the next
business day; (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one (1) day
after deposit with a nationally recognized overnight courier, special next day
delivery, with verification of receipt. All communications shall be sent:
To the Company at: With a copy to:
The Neptune Society Inc. Xxxxxx & Xxxxxxx LLP
0000 Xxxxxxx Xxxxxx, 0xx Xxxxx 0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx Xxxx, Xxxxxxxxxx 00000 Seattle, Washington
Telecopier No. (000) 000-0000 Telecopier No. (000) 000-0000
Attention: Xxxxx Xxxxxx, Attention: Xxxxxx X. Xxxxx, Esq.
Chief Executive Officer
To the Holders at: With a copy to:
c/o CapEx, X.X. Xxxx Xxxxx LLP
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000 0000 Xxxxxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxx 00000 Xxxxxx, Xxxxxxxx 00000-0000
Telecopier No. (000) 000-0000 Telecopier No. (000) 000-0000
Telephone No. (000) 000-0000 Telephone No. (000) 000-0000
Attention: Xxxx Xxxxxx, Attention: Xxxxxx X. Xxxxx III, Esq.
Managing Partner
or at such other address as the Company or Agent on behalf of Holders may
designate by ten (10) days advance written notice to the other parties hereto.
11.8 Counterparts; Facsimile. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. This Agreement may be executed and delivered by
facsimile.
11.9 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first set forth above.
COMPANY:
THE NEPTUNE SOCIETY, INC.
By:
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Xxxxx Xxxxxx
Chief Executive Officer
HOLDERS:
CAPEX, L.P. D.H. XXXXX INVESTMENT BANKING CORP.
By: RBP, LLC, its General Partner
By: By:
----------------------------- ------------------------------------
Xxxxxx X. Xxxxxx J. Xxxxxx Xxxxx
Authorized Representative Chairman
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ACKNOWLEDGEMENT
The three immediately undersigned guarantors hereby acknowledge and consent
to the foregoing Agreement and the amendments to the Debentures contemplated
thereby. The undersigned each further explicitly agree to guarantee the
repayment of the Amended and Restated Debentures, under the terms and conditions
of those certain Guarantees dated December 24, 1999, executed by each of the
undersigned, which, where they refer to the Debentures, shall be deemed to refer
to the Amended and Restated Debentures.
NEPTUNE SOCIETY OF AMERICA, INC. NEPTUNE MANAGEMENT CORP.
By: By:
-------------------------------- ---------------------------------
Print Name: Print Name:
-------------------------------- ---------------------------------
Title: Title:
-------------------------------- ---------------------------------
HERITAGE ALTERNATIVES, INC.
By:
--------------------------------
Print Name:
--------------------------------
Title:
--------------------------------
The undersigned guarantor hereby acknowledges and consents to the foregoing
Agreement and the amendments to the Debentures contemplated thereby. The
undersigned has guaranteed the repayment of the Amended and Restated Debenture
in a separate Guaranty dated July 31, 2003.
TRIDENT SOCIETY, INC.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
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EXHIBIT A
ESCROW AGREEMENT
EXHIBIT B
CAPEX AMENDED AND RESTATED DEBENTURE
EXHIBIT C
DHB AMENDED AND RESTATED DEBENTURE
EXHIBIT D
CAPEX WARRANT AMENDMENT
EXHIBIT E
DHB WARRANT AMENDMENT
EXHIBIT F
SECURITY AGREEMENT AMENDMENT AGREEMENT
EXHIBIT G
TRIDENT GUARANTY
EXHIBIT H
CAPEX ADDITIONAL WARRANT
EXHIBIT I
DHB ADDITIONAL WARRANT
EXHIBIT J
CAPITALIZATION TABLE
EXHIBIT K
CAPEX AND DHB WAIVER OF DEFAULTS
