EXHIBIT 10.1
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SECURITIES PURCHASE AGREEMENT
Among
SIGNAL APPAREL COMPANY, INC.,
XXXXX XXXXXXX STRATEGIC GROWTH FUND, LTD.
and
XXXXX XXXXXXX STRATEGIC GROWTH FUND, L.P.
Dated as of March 3, 1999
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SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of March
3, 1999, by and among Signal Apparel Company, Inc., an Indiana corporation (the
"Company"), Xxxxx Xxxxxxx Strategic Growth Fund, Ltd., a Cayman Islands exempt
company ("Xxxxx Xxxxxxx Limited"), and Xxxxx Xxxxxxx Strategic Growth Fund,
L.P., a New York limited partnership ("Xxxxx Xxxxxxx XX") (each of Xxxxx Xxxxxxx
Limited and Xxxxx Xxxxxxx XX referred to herein as a "Purchaser" and,
collectively, the "Purchasers.")
WHEREAS, the Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D as promulgated by the United States Securities
and Exchange Commission (the "Commission") under Section 4(2) of the Securities
Act of 1933, as amended (the "Securities Act");
WHEREAS, the Company and the Purchasers desire to redeem the Preferred
Stock (as defined in the Convertible Preferred Agreement) issued to the
Purchasers pursuant to that certain Convertible Preferred Stock Purchase
Agreement (the "Convertible Preferred Agreement"), dated as of September 17,
1998, between the Company, the Purchasers and certain other investors listed on
the signature page therein;
WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers, and the Purchasers
desire to acquire from the Company, an aggregate of $5,000,000 principal amount
of 5% Convertible Debentures due March 3, 2002 (the "Debentures"), in the form
of Exhibit A annexed hereto, and warrants (the "Warrants") to purchase up to
2,500,000 of the Company's common stock, par value $.01 per share (the "Common
Stock"), in the form of Exhibit B annexed hereto;
WHEREAS, the Company acknowledges its obligation to issue to the Purchasers
the Warrants issuable pursuant to the Convertible Preferred Agreement; and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form of Exhibit C attached hereto (the
"Registration Rights Agreement") pursuant to which the Company has agreed to
provide certain registration rights under the Securities Act and the rules and
regulations promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, in consideration of the promises and mutual covenants and
agreements hereinafter, the Company and the Purchasers hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE OF THE SECURITIES AND WARRANTS
1.1 Purchase and Sale. Subject to the terms and conditions set forth
herein, the Company shall issue and sell to each Purchaser, and each Purchaser,
severally and not jointly, shall purchase from the Company on the Closing Date
(as defined below), the principal amount of Debentures and Warrants as set forth
for such Purchaser on Schedule I.
1.2 Closings.
a. The Closing. The closing of the purchase and sale of the Debentures and
Warrants (the "Closing") shall take place at the offices of Akin, Gump, Strauss,
Xxxxx & Xxxx, L.L.P., 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or by
transmission by facsimile and overnight courier, immediately following the
execution hereof or such later date or different location as the parties shall
agree, but not prior to the date that the conditions set forth in Section 4.1
have been satisfied or waived by the appropriate party (the "Closing Date"). At
the Closing:
(i) Each Purchaser shall deliver, as directed by the Company, its
portion of the purchase price as set forth next to its name on Schedule I
in United States dollars in immediately available funds to an account or
accounts designated in writing by the Company;
(ii) The Company shall deliver to each Purchaser a Debenture, in the
form of Exhibit A hereto, representing the principal amount purchased by
such Purchaser as set forth on Schedule I hereto;
(iii) The Company shall deliver to each Purchaser a Warrant, in the
form of Exhibit B hereto, representing the right to acquire the number of
shares of Common Stock purchased by such Purchaser as set forth on Schedule
I hereto;
(iv) The Company shall deliver to each Purchaser the Warrants issuable
by the Company to such Purchaser pursuant to the Convertible Preferred
Agreement; and
(iv) The parties shall execute and deliver each of the documents
referred to in Section 4.1 hereof.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The Company
hereby makes the following representations and warranties to each of the
Purchasers:
a. Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the
State of Indiana, with the requisite corporate power and authority to own
and use its properties and assets and to carry on its business as currently
conducted. Except as set forth on Schedule 2.1(a) or in the
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Company's Form 10-K for the year ended December 31, 1998, the Company has
no material subsidiaries (collectively, the "Subsidiaries"). Each of the
Subsidiaries (which for purposes of this Agreement means any entity in
which the Company, directly or indirectly, owns the majority of such
entity's capital stock or holds an equivalent equity or similar interest)
is a corporation duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or organization (as
applicable), with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
Each of the Company and the Subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing as a foreign corporation
in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, would
not, individually or in the aggregate, (x) adversely affect the legality,
validity or enforceability of any of this Agreement or the Transaction
Documents (as defined in Section 2.1(b)) or any of the transactions
contemplated hereby or thereby, (y) have or result in a material adverse
effect on the results of operations, assets, prospects, or financial
condition of the Company and its Subsidiaries, taken as a whole or (z)
impair the Company's ability to perform fully on a timely basis its
obligations under any Transaction Document (any of (x), (y) or (z), being a
"Material Adverse Effect").
b. Authorization; Enforcement. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated by this Agreement and the Debenture, the Warrants and the
Registration Rights Agreement (collectively, the "Transaction Documents"),
and otherwise to carry out its obligations hereunder and thereunder. The
execution and delivery of each of this Agreement and the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action and no further action is required by the Company, its
Board of Directors or its stockholders. Each of this Agreement and the
Transaction Documents has been duly executed by the Company and when
delivered in accordance with the terms hereof will constitute the valid and
binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
or similar laws relating to, or affecting generally the enforcement of,
creditors' rights and remedies or by other equitable principles of general
application. Neither the Company nor any Subsidiary is in any material
violation of any of the provisions of its respective certificate of
incorporation, bylaws or other charter documents such that any right of a
holder of the Debentures would be affected.
c. Capitalization. As of the date hereof, the authorized capital stock
of the Company is as set forth in Schedule 2.1(c). All of such outstanding
shares of capital stock have been, or upon issuance will be, validly
authorized and issued, fully paid and nonassessable and were issued in
accordance with the registration or qualification provisions of the
Securities Act, or pursuant to valid exemptions therefrom. Except as
disclosed in Schedule 2.1(c), (i) no shares of the Company's capital stock
are subject to preemptive rights or any other similar rights or any liens
or encumbrances suffered or permitted by the Company, nor is any holder of
the Common Stock entitled to preemptive or similar rights arising out of
any agreement or understanding with the Company by virtue of any
Transaction Document, (ii) there are no outstanding options, warrants,
scrip rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, or giving any Person (as defined below) any right to
subscribe for or acquire, any shares of capital stock of the Company or any
of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which the
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Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its
Subsidiaries or options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into, any shares of capital stock of the Company or any
of its Subsidiaries, (iii) there are no outstanding debt securities, (iv)
there are no agreements or arrangements under which the Company or any of
its Subsidiaries is obligated to register the sale of any of their
securities under the Securities Act (except the Registration Rights
Agreement), (v) there are no outstanding securities of the Company or any
of its Subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements by
which the Company or any of its Subsidiaries is or may become bound to
redeem a security of the Company or any of its Subsidiaries, (vi) there are
no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the shares of Common Stock as
described in this Agreement, (vii) the Company does not have any stock
appreciation rights or "phantom stock" plans or agreements or any similar
plan or agreement and (viii) except as specifically disclosed in the SEC
Documents (as defined in Section 2.1(k) hereof), no Person (as defined
below) or group of related Persons beneficially owns (as determined
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial
ownership of in excess of 5% of the Common Stock. "Person" means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other
entity of any kind.
d. Authorization and Validity; Issuance of Shares. The shares of
Common Stock issuable upon conversion of the Debentures and exercise of the
Warrants (collectively, the "Underlying Shares") are and will at all times
hereafter continue to be duly authorized and reserved for issuance and the
shares of Common Stock issued upon conversion of the Debentures (the
"Debenture Shares") and exercise of the Warrants (the "Warrant Shares")
will be validly issued, fully paid and non-assessable, free and clear of
all liens, encumbrances and Company rights of first refusal, other than
liens and encumbrances created by the Purchasers (collectively, "Liens")
and will not be subject to any preemptive or similar rights. The issuance
by the Company of the Debentures, the Warrants and the Underlying Shares is
exempt from registration under the Securities Act.
e. No Conflicts. The execution, delivery and performance of this
Agreement and each of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and
thereby (including the issuance of the Underlying Shares) do not and will
not (i) conflict with or violate any provision of the Company's Certificate
of Incorporation, as amended and as in effect on the date hereof (the
"Certificate of Incorporation"), the Company's Bylaws, as in effect on the
date hereof (the "Bylaws") or other organizational documents of the Company
or any of the Subsidiaries, (ii) subject to obtaining the consents referred
to in Section 2.1(f), conflict with, or constitute a default (or an event
which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture, patent, patent license or
instrument (evidencing a Company or Subsidiary debt or otherwise) to which
the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the
Company or any Subsidiary is subject (including Federal and state
securities laws and
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regulations and the rules and regulations of the principal market or
exchange on which the Common Stock is traded or listed) applicable to the
Company or any of its Subsidiaries, or by which any material property or
asset of the Company or any Subsidiary is bound or affected, except in the
case of each of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations violations as would
not, individually or in the aggregate, have or result in a Material Adverse
Effect.
f. Consents and Approvals. Except as specifically set forth on
Schedule 2.1(f), neither the Company nor any Subsidiary is required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal, state,
local or other governmental authority, regulatory or self regulatory
agency, or other Person in connection with the execution, delivery and
performance by the Company of this Agreement or the Transaction Documents,
other than (i) the filing of a registration statement with the Commission,
which shall be filed in accordance with and in the time periods set forth
in the Registration Rights Agreement, (ii) the application(s) or any
letter(s) acceptable to the New York Stock Exchange (the "NYSE") for the
listing of the Underlying Shares with the NYSE (and with any other national
securities exchange or market on which the Common Stock is then listed) and
(iii) any filings, notices or registrations under applicable state
securities laws (together with the consents, waivers, authorizations,
orders, notices and filings referred to on Schedule 2.1(f), the "Required
Approvals").
g. Litigation; Proceedings. Except as specifically set forth on
Schedule 2.1(g), there is no action, suit, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries or any of their
respective properties before or by any court, governmental or
administrative agency or regulatory authority (federal, state, county,
local or foreign) which (i) adversely affects or challenges the legality,
validity or enforceability of any of this Agreement or the Transaction
Documents or (ii) could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.
h. No Default or Violation. Neither the Company nor any Subsidiary (i)
is in default under or in violation of any indenture, loan or other credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound which could reasonably be
expected to, individually or in the aggregate, have a Material Adverse
Effect, (ii) is in violation of any order of any court, arbitrator or
governmental body applicable to it which could reasonable be expected to,
individually or in the aggregate, have a Material Adverse Effect, (iii) is
in violation of any statute, rule or regulation of any governmental
authority to which it is subject which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted, and
shall not be conducted, in violation of any law, ordinance, rule or
regulation of any governmental entity, except where such violations have
not resulted or could not reasonably be expected to result, individually or
in the aggregate, in a Material Adverse Effect. Neither the Company nor any
of its Subsidiaries is in breach of any agreement where such breach,
individually or in the aggregate, would have a Material Adverse Effect.
i. Disclosure; Absence of Certain Changes. None of this Agreement, the
Schedules to this Agreement, the Transaction Documents or any other written
or formally presented information, report, financial statement, exhibit,
schedule or document furnished by or on behalf of the Company in connection
with the negotiation of the transactions contemplated
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hereby contained, contains, or will contain at the time it was or is so
furnished any untrue statement of a material fact or omitted, omits or will
omit at such time to state any material fact necessary in order to make the
statements made herein and therein, in light of the circumstances under
which they were made, not misleading. Except as disclosed on Schedule
2.1(i) or in SEC Documents filed on XXXXX at least five business days prior
to the date hereof, since December 31, 1998, there has been no material
adverse change and no material adverse development in the business,
properties, operations, financial condition, liabilities or results of
operations or, insofar as can reasonably be foreseen, prospects of the
Company or the Subsidiaries.
j. Private Offering. The Company and all Persons acting on its behalf
have not made, directly or indirectly, and will not make, offers or sales
of any securities or solicited any offers to buy any security under
circumstances that would require registration of the Debentures, the
Warrants or the Underlying Shares or the issuance of such securities under
the Securities Act. The offer, sale and issuance of the Debentures, the
Warrants and the Underlying Shares to the Purchasers will not be integrated
with any other offer, sale and issuance of the Company's securities (past,
current, or future) under the Securities Act or any regulations of any
exchange or automated quotation system on which any of the securities of
the Company are listed or designated or for purposes of any stockholder
approval provision applicable to the Company or its securities. Subject to
the accuracy and completeness of the representations and warranties of the
respective Purchasers contained in Section 2.2 hereof, the offer, sale and
issuance by the Company to the Purchasers of the Debentures, the Warrants
and the Underlying Shares is exempt from the registration requirements of
the Securities Act.
k. SEC Documents; Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) of the Exchange Act. The
Company has filed all reports required to be filed by it with the
Commission pursuant to the reporting requirements of the Exchange Act,
including pursuant to Section 13, 14 or 15(d) thereof (the foregoing
materials and all exhibits included therein and financial statements and
schedules thereto and documents (other than exhibits to such documents)
incorporated by reference therein being collectively referred to herein as
the "SEC Documents"), on a timely basis or has received a valid extension
of such time of filing and has filed any such SEC Documents prior to the
expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when
filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading. All material agreements to which the
Company or any Subsidiary is a party or to which the property or assets of
the Company or any Subsidiary are subject and which are required to be
filed as exhibits to the SEC Documents have been filed as exhibits to the
SEC Documents as required and neither the Company nor any Subsidiary is in
breach of any such agreement where such breach could reasonably be expected
to, individually or in the aggregate, have a Material Adverse Effect. As of
their respective dates, the financial statements of the Company included in
the SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations
of the Commission with respect thereto as in effect at the time of filing.
Such financial statements have been prepared in accordance with generally
accepted accounting principles in the United States applied on a consistent
basis during the periods involved, except as may be otherwise specified in
such financial statements or the notes thereto, and fairly present in all
material respects the financial position of the Company as of and
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for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to
normal, immaterial year-end audit adjustments. Since the date of the
financial statements included in the Company's last filed Quarterly Report
on Form 10-Q for the period ended December 31, 1998, there has been no
event, occurrence or development that has had or to the Company's
knowledge, as of the date of this Agreement, will have a Material Adverse
Effect which has not been specifically disclosed in writing to the
Purchasers by the Company. The Company last filed audited financial
statements with the Commission on March 31, 1998, and has not received any
comments from the Commission in respect thereof. Neither the Company nor
any of its Subsidiaries or any of their officers, directors, employees or
agents have provided the Purchasers or their agents or counsel with any
material, nonpublic information. The Company acknowledges that the
Purchasers will be trading in the securities of the Company in reliance on
the foregoing representation and warranty.
l. Investment Company. The Company is not, and is not controlled by or
under common control with an affiliate (an "Affiliate") of an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended.
m. Broker's Fees. Except for fees payable to Xxxxx Xxxxxxx Asset
Management, LLC pursuant to Section 6.16 hereof, no fees or commissions or
similar payments with respect to the transactions contemplated by this
Agreement or the Transaction Documents have been paid or will be payable by
the Company to any broker, financial advisor, finder, investment banker, or
bank with respect to the transactions contemplated by this Agreement. The
Purchasers shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of a
type contemplated in this Section 2.1(m) that may be due in connection with
the transactions contemplated by this Agreement and the Transaction
Documents. The Company shall indemnify and hold harmless each of the
Purchasers, its employees, officers, directors, agents and partners, and
their respective Affiliates, from and against all claims, losses, damages,
costs (including the costs of preparation and attorney's fees) and expenses
suffered in respect of any such claimed or existing fees.
n. Form S-3 Eligibility. The Company is, and at the Closing Date will
be, eligible to register securities (including the Underlying Shares) for
resale with the Commission under Form S-3 (or any successor form)
promulgated under the Securities Act.
o. Listing and Maintenance Requirements Compliance. The principal
market on which the Common Stock is currently traded is the NYSE. Except as
disclosed on Schedule 2.1(o), the Company has not in the three years
preceding the date hereof received notice (written or oral) from the NYSE
(or any stock exchange, market or trading facility on which the Common
Stock is or has been listed (or on which it has been quoted)) to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such market or exchange. Except as disclosed on Schedule
2.1(o), the Company is not aware of any facts which would reasonably lead
to delisting or suspension of the Common Stock by the NYSE. After giving
effect to the transactions contemplated by this Agreement and the
Transaction Documents, the Company believes that it will be in compliance
with all such maintenance requirements.
p. Intellectual Property Rights. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all trademarks, trademark
applications, trade names and service marks, whether or not registered, and
all patents, patent applications, copyrights, inventions, licenses,
approvals, governmental authorizations, trade secrets and intellectual
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property rights (collectively, "Intellectual Property Rights") which are
necessary for use in connection with their respective businesses as now
conducted and as described in the SEC Documents. Except as set forth on
Schedule 2.1(p), none of the Company's Intellectual Property Rights have
expired or terminated, or are expected to expire or terminate within two
years from the date of this Agreement. Neither the Company nor any of its
Subsidiaries has infringed or is infringing on any of the Intellectual
Property Rights of any Person and, except as set forth on Schedule 2.1(p),
there is no claim, action or proceeding which has been made or brought
against, or to the Company's knowledge, is being made, brought or
threatened against, the Company or its Subsidiaries regarding the
infringement of any of the Intellectual Property Rights, and the Company
and its Subsidiaries are unaware of any facts or circumstances which might
give rise to any of the foregoing, except where any of the foregoing could
not reasonably be expected have a Material Adverse Effect. The Company and
its Subsidiaries have taken reasonable security measures to protect the
secrecy, confidentiality and value of all of their intellectual properties.
q. Registration Rights; Rights of Participation. Except as described
on Schedule 2.1(q) hereto, (i) the Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration rights)
to have any securities of the Company registered with the Commission or any
other governmental authority which has not been satisfied and (ii) no
Person, including, but not limited to, current or former stockholders of
the Company, underwriters, brokers or agents, has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement or any
Transaction Document.
r. Title. Except as disclosed on Schedule 2.1(r), the Company and the
Subsidiaries have good and marketable title in fee simple to all real
property and personal property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear
of all Liens, except for Liens that do not materially affect the value of
such property and do not interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries. Any real
property and facilities held under lease by the Company and the
Subsidiaries are held by them under valid, subsisting and, to the Company's
knowledge, enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of such property
and buildings by the Company and the Subsidiaries.
s. Permits. The Company and the Subsidiaries possess all certificates,
authorizations, licenses, easements, consents, approvals, orders and
permits necessary to own, lease and operate their respective properties and
to conduct their respective businesses as currently conducted except where
the failure to possess such permits would not, individually or in the
aggregate, have a Material Adverse Effect ("Material Permits"), and there
is no proceeding pending, or, to the knowledge of the Company, threatened
relating to the revocation, modification, suspension or cancellation of any
Material Permit. To the Company's knowledge, neither the Company nor any of
the Subsidiaries is in conflict with or default or violation of any
Material Permit.
t. Insurance. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as management of the Company believes to be
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. Neither the Company nor any such Subsidiary has
any reason to believe that it will not be able to renew its existing
insurance coverages as and
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when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business, at a cost that would
not materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its
Subsidiaries, taken as a whole.
u. Internal Accounting Controls. The Company and each of the
Subsidiaries maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are executed in
accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles in
the United States and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
v. Tax Status; Firpta. Except as set forth on Schedule 2.1(v), the
Company and each of the Subsidiaries has made or filed all federal and
state income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and only to the extent
that the Company and each of its Subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good
faith (which are set forth on Schedule 2.1(v) hereof), and has set aside on
it books provisions reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim. The Company is
not a "United States real property holding corporation" within the meaning
of Section 847(c)(2) of the Internal Revenue Code of 1986, as amended.
w. Transactions With Affiliates. Except as set forth on Schedule
2.1(w), and other than the grant of stock options and warrants disclosed on
Schedule 2.1(c), none of the officers, directors, or employees of the
Company is presently a party to any transaction with the Company or any of
its Subsidiaries (other than for services as employees, officers and
directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of
real or personal property to or from, or otherwise requiring payments to or
from any officer, director or such employee or, to the knowledge of the
Company, any corporation, partnership, trust or entity in which any
officer, director, or any such employee has a substantial interest or is an
officer, director, trustee or partner.
x. Application to Takeover Protection. The Company and its Board of
Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination or other
similar anti-takeover provision under the Certificate of Incorporation,
Bylaws or the laws of the state of incorporation which is or could become
applicable to the Purchasers or the Transaction Documents as a result of
the transactions contemplated by this Agreement or the Transaction
Documents. None of the transactions contemplated by this Agreement or the
Transaction Documents, including the conversion of the Debentures and the
exercise of the Warrants, will trigger any poison pill provisions of any of
the Company's stockholders' rights or similar agreements.
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y. Solicitation Materials. The Company has not (i) distributed any
offering materials in connection with the offering and sale of the
Debentures or the Warrants, other than the SEC Documents, the Schedules to
this Agreement, any amendments and supplements thereto and the materials
listed on Schedule 2.1(y), or (ii) solicited any offer to buy or sell the
Debentures or the Warrants by means of any form of general solicitation or
advertising. Neither the Company, nor any of its Affiliates, nor any Person
acting on its or their behalf, has engaged or will engage in any form of
general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or sale
of the Debentures or Warrants.
z. Acknowledgement of Dilution. The Company understands and
acknowledges the potentially dilutive effect to the Common Stock upon the
issuance of the Debenture Shares and Warrant Shares upon conversion of the
Debenture or exercise of the Warrants (which dilution may be substantial
under certain market conditions). The Company further acknowledges that its
obligation to issue Debenture Shares and Warrant Shares upon conversion of
the Debentures or exercise of the Warrants in accordance with this
Agreement, the Debentures and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company.
aa. Acknowledgement Regarding Purchasers' Purchase of Securities. The
Company acknowledges and agrees that the Purchasers are acting solely in
the capacity of arm's length purchasers with respect to this Agreement and
the transactions contemplated hereby. The Company further acknowledges that
no Purchaser is acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any statement made by any Purchaser or
any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to the Purchasers' purchaser of the
securities. The Company further represents to each Purchaser that the
Company's decision to enter into this Agreement has been based solely on
the independent evaluation of the Company and its representatives.
2.2 Representations and Warranties of the Purchasers. Each of the
Purchasers, severally and not jointly, hereby represents and warrants to the
Company as follows:
a. Organization; Authority. Such Purchaser is a company, a corporation
or a limited partnership duly formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or formation with
the requisite power and authority, corporate or otherwise, to enter into
and to consummate the transactions contemplated hereby and by the
Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The purchase by such Purchaser of the Debentures and the
Warrants hereunder has been duly authorized by all necessary action on the
part of such Purchaser. Each of this Agreement and the Registration Rights
Agreement has been duly executed and delivered by such Purchaser and
constitutes the valid and legally binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity.
b. Investment Intent. Such Purchaser is acquiring the Debentures and
the Warrants for its own account and not with a present view to or for
distributing or reselling the
10
Debentures, the Warrants, the Debenture Shares or the Warrant Shares or any
part thereof or interest therein in violation of the Securities Act;
provided, however, that by making the representations herein, such
Purchaser does not agree to hold any of the Debentures, the Warrants, the
Debenture Shares or the Warrant Shares for any minimum or other specific
term and reserves the right to dispose of the Debentures at any time in
accordance with or pursuant to a registration statement or an exemption
under the Securities Act.
c. Purchaser Status. At the time such Purchaser was offered the
Debentures and the Warrants, and at the Closing Date, (i) it was and will
be an "accredited investor" as defined in Rule 501 under the Securities Act
and (ii) such Purchaser, either alone or together with its representatives,
had and will have such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and
risks of the prospective investment in the Debentures and the Warrants.
d. Reliance. Such Purchaser understands and acknowledges that (i) the
Debentures and the Warrants are being offered and sold to such Purchaser
without registration under the Securities Act in a private placement that
is exempt from the registration provisions of the Securities Act under
Section 4(2) of the Securities Act or Regulation D promulgated thereunder
and (ii) the availability of such exemption depends in part on, and the
Company will rely upon the accuracy and truthfulness of, the
representations set forth in this Section 2.2 and such Purchaser hereby
consents to such reliance.
e. Ability of Purchaser to Bear Risk of Investment. Such Purchaser is
able to bear the economic risk of an investment in the Debentures and the
Underlying Shares and, at the present time, is able to afford a complete
loss of such investment.
f. Information. Such Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and
operations of the Company and materials relating to the offer and sale of
the Debentures and Warrants which have been requested by such Purchaser or
its advisors. Such Purchaser and its advisors, if any, have been afforded
the opportunity to ask questions of the Company. Neither such inquiries nor
any other due diligence investigation conducted by such Purchaser or any of
its advisors or representatives shall modify, amend or affect such
Purchaser's right to rely on the Company's representations and warranties
contained in Section 2.1 above or representations and warranties of the
Company contained in any other transaction document.
g. Convertible Preferred Agreement Warrants. The Purchasers
acknowledge that they have not been delivered the warrants (the "Prior
Warrants") issued pursuant to the Convertible Preferred Agreement. If the
Purchasers do obtain the Prior Warrants, the Purchasers will return the
Prior Warrants to the Company for destruction.
The Company acknowledges and agrees that the Purchasers make no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 2.2.
11
ARTICLE III.
OTHER AGREEMENTS
3.1 Transfer Restrictions.
a. If any Purchaser should decide to dispose of the Debentures, the
Warrants, the Debenture Shares or the Warrant Shares held by it, such Purchaser
understands and agrees that it may do so only pursuant to an effective
registration statement under the Securities Act, to the Company or pursuant to
an available exemption from the registration requirements of the Securities Act
or Rule 144 promulgated under the Securities Act ("Rule 144"). The Company shall
announce any material non-public information that it legally is required to
announce on or prior to the Effectiveness Date (as defined in the Registration
Rights Agreement) of the registration statement filed pursuant to the
Registration Rights Agreement and shall not enter into any subsequent
non-disclosure agreements that would prevent it from announcing an such
information that otherwise legally could have been announced on or prior to the
Effectiveness Date, unless confidential treatment for such information is
granted by the Commission. In connection with any transfer of any Debentures,
Warrants, Debenture Shares or Warrant Shares other than pursuant to an effective
registration statement, Rule 144 or to the Company, the Company may require the
transferor thereof to provide to the Company a written opinion of counsel
experienced in the area of United States securities laws selected by the
transferor, the form and substance of which opinion shall be customary for
opinions of counsel in comparable transactions, to the effect that such transfer
does not require registration of such transferred securities under the
Securities Act; provided, however, that if the Debentures, Warrants, Debenture
Shares or Warrant Shares may be sold pursuant to Rule 144(k), no written opinion
of counsel shall be required from the Purchaser if such Purchaser provides
reasonable assurances that such security can be sold pursuant to Rule 144(k).
Notwithstanding the foregoing, the Company hereby consents to and agrees to
register any transfer by any Purchaser to an Affiliate of such Purchaser,
provided that the transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Any such
transferee shall agree in writing to be bound by the terms of this Agreement and
shall have the rights of a Purchaser under this Agreement and the Transaction
Documents. If a Purchaser provides the Company with an opinion of counsel, the
form and substance of which opinion shall be customary for opinions of counsel
in comparable transactions, to the effect that a public sale, assignment or
transfer of the Debentures, the Debenture Shares, the Warrants and the Warrant
Shares may be made without registration under the Securities Act or the
Purchaser provides the Company with reasonable assurances that the Warrants, the
Debenture Shares and the Warrant Shares can be sold pursuant to Rule 144 without
any restriction as to the number of securities acquired as of a particular date
that can then be immediately sold, the Company shall permit the transfer, and,
in the case of the Debenture Shares and the Warrant Shares, promptly instruct
its transfer agent to issue one or more certificates in such name and in such
denominations as specified by such Purchaser and without any restrictive legend.
Notwithstanding the foregoing or anything else contained herein to the contrary,
the securities may be pledged as collateral in connection with a bona fide
margin account or other lending arrangement.
b. Each Purchaser agrees to the imprinting, so long as is required by this
Section 3.1(b), of the following legend on the Debentures, the Warrants, the
Debenture Shares and the Warrant Shares:
12
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
Neither the Debentures, the Warrants, the Debenture Shares, nor the Warrant
Shares shall contain the legend set forth above (or any other legend) (i) at any
time while a registration statement is effective under the Securities Act
covering such security, (ii) if in the written opinion of counsel to the Company
experienced in the area of United States securities laws such legend is not
required under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the staff of the Commission) or
(iii) if such Debentures, Warrants, Debenture Shares or Warrant Shares may be
sold pursuant to Rule 144. The Company agrees that it will provide each
Purchaser, upon request, with a certificate or certificates representing
Debentures, Warrants, Debenture Shares or Warrant Shares, free from such legend
at such time as such legend is no longer required hereunder. If such certificate
or certificates had previously been issued with such a legend or any other
legend, the Company shall, upon request, receive such certificate or
certificates free of any legend.
3.2 Stop Transfer Instruction. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company which enlarge
the restrictions on transfer set forth in Section 3.1.
3.3 Furnishing of Information. As long as any Purchaser owns the
Debentures, the Warrants, the Debenture Shares or the Warrant Shares, the
Company will cause the Common Stock to continue at all times to be registered
under Section 12 of the Exchange Act, will timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13, 14 or 15(d) of the Exchange Act and promptly furnish, but in no event later
than two (2) business days after the filing thereof with the Commission, the
Purchasers with true and complete copies of all such filings, and will not take
any action or file any document (whether or not permitted by the Exchange Act or
the rules thereunder) to terminate or suspend such reporting and filing
obligations. As long as any Purchaser owns the Debentures, the Warrants, the
Debenture Shares or the Warrant Shares, if the Company is not required to file
reports pursuant to Section 13(a) or 15(d) of the Exchange Act, it will prepare
and furnish to the Purchasers and make publicly available in accordance with
Rule 144(c) promulgated under the Securities Act annual and quarterly financial
statements, together with a discussion and analysis of such financial statements
in form and substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of the
Exchange Act, as well as any other information required thereby, in the time
period that such filings would have been required to have been made under the
Exchange Act. The Company further covenants that it will take such further
action as any holder of the Debentures, the Warrants, the Debenture Shares or
the Warrant Shares may reasonably request, all to the extent required from time
to time to enable such Person to sell the Debentures, the Warrants, the
Debenture Shares, or the Warrant Shares without registration under the
Securities Act within the limitation of the exemptions provided by
13
Rule 144 promulgated under the Securities Act, including the legal opinion
referenced above in Section 3.1(b). Upon the request of any such Person, the
Company shall deliver to such Person a written certification of a duly
authorized officer as to whether it has complied with such requirements.
3.4 Blue Sky Laws. In accordance with the Registration Rights Agreement,
the Company shall (i) qualify the Debenture Shares and the Warrant Shares under
the securities or "blue sky" laws of such jurisdictions as the Purchasers may
request (or to obtain an exemption from such qualification), (ii) shall provide
evidence of any such action so taken to each Purchaser on or prior to the
Closing Date and (iii) shall continue such qualification at all times through
the resale of all Debenture Shares or Warrant Shares, but in any event not past
the fourth anniversary of the Closing Date.
3.5 Integration. The Company shall not sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares in a
manner that would require the registration under the Securities Act of the sale
of the Debentures, the Warrants, the Debenture Shares or the Warrant Shares to
any Purchaser or cause the offering of such securities to be integrated with any
other offering of securities by the Company for the purpose of any stockholder
approval provision applicable to the Company or its securities.
3.6 Listing and Reservation of Debenture Shares and Warrant Shares.
a. The Company shall (i) not later than three (3) business days after the
Closing Date prepare and file with the NYSE (as well as any other national
securities exchange or market on which the Common Stock is then listed) an
additional shares listing application or a letter acceptable to the NYSE
covering and listing a number of shares of Common Stock which is at least equal
to 120% of the maximum number of Underlying Shares then issuable, assuming that
the payment of all future dividends on such shares then outstanding were made in
shares of Common Stock, (ii) take all steps necessary to cause the Underlying
Shares to be approved for listing on the NYSE (as well as on any other national
securities exchange or market on which the Common Stock is then listed) as soon
as possible thereafter, (iii) maintain, so long as any other shares of Common
Stock shall be so listed, such listing of all such Underlying Shares, and (iv)
provide to the Purchasers evidence of such listing. Neither the Company nor any
of its Subsidiaries shall take any action which may result in the delisting or
suspension of the Common Stock on the NYSE. The Company shall promptly provide
to each Purchaser copies of any notices it receives from the NYSE regarding the
continued eligibility of the Common Stock for listing on such automated
quotation system, so long as such notice does not include material, nonpublic
information. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section 3.6(a).
b. The Company at all times shall reserve a sufficient number of shares of
its authorized but unissued Common Stock to provide for 120% of the full
conversion of the outstanding Debentures (including the payment of all dividends
thereon) and exercise of the outstanding Warrants. Shares of Common Stock
reserved for issuance upon conversion of the Debentures and the exercise of the
Warrants shall be allocated pro rata to each of the Purchasers in accordance
with the amount of Debentures and Warrants issued and delivered to such
Purchaser at the Closing. If at any time the number of shares of Common Stock
authorized and
14
reserved for issuance is insufficient to cover 120% of the number of Debenture
Shares and Warrant Shares issued and issuable upon conversion of the Debentures
and exercise of the Warrants (based on the Conversion Price (as defined in the
Debenture) of the Debentures in effect from time to time and the Exercise Price
(as defined in the Warrants) of the Warrants in effect from time to time)
without regard to any limitation on conversions or exercises, the Company will
promptly take all corporate action necessary to authorize and reserve 120% of
such shares pursuant to Section 3(b) of the Registration Statement, including,
without limitation, calling a special meeting of stockholders to authorize
additional shares to meet the Company's obligations under this Section 3.6(b),
in the case of an insufficient number of authorized shares, and using its best
efforts to obtain stockholder approval of an increase in such authorized number
of shares.
3.7 Notice of Breaches.
a. The Company and each Purchaser shall give prompt written notice to the
other of any breach by it of any representation, warranty or other agreement
contained in this Agreement or in the Transaction Documents, as well as any
events or occurrences arising after the date hereof and prior to the Closing
Date, which would reasonably be likely to cause any representation or warranty
or other agreement of such party, as the case may be, contained herein to be
incorrect or breached as of the Closing Date provided such notice will not
constitute material non-public information. However, no disclosure by either
party pursuant to this Section 3.7 shall be deemed to cure any breach of any
representation, warranty or other agreement contained herein or in the
Transaction Documents.
b. Notwithstanding the generality of Section 3.7(a), the Company shall
promptly notify, provided such notification will not constitute material
non-public information, each Purchaser of any notice or claim (written or oral)
that it receives from any lender of the Company or any Subsidiary to the effect
that the consummation of the transactions contemplated hereby and by the
Registration Rights Agreement violates or would violate any written agreement or
understanding between such lender and the Company or any Subsidiary, and the
Company shall promptly furnish by facsimile to the Purchasers a copy of any
written statement in support of or relating to such claim or notice.
c. The default by any Purchaser of any of its obligations, representations
or warranties under this Agreement or the Transaction Documents shall not be
imputed to, and shall have no effect upon, any other Purchaser or affect the
Company's obligations under this Agreement or any Transaction Document to any
non-defaulting Purchaser.
3.8 Form D. The Company agrees to file a Form D with respect to the
Debentures and Warrants as required by Rule 506 under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing.
3.9 Right of First Refusal; Subsequent Registrations. The Company shall
not, directly or indirectly, without the prior written consent of the
Purchasers, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its or its Affiliates' equity or equity-equivalent
securities or any instrument that permits the holder thereof to acquire Common
Stock at any time over the life of the security or instrument at a price that is
less than the closing bid price of the Common Stock at the time of issuance of
such security or instrument (a "Subsequent Placement") for a period of
15
six (6) months after the Closing Date, except (i) the granting of options or
warrants to employees, officers, directors and consultants of the Company, and
the issuance of shares upon exercise of options granted, under any stock option
plan heretofore or hereinafter duly adopted by the Company or under any other
compensatory arrangement between the Company and any employee, officer, director
or consultant, or the issuance of shares pursuant to any compensatory warrants
issued to any of the foregoing, (ii) shares issued upon exercise of any
currently outstanding warrants and upon conversion of any currently outstanding
convertible preferred stock in each case disclosed in Schedule 2.1(c), and (iii)
shares of Common Stock issued upon conversion of Preferred Shares, unless (A)
the Company delivers to each Purchaser a written notice (the "Subsequent
Placement Notice") of its intention to effect such Subsequent Placement, which
Subsequent Placement Notice shall describe in reasonable detail the proposed
terms of such Subsequent Placement the amount of proceeds intended to be raised
thereunder, the Person with whom such Subsequent Placement shall be effected,
and attached to which shall be a term sheet or similar document relating thereto
and (B) no Purchaser shall have notified the Company by 5:00 p.m. (New York
time) on the third (3rd) Trading Date after its receipt of the Subsequent
Placement Notice of its willingness to provide (or to cause its sole designee to
provide), subject to completion of mutually acceptable documentation, financing
to the Company on substantially the terms set forth in the Subsequent Placement
Notice. If no Purchaser shall notify the Company of its intention to provide the
entire financing as proposed in the Subsequent Placement Notice within such time
period, the Company may effect the Subsequent Placement substantially upon the
terms and to the Person (or Affiliates of such Persons) set forth in the
Subsequent Placement Notice; provided, that the Company shall provide each
Purchaser with a second Subsequent Placement Notice, and the Purchasers shall
again have the right of first refusal set forth above in this paragraph (a), if
the Subsequent Placement subject to the initial Subsequent Placement Notice
shall not have been consummated for any reason on the terms set forth in such
Subsequent Placement Notice within thirty (30) Trading Days after the date of
the initial Subsequent Placement Notice with the Person (or an Affiliate of such
Person) identified in the Subsequent Placement Notice. If the Purchasers shall
indicate a willingness to provide financing in excess of the amount set forth in
the Subsequent Placement Notice, then each Purchaser shall be entitled to
provide financing pursuant to such Subsequent Placement Notice up to an amount
equal to such Purchaser's pro rata portion of the Debentures purchased by the
Purchasers under this Agreement at the Closing.
3.10 Use of Proceeds. The Company shall use the proceeds from the sale of
the Debentures and the exercise of the Warrants for the redemption of the
existing Preferred Stock (as defined in the Convertible Preferred Agreement) and
the payment of fees associated therein, and for working capital and general
corporate purposes and not for the satisfaction of any portion of Company
borrowings outside the normal course of business or to redeem Company equity or
equity-equivalent securities. Pending application of the proceeds of this
placement in the manner permitted hereby, the Company will invest such proceed
in interest bearing securities.
3.11 Transactions with Affiliates. So long as any Debentures or Warrants
are outstanding, the Company shall not, and shall cause each of its Subsidiaries
not to, enter into, amend, modify or supplement, or permit any Subsidiary to
enter into, amend, modify or supplement, any agreement, transaction, commitment
or arrangement with any of its or any Subsidiary's officers, directors or
persons who were officers or directors at any time during the previous two
years, stockholders who beneficially own 5% or more of the Common Stock, or
Affiliates or any individual related by blood, marriage or adoption to any such
individual or with any entity in which any such entity or individual owns a 5%
or more beneficial interest (each a
16
"Related Party"), except for (a) customary employment arrangements and benefit
programs on reasonable terms, (b) any agreement, transaction, commitment or
arrangement on an arms-length basis on terms no less favorable than terms which
would have been obtainable from a Person other than such Related Party, or (c)
any agreement, transaction, commitment or arrangement which is approved by a
majority of the disinterested directors of the Company. For purposes hereof, any
director who is also an officer of the Company or any Subsidiary of the Company
shall not be a disinterested director with respect to any such agreement,
transaction, commitment or arrangement. "Affiliate" for purposes of this section
only means, with respect to any person or entity, another person or entity that,
directly or indirectly, (i) has a 5% or more equity interest in that person or
entity, (ii) has 5% or more common ownership with that person or entity, (iii)
controls that person or entity, or (iv) shares common control with that person
or entity. "Control" or "Controls" for purposes of this section means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
3.12 Transfer Agent Instructions. At the Closing the Company shall issue
irrevocable instructions to its transfer agent (and shall issue to any
subsequent transfer agent as required), to issue certificates, registered in the
name of each such Purchaser or its respective nominee(s), for the Debenture
Shares and/or the Warrant Shares in such amounts as specified from time to time
by each Purchaser to the Company in a form acceptable to such Purchasers (the
"Irrevocable Transfer Agent Instructions"). So long as required pursuant to
Section 3.1(b), all such certificates shall bear the restrictive legend
specified in Section 3.1(b) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 3.12, and stop transfer instructions to give effect to Section
3.1 hereof (in the case of the Debenture Shares and the Warrant Shares, prior to
registration of the Debenture Shares under the Securities Act) will be given by
the Company to its transfer agent and that the Debentures, the Warrants, the
Debenture Shares and the Warrant Shares shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement and the Transaction Documents. If a Purchaser provides the Company
with an opinion of counsel, the form and substance of which opinion shall be
customary for opinions of counsel in comparable transactions, to the effect that
a public sale, assignment or transfer of the Debentures, the Debenture Shares,
the Warrants and the Warrant Shares may be made without registration under the
Securities Act or the Purchaser provides the Company with reasonable assurances
that the Warrants, the Debenture Shares and the Warrant Shares can be sold
pursuant to Rule 144 without any restriction as to the number of securities
acquired as of a particular date that can then be immediately sold, the Company
shall permit the transfer, and, in the case of the Debenture Shares and the
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such
Purchaser and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Purchasers by violating the intent and purpose of the transactions contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 3.12 will be inadequate and agrees,
in the event of a beach or threatened breach by the Company of the provisions of
this Section 3.12, that the Purchasers, shall be entitled, in addition to all
other available remedies, to an order and/or injunction restraining any breach
and requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
3.13 Press Release; Filing of Form 8-K. Subject to the provisions of
Section 6.10 hereof, prior to the opening of the NYSE on March 5, 1999, the
Company shall file a press
17
release in form and substance acceptable to the Purchasers. On or before the
15th business day following the Closing Date, the Company shall file a Form 8-K
with the Commission describing the terms of the transaction contemplated by this
Agreement and the Transaction Documents in the form required by the Exchange
Act.
3.14 Financial Information. The Company agrees to send the following to
each Purchaser during the Registration Period: (i) within three (3) business
days after the filing thereof with the SEC, a copy of its Annual Reports on Form
10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and
any registration statements or amendments (other than on Form S-8) filed
pursuant to the Securities Act, (ii) on the same day as the release thereof,
facsimile copies of all press releases issued by the Company or any of its
Subsidiaries, and (iii) copies of any notices and other information made
available or given to the stockholders of the Company generally,
contemporaneously with the making available or giving thereof to the
stockholders.
3.15 Ordinary Course Brokerage and Trading. Subject to compliance with all
applicable securities laws and NYSE regulations, no Purchaser shall be
prohibited from engaging in its ordinary course brokerage and trading activities
in respect of the Company's Common Stock.
3.16 Best Efforts. Each of the parties hereto shall use its commercially
reasonable best efforts to satisfy each of the conditions to be satisfied by it
as provided in Article IV of this Agreement.
3.17 Corporate Existence.
a. Until such time as all of the Purchasers provide the Company with
written notice that they do not beneficially own any Debentures or Warrants, the
Company shall maintain its corporate existence and shall not sell all or
substantially all of the Company's assets, except in the event of a merger or
consolidation or sale of all or substantially all of the Company's assets, where
the surviving or successor entity in such transaction (i) assumes the Company's
obligations hereunder and under the agreements and instruments entered into in
connection herewith and (ii) is a publicly traded corporation whose common stock
is listed for trading on the NYSE, the NASDAQ or the American Stock Exchange.
b. If the Company effects a reverse stock split at any time within twelve
(12) months of the Closing Date, the Conversion Price (as defined in the
Debenture) of the Debenture and the Exercise Price (as defined in the Warrant)
in effect immediately prior to such reverse stock split shall remain in effect
immediately after giving effect to such reverse stock split.
3.18 Subsequent Registrations. Other than Underlying Shares and other
Registrable Securities (as defined in the Registration Rights Agreement) to be
registered in accordance with the Registration Rights Agreement, the Company
shall not, for a period of not less than 90 Trading Days after the date that the
Registration Statement is declared effective by the Commission, without the
prior written consent of two-thirds of the Purchasers, (i) issue or sell any of
its or any of its Affiliates' equity or equity-equivalent securities unless such
issuance or sale is equal to or at a premium to the Per Share Market Price (as
defined in the Registration Rights Agreement) on the date such issuance or sale,
(ii) register for resale any securities of the Company or (iii) have a
registration statement declared effective covering an issuance by the
18
Company of any of its securities. Any days that any Purchaser is unable to sell
Underlying Shares under an Registration Statement shall be added to such 90
Trading Day period for the purposes of (i), (ii) and (iii) above.
3.19 Certain Agreements. As long as any Purchaser owns Debentures, the
Company shall not and shall cause the Subsidiaries not to, without the consent
of each of the Purchasers (i) amend its articles of incorporation, bylaws or
other charter documents so as to adversely affect any rights of any Purchaser,
(ii) declare, authorize, set aside or pay any dividend or other distribution
with respect to the Common Stock except as permitted under the Debenture and as
would not adversely affect the rights of any Purchaser hereunder or under the
Debenture, (iii) repay, repurchase or offer to repay, repurchase or otherwise
acquire or pay dividends or make distributions on shares of its Common Stock in
any manner, (iv) issue any series of preferred stock or other securities with
rights senior (in respect of liquidations, dividends, preferences and similar
rights) to those of the Debentures, or (v) enter into nay agreement with respect
to the foregoing.
3.20 No Violation of Applicable Law. Notwithstanding any provision of this
Agreement to the contrary, if the redemption of the Underlying Shares otherwise
required under this Agreement or any Transaction Document would be prohibited by
the relevant provisions of the Business Corporation law of the State of Indiana,
such redemption shall be effected as soon as it is permitted under such law;
provided, however, that from the fifth (5th) day after such redemption notice
until such redemption price is paid in full, interest on any such unpaid amount
shall accrue and be payable at the rate of 15% per annum, in accordance with the
applicable Debenture.
3.21 Material Information. The Company confirms that it will not provide
the Purchasers or their agents or counsel with any information that constitutes
or might constitute material non-public information without the prior consent of
the Purchasers, their agents or their counsel. The Company further covenants
that any information provided by the Company to the Purchasers, their agents or
their counsel which could be deemed to constitute material non-public
information, will cease to be material non-public information (either through
disclosure by the Company or otherwise) by April 15, 1999.
3.22 Seniority. The Debentures shall be subordinate to any future debt
incurred by the Company, but shall rank pari passu to any future convertible
debt incurred by the Company.
ARTICLE IV.
CONDITIONS
4.1 Closing Conditions.
a. Conditions Precedent to the Obligation of the Company to Sell. The
obligation of the Company to sell the Debentures and the Warrants hereunder is
subject to the satisfaction or waiver (with prior written notice to each
Purchaser) by the Company, at or before the Closing, of each of the following
conditions:
19
(i) Accuracy of the Purchasers' Representations and Warranties. The
representations and warranties of each Purchaser in this Agreement shall be
true and correct in all material respects as of the date when made (except
for representations and warranties that speak as of a specific date) and as
of the Closing Date;
(ii) Performance by the Purchasers. Each Purchaser shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by such Purchaser at or prior to the
Closing; and
(iii) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement or the Transaction Documents.
b. Conditions Precedent to the Obligation of the Purchasers to Purchase.
The obligation of each Purchaser hereunder to acquire and pay for the Debentures
and Warrants is subject to the satisfaction or waiver (with prior written notice
to the Company and each other Purchaser) by such Purchaser, at or before the
Closing, of each of the following conditions:
(i) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company set forth in this Agreement
shall be true and correct in all respects as of the date when made and as
of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date);
(ii) Performance by the Company. The Company shall have performed,
satisfied and complied in all material respects with all covenants,
agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company at or prior to the Closing;
(iii) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by this Agreement and the Transaction Documents;
(iv) No Suspensions of Trading in Common Stock. The trading in the
Common Stock shall not have been suspended by the Commission or on the NYSE
which suspension shall remain in effect;
(v) Listing of Common Stock. The Common Stock shall have been at all
times since the date hereof, and on the Closing Date shall be, listed for
trading on the NYSE;
(vi) Required Approvals. All Required Approvals shall have been
obtained and copies thereof delivered to such Purchaser;
(vii) Shares of Common Stock. The Company shall have duly reserved the
number of Underlying Shares required by this Agreement and the Transaction
Documents to be reserved for issuance upon conversion of the Debentures and
the exercise of the Warrants;
20
(viii) Change of Control. No Change of Control shall have occurred
between the date hereof and the Closing Date. "Change of Control" means the
occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or "group" (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), other than the Purchasers or any of
their Affiliates, of in excess of 50% of the voting securities of the
Company, (ii) a replacement of more than one-half of the members of the
Company's Board of Directors which is not approved by those individuals who
are members of the Board of Directors on the date hereof in one or a series
of related transactions, (iii) the merger of the Company with or into
another entity, (iv) consolidation or sale of all or substantially all of
the assets of the Company in one or a series of related transactions or (v)
the execution by the Company of an agreement to which the Company is a
party or by which it is bound, providing for any of the events set forth
above in (i), (ii), (iii) or (iv);
(ix) Transfer Agent Instructions. The Irrevocable Transfer Agent
Instructions, in a form acceptable to the Purchasers, shall have been
delivered to and acknowledged in writing by the Company's transfer agent
with a copy forwarded to each Purchaser;
(x) Resolutions. The Board of Directors of the Company shall have
adopted resolutions consistent with Section 2.1(b) and in a form reasonably
acceptable to each Purchaser (the "Resolutions");
(xi) Litigation. No litigation shall have been instituted or
threatened against the Company which could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect;
(xii) Adverse Changes. Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-Q or Annual Report on
Form 10-K, whichever is more recent, last filed prior to the date of this
Agreement, no event which had a Material Adverse Effect shall have occurred
which is not disclosed in the Schedules hereto (for purposes hereof,
changes in the market price of the Common Stock may be considered in
determining whether there has occurred an event which has had a Material
Adverse Effect); and
(xiii) Promethean Redemption. The Closing shall occur simultaneously
with the redemption by the Company of the shares of Preferred Stock (as
defined in the Convertible Preferred Agreement) issued to Heracles Fund
Ltd. and Themis Partners, L.P. pursuant to the Convertible Preferred
Agreement.
c. Documents and Certificates. At the Closing, the Company shall have
delivered to the Purchasers the following in form and substance reasonably
satisfactory to the Purchasers:
(i) Opinion. An opinion of the Company's legal counsel in the form
attached hereto as Exhibit D dated as of the Closing Date;
(ii) Debenture. A Debenture(s) representing the principal amount of
Debentures purchased by such Purchaser as set forth next to such
Purchaser's name on Schedule I, registered in the name of such Purchaser,
each in form satisfactory to the Purchaser;
21
(iii) Warrant. A Warrant(s) representing the Warrants purchased by
such Purchaser as set forth next to such Purchaser's name on Schedule I,
registered in the name of such Purchaser;
(iv) Registration Rights. The Company shall have executed and
delivered the Registration Rights Agreement;
(v) Officer's Certificate. An Officer's Certificate dated the Closing
Date and signed by an executive officer of the Company confirming the
accuracy of the Company's representations, warranties and covenants as of
the Closing Date and confirming the compliance by the Company with the
conditions precedent set forth in this Section 4.1 as of the Closing Date;
(vi) Secretary's Certificate. A Secretary's Certificate dated the
Closing Date and signed by the Secretary or Assistant Secretary of the
Company certifying (A) that attached thereto is a true and complete copy of
the Certificate of Incorporation of the Company, as in effect on the
Closing Date, (B) that attached thereto is a true and complete copy of the
by-laws of the Company, as in effect on the Closing Date and (C) that
attached thereto is a true and complete copy of the Resolutions duly
adopted by the Board of Directors of the Company authorizing the execution,
delivery and performance of this Agreement and of the Transaction
Documents, and that such Resolutions have not been modified, rescinded or
revoked;
(vii) Certificates of Incorporation. The Company shall have delivered
to each of the Purchasers a copy of a certificate evidencing the
incorporation and good standing of the Company and each Subsidiary, in such
corporation's state of incorporation issued by the Secretary of State of
such state of incorporation as of a date within ten days of the Closing
Date. The Company shall have delivered to each of the Purchasers a copy of
its Certificate of Incorporation as certified by the Secretary of State of
the State of Indiana within ten days of the Closing Date;
(viii) Transfer Agent Letter. The Company shall have delivered to each
Purchaser a letter from the Company's transfer agent certifying the number
of shares of Common Stock outstanding as of a date within five days of the
Closing Date; and
(ix) Other Documents. The Company shall have delivered to each
Purchaser such other documents relating to the transactions contemplated by
the Transaction Documents as the Purchasers or its counsel may reasonably
request.
ARTICLE V.
INDEMNIFICATION
5.1 Indemnification. Except to the extent that matters which could be
covered by this Section 5 are covered by Section 5 of the Registration Rights
Agreement, in consideration of the Purchasers execution and delivery of this
Agreement and the Transaction Documents and acquiring the Debentures, Debenture
Shares, Warrants and Warrant Shares thereunder and in addition to all of the
Company's other obligations under this Agreement and the Transaction Documents,
the Company agrees that, in the event that any Purchaser, other than by reason
of its
22
gross negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation brought by or against any person, including
shareholders of the Company, in connection with or as a result of (a) any
misrepresentation or breach of any representation or warranty made by the
Company in the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in the Transaction Documents or
any other certificate, instrument or document hereby or thereby, or (c) any
cause of action, suit or claim brought or made against such Purchaser and
arising out of or resulting from the execution, delivery, performance or
enforcement of the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby, the Company will reimburse such
Purchaser for its legal and other actual out-of-pocket expenses (including the
cost of any investigation and preparation) incurred in connection therewith. The
reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any affiliate of the Purchasers and
partners, directors, agents, employees and controlling persons (if any), as the
case may be, of the Purchasers and any such affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such affiliate and any
such person. The Company also agrees that neither the Purchasers or any such
affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any person asserting claims on behalf of or
in right of the Company in connection with or as a result of the consummation of
the Transaction Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross negligence
or willful misconduct of such Purchaser or entity in connection with the
transactions contemplated by this Agreement.
ARTICLE VI.
MISCELLANEOUS
6.1 Entire Agreement. This Agreement, together with the Exhibits and
Schedules hereto and the Transaction Documents contain the entire understanding
of the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, oral or written, with respect to such matters.
6.2 Notices. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile, provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party (if received by 7:00 p.m. EST where such
notice is received) or the first business day following such delivery (if
received after 7:00 p.m. EST where such notice is received); or (iii) one
business day after deposit with a nationally recognized overnight delivery
service, in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
If to the Company:
Signal Apparel Company, Inc.
000X Xxxxxxxxxxxx Xxxx
00
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attn: President & General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
and:
000xx Xxxxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 10019
Attn: President & General Counsel
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx
If to Xxxxx Xxxxxxx Strategic Growth Fund, Ltd. to:
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx
If to Xxxxx Xxxxxxx Strategic Growth Fund, L.P. to:
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx
With a copy to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxx
24
Each party shall provide written notice to the other party of any change in
address or facsimile number in accordance with the provisions hereof.
6.3 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed, in the case of an amendment, by
both the Company and each of the Purchasers or, in the case of a waiver, by the
party against whom enforcement of any such waiver is sought. No waiver of any
default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any other provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner impair
the exercise of any such right accruing to it thereafter. Notwithstanding the
foregoing, no such amendment shall be effective to the extent that it applies to
less than all of the holders of the Debentures outstanding. The Company shall
not offer or pay any consideration to a Purchaser for consenting to such an
amendment or waiver unless the same consideration is offered to each Purchaser
and the same consideration is paid to each Purchaser which consents to such
amendment or waiver.
6.4 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
6.5 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns. The
Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of each of the Purchasers. The Purchasers may
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Company, provided, that any assignees must make the
representations and warranties set forth in Section 2.2 and otherwise comply
with the terms of this Agreement otherwise applicable to its assignor. This
provision shall not limit a Purchaser's right to transfer securities in
accordance with all of the terms of this Agreement or the Transaction Documents.
6.6 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
6.7 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to the principles of conflicts of law thereof. Each party hereby
irrevocably submits to the nonexclusive jurisdiction of the state and federal
courts sitting in the City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER
25
OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION
CONTEMPLATED HEREBY.
6.8 Survival. The representations and warranties of the Company and the
Purchasers contained in Sections 2.1 and 2.2, the agreements and covenants set
forth in Section 3, and the indemnification provisions set forth in Section 5,
shall survive the Closing and any conversion of the Debentures or exercise of
the Warrants regardless of any investigation made by or on behalf of the such
Purchaser or by or on behalf of the Company, except that, in the case of
representations and warranties such survival shall be limited to the period of
six (6) years following the Closing Date on which they were made or deemed to
have been made (other than with respect to any claim by a third party against
the party to this Agreement who seeks to assert a claim based on such
representations and warranties). This section shall have no effect on the
survival of the indemnification provisions of the Registration Rights Agreement.
6.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
6.10 Publicity. The Company and the Purchasers shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the names of any of the Purchasers
without each such Purchaser's prior written consent. The Purchasers and their
affiliated companies shall, without further cost, have the right to use in its
advertising, marketing or other similar materials all or parts of the Company's
press releases that focus on the Transaction forming the subject matter of this
Agreement or which make reference to the Transaction. The Purchasers understand
that this grant by the Company only waives objections that the Company might
have to the use of such materials by the Purchasers and in no way constitutes a
representation by the Company that references in such materials to the
activities of third-parties have been cleared or constitute a fair use.
6.11 Severability. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefor, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
6.12 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the Purchasers
will be entitled to specific performance of the obligations of the Company under
this Agreement or the Transaction Documents without the showing of economic loss
and without any bond or other security being
26
required. Each of the Company and the Purchasers (severally and not jointly)
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agree to waive in any action for specific performance of any
such obligation the defense that a remedy at law would be adequate.
6.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser hereunder is several and not joint with the
obligations of the other Purchasers hereunder, and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser hereunder. Nothing contained herein or in any other agreement or
document delivered at the Closing, and no action taken by any Purchaser pursuant
hereto or thereto, shall be deemed to constitute the Purchasers as a
partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Purchasers are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Purchaser shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
6.14 Payment Set Aside. To the extent that the Company makes a payment or
payments to the Purchasers hereunder or pursuant to the Transaction Documents or
the Purchasers enforce or exercise their rights hereunder or thereunder, and
such payment or payments or the proceeds of such enforcement or exercise or any
part thereof are subsequently invalidated, declared fraudulent or preferential,
set aside, recovered from, disgorged by or are required to be refunded, repaid
or otherwise restored to the Company, a trustee, receiver or any other Person
under any law (including, without limitation, any bankruptcy law, state or
federal law, common law or equitable cause of action), then to the extent of any
such restoration the obligation or part thereof originally intended to be
satisfied shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or setoff had not occurred.
6.15 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
6.16 Fees and Expenses. Except as set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement; provided, however, that the Company shall pay to
Xxxxx Xxxxxxx Asset Management $50,000, of which $25,000 shall have been paid
upon the execution of the term sheet and $25,000 shall be paid upon the
execution of this Agreement. The Company shall pay all stamp and other taxes and
duties levied in connection with the issuance of the Debenture Shares and the
Warrant Shares pursuant hereto.
[SIGNATURE PAGES FOLLOW]
27
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized persons as of the
date first indicated above.
SIGNAL APPAREL COMPANY, INC.
By: /s/ Xxxxxx Xxxxxxxx
------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Chief Financial Officer
XXXXX XXXXXXX STRATEGIC
GROWTH FUND, LTD.
By: Xxxxx Xxxxxxx Asset Management, LLC
By: /s/ Xxxx Xxxxxx
------------------------------
Name: Xxxx Xxxxxx
Title: Principal
XXXXX XXXXXXX STRATEGIC
GROWTH FUND, L.P.
By: Xxxxx Xxxxxxx Capital, LLC
its general partner
By: /s/ Xxxx Xxxxxx
------------------------------
Name: Xxxx Xxxxxx
Title: Principal
2
