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STOCK PURCHASE AGREEMENT
dated
March 30, 1999
between
XXXXXX TECHNOLOGIES, INC.
and
XXXXXXX US DISCOVERY FUND III, L.P.
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TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK................................1
SECTION 2. CLOSING.............................................................2
SECTION 3. DEFINITIONS.........................................................2
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................14
4.1. Corporate Existence, Power and Authority.....................14
4.2. Capital Stock................................................15
4.3. Subsidiaries.................................................16
4.4. Business.....................................................16
4.5. No Defaults or Conflicts.....................................16
4.6. Disclosure Materials; Other Information......................17
4.7. Litigation...................................................18
4.8. Taxes........................................................18
4.9. ERISA........................................................18
4.10. Legal Compliance.............................................20
4.11. Outstanding Securities.......................................20
4.12. Permits, Licenses and Approvals; Intellectual
Property and Other Rights....................................20
4.13. Key Employees................................................21
4.14. Properties...................................................21
4.15. Suppliers and Customers......................................21
4.16. Environmental Compliance.....................................22
4.17. No Burdensome Agreements.....................................22
4.18. Offering of Shares...........................................23
4.19. SEC Reports..................................................23
4.20. Indebtedness.................................................23
4.21. Use of Proceeds..............................................24
4.22. Other Names..................................................24
4.23. Brokers......................................................24
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER....................24
5.1. Corporate Power and Authority................................24
5.2. Investment Intent............................................25
5.3. Brokers......................................................25
5.4. Ownership of Common Stock....................................25
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Page
SECTION 6. RESTRICTIONS ON TRANSFER...........................................26
SECTION 7. INFORMATION AS TO THE COMPANY......................................26
7.1. Financial Information.......................................26
7.2. Communication with Accountants..............................28
7.3. Inspection..................................................29
7.4. Notices.....................................................29
SECTION 8. AFFIRMATIVE COVENANTS..............................................30
8.1. Maintenance of Existence, Properties and Franchises;
Compliance with Law; Taxes; Insurance.......................30
8.2. Office for Payment, Exchange and Registration;
Location of Office; Notice of Change of Name or Office......31
8.3. Fiscal Year.................................................31
8.4. Environmental Matters.......................................32
8.5. Reservation of Shares.......................................33
8.6. Securities Exchange Act Registration........................33
8.7. Delivery of Information for Rule 144A Transactions..........33
8.8. Senior Securities...........................................34
8.9. Further Assurances..........................................34
8.10. Stockholder Approval........................................34
8.11. Shares Paid as Dividends....................................34
SECTION 9. NEGATIVE COVENANTS.................................................34
9.1. No Dilution or Impairment; No Changes in Capital Stock......35
9.2. Indebtedness................................................36
9.3. Consolidation, Merger and Sale..............................36
9.4. No Change in Business.......................................36
9.5. Restricted Payments; Investments............................36
9.6. Sale of Substantial Portion of Assets.......................36
9.7. Obligations to Affiliates...................................37
9.8. Transactions with Affiliates................................37
9.9. Liens.......................................................38
9.10. Private Placement Status....................................38
9.11. Maintenance of Public Market................................38
9.12. Actions Prior to the Closing Date...........................39
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Page
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS.............................39
10.1. Certificate of Amendment; Stockholders' Agreement;
Registration Rights Agreement..............................39
10.2. Certificates for Shares....................................39
10.3. Senior Status..............................................40
10.4. Accuracy of Representations and Warranties.................40
10.5. Compliance with Agreements.................................40
10.6. Officers' Certificates.....................................40
10.7. Proceedings................................................40
10.8. Legality; Governmental and Other Authorization.............40
10.9. No Material Adverse Change.................................41
10.10. Opinion of Counsel.........................................41
10.11. Purchases of Shares........................................41
10.12. Consents...................................................41
10.13. Other Documents and Opinions...............................41
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS...............42
SECTION 12. SPECIFIC PERFORMANCE..............................................42
SECTION 13. EXPENSES..........................................................43
SECTION 14. DIRECT PAYMENTS...................................................44
SECTION 15. AMENDMENTS AND WAIVERS............................................45
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED
SHARES; REPLACEMENT...............................................45
SECTION 17. NOTICES...........................................................46
SECTION 18. MISCELLANEOUS.....................................................46
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is dated as of March 30, 1999 between Xxxxxx
Technologies, Inc., a New York corporation (the "Company"), and the Purchaser
listed on the signature page of this Agreement (the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Company desires to issue and sell to the Purchaser, and the
Purchaser desires to purchase from the Company, shares of the Company's Series A
Convertible Preferred Stock, par value $.01 per share (the "Series A Convertible
Preferred Stock"), upon the terms and provisions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK
(a) The Company agrees to sell to the Purchaser and, subject to the terms
and conditions hereof and in reliance upon the representations and warranties of
the Company contained herein or made pursuant hereto, the Purchaser agrees to
purchase from the Company at the Closing provided for in Section 2 hereof, the
number of shares of Series A Convertible Preferred Stock set forth opposite the
Purchaser's name on Schedule 1 hereto. The shares of Series A Convertible
Preferred Stock being acquired under this Agreement and by the other Purchaser
under the other Stock Purchase Agreement (as hereinafter defined) are
collectively referred to herein as the "Shares", containing rights and
privileges as more fully set forth in the Certificate of Amendment of the
Certificate of Incorporation of the Company in the form attached hereto as
Exhibit A (the "Certificate of Amendment").
(b) The aggregate purchase price to be paid to the Company by the Purchaser
for the Shares to be purchased by the Purchaser pursuant to this Agreement shall
be the amount set forth opposite the Purchaser's name on Schedule 1 hereto. No
further payment shall be required from the Purchaser for the Shares.
(c) The Shares are being sold to the purchasers listed on Schedule 1 hereto
(the "Purchasers") pursuant to this Agreement and the other Series A Convertible
Preferred Stock Purchase Agreement (both of such agreements collectively, as
from time to time assigned, supplemented or amended or as the terms thereof may
be waived, the "Stock Purchase
Agreements"). Both Stock Purchase Agreements shall be dated the date hereof and
shall be identical except as to the identities of the respective Purchasers. The
sale of Shares to each Purchaser under each Stock Purchase Agreement is to be a
separate sale, and no Purchaser shall have any liability under any Stock
Purchase Agreement other than the Stock Purchase Agreement to which it is a
party.
(d) The Company will use the proceeds realized from the sale of the Shares
to fund the roll-out of the Depot Strategy program, fees and expenses of the
transactions contemplated hereby and for working capital purposes.
SECTION 2. CLOSING
(a) Subject to the terms and conditions hereof, the closing of the purchase
and sale of the Shares to be purchased by the Purchaser will be deemed to have
taken place at the offices of Xxxxxx, Xxxxx & Bockius LLP, 000 Xxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx at 9:00 A.M., New York City time, on March 30, 1999, or such
other time and date as shall be mutually agreed to by the Company and the
Purchaser (the "Closing") (such time and date are herein referred to as the
"Closing Date").
(b) Subject to the terms and conditions hereof, at the Closing (i) the
Company will deliver to the Purchaser a certificate registered in the
Purchaser's name (or the name of its nominee, if any, as specified on Schedule 1
hereto) evidencing the number of Shares set forth opposite the Purchaser's name
on Schedule 1 and (ii) upon the Purchaser's receipt thereof, the Purchaser will
deliver to the Company a certified or official bank check (or wire transfer) in
an amount equal to the aggregate purchase price (as specified in Section 1(b)
hereof) for the Shares to be purchased by the Purchaser payable to the order of
the Company in federal or other immediately available funds.
SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions shall apply
(such definitions to be equally applicable to both the singular and plural forms
of the terms defined):
"Affiliate", when used with respect to any Person, means (i) if such
Person is a corporation, any officer or director thereof (other than a
director elected pursuant to Section 4 of the Certificate of Amendment) and
any Person which is, directly or indirectly, the beneficial owner (by
itself or as part of any group) of more than five percent (5%) of any class
of any equity security (within the meaning of the Securities Exchange Act)
thereof, and, if such beneficial owner is a partnership, any general
partner thereof, or if such beneficial owner is a
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corporation, any Person controlling, controlled by or under common control
with such beneficial owner, or any officer or director of such beneficial
owner or of any corporation occupying any such control relationship, (ii)
if such Person is a partnership, any general or limited partner thereof,
and (iii) any other Person which, directly or indirectly, controls or is
controlled by or is under common control with such Person. For purposes of
this definition, "control" (including the correlative terms "controlling",
"controlled by" and "under common control with"), with respect to any
Person, shall mean possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities or by contract
or otherwise. The holding of Shares (or of Conversion Shares obtained upon
conversion of Shares), and the rights under any Stock Purchase Agreement or
under the Certificate of Amendment, the Stockholders' Agreement or the
Registration Rights Agreement (or the exercise of any such rights,
including, without limitation, nominating a director to the Board (or Board
committee) of the Company and/or sending an observer to Board (or Board
committee) meetings of the Company), shall not cause a Purchaser to be
deemed to be an "Affiliate" of the Company.
"Affiliate Loan" means the loan made to the Company by Xxxxxxxx X.
Xxxxxx, Xx., in the original principal amount of $365,000, pursuant to the
promissory note dated February 25, 1999.
"Agreement" means this Stock Purchase Agreement (together with
exhibits and schedules) as from time to time assigned, supplemented or
amended or as the terms hereof may be waived.
"Benefit Plan" means any Plan, existing at the Closing, established or
to which contributions have at any time been made by the Company, or any
predecessor of any of the foregoing, or under which any employee, former
employee or director of the Company or any beneficiary thereof is covered,
is eligible for coverage or has benefit rights.
"Board" or "Board of Directors" means with respect to any Person which
is a corporation, a business trust or other entity, the board of directors
or other group, however designated, which is charged with legal
responsibility for the management of such Person, or any committee of such
board of directors or group, however designated, which is authorized to
exercise the power of such board or group in respect of the matter in
question.
"Business Day" means any day other than a Saturday, Sunday or any day
on which banks in the location of the office of the Company provided for in
Section 17 hereof are authorized or obligated to close.
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"Capitalized Lease" means any lease to which the Company is party as
lessee, or by which it is bound, under which it leases any property (real,
personal or mixed) from any lessor other than the Company, and which either
is required to be capitalized in accordance with generally accepted
accounting principles consistently applied, or, even if not so required to
be capitalized, shall have (or have had), at the time first entered into,
an initial term of greater than three (3) years (including leases of
shorter duration which are or were extendible to a total term greater than
three (3) years at the option of the lessor). The value of Capitalized
Leases, as of the time of any determination thereof, shall mean the sum of
the then present values, determined as hereinafter provided, of future
obligations of lessees under then existing Capitalized Leases. To compute
the value of any Capitalized Lease, the following methods shall be used, as
applicable:
(i) values of leases required to be capitalized in accordance with
generally accepted accounting principles shall be computed in
accordance with such principles; and
(ii) values of other leases (and values of contracts or other items
which this Agreement provides are to be valued as if they were
Capitalized Leases) shall be computed by discounting, to the date
of determination, at an assumed interest rate of eight percent
(8%) per annum, the minimum amount of future rental payments that
will be due under the related documentation, including rental
payments that may be due during extensions which are at the other
party's option, but excluding any amounts in respect of insurance
on, taxes on and/or maintenance of the properties subject to such
leases (provided that such amounts are owed and paid only to the
extent actually incurred).
"Certificate of Amendment" has the meaning set forth in Section 1(a)
hereof.
"Closing" has the meaning set forth in Section 2(a) hereof.
"Closing Date" has the meaning set forth in Section 2(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and interpretations thereunder.
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering
the Securities Act or the Securities Exchange Act.
"Common Stock" means the Company's Common Stock, par value $.01 per
share, and shall also include any common stock of the Company hereafter
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authorized and any capital stock of the Company of any other class
hereafter authorized which is not preferred as to dividends or assets over
any other class of capital stock of the Company or which has ordinary
voting power for the election of directors of the Company.
"Company" means Xxxxxx Technologies, Inc., a New York corporation, its
successors and assigns.
"Consolidated" or "consolidated", when used with reference to any
financial term in this Agreement, means the aggregate for the Company of
the amounts signified by such term for all such Persons, with intercompany
items eliminated, and, with respect to net worth, after eliminating the
portion of net worth properly attributable to minority interests, if any,
in the capital of any such Person (other than in the capital of the
Company) and otherwise as determined in accordance with generally accepted
accounting principles consistently applied (except as otherwise expressly
provided herein).
"Conversion Share" or "Conversion Shares" means the shares of the
Company's Common Stock obtained or obtainable upon conversion of Shares and
shall also include any capital stock or other securities into which
Conversion Shares are changed and any capital stock or other securities
resulting from or comprising a reclassification, combination or subdivision
of, or a stock dividend on, any Conversion Shares. In the event that any
Conversion Shares are sold either in a public offering pursuant to a
registration statement under the Securities Act or pursuant to a Rule 144
Transaction, then the transferees of such Conversion Shares shall not be
entitled to any benefits under this Agreement with respect to such
Conversion Shares and such Conversion Shares shall no longer be considered
to be "Conversion Shares".
"Designated Entity" means, in connection with the rights of any Person
holding less than thirty percent (30%), in the aggregate, of the originally
issued Shares and Conversion Shares, (i) as long as any Shares or
Conversion Shares are held by any Person identified in clause (i) or (ii)
of the definition of "Xxxxxxx Holders", Xxxxxxx Capital Management, 000
Xxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxxx X. Xxxx and (ii) if no
Shares or Conversion Shares are held by a Person identified in clause (i)
or (ii) of the definition of "Xxxxxxx Holders", the entity designated by
the Transferee holding the largest number of such shares, provided, that
such Transferee owns thirty percent (30%) or more, in the aggregate, of the
originally issued Shares and Conversion Shares (in which case such
Transferee shall provide notice to the Corporation of such entity). For so
long as no Shares or Conversion Shares are held by any Person identified in
clause (i) or (ii) of the definition of "Xxxxxxx Holders" and no Person
holds thirty percent (30%) or more, in the aggregate, of the originally
issued Shares and Conversion Shares, there shall be no Designated Entity.
For purposes of this definition of "Designated Entity," the
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calculation of a Person's percentage holdings of Conversion Shares shall be
determined based upon the number of Shares from which such Conversion
Shares derived.
"Disclosure Material" has the meaning specified in Section 4.6(a)
hereof.
"Environmental Laws" means all federal, state, local, foreign, civil
and criminal laws, statutes, ordinances, orders, codes, Environmental
Permits, rules, policies and regulations and common law relating to the
protection of the environment and human health or relating to the handling,
use, generation, treatment, storage, transportation or disposal of
Hazardous Materials, including but not limited to the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. ss. 6901 et seq.; the Toxic Substances
Control Act, 15 U.S.C. ss. 2601 et seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. ss. 9601 et
seq.; the Federal Water Pollution Control Act, 33 U.S.C. ss. 1251 et seq.;
the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. ss. 1801 et seq.; the Occupational Safety and
Health Act, 29 U.S.C. ss. 651; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. ss. 136y et seq.; and the Oil Pollution Act of
1990, 33 U.S.C. ss. 2701 et seq., all as may be amended or superseded from
time to time.
"Environmental Lien" has the meaning set forth in Section 4.16(d)
hereof.
"Environmental Permits" means all permits, licenses, approvals,
authorizations or consents required by any Governmental Authority under any
applicable Environmental Law and includes any and all orders, consent
orders or binding agreements issued or entered into by a Governmental
Authority under any applicable Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each "person" (as defined in Section 3(9) of
ERISA) which is under "common control" with the Company (within the meaning
of Section 414(b), (c), (m) or (o) of the Code).
"Xxxxxxx Funds" means Xxxxxxx US Discovery Fund III, L.P. and Xxxxxxx
US Discovery Offshore Fund III, L.P.
"Xxxxxxx Holders" means (i) the Xxxxxxx Funds, (ii) any Affiliate,
officer or employee of an Affiliate or investment fund managed by an
Affiliate of the Xxxxxxx Funds to which the Xxxxxxx Funds may transfer
record and/or beneficial ownership of the Shares or the Conversion Shares
and (iii) any transferee of Shares or Conversion Shares from a Person named
in clause (i) or (ii) hereof (provided that such transferee is consented to
by the Company, such consent not to be unreasonably withheld) other than a
transferee of Shares or Conversion
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Shares sold in either a public offering pursuant to a registration
statement under the Securities Act or pursuant to a Rule 144 Transaction.
"Governmental Authority" means any federal, state, or local
governmental agency or authority (including regulatory authority) having
jurisdiction over the Company or any of its respective assets or
businesses.
"Guaranty" means (i) any guaranty or endorsement of the payment or
performance of, or any contingent obligation in respect of, any
indebtedness or other obligation of any other Person, (ii) any other
arrangement whereby credit is extended to one obligor (directly or
indirectly) on the basis of any promise or undertaking of another Person
(a) to pay the indebtedness of such obligor, (b) to purchase an obligation
owed by such obligor, (c) to purchase or lease assets (or to provide funds,
goods or services) under circumstances that would enable such obligor to
discharge one or more of its obligations or (d) to maintain the capital,
working capital, solvency or general financial condition of such obligor,
in each case whether or not such arrangement is disclosed in the balance
sheet of such other Person or is referred to in a footnote thereto and
(iii) any liability as a general partner of a partnership in respect of
indebtedness or other obligations of such partnership; provided, however,
that the term "Guaranty" shall not include (1) endorsements for collection
or deposit in the ordinary course of business or (2) obligations of the
Company which would constitute Guaranties solely by virtue of the
continuing liability of a Person which has sold assets subject to
liabilities for the liabilities which were assumed by the Person acquiring
the assets, unless such liability is required to be carried on the
consolidated balance sheet of the Company. The amount of any Guaranty and
the amount of indebtedness resulting from such Guaranty shall be the
maximum amount of the guarantor's potential obligation in respect of such
Guaranty.
"Hazardous Materials" means any petroleum, petroleum hydrocarbons,
petroleum waste or petroleum products, underground storage tanks, asbestos
or asbestos-containing materials, pesticides, lead and lead-containing
materials, urea formaldehyde insulation and polychlorinated biphenyls
(PCBs), ionizing and non-ionizing radiation including radon and
electromagnetic frequency radiation; and any chemicals, materials,
substances or wastes in any amount or concentration which are now or
hereafter "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous wastes,"
"toxic substances," "toxic pollutants" or words of similar import, under
any Environmental Law.
"Indebtedness" of any Person means, without duplication, as of any
date as of which the amount thereof is to be determined, (i) all
obligations of such Person to repay money borrowed (including, without
limitation, all notes payable and drafts accepted representing extensions
of credit, all obligations under letters
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of credit, all obligations evidenced by bonds, debentures, notes or other
similar instruments and all obligations upon which interest charges are
customarily paid), (ii) all Capitalized Leases in respect of which such
Person is liable as lessee or as the guarantor of the lessee, (iii) all
monetary obligations which are secured by any Lien existing on property
owned by such Person whether or not the obligations secured thereby have
been incurred or assumed by such Person, (iv) all conditional sales
contracts and similar title retention debt instruments under which such
Person is obligated to make payments, (v) all Guaranties by such Person and
(vi) all contractual obligations (whether absolute or contingent) of such
Person to repurchase goods sold and distributed. "Indebtedness" shall not
include, however, any unfunded obligations in any employee pension benefit
plan (as defined in ERISA) of the Company.
"Investment" means, with respect to any Person, (i) any loan, advance
or extension of credit by such Person to, and any contributions to the
capital of, any other Person, (ii) any Guaranty by such Person, (iii) any
interest in any capital stock, equity interest or other securities of any
other Person, (iv) any transfer or sale of property of such Person to any
other Person other than upon full payment, in cash, or not less than the
agreed sale price or the fair value of such property, whichever is higher
and (v) any commitment or option to make an Investment if, in the case of
an option, the consideration therefor exceeds $50,000, and any of the
foregoing under clauses (i) through (v) shall be considered an Investment
whether such Investment is acquired by purchase, exchange, merger or any
other method; provided, that the term "Investment" (1) shall not include an
Investment in the Company, (2) shall not include current trade and customer
accounts receivable and allowances, provided they relate to goods furnished
in the ordinary course of business and are given in accordance with the
customary practices of the Company, (3) shall not include temporary
investments of excess cash of the Company in any of the following: (A)
investment grade obligations maturing within one year of their issuance
which as to principal and interest constitute direct obligations of, or
obligations guaranteed by, the United States of America, (B) negotiable
certificates of deposit of banks or trust companies which are organized
under the laws of the United States of America or any state thereof and
which have capital and surplus of at least $500,000,000, (C) commercial
paper which is rated not less than prime-one or A-1 or their equivalents by
Xxxxx'x Investor Service, Inc. or Standard & Poor's Corporation or their
successors, (D) any repurchase agreement secured by any one or more of the
foregoing and (E) money market funds primarily investing in any of the
foregoing securities and sponsored by or affiliated with nationally
recognized brokerage or investment advisory firms, and (4) shall not
include Investments of the Company existing on the date hereof and
disclosed on Schedule 3 hereto.
"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security interest of any kind or nature whatsoever
(including, without
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limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same effect as any of the
foregoing, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against the
assignor), any filing of a financing statement as debtor under the Uniform
Commercial Code or any similar statute and any agreement to give or make
any of the foregoing.
"Outside Directors" means those directors on the Company's Board of
Directors at any time who are not otherwise Affiliates of or employed by
the Company.
"Outstanding" or "outstanding" means (a) when used with reference to
the Shares or the Conversion Shares as of a particular time, all Shares or
Conversion Shares theretofore duly issued except (i) Shares or Conversion
Shares theretofore reported as lost, stolen, mutilated or destroyed or
surrendered for transfer, exchange or replacement, in respect of which new
or replacement Shares or Conversion Shares have been issued by the Company,
(ii) Shares or Conversion Shares theretofore cancelled by the Company and
(iii) Shares or Conversion Shares registered in the name of, as well as
Shares or Conversion Shares owned beneficially by, the Company, or any of
its Affiliates. For purposes of the preceding sentence, in no event shall
"Affiliates" include (x) the persons which are identified as "Purchasers"
on Schedule 1 hereto or (y) any Affiliates of any such persons.
"Pension Plan" means any "employee pension benefit plan" as defined in
Section 3(2) of ERISA.
"Person" or "person" means an individual, corporation, partnership,
firm, association, joint venture, trust, unincorporated organization,
government, governmental body, agency, political subdivision or other
entity.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, or whether for the
benefit of a single individual or more than one individual including, but
not limited to, any "employee benefit plan" within the meaning of Section
3(3) of ERISA.
"Preferred Stock" means any class of the capital stock of a
corporation (whether or not convertible into any other class of such
capital stock) which has any right, whether absolute or contingent, to
receive dividends or other
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distributions of the assets of such corporation (including, without
limitation, amounts payable in the event of the voluntary or involuntary
liquidation, dissolution or winding-up of such corporation), which right is
superior to the rights of another class of the capital stock of such
corporation. "Preferred Stock" includes, without limitation, the Series A
Convertible Preferred Stock.
"Purchaser" means the person who accepts and agrees to the terms
hereof as indicated by such person's signature (as "the undersigned
Purchaser") on the execution page of this Agreement, together with its
successors and assigns.
"Purchasers" has the meaning set forth in Section 1(c) hereof,
together with their respective successors and assigns.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, among the Company and each of the
Purchasers.
"Restricted Payment" means (i) every payment in connection with the
redemption, purchase, retirement or other acquisition by or on behalf of
the Company of any shares of the Company's capital stock (as defined
below), whether or not owned by the Company, (ii) any prepayments or
repayments made on Indebtedness of the Company, (iii) every payment to or
on behalf of any Affiliate of the Company on account of or with respect to
any lease arrangements, and (iv) every payment by or on behalf of the
Company (whether as repayment or prepayment of principal or as interest or
otherwise) on or with respect to (A) any obligation to repay money borrowed
owing to any Affiliate of the Company or (B) any obligation, to any Person,
of any Affiliate of the Company or to any other holder of shares of the
Company's capital stock (as defined below), which obligation is assumed, or
is the subject of a Guaranty, by the Company; provided, however, that the
term "Restricted Payment" shall not apply to (1) any payment in respect of
capital stock of the Company to the extent payable in shares of the capital
stock of the Company, (2) any regularly scheduled prepayment or repayment
of Indebtedness, provided that such Indebtedness being prepaid or repaid is
not at the time of such prepayment or repayment or at any prior time
thereto owing to an Affiliate of the Company, provided that regularly
scheduled payments or prepayments pursuant to the Affiliate Loan are not
"Restricted Payments", (3) payments to DuPont Chemical and Energy
Operations, Inc. and X.X. XxXxxx de Nemours and Company in the ordinary
course of business, consistent with past practice, and not in connection
with any financing or extraordinary corporate transaction are not
"Restricted Payments", or (4) any payments, distributions or other
transfers or actions on or with respect to the Shares or the Conversion
Shares or to the Purchasers (or holders of Shares or the Conversion Shares)
under the Stock Purchase Agreements. For purposes of this
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definition, "capital stock" shall also include warrants and other rights
and options to acquire shares of capital stock (whether upon exercise,
conversion, exchange or otherwise).
"Rule 144" means (i) Rule 144 under the Securities Act as such Rule is
in effect from time to time and (ii) any successor rule, regulation or law,
as in effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as such Rule
is in effect from time to time and (ii) any successor rule, regulation or
law, as in effect from time to time.
"Rule 144 Transaction" means a transfer of Conversion Shares (A)
complying with Rule 144 as such Rule is in effect on the date of such
transfer (but not including a sale other than pursuant to "brokers'
transactions" as defined in clauses (1) and (2) of paragraph (g) of such
Rule as in effect on the date hereof) and (B) occurring at a time when
Conversion Shares are registered pursuant to Section 12 of the Securities
Exchange Act.
"SEC Reports" has the meaning set forth in Section 4.19 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules, regulations and interpretations thereunder.
"Series A Convertible Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $.01 per share, which will have the
rights, powers and privileges on the Closing Date as more fully set forth
in the Certificate of Amendment.
"Shares" has the meaning set forth in Section 1(a) hereof. In the
event that any Shares are sold either in a public offering pursuant to a
registration statement under Section 5 of the Securities Act or pursuant to
a Rule 144 Transaction, then the transferees of such Shares shall not be
entitled to any benefits under this Agreement with respect to such Shares
and such Shares shall no longer be considered to be "Shares" for purposes
of any consent or waiver provision of this Agreement.
"Stock Purchase Agreements" has the meaning set forth in Section 1(c)
hereof.
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"Stockholders' Agreement" means the Stockholders' Agreement, dated as
of the Closing Date, among the Company, the Purchasers and certain other
stockholders of the Company.
"Stockholders' Meeting" means the Company's 1999 annual meeting of
stockholders.
"Subsidiary", with respect to any Person, means any corporation,
association or other entity of which more than 50% of the total voting
power of shares of stock or other equity interests (without regard to the
occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is, at the time as of which any determination
is being made, owned or controlled, directly or indirectly, by such Person
or one or more of its Subsidiaries, or both. The term "Subsidiary" or
"Subsidiaries" when used herein without reference to any particular Person,
means a Subsidiary or Subsidiaries of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any
nature whatsoever, whether disputed or not, together with any interest,
penalties, additions to tax or additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau, body,
department or authority of any United States federal, state or local
jurisdiction, or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Transferees" shall mean any transferee (except for a Xxxxxxx Holder)
of Shares or Conversion Shares from a Xxxxxxx Holder. Transferees shall not
include a transferee of Shares or Conversion Shares sold in either a public
offering pursuant to a registration statement under the Securities Act or
pursuant to a Rule 144 Transaction.
(b) For all purposes of this Agreement, except as otherwise expressly
provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision;
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(ii) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles consistently applied (except as otherwise provided herein);
(iii) all computations provided for herein, if any, shall be made in
accordance with generally accepted accounting principles consistently
applied (except as otherwise provided herein);
(iv) any uses of the masculine, feminine or neuter gender shall also
be deemed to include any other gender, as appropriate;
(v) all references herein to actions by the Company, such as "create",
"sell", "transfer", "dispose of", etc., mean such action whether voluntary
or involuntary, by operation of law or otherwise;
(vi) the exhibits and schedules to this Agreement shall be deemed a
part of this Agreement;
(vii) each of the representations and warranties of the Company
contained in Section 4 hereof is separate and is not limited, qualified or
modified by the existence, wording or satisfaction of any other
representation or warranty of the Company in Section 4 hereof or otherwise;
(viii) each of the covenants of the Company contained in Sections 7, 8
and 9 hereof or otherwise contained in any Stock Purchase Agreement, the
Certificate of Amendment, the Stockholders' Agreement or the Registration
Rights Agreement is separate and is not limited or satisfied by the
existence, wording or satisfaction of any other covenant of the Company in
Section 7, 8 or 9 hereof or otherwise; and
(ix) all references herein (in covenants or otherwise) to any
action(s) which are to be taken (or which are prohibited from being taken)
by any Person or the Company shall apply to such Person or the Company, as
the case may be, whether such action is taken directly or indirectly.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows as of the
date hereof and as of the Closing Date:
4.1. Corporate Existence, Power and Authority.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation. The Company
is duly qualified, licensed and authorized to do business and is in good
standing in each jurisdiction in which it owns or leases any property or in
which the conduct of its business requires it to so qualify or be so licensed,
except for such jurisdictions where the failure to so qualify or be so licensed
would not have a material adverse effect on the Company's assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects.
(b) No proceeding has been commenced looking toward the dissolution or
merger of the Company or the amendment of its certificate of incorporation
(other than the Certificate of Amendment). The Company is not in violation in
any respect of its certificate of incorporation or by-laws.
(c) The Company has all requisite corporate power and authority to own or
to hold under lease and to operate the properties it owns or holds and to
conduct its business as now being conducted.
(d) The Company has all requisite corporate power and authority to execute,
deliver, enter into, consummate the transactions contemplated by and perform its
obligations under (i) the Stock Purchase Agreements, including, without
limitation, the issuance by the Company of the Shares and the Conversion Shares
as contemplated herein and therein and in the Certificate of Amendment, (ii) the
Stockholders' Agreement and (iii) the Registration Rights Agreement. The
execution, delivery and performance of the Stock Purchase Agreements, the
Stockholders' Agreement and the Registration Rights Agreement by the Company
(including, without limitation, the issuance by the Company of the Shares and
the Conversion Shares as contemplated herein and therein and in the Certificate
of Amendment) have been duly authorized by all required corporate actions. The
Company has duly executed and delivered the Stock Purchase Agreements, the
Stockholders' Agreement and the Registration Rights Agreement. The Stock
Purchase Agreements, the Stockholders' Agreement and the Registration Rights
Agreement constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to the
rights of creditors generally.
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4.2. Capital Stock.
(a) Schedule 6(a) hereto correctly and completely lists (i) the authorized
capital stock of the Company (Common Stock and Preferred Stock), (ii) the number
of designated shares of Preferred Stock in each series or class after giving
effect to the Certificate of Amendment and (iii) on the Closing Date, after
giving effect to the issuance of Shares contemplated by the Stock Purchase
Agreements, the number of shares outstanding in each series or class. All of
such outstanding shares are, or on the Closing Date will be, duly authorized,
validly issued and outstanding, fully paid and non-assessable. The shares of the
Company's Common Stock issuable upon conversion of the Series A Convertible
Preferred Stock will be, when issued in accordance with the terms of the Series
A Convertible Preferred Stock, duly authorized, validly issued, fully paid and
non-assessable. Except as provided in the Certificate of Amendment, none of the
shares of the Company's capital stock which will be outstanding at the Closing
(i) were or will be subject to preemptive rights when issued or (ii) provide the
holders thereof with any preemptive rights with respect to any issuances of
capital stock.
(b) Schedule 6(b) hereto correctly and completely lists the number and
purpose for which such shares of the Company's Common Stock are reserved for
issuance by the Company.
(c) Except as referred to in Schedule 6(b), there are no outstanding
options, warrants, subscriptions, rights, convertible securities or other
agreements or plans under which the Company may become obligated to issue, sell
or transfer shares of its capital stock or other securities.
(d) Except as disclosed on Exhibit B hereto, there are and will be no
outstanding registration rights with respect to any capital stock of the
Company, which (in either case) will be outstanding on the Closing Date, or any
capital stock referred to in Section 4.2(b) or 4.2(c).
(e) Except as disclosed on Exhibit B hereto, there are no voting
agreements, voting trusts, proxies or other agreements or understandings with
respect to the voting of any capital stock of the Company.
(f) Except as disclosed on Exhibit B hereto, there are no anti-dilution
protections or other adjustment provisions in existence with respect to any
capital stock of the Company or any capital stock referred to in Section 4.2(b)
or 4.2(c).
(g) The Certificate of Amendment has been duly adopted by the Company's
Board of Directors and, when filed with the Secretary of State of the State of
New York, will be fully effective as an amendment to the Company's certificate
of incorporation. Upon filing of the Certificate of Amendment with the Secretary
of State of New York, the Shares will have all of the rights, priorities and
terms set forth in the Certificate of Amendment.
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(h) Those Persons who own, directly or indirectly, more than 5% of the
Company's outstanding Common Stock are as follows: Xxxxx X. Xxxxxx, Xxxxxx X.
Xxxxxx, Xxxxxxx X. Xxxxxxxxxxx, Xxxxxxx X. Xxxx-Xxxxxxxx, Xxxxxxxx X. Xxxxxx and
XxXxxx Chemical and Energy Operations, Inc.
4.3. Subsidiaries.
The Company has no Subsidiaries other than Xxxxxx Holdings, Inc., Xxxxxx
Technologies Company and Environmental Support Solutions, Inc. The Company has
no Investments in any other Person, except as described in the preceding
sentence.
4.4. Business.
The Company sells refrigerants and provides refrigerant management
services, consisting primarily of recovery and reclamation of the refrigerants
used in commercial air conditioning and refrigeration systems, as well as
RefrigerantSide(TM) services, through which the Company performs decontamination
to remove moisture, oils and other contaminants in such systems. The Company
neither currently engages in, nor has any intention of engaging in, any other
business.
4.5. No Defaults or Conflicts.
(a) The Company is not in violation or default in any material respect (and
is not in default in any material respect regarding any Indebtedness) under any
indenture, agreement or instrument to which it is a party or by which it or its
properties may be bound. The Company is not in default under any material order,
writ, injunction, judgment or decree of any court or other Governmental
Authority or arbitrator(s) having jurisdiction over the Company.
(b) The execution, delivery and performance by the Company of the Stock
Purchase Agreements, the Stockholders' Agreement and the Registration Rights
Agreement and any of the transactions contemplated hereby or thereby (including,
without limitation, the issuance of the Shares and the Conversion Shares as
contemplated herein and therein and in the Certificate of Amendment and the
adoption of the Certificate of Amendment as an amendment to the Company's
certificate of incorporation) do not and will not (i) violate or conflict with,
with or without the giving of notice or the passage of time or both, any
provision of (A) the certificate of incorporation or by-laws of the Company or
(B) any material law, rule, regulation or order of any Governmental Authority,
or any material judgment, writ, injunction, decree, award or other action of any
court, Governmental Authority or arbitrator(s), or any agreement, indenture or
other instrument applicable to the Company or any of its properties, (ii) result
in the creation of any Lien upon any of the Company's properties, assets or
revenues, (iii) require the consent, waiver, approval, order or authorization
of, or declaration, registration, qualification or filing with, any Person
(whether or not a Governmental Authority and including, without limitation,
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any shareholder approval), or (iv) cause antidilution clauses of any outstanding
securities to become operative or give rise to any preemptive rights.
4.6. Disclosure Materials; Other Information.
(a) The Company has previously furnished to the Purchaser the materials
described on Schedule 4 hereto (the "Disclosure Material"). The audited and
unaudited financial statements referred to or contained in the materials
referred to on Schedule 4 fairly present the consolidated financial condition of
the Company as of the respective dates thereof and the consolidated results of
the operations of the Company for such periods and have been prepared in
accordance with generally accepted accounting principles consistently applied,
except that any such unaudited statements may omit notes and may be subject to
year-end adjustment.
(b) Since September 30, 1998, except as disclosed on Exhibit B hereto, (i)
the business of the Company has been conducted in the ordinary course and (ii)
there has been no material adverse change in the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis. As of the
Closing Date and as of the date hereof, there are no material liabilities of the
Company which would be required to be provided for in a consolidated balance
sheet of the Company as of either such date prepared in accordance with
generally accepted accounting principles consistently applied, other than
liabilities provided for in the financial statements referred to in Section
4.6(a). Since September 30, 1998, no amount or property has directly or
indirectly been declared, ordered, paid, made or set aside for any Restricted
Payment nor has any such action been agreed to.
(c) There are no material liabilities, contingent or otherwise, of the
Company that have not been disclosed in the financial statements referred to in
Section 4.6(a) or otherwise disclosed in the Disclosure Material.
(d) None of the Disclosure Material contained or contains a false or
misleading statement of a material fact or omits to state any material fact
necessary in order to make the statements made in such Disclosure Material, in
light of the circumstances under which they were made, not misleading.
(e) There is no fact known to the Company which is not in the Disclosure
Material and which materially and adversely affects, or in the future might
materially and adversely affect, the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis.
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4.7. Litigation.
Except as disclosed on Exhibit B hereto, there is no action, suit,
proceeding, investigation or claim pending or, to the knowledge of the Company,
threatened in law, equity or otherwise before any court, Governmental Authority
or arbitrator which (i) questions the validity of the Stock Purchase Agreements,
the Certificate of Amendment, the Stockholders' Agreement, the Registration
Rights Agreement, the Shares or the Conversion Shares or any action taken or to
be taken pursuant hereto or thereto, (ii) might adversely affect the right,
title or interest of any Purchaser to the Shares or the Conversion Shares or
(iii) might result in a material adverse change in the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis.
4.8. Taxes.
The Company has duly and timely filed all Tax Returns required to be filed
by it, and each such Tax Return correctly and completely reflects the Tax
liability and all other information required to be reported thereon. The Company
has paid or caused to be paid all Taxes (whether or not reflected on such Tax
Returns) that are due and payable. The provision for Taxes due by the Company in
the most recent financial statement included in the Disclosure Material is
sufficient for all unpaid Taxes, being current Taxes not yet due and payable, of
the Company, as of the end of the period covered by such financial statement,
and as of the Closing Date, such provision, as adjusted for the passage of time
through the Closing Date, will be sufficient for the then-accrued and unpaid
Taxes not yet due and payable of the Company. There is no dispute concerning any
Tax liability of the Company either threatened, claimed or raised by any Taxing
Authority, and the Company does not expect any Taxing Authority to assess
additional Taxes against or in respect of it for any past period. The Company
has withheld and paid, or, if not yet due for payment, set aside in accounts for
such purposes, all Taxes required to have been withheld in connection with
amounts paid or owing to any employee, creditor, independent contractor or other
third party. The Company has no liability for Taxes of any Person other than the
Company as a transferee or successor, by contract or otherwise. There are no
applicable Taxes payable by the Company in connection with the execution and
delivery of the Stock Purchase Agreements, the Stockholders' Agreement or the
Registration Rights Agreement or the issuance by the Company of the Shares or
the Conversion Shares.
4.9. ERISA.
(a) All Benefit Plans are listed in Exhibit B, and copies of all
documentation relating to such Benefit Plans have been delivered or made
available to the Purchasers (including copies of written Benefit Plans, written
descriptions of oral Benefit Plans, summary plan descriptions, trust agreements,
the three most recent annual returns, employee communications, and IRS
determination letters).
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(b) Each Benefit Plan has at all times been maintained and administered in
all material respects in accordance with its terms and with the requirements of
all applicable law, including ERISA and the Code, and each Benefit Plan intended
to qualify under Section 401(a) of the Code has at all times since its adoption
been so qualified, and each trust which forms a part of any such plan has at all
times since its adoption been tax-exempt under Section 501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding deficiency"
within the meaning of Section 302 of ERISA or Section 412 of the Code, and the
"amount of unfunded benefit liabilities" within the meaning of Section
4001(a)(18) of ERISA does not exceed zero with respect to any Benefit Plan
subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of Section 4043 of ERISA) has
occurred with respect to any Benefit Plan or any Plan maintained by an ERISA
Affiliate since the effective date of said Section 4043.
(e) No Benefit Plan is a multiemployer plan within the meaning of Section
3(37) of ERISA.
(f) No direct, contingent or secondary liability has been incurred or is
expected to be incurred by the Company under Title IV of ERISA to any party with
respect to any Benefit Plan, or with respect to any other Plan presently or
heretofore maintained or contributed to by any ERISA Affiliate.
(g) Neither the Company nor any ERISA Affiliate has incurred any liability
for any tax imposed under Section 4971 through 4980B of the Code or civil
liability under Section 502(i) or (l) of ERISA.
(h) No benefit under any Benefit Plan, including, without limitation, any
severance or parachute payment plan or agreement, will be established or become
accelerated, vested or payable by reason of any transaction contemplated under
this Agreement.
(i) No Benefit Plan provides health or death benefit coverage beyond the
termination of an employee's employment, except as required by Part 6 of
Subtitle B of Title I of ERISA or Section 4980B of the Code or any State laws
requiring continuation of benefits coverage following termination of employment.
(j) No suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of plan activities) has been brought or, to the
knowledge of the Company, threatened against or with respect to any Benefit Plan
and there are no facts or circumstances known to the Company that could
reasonably be expected to give rise to any such suit, action or other
litigation.
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(k) All contributions to Benefit Plans that were required to be made under
such Benefit Plans have been made, and all benefits accrued under any unfunded
Benefit Plan have been paid, accrued or otherwise adequately reserved in
accordance with generally accepted accounting principles, all of which accruals
under unfunded Benefit Plans are as disclosed in Exhibit B, and the Company has
performed all material obligations required to be performed under all Benefit
Plans.
(l) The execution, delivery and performance of the Stock Purchase
Agreements, the Stockholders' Agreement and the Registration Rights Agreement
and the consummation of the transactions contemplated hereby and thereby
(including, without limitation, the offer, issuance and sale by the Company, and
the purchase by the Purchaser of the Shares and the Conversion Shares) will not
involve any "prohibited transaction" within the meaning of ERISA or the Code.
4.10. Legal Compliance.
(a) The Company has complied with all applicable laws, rules, regulations,
orders, licenses, judgments, writs, injunctions, decrees or demands, except to
the extent that failure to so comply would not materially adversely affect the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis.
(b) There are no material adverse orders, judgments, writs, injunctions or
decrees of any court or administrative body, domestic or foreign, or of any
other Governmental Authority, domestic or foreign, outstanding against the
Company.
4.11. Outstanding Securities.
All securities (as defined in the Securities Act) of the Company have been
offered, issued, sold and delivered in compliance with, or pursuant to
exemptions from, all applicable federal and state laws, and the rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities.
4.12. Permits, Licenses and Approvals; Intellectual Property and Other
Rights.
Except as listed on Schedule 4.12, the Company owns or possesses and holds
free from burdensome restrictions or material conflicts with the rights of
others all franchises, licenses, permits, consents, approvals and other
authority (governmental or otherwise), patents, patent rights, trademarks,
trademark rights, trade names, trade name rights and copyrights (each of which
is listed on Exhibit B hereto), and all rights and privileges with respect to
any of the foregoing, as are necessary for the conduct of its business as now
being conducted and as proposed to be conducted. To the best of the Company's
knowledge, the Company is not in default in any material respect under any of
such franchises, licenses, permits, consents,
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approvals or other authority. The rights of (and use by) the Company with
respect to such or any other patents, patent rights, trademarks, trademark
rights, trade names, trade name rights or copyrights do not conflict with or
infringe any rights of others in a manner which might materially and adversely
affect the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company on a
consolidated basis, and no such claim of conflict or infringement has been
asserted by any Person.
4.13. Key Employees.
The Company has good relationships with its employees and has not had and
does not expect any substantial labor problems. The Company has no knowledge as
to any intentions of any key employee or any group of employees to leave the
employ of the Company. Except as set forth on Exhibit B hereto, the employees of
the Company are not and have never been represented by any labor union, and no
collective bargaining agreement is binding and in force against the Company or
currently being negotiated by the Company.
4.14. Properties.
The Company has good and marketable title to its real property, all of
which is disclosed on Exhibit B hereto, and good and marketable title to each of
its other properties. Certain real property used by the Company in the conduct
of its business is held under lease (as identified on Exhibit B hereto), and the
Company is not aware of any pending or threatened claim or action by any lessor
of any such property to terminate any such lease. All such leases are valid and
in full force and effect, and none of such leases is in default. Except as
disclosed on Schedule 5, none of the properties owned or leased by the Company
is subject to any Liens which could materially and adversely affect the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis.
4.15. Suppliers and Customers.
(a) The Company has no reason to believe that it does not have adequate
sources of supply for its business as currently conducted and as proposed to be
conducted. The Company has good relationships with all of its material sources
of supply of goods and services and does not anticipate any material problem
with any such material sources of supply.
(b) The Company has no knowledge that the customer base of the Company
might materially decrease.
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4.16. Environmental Compliance.
Except as disclosed on Schedule 4.16 hereto:
(a) the Company has not received any verbal or written notice, citation,
subpoena, summons, complaint or other correspondence or communication from any
person with respect to the presence of any Hazardous Material at, on, about,
under, emanating to or from or affecting any of the real property (including
improvements) currently or formerly owned, leased, operated or occupied by the
Company or any predecessors thereof;
(b) there has been no intentional or unintentional, gradual or sudden,
release, disposal or discharge upon, into, beneath or from the real property
(including improvements) currently or formerly owned, leased, operated or
occupied by the Company or any predecessors thereof that has caused or is
causing soil or groundwater contamination which under applicable Environmental
Laws could require investigation or remediation or could otherwise create a
material liability or obligation on the part of the Company;
(c) the Company is in material compliance with all applicable Environmental
Laws and the terms and conditions of all Environmental Permits;
(d) to the best knowledge of the Company after reasonable inquiry, there
are no Liens arising under or pursuant to any Environmental Law ("Environmental
Liens") relating to any real property (including improvements thereon) currently
owned by the Company;
(e) there are no (i) underground storage tanks, (ii) polychlorinated
biphenyl containing equipment or (iii) asbestos-containing materials at any site
currently owned, leased, operated or occupied by the Company;
(f) the Company has not transported or arranged for the treatment, storage,
handling, disposal or transportation of any Hazardous Material to any location
which could reasonably be expected to result in material liability to the
Company; and
(g) no real property currently or previously owned, leased, operated or
occupied by the Company or any predecessors thereof is currently listed, or to
the knowledge of the Company, proposed to be listed on the National Priorities
List, the Comprehensive Environmental Response, Compensation and Liability
Information System or on any similar state list of sites requiring investigation
or cleanup.
4.17. No Burdensome Agreements.
To the best of the knowledge of the Company, (i) the Company is not a party
to, or bound by (nor are any of its properties affected by), any commitment,
contract or agreement, any term of which materially adversely affects, or in the
future would reasonably be expected to
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materially adversely affect, the assets, properties, business, affairs, results
of operations, condition (financial or otherwise) or prospects of the Company on
a consolidated basis and (ii) the Company is not a party to any contract or
agreement with any Affiliate of the Company, the terms of which are less
favorable to the Company than those which might have been obtained, at the time
such contract or agreement was entered into, from a person who was not such an
Affiliate.
4.18. Offering of Shares.
Neither the Company nor, to the Company's knowledge, any agent or other
Person acting on its behalf, directly or indirectly, (i) offered any of the
Shares or any similar security of the Company (A) by any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or (B) for sale to or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with, any
person other than the Purchasers and not more than fifty (50) other
institutional investors each of which the Company reasonably believed was an
"accredited investor" within the meaning of Regulation D under the Securities
Act or (ii) has done or caused to be done (or has omitted to do or to cause to
be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares within the provisions of Section 5 of the
Securities Act or the filing, notification or reporting provisions of any state
securities laws.
4.19. SEC Reports.
The Company has filed all proxy statements, reports and other documents
required to be filed by it under the Securities Exchange Act. The Company has
furnished the Purchaser with copies of (i) its Annual Report on Form 10-K for
the fiscal year ended December 31, 1997, (ii) its Quarterly Reports on Form 10-Q
for the fiscal quarters ended March 31, 1998, June 30, 1998 and September 30,
1998 and (iii) its Proxy Statement dated February 16, 1999 (collectively, the
"SEC Reports"). Each SEC Report was in substantial compliance with the
requirements of its respective form and none of the SEC Reports, nor the
financial statements (and the notes thereto) included in the SEC Reports, as of
their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.20. Indebtedness.
Schedule 2 hereto sets forth (i) the amount of all Indebtedness of the
Company outstanding on such Closing Date, which, individually, exceeds $50,000,
(ii) any Lien with respect to such Indebtedness and (iii) a description of each
instrument or agreement governing such Indebtedness. The Company has made
available to the Purchaser a complete and correct copy of each such instrument
or agreement (including all amendments, supplements or modifications thereto).
No material default exists with respect to or under any such Indebtedness
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or any material instrument or agreement relating thereto and no event or
circumstance exists with respect thereto that (with notice or the lapse of time
or both) could give rise to such a default.
4.21. Use of Proceeds.
The Company will use the proceeds realized from the sale of the Shares to
fund the roll-out of the Depot Strategy program, fees and expenses of the
transactions contemplated hereby and for working capital purposes. No portion of
such proceeds will be used for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying, within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System, as amended from time to time,
any "margin stock" as defined in said Regulation U, or for the purpose of
purchasing, carrying or trading in securities within the meaning of Regulation T
of the Board of Governors of the Federal Reserve System, as amended from time to
time, or for the purpose of reducing or retiring any indebtedness which both (i)
was originally incurred to purchase any such margin stock or other securities
and (ii) was directly or indirectly secured by such margin stock or other
securities. None of the assets of the Company includes any such "margin stock."
The Company has no present intention of acquiring any such "margin stock."
4.22. Other Names.
The business previously or presently conducted by the Company has not been
conducted under any corporate, trade or fictitious name, other than those names
listed on Exhibit B hereto.
4.23. Brokers.
Except as disclosed on Exhibit B hereto, no broker, finder or investment
banker or other party is entitled to any brokerage, finder's or other similar
fee or commission in connection with any Stock Purchase Agreement, the
Stockholders' Agreement, the Registration Rights Agreement or the Certificate of
Amendment or any of the transactions contemplated hereby or thereby, based upon
arrangements made by or on behalf of the Company or any of its Affiliates.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
5.1. Corporate Power and Authority.
The Purchaser has all requisite power, authority and legal right to
execute, deliver, enter into, consummate the transactions contemplated by and
perform its obligations under this Agreement, the Stockholders' Agreement and
the Registration Rights Agreement. The execution, delivery and performance of
this Agreement, the Stockholders' Agreement and the
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Registration Rights Agreement by the Purchaser have been duly authorized by all
required corporate and other actions. The Purchaser has duly executed and
delivered this Agreement, the Stockholders' Agreement and the Registration
Rights Agreement, and this Agreement, the Stockholders' Agreement and the
Registration Rights Agreement constitute the legal, valid and binding
obligations of the Purchaser enforceable against the Purchaser in accordance
with their respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to the rights of creditors generally.
5.2. Investment Intent.
The Purchaser is capable of evaluating the risk of its investment in the
Shares being purchased by it and is able to bear the economic risk of such
investment. The Purchaser is purchasing the Shares to be purchased by it for its
own account for investment and not with a present view to any distribution
thereof in violation of applicable securities laws; provided, however, that,
upon notice to the Company, the Purchaser may transfer record and/or beneficial
ownership of the Shares or the Conversion Shares to one or more Affiliates,
officers or employees of Affiliates or investment funds managed by Affiliates of
the Purchaser, in all cases in compliance with federal securities laws. It is
understood that the disposition of the Purchaser's Shares or Conversion Shares
shall at all times be within the Purchaser's control. If the Purchaser should in
the future decide to dispose of any of its Shares or Conversion Shares, it is
understood that it may do so only in compliance with the Securities Act,
applicable securities laws, this Agreement and the right of first offer set
forth in Section 5 of the Stockholders' Agreement. The Purchaser is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
5.3. Brokers.
Except as disclosed on Exhibit B hereto, no broker, finder or investment
banker or other party is entitled to any brokerage, finder's or other similar
fee or commission in connection with any Stock Purchase Agreement, the
Stockholders' Agreement, the Registration Rights Agreement or the Certificate of
Amendment or any of the transactions contemplated hereby or thereby, based upon
arrangements made by or on behalf of the Purchaser or any of its Affiliates.
5.4. Ownership of Common Stock.
The Purchaser currently does not own any shares of Common Stock and will
not acquire any additional shares of Common Stock in the public market. Any
future ownership by the Purchaser of shares of Common Stock shall be subject to
the limitations set forth in Section 4(a) of the Certificate of Amendment.
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SECTION 6. RESTRICTIONS ON TRANSFER
The Purchaser agrees that it will not sell or otherwise dispose of any
Shares or Conversion Shares unless such Shares or Conversion Shares have been
registered under the Securities Act and, to the extent required, under any
applicable state securities laws, or pursuant to an applicable exemption from
such registration requirements. The Company may endorse on all Share
certificates a legend stating or referring to such transfer restrictions and may
place a stop order with the Company's transfer agent for the Shares.
SECTION 7. INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. Financial Information.
(a) The Company will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with generally accepted accounting
principles consistently applied.
(b) So long as any of the Shares remain outstanding, the Company will
deliver to (x) each holder of thirty percent (30%) or more of the Shares and
Conversion Shares and (y) a Designated Entity, the following:
(i) as soon as practicable but not later than five (5) Business Days
after their issuance, and in any event within ninety-five (95) days after
the close of each fiscal year of the Company, (A) a consolidated balance
sheet of the Company as of the end of such fiscal year and (B) consolidated
statements of operations, stockholders' equity and cash flows of the
Company for such fiscal year, in each case for statements set forth in
clause (B) setting forth in comparative form the corresponding figures for
the preceding fiscal year, all such balance sheets and statements to be in
reasonable detail and certified without qualification by BDO Xxxxxxx, LLP
or any "Big Five" independent public accounting firm selected by the Audit
Committee of the Board of Directors of the Company and approved by the
shareholders of the Company, and such statements shall be accompanied by a
management analysis of any material differences between the results for
such fiscal year and the corresponding figures for the preceding year;
(ii) as soon as practicable, copies (A) of all financial statements,
proxy material or reports sent to the Company's stockholders, (B) of any
public press releases and (C) of all reports or registration statements
filed with the Commission pursuant to the Securities Act or the Securities
Exchange Act;
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(iii) as soon as practicable and in any event within fifty (50) days
after the close of each of the first three (3) fiscal quarters of the
Company, (A) a consolidated balance sheet of the Company as of the end of
such fiscal quarter, (B) consolidated statements of operations,
stockholders' equity and cash flows of the Company for the portion of the
fiscal year ended with the end of such quarter, in each case in reasonable
detail, certified by the Chief Financial Officer, Chief Executive Officer
or President of the Company and setting forth in comparative form the
corresponding figures for the comparable period one year prior thereto
(subject to normal year-end adjustments), together with a management
analysis of any material differences between such results and the
corresponding figures for such prior period and (C) a certificate of the
Chief Financial Officer, Chief Executive Officer or President of the
Company certifying the Company's compliance with the covenants contained in
Section 9 (other than Section 9.12) of this Agreement;
(iv) as soon as practicable and without duplication of any of the
above items, any other materials furnished to the Company's Board of
Directors or to holders of the Company's capital stock or Indebtedness,
including, without limitation, any compliance certificates furnished in
respect of such Indebtedness; and
(v) as soon as practicable, such other information as may reasonably
be requested by a holder of Shares.
(c) The Company will deliver to each member of the Company's Board of
Directors and each observer to the Company's Board of Directors appointed
pursuant to Section 2(a) of the Stockholders' Agreement, as soon as practicable
(and in the case of (iii), prior to the end of each fiscal year) and without
duplication of any of the items listed below, the following:
(i) copies of any annual, special or interim audit reports or
management or comment letters with respect to the Company or its operations
submitted to the Company by independent public accountants;
(ii) copies of summary financial information prepared on a quarterly
basis regarding the Company on a consolidated basis as presented to the
Company's Board of Directors and any other summary financial information
otherwise prepared;
(iii) copies of the annual budget and business plan for the next
fiscal year;
(iv) copies of all formal communications, from time to time, to
directors of the Company (including without limitation all information
furnished to such directors in connection with such communications), and
copies of minutes of meetings of the Company's Board of Directors (and of
any executive committees thereof);
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(v) notice of default under any material agreement, contract or other
instrument to which the Company is a party or by which it is bound;
(vi) notice of any action or proceeding which has been commenced or
threatened against the Company and which, if adversely determined, would
have, individually or in the aggregate, a material adverse effect on the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a
consolidated basis; and
(vii) copies of all filings made with the Commission.
(d) All such financial statements referred to in this Section 7.1 shall be
prepared in accordance with generally accepted accounting principles
consistently applied (except for any change in accounting principles specified
in the accompanying certificate and except that any interim financial statements
may omit notes and may be subject to normal year-end adjustments).
(e) Without limiting the foregoing provisions of this Section 7.1, the
Company agrees that, if requested in writing by any holder of Shares, it will
not deliver to such holder (until otherwise instructed by a holder of thirty
percent (30%) or more of the Shares) (x) any non-public information or
non-public materials regarding the Company (whether described in this Section
7.1 or otherwise) and (y) any information (whether or not included in clause
(x)) which such holder specifies that it does not want to receive. The Company
shall comply with any such request with respect to each such Purchaser and any
subsequent holders of Shares acquired directly or indirectly (through one or
more transfers) from such Purchaser, until instructed otherwise by the then
holder of such Shares.
7.2. Communication with Accountants.
The Company hereby authorizes (a) each holder of thirty percent (30%) or
more of the Shares and Conversion Shares, and (b) a Designated Entity, to
communicate directly with the independent certified public accountants for the
Company and authorizes such accountants to disclose to each such holder any and
all financial statements and any other information of any kind that they may
have with respect to the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company, provided, that each such holder has delivered to the Company a
confidentiality agreement in form and substance reasonably acceptable to the
Company. The Company shall deliver a letter addressed to such accountants
instructing them to comply with the provisions of this Section 7.2. For purposes
of Section 7.2(a), the calculation of a Person's percentage holdings of
Conversion Shares shall be determined based upon the number of Shares from which
such Conversion Shares derived.
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7.3. Inspection.
The Company will permit (a) each holder of thirty percent (30%) or more of
the Shares and Conversion Shares, (b) any authorized representative of a holder
referred to in clause (a) and (c) a Designated Entity to visit and inspect any
of the properties of the Company, to examine the Company's books and records and
to discuss with the Company's officers the Company's books and records and the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company, all at such
reasonable times and as often as may be reasonably requested, provided, that
each such holder, representative or Designated Entity has delivered to the
Company a confidentiality agreement in form and substance reasonably acceptable
to the Company. For purposes of Section 7.3(a), the calculation of a Person's
percentage holdings of Conversion Shares shall be determined based upon the
number of Shares from which such Conversion Shares derived.
7.4. Notices.
The Company will give notice to all holders of Shares promptly after it
learns (other than by notice from all of such holders) of the existence of any
of the following:
(a) any default under any Indebtedness (or under any indenture, mortgage or
other agreement relating to any Indebtedness) which Indebtedness is in an
aggregate principal amount exceeding $100,000 (or the equivalent thereof in
other currencies) in respect of which the Company is liable;
(b) any action or proceeding which has been commenced or threatened against
the Company and which, if adversely determined, would have, individually or in
the aggregate, a material adverse effect on the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis or the ability of the Company
to perform its obligations under the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or the Certificate of
Amendment;
(c) any dispute which may exist between the Company and any Governmental
Authority which may, individually or in the aggregate, materially adversely
affect the normal business operations of the Company or the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis or the ability of
the Company to perform its obligations under the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement or the Certificate of
Amendment; and
(d) if any (i) "reportable event" (as such term is described in Section
4043(c) of ERISA) has occurred; or (ii) "accumulated funding deficiency" (within
the meaning of Section 412(a) of the Code) has been incurred with respect to a
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA
-29-
Affiliate that is subject to the funding requirements of ERISA and the Code or
an application may be or has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code, in each case with respect to such a Pension Plan; or (iii)
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate has been terminated,
reorganized, petitioned or declared insolvent under Title IV of ERISA; or (iv)
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate has an unfunded current
liability giving rise to a lien under ERISA or the Code; or (v) proceeding has
been instituted pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Pension Plan maintained or contributed to (or required to be
maintained or contributed to) by the Company or any ERISA Affiliate; or (vi) of
the Company or its ERISA Affiliates will or may incur any liability (including
any contingent or secondary liability) to or on account of the termination or
withdrawal from a Pension Plan maintained or contributed to (or required to be
maintained or contributed to) by the Company or any ERISA Affiliate; or (vii)
"prohibited transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code) in connection with an "employee benefit plan" (as
defined in Section 3(3) of ERISA), maintained or contributed to (or required to
be maintained or contributed to) by the Company or any ERISA Affiliate has
occurred.
Such notice (i) with respect to (a), shall specify the nature and period of
existence of any such default and what the Company proposes to do with respect
thereto and (ii) with respect to (b), (c) or (d), shall specify the nature of
any such matter referred to in such clause, what action the Company proposes to
take with respect thereto and what action any other relevant Person is taking or
proposes to take with respect thereto.
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. Maintenance of Existence, Properties and Franchises; Compliance with
Law; Taxes; Insurance.
The Company will:
(a) maintain its corporate existence, rights and other franchises in full
force and effect;
(b) maintain its tangible assets in good repair, working order and
condition so far as necessary or advantageous to the proper carrying on of its
business;
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(c) comply with all applicable laws and with all applicable orders, rules,
rulings, certificates, licenses, regulations, demands, judgments, writs,
injunctions and decrees, provided, that such compliance shall not be necessary
so long as (i) the applicability or validity of any such law, order, rule,
ruling, certificate, license, regulation, demand, judgment, writ, injunction or
decree shall be contested in good faith by appropriate proceedings and (ii)
failure to so comply will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
(d) pay promptly when due all Taxes imposed upon its properties, assets or
income and all claims or indebtedness (including, without limitation, vendor's,
workmen's and like claims) which might become a Lien upon such properties or
assets; provided, that payment of any such Tax shall not be necessary so long as
(i) the applicability or validity thereof shall be contested in good faith by
appropriate proceedings and a reserve, if appropriate, shall have been
established with respect thereto and (ii) failure to make such payment will not
have a material adverse effect on the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis; and
(e) keep adequately insured, by financially sound and reputable insurers of
nationally recognized stature, all its properties of a character customarily
insured by entities similarly situated, against loss or damage of the kinds and
in amounts customarily insured against by such entities and with such
deductibles or coinsurance as is customary.
8.2. Office for Payment, Exchange and Registration; Location of Office;
Notice of Change of Name or Office.
(a) So long as any of the Shares is outstanding, the Company will maintain
an office or agency where Shares may be presented for redemption, exchange,
conversion or registration of transfer as provided in this Agreement. Such
office or agency initially shall be the office of the Company specified in
Section 17 hereof, subject to Section 8.2(b).
(b) The Company shall give each holder of Shares at least twenty (20) days'
prior written notice of any change in (i) the name of the Company as then in
effect or (ii) the location of the office of the Company required to be
maintained under this Section 8.2.
8.3. Fiscal Year.
The fiscal year of the Company for tax, accounting and any other purposes
shall end on December 31 of each calendar year.
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8.4. Environmental Matters.
(a) The Company shall keep and maintain any property either owned, leased,
operated or occupied by the Company free and clear of any Environmental Liens,
and the Company shall keep all such property free of Hazardous Material
contamination and in compliance with all applicable Environmental Laws and the
terms and conditions of any Environmental Permits; provided, however, that the
Company shall have the right at its cost and expense, and acting in good faith,
to contest, object or appeal by appropriate legal proceedings the validity of
any Environmental Lien. The contest, objection or appeal with respect to the
validity of an Environmental Lien shall suspend the Company's obligation to
eliminate such Environmental Lien under this paragraph pending a final
determination by appropriate administrative or judicial authority of the
legality, enforceability or status of such Environmental Lien, provided that the
following conditions are satisfied: (i) contemporaneously with the commencement
of such proceedings, the Company shall give written notice thereof to each
holder of Shares or Conversion Shares; and (ii) if under applicable law any real
property or improvements thereon are subject to sale or forfeiture for failure
to satisfy the Environmental Lien prior to a final determination of the legal
proceedings, the Company must successfully move to stay such sale, forfeiture or
foreclosure pending final determination of the Company's action; and (iii) the
Company must, if requested, furnish to the holders of Shares or Conversion
Shares a good and sufficient bond, surety, letter of credit or other security
satisfactory to such holders equal to the amount (including any interest and
penalty) secured by the Environmental Lien.
(b) The Company will, by administrative or judicial process, enforce the
obligations of any other Person who is potentially liable for damages,
contribution or other relief in connection with any violation of Environmental
Laws, including, but not limited to, asbestos abatement, Hazardous Material
remediation or off-site or on-site disposal.
(c) The Company will defend, indemnify and hold harmless each current,
former and future holder of Shares or Conversion Shares, and each such holder's
employees, officers, directors, stockholders, partners, agents, representatives
and assigns, from and against any liabilities, obligations, losses, damages,
penalties, actions, judgments, suits and claims, joint or several, and any
costs, disbursements and expenses (including attorneys' fees and expenses and
costs of investigation) of whatever kind or nature, known or unknown, contingent
or otherwise, arising out of or in any way related to (i) the presence,
disposal, release, removal, discharge, storage or transportation of any
Hazardous Material upon, into, from or affecting any real property (including
improvements) currently or formerly owned, leased, operated or occupied by the
Company; (ii) any judicial or administrative action, suit or proceeding, actual
or threatened, relating to Hazardous Material upon, in, from or affecting any
real property (including improvements) currently or formerly owned, leased,
operated or occupied by the Company; (iii) any violation of any Environmental
Law by the Company or any of its agents, tenants, subtenants or invitees; (iv)
the imposition of any Environmental Lien for the recovery of costs expended in
the investigation, study or remediation of any environmental liability of (or
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asserted against) the Company; and (v) any liability arising out of or related
to the off-site transportation, shipment, disposal, treatment, handling or
disposal of Hazardous Materials. This Section 8.4(c) and Section 8.4(d) shall
survive any payment, conversion or transfer of Shares and any termination of
this Agreement.
(d) To the extent that the Company is strictly liable without regard to
fault under any Environmental Law, the Company's obligations to the holders of
Shares or Conversion Shares under any of the indemnification provisions of the
Stock Purchase Agreements shall likewise be strict without regard to fault with
respect to the violation of any Environmental Law which results in any liability
to any of the indemnified persons referred to in Section 8.4(c).
8.5. Reservation of Shares.
There have been reserved, and the Company shall at all times keep reserved,
free from preemptive rights, out of its authorized Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of the conversion
rights provided in Section 5 of the Certificate of Amendment.
8.6. Securities Exchange Act Registration.
(a) The Company will maintain effective a registration statement
(containing such information and documents as the Commission shall specify and
otherwise complying with the Securities Exchange Act), under Section 12(b) or
Section 12(g), whichever is applicable, of the Securities Exchange Act, with
respect to the Common Stock of the Company, and the Company will file on time
such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of Shares, make
whatever other filings with the Commission, or otherwise make generally
available to the public such financial and other information, as any such holder
may deem reasonably necessary or desirable in order to enable such holder to be
permitted to sell Shares pursuant to the provisions of Rule 144.
8.7. Delivery of Information for Rule 144A Transactions.
If a holder of Shares proposes to transfer any such Shares pursuant to Rule
144A under the Securities Act (as in effect from time to time), the Company
agrees to provide (upon the request of such holder or the prospective
transferee) to such holder and (if requested) to the prospective transferee any
financial or other information concerning the Company which is required to be
delivered by such holder to any transferee of such Shares pursuant to such Rule
144A.
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8.8. Senior Securities.
The Company shall maintain the senior status of the Series A Convertible
Preferred Stock such that it shall rank senior in all respects, including the
payment on liquidation and redemption, to all other equity securities of the
Company.
8.9. Further Assurances.
The Company will from time to time, upon the request of the Xxxxxxx
Holders, promptly and duly execute and deliver any and all such further
instruments and documents as the Xxxxxxx Holders may reasonably deem necessary
or desirable to obtain the full benefits of (i) the obligations of the Company
under this Agreement and (ii) the other rights and powers herein granted. Upon
the instructions from time to time of the Xxxxxxx Holders, the Company shall
execute and cause to be filed any document or filing presented to the Company in
proper form for signing or filing, in each case as the Xxxxxxx Holders may
reasonably deem necessary or desirable in light of the Company's obligations
under this Agreement, and the Company shall pay or cause to be paid any filing
or other fees in connection therewith.
8.10. Stockholder Approval.
The transactions contemplated hereby have been structured by the parties to
comply with the requirements for stockholder approval of the NASDAQ Stock Market
and so that further stockholder action shall not be required. If such rules
require such stockholder approval, the Company shall use its best efforts to
obtain such stockholder approval. In the event the Company fails to obtain such
stockholder approval, the terms of the transactions contemplated hereby shall be
restructured so that they (i) satisfy the requirements of the NASDAQ Stock
Market and (ii) provide the holders of Series A Preferred Stock with the same
economic benefit they would have received had such stockholder approval been
obtained.
8.11. Shares Paid as Dividends.
If the Company shall pay to the holders of Series A Preferred Stock
additional shares of Series A Preferred Stock as a dividend pursuant to Section
2 of the Certificate of Amendment, such additional shares, on the date of such
payment, will be duly authorized, validly issued, fully paid and non-assessable.
SECTION 9. NEGATIVE COVENANTS
The Company covenants and agrees that without the prior written consent of
the Xxxxxxx Holders:
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9.1. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its certificate of incorporation or
through any consolidation, merger, reorganization, transfer of assets,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of the Stock
Purchase Agreements, the Certificate of Amendment, the Registration Rights
Agreement or the Stockholders' Agreement. The Company will at all times in good
faith assist in the carrying out of all such terms, and in the taking of all
such action, as may be necessary or appropriate in order to protect the rights
of the holders of Shares (as such rights are set forth in the Stock Purchase
Agreements, the Certificate of Amendment, the Registration Rights Agreement and
the Stockholders' Agreement) against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not issue any
shares or class or series of equity or equity-linked security, which is senior
to, or pari passu with, the Series A Convertible Preferred Stock as to dividend
payments or amounts payable in the event of liquidation or winding up of the
Company, (b) will not enter into any agreement or instrument which would
restrict or otherwise materially adversely affect the ability of the Company to
perform its obligations under the Stock Purchase Agreements, the Stockholders'
Agreement, the Registration Rights Agreement or the Certificate of Amendment,
(c) will not amend its certificate of incorporation or by-laws in any manner
which would impair or reduce the rights of the Preferred Stock, including,
without limitation, an amendment which would alter or change the powers,
privileges or preferences of the holders of the Series A Convertible Preferred
Stock (including, without limitation, changing the Certificate of Amendment
after any Shares have been called for redemption), (d) except as otherwise
provided in the Certificate of Amendment, will not redeem, repurchase or
otherwise acquire any shares of capital stock of the Company or any other rights
or options to subscribe for or purchase any capital stock of the Company or any
other securities convertible into or exchangeable for capital stock of the
Company, (e) will not permit the par value or the determined or stated value of
any shares of Common Stock receivable upon the conversion of the Shares to
exceed the amount payable therefor upon such conversion, (f) will take all such
action as may be necessary or appropriate in order that the Company may at all
times validly and legally issue duly authorized, fully paid and nonassessable
shares of the Common Stock free from all Taxes, Liens and charges with respect
to the issue thereof, upon the conversion of the Shares from time to time
outstanding, (g) will not take any action which results in any adjustment of the
current conversion price under the Certificate of Amendment if the total number
of shares of the Common Stock (or other securities) issuable after the action
upon the conversion of all of the then outstanding Shares would exceed the total
number of shares of Common Stock (or other securities) then authorized by the
Company's certificate of incorporation and available for the purpose of issuance
upon such conversion, provided, that nothing contained herein shall require the
Company to make an ultra xxxxx issuance of Common Stock, (h) will not have any
authorized Common Stock (and will not issue any Common Stock) other than its
existing authorized Common Stock, $.01 par value per share, and (i) will not
amend its certificate of incorporation to change any terms of its Common Stock.
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9.2. Indebtedness.
So long as the Xxxxxxx Holders hold at least 30% of the aggregate number of
Shares, the Company will not (i) incur Indebtedness, excluding any Indebtedness
set forth on Schedule 2 hereto, in excess of $7.5 million in aggregate principal
amount; or (ii) enter into any agreement, amendment or modification with respect
to any Indebtedness, which agreement, amendment or modification restricts or
prohibits (or was intended primarily to restrict or prohibit) the Company from
making any payments under, or otherwise performing, the Stock Purchase
Agreements.
9.3. Consolidation, Merger and Sale.
So long as the Xxxxxxx Holders hold at least 30% of the aggregate number of
Shares, the Company will not (and will not agree to): (a) wind up, liquidate or
dissolve its affairs; (b) sell, lease, transfer or otherwise dispose of all or
substantially all of its assets to any other Person; or (c) effect a merger or
consolidation if the Company is not the surviving corporation from such merger
or consolidation.
9.4. No Change in Business
The Company will not change substantially the character of its business as
conducted on the Closing Date as represented in Section 4.4 hereof and described
in the Disclosure Material.
9.5. Restricted Payments; Investments.
The Company will not declare or make or permit to be declared or made any
Restricted Payment or any Investment.
9.6. Sale of Substantial Portion of Assets.
After the Closing Date, the Company will not sell, transfer, lease or
otherwise dispose of any assets to any Person (other than assets consisting of
inventory being disposed of in the ordinary course of business and other than
assets which are, contemporaneously with such disposition (or within ninety (90)
days thereafter), being replaced with other substantially similar (or improved)
assets which are used by the Company for substantially the same purpose as the
assets being replaced) to the extent the aggregate assets so sold, transferred,
leased or disposed of:
(x) during the twelve (12) month period ending on the date of such
sale, transfer, lease or disposition (i) had an aggregate book value equal
to ten percent (10%) or more of the aggregate book value of the
consolidated total assets of the Company at the end of the most recent
fiscal quarter preceding such sale,
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transfer, lease or disposition or (ii) accounted for ten percent (10%) or
more of the consolidated revenues of the Company as shown on the
consolidated income statement of the Company for the most recent fiscal
quarter or the then preceding fiscal year; or
(y) during the period from the Closing Date through such sale,
transfer, lease or disposition (i) had an aggregate book value equal to ten
percent (10%) or more of the aggregate book value of the consolidated total
assets of the Company at the end of the most recent fiscal quarter
preceding such sale, transfer, lease or disposition or (ii) accounted for
ten percent (10%) or more of the consolidated revenues of the Company over
the Company's fiscal periods beginning after the Closing Date and ending at
the end of the most recent fiscal quarter as shown on the consolidated
income statements of the Company for such periods.
9.7. Obligations to Affiliates.
The Company may not incur or permit to exist any of the following:
(a) any obligation of the Company to repay money borrowed owing to (i) any
Affiliate of the Company or (ii) any other holder of shares of the capital stock
of the Company; or
(b) any obligation, to any Person, which obligation is assumed or
guaranteed by the Company and which is an obligation of (i) any Affiliate of the
Company or (ii) any other holder of shares of the capital stock of the Company.
This Section 9.7 shall not apply to (1) any obligations under the Stock Purchase
Agreements or with respect to the Shares, (2) any loans, advances or Guarantees
referred to in clause (1) of the proviso to the definition of "Investment"
contained in Section 3 hereof, (3) Indebtedness identified on Schedule 2 hereto,
(4) the Affiliate Loan or (5) payments to DuPont Chemical and Energy Operations,
Inc. and X.X. XxXxxx de Nemours and Company in the ordinary course of business,
consistent with past practice, and not in connection with any financing or
extraordinary corporate transaction.
9.8. Transactions with Affiliates.
The Company will not, directly or indirectly, enter into any transaction or
agreement (including, without limitation, the purchase, sale, distribution,
lease or exchange of any property or the rendering of any service) with any
Affiliate of the Company, unless such transaction or agreement (a) is approved
by a majority of the Outside Directors on the Board of Directors of the Company
(provided that this Section 9.8(a) shall not apply to payments to DuPont
Chemical and Energy Operations, Inc. and X.X. XxXxxx de Nemours and Company in
the
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ordinary course of business, consistent with past practice, and not in
connection with any financing or extraordinary corporate transaction), and (b)
is on terms that are no less favorable to the Company than those which might be
obtained at the time of such transaction from a Person who is not such an
Affiliate; provided, however, that this Section 9.8 shall not limit, or be
applicable to, (i) employment arrangements with (and general salary and benefits
compensation for) any individual who is a full-time employee of the Company if
such arrangements are approved by a majority of the Outside Directors on the
Board of Directors of the Company; and (ii) the payment of reasonable and
customary regular fees to directors of the Company who are not employees of the
Company.
9.9. Liens.
So long as the Xxxxxxx Holders hold at least 30% of the aggregate number of
Shares, the Company will not create or permit to exist any Liens upon or with
respect to any of its assets or income, other than existing liens set forth on
Schedule 5 hereto, in excess of $7.5 million in the aggregate.
9.10. Private Placement Status.
Neither the Company nor any agent nor other Person acting on the Company's
behalf will do or cause to be done (or will omit to do or to cause to be done)
any act which act (or which omission) would result in bringing the issuance or
sale of the Shares or the Conversion Shares within the provisions of Section 5
of the Securities Act or the filing, notification or reporting requirements of
any state securities law (other than in accordance with a registration and
qualification of Conversion Shares pursuant to the Registration Rights
Agreement).
9.11. Maintenance of Public Market.
The Company will not proceed with a program of acquisition of its Common
Stock, initiate a corporate reorganization or recapitalization or undertake a
consolidation or merger or authorize, consent to or take any action which would
have the effect of:
(a) removing the Company from registration with the Commission under the
Securities Exchange Act with respect to the Company's Common Stock;
(b) requiring the Company to make a filing under Section 13(e) of the
Securities Exchange Act;
(c) reducing substantially or eliminating the public market for shares of
Common Stock of the Company;
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(d) causing a delisting of the Company's Common Stock as a National Market
Security on the NASDAQ Stock Market (unless such stock is delisted as a result
of being listed on a national securities exchange); or
(e) if any shares of the Company's Common Stock are at any time listed on a
national exchange, causing a delisting of such stock from such exchange.
9.12. Actions Prior to the Closing Date.
From the date hereof through the Closing Date, the Company will not, (a)
issue or agree to issue any capital stock or any securities exercisable for, or
convertible or exchangeable into, capital stock or (b) purchase, redeem or
otherwise acquire any of its capital stock; provided, however, that this Section
9.12 shall not limit, or be applicable to, (i) the transactions contemplated by
the Stock Purchase Agreements, including any issuance of capital stock in
connection with the transactions contemplated by Sections 9.1 and 9.11 hereof,
(ii) grants of options or issuances of Common Stock to officers, directors or
employees of the Company pursuant to the current terms of the Company's 1994 and
1997 Stock Option Plans and (iii) any grants of warrants to Wm. Sword & Company
Incorporated and Xxxxx Xxxxxx as a result of the transactions contemplated
hereby.
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase Shares hereunder is subject to
satisfaction of the following conditions at the Closing (any of which may be
waived by the Purchaser):
10.1. Certificate of Amendment; Stockholders' Agreement; Registration
Rights Agreement.
(a) The certificate of incorporation of the Company shall have been duly
amended by the filing of the Certificate of Amendment in the form of Exhibit A
hereto.
(b) The Company, the Purchasers and certain other stockholders of the
Company shall have entered into a Stockholders' Agreement substantially in the
form of Exhibit C hereto.
(c) The Company shall have entered into a Registration Rights Agreement
with the Purchasers substantially in the form of Exhibit D hereto.
10.2. Certificates for Shares.
The Purchaser shall concurrently receive the certificates for Shares
contemplated by Section 2(b) hereof.
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10.3. Senior Status.
The Company shall have taken all of the necessary actions, including the
amendment of the appropriate existing agreements, so that the Series A
Convertible Preferred Stock shall rank senior in all respects, including the
payment on liquidation and redemption, to all other equity securities of the
Company.
10.4. Accuracy of Representations and Warranties.
The representations and warranties of the Company contained herein or in
any certificate or document delivered pursuant hereto shall be correct and
complete on and as of the Closing Date with the same effect as though made on
and as of the Closing Date (after giving effect to the transactions contemplated
by this Agreement).
10.5. Compliance with Agreements.
The Company shall have performed and complied in all material respects with
all agreements, covenants and conditions contained in the Stock Purchase
Agreements and any other document contemplated hereby or thereby which are
required to be performed or complied with by the Company on or before the
Closing Date.
10.6. Officers' Certificates.
The Purchaser shall have received a certificate dated the Closing Date and
signed by the President or Chief Executive Officer and by the Secretary or the
Treasurer of the Company, to the effect that the conditions of Sections 10.3,
10.4, 10.8 and 10.9 have been satisfied.
10.7. Proceedings.
All corporate and other proceedings in connection with the transactions
contemplated by the Stock Purchase Agreements, and all documents incident
thereto, shall be in form and substance reasonably satisfactory to the Purchaser
and its counsel, and the Purchaser shall have received all such originals or
certified or other copies of such documents as the Purchaser or its counsel may
reasonably request.
10.8. Legality; Governmental and Other Authorization.
The purchase of and payment for the Shares shall not be prohibited by any
law or governmental order, rule, ruling, regulation, release, interpretation or
opinion applicable to the Purchaser and shall not subject the Purchaser to any
penalty, tax, liability or other onerous condition. Any necessary consents,
approvals, licenses, permits, orders and authorizations of, and any filings,
registrations or qualifications with, any Governmental Authority or other
Person,
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with respect to the transactions contemplated by the Stock Purchase Agreements
shall have been obtained or made and shall be in full force and effect. The
Company shall have delivered to the Purchaser, upon its reasonable request
setting forth what is required, factual certificates or other evidence, in form
and substance satisfactory to the Purchaser and its counsel, to enable the
Purchaser to establish compliance with this condition.
10.9. No Material Adverse Change.
Except to the extent otherwise disclosed in the projected 1998 financial
statements contained in the Confidential Information Memorandum, as amended,
listed on Schedule 4, there shall have been no material adverse change in the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis since September 30, 1998.
10.10. Opinion of Counsel.
The Purchaser shall have received an opinion, dated the Closing Date and
addressed to the Purchasers, of Xxxxxx Xxxxxxxxxx LLP, counsel for the Company,
which opinion shall be in form and substance reasonably satisfactory to the
Purchaser and its counsel and shall be in the form set forth in Exhibit E
hereto.
10.11. Purchases of Shares.
The sale and purchase of Shares by the Xxxxxxx Funds pursuant to the Stock
Purchase Agreements between each of the Xxxxxxx Funds and the Company shall be
consummated concurrently for an aggregate purchase price of not less than
$6,500,000.
10.12. Consents.
The Company shall have received all consents required pursuant to the Loan
and Security Agreement, dated April 29, 1998, between the Company and The CIT
Group/Credit Finance, Inc.
10.13. Other Documents and Opinions.
The Purchaser shall have received such other documents and opinions, in
form and substance reasonably satisfactory to the Purchaser and its counsel,
relating to matters incident to the transactions contemplated hereby, as the
Purchaser may reasonably request.
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SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and agreements of the
Company and the Purchaser contained in this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement or in any document or certificate
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive, and shall continue in effect following the execution and delivery
of the Stock Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the closings hereunder and thereunder, any investigation at
any time made by the Purchaser or on its behalf or by any other Person, the
issuance, sale and delivery of the Shares, any disposition thereof and any
payment, conversion or cancellation of the Shares; provided, however, that the
representations and warranties set forth in Section 4 (other than Section
4.2(a)) and Section 5 shall survive only until the second anniversary of the
Closing Date, and the provisions of Section 9 shall terminate upon conversion of
seventy percent (70%) or more of the Shares pursuant to the Certificate of
Amendment. All statements contained in any certificate or other document
delivered by or on behalf of the Company pursuant hereto shall constitute
representations and warranties by the Company hereunder.
(b) The Company agrees to indemnify and hold the Purchaser harmless from
and against and will pay to the Purchaser the full amount of any loss, damage,
liability or expense (including amounts paid in settlement and reasonable
attorneys' fees and expenses) to the Purchaser resulting either directly or
indirectly from any breach of the representations, warranties, covenants or
agreements of the Company contained in any Stock Purchase Agreement or in the
Stockholders' Agreement, the Registration Rights Agreement or any other document
or certificate delivered pursuant hereto or thereto or in connection herewith or
therewith; provided, however, that the Company's liability under this Section
11(b) with respect to breaches of its representations and warranties set forth
in Section 4 (other than Sections 4.2(a), 4.8, 4.9 and 4.16) shall not exceed
the amount of the purchase price for the Shares purchased by the Purchaser
pursuant to this Agreement, plus reasonable attorneys' fees and expenses
incurred by the Purchaser.
SECTION 12. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the event that
this Agreement is not specifically enforced, and the parties agree that any
damages available at law for a breach of this Agreement would not be an adequate
remedy. Therefore, the provisions hereof and the obligations of the parties
hereunder shall be enforceable in a court of equity, or other tribunal with
jurisdiction, by a decree of specific performance, and appropriate injunctive
relief may be applied for and granted in connection therewith. Such remedies and
all other remedies provided for in this Agreement shall, however, be cumulative
and not exclusive and shall be in addition to any other remedies which a party
may have under this Agreement or otherwise.
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SECTION 13. EXPENSES
(a) Whether or not the transactions herein contemplated are consummated,
the Company shall pay (i) the costs, fees and expenses of the Company and its
counsel in connection with the Stock Purchase Agreements, the Certificate of
Amendment, the Stockholders' Agreement and the Registration Rights Agreement,
other related documentation and the issuance of the Shares and the Conversion
Shares and the furnishing of all opinions by counsel for the Company, (ii) the
costs, fees and expenses of Xxxxxx, Xxxxx & Bockius LLP in connection with the
Stock Purchase Agreements, the Certificate of Amendment, the Stockholders'
Agreement and the Registration Rights Agreement, other related documentation and
the transactions contemplated hereby and thereby (whether or not a Closing
occurs hereunder) and if the Closing occurs the Company will make such payment
on the Closing Date; provided, however, that such fees and expenses shall not
exceed $80,000 without the approval of the Company, (iii) the fees and expenses
of counsel to the Purchasers in connection with any amendments to or
modifications or waivers of any provisions of the Stock Purchase Agreements, the
Certificate of Amendment, the Stockholders' Agreement or the Registration Rights
Agreement, other related documentation or in connection with any other
agreements between the Purchasers and the Company and (iv) the fees and expenses
(including attorneys' fees and expenses) of any holder of Shares or Conversion
Shares in enforcing its rights against the Company if the Company defaults in
its obligations hereunder, under the Certificate of Amendment, the Stockholders'
Agreement or the Registration Rights Agreement.
(b) In addition to all other sums due hereunder or provided for in this
Agreement, the Company shall pay to the Purchaser or its agents, respectively,
an amount sufficient to indemnify such persons (net of any Taxes on any
indemnity payments) against all reasonable costs and expenses (including
reasonable attorneys' fees and expenses and reasonable costs of investigation)
and damages and liabilities incurred by the Purchaser or its agents pursuant to
any investigation or proceeding brought by any third party against any or all of
the Company, the Purchasers, or their agents, arising out of or in connection
with the Stock Purchase Agreements, the Stockholders' Agreement, the
Registration Rights Agreement or the purchase of the Shares (or any transactions
contemplated hereby or thereby or any other document or instrument executed
herewith or therewith or pursuant hereto or thereto), whether or not the
transactions contemplated by this Agreement are consummated, which investigation
or proceeding requires the participation of the Purchaser or its agents or is
commenced or filed against the Purchaser or its agents because of the Stock
Purchase Agreements, the Stockholders' Agreement, the Registration Rights
Agreement or the purchase of the Shares (or any of the transactions contemplated
hereby or thereby or any other document or instrument executed herewith or
therewith or pursuant hereto or thereto), other than any investigation or
proceeding in which it is finally determined that there was gross negligence or
willful misconduct on the part of the Purchaser or its agents which was not
taken by them in reliance upon any of the Company's representations, warranties,
covenants or agreements in the Stock Purchase Agreements, the Stockholders'
Agreement, the Registration Rights Agreement or in any other documents or
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instruments contemplated hereby or thereby or executed herewith or therewith or
pursuant hereto or thereto. The Company shall assume the defense, and shall have
its counsel represent the Purchaser and such agents, in connection with
investigating, defending or preparing to defend any such action, suit, claim or
proceeding (including any inquiry or investigation); provided, however, that the
Purchaser, or any such agent, shall have the right (without releasing the
Company from any of its obligations hereunder) to employ its own counsel and
either to direct its own defense or to participate in the Company's defense, but
the fees and expenses of such counsel shall be at the expense of such Person
unless (i) the employment of such counsel shall have been authorized in writing
by the Company in connection with such defense, (ii) the Company shall not have
provided its counsel to take charge of such defense or (iii) the Purchaser, or
such agent of the Purchaser, shall have concluded that there may be defenses
available to it or them which are different from or additional to those
available to the Company, then in any of such events referred to in clauses (i),
(ii) or (iii) such counsel fees and expenses (but only for one counsel for the
Purchaser and its agents) shall be borne by the Company. Any settlement of any
such action, suit, claim or proceeding shall require the consent of both the
Company and such indemnified person (neither of which shall unreasonably
withhold its consent).
(c) The Company agrees to pay, or to cause to be paid, all documentary,
stamp and other similar Taxes levied under the laws of the United States of
America, any state or local Taxing Authority thereof or therein or any other
applicable jurisdiction in connection with the issuance and sale of the Shares
and the execution and delivery of the Stock Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement and any other
documents or instruments contemplated hereby or thereby and any modification of
the Certificate of Amendment, the Stockholders' Agreement, the Registration
Rights Agreement or the Stock Purchase Agreements or any such other documents or
instruments and will hold the Purchaser harmless without limitation as to time
against any and all liabilities with respect to all such Taxes.
(d) The obligations of the Company under this Section 13 shall survive the
Closing hereunder and any termination of the Stock Purchase Agreements.
SECTION 14. DIRECT PAYMENTS
As long as the Purchaser or any institutional holder which is a direct or
indirect transferee (as a result of one or more transfers) from the Purchaser
shall be the holder of any Shares, the Company will make all redemption
payments, liquidation payments and other distributions by wire transfer to the
Purchaser's or such other holder's (or its nominee's) account at any bank or
trust company, notwithstanding any contrary provision herein or in the Company's
certificate of incorporation with respect to the place of payment. The Purchaser
has provided an address on Schedule 1 hereto for payments by wire transfer, and
such address may
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be changed for the Purchaser or any subsequent holder by notice to the Company.
All such payments shall be made in U.S. dollars and in federal or other
immediately available funds.
SECTION 15. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended, waived,
modified or terminated only with the written consent of the Persons identified
in clause (i) and (ii) of the definition of "Xxxxxxx Holders"; provided,
however, that if no Shares or Conversion Shares are held by such Persons, the
written consent of holders of two-thirds of outstanding Shares and Conversion
Shares shall be required for any such amendment, waiver, modification or
termination.
(b) The Company agrees that all holders of Shares and Conversion Shares
shall be notified by the Company in advance of any proposed amendment, waiver,
modification or termination, but failure to give such notice shall not in any
way affect the validity of any such amendment, waiver, modification or
termination. In addition, promptly after obtaining the written consent of the
holders as herein provided, the Company shall transmit a copy of any amendment,
waiver, modification or termination which has been adopted to all holders of
Shares and Conversion Shares then outstanding, but failure to transmit copies
shall not in any way affect the validity of any such amendment, waiver,
modification or termination.
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of any holder
of Shares to the Company at its address provided under Section 17 hereof, the
Company at its expense (except for any transfer tax arising out of the exchange)
will issue and deliver to or upon the order of the holder in exchange therefor a
new certificate or certificates in such amount or amounts as such holder may
request in the aggregate representing the number of Shares represented by such
surrendered certificates, and registered in the name of such holder or as such
holder may direct.
(b) Any Share certificate which is converted into Conversion Shares in
whole or in part shall be cancelled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into Conversion Shares. The Company shall issue a new certificate with respect
to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part.
(c) Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Share certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory to the Company (if
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requested by the Company and unsecured in the case of the Purchaser or an
institutional holder), or in the case of any such mutilation, upon surrender of
such Share certificate (which surrendered Share certificate shall be cancelled
by the Company), the Company will issue a new Share certificate of like tenor in
lieu of such lost, stolen, destroyed or mutilated Share certificate, as if the
lost, stolen, destroyed or mutilated Share certificate were then surrendered for
exchange.
SECTION 17. NOTICES
All notices, requests, demands, consents and other communications hereunder
shall be in writing and shall be delivered by hand or shall be sent by telex or
telecopy (confirmed by registered, certified or overnight mail or courier,
postage and delivery charges prepaid), (i) if to the Company, to Xxxxxx
Technologies, Inc., 000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx Xxxxx, Xxx Xxxx 00000,
Attention: Xxxxxxx X. Xxxxxxxxxxx, with a copy to Xxxxxx Xxxxxxxxxx LLP, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxxxx Xxxxxxxxx, Esq. or (ii)
if to the Purchaser, at the address indicated on Schedule 1 hereto, with a copy
to Xxxxxx, Xxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000-0000,
Attention: Xxxxx X. Xxxxxx, Esq., or at such other address as a party may from
time to time designate as its address in writing to the other party to this
Agreement. Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such notice is
delivered or, if sent by telex or telecopier, when received.
SECTION 18. MISCELLANEOUS
(a) The Stock Purchase Agreements, the Stockholders' Agreement, the
Registration Rights Agreement and, upon the Closing, the Certificate of
Amendment, together with any further agreements entered into by the Purchaser
and the Company at the Closing, contain the entire agreement between the
Purchaser and the Company, and supersede any prior oral or written agreements,
commitments, terms or understandings regarding the subject matter hereof.
(b) Any provision of this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, whether so expressed
or not; provided, that (a) the Company may not assign any of its rights, duties
or obligations under this
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Agreement, except with the Purchaser's written consent, and (b) the Purchaser
may assign any of its rights, duties or obligations under this Agreement to a
purchaser of its Shares, provided that such purchaser is reasonably acceptable
to the Company.
(d) In addition to any assignment by operation of law, the Purchaser may
assign, in whole or in part, any or all of its rights (and/or obligations) under
this Agreement to any permitted transferee of any or all of its Shares or
Conversion Shares, and (unless such assignment expressly provides otherwise) any
such assignment shall not diminish the rights the Purchaser would otherwise have
under this Agreement or with respect to any remaining Shares or Conversion
Shares held by the Purchaser.
(e) No course of dealing and no delay on the part of any party hereto in
exercising any right, power, or remedy conferred by this Agreement shall operate
as a waiver thereof or otherwise prejudice such party's rights, powers and
remedies. No single or partial exercise of any right, power or remedy conferred
by this Agreement shall preclude any other or further exercise thereof or the
exercise of any other right, power or remedy.
(f) The headings and captions in this Agreement are for convenience of
reference only and shall not define, limit or otherwise affect any of the terms
or provisions hereof.
(g) This Agreement shall be governed by, and construed in accordance with,
the laws of the State of New York (other than any conflict of laws rules which
might result in the application of the laws of any other jurisdiction).
(h) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument,
and all signatures need not appear on any one counterpart.
(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND IRREVOCABLY
AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS AGREEMENT, THE CERTIFICATE OF AMENDMENT, THE STOCKHOLDERS'
AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION
SHARES MAY BE LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR ITSELF AND IN
CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY
IN CONNECTION WITH THIS AGREEMENT, THE CERTIFICATE OF AMENDMENT, THE
STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS
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AGREEMENT, THE SHARES OR THE CONVERSION SHARES. A COPY OF ANY SUCH PROCESS SO
SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE COMPANY AT THE ADDRESS OF THE
COMPANY PROVIDED HEREUNDER EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE
LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF
PROCESS. AS AN ALTERNATIVE TO SERVICE OF PROCESS ON SUCH AGENT (WHETHER OR NOT
ANY SUCH AGENT HAS BEEN APPOINTED), THE COMPANY HEREBY AGREES THAT SERVICE UPON
IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE AND SERVICE OF PROCESS. NOTHING
HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR SHALL LIMIT THE RIGHT OF THE PURCHASER TO BRING PROCEEDINGS OR OBTAIN OR
ENFORCE JUDGMENTS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
(j) THE COMPANY AND THE PURCHASER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT, THE CERTIFICATE OF AMENDMENT, THE STOCKHOLDERS' AGREEMENT, THE
REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION SHARES, OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE
COMPANY AND THE PURCHASER ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE PURCHASER. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND
THE PURCHASER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT, THE CERTIFICATE OF
AMENDMENT, THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE
SHARES OR THE CONVERSION SHARES. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.
[remainder of page intentionally left blank]
-48-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
XXXXXX TECHNOLOGIES, INC.
By ______________________________
Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
Accepted and Agreed to as of the
date first above written by the
undersigned Purchaser:
XXXXXXX US DISCOVERY FUND III, L.P.
By: XXXXXXX US DISCOVERY
PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By: __________________________
Xxxxxx X. Xxxx, member
Schedule 1
to the Stock
Purchase Agreement
Social Security or Taxpayer Number of Shares at Share Purchase
Name of Purchaser Identification Number Closing Price
------------------------- --------------------------- ------------------- --------------
Xxxxxxx US Discovery Fund 00-0000000 56,019 $5,601,900
III, X.X.
Xxxxxxx US Discovery 00-0000000 8,981 $ 898,100
Offshore Fund III, L.P.
(a) address for communications:
Xxxxxxx Capital Management
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
(b) address for payments by
wire transfer:
Xxxxxxx US Discovery Fund III, X.X. Xxxxxxx US Discovery Offshore Fund III, X.X.
Xxxxx Manhattan Bank Citibank, N.A.
ABA # 000000000 ABA # 000000000 / Chips UID# 0008 / Swift Code - XXXXXX00
A/C # 10921671 A/C: The Bank of Bermuda Limited, Xxxxxxxx, Bermuda
A/C: Xxxxxx Xxxxxxx Inc. Chips UID# 005584
A/C # 400-470551 Swift Code: BBDA BM HM
A/C: Xxxxxxx US Discovery Fund III, L.P. A/C: Xxxxxxx US Discovery Offshore Fund III, L.P.
A/C # 0246769
Schedule 2
to the Stock
Purchase Agreement
Indebtedness
Amount Liens Title and Date of Agreement
------ ----- ---------------------------
$ 1,488,000 All Assets Xxxxxx Technologies Company and Environmental
Support Solutions, Inc. with the CIT
Group/Credit Finance Inc./$5,000,000 Commercial
Credit Line Finance Facility, April 29, 1998
$ 671,000 Ft. Lauderdale Real Property Turnberry Savings Bank - Promissory Note,
Florida Mortgage & Security Agreement and
Collateral Assignment of Leases & Rent,
December 6, 1996
$ 54,000 Xxxxx Reclamation Machines Lease as amended by Amendment
September 1, 1994 Refrigerant Recovery
Corporation of America- X.X. Xxxxx
$ 72,000 Lab and Other Equipment Lease Agreement-Xxxxxx Technologies, Co. and
Green Tree Vendor Services
October 19, 1998
$ 872,000 Aerosol Packaging Equipment, ISO Xxxxxx Technologies, Inc. and The Xxxxxx Asset
Containers and Other Equipment Group, Inc. Master Equipment Lease
August 2, 1996
$ 495,000 Hillburn Location Lease - Ramapo Land Co., Inc. and Refrigerant
Reclamation Industries, Inc.
May 20, 1994
$ 279,000 Rantoul Location Lease - Roeco Enterprises, Inc. and Xxxxxx
Technologies, Inc.
October 1, 1997
$ 64,000 Baton Rouge Location Lease - Xxxxx XxXxxx and Xxxxxx
Technologies, Inc.
April 7, 1995
$ 131,000 Punta Gorda Location Commercial Lease - Xxxxx X. Lojingeer and
Xxxxxx Technologies Company
April 19, 1997
$ 256,000 Pearl River Location Lease - Xxxxxxxx Building Corporation and
Xxxxxx Technologies Company
November 9, 1998
$ 52,000 XXXX Machine Commercial Loan - Xxxxxxx Bank and Xxxxxx
Technologies, Inc.
September 5, 1996
$ 51,000 1999 Freightliner FL70 Retail Installment Contract - Xxxxxx
Technologies Co. and Xxxxxxxxx Truck Center,
Inc. March 16, 1999
$ 51,000 1999 Freightliner FL70 Retail Installment Contract - Xxxxxx
Technologies, Inc. and Xxxxxxxxx Truck Center,
Inc. February 19, 1999
Schedule 3
to the Stock
Purchase Agreement
Investments
-- 25% interest of Environmental Support Solutions, Inc. (ESS)
-- Xxxxxx guarantee of ESS office lease in Mesa, Arizona
Schedule 4
to the Stock
Purchase Agreement
Disclosure Material
1) Confidential Informational Memorandum, as amended
2) Depot strategy memorandum
3) Management presentation January 1999, January 1999, March 1999
4) Proforma depot income statement December 31, 1998
5) Draft Form 10-KSB for the year ended December 31, 1998
6) Summary financial information as of March 11, 1999 and February 28, 1997
7) Budget for year ended December 31, 1999
8) Detailed summary information including forecast assumptions to five year
forecast including but not limited to, service and refrigerant revenues,
capital expenditures, depot sales and G&A expense, number of employees and
summary of refrigerant sales assumptions
9) Depot sales "bottom up" model
10) Summary depot model
11) Proforma depot and satellite budget
12) Revenues by customer September 30, 1998 and December 31, 1998
13) Market data information including but not limited to, First Boston report,
February 1999; ARI statistical profile, Air Conditioning News - September
22, 1997, Xxxxxx Research Company - BSRIA, Commerce News - August 1, 1997,
Equitable Security Report - November 1997
14) Form 10-QSB for quarters ended March 31, 1998; June 30, 1998 and September
30, 1998
15) Form 10-KSB for years ended December 31, 1997; December 31, 1996 and
December 31, 1995
16) Revenues by job 1998 in total and by location
17) ZugiBeast Patent
18) Summary of revenue by site, R-Side vs. Non R-Side - December 31, 1998
19) List of customer references, March 8, 1999; March 9, 1999; undated
20) Financial package delivered to Board of Directors
21) Letter to Xxx Xxxx and Kingston Chu dated February 26, 1999 and attachments
22) Refrigerant sales by site as of December 31, 1998
23) Interoffice memorandum dated December 18, 1998 regarding DuPont reclamation
forecast
24) Inventory - FIFO/on hand report dated February 26, 1999
25) Xxxxxx consolidating roll-up financial reports for the period ended
September 30, 1997, December 31, 1997, March 31, 1998, June 30, 1998,
September 30, 1998 and December 31, 1998
26) Quarterly financial results by location and in total for the years ended
December 31, 1998 and 1997
27) Refrigerant gross profit by major customer
28) US refrigerant market size by automotive and XXXX/X
00) Xxxxxx Technologies, Inc. refrigerant sales by pounds and dollars as of
1998 and 1997
30) Listing of officer compensation as of December 31, 1998
31) List of personal references for officers of the Company
32) Listing of stock options by individual for the 1994 and 1997 stock option
plans
33) Listing of total common stock and common stock equivalents outstanding at
December 31, 1998
34) Market sizing by service event
35) Detail of sales by line of business
36) Allocation of selling general and administrative expenses for projected
periods
37) Weather data cities
38) Letter dated February 27, 1999 to Xxxxx Xxxxxxx, Esq. including:
o Consolidated Amended Complaint, dated October 29, 1998
o Affidavit of Xxxxxxx X. Xxxxxxxx in support of Defendants' Motion to
Dismiss, sworn to December 23, 1998, with exhibits
o Memorandum of Law in Support of Defendants' Motion to Dismiss
o Plaintiffs' Memorandum of Law in Opposition to Defendants' Motion to
Dismiss
o First Amended Verified Complaint
o Notice of Motion to Dismiss, dated January 11, 1999, with supporting
affidavits and exhibits
o Memorandum of Law in Support of Defendant Xxxxxx Technologies, Inc.'s
Motion to Dismiss
o Affidavits of Xxxx X. Xxxxxxxx, P.E. and Xxxxx X. Xxxxxxxx, in
opposition to Motion to Dismiss with Exhibits
o Memorandum of Law of Plaintiff United Water New York Inc. in
Opposition to Defendant Xxxxxx Technologies, Inc.'s Motion to Dismiss
o Reply Affidavit of Xxxxxx Xxxxxx in Support of Motion to Dismiss
o Reply Memorandum of Law of Xxxxxx Technologies, Inc. in Further
Support of Its Motion to Dismiss
o Copy of Xxxxxxx X. Xxxxxxxxxxx'x letter dated January 31, 1998 to
Xxxxx Agency, together with backup information underlying the issues
o Summary of Monitoring Well Testing Results for R-11 and R-12 through
January 1999
o Copy of September 22, 1998 letter from LeBoeuf, Lamb, Xxxxxx and
XxxXxx itemizing for settlement discussion purposes only, United
Water's claimed damages
39) Letter dated March 3, 1999 to Xxxxxx Xxxxxxxx, Esq. including:
o Copies of Certificate of Incorporation and all amendments thereto with
filing receipts; and copy of original by-laws and all amendments
thereto
o Schedule of stock options issued to Officers
o Copies of Stock Purchase Agreement, Shareholders Agreement, Standstill
Agreement and Registration Agreement with DuPont Chemical and Energy
Operations, Inc.
o Schedule of outstanding stock and stock equivalents; "Average Number
of Shares, December 1998" (1 page))
o Copies of Loan and Security Agreement, General Security Agreement,
Guaranty from Xxxxxx Technologies, Inc., Junior Mortgage and Security
Agreement, and Warrant with The CIT Group/Credit Finance, Inc.
o Promissory Note, Florida Mortgage and Security Agreement, and
Collateral Assignment of Leases and Rents with Turnberry Bank
o Note to Xxxxxxxxx X. Xxxxxx, Xx.; dated February 25, 1999
o Schedule of Capital Leases as of December 31, 1998 (1 page)
o Schedule of Operating Leases as of December 31, 1998 (3 pages)
40) Letter dated March 4, 1999, to Xxxx Xxxxxxx, Esq. including;
o Copy of United Capitol Insurance Company Pollution Insurance Policy
for the term November 14, 1997 to November 14, 1998, Policy Number
SLP4001093
o Copy of original draft of the DEC's proposed consent order
o Copy of plans for proposed remediation system; dated April 15, 1998
o Copy of March 1, 1999 response by Sive, Paget & Riesel to sur-reply
submission of United Water
41) Letter dated March 8, 1999, to Xxxx Xxxxxxx, Esq. including;
o Copies of Interim Settlement Agreement, dated December 9, 1996
o Copies of the following correspondence with United Capital:
o United Capital letter, dated June 24, 1998
x Xxxxxx Technologies, Inc. letter, dated July 28, 1998
o United Capital letter, dated November 9, 1998
o United Capital letter, dated October 9, 1998
o Copies of original draft proposal and cost estimate for remediation
system (dated September 12, 1997)
42) Letter dated March 10, 1999, to Xxxx Xxxxx, Esq. including;
o Copy of Insurance Policy issued by National Insurance Company of
Pittsburgh; Policy Number 4866308
o Copies of the following Correspondence with Insurer:
x Xxxxxx Technologies, Inc. letter, dated March 7, 1998
o A.I. Management letter, dated March 16, 1998
x Xxxxxx Technologies, Inc. letter, dated March 28, 1998
x Xxxxxx Technologies, Inc. letter, dated April 21, 1998
x Xxxxxx Technologies, Inc. letter, dated May 19, 1998
o A.I. Management letter, dated June 1, 1998
x Xxxxxx Technologies, Inc. letter, dated June 2, 1998
x Xxxxxx Technologies, Inc. letter, dated June 24, 1998
x Xxxxxx Technologies, Inc. letter, dated July 23, 1998, with
attached letter of Xxxxx Xxxx, dated July 22, 1998
x Xxxxxx Technologies, Inc. letter, dated October 14, 1998
o A.I. Management letter, dated November 24, 1998
x Xxxxxx Technologies, Inc. letter, dated December 2, 1998
o Copies of Press Releases and Xxxxxxxxxxx
43) Letter dated March 11, 1999 to Xxxx Xxxxx, Esq. including;
o Four page summary of restatement issues
o August 9, 1997 letter to BDO Xxxxxxx, marked DRAFT (2 pages)
o Audit Committee Meeting Agenda, for July 30, 1997 meeting (1
page)
o Six pages of minutes from July 30, 1997 Audit Committee meeting
44) Ramapo Well Field VOC Summaries, provided by United Water of New Jersey for
Production Well #84, 85, 99, 100 for period January 1, 1997 through August
31, 1998 (13 pages)
45) Monitoring Well Summaries for R-11 and R-12 levels, for period April 22,
1996 and September 3, 1998 (2 pages)
46) Xxxxxxx Bank lease
47) Greentree Vendor lease
48) Xxxxxx X. Xxxxx lease
49) Xxxxxx leases, Schedule 1 and 2
50) Building Leases
a) Hillburn, New York
b) Pearl River, New York
c) Rantoul, Illinois
d) Xxxxx Xxxxx, Xxxxxxxxx
x) Xxxxx Xxxxx, Xxxxxxx
51) GMAC leases, 1999 Vans (2)
52) CIT waiver of provisions prohibiting dividends
53) February 16, 1999 Proxy materials for March 16, 1999 Special Meeting of the
Shareholders
54) Letter dated March 26, 1999 to Xxxx Xxxxxxx, Esq. Including
o Copy of written statement of Xxxx X. Xxxxxx
o Copy of Notice of Violation, dated 2/26/99 from LA. Dept. of Public
Safety
o Copy of Notice of Violation, dated 3/8/99 from LA. Dept. of Public
Safety
o Copy of Phase II Subsurface Investigation, dated 8/31/98, for 000
Xxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxx
Schedule 4.12
to the Stock
Purchase Agreement
Permits, Licenses & Approvals; Intellectual Property & Other Rights
All patents, patent rights, trademarks, trademark rights, trade names, trade
name rights and copyrights are subject to, and constitute collateral for, the
Loan & Security Agreement, and related documents, executed and delivered in
connection with the Line of Credit issued by The CIT Group/Credit Finance, Inc.
Schedule 4.16
to the Stock
Purchase Agreement
Environmental Compliance
Paragraph 4.16 (a)
o All facts and circumstances relating to the alleged contamination of
Ramapo Valley Aquifer as alleged in action entitled United Water New
York Inc.x. Xxxxxx Technologies, Inc., Rockland County Supreme Court
Index # 3126/98, and all proceedings, discussions and negotiations
with the N.Y.S. DEC for a consent order relative to same.
o Ammonia release incident at Baton Rouge Louisiana facility on January
25, 1999, Notice of Violation dated 2/26/99, alleging violation for
"Delayed Release Notification of Ammonia" - $1,000 proposed penalty,
and Notice of Violation dated March 9, 1999 (received March 26, 1999)
for alleged "Careless Handling of Anhydrous Ammonia - $7,500 proposed
penalty.
o Company reported vapor release of approximately 8,000 lbs. of R22 on
4/23/98 at Hillburn, NY facility due to failed pressure relief device.
o Phase II Subsurface Investigation Report, dated August 31, 1998,
relating to 000 Xxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxx
Paragraph 4.16 (b)
o Alleged contamination of groundwater and Ramapo Valley Aquifer, which
is the subject of the action entitled United Water New York Inc.x.
Xxxxxx Technologies, Inc., Rockland County Supreme Court Index #
3126/98, and which is the subject of all proceedings, discussions and
negotiations with the N.Y.S. DEC for a consent order relative to same.
o Phase II Subsurface Investigation Report, dated August 31, 1998,
relating to 000 Xxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxx, reported detection
in three monitoring xxxxx of five (5) volatile organic compounds in
groundwater at levels in excess of groundwater quality guidance
values. None of these compounds were ever present at the facility
during the Company's use and occupancy of the premises.
Paragraph 4.16 (c) & (d) NA
Paragraph 4.16 (e)
The Company is not aware of any asbestos-containing materials, except that
one (1) storage tank located at Baton Rouge, Louisiana facility, is
believed to have asbestos insulation.
Paragraph 4.16 (f)
None
Paragraph 4.16 (g) NA
Schedule 5
to the Stock
Purchase Agreement
Liens
Title and Date of Agreement Affected Property
1) Turnberry Savings Bank - Promissory Note, Florida Mortgage Mortgage on Ft. Lauderdale Property
& Security Agreement and Collateral Assignment of Leases &
Rents -December 6, 1996
2) CIT Credit Finance - Xxxxxx Technologies Company and All Assets and property
Environmental Support Solutions, Inc. with The CIT
Group/Credit Finance, Inc. - $5,000,000 Commercial Credit
Line Finance Facility - April 29, 1998
3) Lease Agreement - Xxxxxx Technologies, Inc. and Absolute Lab Equipment
Financial Services, Ltd. Partnership - March 22, 1995
4) Open End Commercial Motor Vehicle Lease Agreement Franklin International Rack Truck
Equity Leasing Co. and Xxxxxx Technologies, Inc. - April
10, 1995
5) Open End Commercial Motor Vehicle Lease Agreement Franklin International Rack Truck
Equity Leasing Co. and Xxxxxx Technologies, Inc. - April
10, 1995
6) Open End Commercial Motor Vehicle Lease Agreement Franklin International Rack Truck
Equity Leasing Co. and Xxxxxx Technologies, Inc. - April
10, 1995
7) Xxxxxx Technologies, Inc. and Associates Commercial Corp. Forklift
(IL) June 28, 1995
8) Xxxxxx Technologies, Inc. and Associates Commercial Corp. Forklift
(LA) June 28, 1995
9) Lease Agreement (NY) Xxxxxx Technologies, Company and Lab Equipment
Newcourt Financial - April 21, 1998
10) Lease Agreement (FL) Xxxxxx Technologies Company and Lab Equipment
Newcourt Financial - April 21, 1998
11) Lease Agreement - Xxxxxx Technologies Company and Lab and Other Equipment
Greentree Vendor Service - October 19, 1998
12) Commercial Loan - Xxxxxxx Bank and Xxxxxx Technologies, XXXX Machine
Inc. - September 5, 1996
13) Vehicle Retail Installment Contract - Xxxxxx Pickup Truck
Technologies, Inc. and Xxx Xxxxxxxx Ford, Inc.
August 25, 1995
14) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America - CA Xxxxx XX
15) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America - Xxxx Xxxx
16) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America - XX Xxxxxxxxx
17) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America - XX Xxxxx
18) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America - Xxxxxx
Xxxxxxx
19) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America - Xxxxxxx
Xxxxx
20) Retail Installment Contract - Xxxxxx Technologies Company Freightliner Box Truck
and Xxxxxxxxx Truck Center, Inc. - March 16, 1999
21) Retail Installment Contract - Xxxxxx Technologies Company Freightliner Box Truck
and Xxxxxxxxx Truck Center, Inc. - February 19,1999
Schedule 6
to the Stock
Purchase Agreement
Capital Stock
(a) Authorized, Issued and Outstanding
(i) authorized capital stock 20,000,000 shares of Common Stock, par value
$.01 5,000,000 shares of Preferred Stock, par value $.01
(ii) number of designated shares of Preferred Stock in each series or class
after giving effect to the Certificate of Designations
75,000 shares of Series A Convertible Preferred Stock
(iii) number of shares outstanding in each series or class after giving
effect to the issuance of Shares contemplated by the Stock Purchase
Agreements
5,085,820 shares of Common Stock 65,000
shares of Series A Convertible Preferred Stock
(b) Common Stock Reserved for Issuance
(i) 2,736,842 shares of Common Stock to be issued upon conversion of the
Series A Convertible Preferred Stock
(ii) 2,544,529 shares of Common Stock to be issued pursuant to Company
Stock Option Plans and outstanding warrants (including 500,000 shares
pursuant to future plans)
EXHIBIT B
To the Stock
Purchase Agreement
1. Paragraph 4.2 (d)
Registration rights were granted by the Company pursuant to and as provided
in the Registration Agreement between DuPont Chemical and Energy
Operations, Inc, X.X. Xxxxxx de Nemours & Company and Xxxxxx Technologies,
Inc.; dated 1/29/97.
2. Paragraph 4.2 (e)
An agreement with respect to the voting of capital stock of the Company was
made pursuant to and as provided in the Shareholders' Agreement and
Standstill Agreement, each dated 1/29/97, between DuPont Chemical and
Energy Operations, Inc., X.X. Xxxxxx de Nemours & Company and Xxxxxx
Technologies, Inc.
3. Paragraph 4.2 (f)
Certain anti-dilution or other adjustment provisions were granted pursuant
to and as provided in the Stock Purchase Agreement, Shareholders'
Agreement, Standstill Agreement and Registration Agreement, each dated
1/29/97 between DuPont Chemical and Energy Operations, Inc., X.X. Xxxxxx de
Nemours & Company and Xxxxxx Technologies, Inc.
4. Paragraph 4.6 (b)
(i) a. Sale of 75% ownership of ESS on 3/19/99
b. The Affliliate Loan
(ii) Except to the extent otherwise disclosed in the projected 1998
financial statements contained in the Confidential Information
Memorandum, as amended (Item 1 to Schedule 4.)
5. Paragraph 4.7
(i) None
(ii) None
A) In re Xxxxxx Technologies, Inc. Securities Litigation, 00 Xxx.
0000 (XXX), pending in United Xxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx
Xxxxxxxx xx Xxx Xxxx - Defendant's motion to dismiss consolidated
complaint is sub xxxxxx
B) United Water New York Inc. x. Xxxxxx Technologies, Inc., Rockland
County Supreme Court Index No. 3126/98 - Defendant's motion to
dismiss certain causes of action in amended complaint is sub
xxxxxx
C) BNY Financial Corporation x. Xxxxxx Technologies Inc., N.Y.
County Supreme Court Index #602203/98 - currently in discovery
D) Proceedings, discussions and negotiations with the NYSDEC for a
protective order relative to Alleged contamination of groundwater
and Ramapo Valley Aquifer, which is the subject of "B)" above
E) Notice of Alleged Safety or Health Hazards, dated 2/3/99,
received from Occupational Safety and Health Administration
regarding Hillburn, NY facility. Notice issued in response to a
complaint from an unnamed party, believed to be a former
employee. A follow up meeting at the facility took place on March
26, 1999 indicating that a formal report will be received within
two weeks. Verbal comments from representative identified approx.
10-12 primarily housekeeping and training items, all of which
have been fully or partially addressed, which was so noted by
representative at meeting.
6. Paragraph 4.9
(a) Company Health & Dental Insurance Plans issued by, respectively, the
New England and Met Life;
Xxxxxx Technologies, Inc. 401 (K) through M & T Bank
Xxxxxx Technologies, Inc. 1994 & 1997 Stock Options Plans
Xxxxxx Technologies, Inc. Flexible Benefit Plan, including Dependent
Care Assistance Plan and Medical Reimbursement Plan
(k) None
7. Paragraph 4.12
a. EPA Certified Reclaimer pursuant to 40 CFR Part 82
b. Certified Reclaimer under Air Conditioning and Refrigeration Institute
("ARI") Certified Reclaimer Program
c. State Contractor Licenses in States of California and Nevada
d. New York State Waste Hauler Permit and Connecticut Waste Hauler
Permit, plus soth other and various local permits as applicable
e. License Agreement with ARI for use of ARI logo
f. License to use DuPont and SUVA trademarks pursuant to Segment Marketer
Agreement with DuPont
g. patents, trademarks, and copyrights as listed on attached Schedule of
Patents, Trademarks and Copyrights
8. Paragraph 4.13 - NONE
9. Paragraph 4.14
Real Property Owned:
- 0000 X.X. 00xx Xxx., Xx. Xxxxxxxxxx, Xxxxxxx
- Leased Real Property:
- 00 Xxxxx Xxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx
- One Xxxxxxx Drive, Congers, New York
- 000 X. Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
- 0000 Xxxxxxx Xxxxxxx, Xxxxx Xxxxx, Xx.
- 0000 Xxxxxxxx Xxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx
- 0000 Xxxxxxxxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxx
- 0000 Xxxxxx Xxxxx, Xxxxxxx, XX
- 0000 00xx Xxxxxx, X.X., Xxxxx #00, Xxxxxx, XX
10. Paragraph 4.22
a. Former names: Refrigerant Reclamation Industries, Inc.
Refrigerant Recovery Corporation of America, Inc.
Refrigerant Reclamation Corporation of America, Inc.
Xxxxxx Technologies of TN, Inc.
GRR Co., Inc., d/b/a Golden Refrigerant
HT Holdings, Inc.
b. Fictitious names: Xxxxxx Technologies of New York
Xxxxxx Technologies of Tennessee
Xxxxxx Technologies Company of Tennessee
11. Paragraph 4.23 & 5.3
a. Wm Sword & Company Incorporated
SCHEDULE OF PATENTS, TRADEMARKS, COPYRIGHTS
TITLE-NAME TYPE INVENTOR OWNER DATE ISSUED NUMBER
---------- ---- -------- ----- ----------- ------
Method & Apparatus
for Refrigerant
Reclamation Patent X. Xxxxxx Xxxxxx 1/3/95 5,377,499
Hydraulic System
for Recovering
Refrigerants Patent X. Xxxxxx Xxxxxx 4/2/96 5,502,974
Method & Apparatus
for Reclaiming a
Refrigerant Patent X. Xxxxxx Xxxxxx 6/11/91 5,022,230
Apparatus & Method
For Recovering Volatile
Refrigerants Patent X. Xxxxxx Xxxxxx 9/8/98 5,802,859
Method & Apparatus
For Sonic Cleaning of
Heat Exchangers Patent Pending X. Xxxxxx Xxxxxx filed 8/12/98 App # 60/096,296
Apparatus & Method
For Flushing a X. Xxxxxx &
Chiller System Patent Pending A. Xxxx Xxxxxx filed 8/12/98 App # 60,096,297
Apparatus & Method
For Flushing a X. Xxxxxxx &
Refrigeration System Patent Pending A. Xxxx Xxxxxx filed 8/12/98 App # 60/096,295
GLACIER Trademark N/A Xxxxxx filed 3/7/97 Ser # 75/253240
ZUGIBEAST Trademark N/A Xxxxxx 7/9/96 1,985,422
HTI Service Xxxx N/A Xxxxxx 4/23/96 1,970,063
Trademark
HUDSONIC Service Xxxx N/A Xxxxxx filed 8/12/98 Ser. # 75/535,057
R-SIDE Service Xxxx N/A Xxxxxx filed 8/6/98 Ser. # 75/532,328
Trademark
REFRIGERANTSIDE Service Xxxx N/A Xxxxxx filed 8/6/98 Ser. # 75/532,327
Trademark
Xxxxxx Technologies, Service Xxxx
Inc. Trademark N/A Xxxxxx 4/23/96 1,969,986
SCHEDULE OF PATENTS, TRADEMARKS, COPYRIGHTS (cont.)
TITLE-NAME TYPE INVENTOR OWNER DATE ISSUED NUMBER
---------- ---- -------- ----- ----------- ------
Refrigerant Journal
System Copyright N/A ESS 5/17/95 TX 0-000-000
Refrigerant Journal
System Software Copyright N/A ESS 5/8/95 TXu 692-039
Facility Refrigerant
Manager Training
Manual Copyright N/A ESS 6/26/95 TX 0-000-000
Refrigerant Management
Survey Copyright N/A ESS 6/29/95 TX 0-000-000
Refrigerant
Management Plan Copyright N/A ESS 5/22/95 TX 0-000-000
Refrigerant Compliance
Manager Copyright N/A ESS 11/16/93 TX 0-000-000
Refrigerant Compliance
Manager Trademark N/A ESS Filed 9/19/96 Ser. # 75/168690
Refrigerant Journal
Software Trademark N/A ESS 10/21/97 Reg. # 2,106,923
Facility Associate Trademark N/A ESS 10/21/97 Reg. # 2,106,926
Generator Associate Trademark N/A ESS 10/28/97 Reg. # 2,108,829
Manifest Associate Trademark N/A ESS 10/28/97 Reg. # 2,108,828
Transporter Associate Trademark N/A ESS 11/18/97 Reg. # 2,113,856
================================================================================
STOCK PURCHASE AGREEMENT
dated
March 30, 1999
between
XXXXXX TECHNOLOGIES, INC.
and
XXXXXXX US DISCOVERY OFFSHORE FUND III, L.P.
================================================================================
TABLE OF CONTENTS
Page
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK.........................................................1
SECTION 2. CLOSING......................................................................................2
SECTION 3. DEFINITIONS..................................................................................2
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................14
4.1. Corporate Existence, Power and Authority....................................................14
4.2. Capital Stock...............................................................................15
4.3. Subsidiaries................................................................................16
4.4. Business....................................................................................16
4.5. No Defaults or Conflicts....................................................................16
4.6. Disclosure Materials; Other Information.....................................................17
4.7. Litigation..................................................................................18
4.8. Taxes.......................................................................................18
4.9. ERISA.......................................................................................18
4.10. Legal Compliance............................................................................20
4.11. Outstanding Securities......................................................................20
4.12. Permits, Licenses and Approvals; Intellectual Property and Other Rights.....................20
4.13. Key Employees...............................................................................21
4.14. Properties..................................................................................21
4.15. Suppliers and Customers.....................................................................21
4.16. Environmental Compliance....................................................................22
4.17. No Burdensome Agreements....................................................................22
4.18. Offering of Shares..........................................................................23
4.19. SEC Reports.................................................................................23
4.20. Indebtedness................................................................................23
4.21. Use of Proceeds.............................................................................24
4.22. Other Names.................................................................................24
4.23. Brokers.....................................................................................24
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............................................24
5.1. Corporate Power and Authority...............................................................24
5.2. Investment Intent...........................................................................25
5.3. Brokers.....................................................................................25
5.4. Ownership of Common Stock...................................................................25
i
SECTION 6. RESTRICTIONS ON TRANSFER....................................................................26
SECTION 7. INFORMATION AS TO THE COMPANY...............................................................26
7.1. Financial Information.......................................................................26
7.2. Communication with Accountants..............................................................28
7.3. Inspection..................................................................................29
7.4. Notices.....................................................................................29
SECTION 8. AFFIRMATIVE COVENANTS.......................................................................30
8.1. Maintenance of Existence, Properties and Franchises; Compliance
with Law; Taxes; Insurance..................................................................30
8.2. Office for Payment, Exchange and Registration; Location of Office;
Notice of Change of Name or Office..........................................................31
8.3. Fiscal Year.................................................................................31
8.4. Environmental Matters.......................................................................32
8.5. Reservation of Shares.......................................................................33
8.6. Securities Exchange Act Registration........................................................33
8.7. Delivery of Information for Rule 144A Transactions..........................................33
8.8. Senior Securities...........................................................................34
8.9. Further Assurances..........................................................................34
8.10. Stockholder Approval........................................................................34
8.11. Shares Paid as Dividends....................................................................34
SECTION 9. NEGATIVE COVENANTS..........................................................................34
9.1. No Dilution or Impairment; No Changes in Capital Stock......................................35
9.2. Indebtedness................................................................................36
9.3. Consolidation, Merger and Sale..............................................................36
9.4. No Change in Business.......................................................................36
9.5. Restricted Payments; Investments............................................................36
9.6. Sale of Substantial Portion of Assets.......................................................36
9.7. Obligations to Affiliates...................................................................37
9.8. Transactions with Affiliates................................................................37
9.9. Liens.......................................................................................38
9.10. Private Placement Status....................................................................38
9.11. Maintenance of Public Market................................................................38
9.12. Actions Prior to the Closing Date...........................................................39
ii
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS.......................................................39
10.1. Certificate of Amendment; Stockholders' Agreement;
Registration Rights Agreement...............................................................39
10.2. Certificates for Shares.....................................................................39
10.3. Senior Status...............................................................................40
10.4. Accuracy of Representations and Warranties..................................................40
10.5. Compliance with Agreements..................................................................40
10.6. Officers=Certificates.......................................................................40
10.7. Proceedings.................................................................................40
10.8. Legality; Governmental and Other Authorization..............................................40
10.9. No Material Adverse Change..................................................................41
10.10. Opinion of Counsel..........................................................................41
10.11. Purchases of Shares.........................................................................41
10.12. Consents....................................................................................41
10.13. Other Documents and Opinions................................................................41
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES
AND COVENANTS...............................................................................42
SECTION 12. SPECIFIC PERFORMANCE........................................................................42
SECTION 13. EXPENSES....................................................................................43
SECTION 14. DIRECT PAYMENTS.............................................................................44
SECTION 15. AMENDMENTS AND WAIVERS......................................................................45
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT.........................45
SECTION 17. NOTICES.....................................................................................46
SECTION 18. MISCELLANEOUS...............................................................................46
iii
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT is dated as of March 30, 1999 between
Xxxxxx Technologies, Inc., a New York corporation (the "Company"), and the
Purchaser listed on the signature page of this Agreement (the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Company desires to issue and sell to the Purchaser, and
the Purchaser desires to purchase from the Company, shares of the Company's
Series A Convertible Preferred Stock, par value $.01 per share (the "Series A
Convertible Preferred Stock"), upon the terms and provisions hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK
(a) The Company agrees to sell to the Purchaser and, subject to the
terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, the
Purchaser agrees to purchase from the Company at the Closing provided for in
Section 2 hereof, the number of shares of Series A Convertible Preferred Stock
set forth opposite the Purchaser's name on Schedule 1 hereto. The shares of
Series A Convertible Preferred Stock being acquired under this Agreement and by
the other Purchaser under the other Stock Purchase Agreement (as hereinafter
defined) are collectively referred to herein as the "Shares", containing rights
and privileges as more fully set forth in the Certificate of Amendment of the
Certificate of Incorporation of the Company in the form attached hereto as
Exhibit A (the "Certificate of Amendment").
(b) The aggregate purchase price to be paid to the Company by the
Purchaser for the Shares to be purchased by the Purchaser pursuant to this
Agreement shall be the amount set forth opposite the Purchaser's name on
Schedule 1 hereto. No further payment shall be required from the Purchaser for
the Shares.
(c) The Shares are being sold to the purchasers listed on Schedule 1
hereto (the "Purchasers") pursuant to this Agreement and the other Series A
Convertible Preferred Stock Purchase Agreement (both of such agreements
collectively, as from time to time assigned, supplemented or amended or as the
terms thereof may be waived, the "Stock Purchase Agreements"). Both Stock
Purchase Agreements shall be dated the date hereof and shall be identical except
as to the identities of the respective Purchasers. The sale of Shares to each
Purchaser under each Stock Purchase Agreement is to be a separate sale, and no
Purchaser shall have any liability under any Stock Purchase Agreement other than
the Stock Purchase Agreement to which it is a party.
(d) The Company will use the proceeds realized from the sale of the
Shares to fund the roll-out of the Depot Strategy program, fees and expenses of
the transactions contemplated hereby and for working capital purposes.
SECTION 2. CLOSING
(a) Subject to the terms and conditions hereof, the closing of the
purchase and sale of the Shares to be purchased by the Purchaser will be deemed
to have taken place at the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, 000 Xxxx
Xxxxxx, Xxx Xxxx, Xxx Xxxx at 9:00 A.M., New York City time, on March 30, 1999,
or such other time and date as shall be mutually agreed to by the Company and
the Purchaser (the "Closing") (such time and date are herein referred to as the
"Closing Date").
(b) Subject to the terms and conditions hereof, at the Closing (i)
the Company will deliver to the Purchaser a certificate registered in the
Purchaser's name (or the name of its nominee, if any, as specified on Schedule 1
hereto) evidencing the number of Shares set forth opposite the Purchaser's name
on Schedule 1 and (ii) upon the Purchasers receipt thereof, the Purchaser will
deliver to the Company a certified or official bank check (or wire transfer) in
an amount equal to the aggregate purchase price (as specified in Section 1(b)
hereof) for the Shares to be purchased by the Purchaser payable to the order of
the Company in federal or other immediately available funds.
SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions shall
apply (such definitions to be equally applicable to both the singular and plural
forms of the terms defined):
"Affiliate", when used with respect to any Person, means (i) if such
Person is a corporation, any officer or director thereof (other than a
director elected pursuant to Section 4 of the Certificate of Amendment)
and any Person which is, directly or indirectly, the beneficial owner
(by itself or as part of any group) of more than five percent (5%) of
any class of any equity security (within the meaning of the Securities
Exchange Act) thereof, and, if such beneficial owner is a partnership,
any general partner thereof, or if such beneficial owner is a
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corporation, any Person controlling, controlled by or under common
control with such beneficial owner, or any officer or director of such
beneficial owner or of any corporation occupying any such control
relationship, (ii) if such Person is a partnership, any general or
limited partner thereof, and (iii) any other Person which, directly or
indirectly, controls or is controlled by or is under common control
with such Person. For purposes of this definition, "control" (including
the correlative terms "controlling", "controlled by" and "under common
control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. The holding
of Shares (or of Conversion Shares obtained upon conversion of Shares),
and the rights under any Stock Purchase Agreement or under the
Certificate of Amendment, the Stockholders= Agreement or the
Registration Rights Agreement (or the exercise of any such rights,
including, without limitation, nominating a director to the Board (or
Board committee) of the Company and/or sending an observer to Board (or
Board committee) meetings of the Company), shall not cause a Purchaser
to be deemed to be an "Affiliate" of the Company.
"Affiliate Loan" means the loan made to the Company by Xxxxxxxx X.
Xxxxxx, Xx., in the original principal amount of $365,000, pursuant to
the promissory note dated February 25, 1999.
"Agreement" means this Stock Purchase Agreement (together with
exhibits and schedules) as from time to time assigned, supplemented or
amended or as the terms hereof may be waived.
"Benefit Plan" means any Plan, existing at the Closing, established
or to which contributions have at any time been made by the Company, or
any predecessor of any of the foregoing, or under which any employee,
former employee or director of the Company or any beneficiary thereof
is covered, is eligible for coverage or has benefit rights.
ABoard" or ABoard of Directors" means with respect to any Person
which is a corporation, a business trust or other entity, the board of
directors or other group, however designated, which is charged with
legal responsibility for the management of such Person, or any
committee of such board of directors or group, however designated,
which is authorized to exercise the power of such board or group in
respect of the matter in question.
"Business Day" means any day other than a Saturday, Sunday or any
day on which banks in the location of the office of the Company
provided for in Section 17 hereof are authorized or obligated to close.
-3-
"Capitalized Lease" means any lease to which the Company is party as
lessee, or by which it is bound, under which it leases any property
(real, personal or mixed) from any lessor other than the Company, and
which either is required to be capitalized in accordance with generally
accepted accounting principles consistently applied, or, even if not so
required to be capitalized, shall have (or have had), at the time first
entered into, an initial term of greater than three (3) years
(including leases of shorter duration which are or were extendible to a
total term greater than three (3) years at the option of the lessor).
The value of Capitalized Leases, as of the time of any determination
thereof, shall mean the sum of the then present values, determined as
hereinafter provided, of future obligations of lessees under then
existing Capitalized Leases. To compute the value of any Capitalized
Lease, the following methods shall be used, as applicable:
(i) values of leases required to be capitalized in accordance with
generally accepted accounting principles shall be computed in
accordance with such principles; and
(ii) values of other leases (and values of contracts or other items
which this Agreement provides are to be valued as if they were
Capitalized Leases) shall be computed by discounting, to the
date of determination, at an assumed interest rate of eight
percent (8%) per annum, the minimum amount of future rental
payments that will be due under the related documentation,
including rental payments that may be due during extensions
which are at the other party's option, but excluding any
amounts in respect of insurance on, taxes on and/or maintenance
of the properties subject to such leases (provided that such
amounts are owed and paid only to the extent actually
incurred).
"Certificate of Amendment" has the meaning set forth in Section 1(a)
hereof.
"Closing" has the meaning set forth in Section 2(a) hereof.
"Closing Date" has the meaning set forth in Section 2(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and interpretations thereunder.
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering the
Securities Act or the Securities Exchange Act.
"Common Stock" means the Company's Common Stock, par value $.01 per
share, and shall also include any common stock of the Company hereafter
authorized and any capital stock of the Company of any other class hereafter
authorized which is not preferred as to dividends or assets over any other class
of capital stock of the Company or which has ordinary voting power for the
election of directors of the Company.
-4-
"Company" means Xxxxxx Technologies, Inc., a New York corporation,
its successors and assigns.
"Consolidated" or "consolidated", when used with reference to any
financial term in this Agreement, means the aggregate for the Company of the
amounts signified by such term for all such Persons, with intercompany items
eliminated, and, with respect to net worth, after eliminating the portion of net
worth properly attributable to minority interests, if any, in the capital of any
such Person (other than in the capital of the Company) and otherwise as
determined in accordance with generally accepted accounting principles
consistently applied (except as otherwise expressly provided herein).
"Conversion Share" or "Conversion Shares" means the shares of the
Company's Common Stock obtained or obtainable upon conversion of Shares and
shall also include any capital stock or other securities into which Conversion
Shares are changed and any capital stock or other securities resulting from or
comprising a reclassification, combination or subdivision of, or a stock
dividend on, any Conversion Shares. In the event that any Conversion Shares are
sold either in a public offering pursuant to a registration statement under the
Securities Act or pursuant to a Rule 144 Transaction, then the transferees of
such Conversion Shares shall not be entitled to any benefits under this
Agreement with respect to such Conversion Shares and such Conversion Shares
shall no longer be considered to be "Conversion Shares".
"Designated Entity" means, in connection with the rights of any
Person holding less than thirty percent (30%), in the aggregate, of the
originally issued Shares and Conversion Shares, (i) as long as any Shares or
Conversion Shares are held by any Person identified in clause (i) or (ii) of the
definition of "Xxxxxxx Holders", Xxxxxxx Capital Management, 000 Xxxx Xxxxxx,
Xxx Xxxx, XX 00000, Attention: Xxxxxx X. Xxxx and (ii) if no Shares or
Conversion Shares are held by a Person identified in clause (i) or (ii) of the
definition of "Xxxxxxx Holders", the entity designated by the Transferee holding
the largest number of such shares, provided, that such Transferee owns thirty
percent (30%) or more, in the aggregate, of the originally issued Shares and
Conversion Shares (in which case such Transferee shall provide notice to the
Corporation of such entity). For so long as no Shares or Conversion Shares are
held by any Person identified in clause (i) or (ii) of the definition of
"Xxxxxxx Holders" and no Person holds thirty percent (30%) or more, in the
aggregate, of the originally issued Shares and Conversion Shares, there shall be
no Designated Entity. For purposes of this definition of "Designated Entity,"
the calculation of a Person's percentage holdings of Conversion Shares shall be
determined based upon the number of Shares from which such Conversion Shares
derived.
-5-
"Disclosure Material" has the meaning specified in Section 4.6(a)
hereof.
"Environmental Laws" means all federal, state, local, foreign, civil
and criminal laws, statutes, ordinances, orders, codes, Environmental Permits,
rules, policies and regulations and common law relating to the protection of the
environment and human health or relating to the handling, use, generation,
treatment, storage, transportation or disposal of Hazardous Materials, including
but not limited to the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
ss. 6901 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.;
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. ss. 9601 et seq.; the Federal Water Pollution Control Act, 33
U.S.C. ss. 1251 et seq.; the Clean Air Act, 42 U.S.C. ss. 7401 et seq.; the
Hazardous Materials Transportation Act, 49 U.S.C. ss. 1801 et seq.; the
Occupational Safety and Health Act, 29 U.S.C. ss. 651; the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. ss. 136y et seq.; and the Oil Pollution
Act of 1990, 33 U.S.C. ss. 2701 et seq., all as may be amended or superseded
from time to time.
"Environmental Lien" has the meaning set forth in Section 4.16(d)
hereof.
"Environmental Permits" means all permits, licenses, approvals,
authorizations or consents required by any Governmental Authority under any
applicable Environmental Law and includes any and all orders, consent orders or
binding agreements issued or entered into by a Governmental Authority under any
applicable Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means each "person" (as defined in Section 3(9) of
ERISA) which is under "common control" with the Company (within the meaning of
Section 414(b), (c), (m) or (o) of the Code).
"Xxxxxxx Funds" means Xxxxxxx US Discovery Fund III, L.P. and
Xxxxxxx US Discovery Offshore Fund III, L.P.
"Xxxxxxx Holders" means (i) the Xxxxxxx Funds, (ii) any Affiliate,
officer or employee of an Affiliate or investment fund managed by an Affiliate
of the Xxxxxxx Funds to which the Xxxxxxx Funds may transfer record and/or
beneficial ownership of the Shares or the Conversion Shares and (iii) any
transferee of Shares or Conversion Shares from a Person named in clause (i) or
(ii) hereof (provided that such transferee is consented to by the Company, such
consent not to be unreasonably withheld) other than a transferee of Shares or
Conversion Shares sold in either a public offering pursuant to a registration
statement under the Securities Act or pursuant to a Rule 144 Transaction.
-6-
"Governmental Authority" means any federal, state, or local
governmental agency or authority (including regulatory authority) having
jurisdiction over the Company or any of its respective assets or businesses.
"Guaranty" means (i) any guaranty or endorsement of the payment or
performance of, or any contingent obligation in respect of, any indebtedness or
other obligation of any other Person, (ii) any other arrangement whereby credit
is extended to one obligor (directly or indirectly) on the basis of any promise
or undertaking of another Person (a) to pay the indebtedness of such obligor,
(b) to purchase an obligation owed by such obligor, (c) to purchase or lease
assets (or to provide funds, goods or services) under circumstances that would
enable such obligor to discharge one or more of its obligations or (d) to
maintain the capital, working capital, solvency or general financial condition
of such obligor, in each case whether or not such arrangement is disclosed in
the balance sheet of such other Person or is referred to in a footnote thereto
and (iii) any liability as a general partner of a partnership in respect of
indebtedness or other obligations of such partnership; provided, however, that
the term "Guaranty" shall not include (1) endorsements for collection or deposit
in the ordinary course of business or (2) obligations of the Company which would
constitute Guaranties solely by virtue of the continuing liability of a Person
which has sold assets subject to liabilities for the liabilities which were
assumed by the Person acquiring the assets, unless such liability is required to
be carried on the consolidated balance sheet of the Company. The amount of any
Guaranty and the amount of indebtedness resulting from such Guaranty shall be
the maximum amount of the guarantor's potential obligation in respect of such
Guaranty.
"Hazardous Materials" means any petroleum, petroleum hydrocarbons,
petroleum waste or petroleum products, underground storage tanks, asbestos or
asbestos-containing materials, pesticides, lead and lead-containing materials,
urea formaldehyde insulation and polychlorinated biphenyls (PCBs), ionizing and
non-ionizing radiation including radon and electromagnetic frequency radiation;
and any chemicals, materials, substances or wastes in any amount or
concentration which are now or hereafter "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants" or words of similar
import, under any Environmental Law.
"Indebtedness" of any Person means, without duplication, as of any
date as of which the amount thereof is to be determined, (i) all obligations of
such Person to repay money borrowed (including, without limitation, all notes
payable and drafts accepted representing extensions of credit, all obligations
-7-
under letters of credit, all obligations evidenced by bonds, debentures, notes
or other similar instruments and all obligations upon which interest charges are
customarily paid), (ii) all Capitalized Leases in respect of which such Person
is liable as lessee or as the guarantor of the lessee, (iii) all monetary
obligations which are secured by any Lien existing on property owned by such
Person whether or not the obligations secured thereby have been incurred or
assumed by such Person, (iv) all conditional sales contracts and similar title
retention debt instruments under which such Person is obligated to make
payments, (v) all Guaranties by such Person and (vi) all contractual obligations
(whether absolute or contingent) of such Person to repurchase goods sold and
distributed. "Indebtedness" shall not include, however, any unfunded obligations
in any employee pension benefit plan (as defined in ERISA) of the Company.
"Investment" means, with respect to any Person, (i) any loan,
advance or extension of credit by such Person to, and any contributions to the
capital of, any other Person, (ii) any Guaranty by such Person, (iii) any
interest in any capital stock, equity interest or other securities of any other
Person, (iv) any transfer or sale of property of such Person to any other Person
other than upon full payment, in cash, or not less than the agreed sale price or
the fair value of such property, whichever is higher and (v) any commitment or
option to make an Investment if, in the case of an option, the consideration
therefor exceeds $50,000, and any of the foregoing under clauses (i) through (v)
shall be considered an Investment whether such Investment is acquired by
purchase, exchange, merger or any other method; provided, that the term
"Investment" (1) shall not include an Investment in the Company, (2) shall not
include current trade and customer accounts receivable and allowances, provided
they relate to goods furnished in the ordinary course of business and are given
in accordance with the customary practices of the Company, (3) shall not include
temporary investments of excess cash of the Company in any of the following: (A)
investment grade obligations maturing within one year of their issuance which as
to principal and interest constitute direct obligations of, or obligations
guaranteed by, the United States of America, (B) negotiable certificates of
deposit of banks or trust companies which are organized under the laws of the
United States of America or any state thereof and which have capital and surplus
of at least $500,000,000, (C) commercial paper which is rated not less than
prime-one or A-1 or their equivalents by Xxxxx'x Investor Service, Inc. or
Standard & Poor's Corporation or their successors, (D) any repurchase agreement
secured by any one or more of the foregoing and (E) money market funds primarily
investing in any of the foregoing securities and sponsored by or affiliated with
nationally recognized brokerage or investment advisory firms, and (4) shall not
include Investments of the Company existing on the date hereof and disclosed on
Schedule 3 hereto.
ALien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security interest of any kind or nature whatsoever (including,
-8-
without limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same effect as any of the foregoing,
any assignment or other conveyance of any right to receive income and any
assignment of receivables with recourse against the assignor), any filing of a
financing statement as debtor under the Uniform Commercial Code or any similar
statute and any agreement to give or make any of the foregoing.
"Outside Directors" means those directors on the Company's Board of
Directors at any time who are not otherwise Affiliates of or employed by the
Company.
"Outstanding" or "outstanding" means (a) when used with reference to
the Shares or the Conversion Shares as of a particular time, all Shares or
Conversion Shares theretofore duly issued except (i) Shares or Conversion Shares
theretofore reported as lost, stolen, mutilated or destroyed or surrendered for
transfer, exchange or replacement, in respect of which new or replacement Shares
or Conversion Shares have been issued by the Company, (ii) Shares or Conversion
Shares theretofore cancelled by the Company and (iii) Shares or Conversion
Shares registered in the name of, as well as Shares or Conversion Shares owned
beneficially by, the Company, or any of its Affiliates. For purposes of the
preceding sentence, in no event shall "Affiliates" include (x) the persons which
are identified as "Purchasers" on Schedule 1 hereto or (y) any Affiliates of any
such persons.
"Pension Plan" means any "employee pension benefit plan" as defined
in Section 3(2) of ERISA.
"Person" or "person" means an individual, corporation, partnership,
firm, association, joint venture, trust, unincorporated organization,
government, governmental body, agency, political subdivision or other entity.
"Plan" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave of absence,
layoff, vacation, day or dependent care, legal services, cafeteria, life,
health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, or whether for the benefit of
a single individual or more than one individual including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA.
"Preferred Stock" means any class of the capital stock of a
corporation (whether or not convertible into any other class of such capital
stock) which has any right, whether absolute or contingent, to
-9-
receive dividends or other distributions of the assets of such corporation
(including, without limitation, amounts payable in the event of the voluntary or
involuntary liquidation, dissolution or winding-up of such corporation), which
right is superior to the rights of another class of the capital stock of such
corporation. "Preferred Stock" includes, without limitation, the Series A
Convertible Preferred Stock.
"Purchaser" means the person who accepts and agrees to the terms
hereof as indicated by such person's signature (as "the undersigned Purchaser")
on the execution page of this Agreement, together with its successors and
assigns.
"Purchasers" has the meaning set forth in Section 1(c) hereof,
together with their respective successors and assigns.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the Closing Date, among the Company and each of the
Purchasers.
"Restricted Payment" means (i) every payment in connection with the
redemption, purchase, retirement or other acquisition by or on behalf of the
Company of any shares of the Company's capital stock (as defined below), whether
or not owned by the Company, (ii) any prepayments or repayments made on
Indebtedness of the Company, (iii) every payment to or on behalf of any
Affiliate of the Company on account of or with respect to any lease
arrangements, and (iv) every payment by or on behalf of the Company (whether as
repayment or prepayment of principal or as interest or otherwise) on or with
respect to (A) any obligation to repay money borrowed owing to any Affiliate of
the Company or (B) any obligation, to any Person, of any Affiliate of the
Company or to any other holder of shares of the Company's capital stock (as
defined below), which obligation is assumed, or is the subject of a Guaranty, by
the Company; provided, however, that the term "Restricted Payment" shall not
apply to (1) any payment in respect of capital stock of the Company to the
extent payable in shares of the capital stock of the Company, (2) any regularly
scheduled prepayment or repayment of Indebtedness, provided that such
Indebtedness being prepaid or repaid is not at the time of such prepayment or
repayment or at any prior time thereto owing to an Affiliate of the Company,
provided that regularly scheduled payments or prepayments pursuant to the
Affiliate Loan are not "Restricted Payments", (3) payments to DuPont Chemical
and Energy Operations, Inc. and X.X. XxXxxx de Nemours and Company in the
ordinary course of business, consistent with past practice, and not in
connection with any financing or extraordinary corporate transaction are not
"Restricted Payments", or (4) any payments, distributions or other transfers or
actions on or with respect to the Shares or the Conversion Shares or to the
Purchasers (or holders of Shares or the Conversion Shares) under the Stock
Purchase Agreements. For purposes of this definition, "capital stock" shall also
include warrants and other rights and options to acquire shares of capital stock
(whether upon exercise, conversion, exchange or otherwise).
-10-
"Rule 144" means (i) Rule 144 under the Securities Act as such Rule
is in effect from time to time and (ii) any successor rule, regulation or law,
as in effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule, regulation or
law, as in effect from time to time.
ARule 144 Transaction" means a transfer of Conversion Shares (A)
complying with Rule 144 as such Rule is in effect on the date of such transfer
(but not including a sale other than pursuant to "brokers= transactions" as
defined in clauses (1) and (2) of paragraph (g) of such Rule as in effect on the
date hereof) and (B) occurring at a time when Conversion Shares are registered
pursuant to Section 12 of the Securities Exchange Act.
"SEC Reports" has the meaning set forth in Section 4.19 hereof.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules, regulations and interpretations thereunder.
"Series A Convertible Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $.01 per share, which will have the
rights, powers and privileges on the Closing Date as more fully set forth in the
Certificate of Amendment.
"Shares" has the meaning set forth in Section 1(a) hereof. In the
event that any Shares are sold either in a public offering pursuant to a
registration statement under Section 5 of the Securities Act or pursuant to a
Rule 144 Transaction, then the transferees of such Shares shall not be entitled
to any benefits under this Agreement with respect to such Shares and such Shares
shall no longer be considered to be "Shares" for purposes of any consent or
waiver provision of this Agreement.
"Stock Purchase Agreements" has the meaning set forth in Section
1(c) hereof.
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"Stockholders= Agreement" means the Stockholders= Agreement, dated
as of the Closing Date, among the Company, the Purchasers and certain other
stockholders of the Company.
"Stockholders= Meeting" means the Company's 1999 annual meeting of
stockholders.
"Subsidiary", with respect to any Person, means any corporation,
association or other entity of which more than 50% of the total voting power of
shares of stock or other equity interests (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is, at the time as of which any determination is being made, owned or
controlled, directly or indirectly, by such Person or one or more of its
Subsidiaries, or both. The term "Subsidiary" or "Subsidiaries" when used herein
without reference to any particular Person, means a Subsidiary or Subsidiaries
of the Company.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
alternative or add-on minimum, environmental or other taxes, assessments,
duties, fees, levies or other governmental charges of any nature whatsoever,
whether disputed or not, together with any interest, penalties, additions to tax
or additional amounts with respect thereto.
"Tax Returns" means any returns, reports or statements (including
any information returns) required to be filed for purposes of a particular Tax.
"Taxing Authority" means any governmental agency, board, bureau,
body, department or authority of any United States federal, state or local
jurisdiction, or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"Transferees" shall mean any transferee (except for a Xxxxxxx
Holder) of Shares or Conversion Shares from a Xxxxxxx Holder. Transferees shall
not include a transferee of Shares or Conversion Shares sold in either a public
offering pursuant to a registration statement under the Securities Act or
pursuant to a Rule 144 Transaction.
(b) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and other words
of similar import refer to this Agreement as a whole and not to any
particular Section or other subdivision;
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(ii) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles consistently applied (except as otherwise
provided herein);
(iii) all computations provided for herein, if any, shall be
made in accordance with generally accepted accounting principles
consistently applied (except as otherwise provided herein);
(iv) any uses of the masculine, feminine or neuter gender shall
also be deemed to include any other gender, as appropriate;
(v) all references herein to actions by the Company, such as
"create", "sell", "transfer", "dispose of", etc., mean such action
whether voluntary or involuntary, by operation of law or otherwise;
(vi) the exhibits and schedules to this Agreement shall be
deemed a part of this Agreement;
(vii) each of the representations and warranties of the Company
contained in Section 4 hereof is separate and is not limited, qualified
or modified by the existence, wording or satisfaction of any other
representation or warranty of the Company in Section 4 hereof or
otherwise;
(viii) each of the covenants of the Company contained in
Sections 7, 8 and 9 hereof or otherwise contained in any Stock Purchase
Agreement, the Certificate of Amendment, the Stockholders= Agreement or
the Registration Rights Agreement is separate and is not limited or
satisfied by the existence, wording or satisfaction of any other
covenant of the Company in Section 7, 8 or 9 hereof or otherwise; and
(ix) all references herein (in covenants or otherwise) to any
action(s) which are to be taken (or which are prohibited from being
taken) by any Person or the Company shall apply to such Person or the
Company, as the case may be, whether such action is taken directly or
indirectly.
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SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows as
of the date hereof and as of the Closing Date:
4.1. Corporate Existence, Power and Authority.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. The
Company is duly qualified, licensed and authorized to do business and is in good
standing in each jurisdiction in which it owns or leases any property or in
which the conduct of its business requires it to so qualify or be so licensed,
except for such jurisdictions where the failure to so qualify or be so licensed
would not have a material adverse effect on the Company's assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects.
(b) No proceeding has been commenced looking toward the dissolution
or merger of the Company or the amendment of its certificate of incorporation
(other than the Certificate of Amendment). The Company is not in violation in
any respect of its certificate of incorporation or by-laws.
(c) The Company has all requisite corporate power and authority to
own or to hold under lease and to operate the properties it owns or holds and to
conduct its business as now being conducted.
(d) The Company has all requisite corporate power and authority to
execute, deliver, enter into, consummate the transactions contemplated by and
perform its obligations under (i) the Stock Purchase Agreements, including,
without limitation, the issuance by the Company of the Shares and the Conversion
Shares as contemplated herein and therein and in the Certificate of Amendment,
(ii) the Stockholders= Agreement and (iii) the Registration Rights Agreement.
The execution, delivery and performance of the Stock Purchase Agreements, the
Stockholders= Agreement and the Registration Rights Agreement by the Company
(including, without limitation, the issuance by the Company of the Shares and
the Conversion Shares as contemplated herein and therein and in the Certificate
of Amendment) have been duly authorized by all required corporate actions. The
Company has duly executed and delivered the Stock Purchase Agreements, the
Stockholders= Agreement and the Registration Rights Agreement. The Stock
Purchase Agreements, the Stockholders= Agreement and the Registration Rights
Agreement constitute the legal, valid and binding obligations of the Company
enforceable in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to the
rights of creditors generally.
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4.2. Capital Stock.
(a) Schedule 6(a) hereto correctly and completely lists (i) the
authorized capital stock of the Company (Common Stock and Preferred Stock), (ii)
the number of designated shares of Preferred Stock in each series or class after
giving effect to the Certificate of Amendment and (iii) on the Closing Date,
after giving effect to the issuance of Shares contemplated by the Stock Purchase
Agreements, the number of shares outstanding in each series or class. All of
such outstanding shares are, or on the Closing Date will be, duly authorized,
validly issued and outstanding, fully paid and non-assessable. The shares of the
Company's Common Stock issuable upon conversion of the Series A Convertible
Preferred Stock will be, when issued in accordance with the terms of the Series
A Convertible Preferred Stock, duly authorized, validly issued, fully paid and
non-assessable. Except as provided in the Certificate of Amendment, none of the
shares of the Company's capital stock which will be outstanding at the Closing
(i) were or will be subject to preemptive rights when issued or (ii) provide the
holders thereof with any preemptive rights with respect to any issuances of
capital stock.
(b) Schedule 6(b) hereto correctly and completely lists the number
and purpose for which such shares of the Company's Common Stock are reserved for
issuance by the Company.
(c) Except as referred to in Schedule 6(b), there are no outstanding
options, warrants, subscriptions, rights, convertible securities or other
agreements or plans under which the Company may become obligated to issue, sell
or transfer shares of its capital stock or other securities.
(d) Except as disclosed on Exhibit B hereto, there are and will be
no outstanding registration rights with respect to any capital stock of the
Company, which (in either case) will be outstanding on the Closing Date, or any
capital stock referred to in Section 4.2(b) or 4.2(c).
(e) Except as disclosed on Exhibit B hereto, there are no voting
agreements, voting trusts, proxies or other agreements or understandings with
respect to the voting of any capital stock of the Company.
(f) Except as disclosed on Exhibit B hereto, there are no
anti-dilution protections or other adjustment provisions in existence with
respect to any capital stock of the Company or any capital stock referred to in
Section 4.2(b) or 4.2(c).
(g) The Certificate of Amendment has been duly adopted by the
Company's Board of Directors and, when filed with the Secretary of State of the
State of New York, will be fully effective as an amendment to the Company's
certificate of incorporation. Upon filing of the Certificate of Amendment with
the Secretary of State of New York, the Shares will have all of the rights,
priorities and terms set forth in the Certificate of Amendment.
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(h) Those Persons who own, directly or indirectly, more than 5% of
the Company's outstanding Common Stock are as follows: Xxxxx X. Xxxxxx, Xxxxxx
X. Xxxxxx, Xxxxxxx X. Xxxxxxxxxxx, Xxxxxxx X. Xxxx-Xxxxxxxx, Xxxxxxxx X. Xxxxxx
and XxXxxx Chemical and Energy Operations, Inc.
4.3. Subsidiaries.
The Company has no Subsidiaries other than Xxxxxx Holdings, Inc.,
Xxxxxx Technologies Company and Environmental Support Solutions, Inc. The
Company has no Investments in any other Person, except as described in the
preceding sentence.
4.4. Business.
The Company sells refrigerants and provides refrigerant management
services, consisting primarily of recovery and reclamation of the refrigerants
used in commercial air conditioning and refrigeration systems, as well as
RefrigerantSide(TM) services, through which the Company performs decontamination
to remove moisture, oils and other contaminants in such systems. The Company
neither currently engages in, nor has any intention of engaging in, any other
business.
4.5. No Defaults or Conflicts.
(a) The Company is not in violation or default in any material
respect (and is not in default in any material respect regarding any
Indebtedness) under any indenture, agreement or instrument to which it is a
party or by which it or its properties may be bound. The Company is not in
default under any material order, writ, injunction, judgment or decree of any
court or other Governmental Authority or arbitrator(s) having jurisdiction over
the Company.
(b) The execution, delivery and performance by the Company of the
Stock Purchase Agreements, the Stockholders= Agreement and the Registration
Rights Agreement and any of the transactions contemplated hereby or thereby
(including, without limitation, the issuance of the Shares and the Conversion
Shares as contemplated herein and therein and in the Certificate of Amendment
and the adoption of the Certificate of Amendment as an amendment to the
Company's certificate of incorporation) do not and will not (i) violate or
conflict with, with or without the giving of notice or the passage of time or
both, any provision of (A) the certificate of incorporation or by-laws of the
Company or (B) any material law, rule, regulation or order of any Governmental
Authority, or any material judgment, writ, injunction, decree, award or other
action of any court, Governmental Authority or arbitrator(s), or any agreement,
indenture or other instrument applicable to the Company or any of its
properties, (ii) result in the creation of any Lien upon any of the Company's
properties, assets or revenues, (iii) require the consent, waiver, approval,
order or authorization of, or declaration, registration, qualification or filing
with, any Person (whether or not a Governmental Authority and including, without
limitation, any shareholder approval), or (iv) cause antidilution clauses of any
outstanding securities to become operative or give rise to any preemptive
rights.
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4.6. Disclosure Materials; Other Information.
(a) The Company has previously furnished to the Purchaser the
materials described on Schedule 4 hereto (the "Disclosure Material"). The
audited and unaudited financial statements referred to or contained in the
materials referred to on Schedule 4 fairly present the consolidated financial
condition of the Company as of the respective dates thereof and the consolidated
results of the operations of the Company for such periods and have been prepared
in accordance with generally accepted accounting principles consistently
applied, except that any such unaudited statements may omit notes and may be
subject to year-end adjustment.
(b) Since September 30, 1998, except as disclosed on Exhibit B
hereto, (i) the business of the Company has been conducted in the ordinary
course and (ii) there has been no material adverse change in the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis. As
of the Closing Date and as of the date hereof, there are no material liabilities
of the Company which would be required to be provided for in a consolidated
balance sheet of the Company as of either such date prepared in accordance with
generally accepted accounting principles consistently applied, other than
liabilities provided for in the financial statements referred to in Section
4.6(a). Since September 30, 1998, no amount or property has directly or
indirectly been declared, ordered, paid, made or set aside for any Restricted
Payment nor has any such action been agreed to.
(c) There are no material liabilities, contingent or otherwise, of
the Company that have not been disclosed in the financial statements referred to
in Section 4.6(a) or otherwise disclosed in the Disclosure Material.
(d) None of the Disclosure Material contained or contains a false or
misleading statement of a material fact or omits to state any material fact
necessary in order to make the statements made in such Disclosure Material, in
light of the circumstances under which they were made, not misleading.
(e) There is no fact known to the Company which is not in the
Disclosure Material and which materially and adversely affects, or in the future
might materially and adversely affect, the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis.
-17-
4.7. Litigation.
Except as disclosed on Exhibit B hereto, there is no action, suit,
proceeding, investigation or claim pending or, to the knowledge of the Company,
threatened in law, equity or otherwise before any court, Governmental Authority
or arbitrator which (i) questions the validity of the Stock Purchase Agreements,
the Certificate of Amendment, the Stockholders= Agreement, the Registration
Rights Agreement, the Shares or the Conversion Shares or any action taken or to
be taken pursuant hereto or thereto, (ii) might adversely affect the right,
title or interest of any Purchaser to the Shares or the Conversion Shares or
(iii) might result in a material adverse change in the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis.
4.8. Taxes.
The Company has duly and timely filed all Tax Returns required to be
filed by it, and each such Tax Return correctly and completely reflects the Tax
liability and all other information required to be reported thereon. The Company
has paid or caused to be paid all Taxes (whether or not reflected on such Tax
Returns) that are due and payable. The provision for Taxes due by the Company in
the most recent financial statement included in the Disclosure Material is
sufficient for all unpaid Taxes, being current Taxes not yet due and payable, of
the Company, as of the end of the period covered by such financial statement,
and as of the Closing Date, such provision, as adjusted for the passage of time
through the Closing Date, will be sufficient for the then-accrued and unpaid
Taxes not yet due and payable of the Company. There is no dispute concerning any
Tax liability of the Company either threatened, claimed or raised by any Taxing
Authority, and the Company does not expect any Taxing Authority to assess
additional Taxes against or in respect of it for any past period. The Company
has withheld and paid, or, if not yet due for payment, set aside in accounts for
such purposes, all Taxes required to have been withheld in connection with
amounts paid or owing to any employee, creditor, independent contractor or other
third party. The Company has no liability for Taxes of any Person other than the
Company as a transferee or successor, by contract or otherwise. There are no
applicable Taxes payable by the Company in connection with the execution and
delivery of the Stock Purchase Agreements, the Stockholders= Agreement or the
Registration Rights Agreement or the issuance by the Company of the Shares or
the Conversion Shares.
4.9. ERISA.
(a) All Benefit Plans are listed in Exhibit B, and copies of all
documentation relating to such Benefit Plans have been delivered or made
available to the Purchasers (including copies of written Benefit Plans, written
descriptions of oral Benefit Plans, summary plan descriptions, trust agreements,
the three most recent annual returns, employee communications, and IRS
determination letters).
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(b) Each Benefit Plan has at all times been maintained and
administered in all material respects in accordance with its terms and with the
requirements of all applicable law, including ERISA and the Code, and each
Benefit Plan intended to qualify under Section 401(a) of the Code has at all
times since its adoption been so qualified, and each trust which forms a part of
any such plan has at all times since its adoption been tax-exempt under Section
501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
Code, and the "amount of unfunded benefit liabilities" within the meaning of
Section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of Section 4043 of
ERISA) has occurred with respect to any Benefit Plan or any Plan maintained by
an ERISA Affiliate since the effective date of said Section 4043.
(e) No Benefit Plan is a multiemployer plan within the meaning of
Section 3(37) of ERISA.
(f) No direct, contingent or secondary liability has been incurred
or is expected to be incurred by the Company under Title IV of ERISA to any
party with respect to any Benefit Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA Affiliate.
(g) Neither the Company nor any ERISA Affiliate has incurred any
liability for any tax imposed under Section 4971 through 4980B of the Code or
civil liability under Section 502(i) or (l) of ERISA.
(h) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated under this Agreement.
(i) No Benefit Plan provides health or death benefit coverage beyond
the termination of an employee's employment, except as required by Part 6 of
Subtitle B of Title I of ERISA or Section 4980B of the Code or any State laws
requiring continuation of benefits coverage following termination of employment.
(j) No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of plan activities) has been brought
or, to the knowledge of the Company, threatened against or with respect to any
Benefit Plan and there are no facts or circumstances known to the Company that
could reasonably be expected to give rise to any such suit, action or other
litigation.
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(k) All contributions to Benefit Plans that were required to be made
under such Benefit Plans have been made, and all benefits accrued under any
unfunded Benefit Plan have been paid, accrued or otherwise adequately reserved
in accordance with generally accepted accounting principles, all of which
accruals under unfunded Benefit Plans are as disclosed in Exhibit B, and the
Company has performed all material obligations required to be performed under
all Benefit Plans.
(l) The execution, delivery and performance of the Stock Purchase
Agreements, the Stockholders= Agreement and the Registration Rights Agreement
and the consummation of the transactions contemplated hereby and thereby
(including, without limitation, the offer, issuance and sale by the Company, and
the purchase by the Purchaser of the Shares and the Conversion Shares) will not
involve any "prohibited transaction" within the meaning of ERISA or the Code.
4.10. Legal Compliance.
(a) The Company has complied with all applicable laws, rules,
regulations, orders, licenses, judgments, writs, injunctions, decrees or
demands, except to the extent that failure to so comply would not materially
adversely affect the assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or prospects of the Company on
a consolidated basis.
(b) There are no material adverse orders, judgments, writs,
injunctions or decrees of any court or administrative body, domestic or foreign,
or of any other Governmental Authority, domestic or foreign, outstanding against
the Company.
4.11. Outstanding Securities.
All securities (as defined in the Securities Act) of the Company
have been offered, issued, sold and delivered in compliance with, or pursuant to
exemptions from, all applicable federal and state laws, and the rules and
regulations of federal and state regulatory bodies governing the offering,
issuance, sale and delivery of securities.
4.12. Permits, Licenses and Approvals; Intellectual Property and
Other Rights.
Except as listed on Schedule 4.12, the Company owns or possesses and
holds free from burdensome restrictions or material conflicts with the rights of
others all franchises, licenses, permits, consents, approvals and other
authority (governmental or otherwise), patents, patent rights, trademarks,
trademark rights, trade names, trade name rights and copyrights (each of which
is listed on Exhibit B hereto), and all rights and privileges with respect to
any of the foregoing, as are necessary for the conduct of its business as now
being conducted and as proposed to be conducted. To the best of the Company's
knowledge, the Company is not in default in any material respect under any of
such franchises, licenses, permits, consents, approvals or other authority. The
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rights of (and use by) the Company with respect to such or any other patents,
patent rights, trademarks, trademark rights, trade names, trade name rights or
copyrights do not conflict with or infringe any rights of others in a manner
which might materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis, and no such claim of conflict
or infringement has been asserted by any Person.
4.13. Key Employees.
The Company has good relationships with its employees and has not
had and does not expect any substantial labor problems. The Company has no
knowledge as to any intentions of any key employee or any group of employees to
leave the employ of the Company. Except as set forth on Exhibit B hereto, the
employees of the Company are not and have never been represented by any labor
union, and no collective bargaining agreement is binding and in force against
the Company or currently being negotiated by the Company.
4.14. Properties.
The Company has good and marketable title to its real property, all
of which is disclosed on Exhibit B hereto, and good and marketable title to each
of its other properties. Certain real property used by the Company in the
conduct of its business is held under lease (as identified on Exhibit B hereto),
and the Company is not aware of any pending or threatened claim or action by any
lessor of any such property to terminate any such lease. All such leases are
valid and in full force and effect, and none of such leases is in default.
Except as disclosed on Schedule 5, none of the properties owned or leased by the
Company is subject to any Liens which could materially and adversely affect the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis.
4.15. Suppliers and Customers.
(a) The Company has no reason to believe that it does not have
adequate sources of supply for its business as currently conducted and as
proposed to be conducted. The Company has good relationships with all of its
material sources of supply of goods and services and does not anticipate any
material problem with any such material sources of supply.
(b) The Company has no knowledge that the customer base of the
Company might materially decrease.
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4.16. Environmental Compliance.
Except as disclosed on Schedule 4.16 hereto:
(a) the Company has not received any verbal or written notice,
citation, subpoena, summons, complaint or other correspondence or communication
from any person with respect to the presence of any Hazardous Material at, on,
about, under, emanating to or from or affecting any of the real property
(including improvements) currently or formerly owned, leased, operated or
occupied by the Company or any predecessors thereof;
(b) there has been no intentional or unintentional, gradual or
sudden, release, disposal or discharge upon, into, beneath or from the real
property (including improvements) currently or formerly owned, leased, operated
or occupied by the Company or any predecessors thereof that has caused or is
causing soil or groundwater contamination which under applicable Environmental
Laws could require investigation or remediation or could otherwise create a
material liability or obligation on the part of the Company;
(c) the Company is in material compliance with all applicable
Environmental Laws and the terms and conditions of all Environmental Permits;
(d) to the best knowledge of the Company after reasonable inquiry,
there are no Liens arising under or pursuant to any Environmental Law
("Environmental Liens") relating to any real property (including improvements
thereon) currently owned by the Company;
(e) there are no (i) underground storage tanks, (ii) polychlorinated
biphenyl containing equipment or (iii) asbestos-containing materials at any site
currently owned, leased, operated or occupied by the Company;
(f) the Company has not transported or arranged for the treatment,
storage, handling, disposal or transportation of any Hazardous Material to any
location which could reasonably be expected to result in material liability to
the Company; and
(g) no real property currently or previously owned, leased, operated
or occupied by the Company or any predecessors thereof is currently listed, or
to the knowledge of the Company, proposed to be listed on the National
Priorities List, the Comprehensive Environmental Response, Compensation and
Liability Information System or on any similar state list of sites requiring
investigation or cleanup.
4.17. No Burdensome Agreements.
To the best of the knowledge of the Company, (i) the Company is not
a party to, or bound by (nor are any of its properties affected by), any
commitment, contract or agreement, any term of which materially adversely
affects, or in the future would reasonably be expected to materially adversely
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affect, the assets, properties, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis and (ii) the Company is not a party to any contract or agreement with any
Affiliate of the Company, the terms of which are less favorable to the Company
than those which might have been obtained, at the time such contract or
agreement was entered into, from a person who was not such an Affiliate.
4.18. Offering of Shares.
Neither the Company nor, to the Company's knowledge, any agent or
other Person acting on its behalf, directly or indirectly, (i) offered any of
the Shares or any similar security of the Company (A) by any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) or (B) for sale to or solicited offers to buy any thereof
from, or otherwise approached or negotiated with respect thereto with, any
person other than the Purchasers and not more than fifty (50) other
institutional investors each of which the Company reasonably believed was an
"accredited investor" within the meaning of Regulation D under the Securities
Act or (ii) has done or caused to be done (or has omitted to do or to cause to
be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares within the provisions of Section 5 of the
Securities Act or the filing, notification or reporting provisions of any state
securities laws.
4.19. SEC Reports.
The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Securities Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1997, (ii) its Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1998, June 30, 1998 and
September 30, 1998 and (iii) its Proxy Statement dated February 16, 1999
(collectively, the "SEC Reports"). Each SEC Report was in substantial compliance
with the requirements of its respective form and none of the SEC Reports, nor
the financial statements (and the notes thereto) included in the SEC Reports, as
of their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
4.20. Indebtedness.
Schedule 2 hereto sets forth (i) the amount of all Indebtedness of
the Company outstanding on such Closing Date, which, individually, exceeds
$50,000, (ii) any Lien with respect to such Indebtedness and (iii) a description
of each instrument or agreement governing such Indebtedness. The Company has
made available to the Purchaser a complete and correct copy of each such
instrument or agreement (including all amendments, supplements or modifications
thereto). No material default exists with respect to or under any such
Indebtedness or any material instrument or agreement relating thereto and no
event or circumstance exists with respect thereto that (with notice or the lapse
of time or both) could give rise to such a default.
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4.21. Use of Proceeds.
The Company will use the proceeds realized from the sale of the
Shares to fund the roll-out of the Depot Strategy program, fees and expenses of
the transactions contemplated hereby and for working capital purposes. No
portion of such proceeds will be used for the purpose, whether immediate,
incidental or ultimate, of purchasing or carrying, within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as amended
from time to time, any "margin stock" as defined in said Regulation U, or for
the purpose of purchasing, carrying or trading in securities within the meaning
of Regulation T of the Board of Governors of the Federal Reserve System, as
amended from time to time, or for the purpose of reducing or retiring any
indebtedness which both (i) was originally incurred to purchase any such margin
stock or other securities and (ii) was directly or indirectly secured by such
margin stock or other securities. None of the assets of the Company includes any
such "margin stock." The Company has no present intention of acquiring any such
"margin stock."
4.22. Other Names.
The business previously or presently conducted by the Company has
not been conducted under any corporate, trade or fictitious name, other than
those names listed on Exhibit B hereto.
4.23. Brokers.
Except as disclosed on Exhibit B hereto, no broker, finder or
investment banker or other party is entitled to any brokerage, finder's or other
similar fee or commission in connection with any Stock Purchase Agreement, the
Stockholders= Agreement, the Registration Rights Agreement or the Certificate of
Amendment or any of the transactions contemplated hereby or thereby, based upon
arrangements made by or on behalf of the Company or any of its Affiliates.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as follows:
5.1. Corporate Power and Authority.
The Purchaser has all requisite power, authority and legal right to
execute, deliver, enter into, consummate the transactions contemplated by and
perform its obligations under this Agreement, the Stockholders= Agreement and
the Registration Rights Agreement. The execution, delivery and performance of
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this Agreement, the Stockholders= Agreement and the Registration Rights
Agreement by the Purchaser have been duly authorized by all required corporate
and other actions. The Purchaser has duly executed and delivered this Agreement,
the Stockholders= Agreement and the Registration Rights Agreement, and this
Agreement, the Stockholders= Agreement and the Registration Rights Agreement
constitute the legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally.
5.2. Investment Intent.
The Purchaser is capable of evaluating the risk of its investment in
the Shares being purchased by it and is able to bear the economic risk of such
investment. The Purchaser is purchasing the Shares to be purchased by it for its
own account for investment and not with a present view to any distribution
thereof in violation of applicable securities laws; provided, however, that,
upon notice to the Company, the Purchaser may transfer record and/or beneficial
ownership of the Shares or the Conversion Shares to one or more Affiliates,
officers or employees of Affiliates or investment funds managed by Affiliates of
the Purchaser, in all cases in compliance with federal securities laws. It is
understood that the disposition of the Purchaser's Shares or Conversion Shares
shall at all times be within the Purchaser's control. If the Purchaser should in
the future decide to dispose of any of its Shares or Conversion Shares, it is
understood that it may do so only in compliance with the Securities Act,
applicable securities laws, this Agreement and the right of first offer set
forth in Section 5 of the Stockholders= Agreement. The Purchaser is an
"accredited investor" as defined in Rule 501(a) under the Securities Act.
5.3. Brokers.
Except as disclosed on Exhibit B hereto, no broker, finder or
investment banker or other party is entitled to any brokerage, finder's or other
similar fee or commission in connection with any Stock Purchase Agreement, the
Stockholders= Agreement, the Registration Rights Agreement or the Certificate of
Amendment or any of the transactions contemplated hereby or thereby, based upon
arrangements made by or on behalf of the Purchaser or any of its Affiliates.
5.4 Ownership of Common Stock.
The Purchaser currently does not own any shares of Common Stock and
will not acquire any additional shares of Common Stock in the public market. Any
future ownership by the Purchaser of shares of Common Stock shall be subject to
the limitations set forth in Section 4(a) of the Certificate of Amendment.
-25-
SECTION 6. RESTRICTIONS ON TRANSFER
The Purchaser agrees that it will not sell or otherwise dispose of
any Shares or Conversion Shares unless such Shares or Conversion Shares have
been registered under the Securities Act and, to the extent required, under any
applicable state securities laws, or pursuant to an applicable exemption from
such registration requirements. The Company may endorse on all Share
certificates a legend stating or referring to such transfer restrictions and may
place a stop order with the Company's transfer agent for the Shares.
SECTION 7. INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. Financial Information.
(a) The Company will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with generally accepted accounting
principles consistently applied.
(b) So long as any of the Shares remain outstanding, the Company
will deliver to (x) each holder of thirty percent (30%) or more of the Shares
and Conversion Shares and (y) a Designated Entity, the following:
(i) as soon as practicable but not later than five (5) Business
Days after their issuance, and in any event within ninety-five (95) days after
the close of each fiscal year of the Company, (A) a consolidated balance sheet
of the Company as of the end of such fiscal year and (B) consolidated statements
of operations, stockholders= equity and cash flows of the Company for such
fiscal year, in each case for statements set forth in clause (B) setting forth
in comparative form the corresponding figures for the preceding fiscal year, all
such balance sheets and statements to be in reasonable detail and certified
without qualification by BDO Xxxxxxx, LLP or any "Big Five" independent public
accounting firm selected by the Audit Committee of the Board of Directors of the
Company and approved by the shareholders of the Company, and such statements
shall be accompanied by a management analysis of any material differences
between the results for such fiscal year and the corresponding figures for the
preceding year;
(ii) as soon as practicable, copies (A) of all financial
statements, proxy material or reports sent to the Company's stockholders, (B) of
any public press releases and (C) of all reports or registration statements
filed with the Commission pursuant to the Securities Act or the Securities
Exchange Act;
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(iii) as soon as practicable and in any event within fifty (50)
days after the close of each of the first three (3) fiscal quarters of the
Company, (A) a consolidated balance sheet of the Company as of the end of such
fiscal quarter, (B) consolidated statements of operations, stockholders= equity
and cash flows of the Company for the portion of the fiscal year ended with the
end of such quarter, in each case in reasonable detail, certified by the Chief
Financial Officer, Chief Executive Officer or President of the Company and
setting forth in comparative form the corresponding figures for the comparable
period one year prior thereto (subject to normal year-end adjustments), together
with a management analysis of any material differences between such results and
the corresponding figures for such prior period and (C) a certificate of the
Chief Financial Officer, Chief Executive Officer or President of the Company
certifying the Company's compliance with the covenants contained in Section 9
(other than Section 9.12) of this Agreement;
(iv) as soon as practicable and without duplication of any of
the above items, any other materials furnished to the Company's Board of
Directors or to holders of the Company's capital stock or Indebtedness,
including, without limitation, any compliance certificates furnished in respect
of such Indebtedness; and
(v) as soon as practicable, such other information as may
reasonably be requested by a holder of Shares.
(c) The Company will deliver to each member of the Company's Board
of Directors and each observer to the Company's Board of Directors appointed
pursuant to Section 2(a) of the Stockholders= Agreement, as soon as practicable
(and in the case of (iii), prior to the end of each fiscal year) and without
duplication of any of the items listed below, the following:
(i) copies of any annual, special or interim audit reports or
management or comment letters with respect to the Company or its operations
submitted to the Company by independent public accountants;
(ii) copies of summary financial information prepared on a
quarterly basis regarding the Company on a consolidated basis as presented to
the Company's Board of Directors and any other summary financial information
otherwise prepared;
(iii) copies of the annual budget and business plan for the next
fiscal year;
(iv) copies of all formal communications, from time to time, to
directors of the Company (including without limitation all information furnished
to such directors in connection with such communications), and copies of minutes
of meetings of the Company's Board of Directors (and of any executive committees
thereof);
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(v) notice of default under any material agreement, contract or
other instrument to which the Company is a party or by which it is bound;
(vi) notice of any action or proceeding which has been commenced
or threatened against the Company and which, if adversely determined, would
have, individually or in the aggregate, a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(vii) copies of all filings made with the Commission.
(d) All such financial statements referred to in this Section 7.1
shall be prepared in accordance with generally accepted accounting principles
consistently applied (except for any change in accounting principles specified
in the accompanying certificate and except that any interim financial statements
may omit notes and may be subject to normal year-end adjustments).
(e) Without limiting the foregoing provisions of this Section 7.1,
the Company agrees that, if requested in writing by any holder of Shares, it
will not deliver to such holder (until otherwise instructed by a holder of
thirty percent (30%) or more of the Shares) (x) any non-public information or
non-public materials regarding the Company (whether described in this Section
7.1 or otherwise) and (y) any information (whether or not included in clause
(x)) which such holder specifies that it does not want to receive. The Company
shall comply with any such request with respect to each such Purchaser and any
subsequent holders of Shares acquired directly or indirectly (through one or
more transfers) from such Purchaser, until instructed otherwise by the then
holder of such Shares.
7.2. Communication with Accountants.
The Company hereby authorizes (a) each holder of thirty percent
(30%) or more of the Shares and Conversion Shares, and (b) a Designated Entity,
to communicate directly with the independent certified public accountants for
the Company and authorizes such accountants to disclose to each such holder any
and all financial statements and any other information of any kind that they may
have with respect to the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company, provided, that each such holder has delivered to the Company a
confidentiality agreement in form and substance reasonably acceptable to the
Company. The Company shall deliver a letter addressed to such accountants
instructing them to comply with the provisions of this Section 7.2. For purposes
of Section 7.2(a), the calculation of a Person's percentage holdings of
Conversion Shares shall be determined based upon the number of Shares from which
such Conversion Shares derived.
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7.3. Inspection.
The Company will permit (a) each holder of thirty percent (30%) or
more of the Shares and Conversion Shares, (b) any authorized representative of a
holder referred to in clause (a) and (c) a Designated Entity to visit and
inspect any of the properties of the Company, to examine the Company's books and
records and to discuss with the Company's officers the Company's books and
records and the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company, all
at such reasonable times and as often as may be reasonably requested, provided,
that each such holder, representative or Designated Entity has delivered to the
Company a confidentiality agreement in form and substance reasonably acceptable
to the Company. For purposes of Section 7.3(a), the calculation of a Person's
percentage holdings of Conversion Shares shall be determined based upon the
number of Shares from which such Conversion Shares derived.
7.4. Notices.
The Company will give notice to all holders of Shares promptly after
it learns (other than by notice from all of such holders) of the existence of
any of the following:
(a) any default under any Indebtedness (or under any indenture,
mortgage or other agreement relating to any Indebtedness) which Indebtedness is
in an aggregate principal amount exceeding $100,000 (or the equivalent thereof
in other currencies) in respect of which the Company is liable;
(b) any action or proceeding which has been commenced or threatened
against the Company and which, if adversely determined, would have, individually
or in the aggregate, a material adverse effect on the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis or the ability of
the Company to perform its obligations under the Stock Purchase Agreements, the
Stockholders= Agreement, the Registration Rights Agreement or the Certificate of
Amendment;
(c) any dispute which may exist between the Company and any
Governmental Authority which may, individually or in the aggregate, materially
adversely affect the normal business operations of the Company or the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis or
the ability of the Company to perform its obligations under the Stock Purchase
Agreements, the Stockholders= Agreement, the Registration Rights Agreement or
the Certificate of Amendment; and
(d) if any (i) "reportable event" (as such term is described in
Section 4043(c) of ERISA) has occurred; or (ii) "accumulated funding deficiency"
(within the meaning of Section 412(a) of the Code) has been incurred with
respect to a Pension Plan maintained or contributed to (or required to be
maintained or contributed to) by the Company or any ERISA Affiliate that is
-29-
subject to the funding requirements of ERISA and the Code or an application may
be or has been made to the Secretary of the Treasury for a waiver or
modification of the minimum funding standard (including any required installment
payments) or an extension of any amortization period under Section 412 of the
Code, in each case with respect to such a Pension Plan; or (iii) Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate has been terminated, reorganized, petitioned
or declared insolvent under Title IV of ERISA; or (iv) Pension Plan maintained
or contributed to (or required to be maintained or contributed to) by the
Company or any ERISA Affiliate has an unfunded current liability giving rise to
a lien under ERISA or the Code; or (v) proceeding has been instituted pursuant
to Section 515 of ERISA to collect a delinquent contribution to a Pension Plan
maintained or contributed to (or required to be maintained or contributed to) by
the Company or any ERISA Affiliate; or (vi) of the Company or its ERISA
Affiliates will or may incur any liability (including any contingent or
secondary liability) to or on account of the termination or withdrawal from a
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate; or (vii) "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) in connection with an "employee benefit plan" (as defined in Section
3(3) of ERISA), maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate has occurred.
Such notice (i) with respect to (a), shall specify the nature and period of
existence of any such default and what the Company proposes to do with respect
thereto and (ii) with respect to (b), (c) or (d), shall specify the nature of
any such matter referred to in such clause, what action the Company proposes to
take with respect thereto and what action any other relevant Person is taking or
proposes to take with respect thereto.
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. Maintenance of Existence, Properties and Franchises; Compliance
with Law; Taxes; Insurance.
The Company will:
(a) maintain its corporate existence, rights and other franchises in
full force and effect;
(b) maintain its tangible assets in good repair, working order and
condition so far as necessary or advantageous to the proper carrying on of its
business;
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(c) comply with all applicable laws and with all applicable orders,
rules, rulings, certificates, licenses, regulations, demands, judgments, writs,
injunctions and decrees, provided, that such compliance shall not be necessary
so long as (i) the applicability or validity of any such law, order, rule,
ruling, certificate, license, regulation, demand, judgment, writ, injunction or
decree shall be contested in good faith by appropriate proceedings and (ii)
failure to so comply will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
(d) pay promptly when due all Taxes imposed upon its properties,
assets or income and all claims or indebtedness (including, without limitation,
vendor's, workmen's and like claims) which might become a Lien upon such
properties or assets; provided, that payment of any such Tax shall not be
necessary so long as (i) the applicability or validity thereof shall be
contested in good faith by appropriate proceedings and a reserve, if
appropriate, shall have been established with respect thereto and (ii) failure
to make such payment will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(e) keep adequately insured, by financially sound and reputable
insurers of nationally recognized stature, all its properties of a character
customarily insured by entities similarly situated, against loss or damage of
the kinds and in amounts customarily insured against by such entities and with
such deductibles or coinsurance as is customary.
8.2. Office for Payment, Exchange and Registration; Location of
Office; Notice of Change of Name or Office.
(a) So long as any of the Shares is outstanding, the Company will
maintain an office or agency where Shares may be presented for redemption,
exchange, conversion or registration of transfer as provided in this Agreement.
Such office or agency initially shall be the office of the Company specified in
Section 17 hereof, subject to Section 8.2(b).
(b) The Company shall give each holder of Shares at least twenty
(20) days= prior written notice of any change in (i) the name of the Company as
then in effect or (ii) the location of the office of the Company required to be
maintained under this Section 8.2.
8.3. Fiscal Year.
The fiscal year of the Company for tax, accounting and any other
purposes shall end on December 31 of each calendar year.
-31-
8.4. Environmental Matters.
(a) The Company shall keep and maintain any property either owned,
leased, operated or occupied by the Company free and clear of any Environmental
Liens, and the Company shall keep all such property free of Hazardous Material
contamination and in compliance with all applicable Environmental Laws and the
terms and conditions of any Environmental Permits; provided, however, that the
Company shall have the right at its cost and expense, and acting in good faith,
to contest, object or appeal by appropriate legal proceedings the validity of
any Environmental Lien. The contest, objection or appeal with respect to the
validity of an Environmental Lien shall suspend the Company's obligation to
eliminate such Environmental Lien under this paragraph pending a final
determination by appropriate administrative or judicial authority of the
legality, enforceability or status of such Environmental Lien, provided that the
following conditions are satisfied: (i) contemporaneously with the commencement
of such proceedings, the Company shall give written notice thereof to each
holder of Shares or Conversion Shares; and (ii) if under applicable law any real
property or improvements thereon are subject to sale or forfeiture for failure
to satisfy the Environmental Lien prior to a final determination of the legal
proceedings, the Company must successfully move to stay such sale, forfeiture or
foreclosure pending final determination of the Company's action; and (iii) the
Company must, if requested, furnish to the holders of Shares or Conversion
Shares a good and sufficient bond, surety, letter of credit or other security
satisfactory to such holders equal to the amount (including any interest and
penalty) secured by the Environmental Lien.
(b) The Company will, by administrative or judicial process, enforce
the obligations of any other Person who is potentially liable for damages,
contribution or other relief in connection with any violation of Environmental
Laws, including, but not limited to, asbestos abatement, Hazardous Material
remediation or off-site or on-site disposal.
(c) The Company will defend, indemnify and hold harmless each
current, former and future holder of Shares or Conversion Shares, and each such
holder's employees, officers, directors, stockholders, partners, agents,
representatives and assigns, from and against any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits and claims, joint or
several, and any costs, disbursements and expenses (including attorneys= fees
and expenses and costs of investigation) of whatever kind or nature, known or
unknown, contingent or otherwise, arising out of or in any way related to (i)
the presence, disposal, release, removal, discharge, storage or transportation
of any Hazardous Material upon, into, from or affecting any real property
(including improvements) currently or formerly owned, leased, operated or
occupied by the Company; (ii) any judicial or administrative action, suit or
proceeding, actual or threatened, relating to Hazardous Material upon, in, from
or affecting any real property (including improvements) currently or formerly
owned, leased, operated or occupied by the Company; (iii) any violation of any
Environmental Law by the Company or any of its agents, tenants, subtenants or
invitees; (iv) the imposition of any Environmental Lien for the recovery of
costs expended in the investigation, study or remediation of any environmental
liability of (or asserted against) the Company; and (v) any liability arising
out of or related to the off-site transportation, shipment, disposal, treatment,
handling or disposal of Hazardous Materials. This Section 8.4(c) and Section
8.4(d) shall survive any payment, conversion or transfer of Shares and any
termination of this Agreement.
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(d) To the extent that the Company is strictly liable without regard
to fault under any Environmental Law, the Company's obligations to the holders
of Shares or Conversion Shares under any of the indemnification provisions of
the Stock Purchase Agreements shall likewise be strict without regard to fault
with respect to the violation of any Environmental Law which results in any
liability to any of the indemnified persons referred to in Section 8.4(c).
8.5. Reservation of Shares.
There have been reserved, and the Company shall at all times keep
reserved, free from preemptive rights, out of its authorized Common Stock a
number of shares of Common Stock sufficient to provide for the exercise of the
conversion rights provided in Section 5 of the Certificate of Amendment.
8.6. Securities Exchange Act Registration.
(a) The Company will maintain effective a registration statement
(containing such information and documents as the Commission shall specify and
otherwise complying with the Securities Exchange Act), under Section 12(b) or
Section 12(g), whichever is applicable, of the Securities Exchange Act, with
respect to the Common Stock of the Company, and the Company will file on time
such information, documents and reports as the Commission may require or
prescribe for companies whose stock has been registered pursuant to such Section
12(b) or Section 12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of Shares, make
whatever other filings with the Commission, or otherwise make generally
available to the public such financial and other information, as any such holder
may deem reasonably necessary or desirable in order to enable such holder to be
permitted to sell Shares pursuant to the provisions of Rule 144.
8.7. Delivery of Information for Rule 144A Transactions.
If a holder of Shares proposes to transfer any such Shares pursuant
to Rule 144A under the Securities Act (as in effect from time to time), the
Company agrees to provide (upon the request of such holder or the prospective
transferee) to such holder and (if requested) to the prospective transferee any
financial or other information concerning the Company which is required to be
delivered by such holder to any transferee of such Shares pursuant to such Rule
144A.
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8.8. Senior Securities.
The Company shall maintain the senior status of the Series A
Convertible Preferred Stock such that it shall rank senior in all respects,
including the payment on liquidation and redemption, to all other equity
securities of the Company.
8.9. Further Assurances.
The Company will from time to time, upon the request of the Xxxxxxx
Holders, promptly and duly execute and deliver any and all such further
instruments and documents as the Xxxxxxx Holders may reasonably deem necessary
or desirable to obtain the full benefits of (i) the obligations of the Company
under this Agreement and (ii) the other rights and powers herein granted. Upon
the instructions from time to time of the Xxxxxxx Holders, the Company shall
execute and cause to be filed any document or filing presented to the Company in
proper form for signing or filing, in each case as the Xxxxxxx Holders may
reasonably deem necessary or desirable in light of the Company's obligations
under this Agreement, and the Company shall pay or cause to be paid any filing
or other fees in connection therewith.
8.10. Stockholder Approval.
The transactions contemplated hereby have been structured by the
parties to comply with the requirements for stockholder approval of the NASDAQ
Stock Market and so that further stockholder action shall not be required. If
such rules require such stockholder approval, the Company shall use its best
efforts to obtain such stockholder approval. In the event the Company fails to
obtain such stockholder approval, the terms of the transactions contemplated
hereby shall be restructured so that they (i) satisfy the requirements of the
NASDAQ Stock Market and (ii) provide the holders of Series A Preferred Stock
with the same economic benefit they would have received had such stockholder
approval been obtained.
8.11. Shares Paid as Dividends.
If the Company shall pay to the holders of Series A Preferred Stock
additional shares of Series A Preferred Stock as a dividend pursuant to Section
2 of the Certificate of Amendment, such additional shares, on the date of such
payment, will be duly authorized, validly issued, fully paid and non-assessable.
SECTION 9. NEGATIVE COVENANTS
The Company covenants and agrees that without the prior written
consent of the Xxxxxxx Holders:
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9.1. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Stock Purchase Agreements, the Certificate of Amendment, the Registration Rights
Agreement or the Stockholders= Agreement. The Company will at all times in good
faith assist in the carrying out of all such terms, and in the taking of all
such action, as may be necessary or appropriate in order to protect the rights
of the holders of Shares (as such rights are set forth in the Stock Purchase
Agreements, the Certificate of Amendment, the Registration Rights Agreement and
the Stockholders= Agreement) against dilution or other impairment. Without
limiting the generality of the foregoing, the Company (a) will not issue any
shares or class or series of equity or equity-linked security, which is senior
to, or pari passu with, the Series A Convertible Preferred Stock as to dividend
payments or amounts payable in the event of liquidation or winding up of the
Company, (b) will not enter into any agreement or instrument which would
restrict or otherwise materially adversely affect the ability of the Company to
perform its obligations under the Stock Purchase Agreements, the Stockholders=
Agreement, the Registration Rights Agreement or the Certificate of Amendment,
(c) will not amend its certificate of incorporation or by-laws in any manner
which would impair or reduce the rights of the Preferred Stock, including,
without limitation, an amendment which would alter or change the powers,
privileges or preferences of the holders of the Series A Convertible Preferred
Stock (including, without limitation, changing the Certificate of Amendment
after any Shares have been called for redemption), (d) except as otherwise
provided in the Certificate of Amendment, will not redeem, repurchase or
otherwise acquire any shares of capital stock of the Company or any other rights
or options to subscribe for or purchase any capital stock of the Company or any
other securities convertible into or exchangeable for capital stock of the
Company, (e) will not permit the par value or the determined or stated value of
any shares of Common Stock receivable upon the conversion of the Shares to
exceed the amount payable therefor upon such conversion, (f) will take all such
action as may be necessary or appropriate in order that the Company may at all
times validly and legally issue duly authorized, fully paid and nonassessable
shares of the Common Stock free from all Taxes, Liens and charges with respect
to the issue thereof, upon the conversion of the Shares from time to time
outstanding, (g) will not take any action which results in any adjustment of the
current conversion price under the Certificate of Amendment if the total number
of shares of the Common Stock (or other securities) issuable after the action
upon the conversion of all of the then outstanding Shares would exceed the total
number of shares of Common Stock (or other securities) then authorized by the
Company's certificate of incorporation and available for the purpose of issuance
upon such conversion, provided, that nothing contained herein shall require the
Company to make an ultra xxxxx issuance of Common Stock, (h) will not have any
authorized Common Stock (and will not issue any Common Stock) other than its
existing authorized Common Stock, $.01 par value per share, and (i) will not
amend its certificate of incorporation to change any terms of its Common Stock.
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9.2. Indebtedness.
So long as the Xxxxxxx Holders hold at least 30% of the aggregate
number of Shares, the Company will not (i) incur Indebtedness, excluding any
Indebtedness set forth on Schedule 2 hereto, in excess of $7.5 million in
aggregate principal amount; or (ii) enter into any agreement, amendment or
modification with respect to any Indebtedness, which agreement, amendment or
modification restricts or prohibits (or was intended primarily to restrict or
prohibit) the Company from making any payments under, or otherwise performing,
the Stock Purchase Agreements.
9.3. Consolidation, Merger and Sale.
So long as the Xxxxxxx Holders hold at least 30% of the aggregate
number of Shares, the Company will not (and will not agree to): (a) wind up,
liquidate or dissolve its affairs; (b) sell, lease, transfer or otherwise
dispose of all or substantially all of its assets to any other Person; or (c)
effect a merger or consolidation if the Company is not the surviving corporation
from such merger or consolidation.
9.4. No Change in Business
The Company will not change substantially the character of its
business as conducted on the Closing Date as represented in Section 4.4 hereof
and described in the Disclosure Material.
9.5. Restricted Payments; Investments.
The Company will not declare or make or permit to be declared or
made any Restricted Payment or any Investment.
9.6. Sale of Substantial Portion of Assets.
After the Closing Date, the Company will not sell, transfer, lease
or otherwise dispose of any assets to any Person (other than assets consisting
of inventory being disposed of in the ordinary course of business and other than
assets which are, contemporaneously with such disposition (or within ninety (90)
days thereafter), being replaced with other substantially similar (or improved)
assets which are used by the Company for substantially the same purpose as the
assets being replaced) to the extent the aggregate assets so sold, transferred,
leased or disposed of:
(x) during the twelve (12) month period ending on the date of
such sale, transfer, lease or disposition (i) had an aggregate book
value equal to ten percent (10%) or more of the aggregate book value
of the consolidated total assets of the Company at the end of the
most recent fiscal quarter preceding such sale, transfer, lease or
disposition or (ii) accounted for ten percent (10%) or more of the
consolidated revenues of the Company as shown on the consolidated
income statement of the Company for the most recent fiscal quarter
or the then preceding fiscal year; or
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(y) during the period from the Closing Date through such sale,
transfer, lease or disposition (i) had an aggregate book value equal
to ten percent (10%) or more of the aggregate book value of the
consolidated total assets of the Company at the end of the most
recent fiscal quarter preceding such sale, transfer, lease or
disposition or (ii) accounted for ten percent (10%) or more of the
consolidated revenues of the Company over the Company's fiscal
periods beginning after the Closing Date and ending at the end of
the most recent fiscal quarter as shown on the consolidated income
statements of the Company for such periods.
9.7. Obligations to Affiliates.
The Company may not incur or permit to exist any of the following:
(a) any obligation of the Company to repay money borrowed owing to
(i) any Affiliate of the Company or (ii) any other holder of shares of the
capital stock of the Company; or
(b) any obligation, to any Person, which obligation is assumed or
guaranteed by the Company and which is an obligation of (i) any Affiliate of the
Company or (ii) any other holder of shares of the capital stock of the Company.
This Section 9.7 shall not apply to (1) any obligations under the Stock Purchase
Agreements or with respect to the Shares, (2) any loans, advances or Guarantees
referred to in clause (1) of the proviso to the definition of "Investment"
contained in Section 3 hereof, (3) Indebtedness identified on Schedule 2 hereto,
(4) the Affiliate Loan or (5) payments to DuPont Chemical and Energy Operations,
Inc. and X.X. XxXxxx de Nemours and Company in the ordinary course of business,
consistent with past practice, and not in connection with any financing or
extraordinary corporate transaction.
9.8. Transactions with Affiliates.
The Company will not, directly or indirectly, enter into any
transaction or agreement (including, without limitation, the purchase, sale,
distribution, lease or exchange of any property or the rendering of any service)
with any Affiliate of the Company, unless such transaction or agreement (a) is
approved by a majority of the Outside Directors on the Board of Directors of the
Company (provided that this Section 9.8(a) shall not apply to payments to DuPont
Chemical and Energy Operations, Inc. and X.X. XxXxxx de Nemours and Company in
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the ordinary course of business, consistent with past practice, and not in
connection with any financing or extraordinary corporate transaction), and (b)
is on terms that are no less favorable to the Company than those which might be
obtained at the time of such transaction from a Person who is not such an
Affiliate; provided, however, that this Section 9.8 shall not limit, or be
applicable to, (i) employment arrangements with (and general salary and benefits
compensation for) any individual who is a full-time employee of the Company if
such arrangements are approved by a majority of the Outside Directors on the
Board of Directors of the Company; and (ii) the payment of reasonable and
customary regular fees to directors of the Company who are not employees of the
Company.
9.9. Liens.
So long as the Xxxxxxx Holders hold at least 30% of the aggregate
number of Shares, the Company will not create or permit to exist any Liens upon
or with respect to any of its assets or income, other than existing liens set
forth on Schedule 5 hereto, in excess of $7.5 million in the aggregate.
9.10. Private Placement Status.
Neither the Company nor any agent nor other Person acting on the
Company's behalf will do or cause to be done (or will omit to do or to cause to
be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares or the Conversion Shares within the provisions of
Section 5 of the Securities Act or the filing, notification or reporting
requirements of any state securities law (other than in accordance with a
registration and qualification of Conversion Shares pursuant to the Registration
Rights Agreement).
9.11. Maintenance of Public Market.
The Company will not proceed with a program of acquisition of its
Common Stock, initiate a corporate reorganization or recapitalization or
undertake a consolidation or merger or authorize, consent to or take any action
which would have the effect of:
(a) removing the Company from registration with the Commission under
the Securities Exchange Act with respect to the Company's Common Stock;
(b) requiring the Company to make a filing under Section 13(e) of
the Securities Exchange Act;
(c) reducing substantially or eliminating the public market for
shares of Common Stock of the Company;
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(d) causing a delisting of the Company's Common Stock as a National
Market Security on the NASDAQ Stock Market (unless such stock is delisted as a
result of being listed on a national securities exchange); or
(e) if any shares of the Company's Common Stock are at any time
listed on a national exchange, causing a delisting of such stock from such
exchange.
9.12. Actions Prior to the Closing Date.
From the date hereof through the Closing Date, the Company will not,
(a) issue or agree to issue any capital stock or any securities exercisable for,
or convertible or exchangeable into, capital stock or (b) purchase, redeem or
otherwise acquire any of its capital stock; provided, however, that this Section
9.12 shall not limit, or be applicable to, (i) the transactions contemplated by
the Stock Purchase Agreements, including any issuance of capital stock in
connection with the transactions contemplated by Sections 9.1 and 9.11 hereof,
(ii) grants of options or issuances of Common Stock to officers, directors or
employees of the Company pursuant to the current terms of the Company's 1994 and
1997 Stock Option Plans and (iii) any grants of warrants to Wm. Sword & Company
Incorporated and Xxxxx Xxxxxx as a result of the transactions contemplated
hereby.
SECTION 10. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase Shares hereunder is subject
to satisfaction of the following conditions at the Closing (any of which may be
waived by the Purchaser):
10.1. Certificate of Amendment; Stockholders= Agreement;
Registration Rights Agreement.
(a) The certificate of incorporation of the Company shall have been
duly amended by the filing of the Certificate of Amendment in the form of
Exhibit A hereto.
(b) The Company, the Purchasers and certain other stockholders of
the Company shall have entered into a Stockholders= Agreement substantially in
the form of Exhibit C hereto.
(c) The Company shall have entered into a Registration Rights
Agreement with the Purchasers substantially in the form of Exhibit D hereto.
10.2. Certificates for Shares.
The Purchaser shall concurrently receive the certificates for Shares
contemplated by Section 2(b) hereof.
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10.3. Senior Status.
The Company shall have taken all of the necessary actions, including
the amendment of the appropriate existing agreements, so that the Series A
Convertible Preferred Stock shall rank senior in all respects, including the
payment on liquidation and redemption, to all other equity securities of the
Company.
10.4. Accuracy of Representations and Warranties.
The representations and warranties of the Company contained herein
or in any certificate or document delivered pursuant hereto shall be correct and
complete on and as of the Closing Date with the same effect as though made on
and as of the Closing Date (after giving effect to the transactions contemplated
by this Agreement).
10.5. Compliance with Agreements.
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the Stock
Purchase Agreements and any other document contemplated hereby or thereby which
are required to be performed or complied with by the Company on or before the
Closing Date.
10.6. Officers= Certificates.
The Purchaser shall have received a certificate dated the Closing
Date and signed by the President or Chief Executive Officer and by the Secretary
or the Treasurer of the Company, to the effect that the conditions of Sections
10.3, 10.4, 10.8 and 10.9 have been satisfied.
10.7. Proceedings.
All corporate and other proceedings in connection with the
transactions contemplated by the Stock Purchase Agreements, and all documents
incident thereto, shall be in form and substance reasonably satisfactory to the
Purchaser and its counsel, and the Purchaser shall have received all such
originals or certified or other copies of such documents as the Purchaser or its
counsel may reasonably request.
10.8. Legality; Governmental and Other Authorization.
The purchase of and payment for the Shares shall not be prohibited
by any law or governmental order, rule, ruling, regulation, release,
interpretation or opinion applicable to the Purchaser and shall not subject the
Purchaser to any penalty, tax, liability or other onerous condition. Any
necessary consents, approvals, licenses, permits, orders and authorizations of,
and any filings, registrations or qualifications with, any Governmental
Authority or other Person, with respect to the transactions contemplated by the
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Stock Purchase Agreements shall have been obtained or made and shall be in full
force and effect. The Company shall have delivered to the Purchaser, upon its
reasonable request setting forth what is required, factual certificates or other
evidence, in form and substance satisfactory to the Purchaser and its counsel,
to enable the Purchaser to establish compliance with this condition.
10.9. No Material Adverse Change.
Except to the extent otherwise disclosed in the projected 1998
financial statements contained in the Confidential Information Memorandum, as
amended, listed on Schedule 4, there shall have been no material adverse change
in the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company on a
consolidated basis since September 30, 1998.
10.10. Opinion of Counsel.
The Purchaser shall have received an opinion, dated the Closing Date
and addressed to the Purchasers, of Xxxxxx Xxxxxxxxxx LLP, counsel for the
Company, which opinion shall be in form and substance reasonably satisfactory to
the Purchaser and its counsel and shall be in the form set forth in Exhibit E
hereto.
10.11. Purchases of Shares.
The sale and purchase of Shares by the Xxxxxxx Funds pursuant to the
Stock Purchase Agreements between each of the Xxxxxxx Funds and the Company
shall be consummated concurrently for an aggregate purchase price of not less
than $6,500,000.
10.12. Consents.
The Company shall have received all consents required pursuant to
the Loan and Security Agreement, dated April 29, 1998, between the Company and
The CIT Group/Credit Finance, Inc.
10.13. Other Documents and Opinions.
The Purchaser shall have received such other documents and opinions,
in form and substance reasonably satisfactory to the Purchaser and its counsel,
relating to matters incident to the transactions contemplated hereby, as the
Purchaser may reasonably request.
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SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and agreements of the
Company and the Purchaser contained in this Agreement, the Stockholders=
Agreement, the Registration Rights Agreement or in any document or certificate
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive, and shall continue in effect following the execution and delivery
of the Stock Purchase Agreements, the Stockholders= Agreement, the Registration
Rights Agreement, the closings hereunder and thereunder, any investigation at
any time made by the Purchaser or on its behalf or by any other Person, the
issuance, sale and delivery of the Shares, any disposition thereof and any
payment, conversion or cancellation of the Shares; provided, however, that the
representations and warranties set forth in Section 4 (other than Section
4.2(a)) and Section 5 shall survive only until the second anniversary of the
Closing Date, and the provisions of Section 9 shall terminate upon conversion of
seventy percent (70%) or more of the Shares pursuant to the Certificate of
Amendment. All statements contained in any certificate or other document
delivered by or on behalf of the Company pursuant hereto shall constitute
representations and warranties by the Company hereunder.
(b) The Company agrees to indemnify and hold the Purchaser harmless
from and against and will pay to the Purchaser the full amount of any loss,
damage, liability or expense (including amounts paid in settlement and
reasonable attorneys= fees and expenses) to the Purchaser resulting either
directly or indirectly from any breach of the representations, warranties,
covenants or agreements of the Company contained in any Stock Purchase Agreement
or in the Stockholders= Agreement, the Registration Rights Agreement or any
other document or certificate delivered pursuant hereto or thereto or in
connection herewith or therewith; provided, however, that the Company's
liability under this Section 11(b) with respect to breaches of its
representations and warranties set forth in Section 4 (other than Sections
4.2(a), 4.8, 4.9 and 4.16) shall not exceed the amount of the purchase price for
the Shares purchased by the Purchaser pursuant to this Agreement, plus
reasonable attorneys= fees and expenses incurred by the Purchaser.
SECTION 12. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the event
that this Agreement is not specifically enforced, and the parties agree that any
damages available at law for a breach of this Agreement would not be an adequate
remedy. Therefore, the provisions hereof and the obligations of the parties
hereunder shall be enforceable in a court of equity, or other tribunal with
jurisdiction, by a decree of specific performance, and appropriate injunctive
relief may be applied for and granted in connection therewith. Such remedies and
all other remedies provided for in this Agreement shall, however, be cumulative
and not exclusive and shall be in addition to any other remedies which a party
may have under this Agreement or otherwise.
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SECTION 13. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company shall pay (i) the costs, fees and expenses of the
Company and its counsel in connection with the Stock Purchase Agreements, the
Certificate of Amendment, the Stockholders= Agreement and the Registration
Rights Agreement, other related documentation and the issuance of the Shares and
the Conversion Shares and the furnishing of all opinions by counsel for the
Company, (ii) the costs, fees and expenses of Xxxxxx, Xxxxx & Bockius LLP in
connection with the Stock Purchase Agreements, the Certificate of Amendment, the
Stockholders= Agreement and the Registration Rights Agreement, other related
documentation and the transactions contemplated hereby and thereby (whether or
not a Closing occurs hereunder) and if the Closing occurs the Company will make
such payment on the Closing Date; provided, however, that such fees and expenses
shall not exceed $80,000 without the approval of the Company, (iii) the fees and
expenses of counsel to the Purchasers in connection with any amendments to or
modifications or waivers of any provisions of the Stock Purchase Agreements, the
Certificate of Amendment, the Stockholders= Agreement or the Registration Rights
Agreement, other related documentation or in connection with any other
agreements between the Purchasers and the Company and (iv) the fees and expenses
(including attorneys= fees and expenses) of any holder of Shares or Conversion
Shares in enforcing its rights against the Company if the Company defaults in
its obligations hereunder, under the Certificate of Amendment, the Stockholders=
Agreement or the Registration Rights Agreement.
(b) In addition to all other sums due hereunder or provided for in
this Agreement, the Company shall pay to the Purchaser or its agents,
respectively, an amount sufficient to indemnify such persons (net of any Taxes
on any indemnity payments) against all reasonable costs and expenses (including
reasonable attorneys= fees and expenses and reasonable costs of investigation)
and damages and liabilities incurred by the Purchaser or its agents pursuant to
any investigation or proceeding brought by any third party against any or all of
the Company, the Purchasers, or their agents, arising out of or in connection
with the Stock Purchase Agreements, the Stockholders= Agreement, the
Registration Rights Agreement or the purchase of the Shares (or any transactions
contemplated hereby or thereby or any other document or instrument executed
herewith or therewith or pursuant hereto or thereto), whether or not the
transactions contemplated by this Agreement are consummated, which investigation
or proceeding requires the participation of the Purchaser or its agents or is
commenced or filed against the Purchaser or its agents because of the Stock
Purchase Agreements, the Stockholders= Agreement, the Registration Rights
Agreement or the purchase of the Shares (or any of the transactions contemplated
hereby or thereby or any other document or instrument executed herewith or
therewith or pursuant hereto or thereto), other than any investigation or
proceeding in which it is finally determined that there was gross negligence or
willful misconduct on the part of the Purchaser or its agents which was not
taken by them in reliance upon any of the Company's representations, warranties,
covenants or agreements in the Stock Purchase Agreements, the Stockholders=
Agreement, the Registration Rights Agreement or in any other documents or
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instruments contemplated hereby or thereby or executed herewith or therewith or
pursuant hereto or thereto. The Company shall assume the defense, and shall have
its counsel represent the Purchaser and such agents, in connection with
investigating, defending or preparing to defend any such action, suit, claim or
proceeding (including any inquiry or investigation); provided, however, that the
Purchaser, or any such agent, shall have the right (without releasing the
Company from any of its obligations hereunder) to employ its own counsel and
either to direct its own defense or to participate in the Company's defense, but
the fees and expenses of such counsel shall be at the expense of such Person
unless (i) the employment of such counsel shall have been authorized in writing
by the Company in connection with such defense, (ii) the Company shall not have
provided its counsel to take charge of such defense or (iii) the Purchaser, or
such agent of the Purchaser, shall have concluded that there may be defenses
available to it or them which are different from or additional to those
available to the Company, then in any of such events referred to in clauses (i),
(ii) or (iii) such counsel fees and expenses (but only for one counsel for the
Purchaser and its agents) shall be borne by the Company. Any settlement of any
such action, suit, claim or proceeding shall require the consent of both the
Company and such indemnified person (neither of which shall unreasonably
withhold its consent).
(c) The Company agrees to pay, or to cause to be paid, all
documentary, stamp and other similar Taxes levied under the laws of the United
States of America, any state or local Taxing Authority thereof or therein or any
other applicable jurisdiction in connection with the issuance and sale of the
Shares and the execution and delivery of the Stock Purchase Agreements, the
Stockholders= Agreement, the Registration Rights Agreement and any other
documents or instruments contemplated hereby or thereby and any modification of
the Certificate of Amendment, the Stockholders= Agreement, the Registration
Rights Agreement or the Stock Purchase Agreements or any such other documents or
instruments and will hold the Purchaser harmless without limitation as to time
against any and all liabilities with respect to all such Taxes.
(d) The obligations of the Company under this Section 13 shall
survive the Closing hereunder and any termination of the Stock Purchase
Agreements.
SECTION 14. DIRECT PAYMENTS
As long as the Purchaser or any institutional holder which is a
direct or indirect transferee (as a result of one or more transfers) from the
Purchaser shall be the holder of any Shares, the Company will make all
redemption payments, liquidation payments and other distributions by wire
transfer to the Purchaser's or such other holder's (or its nominee's) account at
any bank or trust company, notwithstanding any contrary provision herein or in
the Company's certificate of incorporation with respect to the place of payment.
The Purchaser has provided an address on Schedule 1 hereto for payments by wire
transfer, and such address may be changed for the Purchaser or any subsequent
holder by notice to the Company. All such payments shall be made in U.S. dollars
and in federal or other immediately available funds.
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SECTION 15. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended,
waived, modified or terminated only with the written consent of the Persons
identified in clause (i) and (ii) of the definition of "Xxxxxxx Holders";
provided, however, that if no Shares or Conversion Shares are held by such
Persons, the written consent of holders of two-thirds of outstanding Shares and
Conversion Shares shall be required for any such amendment, waiver, modification
or termination.
(b) The Company agrees that all holders of Shares and Conversion
Shares shall be notified by the Company in advance of any proposed amendment,
waiver, modification or termination, but failure to give such notice shall not
in any way affect the validity of any such amendment, waiver, modification or
termination. In addition, promptly after obtaining the written consent of the
holders as herein provided, the Company shall transmit a copy of any amendment,
waiver, modification or termination which has been adopted to all holders of
Shares and Conversion Shares then outstanding, but failure to transmit copies
shall not in any way affect the validity of any such amendment, waiver,
modification or termination.
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of any
holder of Shares to the Company at its address provided under Section 17 hereof,
the Company at its expense (except for any transfer tax arising out of the
exchange) will issue and deliver to or upon the order of the holder in exchange
therefor a new certificate or certificates in such amount or amounts as such
holder may request in the aggregate representing the number of Shares
represented by such surrendered certificates, and registered in the name of such
holder or as such holder may direct.
(b) Any Share certificate which is converted into Conversion Shares
in whole or in part shall be cancelled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into Conversion Shares. The Company shall issue a new certificate with respect
to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part.
(c) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of any Share certificate and, in the case
of any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory to the Company (if requested by the Company and
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unsecured in the case of the Purchaser or an institutional holder), or in the
case of any such mutilation, upon surrender of such Share certificate (which
surrendered Share certificate shall be cancelled by the Company), the Company
will issue a new Share certificate of like tenor in lieu of such lost, stolen,
destroyed or mutilated Share certificate, as if the lost, stolen, destroyed or
mutilated Share certificate were then surrendered for exchange.
SECTION 17. NOTICES
All notices, requests, demands, consents and other communications
hereunder shall be in writing and shall be delivered by hand or shall be sent by
telex or telecopy (confirmed by registered, certified or overnight mail or
courier, postage and delivery charges prepaid), (i) if to the Company, to Xxxxxx
Technologies, Inc., 000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx Xxxxx, Xxx Xxxx 00000,
Attention: Xxxxxxx X. Xxxxxxxxxxx, with a copy to Xxxxxx Xxxxxxxxxx LLP, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxxxx Xxxxxxxxx, Esq. or (ii)
if to the Purchaser, at the address indicated on Schedule 1 hereto, with a copy
to Xxxxxx, Xxxxx & Xxxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, XX 00000-0000,
Attention: Xxxxx X. Xxxxxx, Esq., or at such other address as a party may from
time to time designate as its address in writing to the other party to this
Agreement. Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such notice is
delivered or, if sent by telex or telecopier, when received.
SECTION 18. MISCELLANEOUS
(a) The Stock Purchase Agreements, the Stockholders= Agreement, the
Registration Rights Agreement and, upon the Closing, the Certificate of
Amendment, together with any further agreements entered into by the Purchaser
and the Company at the Closing, contain the entire agreement between the
Purchaser and the Company, and supersede any prior oral or written agreements,
commitments, terms or understandings regarding the subject matter hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, whether so
expressed or not; provided, that (a) the Company may not assign any of its
rights, duties or obligations under this Agreement, except with the Purchaser's
written consent, and (b) the Purchaser may assign any of its rights, duties or
obligations under this Agreement to a purchaser of its Shares, provided that
such purchaser is reasonably acceptable to the Company.
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(d) In addition to any assignment by operation of law, the Purchaser
may assign, in whole or in part, any or all of its rights (and/or obligations)
under this Agreement to any permitted transferee of any or all of its Shares or
Conversion Shares, and (unless such assignment expressly provides otherwise) any
such assignment shall not diminish the rights the Purchaser would otherwise have
under this Agreement or with respect to any remaining Shares or Conversion
Shares held by the Purchaser.
(e) No course of dealing and no delay on the part of any party
hereto in exercising any right, power, or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party's rights,
powers and remedies. No single or partial exercise of any right, power or remedy
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(f) The headings and captions in this Agreement are for convenience
of reference only and shall not define, limit or otherwise affect any of the
terms or provisions hereof.
(g) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York (other than any conflict of laws rules
which might result in the application of the laws of any other jurisdiction).
(h) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument,
and all signatures need not appear on any one counterpart.
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(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS RELATING TO THIS AGREEMENT, THE CERTIFICATE OF AMENDMENT, THE
STOCKHOLDERS= AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE
CONVERSION SHARES MAY BE LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR
ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE
NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT
RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE CERTIFICATE OF
AMENDMENT, THE STOCKHOLDERS= AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE
SHARES OR THE CONVERSION SHARES. A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE
MAILED BY REGISTERED MAIL TO THE COMPANY AT THE ADDRESS OF THE COMPANY PROVIDED
HEREUNDER EXCEPT THAT UNLESS OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE
TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF SERVICE OF PROCESS. AS AN
ALTERNATIVE TO SERVICE OF PROCESS ON SUCH AGENT (WHETHER OR NOT ANY SUCH AGENT
HAS BEEN APPOINTED), THE COMPANY HEREBY AGREES THAT SERVICE UPON IT BY MAIL
SHALL CONSTITUTE SUFFICIENT NOTICE AND SERVICE OF PROCESS. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL
LIMIT THE RIGHT OF THE PURCHASER TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE
JUDGMENTS AGAINST THE COMPANY IN THE COURTS OF ANY OTHER JURISDICTION.
(j) THE COMPANY AND THE PURCHASER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS AGREEMENT, THE CERTIFICATE OF AMENDMENT, THE STOCKHOLDERS= AGREEMENT,
THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION SHARES, OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE
COMPANY AND THE PURCHASER ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF THE PURCHASER. THE SCOPE
OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT
MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS
TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND
THE PURCHASER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT, THE CERTIFICATE OF
AMENDMENT, THE STOCKHOLDERS= AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE
SHARES OR THE CONVERSION SHARES. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY
BE FILED AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
XXXXXX TECHNOLOGIES, INC.
By___________________________________________
Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
Accepted and Agreed to as of the
date first above written by the
undersigned Purchaser:
XXXXXXX US DISCOVERY FUND III, L.P.
By: XXXXXXX US DISCOVERY
PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By:______________________
Xxxxxx X. Xxxx, member
Schedule 1
to the Stock
Purchase Agreement
Social Security or Taxpayer Number of Shares at Share Purchase
Name of Purchaser Identification Number Closing Price
----------------- --------------------------- ------------------- --------------
Xxxxxxx US Discovery Fund 00-0000000 56,019 $5,601,900
III, X.X.
Xxxxxxx US Discovery 00-0000000 8,981 $898,100
Offshore Fund III, L.P.
(a) address for communications:
Xxxxxxx Capital Management
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
(b) address for payments by
wire transfer:
Xxxxxxx US Discovery Fund III, X.X. Xxxxxxx US Discovery Offshore Fund III, X.X.
Xxxxx Manhattan Bank Citibank, N.A.
ABA # 000000000 ABA # 000000000 / Chips UID# 0008 / Swift Code - XXXXXX00
A/C # 10921671 A/C: The Bank of Bermuda Limited, Xxxxxxxx, Bermuda
A/C: Xxxxxx Xxxxxxx Inc. Chips UID# 005584
A/C # 400-470551 Swift Code: BBDA BM HM
A/C: Xxxxxxx US Discovery Fund III, L.P. A/C: Xxxxxxx US Discovery Offshore Fund III, L.P.
A/C # 0246769
Schedule 2
to the Stock
Purchase Agreement
Indebtedness
Amount Liens Title and Date of Agreement
------ ----- ---------------------------
$ 1,488,000 All Assets Xxxxxx Technologies Company and Environmental
Support Solutions, Inc. with the CIT
Group/Credit Finance Inc./$5,000,000 Commercial
Credit Line Finance Facility, April 29, 1998
$ 671,000 Ft. Lauderdale Real Property Turnberry Savings Bank - Promissory Note,
Florida Mortgage & Security Agreement and
Collateral Assignment of Leases & Rent,
December 6, 1996
$ 54,000 Xxxxx Reclamation Machines Lease as amended by Amendment
September 1, 1994 Refrigerant Recovery
Corporation of America- X.X. Xxxxx
$ 72,000 Lab and Other Equipment Lease Agreement-Xxxxxx Technologies, Co. and
Green Tree Vendor Services
October 19, 1998
$ 872,000 Aerosol Packaging Equipment, ISO Xxxxxx Technologies, Inc. and The Xxxxxx Asset
Containers and Other Equipment Group, Inc. Master Equipment Lease August 2,
1996
$ 495,000 Hillburn Location Lease - Ramapo Land Co., Inc. and Refrigerant
Reclamation Industries, Inc.
May 20, 1994
$ 279,000 Rantoul Location Lease - Roeco Enterprises, Inc. and Xxxxxx
Technologies, Inc.
October 1, 1997
$ 64,000 Baton Rouge Location Lease - Xxxxx XxXxxx and Xxxxxx
Technologies, Inc.
April 7, 1995
$ 131,000 Punta Gorda Location Commercial Lease - Xxxxx X. Lojingeer and
Xxxxxx Technologies Company
April 19, 1997
$ 256,000 Pearl River Location Lease - Xxxxxxxx Building Corporation and
Xxxxxx Technologies Company
November 9, 1998
$ 52,000 XXXX Machine Commercial Loan - Xxxxxxx Bank and Xxxxxx
Technologies, Inc.
September 5, 1996
$ 51,000 1999 Freightliner FL70 Retail Installment Contract - Xxxxxx
Technologies Co. and Xxxxxxxxx Truck Center,
Inc. March 16, 1999
$ 51,000 1999 Freightliner FL70 Retail Installment Contract - Xxxxxx
Technologies, Inc. and Xxxxxxxxx Truck Center,
Inc. February 19, 1999
Schedule 3
to the Stock
Purchase Agreement
Investments
- 25% interest of Environmental Support Solutions, Inc. (ESS)
- Xxxxxx guarantee of ESS office lease in Mesa, Arizona
Schedule 4
to the Stock
Purchase Agreement
Disclosure Material
1) Confidential Informational Memorandum, as amended
2) Depot strategy memorandum
3) Management presentation January 1999, January 1999, March 1999
4) Proforma depot income statement December 31, 1998
5) Draft Form 10-KSB for the year ended December 31, 1998
6) Summary financial information as of March 11, 1999 and February 28,
1997
7) Budget for year ended December 31, 1999
8) Detailed summary information including forecast assumptions to five
year forecast including but not limited to, service and refrigerant
revenues, capital expenditures, depot sales and G&A expense, number of
employees and summary of refrigerant sales assumptions
9) Depot sales "bottom up" model
10) Summary depot model
11) Proforma depot and satellite budget
12) Revenues by customer September 30, 1998 and December 31, 1998
13) Market data information including but not limited to, First Boston
report, February 1999; ARI statistical profile, Air Conditioning News -
September 22, 1997, Xxxxxx Research Company - BSRIA, Commerce News -
August 1, 1997, Equitable Security Report - November 1997
14) Form 10-QSB for quarters ended March 31, 1998; June 30, 1998 and
September 30, 1998
15) Form 10-KSB for years ended December 31, 1997; December 31, 1996 and
December 31, 1995
16) Revenues by job 1998 in total and by location
17) ZugiBeast Patent
18) Summary of revenue by site, R-Side vs. Non R-Side - December 31, 1998
19) List of customer references, March 8, 1999; March 9, 1999; undated
20) Financial package delivered to Board of Directors
21) Letter to Xxx Xxxx and Kingston Chu dated February 26, 1999 and
attachments 22) Refrigerant sales by site as of December 31, 1998
23) Interoffice memorandum dated December 18, 1998 regarding DuPont
reclamation forecast
24) Inventory - FIFO/on hand report dated February 26, 1999
25) Xxxxxx consolidating roll-up financial reports for the period ended
September 30, 1997, December 31, 1997, March 31, 1998, June 30, 1998,
September 30, 1998 and December 31, 1998
26) Quarterly financial results by location and in total for the years
ended December 31, 1998 and 1997
27) Refrigerant gross profit by major customer
28) US refrigerant market size by automotive and XXXX/X
00) Xxxxxx Technologies, Inc. refrigerant sales by pounds and dollars as of
1998 and 1997
30) Listing of officer compensation as of December 31, 1998
31) List of personal references for officers of the Company
32) Listing of stock options by individual for the 1994 and 1997 stock
option plans
33) Listing of total common stock and common stock equivalents outstanding
at December 31, 1998
34) Market sizing by service event
35) Detail of sales by line of business
36) Allocation of selling general and administrative expenses for projected
periods
37) Weather data cities
38) Letter dated February 27, 1999 to Xxxxx Xxxxxxx, Esq. including:
o Consolidated Amended Complaint, dated October 29, 1998
o Affidavit of Xxxxxxx X. Xxxxxxxx in support of Defendants'
Motion to Dismiss, sworn to December 23, 1998, with exhibits
o Memorandum of Law in Support of Defendants' Motion to
Dismiss
o Plaintiffs' Memorandum of Law in Opposition to Defendants'
Motion to Dismiss o First Amended Verified Complaint
o Notice of Motion to Dismiss, dated January 11, 1999, with
supporting affidavits and exhibits
o Memorandum of Law in Support of Defendant Xxxxxx
Technologies, Inc.'s Motion to Dismiss
o Affidavits of Xxxx X. Xxxxxxxx, P.E. and Xxxxx X. Xxxxxxxx,
in opposition to Motion to Dismiss with Exhibits
o Memorandum of Law of Plaintiff United Water New York Inc. in
Opposition to Defendant Xxxxxx Technologies, Inc.'s Motion to
Dismiss
o Reply Affidavit of Xxxxxx Xxxxxx in Support of Motion to
Dismiss
o Reply Memorandum of Law of Xxxxxx Technologies, Inc. in
Further Support of Its Motion to Dismiss
o Copy of Xxxxxxx X. Xxxxxxxxxxx'x letter dated January 31,
1998 to Xxxxx Agency, together with backup information
underlying the issues
o Summary of Monitoring Well Testing Results for R-11 and R-12
through January 1999
o Copy of September 22, 1998 letter from LeBoeuf, Lamb, Xxxxxx
and XxxXxx itemizing for settlement discussion purposes only,
United Water's claimed damages
39) Letter dated March 3, 1999 to Xxxxxx Xxxxxxxx, Esq. including:
o Copies of Certificate of Incorporation and all amendments
thereto with filing receipts; and copy of original by-laws and
all amendments thereto
o Schedule of stock options issued to Officers
o Copies of Stock Purchase Agreement, Shareholders Agreement,
Standstill Agreement and Registration Agreement with DuPont
Chemical and Energy Operations, Inc.
o Schedule of outstanding stock and stock equivalents;
"Average Number of Shares, December 1998" (1 page))
o Copies of Loan and Security Agreement, General Security
Agreement, Guaranty from Xxxxxx Technologies, Inc., Junior
Mortgage and Security Agreement, and Warrant with The CIT
Group/Credit Finance, Inc.
o Promissory Note, Florida Mortgage and Security Agreement,
and Collateral Assignment of Leases and Rents with Turnberry
Bank
o Note to Xxxxxxxxx X. Xxxxxx, Xx.; dated February 25, 1999
o Schedule of Capital Leases as of December 31, 1998 (1 page)
o Schedule of Operating Leases as of December 31, 1998
(3 pages)
40) Letter dated March 4, 1999, to Xxxx Xxxxxxx, Esq. including;
o Copy of United Capitol Insurance Company Pollution Insurance
Policy for the term November 14, 1997 to November 14, 1998,
Policy Number SLP4001093
o Copy of original draft of the DEC's proposed consent order
o Copy of plans for proposed remediation system; dated April
15, 1998
o Copy of March 1, 1999 response by Sive, Paget & Riesel to
sur-reply submission of United Water
41) Letter dated March 8, 1999, to Xxxx Xxxxxxx, Esq. including;
o Copies of Interim Settlement Agreement, dated December 9,
1996
o Copies of the following correspondence with United Capital:
o United Capital letter, dated June 24, 1998
x Xxxxxx Technologies, Inc. letter, dated July 28, 1998
o United Capital letter, dated November 9, 1998
o United Capital letter, dated October 9, 1998
o Copies of original draft proposal and cost estimate for
remediation system (dated September 12, 1997)
42) Letter dated March 10, 1999, to Xxxx Xxxxx, Esq. including;
o Copy of Insurance Policy issued by National Insurance
Company of Pittsburgh; Policy Number 4866308
o Copies of the following Correspondence with Insurer:
x Xxxxxx Technologies, Inc. letter, dated March 7, 1998
o A.I. Management letter, dated March 16, 1998
x Xxxxxx Technologies, Inc. letter, dated March 28, 1998
x Xxxxxx Technologies, Inc. letter, dated April 21,
1998
x Xxxxxx Technologies, Inc. letter, dated May 19, 1998
o A.I. Management letter, dated June 1, 1998
x Xxxxxx Technologies, Inc. letter, dated June 2, 1998
x Xxxxxx Technologies, Inc. letter, dated June 24, 1998
x Xxxxxx Technologies, Inc. letter, dated July 23,
1998, with attached letter of Xxxxx Xxxx, dated July
22, 1998
x Xxxxxx Technologies, Inc. letter, dated October 14,
1998
o A.I. Management letter, dated November 24, 1998
x Xxxxxx Technologies, Inc. letter, dated December 2,
1998
o Copies of Press Releases and Xxxxxxxxxxx
43) Letter dated March 11, 1999 to Xxxx Xxxxx, Esq. including;
o Four page summary of restatement issues o August 9,
1997 letter to BDO Xxxxxxx, marked DRAFT (2 pages)
o Audit Committee Meeting Agenda, for July 30, 1997
meeting (1 page)
o Six pages of minutes from July 30, 1997 Audit
Committee meeting
44) Ramapo Well Field VOC Summaries, provided by United Water of New Jersey
for Production Well #84, 85, 99, 100 for period January 1, 1997 through
August 31, 1998 (13 pages)
45) Monitoring Well Summaries for R-11 and R-12 levels, for period April
22, 1996 and September 3, 1998 (2 pages)
46) Xxxxxxx Bank lease
47) Greentree Vendor lease
48) Xxxxxx X. Xxxxx lease
49) Xxxxxx leases, Schedule 1 and 2
50) Building Leases
a) Hillburn, New York
b) Pearl River, New York
c) Rantoul, Illinois
d) Xxxxx Xxxxx, Xxxxxxxxx
x) Xxxxx Xxxxx, Xxxxxxx
51) GMAC leases, 1999 Vans (2)
52) CIT waiver of provisions prohibiting dividends
53) February 16, 1999 Proxy materials for March 16, 1999 Special Meeting of
the Shareholders
54) Letter dated March 26, 1999 to Xxxx Xxxxxxx, Esq. including;
o Copy of written statement of Xxxx X. Xxxxxx
o Copy of Notice of Violation, dated 2/26/99 from LA. Dept. of
Public Safety
o Copy of Notice of Violation, dated 3/8/99 from LA. Dept. of
Public Safety
o Copy of Phase II Subsurface Investigation, dated 8/31/98,
for 000 Xxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxx
Schedule 4.12
to the Stock
Purchase Agreement
Permits, Licenses & Approvals; Intellectual Property & Other Rights
All patents, patent rights, trademarks, trademark rights, trade names, trade
name rights and copyrights are subject to, and constitute collateral for, the
Loan & Security Agreement, and related documents, executed and delivered in
connection with the Line of Credit issued by The CIT Group/Credit Finance, Inc.
Schedule 4.16
to the Stock
Purchase Agreement
Environmental Compliance
Paragraph 4.16 (a)
o All facts and circumstances relating to the alleged contamination of
Ramapo Valley Aquifer as alleged in action entitled United Water New
York Inc. x. Xxxxxx Technologies, Inc., Rockland County Supreme Court
Index # 3126/98, and all proceedings, discussions and negotiations with
the N.Y.S. DEC for a consent order relative to same.
o Ammonia release incident at Baton Rouge Louisiana facility on January
25, 1999, Notice of Violation dated 2/26/99, alleging violation for
"Delayed Release Notification of Ammonia" - $1,000 proposed penalty,
and Notice of Violation dated March 9, 1999 (received March 26, 1999)
for alleged "Careless Handling of Anhydrous Ammonia - $7,500 proposed
penalty.
o Company reported vapor release of approximately 8,000 lbs. of R22 on
4/23/98 at Hillburn, NY facility due to failed pressure relief device.
o Phase II Subsurface Investigation Report, dated August 31, 1998, relating
to 000 Xxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxx
Paragraph 4.16 (b)
o Alleged contamination of groundwater and Ramapo Valley Aquifer,
which is the subject of the action entitled United Water New York Inc.
x. Xxxxxx Technologies, Inc., Rockland County Supreme Court Index #
3126/98, and which is the subject of all proceedings, discussions and
negotiations with the N.Y.S. DEC for a consent order relative to same.
o Phase II Subsurface Investigation Report, dated August 31, 1998,
relating to 000 Xxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxx, reported detection in
three monitoring xxxxx of five (5) volatile organic compounds in
groundwater at levels in excess of groundwater quality guidance values.
None of these compounds were ever present at the facility during the
Company's use and occupancy of the premises.
Paragraph 4.16 (c) & (d) NA
Paragraph 4.16 (e)
The Company is not aware of any asbestos-containing materials, except that
one (1) storage tank located at Baton Rouge, Louisiana facility, is
believed to have asbestos insulation.
Paragraph 4.16 (f)
None
Paragraph 4.16 (g) NA
Schedule 5
to the Stock
Purchase Agreement
Liens
Title and Date of Agreement Affected Property
1) Turnberry Savings Bank - Promissory Note, Florida Mortgage Mortgage on Ft. Lauderdale Property
& Security Agreement and Collateral Assignment of Leases &
Rents -December 6, 1996
2) CIT Credit Finance - Xxxxxx Technologies Company and All Assets and property
Environmental Support Solutions, Inc. with The CIT
Group/Credit Finance, Inc. - $5,000,000 Commercial Credit
Line Finance Facility - April 29, 1998
3) Lease Agreement - Xxxxxx Technologies, Inc. and Absolute Lab Equipment
Financial Services, Ltd. Partnership - March 22, 1995
4) Open End Commercial Motor Vehicle Lease Agreement Franklin International Rack Truck
Equity Leasing Co. and Xxxxxx Technologies, Inc. -
April 10, 1995
5) Open End Commercial Motor Vehicle Lease Agreement Franklin International Rack Truck
Equity Leasing Co. and Xxxxxx Technologies, Inc. -
April 10, 1995
6) Open End Commercial Motor Vehicle Lease Agreement Franklin International Rack Truck
Equity Leasing Co. and Xxxxxx Technologies, Inc. -
April 10, 1995
7) Xxxxxx Technologies, Inc. and Associates Commercial Corp. Forklift
(IL) June 28, 1995
8) Xxxxxx Technologies, Inc. and Associates Commercial Corp. Forklift
(LA) June 28, 1995
9) Lease Agreement (NY) Xxxxxx Technologies, Company and Lab Equipment
Newcourt Financial -
April 21, 1998
10) Lease Agreement (FL) Xxxxxx Technologies Company and Lab Equipment
Newcourt Financial -
April 21, 1998
11) Lease Agreement - Xxxxxx Technologies Company and Lab and Other Equipment
Greentree Vendor Service -
October 19, 1998
12) Commercial Loan - Xxxxxxx Bank and Xxxxxx Technologies, XXXX Machine
Inc. - September 5, 1996
13) Vehicle Retail Installment Contract - Xxxxxx Pickup Truck
Technologies, Inc. and Xxx Xxxxxxxx Ford, Inc.
August 25, 1995
14) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America - CA Xxxxx XX
15) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America - Xxxx Xxxx
16) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America - XX Xxxxxxxxx
17) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America - XX Xxxxx
18) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America -
Xxxxxx Xxxxxxx
19) Lease as amended by Amendment September 1, 1994 Xxxxx Machine
Refrigerant Recovery Corporation of America -
Xxxxxxx Xxxxx
20) Retail Installment Contract - Xxxxxx Technologies Company
Freightliner Box Truck and Xxxxxxxxx Truck Center, Inc. -
March 16, 1999
21) Retail Installment Contract - Xxxxxx Technologies Company Freightliner Box Truck
and Xxxxxxxxx Truck Center, Inc. - February 19,1999
Schedule 6
to the Stock
Purchase Agreement
Capital Stock
(a) Authorized, Issued and Outstanding
(i) authorized capital stock
20,000,000 shares of Common Stock, par value $.01
5,000,000 shares of Preferred Stock, par value $.01
(ii) number of designated shares of Preferred Stock in each series
or class after giving effect to the Certificate of
Designations
75,000 shares of Series A Convertible Preferred Stock
(iii) number of shares outstanding in each series or class after
giving effect to the issuance of Shares contemplated by the
Stock Purchase Agreements
5,085,820 shares of Common Stock
65,000 shares of Series A Convertible Preferred Stock
(b) Common Stock Reserved for Issuance
(i) 2,736,842 shares of Common Stock to be issued upon conversion
of the Series A Convertible Preferred Stock
(ii) 2,544,529 shares of Common Stock to be issued pursuant to
Company Stock Option Plans and outstanding warrants (including
500,000 shares pursuant to future plans)
EXHIBIT B 1
To the Stock
Purchase Agreement
1. Paragraph 4.2 (d)
Registration rights were granted by the Company pursuant to and as
provided in the Registration Agreement between DuPont Chemical and
Energy Operations, Inc, X.X. Xxxxxx de Nemours & Company and Xxxxxx
Technologies, Inc.; dated 1/29/97.
2. Paragraph 4.2 (e)
An agreement with respect to the voting of capital stock of the Company
was made pursuant to and as provided in the Shareholders' Agreement and
Standstill Agreement, each dated 1/29/97, between DuPont Chemical and
Energy Operations, Inc., X.X. Xxxxxx de Nemours & Company and Xxxxxx
Technologies, Inc.
3. Paragraph 4.2 (f)
Certain anti-dilution or other adjustment provisions were granted
pursuant to and as provided in the Stock Purchase Agreement,
Shareholders' Agreement, Standstill Agreement and Registration
Agreement, each dated 1/29/97 between DuPont Chemical and Energy
Operations, Inc., X.X. Xxxxxx de Nemours & Company and Xxxxxx
Technologies, Inc.
4. Paragraph 4.6 (b)
(i) a. Sale of 75% ownership of ESS on 3/19/99
b. The Affliliate Loan
(ii) Except to the extent otherwise disclosed in the projected 1998
financial statements contained in the Confidential Information
Memorandum, as amended (Item 1 to Schedule 4.)
5. Paragraph 4.7
(i) None
(ii) None
A) In re Xxxxxx Technologies, Inc. Securities Litigation, 00 Xxx.
0000 (XXX), pending in United Xxxxxx Xxxxxxxx Xxxxx, Xxxxxxxx
Xxxxxxxx xx Xxx Xxxx - Defendant's motion to dismiss consolidated
complaint is sub xxxxxx
B) United Water New York Inc. x. Xxxxxx Technologies, Inc., Rockland
County Supreme Court Index No. 3126/98 - Defendant's motion to
dismiss certain causes of action in amended complaint is sub
xxxxxx
C) BNY Financial Corporation x. Xxxxxx Technologies Inc., N.Y. County
Supreme Court Index #602203/98 - currently in discovery
D) Proceedings, discussions and negotiations with the NYSDEC for a
protective order relative to Alleged contamination of groundwater
and Ramapo Valley Aquifer, which is the subject of "B)" above
EXHIBIT B 2
To the Stock
Purchase Agreement
E) Notice of Alleged Safety or Health Hazards, dated 2/3/99, received
from Occupational Safety and Health Administration regarding
Hillburn, NY facility. Notice issued in response to a complaint
from an unnamed party, believed to be a former employee. A follow
up meeting at the facility took place on March 26, 1999 indicating
that a formal report will be received within two weeks. Verbal
comments from representative identified approx. 10-12 primarily
housekeeping and training items, all of which have been fully or
partially addressed, which was so noted by representative at
meeting.
6. Paragraph 4.9
(a) Company Health & Dental Insurance Plans issued by, respectively,
the New England and Met Life; Xxxxxx Technologies, Inc. 401 (K)
through M & T Bank Xxxxxx Technologies, Inc. 1994 & 1997 Stock
Options Plans Xxxxxx Technologies, Inc. Flexible Benefit Plan,
including Dependent Care Assistance Plan and Medical Reimbursement
Plan
(k) None
7. Paragraph 4.12
a. EPA Certified Reclaimer pursuant to 40 CFR Part 82
b. Certified Reclaimer under Air Conditioning and Refrigeration
Institute ("ARI") Certified Reclaimer Program
c. State Contractor Licenses in States of California and Nevada
d. New York State Waste Hauler Permit and Connecticut Waste Hauler
Permit, plus soth other and various local permits as applicable
e. License Agreement with ARI for use of ARI logo
f. License to use DuPont and SUVA trademarks pursuant to Segment
Marketer Agreement with DuPont
g. patents, trademarks, and copyrights as listed on attached Schedule
of Patents, Trademarks and Copyrights
8. Paragraph 4.13 - NONE
9. Paragraph 4.14
Real Property Owned:
- 0000 X.X. 00xx Xxx., Xx. Xxxxxxxxxx, Xxxxxxx
- Leased Real Property:
- 00 Xxxxx Xxxxxx Xxxx, Xxxxxxxx, Xxx Xxxx
- One Xxxxxxx Drive, Congers, New York
- 000 X. Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx
- 0000 Xxxxxxx Xxxxxxx, Xxxxx Xxxxx, Xx.
- 0000 Xxxxxxxx Xxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx
- 0000 Xxxxxxxxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxxxx
- 0000 Xxxxxx Xxxxx, Xxxxxxx, XX
- 0000 00xx Xxxxxx, X.X., Xxxxx #00, Xxxxxx, XX
EXHIBIT B 3
To the Stock
Purchase Agreement
10. Paragraph 4.22
a. Former names: Refrigerant Reclamation Industries, Inc. Refrigerant
Recovery Corporation of America, Inc. Refrigerant Reclamation
Corporation of America, Inc. Xxxxxx Technologies of TN, Inc. GRR
Co., Inc., d/b/a Golden Refrigerant HT Holdings, Inc.
b. Fictitious names: Xxxxxx Technologies of New York Xxxxxx
Technologies of Tennessee Xxxxxx Technologies Company of Tennessee
11. Paragraph 4.23 & 5.3
a. Wm. Sword & Company Incorporated
EXHIBIT B 4
To the Stock
Purchase Agreement
SCHEDULE OF PATENTS, TRADEMARKS, COPYRIGHTS
TITLE-NAME TYPE INVENTOR OWNER DATE ISSUED NUMBER
---------- ---- -------- ----- ----------- ------
Method & Apparatus
for Refrigerant
Reclamation Patent X. Xxxxxx Xxxxxx 1/3/95 5,377,499
Hydraulic System
for Recovering
Refrigerants Patent X. Xxxxxx Xxxxxx 4/2/96 5,502,974
Method & Apparatus
for Reclaiming a
Refrigerant Patent X. Xxxxxx Xxxxxx 6/11/91 5,022,230
Apparatus & Method
For Recovering Volatile
Refrigerants Patent X. Xxxxxx Xxxxxx 9/8/98 5,802,859
Method & Apparatus
For Sonic Cleaning of
Heat Exchangers Patent Pending X. Xxxxxx Xxxxxx filed 8/12/98 App #60/096,296
Apparatus & Method
For Flushing a X. Xxxxxx &
Chiller System Patent Pending A. Xxxx Xxxxxx filed 8/12/98 App #60,096,297
Apparatus & Method
For Flushing a X. Xxxxxxx &
Refrigeration System Patent Pending A. Xxxx Xxxxxx filed 8/12/98 App #60/096,295
GLACIER Trademark N/A Xxxxxx filed 3/7/97 Ser #75/253240
ZUGIBEAST Trademark N/A Xxxxxx 7/9/96 1,985,422
HTI Service Xxxx N/A Xxxxxx 4/23/96 1,970,063
Trademark
HUDSONIC Service Xxxx N/A Xxxxxx filed 8/12/98 Ser. #75/535,057
R-SIDE Service Xxxx N/A Xxxxxx filed 8/6/98 Ser. #75/532,328
Trademark
REFRIGERANTSIDE Service Xxxx N/A Xxxxxx filed 8/6/98 Ser. #75/532,327
Trademark
Xxxxxx Technologies, Service Xxxx
Inc. Trademark N/A Xxxxxx 4/23/96 1,969,986
EXHIBIT B 5
To the Stock
Purchase Agreement
SCHEDULE OF PATENTS, TRADEMARKS, COPYRIGHTS (cont.)
TITLE-NAME TYPE INVENTOR OWNER DATE ISSUED NUMBER
---------- ---- -------- ----- ----------- ------
Refrigerant Journal
System Copyright N/A ESS 5/17/95 TX 0-000-000
Refrigerant Journal
System Software Copyright N/A ESS 5/8/95 TX 692-039
Facility Refrigerant
Manager Training
Manual Copyright N/A ESS 6/26/95 TX 0-000-000
Refrigerant Management
Survey Copyright N/A ESS 6/29/95 TX 0-000-000
Refrigerant
Management Plan Copyright N/A ESS 5/22/95 TX 0-000-000
Refrigerant Compliance
Manager Copyright N/A ESS 11/16/93 TX 0-000-000
Refrigerant Compliance
Manager Trademark N/A ESS Filed 9/19/96 Ser. #75/168690
Refrigerant Journal
Software Trademark N/A ESS 10/21/97 Reg. #2,106,923
Facility Associate Trademark N/A ESS 10/21/97 Reg. #2,106,926
Generator Associate Trademark N/A ESS 10/28/97 Reg. #2,108,829
Manifest Associate Trademark N/A ESS 10/28/97 Reg. #2,108,828
Transporter Associate Trademark N/A ESS 11/18/97 Reg. #2,113,856
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
XXXXXX TECHNOLOGIES, INC.
under Section 805 of the Business Corporation Law
------------------------------------
The undersigned, being the Chairman and Chief Executive
Officer and Secretary, respectively, of Xxxxxx Technologies, Inc. (the
"Corporation") hereby certify that:
A. The name of the Corporation is XXXXXX TECHNOLOGIES, INC.
The Corporation was formed under the name REFRIGERANT RECLAMATION INDUSTRIES,
INC.
B. The Certificate of Incorporation was filed with the
Department of State on January 10, 1991.
C. On March __, 1999, the Board of Directors of the
Corporation duly adopted resolutions in order to designate the Series A
Preferred Stock (as set forth in the resolution below).
D. The resolution contained herein has not been modified,
altered or amended and is presently in full force and effect.
E. To effectuate the foregoing, Paragraph (5) of the
Certificate of Incorporation, which refers to the authorized shares of the
Corporation, is hereby amended by adding the following to the end of said
Paragraph (5):
RESOLVED, that pursuant to the authority expressly vested in
the Board of Directors of the Corporation by Paragraph 5 of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby fixes and
determines the voting rights, designations, preferences, qualifications,
privileges, limitations, restrictions, options, conversion rights and other
special or relative rights of the foregoing series of the preferred stock, par
value $.01 per
share, which shall be designated as Series A Convertible Preferred Stock (the
"Series A Preferred Stock").
1. Designation. Seventy-five thousand (75,000) shares of
preferred stock, par value $.01 per share, of the Corporation are hereby
constituted as a series of the preferred stock designated as "Series A
Convertible Preferred Stock"; provided, however, that the Corporation shall
issue any such shares in excess of sixty-five thousand (65,000) only to pay
dividends on the Series A Preferred Stock as provided in Section 2(a)(i).
2. Dividends.
(a) Dividends on Series A Preferred Stock. The Corporation
shall pay, when and as declared by the Corporation's Board of Directors, to the
holders of the Series A Preferred Stock, out of the assets of the Corporation
legally available therefor, dividends at the times, in the amounts and with such
priorities as follows:
(i) Dividend Rate. Dividends on shares of Series A
Preferred Stock will be payable in arrears in cash or, for the first
eight fiscal quarters after the Issue Date, at the option of the
Corporation, in additional shares of Series A Preferred Stock, at a
rate per annum equal to (x) until the fifth anniversary of the Issue
Date, 7.00% of the Preferred Liquidation Value thereof on the Dividend
Payment Date and (y) on and after the fifth anniversary of the Issue
Date, 16.00% of the Preferred Liquidation Value thereof on the Dividend
Payment Date. Dividends will be calculated on the basis of a 360-day
year.
(ii) Accrual of Dividends.
(A) Dividends on each share of Series A Preferred Stock
shall accrue cumulatively on a daily basis from the Issue Date to the
date on which the redemption or conversion of such share of Series A
Preferred Stock shall have been effected, whether or not such dividends
have been declared and whether or not there shall be (at the time such
dividends became or become payable or any other time) profits,
surpluses or other funds of the Corporation legally available for the
payment of dividends.
(B) To the extent not paid on any Dividend Payment Date
for any reason other than the Corporation's compliance with Section
2(b) hereof, all dividends which have accrued on any share of Series A
Preferred Stock then outstanding during the period from and including
the preceding Dividend Payment Date (or from and including the Issue
Date in the case of the initial Dividend Payment Date) to (but
excluding) such Dividend Payment Date shall be added on such Dividend
Payment Date to the Preferred Liquidation Value of such share of Series
A Preferred Stock (so that, without limitation,
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dividends shall thereafter accrue in respect of the amount of such
accrued but unpaid dividends) and shall remain a part thereof until
(but only until) such dividends are paid.
(iii) Payment Dates. Full cumulative dividends on the
Series A Preferred Stock shall be payable semi-annually, on the last
day of March and September in each year (each, a "Dividend Payment
Date"). The first Dividend Payment Date shall be September 30, 1999. If
any Dividend Payment Date shall be on a day other than a Business Day,
then the Dividend Payment Date shall be on the next succeeding Business
Day. An amount equal to the full cumulative dividends shall also be
payable, in satisfaction of such dividend obligation, upon liquidation
as provided under Section 3 hereof, and upon redemption as provided
under Section 6 hereof. The Board of Directors may fix a record date
for the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of the dividends payable pursuant to this
Section 2, which record date shall not be more than 60 days prior to
the Dividend Payment Date.
(iv) Amounts Payable. The amount of dividends payable on
Series A Preferred Stock on each Dividend Payment Date shall be the
full cumulative dividends which are unpaid through and including such
Dividend Payment Date. Dividends which are not paid for any reason
whatsoever on a Dividend Payment Date shall cumulate until paid and
shall be payable on the next Dividend Payment Date on which payment can
lawfully be made (or upon liquidation or redemption as provided
herein). Holders of shares of Series A Preferred Stock called for
redemption on a redemption date falling between the close of business
on a dividend payment record date and the opening of business on the
corresponding Dividend Payment Date shall, in lieu of receiving such
dividend payment on the Dividend Payment Date fixed therefor, receive
an amount equal to such dividend payment (consisting of all accumulated
and unpaid dividends through the redemption date) on the date fixed for
redemption. If for whatever reason all payments have not been made with
respect to any share of Series A Preferred Stock as required by Section
3 on a distribution date or all payments have not been made with
respect to any share of Series A Preferred Stock as required by Section
6 on a redemption date (other than because of a failure by the holder
thereof to tender such shares for payment on such date), then,
notwithstanding any other provision hereof, dividends shall continue to
accumulate on such outstanding shares until paid.
(v) Compliance with Section 2(b). Notwithstanding any
other provision hereof, any dividend not paid by the Corporation under
this Section 2(a) because of the Corporation's compliance with Section
2(b) will be deemed paid under the provision of this Certificate of
Amendment.
(b) Dividends on Common Stock. In the event that (i) the
Corporation shall at any time or from time to time declare, order, pay or make a
dividend or other distribution (whether in cash, securities, rights to purchase
securities or other property) on its Common Stock and (ii) such dividend or
other distribution exceeds on a per share of Common Stock equivalent basis the
amount payable on a share of Series A Preferred Stock on the Dividend Payment
Date immediately following the declaration of such dividend or other
distribution on the Common
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Stock, the holders of the Series A Preferred Stock shall receive, in lieu of the
dividend payable under Section 2(a) on such Dividend Payment Date, from the
Corporation, with respect to each share of Series A Preferred Stock held, a
dividend or distribution that is the same dividend or distribution that would be
received by a holder of the number of shares of Common Stock into which such
share of Series A Preferred Stock is convertible pursuant to the provisions of
Section 5 hereof on the record date for such dividend or distribution. Any such
dividend or distribution shall be declared, ordered, paid or made on the Series
A Preferred Stock at the same time such dividend or distribution is declared,
ordered, paid or made on the Common Stock.
(c) Limitation on Dividends, Repurchases and Redemptions. So
long as any shares of Series A Preferred Stock shall be outstanding, the
Corporation shall not declare or pay or set apart for payment any dividends or
make any other distributions on any Junior Securities, whether in cash,
securities, rights to purchase securities or other property (other than
dividends or distributions payable in shares of the class or series upon which
such dividends or distributions are declared or paid), nor shall the Corporation
or any of its Subsidiaries purchase, redeem or otherwise acquire for any
consideration or make payment on account of the purchase, redemption or other
retirement of any Parity Securities or Junior Securities, nor shall any monies
be paid or made available for a sinking fund for the purchase or redemption of
any Parity Securities or Junior Securities, unless with respect to all of the
foregoing all dividends or other distributions to which the holders of Series A
Preferred Stock shall have been entitled, pursuant to Sections 2(a) and 2(b)
hereof, shall have been paid or declared and a sum of money has been set apart
for the full payment thereof.
(d) Pro Rata Payments. In the event that full dividends are
not paid or made available to the holders of all outstanding shares of Series A
Preferred Stock and of any Parity Securities and funds available for payment of
dividends shall be insufficient to permit payment in full to holders of all such
stock of the full preferential amounts to which they are then entitled, then the
entire amount available for payment of dividends shall be distributed ratably
among all such holders of Series A Preferred Stock and of any Parity Securities
in proportion to the full amount to which they would otherwise be respectively
entitled.
3. Preference on Liquidation.
(a) Liquidation Preference for Series A Preferred Stock. In
the event that the Corporation shall liquidate, dissolve or wind up, whether
voluntarily or involuntarily, no distribution shall be made to the holders of
shares of Common Stock or other Junior Securities (and no monies shall be set
apart for such purpose) unless prior thereto, the holders of shares of Series A
Preferred Stock shall have received an amount per share equal to the greater of
(i) the sum of (x) the Liquidation Value, plus (y) all declared but unpaid
dividends thereon through the date of distribution, (ii) ratable distributions
determined with respect to the holders of Series A Preferred Stock and Common
Stock on the basis of the number of shares of Common Stock into which such
Series A Preferred Stock could be converted pursuant to the provisions of
Section 5 hereof immediately prior to such distribution and (iii) the Payment
Amount, on a per share basis
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(the greater of (i), (ii) and (iii) above is herein referred to as the "Series A
Liquidation Preference").
(b) Pro Rata Payments. If, upon any such liquidation,
dissolution or other winding up of the affairs of the Corporation, the assets of
the Corporation shall be insufficient to permit the payment in full of the
Series A Liquidation Preference for each share of Series A Preferred Stock then
outstanding and the full liquidating payments on all Parity Securities, then the
assets of the Corporation remaining shall be ratably distributed among the
holders of Series A Preferred Stock and of any Parity Securities in proportion
to the full amounts to which they would otherwise be respectively entitled if
all amounts thereon were paid in full.
(c) Sale Not a Liquidation. Neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation, merger or other business combination of the
Corporation with or into one or more corporations shall be deemed to be a
liquidation, dissolution or winding-up, voluntary or involuntary, of the
Corporation.
(d) Notice of Liquidation. Written notice of any liquidation,
dissolution or winding up of the Corporation, stating the payment date or dates
when and the place or places where amounts distributable in such circumstances
shall be payable, shall be given by first class mail, postage prepaid, not less
than thirty (30) days prior to any payment date specified therein, to the
holders of record of the Series D Preferred Stock at their respective addresses
as shall appear on the records of the Corporation.
4. Voting.
(a) General. In addition to any voting rights provided in the
Corporation's Certificate of Incorporation or by law, the Series A Preferred
Stock shall vote together with the Common Stock as a single class on all actions
to be voted on by the stockholders of the Corporation. Each share of Series A
Preferred Stock shall entitle the holder thereof to such number of votes per
share on each such action as shall equal the number of shares of Common Stock
(including fractions of a share) into which each share of Series A Preferred
Stock is then convertible; provided, however, that each holder of Series A
Preferred Stock and Conversion Shares (as defined below in the definition of
"Xxxxxxx Holders") hereby irrevocably constitutes Xxxxx X. Xxxxxx and Xxxxxxx X.
Xxxxxxxxxxx, and each of them, as such holder's proxy, with full power of
substitution in each of them, in the name, place and stead of such holder, to
vote at all meetings of the stockholders of the Corporation (other than with
respect to matters requiring a separate class vote of holders of the Series A
Preferred Stock) that number of voting shares of the Corporation of all classes,
including any now owned or hereafter acquired shares held by such holder and its
Affiliates, in the aggregate, as shall exceed twenty-nine percent (29%) of the
votes entitled to be cast by all stockholders of the Corporation (as
contemplated in the first sentence of this Section 4(a)). Each such proxy is
coupled with an interest. The holders of Series A
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Preferred Stock shall be entitled to notice of any stockholder's meeting in
accordance with the By-Laws of the Corporation.
(b) Board of Directors. The Corporation shall not, without the
written consent or affirmative vote of the holders representing at least a
majority of the shares of Series A Preferred Stock then outstanding, given in
writing or by vote at a meeting, consenting or voting (as the case may be)
separately as a class, increase the maximum number of directors constituting the
Board of Directors to a number in excess of nine (9).
(c) Election of Directors. So long as the Xxxxxxx Holders hold
at least thirty-five percent (35%) of the originally issued shares of Series A
Preferred Stock, the Xxxxxxx Holders (or if no such shares are held by a Xxxxxxx
Holder, any transferee of shares of Series A Preferred Stock consented to by the
Corporation (which consent shall not be unreasonably withheld) (the "Permitted
Preferred Transferee)), shall be entitled, but not required, to elect up to two
(2) directors of the Corporation. So long as the Xxxxxxx Holders hold at least
twenty percent (20%), but less than thirty-five (35%) percent, of the originally
issued shares of Series A Preferred Stock, the Xxxxxxx Holders (or if no such
shares are held by a Xxxxxxx Holder, any Permitted Preferred Transferee), shall
be entitled, but not required, to elect one (1) director of the Corporation. A
director elected in accordance with this Section 4 is referred to as a
"Preferred Director".
Holders of at least a majority of the outstanding shares of
Series A Preferred Stock shall exercise their right, as described above, to
elect each Preferred Director by written notice to the Corporation of the
identity of the person nominated to serve as Preferred Director, and requesting
the Corporation to call a meeting of the holders of Series A Preferred Stock to
act upon such nomination. Each such nomination shall be subject to approval by
the Corporation, such approval not to be unreasonably withheld. Promptly upon
such request, the holders of Series A Preferred Stock, consenting or voting as a
class (as the case may be), shall be entitled to elect a Preferred Director at
any meeting (or in a written consent in lieu thereof) held for the purpose of
electing directors until such time as holders of at least a majority of the
outstanding shares of Series A Preferred Stock shall notify the Corporation in
writing that they no longer wish to exercise their right to elect a Preferred
Director.
At any meeting (or in a written consent in lieu thereof) held
for the purpose of electing directors, (x) the presence in person or by proxy
(or the written consent) of the holders representing a majority of the shares of
Series A Preferred Stock then outstanding shall constitute a quorum of such
class for the election of a Preferred Director; and (y) the absence of the
presence in person or by proxy (or written consent) of the holders representing
less than a majority of the shares of Common Stock then outstanding shall not
affect the right of a quorum of holders of Series A Preferred Stock to elect a
Preferred Director. Any Preferred Director may be removed with or without cause
by, and shall not be removed except by, the holders representing a majority of
the shares of Series A Preferred Stock then outstanding, present in person or by
proxy and voting at a meeting of stockholders, or of the holders of Series A
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Preferred Stock called for that purpose, or by written consent signed by the
holders representing a majority of the shares of Series A Preferred Stock then
outstanding.
A vacancy in the directorship to be held by a Preferred
Director shall be filled only by vote or written consent of the holders of the
Series A Preferred Stock as provided above. Unless otherwise required by the
laws of the State of New York, any holder or holders of at least a majority of
the outstanding shares of Series A Preferred Stock shall have the right to call
a meeting of the holders of Series A Preferred Stock of the Corporation for the
purpose of electing a Preferred Director and filling vacancies of Preferred
Directors.
5. Conversion. The holders of shares of Series A Preferred
Stock shall have the right to convert all or a portion of such shares into fully
paid and nonassessable shares of Common Stock or any capital stock or other
securities into which such Common Stock shall have been changed or any capital
stock or other securities resulting from a reclassification thereof as follows:
(a) Right to Convert. Subject to and upon compliance with the
provisions of this Section 5, a holder of shares of Series A Preferred Stock
shall have the right, at the option of such holder, at any time, to convert any
or all of such shares into the number of fully paid and nonassessable shares of
Common Stock (calculated as to each conversion rounded down to the nearest
1/100th of a share) obtained by dividing (i) the aggregate Liquidation Value of
the shares to be converted, plus all declared but unpaid dividends thereon
through the date of conversion (unless the holder of shares of Series A
Preferred Stock being so converted shall have elected to receive any such
dividends in respect of the shares being converted subsequent to conversion), by
(ii) the Conversion Price, and by surrender of such shares, such surrender to be
made in the manner provided in paragraph (b) of this Section 5. The Common Stock
issuable upon conversion of the shares of Series A Preferred Stock, when such
Common Stock shall be issued in accordance with the terms hereof, is hereby
declared to be and shall be duly authorized, validly issued, fully paid and
nonassessable Common Stock held by the holders thereof.
(b) Mechanics of Conversion. Each holder of Series A Preferred
Stock that desires to convert the same into shares of Common Stock shall
surrender the certificate or certificates therefor, duly endorsed, at the
principal office of the Corporation or of any transfer agent for the Series A
Preferred Stock or Common Stock, accompanied by written notice to the
Corporation that such holder elects to convert the same and stating therein the
number of shares of Series A Preferred Stock being converted and whether all
declared and unpaid dividends in respect of such shares shall be included in the
calculation set forth in Section 5(a) hereof, and setting forth the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued if such name or names shall be different from that of
such holder. Thereupon, the Corporation shall issue and deliver at such office
on the fifth succeeding Business Day after receipt of such certificate and
notice (unless such conversion is in connection with an underwritten public
offering of Common Stock, in which event concurrently with such conversion) to
such holder or on such holder's written order, (i) a certificate or certificates
for the
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number of validly issued, fully paid and nonassessable full shares of Common
Stock to which such holder is entitled and (ii) if less than the full number of
shares of Series A Preferred Stock evidenced by the surrendered certificate or
certificates being converted, a new certificate or certificates, of like tenor,
for the number of shares evidenced by such surrendered certificate or
certificates less the number of shares converted.
Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date of such surrender of the
shares to be converted (except that if such conversion is in connection with an
underwritten public offering of Common Stock, then such conversion shall be
deemed to have been effected upon such surrender) so that the rights of the
holder thereof as to the shares being converted shall cease at such time except
for (x) the right to receive shares of Common Stock and (y) if the holder of the
shares being so converted shall have elected to receive dividends subsequent to
such conversion, all accrued and unpaid dividends in accordance herewith, and
the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock at such time.
(c) Conditional Conversion. Notwithstanding any other
provision hereof, if conversion of any shares of Series A Preferred Stock is to
be made in connection with a public offering of Common Stock or any transaction
described in Section 5(d)(vii) hereof, the conversion of any shares of Series A
Preferred Stock may, at the election of the holder thereof, be conditioned upon
the consummation of the public offering or such transaction, in which case such
conversion shall not be deemed to be effective until the consummation of such
public offering or transaction.
(d) Adjustment of the Conversion Price. The Conversion Price
shall be adjusted from time to time as follows:
(i) Adjustment for Stock Splits and Combinations. If the
Corporation at any time or from time to time after the Issue Date, pays
a stock dividend in shares of its Common Stock, issues any convertible
debt securities, effects a subdivision of the outstanding Common Stock,
combines the outstanding shares of Common Stock, issues by
reclassification of shares of its Common Stock any shares of capital
stock of the Corporation, makes a distribution of any of its assets
(other than cash dividends payable out of earnings or retained earnings
in the ordinary course of business) then, in each such case, the
Conversion Price in effect immediately prior to such event shall be
adjusted so that each holder of shares of Series A Preferred Stock
shall have the right to convert its shares of Series A Preferred Stock
into the number of shares of Common Stock which it would have owned
after the event had such shares of Series A Preferred Stock been
converted immediately before the happening of such event. Any
adjustment under this Section 5(d)(i) shall become effective
retroactively immediately after the record date in the case of a
dividend and distribution and shall become effective immediately after
the effective date in the case of a issuance, subdivision, combination
or reclassification. If
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the Corporation pays a stock dividend in shares of its Common Stock and
the holders of the Series A Preferred Stock received such stock
dividend pursuant to Section 2(b) hereof, the Conversion Price shall
not be adjusted for such stock dividend under this Section 5(d)(i).
(ii) Issuance of Additional Shares of Stock. If the
Corporation shall (except as hereinafter provided) issue or sell
Additional Shares of Stock in exchange for consideration in an amount
per Additional Share of Stock less than the Conversion Price in effect
immediately prior to such issuance or sale of Additional Shares of
Stock, then the Conversion Price as to the Common Stock into which the
Series A Preferred Stock is convertible immediately prior to such
adjustment shall be adjusted to equal the consideration paid per
Additional Share of Stock. The provisions of this Section 5(d)(ii)
shall not apply to any issuance of Additional Shares of Common Stock
for which an adjustment is provided under Section 5(d)(i) or which are
dividends or distributions received by the holders of the Series A
Preferred Stock pursuant to Section 2(b) hereof.
(iii) (A) Issuance of Warrants or Other Rights. If at any
time (i) the Corporation shall in any manner (whether directly or by
assumption in a merger in which the Corporation is the surviving
corporation) issue or sell any warrants or other rights to subscribe
for or purchase any Additional Shares of Stock or any Convertible
Securities, whether or not the rights to exchange or convert thereunder
are immediately exercisable, and the consideration received for such
warrants or other rights or such Convertible Securities shall be less
than the Conversion Price in effect immediately prior to the time of
such issue or sale, then the Conversion Price shall be adjusted as
provided in Section 5(d)(ii). No further adjustments of the Conversion
Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities, upon exercise of such warrants or other
rights or upon the actual issue of such Common Stock upon such
conversion or exchange of such Convertible Securities.
(B) Issuance of Convertible Securities. If at any
time the Corporation shall in any manner (whether directly or by
assumption in a merger in which the Corporation is the surviving
corporation) issue or sell, any Convertible Securities, whether or not
the rights to convert thereunder are immediately exercisable, and the
consideration received for such Convertible Securities shall be less
than the Conversion Price in effect immediately prior to the time of
such issue or sale, then the Conversion Price shall be adjusted as
provided in Section 5(d)(ii). No adjustment of the Conversion Price
shall be made under this Section 5(d)(iii)(B) upon the issuance of any
Convertible Securities which are issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such
warrants or other rights pursuant to Section 5(d)(iii)(A). No further
adjustments of the Conversion Price shall be made upon the actual issue
of such Common Stock upon conversion of such Convertible Securities
and, if any issue or sale of such Convertible Securities is made upon
exercise of any warrant or other right to subscribe
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for or to purchase any such Convertible Securities for which
adjustments of the Conversion Price have been or are to be made
pursuant to other provisions of this Section 5(d), no further
adjustments of the Conversion Price shall be made by reason of such
issue or sale.
(iv) Superseding Adjustments. If, at any time after any
adjustment of the Conversion Price at which the Series A Preferred
Stock is convertible shall have been made pursuant to Section 5(d)(iii)
as a result of any issuance of warrants, rights or Convertible
Securities,
(A) such warrants or rights, or the right of
conversion or exchange in such other Convertible Securities,
shall expire, and all or a portion of such warrants or rights,
or the right of conversion or exchange with respect to all or
a portion of such other Convertible Securities, as the case
may be, shall not have been exercised, or
(B) the consideration per share for which Additional
Shares of Stock are issuable pursuant to such warrants or
rights, or the terms of such other Convertible Securities,
shall be increased (to an amount greater than that which
triggered the adjustment of the Conversion Price pursuant to
Section 5(d)(iii)) solely by virtue of provisions therein
contained for an automatic increase in such consideration per
share upon the occurrence of a specified date or event,
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of
the effect of such warrants or rights or other Convertible Securities
on the basis of
(C) treating the number of Additional Shares of Stock
or other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise of any such
warrants or rights or any such right of conversion or
exchange, as having been issued on the date or dates of any
such exercise and for the consideration actually received and
receivable therefor, and
(D) treating any such warrants or rights or any such
other Convertible Securities which then remain outstanding as
having been granted or issued immediately after the time of
such increase of the consideration per share for which
Additional Shares of Stock or other property are issuable
under such warrants or rights or other Convertible Securities;
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whereupon a new adjustment of the Conversion Price at which
the Series A Preferred Stock is convertible shall be made,
which new adjustment shall supersede the previous adjustment
so rescinded and annulled.
(v) Antidilution Adjustments Under Other Securities.
Without limiting any other rights available hereunder to the holders of
the Series A Preferred Stock, if there is an antidilution adjustment
(i) under any Convertible Securities, whether issued prior to or after
the Issue Date, or (ii) under any rights, options or warrants to
purchase Additional Shares of Stock, whether issued prior to or after
the Issue Date which, in either case, results in a reduction in the
exercise or purchase price with respect to such security or rights or
results in an increase in the number of Additional Shares of Stock
obtainable under such Convertible Security, right, option or warrant,
then an adjustment shall be made to the Conversion Price hereunder. Any
such adjustment pursuant to this Section 5(d)(v) shall be by whichever
of the following methods results in a lower Conversion Price: (A) a
reduction in the Conversion Price equal to the percentage reduction in
such exercise or purchase price with respect to such Convertible
Security, right, option or warrant or (B) a reduction in the Conversion
Price which will result in the same percentage increase in the number
of shares of Common Stock available hereunder as the percentage
increase in the number of Additional Shares of Stock available under
such Convertible Security, right, option or warrant. Any such
adjustment under this Section 5(d)(v) shall only be made if it would
result in a lower Conversion Price than that which would be determined
pursuant to any other antidilution adjustment otherwise required
hereunder as a result of the event or circumstance which triggered the
adjustment to such Convertible Security, right, option or warrant, and
if an adjustment is made pursuant to this Section 5(d)(v), such other
antidilution adjustment otherwise required hereunder shall not be made
as a result of such event or circumstance.
(vi) Other Provisions Applicable to Adjustments under this
Section. The following provisions shall be applicable to making
adjustments to the shares of Common Stock into which the Series A
Preferred Stock is convertible and the Conversion Price at which the
Series A Preferred Stock is convertible provided for in this Section
5(d):
(A) Computation of Consideration. To the extent that
any Additional Shares of Stock or any Convertible Securities
or any warrants or other rights to subscribe for or purchase
any Additional Shares of Stock or any Convertible Securities
shall be issued for cash consideration, the consideration
received by the Corporation therefor shall be the amount of
the cash received by the Corporation therefor, or, if such
Additional Shares of Stock or Convertible Securities are
offered by the Corporation for subscription, the subscription
price, or, if such Additional Shares of Stock or Convertible
Securities are sold to underwriters or dealers for public
offering without a subscription offering, the public offering
price (in any such case subtracting any amounts paid or
receivable for accrued interest or accrued dividends and any
compensation, discounts or expenses paid or
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incurred by the Corporation for and in the underwriting of, or
otherwise in connection with, the issuance thereof, to the
extent such amounts shall exceed in any such case five percent
(5%) of the amount of cash received, subscription price or
public offering price). To the extent that such issuance shall
be for a consideration other than cash, then except as herein
otherwise expressly provided, the amount of such consideration
shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the
Board of Directors of the Corporation. In case any Additional
Shares of Stock or any Convertible Securities or any warrants
or other rights to subscribe for or purchase such Additional
Shares of Stock or Convertible Securities shall be issued in
connection with any merger in which the Corporation issues any
securities, the amount of consideration therefor shall be
deemed to be the fair value, as determined in good faith by
the Board of Directors of the Corporation, of such portion of
the assets and business of the nonsurviving corporation as
such Board in good faith shall determine to be attributable to
such Additional Shares of Stock, Convertible Securities,
warrants or other rights, as the case may be. The
consideration for any Additional Shares of Stock issuable
pursuant to any warrants or other rights to subscribe for or
purchase the same shall be the consideration received by the
Corporation for issuing such warrants or other rights plus the
additional consideration payable to the Corporation upon
exercise of such warrants or other rights. The consideration
for any Additional Shares of Stock issuable pursuant to the
terms of any Convertible Securities shall be the consideration
received by the Corporation for issuing warrants or other
rights to subscribe for or purchase such Convertible
Securities, plus the consideration paid or payable to the
Corporation in respect of the subscription for or purchase of
such Convertible Securities, plus the additional
consideration, if any, payable to the Corporation upon the
exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of
any Additional Shares of Stock or Convertible Securities in
payment or satisfaction of any dividends upon any class of
stock other than Common Stock, the Corporation shall be deemed
to have received for such Additional Shares of Stock or
Convertible Securities a consideration equal to the amount of
such dividend so paid or satisfied.
(B) When Adjustments to Be Made. The adjustments
required by this Section 5(d) shall be made whenever and as
often as any event requiring an adjustment shall occur, except
that any adjustment of the Conversion Price that would
otherwise be required may be postponed (except in the case of
a subdivision or combination of shares of the Common Stock, as
provided for in Section 5(d)(i)) up to, but not beyond, the
date of exercise if such adjustment either by itself or with
other adjustments not previously made amount to a change in
the Conversion Price of less than $.05. Any adjustment
representing a change of less than such minimum amount (except
as aforesaid) which is postponed shall
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be carried forward and made as soon as such adjustment,
together with other adjustments required by this Section 5(d)
and not previously made, would result in a minimum adjustment
or on the date of conversion. For the purpose of any
adjustment, any event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(C) Fractional Interests. In computing adjustments
under this Section 5(d), fractional interests in the Common
Stock shall be taken into account to the nearest 1/100th of a
share.
(D) Challenge to Good Faith Determination. Whenever
the Board of Directors of the Corporation shall be required to
make a determination in good faith of the fair value of any
item under this Section 5(d), such determination may be
challenged in good faith by (1) any holder of thirty percent
(30%) or more of Series A Preferred Stock or (2) a Designated
Entity, and any dispute shall be resolved by an investment
banking firm of recognized national standing jointly selected
by the Corporation and such holder or Designated Entity. The
fees of such investment banker shall be borne by such holder
or Designated Entity unless the Corporation's calculation is
determined to be understated by five percent (5%) or more.
(vii) Reorganization, Reclassification, Merger or
Consolidation. If the Corporation shall at any time reorganize or
reclassify the outstanding shares of Common Stock (other than a change
in par value, or from no par value to par value, or from par value to
no par value, or as a result of a subdivision or combination) or
consolidate with or merge into another corporation (where the
Corporation is not the continuing corporation after such merger or
consolidation), the holders of Series A Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series A
Preferred Stock in whole or in part, the same kind and number of shares
of stock and other securities, cash or other property (and upon the
same terms and with the same rights) as would have been distributed to
a holder upon such reorganization, reclassification, consolidation or
merger had such holder converted its Series A Preferred Stock
immediately prior to such reorganization, reclassification,
consolidation or merger (subject to subsequent adjustments under
Section 5(d) hereof). The Conversion Price upon such conversion shall
be the Conversion Price that would otherwise be in effect pursuant to
the terms hereof. Notwithstanding anything herein to the contrary, the
Corporation will not effect any such reorganization, reclassification,
merger or consolidation unless prior to the consummation thereof, the
corporation which may be required to deliver any stock, securities or
other assets upon the conversion of the Series A Preferred Stock shall
agree by an instrument in writing to deliver such stock, cash,
securities or other assets to the holders of the Series A Preferred
Stock. A sale, transfer or lease of all or substantially all of the
assets of the Corporation to another person shall be deemed a
reorganization, reclassification, consolidation or merger for the
foregoing purposes.
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(viii) Exceptions to Adjustment of Conversion Price.
Anything herein to the contrary notwithstanding, the Corporation shall
not make any adjustment of the Conversion Price in the case of
Additional Shares of Stock.
(ix) Chief Financial Officer's Opinion. Upon each
adjustment of the Conversion Price, and in the event of any change in
the rights of a holder of Series A Preferred Stock by reason of other
events herein set forth, then and in each such case, the Corporation
will promptly obtain an opinion of the chief financial officer of the
Corporation, stating the adjusted Conversion Price, or specifying the
other shares of the Common Stock, securities or assets and the amount
thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. The Corporation will promptly mail a
copy of such opinion to the holders of Series A Preferred Stock. If a
holder of thirty percent (30%) or more of Series A Preferred Stock or a
Designated Entity disagrees with such calculation, the Corporation
agrees to obtain within forty-five (45) Business Days an opinion of a
firm of independent certified public accountants selected by the
Corporation's Board of Directors and acceptable to such holder to
review such calculation and the opinion of such firm of independent
certified public accountants shall be final and binding on the parties
and shall be conclusive evidence of the correctness of the computation
with respect to any such adjustment of the Conversion Price. The fees
of such accountants shall be borne by such holder or Designated Entity
unless the calculation of the chief financial officer of the
Corporation is determined to be understated by five percent (5%) or
more.
(x) Corporation to Prevent Dilution. In case at any time
or from time to time conditions arise by reason of action taken by the
Corporation, which in the good faith opinion of its Board of Directors
or a majority of the holders of the Series A Preferred Stock are not
adequately covered by the provisions of this Section 5(d), and which
might materially and adversely affect the exercise rights of the
holders of the Series A Preferred Stock, the Board of Directors of the
Corporation shall appoint such firm of independent certified public
accountants acceptable to a majority of the holders of the Series A
Preferred Stock, which shall give their opinion upon the adjustment, if
any, on a basis consistent with the standards established in the other
provisions of this Section 5(d), necessary with respect to the
Conversion Price, so as to preserve, without dilution (other than as
specifically contemplated by the Certificate of Incorporation), the
exercise rights of the holders of the Series A Preferred Stock. Upon
receipt of such opinion, the Board of Directors of the Corporation
shall forthwith make the adjustments described therein.
(e) No Impairment. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder
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by the Corporation, but will at all times in good faith assist in the carrying
out of all the provisions of Section 5 hereof and in the taking of all such
action as may be necessary or appropriate in order to protect the conversion
rights of the holders of the Series A Preferred Stock against impairment.
(f) No Fractional Share Adjustments. No fractional shares
shall be issued upon conversion of the Series A Preferred Stock. If more than
one share of the Series A Preferred Stock is to be converted at one time by the
same stockholder, the number of full shares issuable upon such conversion shall
be computed on the basis of the aggregate amount of the shares to be converted.
Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion of any shares of Series A Preferred Stock, the
Corporation will pay a cash adjustment in respect of such fractional interest in
an amount equal to the same fraction of the Market Price per share of Common
Stock at the close of business on the day of conversion which such shares of
Series A Preferred Stock would be convertible into on such date.
(g) Shares to be Reserved. The Corporation shall at all times
reserve and keep available, out of its authorized and unissued stock, solely for
the purpose of effecting the conversion of the Series A Preferred Stock, such
number of shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Series A Preferred Stock from time to time
outstanding. The Corporation shall from time to time, in accordance with the
laws of the State of New York, increase the authorized number of shares of
Common Stock if at any time the number of shares of authorized but unissued
Common Stock shall be insufficient to permit the conversion in full of the
Series A Preferred Stock.
(h) Taxes and Charges. The Corporation will pay any and all
issue or other taxes that may be payable in respect of any issuance or delivery
of shares of Common Stock on conversion of the Series A Preferred Stock. The
Corporation shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issuance or delivery of Common Stock
in a name other than that of the Series A Preferred Stock, and no such issuance
or delivery shall be made unless and until the Person requesting such issuance
has paid to the Corporation the amount of such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(i) Accrued Dividends. Upon conversion of any shares of Series
A Preferred Stock, the holder thereof shall be entitled to receive any accrued
but unpaid dividends in respect of the shares of Series A Preferred Stock so
converted to the date of such conversion.
(j) Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any shares of Series A Preferred
Stock or of any shares of Common Stock issued or issuable upon the conversion of
any shares of Series A Preferred Stock in any manner which interferes with the
timely conversion of such shares of Series A Preferred Stock.
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6. Redemption
(a) Redemption Price. Any redemption of the Series A Preferred
Stock pursuant to Section 6(b) shall be at a price per share equal to the
Liquidation Value plus all declared but unpaid dividends thereon through the
redemption date (the "Mandatory Redemption Price"). Any redemption of the Series
A Preferred Stock pursuant to Section 6(d) shall be at a price per share equal
to the Series A Liquidation Preference, except that, for purposes of calculation
of the redemption price under this Section 6(a), clause (ii) of the definition
of Series A Liquidation Preference in Section 3(a) hereof shall provide for the
amount per share such holders would have received if such holders had converted
their shares of Series A Preferred Stock into shares of Common Stock immediately
prior to the Fundamental Change (the "Optional Redemption Price"). The Mandatory
Redemption Price shall be paid, at the election of the Corporation, in cash or
shares of Common Stock which have been registered under a registration statement
under the Securities Act of 1933, as amended, which registration statement is
effective, provided, that, for purposes of calculating the number of shares of
Common Stock to be received by each holder of Series A Preferred Stock, each
such share of Common Stock shall be valued at 90% of the Market Price.
(b) Redemption at the Corporation's Option. Subject to Section
6(a) hereof, the Corporation may, it its option, redeem all, but not less than
all, of the then outstanding shares of Series A Preferred Stock at the Mandatory
Redemption Price on March 31, 2004.
(c) Procedures for Redemption at the Corporation's Option. In
the event the Corporation shall redeem shares of Series A Preferred Stock
pursuant to Section 6(b), the Corporation shall give written notice of such
redemption by first class mail, postage prepaid, mailed not less than thirty
(30) nor more than ninety (90) days prior to the redemption date, to each holder
of record of the shares to be redeemed, at such holder's address as the same
appears on the stock records of the Corporation. Each such notice shall state:
(i) the redemption date; (ii) the number of shares of Series A Preferred Stock
to be redeemed; (iii) the Mandatory Redemption Price or Optional Redemption
Price, as the case may be; (iv) the place or places where certificates for such
shares are to be surrendered for payment of the Mandatory Redemption Price or
Optional Redemption Price, as the case may be; (v) that payment will be made
upon presentation and surrender of such Series A Preferred Stock; (vi) the then
current Conversion Price; (vii) that dividends on the shares to be redeemed
shall cease to accrue following such redemption date; (viii) that such
redemption is mandatory, if pursuant to Section 6(b); and (ix) that dividends,
if any, accrued to and including the date fixed for redemption will be paid as
specified in such notice. Notice having been mailed as aforesaid, from and after
the redemption date, unless the Corporation shall be in default in the payment
of the Mandatory Redemption Price or Optional Redemption Price, as the case may
be (including any accrued and unpaid dividends to (and including) the date fixed
for redemption), (A) dividends on the shares of the Series A Preferred Stock so
called for redemption shall cease to accrue, (B) such shares
-16-
shall be deemed no longer outstanding and (C) all rights of the holders thereof
as stockholders of the Corporation (except the right to receive from the
Corporation (i) any moneys payable upon redemption without interest thereon and
(ii) any shares of Series A Preferred Stock and Common Stock pursuant to Section
6(a) hereof) shall cease.
Upon surrender in accordance with such notice of the
certificates for any such shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the applicable
Mandatory Redemption Price.
Notwithstanding the foregoing, if notice of redemption has
been given pursuant to this Section 6 and any holder of shares of Series A
Preferred Stock shall, prior to the close of business on the third (3rd)
Business Day preceding the redemption date, give written notice to the
Corporation pursuant to Section 5(b) hereof of the conversion of any or all of
the shares to be redeemed held by such holder (accompanied by a certificate or
certificates for such shares, duly endorsed or assigned to the Corporation),
then the conversion of such shares to be redeemed shall become effective as
provided in Section 5 hereof.
(d) Redemption at Option of Holder Upon a Fundamental Change.
Subject to Section 6(a) hereof, if a Fundamental Change occurs, each holder of
Series A Preferred Stock shall have the right, at the holder's option, to
require the Corporation to repurchase all of such holder's Series A Preferred
Stock, or any portion thereof, on the date (the "Repurchase Date") selected by
the Corporation that is not less than ten (10) nor more than twenty (20) days
after the Final Surrender Date, at a price per share equal to the Optional
Redemption Price. The Corporation agrees that it will not complete any
Fundamental Change unless proper provision has been made to satisfy its
obligations under this Section 6(d).
(e) Notice of Fundamental Change. Within thirty (30) days
after the occurrence of a Fundamental Change, the Corporation shall mail to all
holders of record of the Series A Preferred Stock a notice in the manner and
containing the information set out in Section 6(c), except that, for purposes of
this Section 6(e), such notice shall also describe the occurrence of such
Fundamental Change and the repurchase right arising as a result thereof. To
exercise the repurchase right, a holder of Series A Preferred Stock must
surrender, on or before the date which is, subject to any contrary requirements
of applicable law, thirty (30) days after the date of mailing of the notice from
the Corporation (the "Final Surrender Date"), the certificates representing the
Series A Preferred Stock with respect to which the right is being exercised,
duly endorsed for transfer to the Corporation, together with a written notice of
election.
(f) Election Irrevocable. An election by a holder of Series A
Preferred Stock to have the Corporation repurchase shares of Series A Preferred
Stock pursuant to Section 6(d) shall become irrevocable at the close of business
on the relevant Repurchase Date.
-17-
7. Shares to be Retired. Any share of Series A Preferred Stock
converted, redeemed, repurchased or otherwise acquired by the Corporation shall
be retired and cancelled and shall upon cancellation be restored to the status
of authorized but unissued shares of preferred stock, subject to reissuance by
the Board of Directors as shares of preferred stock of one or more other series
but not as shares of Series A Preferred Stock.
8. Preemptive Rights.
(a) Except (i) for issuances of pro rata dividends to all
holders of Common Stock, (ii) stock issued to employees, officers or directors
in connection with management options or incentive plans approved by the Board
of Directors, (iii) stock issued in connection with any merger, acquisition or
business combination or (iv) stock issued for consideration amounting to less
than $500,000 in any single transaction where the purchase price is not less
than the then applicable Conversion Price, provided that the aggregate amount of
all such transactions shall not exceed $1,000,000, the holders of the Series A
Preferred Stock, in order to enable such holders to maintain their fully diluted
percentage ownership of the Corporation, shall have preemptive rights, as
hereinafter set forth, to purchase any capital stock, including any warrants or
securities convertible into capital stock, of the Corporation hereafter issued
by the Corporation so that a holder of the Series A Preferred Stock shall
hereafter be entitled to acquire a percentage of capital stock which is
hereafter issued equal to the same percentage of the issued and outstanding
Common Stock of the Corporation as is held (directly or obtainable upon
conversion of the Series A Preferred Stock) by such holder of Series A Preferred
Stock immediately prior to the date on which the capital stock is to be issued.
As used herein, "issue" (and variations thereof) includes sales and transfers by
the Corporation of treasury shares.
(b) The Corporation shall, before issuing any additional
capital stock (other than the exceptions referred to in Section 8(a) hereof),
give written notice thereof to the holders of the Series A Preferred Stock. Such
notice shall specify what type of instrument the Corporation intends to issue
and the consideration which the Corporation intends to receive therefor. For a
period of twenty (20) days following receipt by the holders of the Series A
Preferred Stock of such notice, the Corporation shall be deemed to have
irrevocably offered to sell to the holders of the Series A Preferred Stock a
sufficient number of shares of such capital stock so that the holders of the
Series A Preferred Stock, if such holders elect to acquire such shares as
hereinafter set forth, shall be capable of acquiring the same percentage of such
shares as the percentage of Common Stock beneficially owned (directly or
obtainable upon conversion of the Series A Preferred Stock) by such holders
immediately prior to the proposed issuance. In the event any such offer is
accepted, in whole or in part, by the holders of the Series A Preferred Stock,
the Corporation shall sell such shares to holders of the Series A Preferred
Stock for the consideration and on the precise terms set forth in the
Corporation's notice (given under the first two sentences of this paragraph). In
the event that one or more holders of the Series A Preferred Stock elects not
to, or fails to, exercise its rights under this Section 8(b) within the twenty
(20) day period, then the Corporation may issue the remaining shares of capital
stock to third persons but only for the same consideration set forth in the
Corporation's notice (given under the first two
-18-
sentences of this paragraph) and no later than sixty (60) days after the
expiration of such twenty (20) day period. The closing for such transaction
shall take place as proposed by the Corporation with respect to the shares of
capital stock proposed to be issued, at which closing the Corporation shall
deliver certificates for the shares of capital stock in the respective names of
the holders of the Series A Preferred Stock against receipt of the consideration
therefor.
(c) Notwithstanding any other provision hereof, (i) the
preemptive rights granted to holders of Series A Preferred Stock by this Section
8 shall terminate with respect to a share of Series A Preferred Stock upon the
conversion or redemption of such share of Series A Preferred Stock in accordance
with the provisions hereof and (ii) the holders of Series A Preferred Stock and
Conversion Shares shall not increase the fully diluted percentage ownership of
the Corporation beyond such level as exists immediately following the Issue
Date, whether by operation of the provisions of Section 2 or 5 hereof, through
an open market purchase or otherwise, except where the Corporation (a)
determines to pay dividends in additional shares of Series A Preferred Stock as
permitted by Section 2(a)(i), (b) is in financial distress and chooses to issue
securities to such holders, (c) repurchases outstanding shares of its capital
stock or takes other corporate action having a similar effect or (d) pursuant to
Section 5(d), has issued or sold Additional Shares of Stock in exchange for
consideration in an amount per Additional Share of Stock less than the
Conversion Price in effect immediately prior to such issuance or sale.
9. Call
(a) Call at the Corporation's Option. Subject to the other
provisions of this Section 9, on any date beginning two years after the Issue
Date, the Corporation shall have the right to purchase all (but not less than
all) outstanding shares of Series A Preferred Stock (the "Call"), provided,
however, that (i) the Market Price of a share of Common Stock is equal to, or
greater than, an amount equal to 250% of the then applicable Conversion Price
and (ii) the Common Stock has traded, on the principal market for the Common
Stock, with an average daily volume in excess of 20,000 shares for a period of
30 consecutive days ending on the day immediately prior to such date. Any
purchase of the Series A Preferred Stock pursuant to this Section 9(a) shall be
at a price per share of Series A Preferred Stock equal to the Mandatory
Redemption Price.
(b) Procedures for Call at the Corporation's Option. The
Corporation's right to Call the Series A Preferred Stock pursuant to Section
9(a) shall be conditioned upon the Corporation giving notice (the "Call
Notice"), by first class mail, postage prepaid, of the exercise of the Call to
the holders of the Series A Preferred Stock not less than twenty five (25) days
prior to the date of the exercise of the Call (the "Call Date"). Each Call
Notice shall state: (i) the Call Date; (ii) the Mandatory Redemption Price;
(iii) the place or places where certificates for such shares are to be
surrendered for payment of the Mandatory Redemption Price; (iv) that payment
will be made upon presentation and surrender of such Series A Preferred Stock;
(v) the then current Conversion Price and the date on which the right to convert
such shares of Series A Preferred Stock will expire; (vi) that dividends on the
shares to be purchased shall cease to
-19-
accrue following such Call Date; (vii) that such Call is mandatory; and (viii)
that dividends, if any, accrued to and including the Call Date will be paid as
specified in such notice. Notice having been mailed as aforesaid, from and after
the Call Date, unless the Corporation shall be in default in the payment of the
Mandatory Redemption Price (including any accrued and unpaid dividends to (and
including) the Call Date), (A) dividends on the shares of the Series A Preferred
Stock shall cease to accrue, (B) such shares shall be deemed no longer
outstanding and (C) all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation (i) any moneys
payable upon exercise of the Call without interest thereon and (ii) any shares
of Common Stock pursuant to Section 5 hereof) shall cease.
Upon surrender in accordance with the Call Notice of the
certificates for any such shares so purchased (properly endorsed or assigned for
transfer, if the Board of Directors shall so require and the Call Notice shall
so state), such shares shall be purchased by the Corporation at the applicable
Mandatory Redemption Price.
Notwithstanding the foregoing, if the Call Notice has been
given pursuant to this Section 9 and any holder of shares of Series A Preferred
Stock shall, prior to the close of business on the twentieth (20th) day after
receipt of such Call Notice, give written notice to the Corporation pursuant to
Section 5(b) hereof of the conversion of any or all of the shares to be
purchased held by such holder (accompanied by a certificate or certificates for
such shares, duly endorsed or assigned to the Corporation), then (i) the
conversion of such shares to be purchased shall become effective as provided in
Section 5 hereof and (ii) the Corporation's right to Call such shares to be
purchased shall terminate.
10. Definitions. As used herein, the following terms shall
have the respective meanings set forth below:
"Additional Shares of Stock" means all shares of Common
Stock issued by the Corporation after the Issue Date, other than (i)
Common Stock to be issued upon conversion of the Series A Preferred
Stock, (ii) 500,000 shares of Common Stock reserved for issuance under
future stock option plans that may be approved and (iii) 2,044,529
shares of Common Stock reserved or to be reserved for issuance under
stock options, stock option plans or warrants in effect as of the date
of the resolution pursuant to which this Certificate of Amendment has
been adopted.
"Affiliate", when used with respect to any Person, means
(i) if such Person is a corporation, any officer or director thereof
(other than a director elected pursuant to Section 4 hereof) and any
Person which is, directly or indirectly, the beneficial owner (by
itself or as part of any group) of more than five percent (5%) of any
class of any equity security (within the meaning of the Securities
Exchange Act of 1934, as amended) thereof, and, if such beneficial
owner is a partnership, any general partner
-20-
thereof, or if such beneficial owner is a corporation, any Person
controlling, controlled by or under common control with such beneficial
owner, or any officer or director of such beneficial owner or of any
corporation occupying any such control relationship, (ii) if such
Person is a partnership, any general or limited partner thereof, and
(iii) any other Person which, directly or indirectly, controls or is
controlled by or is under common control with such Person. For purposes
of this definition, "control" (including the correlative terms
"controlling", "controlled by" and "under common control with"), with
respect to any Person, shall mean possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting
securities or by contract or otherwise.
"Business Day" means any day other than a Saturday, Sunday
or any day on which banks in the State of New York are authorized or
obligated to close.
"Call" shall have the meaning set forth in Section 9(a).
"Call Date" shall have the meaning set forth in Section
9(b).
"Call Notice" shall have the meaning set forth in Section
9(b).
"Common Stock" means the Corporation's Common Stock, par
value $.01 per share, and shall also include any common stock of the
Corporation hereafter authorized and any capital stock of the
Corporation of any other class hereafter authorized which is not
preferred as to dividends or assets over any other class of capital
stock of the Corporation or which has ordinary voting power for the
election of directors of the Corporation.
"Conversion Price" means the Conversion Price per share of
Common Stock into which the Series A Preferred Stock is convertible, as
such Conversion Price may be adjusted pursuant to Section 5 hereof. The
initial Conversion Price will be $2.375.
"Convertible Securities" means evidences of indebtedness,
shares of preferred stock or other securities which are convertible
into or exchangeable, with or without payment of additional
consideration in cash or property, for Additional Shares of Stock,
either immediately or upon the occurrence of a specified date or a
specified event, other than the Series A Preferred Stock.
"Designated Entity" means, in connection with the rights
of any Person holding less than thirty percent (30%), in the aggregate,
of the originally issued Shares and Conversion Shares (as such terms
are defined below in the definition
-21-
of "Xxxxxxx Holders"), (i) as long as any Shares or Conversion Shares
are held by any Person identified in clause (i) or (ii) of the
definition of "Xxxxxxx Holders", Xxxxxxx Capital Management, 000 Xxxx
Xxxxxx, Xxx Xxxx, XX 00000, Attention: Xxxxxx X. Xxxx and (ii) if no
Shares or Conversion Shares are held by a Person identified in clause
(i) or (ii) of the definition of "Xxxxxxx Holders", the entity
designated by the Transferee holding the largest number of such shares,
provided, that such Transferee owns thirty percent (30%) or more, in
the aggregate, of the originally issued Shares and Conversion Shares
(in which case such Transferee shall provide notice to the Corporation
of such entity). For so long as no Shares or Conversion Shares are held
by any Person identified in clause (i) or (ii) of the definition of
"Xxxxxxx Holders" and no Person holds thirty percent (30%) or more, in
the aggregate, of the originally issued Shares and Conversion Shares,
there shall be no Designated Entity. For purposes of this definition of
"Designated Entity," the calculation of a Person's percentage holdings
of Conversion Shares shall be determined based upon the number of
Shares from which such Conversion Shares derived.
"Final Surrender Date" shall have the meaning set forth in
Section 6(e).
"Xxxxxxx Funds" means Xxxxxxx US Discovery Fund III, L.P.
and Xxxxxxx US Discovery Offshore Fund III, L.P.
"Xxxxxxx Holders" means (i) the Xxxxxxx Funds, (ii) any
Affiliate, officer or employee of an Affiliate or investment fund
managed by an Affiliate of the Xxxxxxx Funds to which the Xxxxxxx Funds
may transfer record and/or beneficial ownership of any shares of Series
A Preferred Stock (the "Shares") or any shares of Common Stock obtained
or obtainable upon conversion of the Shares (the "Conversion Shares")
and (iii) any transferee of Shares or Conversion Shares from a Person
named in clause (i) or (ii) hereof (provided that such transferee is
consented to by the Corporation, such consent not to be unreasonably
withheld), other than a transferee of Shares or Conversion Shares sold
in either a public offering pursuant to a registration statement under
the Securities Act or pursuant to Rule 144 under the Securities Act.
The "Conversion Shares" shall include any capital stock or other
securities into which Conversion Shares are changed and any capital
stock or other securities resulting from or comprising a
reclassification, combination or subdivision of, or a stock dividend
on, any Conversion Shares.
"Fundamental Change" means any of the following events:
(i) the sale (or functional equivalent of a sale) of
all or substantially all of the assets of the Corporation;
-22-
(ii) any event (A) which results in the registration
of the Corporation's Common Stock under the Securities Exchange Act of
1934, as amended, to be no longer required; (B) requiring the
Corporation to make a filing under Section 13(e) of the Securities
Exchange Act of 1934, as amended; (C) reducing substantially or
eliminating the public market for shares of Common Stock of the
Corporation; or (D) causing a delisting of the Corporation's Common
Stock from the Nasdaq Stock Market;
(iii) any consolidation of the Corporation with, or
merger of the Corporation into, any other person, any merger of another
person into the Corporation or any other business combination involving
the Corporation which results in the holders of the Corporation's stock
immediately prior to giving effect to such transaction owning shares of
capital stock of the surviving corporation in such transaction
representing (x) fifty percent (50%) or less of the total voting power
of all shares of capital stock of such surviving corporation entitled
to vote generally in the election of directors or (y) fifty percent
(50%) or less of the total value of all capital stock of such surviving
corporation; or
(iv) the commencement by the Corporation of a voluntary
case under the Federal bankruptcy laws or any other applicable Federal
or state bankruptcy, insolvency or similar law; the consent by the
Corporation to the entry of an order for relief in an involuntary case
under such law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other similar official)
of the Corporation or of any substantial part of its property; any
assignment by the Corporation for the benefit of its creditors; any
admission by the Corporation in writing of its inability to pay its
debts generally as they become due; the entry of a decree or order for
relief in respect of the Corporation by a court having jurisdiction in
the premises in an involuntary case under Federal bankruptcy laws or
any other applicable Federal or state bankruptcy, insolvency or similar
law appointing a receiver, liquidator, assignee, custodian, trustee,
sequestrator (or other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and on account of any such event the
Corporation shall liquidate, dissolve or wind up; or the liquidation,
dissolution or winding up of the Corporation under any other
circumstances.
"Issue Date" means, as to any share of Series A Preferred
Stock, the date of original issuance thereof by the Corporation.
-23-
"Junior Securities" mean the Common Stock and any other
class of capital stock or series of preferred stock existing on the
date hereof or hereafter created by the Corporation which does not
expressly provide that it ranks senior to or pari passu with the Series
A Preferred Stock as to dividends, other distributions, liquidation
preference or otherwise.
"Liquidation Value" means $100 per share with respect to
the Series A Preferred Stock.
"Mandatory Redemption Price" shall have the meaning set
forth in Section 6(a).
"Market Price" means, as to any security on the date of
determination thereof, the average of the closing prices of such
security's sales on all principal United States securities exchanges on
which such security may at the time be listed, or, if there shall have
been no sales on any such exchange on any day, the last trading price
of such security on such day, or if such there is no such price, the
average of the bid and asked prices at the end of such day, on the
Nasdaq Stock Market, in each such case averaged for a period of thirty
(30) consecutive calendar days prior to the day when the Market Price
is being determined. Notwithstanding the foregoing, with respect to the
issuance of any security by the Corporation in an underwritten public
offering, the Market Price shall be the per share purchase price paid
by the underwriters. If at any time such security is not listed on any
exchange or the Nasdaq Stock Market, the Market Price shall be deemed
to be the fair value thereof determined by an investment banking firm
of nationally recognized standing selected by the Board of Directors of
the Corporation and acceptable to holders of a majority of the Series A
Preferred Stock, as of the most recent practicable date when the
determination is to be made, taking into account the value of the
Corporation as a going concern, and without taking into account any
lack of liquidity of such security or any discount for a minority
interest.
"Optional Redemption Price" shall have the meaning set
forth in Section 6(a).
"Parity Securities" mean any class of capital stock or
series of preferred stock existing on the date hereof or hereafter
created by the Corporation, with the prior written consent of the
Xxxxxxx Holders, which expressly provides that it ranks pari passu with
the Series A Preferred Stock as to dividends, other distributions,
liquidation preference or otherwise.
"Payment Amount" means such amount as is necessary to
cause the net present value to equal zero as of any date of all Cash
Inflows and all Cash
-24-
Outflows (each as defined below) with respect to the Series A Preferred
Stock being repurchased pursuant to Section 6 or held on the date of
the distribution pursuant to Section 3, as the case may be, when
calculated with an annual interest rate (compounded annually) equal to
twelve percent (12%). "Cash Inflows" as used herein means all cash
payments, including the Payment Amount, received by the holders of the
Series A Preferred Stock as a dividend or distribution with respect to,
or as consideration for the sale of, such Series A Preferred Stock
(whether such payments are received from the Corporation or any other
Person). "Cash Outflows" as used herein means the sum of all cash
payments made by the holders of the Series A Preferred Stock to the
Corporation to acquire such Series A Preferred Stock. (For the
avoidance of doubt, Cash Inflows and Cash Outflows with respect to any
Series A Preferred Stock not included in the Series A Preferred Stock
being repurchased pursuant to Section 6 hereof as part of the
transaction for which the Payment Amount is then being calculated shall
not be included in the Cash Inflows and Cash Outflows used to make such
calculation (for purposes of Section 6 only), and only the Cash Inflows
and Cash Outflows with respect to the Series A Preferred Stock which
are then being repurchased pursuant to Section 6 hereof in the
transaction for which the Payment Amount is then being calculated shall
be used in the Cash Inflows and Cash Outflows used to make such
calculation (for purposes of Section 6 only).)
"Permitted Preferred Transferee" shall have the meaning
set forth in Section 4(c).
"Person or "person" shall mean an individual, partnership,
corporation, trust, unincorporated organization, joint venture,
government or agency, political subdivision thereof, or any other
entity of any kind.
"Preferred Director" or "Preferred Directors" shall have
the meaning set forth in Section 4(c).
"Preferred Liquidation Value", with respect to any share
of Series A Preferred Stock as of a particular date, means the sum of
$100 plus an amount equal to any accrued and unpaid dividends on such
share of Series A Preferred Stock added to the Preferred Liquidation
Value of such share of Series A Preferred Stock on any Dividend Payment
Date pursuant to Section 2(a)(ii)(B) and not thereafter paid.
"Repurchase Date" shall have the meaning set forth in
Section 6(d).
"Securities Act" shall mean the Securities Act of 1933, as
amended.
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"Series A Liquidation Preference" shall have the meaning
set forth in Section 3(a).
"Series A Preferred Stock" shall have the meaning set
forth in the resolution paragraph in the preamble.
"Stock Purchase Agreements" mean each of the two Stock
Purchase Agreements dated as of the date hereof between the Corporation
and the purchaser listed on the signature page of each such Agreement.
"Subsidiary", with respect to any Person, means any
corporation, association or other entity of which more than 50% of the
total voting power of shares of stock or other equity interests
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is, at the time as
of which any determination is being made, owned or controlled, directly
or indirectly, by such Person or one or more of its Subsidiaries, or
both. The term "Subsidiary" or "Subsidiaries" when used herein without
reference to any particular Person, means a Subsidiary or Subsidiaries
of the Corporation.
"Transferees" shall mean any transferee (except for a
Xxxxxxx Holder) of Shares or Conversion Shares (as such terms are
defined within the definition of "Xxxxxxx Holders") from a Xxxxxxx
Holder. Transferees shall not include a transferee of Shares or
Conversion Shares sold in either a public offering pursuant to a
registration statement under the Securities Act or pursuant to Rule 144
under the Securities Act.
11. Notices. Except as may otherwise be provided for herein,
all notices referred to herein shall be in writing, and all notices hereunder
shall be deemed to have been given and received (i) upon receipt, in the case of
a notice of conversion given to the Corporation as contemplated in Section 5(b)
hereof or in the case of a notice of redemption at the holder's option given to
the Corporation as contemplated in Section 6(d) hereof, or (ii) in all other
cases, upon the earlier of (x) receipt of such notice, (y) three Business Days
after the mailing of such notice if sent by registered mail (unless first-class
mail shall be specifically permitted for such notice under the terms hereof) or
(z) the Business Day following sending such notice by overnight courier, in any
case with postage or delivery charges prepaid, addressed: if to the Corporation,
to its offices at 000 Xxxxx Xxxxxxxxxx Xxxx, Xxxxx Xxxxx, XX 00000, Attention:
Xxxxxxx X. Xxxxxxxxxxx, or to an agent of the Corporation designated as
permitted by the Certificate of Incorporation, or, if to any holder of the
Series A Preferred Stock, to such holder at the address of such holder of the
Series A Preferred Stock as listed in the stock record books of the Corporation,
or to such other address as the Corporation or holder, as the case may be, shall
have designated by notice similarly given.
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[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, we have hereunto executed this Certificate
of Amendment and do affirm the foregoing as true under the penalties of perjury
this ___ day of March, 1999.
XXXXXX TECHNOLOGIES, INC.
By:_____________________________________
Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
By:_____________________________________
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: Secretary
-28-
================================================================================
REGISTRATION RIGHTS AGREEMENT
dated
March 30, 1999
among
Xxxxxx Technologies, Inc.,
Xxxxxxx US Discovery Fund III, L.P.,
and
Xxxxxxx US Discovery Offshore Fund III, L.P.
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I DEMAND REGISTRATIONS............................................1
1.1 Requests for Registration............................1
1.2 Limitations on Demand Registrations..................2
1.3 Effective Registration Statement.....................3
1.4 Priority on Demand Registrations.....................3
1.5 Selection of Underwriters............................3
1.6 Other Registration Rights............................3
ARTICLE II OTHER REGISTRATIONS.............................................4
2.1 Right to Piggyback...................................4
2.2 Priority on Primary Registrations....................4
2.3 Priority on Secondary Registrations..................4
2.4 Other Registrations..................................5
ARTICLE III REGISTRATION PROCEDURES.........................................5
ARTICLE IV REGISTRATION EXPENSES...........................................9
4.1 Company's Fees and Expenses..........................9
4.2 Fees of Counsel to Holders...........................9
ARTICLE V UNDERWRITTEN OFFERINGS..........................................9
5.1 Demand Underwritten Offerings........................9
5.2 Incidental Underwritten Offerings...................10
ARTICLE VI INDEMNIFICATION................................................10
6.1 Indemnification by the Company......................10
6.2 Indemnification by Holders..........................11
6.3 Indemnification Procedures..........................12
6.4 Indemnification of Underwriters.....................13
6.5 Contribution........................................13
6.6 Timing of Indemnification Payments..................14
ARTICLE VII RULE 144.......................................................14
ARTICLE VIII PARTICIPATION IN UNDERWRITTEN REGISTRATIONS...................15
ARTICLE IX MERGERS, ETC..................................................15
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Page
----
ARTICLE X DEFINITIONS....................................................15
ARTICLE XI MISCELLANEOUS..................................................17
11.1 No Inconsistent Agreements..........................17
11.2 Adjustments Affecting Registrable Securities........17
11.3 Remedies............................................18
11.4 Amendments and Waivers..............................18
11.5 Successors and Assigns..............................18
11.6 Notices.............................................18
11.7 Headings............................................19
11.8 Gender..............................................19
11.9 Invalid Provisions..................................20
11.10 Governing Law.......................................20
11.11 Counterparts........................................20
-ii-
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement is dated as of March 30,
1999, among Xxxxxx Technologies, Inc., a New York corporation (the "Company"),
Xxxxxxx US Discovery Fund III, L.P. and Xxxxxxx US Discovery Offshore Fund III,
L.P. (collectively, the "Xxxxxxx Funds"). The Xxxxxxx Funds, any Xxxxxxx Holder
and any Transferee are collectively referred to herein as the "Investors" and,
individually, an "Investor." Capitalized terms used and not otherwise defined
herein have the respective meanings ascribed thereto in Article X.
W I T N E S S E T H:
WHEREAS, simultaneously herewith, the Xxxxxxx Funds have
purchased an aggregate of 65,000 shares of Series A Preferred Stock pursuant to
the terms of the Stock Purchase Agreements;
WHEREAS, it is a condition to the consummation of the
transactions contemplated by the Stock Purchase Agreements that the Company and
the Xxxxxxx Funds enter into this Agreement whereby the Company shall grant, and
the Investors shall obtain, the rights relating to the registration of the
Registrable Securities under the Securities Act, as set forth in this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEMAND REGISTRATIONS
1.1 Requests for Registration. Subject to Section 1.2, at any
time and from time to time on or after the date hereof, the Xxxxxxx Holders may
request registration under the Securities Act of all or part of their
Registrable Securities (i) on Form S-1 or any similar long- form registration
("Long-Form Demand Registrations"), or (ii) on Form S-3 or any similar
short-form registration ("Short-Form Demand Registrations") if the Company
qualifies to use such short form (and the Company will use its best efforts to
make short-form registration statements available for the sale of Registrable
Securities). Thereafter, the Company will use its best efforts to promptly
effect the registration of such Registrable Securities under the Securities Act
on the form requested by the holder or holders making such registration request.
All registrations requested pursuant to this Section 1.1 are referred to herein
as "Demand Registrations." Upon receipt of a request for a Demand Registration,
the Company will give prompt written notice (in
any event within five (5) Business Days after its receipt of such request) of
the request for a Demand Registration to all holders of Registrable Securities
not making such request and will include in such Demand Registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within ten (10) days after the receipt of the
Company's notice. The holders of the Registrable Securities making any such
registration request may, at any time prior to the effective date of the
registration statement relating to any Demand Registration, revoke such Demand
Registration request by providing written notice to the Company. In the event
the holders of the Registrable Securities exercise such revocation right without
reasonable basis after the Company has filed a registration statement pursuant
to such request, such holders shall bear the Registration Expenses (as defined
below) incurred by the Company in connection with any subsequent Long-Form
Demand Registration request made hereunder. For purposes of this Section 1.1,
the term "reasonable basis" means (i) the occurrence of any event or series of
events that become known to such holders after making their Demand Registration
request and that, in the reasonable judgment of such holders, constitute a
material adverse change in the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis, (ii) with respect to the period from the
date of any request for the Demand Registration to the date of such revocation,
a reduction of ten percent (10%) or more in the market price per share of any
class of Registrable Securities (calculated as the average of the closing price
for the five most recent consecutive trading days) or (iii) receipt by the
Company of the opinion of the managing underwriters referred to in Section 1.4
and reduction pursuant thereto of ten percent (10%) of the Registrable
Securities with respect to which a Demand Registration had been requested.
1.2 Limitations on Demand Registrations. (a) The holders of
the Registrable Securities shall be entitled to (i) one (1) Long-Form Demand
Registration and (ii) any number of Short-Form Demand Registrations.
(b) The Company shall be entitled to postpone for a reasonable
period of time not to exceed forty-five (45) days the filing of any registration
statement otherwise required to be prepared and filed by it if, at the time it
receives a Demand Registration request, the Board of Directors of the Company
determines, in its reasonable good faith judgment, that such registration would
materially interfere with a business or financial transaction of substantial
importance to the Company (other than an underwritten public offering of its
securities), including, without limitation, any such transaction involving a
material acquisition, consolidation, merger or corporate reorganization then
pending or proposed by its Board of Directors involving the Company, and the
Company promptly gives the holders of the Registrable Securities written notice
of such determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay; provided, however,
that the Company shall not be entitled to postpone filing a registration
statement in response to a Demand Registration for the twelve (12) months
following the expiration of such forty-five day period. In the event the filing
of any registration statement is postponed pursuant to this paragraph, the
holder or holders of the Registrable Securities making a registration request
-2-
shall have the right to withdraw such Demand Registration request by giving
written notice to the Company within thirty (30) days after receipt of the
notice of postponement (and, in the event of such withdrawal, the right of the
holders of the Registrable Securities to such Demand Registration and the right
of the Company to postpone filing shall be reinstated).
1.3 Effective Registration Statement. A Demand Registration
requested pursuant to Section 1.1 of this Agreement shall not be deemed to have
been effected (i) unless a registration statement with respect thereto has
become effective, (ii) if after it has become effective, such registration is
interfered with by any stop order, injunction or other order or requirement of
the Securities and Exchange Commission (the "SEC") or other governmental agency
or court for any reason, and the Registrable Securities covered thereby have not
been sold, or (iii) if the conditions to closing specified in the purchase
agreement or underwriting agreement entered into in connection with such
registration are not satisfied by reason of (x) a failure by or inability of the
Company to satisfy any thereof, or (y) the occurrence of an event outside the
control of the holders of Registrable Securities. In addition, a Demand
Registration requested pursuant to Section 1.1 of this Agreement shall not be
deemed to have been effected if holders of Registrable Securities are not able
to register and sell at least 80% of the amount of Registrable Securities
requested to be included in such registration; provided, however, that in no
case shall the holders of the Registrable Securities be entitled to more than
one additional Long- Form Demand Registration as a result of the inability to
register and sell such percentage of Registrable Securities.
1.4 Priority on Demand Registrations. The Company will not
include in any Demand Registration any securities which are not Registrable
Securities without the written consent of the Xxxxxxx Holders, except to the
extent expressly required by Section 2 of the DuPont Agreement. If other
securities are permitted to be included in a Demand Registration which is an
underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities exceeds the
number of Registrable Securities which can be sold in such offering within a
price range acceptable to the Xxxxxxx Holders, the Company will include in such
registration, prior to the inclusion of any securities which are not Registrable
Securities, the number of Registrable Securities requested to be included which
in the opinion of such underwriters can be sold, pro rata among the respective
holders on the basis of the amount of Registrable Securities requested to be
offered thereby.
1.5 Selection of Underwriters. The Xxxxxxx Holders will have
the right to select the underwriters and the managing underwriters to administer
a Demand Registration and such underwriters and managing underwriters shall be
reasonably acceptable to the Company. The terms of any underwriting agreement
shall be reasonably acceptable to the Company.
1.6 Other Registration Rights. Except as provided in this
Agreement, the DuPont Agreement or as otherwise consented to in writing by the
Xxxxxxx Holders, the Company will not grant to any Person the right to request
the Company to register any equity
-3-
securities of the Company, or any securities convertible, exchangeable or
exercisable for or into such securities ("Other Securities"), other than
piggyback registration rights entitling the holder thereof to participate in
Company-initiated registrations with holders of Registrable Securities;
provided, however, that the Registrable Securities shall have priority over
Other Securities in any such Company-initiated registration.
ARTICLE II
OTHER REGISTRATIONS
2.1 Right to Piggyback. Except for a registration on Form S-8
of shares issued pursuant to the Company's 1997 Stock Option Plan, whenever the
Company proposes to register any of its securities under the Securities Act
(other than pursuant to a Demand Registration), and the registration form to be
used may be used for the registration of Registrable Securities (a "Piggyback
Registration"), the Company will give prompt written notice (in any event within
five (5) Business Days after its receipt of notice of any exercise of other
demand registration rights) to all holders of Registrable Securities of its
intention to effect such a registration and will include in such registration
all Registrable Securities with respect to which the Company has received
written requests for inclusion therein within ten (10) days after the receipt of
the Company's notice.
2.2 Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering, the Company will include
in such registration (i) first, the securities the Company proposes to sell,
(ii) second, the Registrable Securities requested to be included in such
registration, provided, that if the managing underwriters in good faith
determine that a lower number of Registrable Securities should be included, then
the Company shall be required to include in the underwriting only that lower
number of Registrable Securities, and the holders of Registrable Securities who
have requested registration shall participate in the underwriting pro rata based
upon their total ownership, on a fully diluted basis, of Registrable Securities
requested to be included in such registration and (iii) third, other securities
requested to be included in such registration, provided, that if such request
arises from rights granted pursuant to the DuPont Agreement, and the managing
underwriters have rendered the opinion referred to in Section 1.4 of this
Agreement, then the securities that are the subject of such request may be
treated by the Company, for purposes of this Section 2.2 only, as Registrable
Securities and included in such registration in accordance with clause (ii)
hereof.
2.3 Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of
-4-
securities requested to be included in such registration exceeds the number
which can be sold in such offering, the Company will include in such
registration (i) first, the securities requested to be included therein by the
holders requesting such registration, (ii) second, the Registrable Securities
requested to be included in such registration, provided, that if the managing
underwriters in good faith determine that a lower number of Registrable
Securities should be included, then the Company shall be required to include in
the underwriting only that lower number of Registrable Securities, and the
holders of Registrable Securities who have requested registration shall
participate in the underwriting pro rata based upon their total ownership, on a
fully diluted basis, of Registrable Securities requested to be included in such
registration and (iii) third, other securities requested to be included in such
registration.
2.4 Other Registrations. If the Company has previously filed a
registration statement for a Long-Form Demand Registration with respect to
Registrable Securities pursuant to Article I of this Agreement or pursuant to
this Article II, and if such previous registration has not been withdrawn or
abandoned, the Company will not file or cause to be effected any other
registration of any of its equity securities or securities convertible,
exchangeable or exercisable for or into its equity securities under the
Securities Act (except on Form S-4 or S-8 or any successor form), whether on its
own behalf or at the request of any holder or holders of such securities other
than the holders of the Registrable Securities, until a period of at least six
(6) months elapsed from the effective date of such previous registration.
ARTICLE III
REGISTRATION PROCEDURES
Whenever the holders of Registrable Securities have requested
that any Registrable Securities be registered pursuant to this Agreement, the
Company will use its best efforts to effect the registration and the sale of
such Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto the Company will as expeditiously as
possible or, in the case of clause (q) below, will not:
(a) promptly prepare and file with the SEC a registration
statement with respect to such Registrable Securities (such registration
statement to include all information which the holders of the Registrable
Securities to be registered thereby shall reasonably request) and use its best
efforts to promptly cause such registration statement to become effective,
provided that at least five days before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company will (i)
furnish to counsel selected by the Xxxxxxx Holders, copies of all such documents
proposed to be filed, and the Company shall not file any such documents to which
such counsel shall have reasonably objected on the grounds that such document
does not comply in all material respects with the requirements of the Securities
Act or of the rules or regulations thereunder, and (ii) notify each holder of
Registrable Securities covered by such registration statement of (x) any request
by the SEC to amend such registration statement or amend or supplement any
prospectus or (y) any stop order issued or
-5-
threatened by the SEC, and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered;
(b) (i) promptly prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than 180 days (except that such 180-day
period shall be extended (x) by the length of any period that a stop order or
similar proceeding is in effect which prohibits the distribution of the
Registrable Securities, and (y) by the number of days during the period from and
including the date on which each seller of Registrable Securities shall have
received a notice delivered pursuant to clause (f) below until the date when
such seller shall have received a copy of the supplemented or amended prospectus
contemplated by clause (f) below), and (ii) comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such registration
statement;
(c) as soon as reasonably possible furnish to each seller of
Registrable Securities, without charge, such number of conformed copies of such
registration statement, each amendment and supplement thereto, the prospectus
included in such registration statement (including each preliminary prospectus
and prospectus supplement and, in each case, including all exhibits) and such
other documents as such seller may reasonably request, all in conformity with
the requirements of the Securities Act, in order to facilitate the disposition
of the Registrable Securities owned by such seller;
(d) use its best efforts promptly to register or qualify the
Shares under such other securities or blue sky laws of such jurisdictions as any
seller thereof shall reasonably request, to keep such registration or
qualification in effect for so long as such registration statement remains in
effect and to do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller, provided,
however, that the Company will not be required to (i) qualify generally to do
business as a foreign corporation in any jurisdiction where it would not
otherwise be required to qualify but for this clause (d), (ii) subject itself to
taxation in any such jurisdiction or (iii) consent to general service of process
in any such jurisdiction;
(e) furnish to each seller of Registrable Securities a signed
copy, addressed to such seller (and the underwriters, if any) of an opinion of
counsel for the Company or special counsel to the selling stockholders, dated
the effective date of such registration statement (and, if such registration
statement includes an underwritten public offering, dated the date of the
closing under the underwriting agreement), reasonably satisfactory in form and
substance to counsel selected by the Xxxxxxx Holders, covering substantially the
same matters with respect to such registration statement (and the prospectus
included therein) as are customarily covered in
-6-
opinions of issuer's counsel delivered to the underwriters in underwritten
public offerings, and such other legal matters as the seller (or the
underwriters, if any) may reasonably request;
(f) promptly notify each seller of Registrable Securities, at
a time when a prospectus relating to the Shares is required to be delivered
under the Securities Act, of the Company's becoming aware that the prospectus
included in such registration statement, as then in effect, contains an untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, and, at the request of
any such seller, promptly prepare and furnish such seller a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
under which they were made;
(g) cause all of the Shares to be listed on each securities
exchange on which similar securities issued by the Company are then listed or,
if there shall then be no such listing, to be accepted for quotation as either a
National Market Security or SmallCap Market Security on The NASDAQ Stock Market;
(h) provide a transfer agent and registrar for all of the
Shares not later than the effective date of such registration statement;
(i) enter into such customary arrangements and take all such
other actions as the Xxxxxxx Holders or the underwriters, if any, reasonably
request in order to expedite or facilitate the disposition of the Shares;
(j) make available for inspection by (i) any holder of thirty
percent (30%) or more of Registrable Securities or (ii) a Designated Entity, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
holder, Designated Entity or underwriter, all financial and other records,
pertinent corporate documents and properties of the Company, and cause the
Company's officers, directors, employees and independent accountants to supply
all information reasonably requested by any such holder, Designated Entity,
underwriter, attorney, accountant or agent in connection with such registration
statement; provided, that no such holder, Designated Entity, underwriter,
attorney, accountant or agent shall inspect any non-public information of the
Company unless such Person has executed a confidentiality agreement;
(k) cause the Company's officers to make presentations to
potential purchasers of the Shares, as reasonably requested by any seller of
Registrable Securities or any
-7-
underwriter participating in any disposition pursuant to such registration
statement in connection with any Long-Form Demand Registration;
(l) subject to other provisions hereof, use its best efforts
to cause the Shares to be registered with or approved by such other governmental
agencies or authorities or self-regulatory organizations as may be necessary to
enable the sellers thereof to consummate the disposition of the Shares;
(m) use its best efforts to obtain a "comfort" letter, dated
the effective date of such registration statement (and, if such registration
includes an underwritten offering, dated the date of the closing under the
underwriting agreement), signed by the independent public accountants who have
certified the Company's financial statements, addressed to each seller, and to
the underwriters, if any, covering substantially the same matters with respect
to such registration statement (and the prospectus included therein) and with
respect to events subsequent to the date of such financial statements, as are
customarily covered in accountants' letters delivered to the underwriters in
underwritten public offerings of securities and such other financial matters as
such seller (or the underwriters, if any) may reasonably request; provided,
that, notwithstanding the foregoing, the Company shall have no obligation to
obtain a "comfort" letter in a non-underwritten offering;
(n) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make available to its
securityholders, in each case as soon as practicable, an earnings statement
covering a period of at least twelve months, beginning after the effective date
of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act;
(o) permit any holder of Registrable Securities, which holder,
in the sole judgment exercised in good faith of such holder, might be deemed to
be a controlling person of the Company (within the meaning of the Securities Act
or the Exchange Act), to participate in the preparation of any registration
statement covering such holder's Registrable Securities and to include therein
material, furnished to the Company in writing, which in the reasonable judgment
of such holder should be included and which is reasonably acceptable to the
Company;
(p) use every reasonable effort to obtain the lifting at the
earliest possible time of any stop order suspending the effectiveness of any
registration statement or of any order preventing or suspending the use of any
preliminary prospectus;
(q) at any time file or make any amendment to a registration
statement, or any amendment of or supplement to a prospectus (including
amendments of the documents incorporated by reference into the prospectus), of
which each seller of Registrable Securities or the managing underwriters shall
not have previously been advised and furnished a copy or to
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which the sellers of Registrable Securities, the managing underwriters, or
counsel for such sellers or for the underwriters shall reasonably object; and
(r) make such representations and warranties (subject to
appropriate disclosure schedule exceptions) to sellers of Registrable Securities
and the underwriters, if any, in form, substance and scope as are customarily
made by issuers to underwriters and selling holders, as the case may be, in
underwritten public offerings of substantially the same type; provided, that,
notwithstanding the foregoing, the Company shall have no obligation to make such
representations and warranties in a non-underwritten offering.
ARTICLE IV
REGISTRATION EXPENSES
4.1 Company's Fees and Expenses. All expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws, printing expenses, messenger and delivery
expenses, fees and expenses for listing or quoting the Shares on each securities
exchange or The NASDAQ Stock Market on which similar securities issued by the
Company are then listed or quoted, and fees and disbursements of counsel for the
Company, any transfer agent and all independent certified public accountants,
underwriters (excluding discounts and selling commissions) and other Persons
retained by the Company in connection with any Demand Registration or any
Piggyback Registration (all such expenses being herein called "Registration
Expenses"), will be paid by the Company.
4.2 Fees of Counsel to Holders. Subject to the sixth sentence
of Section 1.1, in connection with each registration hereunder, the Company will
reimburse the holders of Registrable Securities covered by such registration for
the reasonable fees and disbursements of one counsel chosen by the Xxxxxxx
Holders.
ARTICLE V
UNDERWRITTEN OFFERINGS
5.1 Demand Underwritten Offerings. If requested by the
underwriters for any underwritten offerings of Registrable Securities pursuant
to a Demand Registration, the Company will enter into an underwriting agreement
with such underwriters for such offering, such agreement to be reasonably
satisfactory in substance and form to the Xxxxxxx Holders and the underwriters,
and to contain such representations and warranties by the Company and such other
terms as are generally included in agreements of this type, including, without
limitation, indemnities customarily included in such agreements. The holders of
Registrable Securities to be distributed by such underwriters may be parties to
such underwriting agreement and may, at
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their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of such holders of
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. The
Company shall cooperate with any such holder of Registrable Securities in order
to limit any representations or warranties to, or agreements with, the Company
or the underwriters to be made by such holder only to those representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution and any other
representation required by law.
5.2 Incidental Underwritten Offerings. If the Company at any
time proposes to register any of its securities under the Securities Act as
contemplated by Article II of this Agreement and such securities are to be
distributed by or through one or more underwriters, the Company will, if
requested by any holder of Registrable Securities as provided in Article II of
this Agreement, arrange for such underwriters to include all the Registrable
Securities to be offered and sold by such holder, subject to the limitations set
forth in Article II hereof, among the securities to be distributed by such
underwriters. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to the underwriting agreement between the Company
and such underwriters, and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. The Company shall cooperate with any such
holder of Registrable Securities in order to limit any representations or
warranties to, or agreements with, the Company or the underwriters to be made by
such holder only to those representations, warranties or agreements regarding
such holder, such holder's Registrable Securities and such holder's intended
method of distribution and any other representation required by law.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the extent permitted by law, each of the holders
of any Registrable Securities covered by any registration statement prepared
pursuant to this Agreement, each other Person, if any, who controls such holder
within the meaning of the Securities Act or the Exchange Act, and each of their
respective directors, officers and general partners, as follows:
(i) against any and all loss, liability, claim,
damage and expense arising out of or based upon an untrue
statement or alleged untrue statement of a
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material fact contained in any registration statement (or any
amendment or supplement thereto), including all documents
incorporated therein by reference, or in any preliminary
prospectus or prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense to the extent of the aggregate amount paid
in settlement of any litigation, investigation or proceeding
by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue
statement or omission or any such alleged untrue statement or
omission, if such settlement is effected with the written
consent of the Company; and
(iii) against any and all expense incurred by them in
connection with investigating, preparing or defending against
any litigation, investigation or proceeding by any
governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or
omission or any such alleged untrue statement or omission, to
the extent that any such expense is not paid under clause (i)
or (ii) above;
provided, that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or alleged
untrue statement or omission or alleged omission made in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
any holder expressly for use in the preparation of any registration statement
(or any amendment or supplement thereto), including all documents incorporated
therein by reference, or in any preliminary prospectus or prospectus (or any
amendment or supplement thereto); and provided further, that the Company will
not be liable to any holder under the indemnity agreement in this Section 6.1,
with respect to any preliminary prospectus or the final prospectus or the final
prospectus as amended or supplemented, as the case may be, to the extent that
any such loss, liability, claim, damage or expense of such controlling Person or
holder results from the fact that such holder sold Registrable Securities to a
Person to whom there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the final prospectus or of the final
prospectus as then amended or supplemented, whichever is most recent, if the
Company has previously and timely furnished copies thereof to such holder. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or any such director, officer, general
partner, or other controlling Person and shall survive the transfer of such
securities by such seller.
6.2 Indemnification by Holders. In connection with any
registration statement in which a holder of Registrable Securities is
participating, each such holder agrees to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section
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6.1 of this Agreement), to the extent permitted by law, the Company and its
directors, officers and controlling Persons, and their respective directors,
officers and general partners, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary, final or summary prospectus contained therein, or any amendment
or supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such holder,
specifically stating that it is for use in the preparation of such registration
statement, preliminary, final or summary prospectus or amendment or supplement.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company, or such holder, as the case
may be, or any of their respective directors, officers, controlling Persons or
general partners and shall survive the transfer of such securities by such
holder. The obligations of each holder of Registrable Securities pursuant to
this Section 6.2 are to be several and not joint; provided, that, with respect
to each claim pursuant to this Section 6.2, each such holder's maximum liability
under this Section shall be limited to an amount equal to the net proceeds
actually received by such holder (after deducting any underwriting discount and
expenses) from the sale of Registrable Securities being sold pursuant to such
registration statement or prospectus by such holder.
6.3 Indemnification Procedures. Promptly after receipt by an
indemnified party hereunder of written notice of the commencement of any action
or proceeding involving a claim referred to in Section 6.1 or Section 6.2 of
this Agreement, such indemnified party will, if a claim in respect thereof is to
be made against an indemnifying party, give written notice to the latter of the
commencement of such action; provided, that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations under Section 6.1 or Section 6.2 of this Agreement except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
the indemnifying party will be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified,
to the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof, unless in such indemnified party's judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, in which case the indemnifying party shall not be liable for the
fees and expenses of (i) more than one counsel for all holders of Registrable
Securities, selected by the Xxxxxxx Holders, or (ii) more than one counsel for
the Company in connection with any one action or separate but similar or related
actions. An indemnifying party who is not entitled to, or elects not to, assume
the defense of a claim will not be obligated to pay the fees and expenses of
more than one counsel for all parties indemnified by such indemnifying party
with respect to such claim, unless in the judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim, in which event the
indemnifying party shall be
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obligated to pay the fees and expenses of such additional counsel or counsels.
The indemnifying party will not, without the prior written consent of each
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not such indemnified
party or any Person who controls such indemnified party is a party to such
claim, action, suit or proceeding), unless such settlement, compromise or
consent includes an unconditional release of such indemnified party from all
liability arising out of such claim, action, suit or proceeding. Notwithstanding
anything to the contrary set forth herein, and without limiting any of the
rights set forth above, in any event any party will have the right to retain, at
its own expense, counsel with respect to the defense of a claim.
6.4 Indemnification of Underwriters. The Company and each
holder of Registrable Securities requesting registration shall provide for the
foregoing indemnity in any underwriting agreement with respect to any required
registration or other qualification of securities under any Federal or state law
or regulation of any governmental authority other than the Securities Act.
6.5 Contribution. If the indemnification provided for in
Sections 6.1 and 6.2 of this Agreement is unavailable or insufficient to hold
harmless an indemnified party under such Sections, then each indemnifying party
shall contribute to the amount paid or payable to such indemnified party as a
result of the losses, claims, damages or liabilities referred to in Section 6.1
or Section 6.2 of this Agreement in such proportion as is appropriate to reflect
the relative fault of the indemnifying party on the one hand, and the
indemnified party on the other, in connection with statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
any other relevant equitable considerations, including, without limitation, the
relative benefits received by each party from the offering of the securities
covered by such registration statement, the parties' relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted and the opportunity to correct and prevent any statement or omission.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statements or omission. The parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 6.5
were to be determined by pro rata or per capita allocation (even if the
underwriters were treated as one entity for such purpose) or by any other method
of allocation which does not take account of the equitable considerations
referred to in the first sentence of this Section 6.5. The amount paid to an
indemnified party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this Section 6.5 shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any action or claim (which shall be
limited as provided in Section 6.3 of this Agreement if the indemnifying party
has assumed the defense of any such action in accordance with the provisions
thereof)
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which is the subject of this Section 6.5. Promptly after receipt by an
indemnified party under this Section 6.5 of notice of the commencement of any
action against such party in respect of which a claim for contribution may be
made against an indemnifying party under this Section 6.5, such indemnified
party shall notify the indemnifying party in writing of the commencement thereof
if the notice specified in Section 6.3 of this Agreement has not been given with
respect to such action; provided, that the failure to so notify the indemnifying
party shall not relieve the indemnifying party from any liability which it may
otherwise have to any indemnified party under this Section 6.5, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice. The Company and each holder of Registrable Securities agrees with
each other and the underwriters of the Registrable Securities, if requested by
such underwriters, that (i) the underwriters' portion of such contribution shall
not exceed the underwriting discount and (ii) the amount of such contribution
shall not exceed an amount equal to the net proceeds actually received by such
indemnifying party from the sale of Registrable Securities in the offering to
which the losses, liabilities, claims, damages or expenses of the indemnified
parties relate. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
6.6 Timing of Indemnification Payments. The indemnification
required by this Article VI shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
ARTICLE VII
RULE 144
The Company covenants that it will file the reports required
to be filed by it under the Securities Act and the Exchange Act and the rules
and regulations adopted by the SEC thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information), and it will
take such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell shares of Registrable Securities without registration under the Securities
Act within the limitation of the exemption provided by (i) Rule 144 or Rule 144A
under the Securities Act, as such Rules may be amended from time to time, or
(ii) any similar rule or regulation hereafter adopted by the SEC. Upon the
request of any holder of Registrable Securities, the Company will deliver to
such holder a written statement as to whether it has complied with such
requirements.
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ARTICLE VIII
PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Person may participate in any underwritten registration
hereunder unless such Person (i) agrees to sell such Person's securities on the
basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements and consistent with the provisions of this Agreement.
ARTICLE IX
MERGERS, ETC.
The Company shall not, directly or indirectly, enter into any
merger, consolidation or reorganization in which the Company shall not be the
surviving corporation unless the proposed surviving corporation shall, prior to
such merger, consolidation, or reorganization, agree in writing to assume the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Registrable Securities" shall be deemed to be references to the
securities that the Investors or the holders of Registrable Securities would be
entitled to receive in exchange for Registrable Securities under any such
merger, consolidation or reorganization.
ARTICLE X
DEFINITIONS
As used in this Agreement, the following defined terms shall
have the meanings set forth below:
"Business Day" means a day other than Saturday, Sunday or any
day on which banks in the State of New York are authorized or obligated to
close.
"Common Stock" means the Company's Common Stock, par value
$.01 per share.
"Company" shall have the meaning set forth in the first
paragraph hereof.
"Demand Registrations" shall have the meaning set forth in
Section 1.1(a) hereof.
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"Designated Entity" means, in connection with the rights held
by holders of less than thirty percent (30%) of Registrable Securities, (i) as
long as any shares of Registrable Securities are held by any Person identified
in clause (i) or (ii) of the definition of "Xxxxxxx Holders" set forth in the
Stock Purchase Agreements, Xxxxxxx Capital Management, 000 Xxxx Xxxxxx, Xxx
Xxxx, XX 00000, Attention: Xxxxxx X. Xxxx and (ii) if no shares of Registrable
Securities are held by a Person identified in clause (i) or (ii) of the
definition of "Xxxxxxx Holders" set forth in the Stock Purchase Agreements, the
entity designated by the Transferee who holds the largest number of such shares,
provided, that such Transferee owns thirty percent (30%) or more of the
Registrable Securities (in which case such Transferee shall provide notice to
the Company of such entity). For so long as no Registrable Securities are held
by any Person identified in clause (i) or (ii) of the definition of "Xxxxxxx
Holders" set forth in the Stock Purchase Agreements and no Person holds thirty
percent (30%) or more, in the aggregate, of the Registrable Securities, there
shall be no Designated Entity.
"DuPont Agreement" means the Registration Agreement, dated as
of January 29, 1997, among the Company, X.X. XxXxxx de Nemours and Company and
DuPont Chemical and Energy Operations, Inc.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Xxxxxxx Funds" shall have the meaning set forth in the first
paragraph hereof.
"Xxxxxxx Holders" shall have the meaning set forth in Section
3 of the Stock Purchase Agreements.
"Investor" or "Investors" shall have the meaning set forth in
the first paragraph hereof.
"Long-Form Demand Registrations" shall have the meaning set
forth in Section 1.1 hereof.
"Other Securities" shall have the meaning set forth in Section
1.6 hereof.
"Person" means any individual, corporation, partnership,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof.
"Piggyback Registration" shall have the meaning set forth in
Section 2.1 hereof.
"Registrable Securities" means (i) any shares of Common Stock
issued or issuable upon conversion of the Series A Preferred Stock purchased by
the Investors pursuant to the Stock Purchase Agreements and (ii) any securities
issued or issuable with respect to the
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Common Stock referred to in clause (i) by way of stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any particular
Registrable Securities, such securities will cease to be Registrable Securities
when they have (x) been effectively registered under the Securities Act and
disposed of in accordance with the registration statement covering them or (y)
been transferred pursuant to Rule 144 (or any similar rule then in force) under
the Securities Act.
"Registration Expenses" shall have the meaning set forth in
Section 4.1 hereof.
"SEC" shall have the meaning set forth in Section 1.3 hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $.01 per share, which Series A Preferred
Stock is convertible into shares of Common Stock.
"Shares" means the shares of Registrable Securities registered
on the registration statement filed with the SEC in connection with any Demand
Registration or any Piggyback Registration.
"Short-Form Demand Registrations" shall have the meaning set
forth in Section 1.1 hereof.
"Stock Purchase Agreements" means, collectively, the separate
Stock Purchase Agreements, dated as of March 30, 1999, between the Company and
each of the Xxxxxxx Funds.
"Transferees" shall have the meaning set forth in Section 3 of
the Stock Purchase Agreements.
ARTICLE XI
MISCELLANEOUS
11.1 No Inconsistent Agreements. The Company will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted to the holders of Registrable Securities in
this Agreement.
11.2 Adjustments Affecting Registrable Securities. The Company
will not effect or permit to occur any combination, subdivision or
reclassification of any of its securities which would adversely affect the
ability of the holders of Registrable Securities to include Registrable
Securities in a registration undertaken pursuant to this Agreement or which, to
the
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extent within its control, would adversely affect the marketability of such
Registrable Securities in any such registration (including, without limitation,
effecting a stock split or a combination of shares).
11.3 Remedies. In the event of a breach by any party to this
Agreement of its obligations under this Agreement, any party injured by such
breach, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The parties agree that the provisions of this
Agreement shall be specifically enforceable, it being agreed by the parties that
the remedy at law, including monetary damages, for breach of any such provision
will be inadequate compensation for any loss and that any defense in any action
for specific performance that a remedy at law would be adequate is waived.
11.4 Amendments and Waivers. Except as otherwise provided
herein, no modification, amendment or waiver of any provision of this Agreement
will be effective against the Company or any holder of Registrable Securities,
unless such modification, amendment or waiver is approved in writing by the
Company and the Xxxxxxx Holders. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
11.5 Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto will bind and inure
to the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of the
Investors or the holders of Registrable Securities are also for the benefit of,
and enforceable by, any subsequent holder of Registrable Securities.
11.6 Notices. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or sent by nationally
recognized overnight courier service to the parties at the following addresses
or facsimile numbers:
(i) If to an Investor or a holder of Registrable
Securities, to:
Xxxxxxx Capital Management
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx X. Xxxx and Xxxxxx X. Xxxx
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with a copy to:
Xxxxxx, Xxxxx & Bockius LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
(ii) If to the Company, to:
Xxxxxx Technologies, Inc.
000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxxxx
with a copy to:
Xxxxxx Xxxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx Xxxxxxxxx, Esq.
All such notices, requests and other communications will (x) if delivered
personally to the address as provided in this Section 11.6, be deemed given and
received upon delivery, (y) if delivered by facsimile transmission to the
facsimile number as provided in this Section 11.6, be deemed given and received
upon receipt and (z) if delivered by nationally recognized overnight courier
service in the manner described above to the address as provided in this Section
11.6, be deemed given and received on the Business Day following the day it was
sent (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice is
to be delivered pursuant to this Section 11.6). Any party may from time to time
change its address, facsimile number or other information for the purpose of
notices to that party by giving notice specifying such change to the other
parties hereto.
11.7 Headings. The headings used in this Agreement have been
inserted for convenience of reference only and do not define or limit the
provisions hereof.
11.8 Gender. Whenever the pronouns "he" or "his" are used
herein they shall also be deemed to mean "she" or "hers" or "it" or "its"
whenever applicable. Words in the
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singular shall be read and construed as though in the plural and words in the
plural shall be construed as though in the singular in all cases where they
would so apply.
11.9 Invalid Provisions. If any provision of this Agreement is
held to be illegal, invalid or unenforceable, and if the rights or obligations
of any party hereto under this Agreement will not be materially and adversely
affected thereby, (i) such provision will be fully severable, (ii) this
Agreement will be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, (iii) the remaining
provisions of this Agreement will remain in full force and effect and will not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and (iv) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
11.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to a
contract executed and performed in such State without giving effect to the
conflicts of laws principles thereof.
11.11 Counterparts. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first written above.
XXXXXX TECHNOLOGIES, INC.
By: __________________________
Name:
Title:
XXXXXXX US DISCOVERY FUND III, L.P.
By: XXXXXXX US DISCOVERY
PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By:_________________________
Xxxxxx X. Xxxx, member
XXXXXXX US DISCOVERY OFFSHORE
FUND III, L.P.
By: XXXXXXX US DISCOVERY
PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By:_________________________
Xxxxxx X. Xxxx, member
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STOCKHOLDERS' AGREEMENT
This STOCKHOLDERS' AGREEMENT is dated as of March 30, 1999,
among Xxxxxx Technologies, Inc., a New York corporation (the "Company"), Xxxxx
X. Xxxxxx ("KJZ"), Xxxxxx X. Xxxxxx ("TPZ") and Xxxxxxx X. Xxxxxxxxxxx
("Xxxxxxxxxxx" and, collectively with KJZ and TPZ, "Management"), and Xxxxxxx US
Discovery Fund III, L.P. and Xxxxxxx US Discovery Offshore Fund III, L.P.
(collectively, the "Xxxxxxx Funds"). The Xxxxxxx Funds, any Xxxxxxx Holder and
any Transferee are collectively referred to herein as the "Investor Group" and,
individually, as an "Investor."
W I T N E S S E T H:
WHEREAS, pursuant to the terms of the Stock Purchase
Agreements, dated as of March 30, 1999, between the Company and each of the
Xxxxxxx Funds (the "Stock Purchase Agreements"), the Xxxxxxx Funds have
purchased 65,000 shares of the Company's Series A Convertible Preferred Stock,
par value $.01 per share (the "Series A Preferred Stock");
WHEREAS, KJZ beneficially owns approximately 7.0% of the
outstanding shares of the Company's Common Stock, par value $.01 per share (the
"Common Stock"), TPZ beneficially owns approximately 6.8% of the outstanding
shares of the Common Stock and Xxxxxxxxxxx beneficially owns approximately 6.8%
of the outstanding shares of the Common Stock (such shares, along with any
shares of Common Stock or other equity securities of the Company that KJZ, TPZ
or Xxxxxxxxxxx may subsequently acquire, the "Management Shares");
WHEREAS, it is a condition precedent to the Company's and the
Xxxxxxx Funds' respective obligations to consummate the transactions
contemplated by the Stock Purchase Agreements that the parties hereto shall have
entered into this Agreement; and
WHEREAS, each of the members of Management, the Company and
the Xxxxxxx Funds desires to enter into this Agreement to regulate certain
aspects of their relationship;
NOW, THEREFORE, in consideration of the arguments and mutual
covenants contained herein, the parties hereto hereby agree as follows:
1. Rights of Inclusion (Tag-Along Rights).
(a) In the event any member of Management proposes to Transfer
any of its Management Shares (the "Transferor Shares") to any Person (the
"Buyer"), as a condition to
such Transfer, such member of Management shall cause the Buyer to offer (the
"Inclusion Offer") to purchase from each Investor, at each such Investor's
option, up to that number of Investor Shares determined in accordance with
Section 1(b) on the same terms and conditions as are applicable to the
Transferor Shares (including any consideration to be received by such member of
Management in the form of bonuses, consulting fees, noncompetition payments or
pursuant to employment arrangements or similar arrangements), except that each
Investor shall not be required to provide any representation, warranty or other
undertaking other than with respect to its ownership of, and authority to
Transfer, the Investor Shares owned by it free of any liens or encumbrances.
Such member of Management shall provide prompt written notice to each Investor
(the "Inclusion Notice") setting forth all the terms and conditions of the
Inclusion Offer, and each Investor may accept the Inclusion Offer in whole or in
part by providing a written notice of acceptance with respect to Investor Shares
owned by it to such member of Management within twenty (20) days of delivery of
the Inclusion Notice to it (the "Acceptance Notice").
(b) Each Investor shall have the right to sell, pursuant to
the Inclusion Offer, Investor Shares representing the same percentage of all
Investor Shares owned by it as the Transferor Shares are of all Management
Shares owned by such member of Management (such percentage shall be calculated
on the basis that all shares of Series A Preferred Stock owned by each Investor
have been converted into shares of Common Stock at the current conversion price
per share under Section 5 of the Certificate of Amendment); provided, however,
that if no Investor elects to exercise such right, such member of Management
shall nonetheless be entitled to Transfer all of the Transferor Shares described
in the Inclusion Notice. In the event the number of Investor Shares for which
the Investor Group elects to exercise such right, along with the Transferor
Shares and any other shares of the Company to be sold by other stockholders
pursuant to any similar rights granted to such other stockholders, exceed the
number of shares which the Buyer is willing to purchase, the number of shares to
be Transferred to the Buyer by each transferor shall be reduced so that each
transferor is entitled to Transfer the same percentage of its shares included in
its Acceptance Notice as each other transferor. If an Investor elects to
exercise such right, such Investor may, in its sole discretion, determine the
composition of the Investor Shares (i.e., the number of the shares of Series A
Preferred Stock and Common Stock to be included in the Investor Shares) to be
Transferred by it to the Buyer pursuant to the Inclusion Offer. In the event
that any Investor chooses to include any shares of Series A Preferred Stock in
the Investor Shares to be Transferred by it to the Buyer pursuant to the
Inclusion Offer, any such Investor shall, prior to or simultaneously with such
Transfer, convert such shares of Series A Preferred Stock into shares of Common
Stock so that each Investor Transfers only Common Stock to the Buyer; provided
that any such conversion may be made conditional upon completion of such
Transfer to the Buyer.
(c) Such member of Management shall have ninety (90) days from
the date of the Inclusion Notice to Transfer, on behalf of himself and the
Investor Group, up to the number of shares covered by the Inclusion Offer
(including the Transferor Shares) to the Buyer. The terms of such Transfer,
including, without limitation, price and form of consideration, shall be as
2
set forth in the Inclusion Notice. If at the end of such ninety (90) day period
such member of Management has not completed the Transfer of the Transferor
Shares and the Investor Shares (if any) proposed to be Transferred, such member
of Management may not proceed with such Transfer or any other Transfer without
first giving a new Inclusion Notice pursuant to the provisions of this Section
1.
(d) If such member of Management is able to complete the
Transfer of the Transferor Shares and the Investor Shares (if any) proposed to
be Transferred within such ninety (90) day period, at the closing thereof, each
Investor shall deliver to the Buyer a certificate or certificates representing
the Investor Shares owned by it to be Transferred pursuant to the Inclusion
Offer, free and clear of all liens and encumbrances, and the Buyer shall pay to
each such Investor the purchase price for the Investor Shares so Transferred
pursuant to this Section 1 and shall furnish such other evidence of the
completion of such Transfer and the terms thereof as may be reasonably requested
by the Investor Group.
(e) The provisions of this Section 1 shall not apply to any
Transfer or proposed Transfer by any member of Management of Management Shares
representing ten percent (10%) or less of the Management Shares held by such
member on the date hereof, if such Transfer or proposed Transfer by such member,
together with all other such Transfers by such member during the five (5) years
preceding the date of such Transfer, represent twenty-five percent (25%) or less
of the Management Shares held by such member on the date hereof, with Management
Shares held by such member on the date hereof to be appropriately adjusted to
reflect any stock split, stock dividend, recapitalization or similar event;
provided, however, that each Transfer of Management Shares by such member that
takes place within one year of any other Transfer to the same Person or any
Affiliate of such Person shall be aggregated for purposes of such ten percent
(10%) threshold.
2. Additional Directors.
(a) (i) So long as (A) the Xxxxxxx Holders hold at least
thirty-five percent (35%), in the aggregate, of the shares of Series A Preferred
Stock originally issued and Conversion Shares, or (B) if no such shares are held
by a Xxxxxxx Holder, any Transferee consented to by the Company, such consent
not to be unreasonably withheld (a "Permitted Transferee")), such Xxxxxxx
Holders or Permitted Transferee, as the case may be, shall be entitled, but not
required, to nominate up to two (2) individuals to be directors of the Company
(the "Additional Director" or "Additional Directors").
(ii) So long as (A) the Xxxxxxx Holders hold at least
twenty percent (20%), but less than thirty-five (35%) percent, in the aggregate,
of the shares of Series A Preferred Stock originally issued and Conversion
Shares, or (B) if no such shares are held by a Xxxxxxx Holder, any Permitted
Transferee, such Xxxxxxx Holders or Permitted Transferee, as the case may be,
shall be entitled, but not required, to nominate one (1) Additional Director.
3
(iii) Notwithstanding the foregoing provisions of this
Section 2(a), the right of the Xxxxxxx Holders or Permitted Transferee, as the
case may be, to nominate Additional Directors shall be subject to the election
of Preferred Directors pursuant to Section 4(c) of the Certificate of Amendment,
such that for each Preferred Director elected pursuant thereto, the Xxxxxxx
Holders or Permitted Transferee, as the case may be, shall be entitled to
nominate one fewer Additional Director than would be the case had such Preferred
Director not been elected.
(b) Holders of at least a majority of the outstanding shares
of Series A Preferred Stock and Conversion Shares shall exercise their right, as
described in Section 2(a) above, to nominate each Additional Director by written
notice to the Company of the identity of the person so nominated, and requesting
the Company to call a meeting of its stockholders to act upon such nomination.
As promptly as practicable after receipt of written notice from such holders,
the Company will cause (including without limitation by vote of proxies granted
to management of the Company) each Additional Director to be elected to the
Company's Board of Directors. The nomination of each Additional Director shall
be made after consultation with the Company, and any such Additional Director
shall be an individual agreed to by the Company, such agreement not to be
unreasonably withheld. At the time of any such nomination, such Additional
Director will affirm his or her duty of confidentiality to the Company with
regard to any non-public confidential Company information through a
confidentiality agreement reasonably satisfactory to the Company and such
holders. Until the termination of this Agreement in accordance with its terms,
the Company's nominating committee shall recommend to the Company's Board of
Directors that all Additional Directors nominated for election to the Company's
Board of Directors pursuant to this Section 2 be included in the slate of
nominees recommended by such Board to the Company's shareholders for election as
directors at each annual meeting of the shareholders of the Company. In the
event that any Additional Director shall cease to serve as a director of the
Company for any reason, the vacancy created thereby shall be filled according to
the procedures described in Section 2(a) above and this Section 2(b).
Notwithstanding anything in this Section 2(b) to the contrary, in lieu of
holding a special or annual meeting of stockholders to elect Additional
Directors to the Company's Board of Directors, the Company, in its discretion,
may increase the size of its Board of Directors in accordance with the terms of
its bylaws and appoint Additional Directors to fill such newly created vacancies
on the Board of Directors.
(c) The Company will furnish to each Additional Director
elected to the Company's Board of Directors all information that is provided to
the other directors of the Company.
(d) For so long as the Company's Board of Directors is divided
into classes in respect of term of office, the Company shall allocate any
Additional Directors elected thereto pursuant to this Section 2 among such
classes so as best to maintain the respective rights and privileges held by each
such class prior to the election of such Additional Directors.
4
(e) It is the Company's policy to discuss with the Board of
Directors any proposed merger, consolidation, reorganization or acquisition or
disposition of material assets other than in the ordinary course of business and
other transactions out of the ordinary course of business which would have a
material impact on the Company's financial position or results of operations. If
in the future it should no longer be the Company's policy to present any such
matters to the Board of Directors, then the Company will, during the term of
this Agreement, discuss any such transactions with Xxxxxxx Capital Management or
such other Person as the Investor Group may designate in writing to the Company.
(f) Each of KJZ, TPZ and Xxxxxxxxxxx hereby irrevocably and
unconditionally agrees to take all actions necessary to call, or to cause the
Company and the appropriate officers and directors of the Company to call, a
special or annual meeting of stockholders of the Company for the purpose of, and
to vote all shares of Common Stock owned by him and other securities over which
he has voting control at any such annual or special meeting in favor of, or take
all actions by written consent in lieu of any such meeting necessary to cause,
the election as members of the Company's Board of Directors of each Additional
Director nominated in accordance with, and to otherwise effect the intent of,
this Section 2. In addition, each of KJZ, TPZ and Xxxxxxxxxxx agrees to vote the
shares of Common Stock owned by him and other securities over which he has
voting control upon any other matter arising under this Agreement submitted to a
vote of the stockholders in a manner that will implement the terms of this
Agreement.
3. Board Observer Rights; Committees.
(a) (i) So long as (A) the Xxxxxxx Holders hold at least
thirty-five percent (35%), in the aggregate, of the shares of Series A Preferred
Stock originally issued and Conversion Shares, or (B) if no such shares are held
by a Xxxxxxx Holder, any Permitted Transferee, such Xxxxxxx Holders or Permitted
Transferee, as the case may be, shall have the right to appoint up to two (2)
representatives (the "Xxxxxxx Observer" or "Xxxxxxx Observers") (subject to the
provisions of Section 3(b) herein).
(ii) So long as (A) the Xxxxxxx Holders hold at least
twenty percent (20%), but less than thirty-five percent (35%), in the aggregate,
of the shares of Series A Preferred Stock originally issued and Conversion
Shares, or (B) if no such shares are held by a Xxxxxxx Holder, any Permitted
Transferee, such Xxxxxxx Holders or Permitted Transferee, as the case may be,
shall have the right to appoint one (1) Xxxxxxx Observer (subject to the
provisions of Section 3(b) herein).
(iii) The Xxxxxxx Observers shall have the right to attend
and participate in meetings of the Company's Board of Directors, or any
committee thereof, and the Company shall permit any Xxxxxxx Observer to attend
and participate in all such meetings as an observer, provided, that each Xxxxxxx
Observer shall have executed and delivered to the Company a confidentiality
agreement in a form reasonably acceptable to the Company and the Xxxxxxx
5
Holders. A Xxxxxxx Observer shall not have the right to vote on any matter
presented to the Board or any committee thereof. The Company shall give all
Xxxxxxx Observers written notice of each meeting of the Board of Directors or
any committee thereof and all written materials and other information given to
the Company's directors and committee members in the same manner and at the same
time such notices, materials and other information are given to the directors
and committee members. The Company shall reimburse any Xxxxxxx Observer for
travel and other expenses in connection with such meetings to the same extent
that the Company reimburses its directors and committee members. If the Board of
Directors or any committee thereof proposes to take any action by written
consent in lieu of a meeting, the Company shall give written notice thereof to
all Xxxxxxx Observers prior to the effective date of such consent describing the
nature and substance of such action.
(b) During such time that (i) the holders of the Series A
Preferred Stock have elected at least one director to the Company's Board of
Directors (or have waived their right to so elect such director) pursuant to
Section 4 of the Company's Certificate of Amendment with respect to the Series A
Preferred Stock or (ii) at least one Additional Director nominated by the
holders of the Series A Preferred Stock and Conversion Shares pursuant to
Section 2 hereof has been elected to the Company's Board of Directors (any such
Preferred Director or Additional Director being referred to as an "Investor
Director"), the number of Xxxxxxx Observers with respect to whom the Xxxxxxx
Holders or the Permitted Transferee, as the case may be, shall be entitled to
exercise their rights as provided in Section 3(a)(i) shall be modified such that
(A) in the event there is one (1) Investor Director, the Xxxxxxx Holders or the
Permitted Transferee, as the case may be, shall have the right to have one (1)
Xxxxxxx Observer and (B) in the event there are two (2) Investor Directors, the
Xxxxxxx Holders or the Permitted Transferee, as the case may be, shall not have
the right to have any Xxxxxxx Observer.
4. Definitions.
As used herein, the following terms shall have the respective
meanings set forth below:
"Acceptance Notice" shall have the meaning set forth in
Section 1(a) hereof.
"Additional Director" shall have the meaning set forth in
Section 2(a) hereof.
"Affiliate" shall have the meaning set forth in Section 3 of
the Stock Purchase Agreements.
"Board" or "Board of Directors" shall have the meaning given
it in Section 3 of the Stock Purchase Agreements.
"Buyer" shall have the meaning set forth in Section 1(a)
hereof.
6
"Certificate of Amendment" shall have the meaning set forth in
Section 1(a) of the Stock Purchase Agreements.
"Common Stock" shall have the meaning set forth in the second
WHEREAS clause hereof.
"Company" shall have the meaning set forth in the first
paragraph hereof.
"Conversion Shares" shall have the meaning set forth in
Section 3 of the Stock Purchase Agreements.
"Xxxxxxx Funds" shall have the meaning set forth in the first
paragraph hereof.
"Xxxxxxx Holders" shall have the meaning set forth in Section
3 of the Stock Purchase Agreements.
"Xxxxxxx Observer" or "Xxxxxxx Observers" shall have the
meaning set forth in Section 3(a) hereof.
"Inclusion Notice" shall have the meaning set forth in Section
1(a) hereof.
"Inclusion Offer" shall have the meaning set forth in Section
1(a) hereof.
"Investor" shall have the meaning set forth in the first
paragraph hereof.
"Investor Director" shall have the meaning set forth in
Section 3(b) hereof.
"Investor Group" shall have the meaning set forth in the first
paragraph hereof.
"Investor Shares" means all Series A Preferred Stock and
Common Stock owned by the Investor Group.
"Issue Date" shall have the meaning set forth in the
Certificate of Amendment.
"KJZ" shall have the meaning set forth in the first paragraph
hereof.
"Management" shall have the meaning set forth in the first
paragraph hereof.
"Management Shares" shall have the meaning set forth in the
second WHEREAS clause hereof.
"Xxxxxxxxxxx" shall have the meaning set forth in the first
paragraph hereof.
7
"Offer Acceptance Notice" shall have the meaning set forth in
Section 5(a) hereof.
"Offer Notice" shall have the meaning set forth in Section
5(a) hereof.
"Permitted Transferee" shall have the meaning set forth in
Section 2(a) hereof.
"Person" means an individual, corporation, partnership, firm,
association, joint venture, trust, unincorporated organization, governmental
body, agency, political subdivision or other entity.
"Proposed Sale" shall have the meaning set forth in Section
5(a) hereof.
"Series A Preferred Stock" shall have the meaning set forth in
the first WHEREAS clause hereof.
"Stock Purchase Agreements" shall have the meaning set forth
in the first WHEREAS clause hereof.
"TPZ" shall have the meaning set forth in the first paragraph
hereof.
"Transfer" means, with respect to any security, any direct or
indirect sale, transfer, assignment, hypothecation, pledge or any other
disposition of such security or any interest therein.
"Transferee" shall have the meaning set forth in Section 3 of
the Stock Purchase Agreements.
"Transferor Shares" shall have the meaning set forth in
Section 1(a) hereof.
5. Right of First Offer.
(a) Subject to Section 5(c) below, prior to the conversion of any
shares of Series A Preferred Stock pursuant to Section 5 of the Certificate of
Amendment, if any holder thereof receives a bona fide offer for such shares from
any Person listed on Schedule 1 attached hereto (a "Proposed Sale"), as a
condition to a sale pursuant to such offer, such holder shall provide written
notice to the Company (the "Offer Notice") setting forth the identity of the
proposed purchaser and all the terms and conditions of the proposed sale. The
Company shall have the right, but not the obligation, to purchase all of such
shares, on the terms and conditions set forth in the Offer Notice, by delivering
a written notice of acceptance to such holder within ten (10) days of delivery
of the Offer Notice to the Company (the "Offer Acceptance Notice"). If the
Company fails to deliver an Offer Acceptance Notice to such holder within such
ten (10) day period, then such holder shall be entitled to sell its shares in
accordance with the Proposed Sale.
8
(b) Subject to Section 5(a) above, a holder of shares of Series A
Preferred Stock shall have one hundred twenty (120) days from the date of the
Offer Notice to effectuate a Proposed Sale. The terms of such Proposed Sale,
including, without limitation, price and form of consideration, shall be as set
forth in the Offer Notice. If at the end of such one hundred twenty (120) day
period such holder has not completed the Proposed Sale, such holder may not
proceed with such Proposed Sale or any other Proposed Sale without first giving
a new Offer Notice pursuant to the provisions of Section 5(a).
(c) Notwithstanding any provision in this Section 5 to the contrary,
until one year after the Issue Date, no holder of shares of Series A Preferred
Stock or Conversion Shares shall sell any such shares to any Person listed on
Schedule 1 attached hereto, except in the case of the Company being sold in its
entirety to any such Person.
(d) Each of the Xxxxxxx Funds hereby agrees that it will not sell,
assign, transfer or otherwise dispose of any shares of Series A Preferred Stock
or Conversion Shares, other than pursuant to a registered public offering or
pursuant to a Rule 144 Transaction (as defined in the Stock Purchase
Agreements), unless the Transferee of such securities shall have agreed to be
bound by the provisions of this Section 5 as though an original party hereto.
6. Miscellaneous.
(a) In the event of a breach by any party to this Agreement of
its obligations under this Agreement, any party injured by such breach, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The parties agree that the provisions of this Agreement
shall be specifically enforceable, it being agreed by the parties that the
remedy at law, including monetary damages, for breach of any such provision will
be inadequate compensation for any loss and that any defense in any action for
specific performance that a remedy at law would be adequate is waived.
(b) Except as otherwise provided herein, no modification,
amendment or waiver of any provision of this Agreement will be effective against
any party hereto unless such modification, amendment or waiver is approved in
writing by all parties hereto. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver of such
provisions and will not affect the right of such party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
(c) All covenants and agreements in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
(d) All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission
9
or sent by nationally recognized overnight courier service to the parties at the
following addresses or facsimile numbers:
(i) If to an Investor, to:
the address indicated on Schedule 1 to the Stock
Purchase Agreements;
with a copy to:
Xxxxxx, Xxxxx & Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxx, Esq.
(ii) If to the Company, to:
Xxxxxx Technologies, Inc.
000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxxxxxxx
with a copy to:
Xxxxxx Xxxxxxxxxx LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxxx Xxxxxxxxx, Esq.
(iii) If to KJZ, to:
Xxxxx X. Xxxxxx
Xxxxxx Technologies, Inc.
000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
(iv) If to TPZ, to:
Xxxxxx X. Xxxxxx
Xxxxxx Technologies, Inc.
10
000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
(v) If to Xxxxxxxxxxx, to:
Xxxxxxx X. Xxxxxxxxxxx
Xxxxxx Technologies, Inc.
000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
Facsimile No.: (000) 000-0000
All such notices, requests and other communications will (x)
if delivered personally to the address as provided in this Section 6(d), be
deemed given and received upon delivery, (y) if delivered by facsimile
transmission to the facsimile number as provided in this Section 6(d), be deemed
given and received upon receipt and (z) if delivered by nationally recognized
overnight courier service in the manner described above to the address as
provided in this Section 6(d), be deemed given and received on the business day
following the day it was sent (in each case regardless of whether such notice,
request or other communication is received by any other Person to whom a copy of
such notice is to be delivered pursuant to this Section 6(d)). Any party from
time to time may change its address, facsimile number or other information for
the purpose of notices to that party by giving notice specifying such change to
the other parties hereto.
(e) The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
(f) If any provision of this Agreement is held to be illegal,
invalid or unenforceable, and if the rights or obligations of any party hereto
under this Agreement will not be materially and adversely affected thereby, (i)
such provision will be fully severable, (ii) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, (iii) the remaining provisions of this Agreement will
remain in full force and effect and will not be affected by the illegal, invalid
or unenforceable provision or by its severance herefrom and (iv) in lieu of such
illegal, invalid or unenforceable provision, there will be added automatically
as a part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be possible.
(g) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to a contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof.
(h) This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
11
(i) For purposes of Sections 2(a)(i), 2(a)(ii), 3(a)(i) and
3(a)(ii), the calculation of a Person's percentage holdings of Conversion Shares
shall be determined based upon the number of shares of Series A Preferred Stock
from which such Conversion Shares derived.
[remainder of page intentionally left blank]
12
IN WITNESS WHEREOF, the parties have duly executed this
Stockholders' Agreement as of the date first written above.
XXXXXX TECHNOLOGIES, INC.
By: _________________________
Name: Xxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
-----------------------------
Xxxxx X. Xxxxxx
-----------------------------
Xxxxxx X. Xxxxxx
-----------------------------
Xxxxxxx X. Xxxxxxxxxxx
XXXXXXX US DISCOVERY FUND III, L.P.
By: XXXXXXX US DISCOVERY
PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By:___________________________
Xxxxxx X. Xxxx, member
XXXXXXX US DISCOVERY OFFSHORE
FUND III, L.P.
By: XXXXXXX US DISCOVERY
PARTNERS, L.P.,
its general partner
By: XXXXXXX US DISCOVERY, LLC,
its general partner
By:___________________________
Xxxxxx X. Xxxx, member
