1
Exhibit 10.22
SECURITIES PURCHASE AGREEMENT
BY AND BETWEEN
AHT CORPORATION
AS THE COMPANY
AND
CYBEAR, INC.
AS THE PURCHASER
DATED: MARCH 27, 2000
2
SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated March 27, 2000, by and between AHT CORPORATION, a
Delaware corporation (the "Company"), and CYBEAR, INC., a Delaware corporation
(the "Purchaser").
R E C I T A L S:
WHEREAS, the Company is currently contemplating raising up to
$4,000,000 in a private placement of debt securities (the "Offering"); and
WHEREAS, the Company desires to sell and issue to the Purchaser, and
the Purchaser desires to purchase from the Company, $4,000,000 aggregate
principal amount of the Company's 10% Senior Secured Convertible Note due March
31, 2001 (the "Convertible Note"), with terms and conditions as set forth in the
form of Convertible Note attached hereto as EXHIBIT A (with such changes and
modifications as may be approved by the Purchaser); and
WHEREAS, in order to induce the Purchaser to enter into the
transactions described in this Agreement, the Company desires to issue to the
Purchaser warrants to purchase 300,000 shares of the Company's common stock,
$.01 par value (the "Common Stock") on the terms and conditions described in the
Common Stock Purchase Warrant in the form attached hereto as EXHIBIT B (with
such changes and modifications as may be approved by the Purchaser) (the
"Warrants"); and
WHEREAS, the Convertible Note will be convertible into shares of Common
Stock, and the Purchaser will have registration rights with respect to such
shares of Common Stock issuable upon conversion as set forth in the Registration
Rights Agreement in the form attached hereto as EXHIBIT C; and
WHEREAS, the Purchaser will have certain registration rights with
respect to the shares of Common Stock issuable upon exercise of the Warrants as
set forth in the Registration Rights Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the following
meanings:
"Affiliate" means, with respect to any Person (the "Subject Person"),
(i) any other Person (a "Controlling Person") that directly, or indirectly
through one or more intermediaries, Controls the Subject Person or (ii) any
other Person (other than the Subject Person or a Consolidated Subsidiary
3
of the Subject Person) which is Controlled by or is under common Control with a
Controlling Person.
"Agreement" means this Securities Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Asset Sale" has the meaning set forth in Section 8.7.
"Average Market Price" means, for any security as of any date, the
average of the closing price on the Nasdaq Market as reported by Bloomberg or,
if the Nasdaq Market is not the principal trading market for such security, the
closing price of such security on the principal securities exchange or trading
market where such security is listed or traded as reported by Bloomberg, or if
the foregoing do not apply, the closing price of such security in the
over-the-counter market on the electronic bulletin board for such security as
reported by Bloomberg, or, if no closing price is reported for such security by
Bloomberg, then the average of the high bid prices of any market makers for such
security as reported in the "pink sheets" by the National Quotation Bureau,
Inc., in each case for the thirty (30) consecutive Trading Days immediately
prior to such date.
"Balance Sheet Date" has the meaning set forth in Section 4.7.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by the Company.
"Benefit Plans" has the meaning set forth in Section 4.9(b).
"Bloomberg" means Bloomberg, L.P.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York and Miami, Florida are authorized
or required by law to close.
"Capital Reorganization" has the meaning set forth in Section 11.5.
"Change of Control" means:
(i) after the date of this Agreement any Person, other than
the Purchaser or an Affiliate of the Purchaser, shall have acquired
beneficial ownership (within the meaning of Rules 13d-3 and 13d-5
promulgated by the SEC pursuant to the Exchange Act) of 33.3% or more
of the outstanding shares of Common Stock of the Company;
(ii) a transfer of all or substantially all of the assets of
the Company to any Person, other than the Purchaser or an Affiliate of
the Purchaser, in a single transaction or series of related
transactions;
(iii) a consolidation, merger or amalgamation of the Company
with or into another Person, other than the Purchaser or an Affiliate
of the Purchaser, (other than a merger (x) which does not result in any
reclassification, conversion, exchange or cancellation of
2
4
outstanding shares of Common Stock or in which the Company is the
surviving entity, (y) which is effected solely to change the
jurisdiction of incorporation of the Company and results in a
reclassification, conversion or exchange of outstanding shares of
Common Stock solely into shares of Common Stock or (z) consummated in
compliance with Section 8.5 hereof); or
(iv) individuals constituting the Board of Directors of the
Company on the date hereof (together with any new Directors whose
election by such Board of Directors or whose nomination for election by
the stockholders of the Company (x) was approved by a vote of at least
50.1% of the Directors then still in office who were either Directors
as of the date hereof or whose election or nomination for election was
previously so approved or (y) supported by the Purchaser or its
Affiliates, cease for any reason to constitute at least a majority of
the Board of Directors of the Company then in office; or
"Closing" has the meaning set forth in Section 2.3.
"Closing Date" means March 27, 2000.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means AHT Corporation, a Delaware corporation, and its
successors.
"Company Corporate Documents" means the certificate of incorporation
and by-laws of the Company.
"Consolidated Subsidiary" means at any date with respect to any Person,
any Subsidiary or other entity, the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such statements
were prepared as of such date.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or
otherwise .
"Conversion Date" shall mean the date of delivery (including delivery
via telecopy) of a Notice of Conversion for all or a portion of the Convertible
Note by the holder thereof to the Company if such day is a Business Day, or the
next succeeding Business Day if the date of delivery is not a Business Day.
"Conversion Price" means the lower of (i) 80% of the Average Market
Price per share of Common Stock on the Conversion Date; or (ii) $4.34.
"Conversion Shares" has the meaning set forth in Section 4.5.
"Convertible Note" means the Company's 10% Senior Secured Convertible
Note substantially in the form set forth as EXHIBIT A hereto.
3
5
"Deadline" has the meaning set forth in Section 10.1.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such Person.
"Default" means any event or condition which constitutes an Event of
Default or which, with the giving of notice or lapse of time or both would,
unless cured or waived, will constitute an Event of Default.
"Default Interest Rate" has the meaning set forth in the Convertible
Note.
"Derivative Securities" has the meaning set forth in Section 10.6.
"Directors" means the individuals then serving on the Board of
Directors or similar such management council of the Company.
"Environmental Laws" means any and all federal, state, municipal, local
and foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the cleanup or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company and each Subsidiary and all members of
a controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under the Code.
"Event of Default" has the meaning set forth in Section 12 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fixed Price(s)" has the meaning set forth in Section 11.1.
"GAAP" has the meaning set forth in Section 1.2.
4
6
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by virtue
of partnership arrangements, by agreement to keep well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain a minimum net
worth, financial ratio or similar requirements, or otherwise) any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or (ii) entered into for the purpose of assuring in any other manner the
holder of such Debt of the payment thereof or to protect such holder against
loss in respect thereof (in whole or in part); PROVIDED that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The term Guarantee used as a verb has a corresponding meaning.
"Guaranty Agreement" means the Guaranty Agreement of even date herewith
between Advanced Health Technologies Corporation, Advanced Health Management
Corporation, and Advanced Health Bukstel and Halfpenny Corporation, each a
Delaware corporation and wholly owned subsidiary of the Company, in the form
attached hereto as EXHIBIT H.
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances or petroleum products
(including crude oil or any derivative or fraction thereof), defined or
regulated as such in or under any Environmental Laws.
"Intellectual Property" has the meaning set forth in Section 4.20.
"Issuer Registration Statement" means a registration statement filed by
the Company which seeks to register the sale of securities by the Company for
cash.
"License Agreement" means the Co-Marketing and License Agreement of
even date herewith between the Purchaser and Advanced Health Technologies
Corporation, a wholly owned subsidiary of the Company, in the form attached
hereto as EXHIBIT G.
"Lien" means, any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim, title
imperfection, encroachment or other survey defect, pledge, restriction, security
interest or other adverse claim, whether arising by contract or under law or
otherwise (including, without limitation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).
"Liquidated Damages Amount" has the meaning set forth in Section 8.2.
"Listing Applications" shall have the meaning set forth in Section 4.4.
"Material Adverse Effect" means for a specified party, a material
adverse effect on (a) the business, operations, property or condition of the
specified party taken as a whole, (b) the ability of the specified party to
perform its material obligations under this Agreement, or (c) the validity or
enforceability against the specified party of this Agreement or the rights or
remedies of any other party
5
7
hereunder to such an extent that such Agreement or the rights or remedies of any
other party hereunder to such an extent that such other party would be deprived
of the practical realization of the benefits contemplated by this Agreement to
be derived by such other party from this Agreement, including the exhibits to
this Agreement, and on the transactions contemplated hereby or by the agreements
or instruments to be entered into in connection herewith, and; provided,
however, that the existence of a Material Adverse Effect shall be deemed not to
include (x) the adverse impact, if any, of changes in laws, rules, regulations,
interpretations or other promulgations of any governmental authority, or changes
in GAAP, regulatory accounting requirements and market conditions applicable to
companies in the same line of business as the specified party, or (y) the impact
of the fees and expenses of all counsel, accountants and financial advisors, and
the other costs and expenses reasonably incurred by the specified party, in
connection with this Agreement and the transactions contemplated by this
Agreement.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $500,000.
"Maturity Date" shall mean the date of maturity of the Convertible
Note; specifically, March 31, 2001.
"Maximum Number of Shares" shall mean 2,213,550 shares of Common Stock,
which amount is equal to 19.9% of the outstanding Common Stock on the Closing
Date, less 300,000 for Warrants.
"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Nasdaq Market" means the Nasdaq Stock Market's National Market.
"Net Cash Proceeds" means, with respect to any transaction, the total
amount of cash proceeds received by the Company or any Subsidiary less (i)
underwriters' fees, brokerage commissions, professional fees and other customary
out-of-pocket expenses payable in connection with such transaction, and (ii) in
the case of dispositions of assets, (A) actual transfer taxes and income taxes
payable with respect to such dispositions, and (B) the amount of Debt, if any,
secured by a Lien on the asset or assets disposed of and required to be, and
actually repaid by the Company or any Subsidiary in connection therewith, and
any trade payables specifically relating to such asset or assets sold by the
Company or any Subsidiary that are not assumed by the purchaser of such asset or
assets.
"Notice of Conversion" means the form to be delivered by the holder of
the Convertible Note upon conversion of all or a portion thereof to the Company
substantially in the form of EXHIBIT D attached hereto.
"Notice of Exercise" means the form to be delivered by a holder of a
Warrant upon exercise of all or a portion thereof to the Company.
6
8
"Offering" has the meaning set forth in the Recitals.
"Other Taxes" has the meaning set forth in Section 3.6(d).
"Par Value Redemption Price" has the meaning set forth in Section
3.3(a).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means all domestic and foreign licenses, franchises, grants,
authorizations, permits, easements, variances, exemptions, consents,
certificates, orders and approvals necessary to own, lease and operate the
properties of, and to carry on the business of the Company and the Subsidiaries.
"Permitted Debt" has the meaning set forth in Section 8.1.
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under the Code and either (i) is maintained, or
contributed to, by any member of the ERISA Group for employees of any member of
the ERISA Group or (ii) has at any time within the preceding five years been
maintained, or contributed to, by any Person which was at such time a member of
the ERISA Group for employees of any Person which was at such time a member of
the ERISA Group.
"Premium Price" shall mean a dollar amount equal to: (i) one hundred
twenty percent (120%) of the principal amount of the Convertible Note then
outstanding, plus (ii) all accrued and unpaid interest (including Default
Interest, if any) thereon.
"Purchase Price" means the purchase price for the Securities set forth
in Section 2.2 hereof.
"Purchaser" means Cybear, Inc., a Delaware corporation, and its
successors and assigns.
"Registrable Securities" has the meaning set forth in Section 10.4(a).
"Registration Default" has the meaning set forth in Section 10.4(e).
"Registration Default Notice" has the meaning set forth in Section
10.4(f).
"Registration Maintenance Period" has the meaning set forth in Section
10.4(d).
"Registration Rights Agreement" means the agreement between the Company
and the Purchaser dated the Closing Date substantially in the form set forth in
EXHIBIT C attached hereto.
"Required Effectiveness Date" has the meaning set forth in Section
10.4(d).
7
9
"Required Registration Statement" means a registration statement on
which the Registrable Securities are listed pursuant to the Registration Rights
Agreement.
"Rights Offering" has the meaning set forth in Section 11.3.
"SEC" means the Securities and Exchange Commission or any entity
succeeding to all of its material functions.
"SEC Reports" shall have the meaning set forth in Section 4.7.
"Securities" means the Convertible Note, the Warrants and, as
applicable, the Conversion Shares and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the agreement between the Purchaser, the
Company and Advanced Health Technologies Corporation, Advanced Health Management
Corporation, and Advanced Health Bukstel and Halfpenny Corporation (each a
Delaware corporation and wholly owned subsidiary of the Company) dated the
Closing Date substantially in the form set forth in EXHIBIT E attached hereto.
"Share Reorganization" has the meaning set forth in Section 11.2.
"Significant Subsidiary" has the meaning ascribed to it under the
regulations promulgated under the Securities Act.
"Solvency Certificate" shall mean a certificate executed by the chief
financial officer of the Company as to the solvency of the Company, the adequacy
of its capital and its ability to pay its debts, all after giving effect to the
issuance and sale of the Convertible Note and the completion of the offering
(including without limitation the payment of any fees or expenses in connection
therewith).
"Special Distribution" has the meaning set forth in Section 11.4.
"Subordination Terms" means with respect to any Debt the terms of
subordination set forth in EXHIBIT F hereto and which terms shall be set forth
in the instrument evidencing or governing such Debt.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time directly
or indirectly owned by such Person. Unless specified to the contrary,
"Subsidiary" means a Subsidiary of the Company.
"Subsidiary Corporate Documents" means the certificates of
incorporation and by-laws of each Subsidiary.
8
10
"Taxes" has the meaning set forth in Section 3.5(a).
"Trading Day" shall mean any Business Day in which the Nasdaq Market or
other automated quotation system or exchange on which the Common Stock is then
traded is open for trading for at least four (4) hours.
"Transaction Agreements" means this Agreement, the Convertible Note,
the Warrants, the Registration Rights Agreement, the License Agreement, the
Security Agreement and the Guaranty Agreement.
"Transfer" means any disposition of Securities that would constitute a
sale thereof under the Securities Act.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under such Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"Warrants" means the Common Stock Purchase Warrants to purchase 300,000
shares of Common Stock issued to the Purchaser on the Closing Date in the form
of EXHIBIT B hereto
"Warrant Shares" has the meaning set forth in Section 4.5.
9
11
1.2 Accounting Terms And Determinations. Unless otherwise specified herein,
all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared, in accordance with generally accepted
accounting principles as in effect from time to time, applied on a consistent
basis (except for changes concurred in by the Company's independent public
accountants) ("GAAP"). All references to "dollars," "Dollars" or "$" are to
United States dollars unless otherwise indicated.
2. PURCHASE AND SALE OF SECURITIES
2.1 Purchase and Sale of Convertible Note. Subject to the terms and
conditions set forth herein, the Company agrees to issue and sell to the
Purchaser, and the Purchaser agrees to purchase from the Company, on the Closing
Date, the Convertible Note in the principal amount of $4,000,000. In connection
with the purchase and sale of the Convertible Note, the Company will issue to
the Purchaser the Warrants to purchase 300,000 shares of Common Stock in the
form of EXHIBIT B hereto.
2.2 Purchase Price. The purchase price for the Convertible Note shall be
100% of the principal amount thereof. One Dollar ($1.00) of the purchase price
of the Convertible Note shall be allocated to the Warrants. The aggregate
consideration payable by the Purchaser to the Company for the Convertible Note
and the Warrants shall be $4,000,000 (the "Purchase Price").
2.3 Closing and Form of Payment.
(a) On the Closing Date, payment of the Purchase Price by the
Purchaser, subject to the satisfaction of all terms and conditions set forth
herein, shall be made by wire transfer to the Company of immediately available
funds.
(b) The closing of the transactions contemplated by this Agreement
shall occur on the Closing Date at the offices of the Company (the "Closing").
At the Closing, the Company shall deliver to the Purchaser (A) the Convertible
Note issued to the Purchaser as of the Closing Date, and (B) the Warrants issued
to the Purchaser as of the Closing Date, against payment of the Purchase Price.
3. PAYMENT TERMS OF CONVERTIBLE NOTE
3.1 Payment Mechanics. The Company will pay all sums becoming due on the
Convertible Note by the method and at the address specified for such purpose as
the Purchaser shall specify to the Company in writing for such purpose, without
the presentation or surrender of the Convertible Note or the making of any
notation thereon, except that upon written request of the Company made
concurrently with or reasonably promptly after payment or prepayment in full of
this Convertible Note, the Purchaser shall surrender the Convertible Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office. All payments to the Purchaser shall be made for the
Purchaser's benefit to the Purchaser. Prior to any sale or other disposition of
the Convertible Note, the Purchaser will, at its election, either endorse
thereon the amount of principal paid thereon and the last date to which interest
has been paid thereon or surrender the Convertible Note to the Company in
exchange for a new Convertible Note. The Company will afford
10
12
the benefits of this Section 3.1 to any transferee of the Convertible Note
purchased under this Agreement and that has made the same agreement relating to
this Convertible Note as the Purchaser has in this Section 3.1; PROVIDED that
such transferee is an "accredited investor" under Rule 501 of the Securities
Act.
3.2 Voluntary Prepayment. Following the Closing Date, the Company, at any
time and from time to time, upon not less than thirty (30) days prior written
notice ("Prepayment Notice") to the Purchaser, shall have the right to redeem
all, but not less than all, of the outstanding principal amount of the
Convertible Note then outstanding at the Premium Price. The Purchaser will have
Conversion Rights until the close of business on the date immediately preceding
the date fixed for redemption.
3.3 Mandatory Payments.
(a) Interest Payments: Par Value Redemption. Commencing on the
Closing Date and continuing thereafter until the Maturity Date, the Company
shall pay to Purchaser on a quarterly basis interest computed at a rate equal to
ten percent (10%) per annum on the outstanding principal balance of the
Convertible Note outstanding from time to time during such quarterly period. The
first quarterly interest payment shall be due on June 30, 2000. Two subsequent
quarterly interest payments shall be made, one on September 30, 2000 and the
other on December 31, 2000. On March 31, 2001 the remaining outstanding
principal balance of the Convertible Note plus all accrued and unpaid interest
thereon shall be due and payable in full (including, without limitation, Default
Interest, if any) (the unpaid principal balance of the Convertible Note, plus
all accrued and unpaid interest thereon, including Default Interest, if any, is
herein referred to as the "Par Value Redemption Price").
(b) Change of Control Premium Price Redemption. Upon the occurrence
of a Change of Control of the Company and for a period of six months thereafter,
the Purchaser shall have the right to cause the Company to redeem the principal
amount of the Convertible Note then outstanding, together with all accrued and
unpaid interest (including Default Interest, if any) thereon at the Premium
Price, upon ten (10) days prior written notice.
3.4 Prepayment Procedures.
(a) Any prepayment or redemption of the Convertible Note pursuant
to Sections 3.2 or 3.3 above shall be deemed to be effective and consummated
(for purposes of determining the Premium Price, the amount of accrued and unpaid
interest and the time at which the Holder shall thereafter not be entitled to
deliver a Notice of Conversion for the Convertible Note) on the date the
redemption is consummated.
(b) Within five (5) Business Days after (i) the Maturity Date or
(ii) the effective date of a prepayment or redemption of the Convertible Note as
specified in Section 3.4(a) above, the Company shall deliver by wire transfer in
immediately available funds the applicable prepayment/redemption price to the
Purchaser. If the Purchaser does not receive payment of any amounts due for
prepayment or on redemption of the Convertible Note by reason of the Company's
failure to make payment at the times prescribed above for any reason, the
Company shall pay to the
11
13
Purchaser on demand (i) interest on the sums not paid when due at an annual rate
equal to the Default Interest Rate; and (ii) all costs of collection, including,
but not limited to, reasonable attorneys' fees and costs, whether or not any
suit or other formal proceedings are instituted.
(c) Any Notice of Conversion delivered by the Purchaser (including
delivery via telecopy) to the Company prior to the (i) Maturity Date or (ii)
effective date of a redemption specified in Section 3.4(a) above, shall be
honored by the Company and the conversion of the Convertible Note shall be
deemed effected on the Conversion Date. In addition, between the effective date
of redemption specified in Section 3.4(a) above and the date the Company is
required to deliver the redemption proceeds to the Purchaser, the Purchaser may
deliver a Notice of Conversion to the Company, PROVIDED that such notice will be
(i) of no force or effect if the Company timely pays the redemption proceeds to
the Purchaser when due or (ii) honored on or as of the date the Notice of
Conversion if the Company fails to timely pay the redemption proceeds to the
Purchaser when due.
3.5 Payment of Additional Amounts. Any and all payments by the Company
hereunder or under the Convertible Note to the Purchaser shall be made without
deduction or withholding for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto (all such taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes") unless such Taxes are
required by law or the administration thereof to be deducted or withheld. If the
Company shall be required by law or the administration thereof to deduct or
withhold any Taxes from or in respect of any sum payable under the Convertible
Note (i) the Company shall make such deductions or withholdings; and (ii) the
Company shall forthwith pay the full amount deducted or withheld to the relevant
taxation or other authority in accordance with applicable law.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as of the Closing
Date the following:
4.1 Organization and Qualification. The Company and each Significant
Subsidiary is a corporation (or other legal entity) duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, with full power and authority to own, lease, use and operate its
properties and to carry on its business as and where now owned, leased, used,
operated and conducted. The SEC Reports sets forth a list of all Significant
Subsidiaries and the jurisdiction in which each is incorporated. The Company and
each of its Significant Subsidiaries is duly qualified to conduct business as a
foreign corporation and is in good standing in every jurisdiction in which the
nature of the business conducted by it makes such qualification necessary,
except where such failure would not have a Material Adverse Effect.
4.2 Authorization and Execution.
(a) Except as contemplated by Section 7.9, the Company has all
requisite corporate power and authority to enter into and perform the
Transaction Agreements and to consummate the transactions contemplated hereby
and thereby and to issue the Securities in accordance with the terms hereof and
thereof.
12
14
(b) Except as contemplated by Section 7.9, the execution, delivery
and performance by the Company of each Transaction Agreement and the issuance by
the Company of the Securities have been duly and validly authorized and no
further consent or authorization of the Company, its Board of Directors or its
shareholders is required.
(c) The Transaction Agreements have been duly executed and
delivered by the Company.
(d) The Transaction Agreements constitute, and upon execution and
delivery thereof by the Purchaser , will constitute, a valid and binding
agreement of the Company, in each case enforceable against the Company in
accordance with its respective terms, subject to (i) applicable bankruptcy,
insolvency or similar laws affecting the enforceability of creditors rights
generally and (ii) equitable principles of general applicability.
13
15
4.3 Capitalization. As of December 31, 1999, the authorized, issued and
outstanding capital stock of the Company is as set forth on Schedule 4.3 hereto.
All of such outstanding shares of capital stock are, or upon issuance will be,
duly authorized, validly issued, fully paid and non-assessable. No shares of
capital stock of the Company are subject to preemptive rights of the
stockholders of the Company or any liens or encumbrances imposed through the
actions or failure to act of the Company. Other than as set forth in the SEC
Reports or as disclosed in Schedule 4.3, as of the date hereof, (i) there are no
outstanding options, warrants, scrip, rights to subscribe for, puts, calls,
rights of first refusal, agreements, understandings, claims or other commitments
or rights of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the Company
or any of its Subsidiaries, or other arrangements, in each case under which the
Company or any of its Subsidiaries is or may become bound to issue additional
shares of capital stock of the Company or any of its Subsidiaries, and (ii)
there are no agreements or arrangements under which the Company or any of its
Subsidiaries are obligated to register the sale of any of its or their
securities under the Securities Act (except pursuant to the Registration Rights
Agreement) and (iii) there are no anti-dilution or price adjustment provisions
contained in any security issued by the Company (or in any agreement providing
rights to security holders) that will be triggered by the issuance of the
Convertible Note, Conversion Shares, Warrants or Warrant Shares. The Company has
made available to the Purchaser true and correct copies of the Company's SEC
Reports, and the terms of all securities convertible into or exercisable for
Common Stock and the material rights of the holders thereof in respect thereto.
4.4 Governmental Authorization. The execution and delivery by the Company
of the Transaction Agreements will not, the issuance and sale by the Company of
the Securities will not, and the consummation of the transactions contemplated
hereby and by the other Transaction Agreements will not, require any action by
or in respect of, or filing with, any governmental body, agency or governmental
official except (a) such actions or filings that have been undertaken or made
prior to the date hereof and that will be in full force and effect (or as to
which all applicable waiting periods have expired) on and as of the date hereof
or which are not required to be filed on or prior to the Closing Date, (b) such
actions or filings that, if not obtained, would not result in a Material Adverse
Effect, (c) the additional share notice ("Listing Applications") to be filed
with the Nasdaq Market relating to the shares of Common Stock issuable upon
conversion of the Convertible Note and exercise of the Warrants and (d) the
filing of a "Form D" as described in Section 7.13 below.
4.5 Issuance of Shares. Subject to the matters contemplated by Section 7.9,
upon conversion in accordance with the terms of the Convertible Note, or upon
exercise in accordance with the terms of the Warrants (assuming the payment of
the exercise price set forth in the Warrants), the shares of Common Stock issued
upon conversion of the Convertible Note (the "Conversion Shares") or exercise of
the Warrants (the "Warrant Shares") shall be duly and validly issued and
outstanding, fully paid and nonassessable, free and clear of any taxes, Liens
and charges with respect to issuance and shall not be subject to preemptive
rights or similar rights of any other stockholders of the Company. Assuming the
representations and warranties of the Purchaser herein are true and correct in
all material respects, each of the Securities will have been issued in material
compliance with all applicable United States federal securities laws. The
Company understands and acknowledges that, in certain circumstances, the
issuance of the Conversion Shares could dilute the ownership interests of other
stockholders of the Company. The Company further acknowledges that its
obligation to issue the Conversion Shares upon conversion of the Convertible
Note in accordance with this
14
16
Agreement and the Convertible Note is absolute and unconditional regardless of
the dilutive effect that such issuance may have on the ownership interests of
other stockholders of the Company.
4.6 No Conflicts. The execution and delivery by the Company of the
Transaction Agreements to which it is a party will not, the issuance and sale by
the Company of the Securities will not and the consummation of the transactions
contemplated hereby and by the other Transaction Agreements will not, as of the
date hereof, contravene or constitute a default under or violation of (i) any
provision of applicable law or regulation, (ii) the Company Corporate Documents,
(iii) any agreement, judgment, injunction, order, decree or other material
instrument binding upon the Company or any Subsidiary or any of their respective
assets, or result in the creation or imposition of any Lien on any asset of the
Company or any Subsidiary, except in the case of (i) or (ii) hereof where such
contravention or default would not have a Material Adverse Effect. The Company
and each Subsidiary is in compliance with and conforms to all statutes, laws,
ordinances, rules, regulations, orders, restrictions and all other legal
requirements of any domestic or foreign government or any instrumentality
thereof having jurisdiction over the conduct of its businesses or the ownership
of its properties, except in each case where such failure would not have a
Material Adverse Effect.
4.7 Financial Information and Sec Reports. Since December 31, 1998, the
Company has timely filed all forms, reports and documents with the SEC required
to be filed by it under the Exchange Act through the date hereof (all of the
foregoing filed prior to the date hereof and all exhibits included therein and
financial statements and schedules thereto and documents (other than exhibits)
incorporated by reference therein, being referred to herein collectively as the
"SEC Reports"). The Company has made available to the Purchaser true and
complete copies of the SEC Reports, except for such exhibits and incorporated
documents, as well as the Company's unaudited financial statements for the year
ended December 31, 1999 which the Company intends to file after the completion
of its audit as part of its Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (the "1999 Statement"). Such SEC Reports, at the time filed
complied in all material respects in light of the circumstances when made with
the requirements of the Exchange Act and the rules and regulations of the SEC
thereunder applicable to such SEC Reports. The SEC Reports (including without
limitation, the financial statements or schedules included therein) do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The audited and
unaudited consolidated balance sheets of the Company and its Subsidiaries
contained in the SEC Reports and the 1999 Statement, and the related
consolidated statements of income, changes in stockholders' equity and changes
in cash flows for the periods then ended, including the footnotes thereto,
except as indicated therein, (i) complied in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, (ii) have been prepared in accordance with GAAP
consistently applied throughout the periods indicated, except that the unaudited
financial statements do not contain notes and may be subject to normal audit
adjustments and normal annual adjustments and (iii) fairly present the financial
condition of the Company and its Subsidiaries at the dates indicated and the
consolidated results of their operations and cash flows for the periods then
ended. Since December 31, 1999 (the "Balance Sheet Date"), except as disclosed
in the SEC Reports, the 1999 Statement or otherwise disclosed to the Purchaser
in writing, there has been (i) no material adverse change in the assets or
liabilities, or in the business or financial condition, or in the results of
operations, of the Company
15
17
and its Subsidiaries, whether as a result of any legislative or regulatory
change, revocation of any license or rights to do business, fire, explosion,
accident, casualty, labor trouble, flood, drought, riot, storm, condemnation,
act of God, public force or otherwise and (ii) no material adverse change in the
assets or liabilities, or in the business or financial condition, or in the
results of operations of the Company and its Subsidiaries except in the ordinary
course of business.
4.8 Litigation. Except as disclosed in the SEC Reports or in Schedule 4.8,
there is no action, suit or proceeding pending or, to the knowledge of the
Company, threatened against the Company or any Subsidiary, before any court or
arbitrator or any governmental body, agency or official which is reasonably
likely to have a Material Adverse Effect.
4.9 Compliance with ERISA and Other Benefit Plans.
(a) Each member of the ERISA Group has fulfilled its obligations
under the minimum funding standards of ERISA and the Code with respect to each
Plan and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code with respect to each Plan. No member of the
ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Code in respect of any Plan, (ii) failed to make any required
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Code or (iii) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA.
(b) The benefit plans not covered under clause (a) above (including
profit sharing, deferred compensation, stock option, employee stock purchase,
bonus, retirement, health or insurance plans, collectively the "Benefit Plans")
relating to the employees of the Company are duly registered where required by,
and are in good standing in all material respects under, all applicable laws.
All required employer and employee contributions and premiums under the Benefit
Plans to the date hereof have been made, the respective fund or funds
established under the Benefit Plans are funded in accordance with applicable
laws, and no past service funding liabilities exist thereunder.
(c) No Benefit Plans have any unfunded liabilities, either on a
"going concern" or "winding up" basis and determined in accordance with all
applicable laws and actuarial practices and using actuarial assumptions and
methods that are reasonable in the circumstances. No event has occurred and no
condition exists with respect to any Benefit Plans that has resulted or could
reasonably be expected to result in any pension plan having its registration
revoked or wound up (in whole or in part) or refused for the purposes of any
applicable laws or being placed under the administration of any relevant pension
benefits regulatory authority or being required to pay any taxes or penalties
(in any material amounts) under any applicable laws.
4.10 Environmental Matters. The costs and liabilities associated with
Environmental Laws (including the cost of compliance therewith) are unlikely to
have a Material Adverse Effect. Each of the Company and the Subsidiaries
conducts its businesses in compliance in all material respects with all
applicable Environmental Laws.
16
18
4.11 Taxes. All United States federal, state, county, municipal, local or
foreign income tax returns and all other material tax returns (including foreign
tax returns) which are required to be filed by or on behalf of the Company and
each Subsidiary have been filed and all material taxes due pursuant to such
returns or pursuant to any assessment received by the Company and each
Subsidiary have been paid except those being disputed in good faith and for
which adequate reserves have been established. The charges, accruals and
reserves on the books of the Company and each Subsidiary in respect of taxes or
other governmental charges have been established in accordance with GAAP.
4.12 Investments, Joint Ventures. Except set forth on Schedule 4.12, the
Company has no Significant Subsidiaries or other direct or indirect Investment
in any Person, and the Company is not a party to any partnership, management,
shareholders' or joint venture or similar agreement, other than as set forth in
the SEC Reports.
17
19
4.13 Not an Investment Company. Neither the Company nor any Subsidiary is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
4.14 No Solicitation; No Integration with Other Offerings. No form of
general solicitation or general advertising was used by the Company or, to the
best of its actual knowledge, any other Person acting on behalf of the Company,
in connection with the offer and sale of the Securities. Neither the Company,
nor, to its knowledge, any Person acting on behalf of the Company, has, either
directly or indirectly, sold or offered for sale to any Person (other than the
Purchaser) any of the Securities or, within the six months prior to the date
hereof, any other similar security of the Company except as contemplated by this
Agreement, and the Company represents that neither itself nor any Person
authorized to act on its behalf (except that the Company makes no representation
as to the Purchaser and its Affiliates) will sell or offer for sale any such
security to, or solicit any offers to buy any such security from, or otherwise
approach or negotiate in respect thereof with, any Person or Persons so as
thereby to cause the issuance or sale of any of the Securities to be in
violation of any of the provisions of Section 5 of the Securities Act. The
issuance of the Securities to the Purchaser will not be integrated with any
other issuance of the Company's securities (past, current or future) which
requires stockholder approval under the rules of the Nasdaq Market.
4.15 Permits. Each of the Company and its Subsidiaries has all material
Permits; (b) all such Permits are in full force and effect, and each of the
Company and its Subsidiaries has fulfilled and performed all material
obligations with respect to such Permits; and (c) no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
by the issuer thereof or which results in any other material impairment of the
rights of the holder of any such Permit.
4.16 Leases. Except as disclosed in the SEC Reports, neither the Company nor
any Subsidiary is a party to any capital lease obligation with a value greater
than $100,000 or to any operating lease with an aggregate annual rental greater
than $100,000 during the life of such lease.
4.17 Public Utility Holding Company. Neither the Company nor any Subsidiary
is, or will be upon the issuance and sale of the Securities and the use of the
proceeds described herein, subject to regulation under the Public Utility
Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate
Commerce Act or to any federal or state statute or regulation limiting its
ability to issue and perform its obligations under any Transaction Agreement.
4.18 Intellectual Property Rights.
(a) Except as set forth on Schedule 4.18 attached hereto, each of
the Company and its Subsidiaries owns, or is licensed under, and has the rights
to use, as applicable, all of the patents, trademarks, tradenames, service
marks, service names, trade secrets, protected computer software (including,
without limitation, any source or object codes therefor or documentation
relating thereto) and copyright registrations, and applications therefor,
including all Internet domain names registered with any third party, technology
rights and licenses, franchises, know-how, processes, inventions and
intellectual property rights necessary for and material to the conduct of its
business (collectively, "Material Intellectual Property").
18
20
(b) Schedule 4.18 contains a true and complete list of all Material
Intellectual Property, therefor owned by or licensed to the Company or its
Subsidiaries on the date hereof, including all Internet domain names registered
with any third party. Except as set forth in Schedule 4.18, the Company or its
Subsidiaries owns, or is a valid licensee of all Material Intellectual Property
used in its business as currently conducted. Neither the Company, its
Subsidiaries or, to the Company's and its Subsidiaries' knowledge, its
predecessors has materially interfered with or misappropriated the intellectual
property of others, and none of the Material Intellectual Property as used in
the business conducted by such entity infringes in any material manner upon or
otherwise violates the intellectual property of others, nor to the Company's and
its Subsidiaries' knowledge with respect to predecessors, has any person
asserted a claim of such material infringement or violation of intellectual
property against any such entity. Except as set forth on Schedule 4.18, neither
the Company nor its Subsidiaries has licensed or sublicensed its rights in any
Material Intellectual Property, except non-exclusive licenses in the ordinary
course of business, forms of which license agreements and a list of which
licensees, the Company has delivered or made available to the Purchaser.
(c) To the Company's and its Subsidiaries' knowledge, except as
described on Schedule 4.18 or disclosed in the SEC Reports, no officer, director
or employee of the Company or its Subsidiaries has entered into any contract
other than on behalf of the Company or such Subsidiary and with the Company's
authorization, which requires such officer, director or employee to assign any
interest in any Material Intellectual Property.
(d) The Material Intellectual Property owned or licensed by the
Company or its Subsidiaries is sufficient to continue to operate the business as
conducted on the date hereof.
(e) Except as set forth on Schedule 4.18, there are no settlements,
forbearances to βββ, consents, judgments, or orders of which the Company or a
Subsidiary is a party or of which it is aware and which (i) restrict the
Company's or a Subsidiary's rights to use any Material Intellectual Property
owned by or licensed to the Company or such Subsidiary or (ii) permit third
parties to use any Material Intellectual Property.
(f) Except as set forth in Section 12 hereof or on Schedule 4.18,
the consummation of the transactions contemplated hereby will not result in the
material loss or impairment of Company's or a Subsidiary's right to own or use
any of the Material Intellectual Property, nor will require the consent of any
government authority or third party in respect of such Material Intellectual
Property.
4.19 Insurance. The Company and its Subsidiaries maintain insurance in at
least such amounts and cover such risks such that any uninsured loss would not
have a Material Adverse Effect. All insurance coverages of the Company and its
Subsidiaries are in full force and effect and there are no past due premiums in
respect of any such insurance.
4.20 Title to Properties. The Company and its Subsidiaries have good and
marketable title to all their respective properties reflected on the financial
statements referred to in Section 4.7 as being owned by the Company.
19
21
4.21 Internal Accounting Controls. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient, in the judgment of
the Company's Board of Directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences, where non-compliance therewith could not reasonably
be expected, in the aggregate, to have a Material Adverse Effect.
4.22 Standstill. The Company shall comply with the terms and provisions of
Section 8.3 and has no intention of violating the terms and provisions of such
Section.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Purchaser hereby represents and warrants to the Company that:
5.1 Authorization and Execution.
(a) The execution, delivery and performance of the Transaction
Agreements, to the extent the Purchaser has executed such agreements and the
purchase of the Securities pursuant hereto are within the Purchaser's corporate
powers, and have been duly and validly authorized by all requisite corporate
action;
(b) The Transaction Agreements have been duly executed and
delivered by the Purchaser.
(c) The execution and delivery by the Purchaser of the Transaction
Agreements to which it is a party does not, and the consummation of the
transactions contemplated hereby and thereby will not, contravene or constitute
a default under or violation of (i) any provision of applicable law or
regulation, or (ii) any agreement, judgment, injunction, order, decree or other
instrument binding upon Purchaser.
5.2 Acquisition for Investment. The Purchaser is acquiring the Convertible
Note and the Warrants, and will acquire the Conversion Shares and the Warrant
Shares, for its own account for investment and not with a view towards the
public sale or distribution thereof within the meaning of the Securities Act;
and the Purchaser has no intention of making any distribution, within the
meaning of the Securities Act, of the Securities except in compliance with the
registration requirements of the Securities Act or pursuant to an exemption
therefrom; PROVIDED, however, that by making this representation the Purchaser
does not agree to hold the securities for any minimum or specified period of
time (unless any such holding period is required by the terms of any such
exemption being relied on by the Purchaser); and PROVIDED that the disposition
of the Purchaser's property shall at all times be and remain within its control.
5.3 Accredited Investor. The Purchaser is an "accredited investor" as that
term is defined in Rule 501 of Regulation D under the Securities Act by reason
of Rule 501(a)(3) thereof;
20
22
5.4 Reoffers and Resales. The Purchaser will not, directly or indirectly,
offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to
buy, purchase or otherwise acquire or take a pledge of) any of the Securities
unless registered under the Securities Act, pursuant to an exemption from
registration under the Securities Act or in a transaction not requiring
registration under the Securities Act;
5.5 Company Reliance. The Purchaser understands that (a) the Convertible
Note is being offered and sold and the Warrants are being issued to the
Purchaser, (b) upon conversion of the Convertible Note, the Conversion Shares
will be issued to the Purchaser, (c) upon exercise of the Warrants, the Warrant
Shares will be issued to the Purchaser, in each such case in reliance on one or
more exemptions from the registration requirements of the Securities Act,
including, without limitation, Regulation D, and exemptions from state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein
in order to determine the availability of such exemptions and the eligibility of
the Purchaser to acquire or receive an offer to acquire the Securities; and the
information with respect to the Purchaser provided to the Company by the
Purchaser is accurate and complete in all material respects;
5.6 Information Provided. The Purchaser and its advisors, if any, have
requested, received and considered all information relating to the business,
properties, operations, condition (financial or other), results of operations or
prospects of the Company and information relating to the offer and sale of the
Convertible Note and issuance of the Warrants, and the offer of the Conversion
Shares and the Warrant Shares deemed relevant by them (assuming the accuracy and
completeness of the SEC Reports and of the Company's responses to the
Purchaser's requests); the Purchaser and its advisors, if any, have been
afforded the opportunity to ask questions of the Company concerning the terms of
the offering of the Securities and the business, properties, operations,
condition (financial or other), results of operations and prospects of the
Company and have received satisfactory answers to any such inquiries (assuming
the accuracy and completeness of the SEC Reports and the Company's responses to
the Purchaser's requests); without limiting the generality of the foregoing, the
Purchaser has had the opportunity to obtain and to review the SEC Reports and
the Schedules hereto in connection with its decision to purchase the Convertible
Note and to acquire the Warrants, the Purchaser has relied solely upon the SEC
Reports, the Schedules hereto, the representations, warranties, covenants and
agreements of the Company set forth in this Agreement and to be contained in the
other Transaction Documents, as well as any independent investigation of the
Company completed by the Purchaser or its advisors, if any, and is not relying
on any oral representation, statement or promise of any employee or agent of the
Company; the Purchaser understands that its investment in the Securities
involves a high degree of risk.
5.7 Absence of Approvals. The Purchaser understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities;
5.8 Purchaser Status. The Purchaser is not a "broker" or "dealer" as those
terms are defined in the Exchange Act which is required to be registered with
the SEC pursuant to Section 15 of the Exchange Act.
21
23
5.9 Standstill. The Purchaser shall comply with the terms and provisions of
Section 8.3 and has no intention of violating the terms and provisions of such
Section.
6. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES
6.1 Conditions Precedent to the Purchaser's Obligation to Purchase. The
obligation of the Purchaser to purchase the Convertible Note and Warrants at the
Closing is subject to the satisfaction, on or before the Closing Date of each of
the following conditions, PROVIDED that these conditions are for Purchaser's
sole benefit and may be waived by Purchaser at any time in its sole discretion:
(a) The Company shall have executed and delivered to the Purchaser
the Transaction Agreements;
(b) The Company shall have delivered to the Purchaser duly executed
certificates representing the Convertible Note and the Warrants in accordance
with Section 2.3 hereof;
(c) The Company shall have delivered the Solvency Certificate;
(d) The representations and warranties of the Company contained in
each Transaction Agreement shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made at such time
(except for representations and warranties that speak as of a specified date)
and the Company shall have performed, satisfied and complied in all material
respects with all covenants, agreements and conditions required by such
Transaction Agreements to be performed, satisfied or complied with by it at or
prior to the Closing Date. The Purchaser shall have received an Officer's
Certificate, executed by the chief executive officer of the Company, dated as of
the Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by the Purchaser;
(e) The Company shall have received all governmental, board of
directors, shareholders and third party consents and approvals necessary in
connection with the issuance and sale of the Securities;
(f) All applicable waiting periods in respect to the issuance and
sale of the Securities shall have expired without any action having been taken
by any competent authority that could restrain, prevent or impose any materially
adverse conditions thereon or that could seek or threaten any of the foregoing;
(g) The Purchaser shall have received an opinion, dated the Closing
Date, of β'ββββββββ Graev & Karabell LLP, counsel to the Company, in a form
acceptable to the Purchaser, as to certain matters relating to the Company and
the transactions contemplated by this Agreement;
(h) All fees and expenses due and payable by the Company on or
prior to the Closing Date shall have been paid;
(i) The Company Corporate Documents and the Subsidiary Corporate
Documents, if any, shall be in full force and effect and no term or condition
thereof shall have been amended, waived or otherwise modified without the prior
written consent of the Purchaser;
22
24
(j) There shall exist no action, suit, investigation, litigation or
proceeding pending or threatened in any court or before any arbitrator or
governmental instrumentality that challenges the validity of or purports to
affect this Agreement or any other Transaction Agreement, or other transaction
contemplated hereby or thereby or that could reasonably be expected to have a
Material Adverse Effect, or any material adverse effect on the enforceability of
the Transaction Agreements or the Securities or the rights of the Purchaser;
(k) The Purchaser shall have confirmed receipt of the Convertible
Note and the Warrants to be issued, duly executed by the Company;
(l) Immediately before and after the Closing Date, no Default or
Event of Default shall have occurred and be continuing; and
(m) The Purchaser shall have received all other opinions,
resolutions, certificates, instruments, agreements or other documents as it
shall reasonably request.
6.2 Conditions to the Company's Obligations. The obligations of the Company
to issue and sell the Securities to the Purchaser pursuant to this Agreement are
subject to the satisfaction, at or prior to the Closing Date, of the following
conditions:
(a) The representations and warranties of the Purchaser contained
herein shall be true and correct in all material respects on the Closing Date
and the Purchaser shall have performed and complied in all material respects
with all agreements required by this Agreement to be performed or complied with
by the Purchaser at or prior to the Closing Date;
(b) The issue and sale of the Securities by the Company shall not
be prohibited by any applicable law, court order or governmental regulation;
(c) Receipt by the Company of duly executed counterparts of the
Transaction Agreements signed by the Purchaser; and
(d) The Company shall have received payment of the Purchase Price
of the Convertible Note.
7. AFFIRMATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof for so
long as the Convertible Note remains outstanding (except for Sections 7.1(a),
7.8, 7.9, 7.10 and 7.11, which shall apply for so long as the Convertible Note
or Warrants remain outstanding) and for the benefit of the Purchaser:
7.1 Information. The Company will deliver to each holder of the Convertible
Note:
(a) promptly upon the filing thereof, copies of (i) all
registration statements (other than the exhibits thereto and any registration
statements on Form S-8 or its equivalent), (ii) all reports on Forms 10-K, 10-Q
and 8-K (or their equivalents) which the Company or any Subsidiary has filed
with the SEC and (iii) any material press releases issued by the Company or any
Subsidiary;
23
25
(b) within five Business Days after the Company's Chief Executive
Officer or Chief Financial Officer obtains knowledge of a Default or Event of
Default , a certificate of the chief financial officer of the Company setting
forth the details thereof and the action which the Company is taking or proposes
to take with respect thereto;
(c) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed and any other document generally distributed to
shareholders;
(d) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined in
Section 4043 of ERISA) with respect to any Plan which might constitute grounds
for a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of such
notice; (iii) receives notice from the PBGC under Title IV of ERISA of an intent
to terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer any Plan, a copy of
such notice; (iv) applies for a waiver of the minimum funding standard under
Section 412 of the Code, a copy of such application; (v) gives notice of intent
to terminate any Plan under Section 4041(c) of ERISA, a copy of such notice and
other information filed with the PBGC; (vi) gives notice of withdrawal from any
Plan pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any required payment or contribution to any Plan or Multiemployer Plan or
in respect of any Benefit Arrangement or makes any amendment to any Plan or
Benefit Arrangement which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security, a certificate of the chief
financial officer or the chief accounting officer of the Company setting forth
details as to such occurrence and action, if any, which the Company or
applicable member of the ERISA Group is required or proposes to take; and
(e) promptly following the commencement thereof, notice and a
description in reasonable detail of any material litigation or proceeding to
which the Company or any Subsidiary is a party which the Company is required to
disclose in its SEC Reports.
7.2 Payment of Obligations. The Company and its Subsidiaries will pay and
discharge, at or before maturity, all their respective material obligations,
including, without limitation, tax liabilities, except where the same may be
contested in good faith by appropriate proceedings and will maintain, in
accordance with GAAP, appropriate reserves for the accrual of any of the same.
7.3 Maintenance of Property; Insurance. The Company and each Subsidiary
will keep, all property useful and reasonably necessary in its business in good
working order and condition, ordinary wear and tear excepted. In addition, the
Company and each Subsidiary will maintain insurance in at least such amounts and
against such risks as it has insured against as of the Closing Date.
24
26
7.4 Maintenance of Existence. The Company will continue to engage in
business of the same general type as now conducted by the Company, and will
preserve, renew and keep in full force and effect its respective corporate
existence and their respective material rights, privileges and franchises
necessary or desirable in the normal conduct of business except as permitted
pursuant to Section 8.5.
7.5 Compliance with Laws. The Company and each Subsidiary will comply, in
all material respects, with all federal, state, municipal, local or foreign
applicable laws, ordinances, rules, regulations, municipal by-laws, codes and
requirements of governmental authorities (including, without limitation,
Environmental Laws and ERISA and the rules and regulations thereunder) except
(i) where compliance therewith is contested in good faith by appropriate
proceedings or (ii) where non-compliance therewith could not reasonably be
expected, in the aggregate, to have a Material Adverse Effect.
7.6 Inspection of Property, Books and Records. The Company and each
Subsidiary will keep proper books of record and account in accordance with GAAP;
and will permit, during normal business hours upon reasonable notice, the
Purchaser or an Affiliate thereof, as representatives of the Purchaser, to visit
and inspect any of their respective properties, upon reasonable prior notice, to
examine and make abstracts from any of their respective books and records and to
discuss their respective affairs, finances and accounts with their respective
executive officers and independent public accountants, all at such reasonable
times at Purchaser's expense. The Purchaser and any such Affiliate shall
maintain the confidentiality of any information of the Company disclosed to it.
7.7 Investment Company Act. The Company will not be or become an open-end
investment trust, unit investment trust or face-amount certificate company that
is or is required to be registered under Section 8 of the Investment Company Act
of 1940, as amended.
7.8 Supplemental Information. If at any time the Company is not subject to
the requirements of Section 13 or 15(d) of the Exchange Act, the Company will
promptly furnish at its expense, upon request, for the benefit of the holders
from time to time of Securities, and prospective purchasers of Securities,
information satisfying the information requirements of Rule 144 under the
Securities Act.
7.9 Reserved Shares and Listings.
(a) The Purchaser acknowledges that the Company does not presently
have sufficient authorized but unissued shares of Common Stock to deliver to the
Purchaser upon exercise of the Warrants and conversion of the Convertible Notes.
No later than July 14, 2000, the Company shall have taken all action necessary,
including, without limitation, calling a meeting of shareholders to amend its
certificate of incorporation to authorize a sufficient number of shares to
enable the Company to issue the Maximum Number of Shares plus the shares
issuable upon exercise of the Warrant;
(b) Subject to Section 7.9(a), the Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Convertible Note and issuance of the Conversion Shares (based on the Maximum
Number of Shares under the Convertible Note), and the exercise in full of the
Warrants and the issuance of the Warrant Shares (based on the exercise price of
the Warrants in
25
27
effect from time to time). The Company shall not reduce the number of shares of
Common Stock reserved for issuance upon conversion of the Convertible Note and
exercise of the Warrants without the prior written consent of the Purchaser.
(c) The Company shall promptly secure the listing of the Conversion
Shares and Warrant Shares upon each national securities exchange or automated
quotation system, if any, upon which the shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares and Warrant Shares from time to time issuable upon conversion or exercise
of the Convertible Note and Warrants. The Company will obtain and maintain the
listing and trading of its Common Stock on the Nasdaq Market, the Nasdaq
SmallCap Market, the New York Stock Exchange, Inc., or the American Stock
Exchange Inc., and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the National
Association of Securities Dealers, Inc. (the "NASD") and such exchanges, as
applicable. The Company shall promptly provide to the Purchaser copies of any
notices it receives from Nasdaq regarding the continued eligibility of the
Common Stock for listing on the Nasdaq Market.
(d) On or prior to the date that the SEC declares effective the
Required Registration Statement, the Company shall properly file all Listing
Applications with the Nasdaq Market associated with the shares of Common Stock
covered by such registration statement.
26
28
7.10 Issuance of Shares of Common Stock. Upon receipt of a Notice of
Conversion or Notice of Exercise, as applicable, the Company shall immediately
issue irrevocable instructions to its transfer agent to issue certificates,
registered in the name of the Purchaser or its nominee, for the Conversion
Shares or Warrant Shares, as applicable, in such amounts as specified from time
to time by the Purchaser to the Company upon proper conversion of the
Convertible Note or exercise of the Warrants. Upon conversion of the Convertible
Note in accordance with its terms, and/or exercise of the Warrants in accordance
with their terms, the Company will, and will use its best lawful efforts to
cause its transfer agent to, issue one or more certificates representing shares
of Common Stock in such name or names and in such denominations specified by
Purchaser in a Notice of Conversion or Notice of Exercise, as the case may be.
As long as a Required Registration Statement contemplated by the Registration
Rights Agreement shall remain effective, the shares of Common Stock issuable
upon conversion of Convertible Note or exercise of the Warrants, if transferred
pursuant to such Required Registration Statement, shall be issued to any
transferee of such shares from Purchaser without any restrictive legend. Nothing
in this Section 7.12 shall affect in any way Purchaser's obligations to comply
with all securities laws applicable to Purchaser upon resale of such shares of
Common Stock, including any prospectus delivery requirements.
7.11 Form D; Blue Sky Laws. The Company agrees to file a "Form D" with
respect to the Securities as required under Regulation D of the Securities Act
and to provide a copy thereof to the Purchaser promptly after such filing. The
Company shall, on or before the Closing Date, take such action as the Company
shall reasonable determine is necessary to qualify the Securities for sale to
the Purchaser at the Closing pursuant to this Agreement under applicable
securities or "blue sky" laws of the states of the United States (or to obtain
an exemption from such qualification), and shall provide evidence of any such
action so taken to the Purchaser on or prior to the Closing Date.
8. NEGATIVE COVENANTS
The Company or the Purchaser, as the case may be, hereby agrees that,
from and after the date hereof for so long as the Convertible Note remains
outstanding and for the benefit of the other party:
8.1 Limitation on Debt or Other Liabilities. The Company will not itself,
and will not permit any Subsidiary to, create, assume, incur or in any manner
become liable in respect of, including, without limitation, by reason of any
business combination transaction (all of which are referred to herein as
"incurring"), any Debt; PROVIDED that the following items of Debt shall be
excluded from such calculation (such Debt being referred to as "Permitted
Debt"):
(a) Debt not in excess of $1,000,000 aggregate principal amount
which is outstanding on the date hereof and which would be reflected on a
consolidated balance sheet of the Company as of the date hereof prepared in
accordance with GAAP;
(b) Non-recourse Debt not in excess of $1,000,000 aggregate
principal amount which Debt, by its terms, bars the lender thereof from action
against the Company or any Subsidiary, as borrower, if the security value falls
below the amount required to repay such Debt;
27
29
(c) Debt not in excess of $2,000,000 aggregate principal amount
incurred in connection with equipment leases to which the Company or its
Subsidiaries are a party incurred in the ordinary course of business; and
(d) Debt not in excess of $5,000,000 aggregate principal amount
incurred in connection with trade accounts payable, imbalances and refunds
arising in the ordinary course of business.
(e) Debt which is subordinated to this Convertible Note as to
payment on the Subordination Terms set forth in EXHIBIT E or on such other terms
as shall have been approved in advance of the incurrence of such Debt by the
Purchaser as evidenced by the written approval of the Purchaser given prior to
the incurrence of such Debt and for which no payment of principal of such Debt
is scheduled to be due prior to the date that is six months after the Maturity
Date; so long as in the case of Debt permitted by the preceding clauses (b)
through (e), at the time of incurrence of such Debt no Event of Default has
occurred and is continuing or would result from such incurrence and no event
which, with notice or passage of time, or both, would become an Event of Default
has occurred and is continuing or would result from such incurrence.
8.2 Exclusivity. For a period of thirty (30) days from March 17, 2000 (the
"Exclusivity Period"), the Company will not, and will not permit its officers,
directors, employees, agents or representatives to enter into or participate in
material discussions with any third party other than the Purchaser and its
Affiliates concerning (i) the possible acquisition or sale of the Company or of
substantially all of its stock or assets, including its technology; or (ii) an
agreement to loan One Million Dollars ($1,000,000) or more to the Company or
similar financing arrangement. If the Company breaches this provision, the
Company shall pay Purchaser, as liquidated damages, the sum of Two Million
Dollars ($2,000,000) without the necessity of proof by the Company of actual
damages (the "Liquidated Damages Amount"). The parties acknowledge that the
Liquidated Damages Amount is a fair and reasonable measure of the damages that
the Purchaser would sustain as a result of the breach of this provision, and
that the amount of actual damages in the event of such breach would be
impossible to ascertain. The parties acknowledge and agree that, in addition to
all other remedies available (at law or otherwise) to Purchaser, Purchaser shall
be entitled to equitable relief (including injunction and specific performance)
as a remedy for any breach or threatened breach of this provision.
8.3 Standstill. For a period of two years after the Closing, the Company
and the Purchaser shall not and shall cause their Affiliates to refrain from,
directly or indirectly, alone or in concert with others, acquiring, offering to
acquire (by purchase, gift or otherwise) or selling short the securities of the
other party hereto, or otherwise in any manner seeking to depress the price of
the securities of the other party hereto through trading in the securities of
such party or derivatives of such securities.
8.4 Transactions with Affiliates. The Company and each Subsidiary will not,
directly or indirectly, pay any funds to or for the account of, make any
investment in (whether by acquisition of stock or indebtedness, by loan,
advance, transfer of property, guarantee or other agreement to pay, purchase or
service, directly or indirectly, any Debt, or otherwise), lease, sell, transfer
or otherwise dispose of any assets, tangible or intangible, to, or participate
in, or effect any transaction in
28
30
connection with any joint enterprise or other joint arrangement with, any
Affiliate, except, (i) pursuant to those agreements specifically identified on
Schedule 8.4 attached hereto (with a copy of such agreements annexed to such
Schedule 8.4) (ii) on terms to the Company or such Subsidiary no less favorable
than terms that could be obtained by the Company or such Subsidiary from a
Person that is not an Affiliate of the Company upon negotiation at arms' length,
as determined in good faith by the Board of Directors of the Company or (iii)
with and among the Company and its Subsidiaries; PROVIDED that no determination
of the Board of Directors shall be required with respect to any such
transactions entered into in the ordinary course of business.
8.5 Merger or Consolidation. The Company will not, in a single transaction
or a series of related transactions, (i) consolidate with or merge with or into
any other Person, or (ii) permit any other Person to consolidate with or merge
into it, unless (w) either (A) the Company shall be the survivor of such merger
or consolidation or (B) the surviving Person shall expressly assume by
supplemental agreement all of the obligations of the Company under the
Securities and this Agreement; (x) immediately before and immediately after
giving effect to such transaction (including any indebtedness incurred or
anticipated to be incurred in connection with the transaction), no Default or
Event of Default shall have occurred and be continuing; (y) if the Company is
not the surviving entity, such surviving entity's common shares shall be listed
on either The New York Stock Exchange, American Stock Exchange, or the Nasdaq
Stock Market's National Market or the Nasdaq Small Cap Market and (z) the
Company has delivered to the Purchaser an officers' certificate stating that
such consolidation, merger or transfer complies with this Agreement, that the
surviving Person agrees to be bound by all of the agreements and covenants set
forth in the Transaction Agreements as if such surviving Person is the Company,
and that all conditions precedent in this Agreement relating to such transaction
have been satisfied.
8.6 Restrictions on Certain Amendments. Neither the Company nor any
Subsidiary will waive any provision of, amend, or suffer to be amended, any
provision of such entity's existing indebtedness, any Company Corporate Document
or Subsidiary Corporate Document if such amendment, in the Company's reasonable
judgment, would materially adversely affect the Purchaser without the prior
written consent of the Purchaser, which such consent shall not be unreasonably
withheld.
29
31
8.7 Limitation on Asset Sales. Neither the Company nor any Subsidiary will
consummate an Asset Sale unless (a) it receives consideration in cash at the
time of such Asset Sale at least equal to the fair market value of the assets
sold or otherwise disposed of (as determined in good faith by the Company's
Board of Directors) and (b) the Net Cash Proceeds of such sale are used either
(i) to purchase similar assets in the same line of business of equivalent value
within twelve (12) months of the date of the Asset Sale or (ii) to immediately
redeem or prepay the Convertible Note or (iii) for a combination of purchases
and prepayment permitted by the foregoing clauses (i) and (ii). As used herein,
"Asset Sale" means any sale, lease, transfer or other disposition (or series of
related sales, leases, transfers or dispositions) of shares of capital stock of
a Subsidiary (other than directors' qualifying shares), property or other assets
(each referred to for the purposes of this definition as a "disposition"),
including any disposition by means of a merger, consolidation or similar
transaction (other than as permitted under Section 8.5), other than a
disposition of property or assets in the ordinary course of business.
8.8 Limitation on Subsidiaries. Neither the Company nor any Subsidiary
shall permit the creation of any Subsidiaries in which the Company, directly or
indirectly, does not own at least a majority of the outstanding equity
interests, unless approved by the Purchaser, which such consent shall not be
unreasonably withheld.
8.9 Limitation on Stock Repurchases. So long as the Convertible Note is
outstanding, the Company shall not, without the prior written consent of the
Purchaser, redeem, repurchase or otherwise acquire (whether for cash or in
exchange for property or other securities or otherwise) in any rolling twelve
(12) month period more than five percent (5%) of the shares of capital stock of
the Company or any warrants, rights or options to purchase or acquire any such
shares held by persons others than the Purchaser.
9. LIMITATION ON TRANSFERS
9.1 Restrictions on Transfer. From and after their respective dates of
issuance, none of the Securities shall be transferable except upon the
conditions specified in this Section 9, which conditions are intended to ensure
compliance with the provisions of the Securities Act in respect of the Transfer
of any of such Securities or any interest therein. Purchaser will use its best
efforts to cause any proposed transferee of any Securities held by it to agree
to take and hold such Securities subject to the provisions and upon the
conditions specified in this Section 9.
9.2 Restrictive Legends.
(a) Each certificate for Securities issued to Purchaser or to a
subsequent transferee shall (except as contemplated by Section 7.12 and Section
9.1 hereof) include a legend in substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH
SECURITIES, AGREES FOR THE BENEFIT OF THE CORPORATION THAT
SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
ONLY (A) TO THE CORPORATION, (B) PURSUANT TO THE EXEMPTION
FROM REGISTRATION UNDER
30
32
THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF
AVAILABLE, OR (C) IF REGISTERED UNDER THE SECURITIES ACT.
9.3 Notice of Proposed Transfers. Prior to any proposed Transfer of the
Securities other than a transfer (i) registered under the Securities Act, (ii)
to an affiliate of Purchaser which is an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act, PROVIDED that any such
transferee shall agree to be bound by the terms of this Agreement, and (iii) to
be made in reliance on Rule 144 under the Securities Act, the holder thereof
shall give written notice to the Company of such holder's intention to effect
such Transfer, setting forth the manner and circumstances of the proposed
Transfer, which shall be accompanied by (A) an opinion of counsel to the
Company, confirming that such transfer does not give rise to a violation of the
Securities Act, (B) representation letters in form and substance reasonably
satisfactory to the Company to ensure compliance with the provisions of the
Securities Act and (C) letters in form and substance reasonably satisfactory to
the Company from each such transferee stating such transferee's agreement to be
bound by the terms of this Agreement and the Registration Rights Agreement. Such
proposed Transfer may be effected only if the Company shall have received such
notice of transfer, opinion of counsel, representation letters and other letters
referred to in the immediately preceding sentence, whereupon the holder of such
Securities shall be entitled to Transfer such Securities in accordance with the
terms of the notice delivered by the holder to the Company.
10. ADDITIONAL AGREEMENTS AMONG THE PARTIES
10.1 Liquidated Damages.
(a) The Company shall, and shall use its best efforts to cause its
transfer agent to, issue and deliver shares of Common Stock within five (5)
trading days of delivery of a properly completed Notice of Conversion or Notice
of Exercise, as applicable (the "Deadline") to the Purchaser (or any party
receiving Securities by Transfer from Purchaser) at the address of the Purchaser
set forth in the Notice of Conversion or Notice of Exercise, as the case may be.
Consistent with Section 7.12 hereof, if such Notice of Conversion or Notice of
Exercise, as applicable, is delivered while a Required Registration Statement is
effective, such certificates shall be delivered without restrictive legend if
such shares are being transferred pursuant to such Required Registration
Statement. The Company understands that a delay in the issuance of such
certificates after the Deadline could result in economic loss to the Purchaser.
(b) Without in any way limiting the Purchaser's right to pursue
other remedies, including actual damages and/or equitable relief, the Company
agrees that if delivery of the Conversion Shares or Warrant Shares following
delivery of a properly completed Notice of Conversion or Notice of Exercise is
more than one (1) Business Day after the Deadline, the Company shall pay to the
Purchaser as liquidated damages and not a penalty $1,000 per day in cash, for
each of the first two (2) days beyond the Deadline and $2,500 per day in cash
for each day thereafter that the Company fails to deliver such Common Stock.
Such cash amount shall be paid to the Purchaser by the fifth day of the month
following the month in which it has accrued or, at the option of the Purchaser
(by written notice to the Company by the first day of the month following the
month in which it has accrued).
31
33
10.2 Conversion Notice. The Company agrees that, in addition to any other
remedies which may be available to the Purchaser, including, but not limited to,
the remedies available under Section 10.1, in the event the Company fails for
any reason (other than as a result of actions taken by Purchaser in breach of
this Agreement) to effect delivery to Purchaser of certificates as contemplated
by Section 10.1 representing the shares of Common Stock on or prior to the
Deadline after conversion of the Convertible Note, or certificates contemplated
by Section 10.1 after exercise of any Warrant, Purchaser will be entitled, if
prior to the delivery of such certificates, to revoke the Notice of Conversion
or Notice of Exercise, as applicable, by delivering a notice to such effect to
the Company whereupon the Company and the Purchaser shall each be restored to
their respective positions immediately prior to delivery of such Notice of
Conversion or Notice of Exercise.
10.3 Delivery of Source Code. Within five (5) days of the Closing Date, the
Company shall deliver to the Purchaser in escrow, the Source Code and the
Commentary (each as defined in the License Agreement) for the software programs
entitled "Dr. Chart" and "@Rx," together will all necessary codes, keys and all
similar types of access information in order to access all such Source Code and
to customize, modify, and manipulate the related software programs. The
Purchaser shall deposit materials in a secure, environmentally safe, locked
facility which is accessible only to authorized representatives of the
Purchaser. The Purchaser shall have the obligation to use its best efforts to
protect and maintain the confidentiality of the deposit materials. The Purchaser
shall not disclose, transfer, make available, or use the deposit materials and
shall not disclose the contents of the deposit material to any third party or to
any unauthorized personnel. Upon the occurrence of an Event of Default which
remains uncured for a period of thirty (30) days, the Company shall grant to the
Purchaser a perpetual, non-exclusive, non-transferable, limited license to use
and copy "Dr. Chart" and "@Rx", in source code form, and to create derivative
works therefrom, thirty (30) days from such Event of Default if such Event of
Default remains uncured. The Purchaser will acknowledge and agree that such
license shall not commence unless and until such Event of Default occurs and
remains uncured for a period of thirty (30) days, and the Purchaser shall have
no right to use any source code unless and until the occurrence and continuance
of such Event of Default.
10.4 Registration Rights; Additional Registration Statements.
(a) The Company shall grant the Purchaser registration rights
covering the Conversion Shares and Warrant Shares (the "Registrable Securities")
on the terms set forth in the Registration Rights Agreement.
(b) At any time during the period ending on the first date that
follows a total of 90 days following the effectiveness of a Required
Registration Statement during which there has been no (i) Registration Default
relating to such Required Registration Statement or (ii) any other delay in the
ability of the Purchaser to sell the Common Stock pursuant to such Required
Registration Statement, the Company agrees that it will not cause any
registration statement (other than a Required Registration Statement or an
Issuer Registration Statement) to be declared effective by the SEC.
(c) At any time during the period beginning on the date Purchaser
demands registration pursuant to the Registration Rights Agreement and ending on
the date of the effectiveness of a Required Registration Statement filed
pursuant to such demand, the Company
32
34
agrees that it will not file any registration statement (other a Required
Registration Statement or an Issuer Registration Statement) without the written
consent of the Purchaser.
(d) A "Registration Default" shall have occurred if
(i) a registration statement on which the Registrable
Securities are listed pursuant to the Registration Rights Agreement (a "Required
Registration Statement") is not declared effective by the SEC within 120 days of
the filing thereof (the "Required Effectiveness Date"); or
(ii) such effectiveness is not maintained for a continuous
period of at least 90 days (the "Registration Maintenance Period"), and provided
the Purchaser has not unreasonably delayed providing any information concerning
the Purchaser as selling shareholder as may be reasonably requested by the
Company for inclusion in such Required Registration Statement; or
(iii) the Company has filed or caused to be declared effective
a registration statement (other than a Required Registration Statement or an
Issuer Registration Statement) in breach of Sections 10.4(b) or (c).
11. ADJUSTMENT OF FIXED PRICE
11.1 Reorganization. The Conversion Price, and the Maximum Number of Shares
(collectively, the "Fixed Prices") shall be adjusted as hereafter provided.
11.2 Share Reorganization. If and whenever the Company shall subdivide the
outstanding shares of Common Stock into a greater number of shares, consolidate
the outstanding shares of Common Stock into a smaller number of shares, issue
Common Stock or securities convertible into or exchangeable for shares of Common
Stock as a stock dividend to all or substantially all the holders of Common
Stock, or make a distribution on the outstanding Common Stock to all or
substantially all the holders of Common Stock payable in Common Stock or
securities convertible into or exchangeable for Common Stock, any of such events
being herein called a "Share Reorganization," then in each such case the
applicable Fixed Price shall be adjusted, effective immediately after the record
date at which the holders of Common Stock are determined for the purposes of the
Share Reorganization or, if no record date is fixed, the effective date of the
Share Reorganization, by multiplying the applicable Fixed Price in effect on
such record or effective date, as the case may be, by a fraction of which:
(a) the numerator shall be the number of shares of Common Stock
outstanding on such record or effective date (without giving effect to the
transaction); and
(b) the denominator shall be the number of shares of Common Stock
outstanding after giving effect to such Share Reorganization, including, in the
case of a distribution of securities convertible into or exchangeable for shares
of Common Stock, the number of shares of Common Stock that would have been
outstanding if such securities had been converted into or exchanged for Common
Stock on such record or effective date.
33
35
11.3 Rights Offering. If and whenever the Company shall issue to all or
substantially all the holders of Common Stock, rights, options or warrants under
which such holders are entitled, during a period expiring not more than
forty-five (45) days after the record date of such issue, to subscribe for or
purchase Common Stock (or Derivative Securities), at a price per share (or, in
the case of Derivative Securities, at an exchange or conversion price per share
at the date of issue of such securities) of less than 95% of the Market Price of
the Common Stock on such record date (any such event being herein called a
"Rights Offering"), then in each such case the applicable Fixed Price shall be
adjusted, effective immediately after the record date at which holders of Common
Stock are determined for the purposes of the Rights Offering, by multiplying the
applicable Fixed Price in effect on such record date by a fraction of which:
(a) the numerator shall be the sum of the number of shares of Common
Stock outstanding on such record date, and a number obtained by dividing:
(i) either, (x) the product of the total number of shares of
Common Stock so offered for subscription or purchase and the price at which such
shares are so offered, or (y) the product of the maximum number of shares of
Common Stock into or for which the convertible or exchangeable securities so
offered for subscription or purchase may be converted or exchanged and the
conversion or exchange price of such securities, or, as the case may be, by
(ii) the Market Price of the Common Stock on such record date;
and
(b) the denominator shall be the sum of the number of shares of
Common Stock outstanding on such record date, and the number of shares of Common
Stock so offered for subscription or purchase (or, in the case of Derivative
Securities), the maximum number of shares of Common Stock for or into which the
securities so offered for subscription or purchase may be converted or
exchanged).
To the extent that such rights, options or warrants are not exercised prior to
the expiry time thereof, the applicable Fixed Price shall be readjusted
effective immediately after such expiry time to the applicable Fixed Price which
would then have been in effect upon the number of shares of Common Stock (or
Derivative Securities) actually delivered upon the exercise of such rights,
options or warrants.
11.4 Special Distribution. If and whenever the Company shall issue or
distribute to all or substantially all the holders of Common Stock shares of the
Company of any class, other than Common Stock, rights, options or warrants, or
any other assets (excluding cash dividends and equivalent dividends in shares
paid in lieu of cash dividends in the ordinary course); and if such issuance or
distribution does not constitute a Share Reorganization or a Rights Offering
(any such event being herein called a "Special Distribution"), then in each such
case the applicable Fixed Price shall be adjusted, effective immediately after
the record date at which the holders of Common Stock are determined for purposes
of the Special Distribution, by multiplying the applicable Fixed Price in effect
on such record date by a fraction of which:
(a) the numerator shall be the difference between (i) the product of
the number of shares of Common Stock outstanding on such record date and the
Market Price of the Common
34
36
Stock on such date; and (ii) the fair market value, as determined by the
Directors (whose determination shall be conclusive), to the holders of Common
Stock of the shares, rights, options, warrants, evidences of indebtedness or
other assets issued or distributed in the Special Distribution (net of any
consideration paid therefor by the holders of Common Stock), and
(b) the denominator shall be the product of the number of shares of
Common Stock outstanding on such record date and the Market Price of the Common
Stock on such date.
11.5 Capital Reorganization. If and whenever there shall occur a
reclassification or redesignation of the shares of Common Stock or any change of
the shares of Common Stock into other shares, other than in a Share
Reorganization, a consolidation, merger or amalgamation of the Company with, or
into another body corporate, or the transfer of all or substantially all of the
assets of the Company to another body corporate, (any such event being herein
called a "Capital Reorganization"), then in each such case the holder who
exercises the right to convert Convertible Note or exercise the Warrants after
the effective date of such Capital Reorganization shall be entitled to receive
and shall accept, upon the exercise of such right, in lieu of the number of
shares of Common Stock to which such holder was theretofore entitled upon the
exercise of the conversion privilege, the aggregate number of shares or other
securities or property of the Company or of the body corporate resulting from
such Capital Reorganization that such holder would have been entitled to receive
as a result of such Capital Reorganization if, on the effective date thereof,
such holders had been the holder of the number of shares of Common Stock to
which such holder was theretofore entitled upon conversion of the Convertible
Note; PROVIDED, however, that no such Capital Reorganization shall be
consummated in effect unless all necessary steps shall have been taken so that
the holder of the Convertible Note shall thereafter be entitled to receive such
number of shares or other securities of the Company or of the body corporate
resulting from such Capital Reorganization, subject to adjustment thereafter in
accordance with provisions the same, as nearly as may be possible, as those
contained above.
11.6 Adjustment Rules. The following rules and procedures shall be
applicable to adjustments made in this Section 11:
(a) no adjustment in the applicable Fixed Price shall be required
unless such adjustment would result in a change of at least 1% in the applicable
Fixed Price then in effect; PROVIDED, however, that any adjustments which, but
for the provisions of this clause would otherwise have been required to be made,
shall be carried forward and taken into account in any subsequent adjustment;
(b) no adjustment in the applicable Fixed Price shall be made
pursuant to this Article 11 in respect of the issue from time to time of Common
Stock to holders of Common Stock who exercise an option to receive substantially
equivalent dividends in Common Stock in lieu of receiving cash dividends in the
ordinary course; and
(c) if a dispute shall at any time arise with respect to any
adjustment of the applicable Fixed Price, such dispute shall be conclusively
determined by the auditors of the Company or, if they are unable or unwilling to
act, by a firm of independent chartered accountants selected by the
35
37
Directors of the Company and any such determination shall be binding upon the
Company and Purchaser.
11.7 Certificate as to Adjustment. The Company shall from time to time
promptly after the occurrence of any event which requires an adjustment in the
applicable Fixed Price deliver to the Purchaser a certificate specifying the
nature of the event requiring the adjustment, the amount of the adjustment
necessitated thereby, the applicable Fixed Price after giving effect to such
adjustment and setting forth, in reasonable detail, the method of calculation
and the facts upon which such calculation is based.
11.8 Notice to Purchaser. If the Company shall fix a record date for: any
Share Reorganization (other than the subdivision of outstanding Common Stock
into a greater number of shares or the consolidation of outstanding Common Stock
into a smaller number of shares), any Rights Offering, any Special Distribution,
any Capital Reorganization (other than a reclassification or redesignation of
the Common Stock into other shares), or any cash dividend, the Company shall,
not less than 10 days prior to such record date or, if no record date is fixed,
prior to the effective date of such event, give to the Purchaser notice of the
particulars of the proposed event or the extent that such particulars have been
determined at the time of giving the notice.
12. EVENTS OF DEFAULT
12.1 Events of Default. Each of the following events is an "Event of
Default" under this Agreement and the Transaction Agreements:
(a) failure by the Company to pay or prepay when due, all or any
part of the principal on the Convertible Note (whether by virtue of the
agreements specified in this Agreement or the Convertible Note) and the
continuance of such failure for thirty (30) days);
(b) failure by the Company or any of its Subsidiaries to pay or
prepay when due, all or any part of the principal on the Permitted Debt and the
continuance of such failure for thirty (30) days);
(c) failure by the Company to pay (i) within thirty (30) days of the
due date thereof any interest on the Convertible Note or (ii) within thirty (30)
days following the delivery of notice to the Company of any fees or any other
amount payable (not otherwise referred to in (a) above or this clause (b)) by
the Company under this Agreement;
(d) failure by the Company to timely comply with the requirements of
Section 10.1(a) or (b) hereof, which failure is not cured within thirty (30)
days of such failure;
(e) an event of default or breach shall have occurred and continued
for thirty (30) days after notice from the Purchaser under any Transaction
Agreement;
36
38
(f) failure on the part of the Company or any of its Subsidiaries to
observe or perform any covenant contained in any part of Sections 7 or 8 of this
Agreement and continuation of such default for thirty (30) days after notice;
(g) the Company shall have its Common Stock delisted or suspended
from the Nasdaq Market for at least fifteen (15) consecutive Trading Days and is
unable to obtain a listing on either the New York Stock Exchange, the American
Stock Exchange, the Nasdaq Stock Market's SmallCap Market or the Nasdaq Market
within such fifteen (15) Trading Days;
(h) the Company or any of its Subsidiaries has commenced a voluntary
case or other proceeding seeking liquidation, winding-up, reorganization or
other relief with respect to itself or its debts under any bankruptcy,
insolvency, moratorium or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or has consented
to any such relief or to the appointment of or taking possession by any such
official in an involuntary case or other proceeding commenced against it, or has
made a general assignment for the benefit of creditors;
(i) an involuntary case or other proceeding has been commenced
against the Company or any of its Subsidiaries seeking liquidation, winding-up,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency, moratorium or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator, custodian
or other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and unstayed
for a period of sixty (60) days, or an order for relief has been entered against
the Company under the federal bankruptcy laws as now or hereafter in effect;
(j) any representation, warranty, certification or statement made by
the Company or any of its Subsidiaries in any Transaction Agreement or which is
contained in any certificate, document or financial or other statement furnished
at any time under or in connection with any Transaction Agreement shall prove to
have been untrue in any material respect when made and such breach shall
continue for thirty (30) days after notice; or
(k) any member of the ERISA Group has failed to pay when due an
amount or amounts aggregating in excess of $100,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan has been filed under Title IV of ERISA by any member of the ERISA
Group, any plan administrator or any combination of the foregoing; or the PBGC
has instituted proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in respect of,
or to cause a trustee to be appointed to administer any Material Plan; or a
condition has existed by reason of which the PBGC is entitled to obtain a decree
adjudicating that any Material Plan must be terminated; or there has occurred a
complete or partial withdrawal from, or a default, within the meaning of Section
4219(c) (5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current payment
obligation in excess of $100,000;
37
39
12.2 Default Remedies. If one or more of the above Events of Default shall
have occurred and be continuing, then, and in every such occurrence, the
Purchaser shall have the right to, by notice to the Company:
(a) declare the Convertible Note to be, and the Convertible Note
shall thereon become immediately due and payable, PROVIDED that in the case of
any of the Events of Default specified in paragraph (h) or (i) above with
respect the Company or any Subsidiary, then, without any notice to the Company
or any other act by any Purchaser, the entire amount of the Convertible Note
shall become immediately due and payable;
(b) convert the Convertible Note at fifty percent (50%) of the
Conversion Price;
(c) exercise its rights under the Security Agreement; and
(d) exercise its rights under the License Agreement, including the
extension of the term of the License Agreement to a perpetual license and the
release of the Purchaser of its obligation to make any payments to the Company
pursuant thereto;
PROVIDED further, if any Event of Default has occurred and is continuing, and
irrespective of whether the Convertible Note has been declared immediately due
and payable hereunder, any Purchaser may proceed to protect and enforce the
rights of Purchaser by an action at law, suit in equity or other appropriate
proceeding, whether for the specific performance of any agreement contained
herein or in the Convertible Note, or for an injunction against a violation of
any of the terms hereof or thereof, or in aid of the exercise of any power
granted hereby or thereby or by law or otherwise.
12.3 Powers and Remedies Cumulative. No right or remedy herein conferred
upon or reserved to the Purchaser is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
Every power and remedy given by the Convertible Note or by law may be exercised
from time to time, and as often as shall be deemed expedient, by the Purchaser.
13. MISCELLANEOUS
13.1 Notices. All notices, demands and other communications to any party
hereunder shall be in writing (including telecopier or similar writing) and
shall be given to such party at the address set forth below, or such other
address as such party may hereafter specify for the purpose to the other
parties. Each such notice, demand or other communication shall be effective (i)
if given by telecopy, when such telecopy is transmitted to the telecopy number
specified below, (ii) if given by mail, four (4) days after such communication
is deposited in the mail with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means, when delivered at the address
specified in or pursuant to this Section.
38
40
If to Company: AHT Corporation
βββ βββββ ββββββ ββββ
βββββββββ, ββ βββββ
Telecopy: (βββ) βββ-ββββ
Attn: ββββββββ βββββββ, Chairman and
Chief Executive Officer
ββββ βββββββββ, General Counsel
with a copy to: ββββ ββββββ
β'ββββββββ Graev & Karabell, LLP
ββ βββββββββββ βββββ
βββ ββββ, ββ βββββ
Telecopy: (βββ) βββ-ββββ
If to Purchaser: Cybear, Inc.
ββββ ββββ ββββ βββββ, βββββ βββ
ββββ βββββ, ββ βββββ
Telecopy: (βββ) βββ-ββββ
Attn: βββββββ β. βββββ, President and
Chief Operating Officer
with a copy to: βββββββ β. βββββββ
ββββββ βββββ βββββββ βββββ & βββββββ, P.A.
Bank of America Tower
βββ βββββββββ βββ ββββββ, βββββ ββββ
βββββ, ββ βββββ
Telecopy: βββ-βββ-ββββ
13.2 No Waivers; Amendments. No failure or delay on the part of any party in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. No provision of this Agreement may be amended,
supplemented or waived unless such amendment, supplement or waiver is in writing
and is signed by the Company and the Purchaser.
13.3 Indemnification.
(a) The Company agrees to indemnify and hold harmless the Purchaser,
its Affiliates, and each Person, if any, who controls Purchaser, or any of its
Affiliates, within the meaning of the Securities Act or the Exchange Act (each a
"Controlling Person"), and the respective partners, agents, employees, officers
and directors of Purchaser, its Affiliates and any such Controlling Person (each
an "Indemnified Party" and collectively, the "Indemnified Parties"), from and
against any and all losses, claims, damages, liabilities and expenses
(including, without limitation, and as incurred, reasonable costs of
investigating, preparing or defending any such claim or action, whether or not
such Indemnified Party is a party thereto, PROVIDED that the Company shall not
be obligated to advance such costs to any Indemnified Party other than the
Purchaser unless it has received from such Indemnified Party an undertaking to
repay to the Company the costs so advanced if it should be determined by final
judgment of a court of competent jurisdiction that such Indemnified Party was
39
41
not entitled to indemnification hereunder with respect to such costs) which may
be incurred by such Indemnified Party in connection with any investigative,
administrative or judicial proceeding brought or threatened that relates to or
arises out of, or is in connection with any activities contemplated by any
Transaction Agreement or any other services rendered in connection herewith;
PROVIDED that the Company will not be responsible for any claims, liabilities
losses, damages or expenses that are determined by final judgment of a court of
competent jurisdiction to result from such Indemnified Party's gross negligence,
willful misconduct or bad faith.
(b) If any action shall be brought against an Indemnified Party with
respect to which indemnity may be sought against the Company under this
Agreement, such Indemnified Party shall promptly notify the Company in writing
and the Company, at its option, may, assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party and
payment of all reasonable fees and expenses. The failure to so notify the
Company shall not affect any obligations the Company may have to such
Indemnified Party under this Agreement or otherwise unless the Company is
materially adversely affected by such failure. Such Indemnified Party shall have
the right to employ separate counsel in such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party, unless: (i) the Company has failed to assume
the defense and employ counsel or (ii) the named parties to any such action
(including any impleaded parties) include such Indemnified Party and the
Company, and such Indemnified Party shall have been advised by counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the Company, in which case, if such
Indemnified Party notifies the Company in writing that it elects to employ
separate counsel at the expense of the Company, the Company shall not have the
right to assume the defense of such action or proceeding on behalf of such
Indemnified Party, PROVIDED, however, that the Company shall not, in connection
with any one such action or proceeding or separate but substantially similar or
related actions or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be responsible hereunder for the
reasonable fees and expenses of more than one such firm of separate counsel, in
addition to any local counsel, which counsel shall be designated by the
Purchaser. The Company shall not be liable for any settlement of any such action
effected without the written consent of the Company (which shall not be
unreasonably withheld) and the Company agrees to indemnify and hold harmless
each Indemnified Party from and against any loss or liability by reason of
settlement of any action effected with the consent of the Company. In addition,
the Company will not, without the prior written consent of the Purchaser, settle
or compromise or consent to the entry of any judgment in or otherwise seek to
terminate any pending or threatened action, claim, suit or proceeding in respect
to which indemnification or contribution may be sought hereunder (whether or not
any Indemnified Party is a party thereto) unless such settlement, compromise,
consent or termination includes an express unconditional release of the
Purchaser and the other Indemnified Parties, satisfactory in form and substance
to the Purchaser, from all liability arising out of such action, claim, suit or
proceeding.
(c) If for any reason the foregoing indemnity is unavailable
(otherwise than pursuant to the express terms of such indemnity) to an
Indemnified Party or insufficient to hold an Indemnified Party harmless, then in
lieu of indemnifying such Indemnified Party, the Company shall contribute to the
amount paid or payable by such Indemnified Party as a result of such claims,
liabilities, losses, damages, or expenses (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and by the Purchaser on the other from the
40
42
transactions contemplated by this Agreement or (ii) if the allocation provided
by clause (i) is not permitted under applicable law, in such proportion as is
appropriate to reflect not only the relative benefits received by the Company on
the one hand and the Purchaser on the other, but also the relative fault of the
Company and the Purchaser as well as any other relevant equitable
considerations. Notwithstanding the provisions of this Section 13.3, the
aggregate contribution of all Indemnified Parties shall not exceed the amount of
interest and fees actually received by the Purchaser pursuant to this Agreement.
It is hereby further agreed that the relative benefits to the Company on the one
hand and the Purchaser on the other with respect to the transactions
contemplated hereby shall be determined by reference to, among other things,
whether any untrue or alleged untrue statement of material fact or the omission
or alleged omission to state a material fact related to information supplied by
the Company or by the Purchaser and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission. 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
(d) The indemnification, contribution and expense reimbursement
obligations set forth in this Section 13.3: (i) shall be in addition to any
liability the Company may have to any Indemnified Party at common law or
otherwise, (ii) shall survive the termination of this Agreement and the other
Transaction Agreements and the payment in full of the Convertible Note and (iii)
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Purchaser or any other Indemnified
Party.
13.4 Expenses: Documentary Taxes. The Company agrees to pay (i) all
reasonable out-of-pocket expenses of the Purchaser, including fees and
disbursements of counsel, in connection with any waiver or consent hereunder or
under any other Transaction Document or any amendment hereof or thereof and (ii)
all reasonable out-of-pocket expenses of the Purchaser and each holder of
Securities, including fees and disbursements of counsel, in connection with any
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom. In addition, the Company agrees to pay any and all stamp, transfer
and other similar taxes, assessments or charges payable in connection with the
execution and delivery of any Transaction Agreement or the issuance of the
Securities to the Purchaser, excluding its assigns.
13.5 Payment. The Company agrees that, so long as Purchaser shall own the
Convertible Note purchased by it from the Company hereunder, the Company will
make payments to Purchaser of all amounts due thereon by wire transfer by 1:00
P.M. (Eastern Standard Time) on the date of payment.
13.6 Usury. It is the intention of the parties to comply with all applicable
usury laws. Accordingly, it is agreed that notwithstanding any provision to the
contrary in the Transaction Agreements, in no event shall the Transaction
Agreements require the payment or permit the collection of interest in excess of
the maximum amount permitted by such laws. If any such excess of interest is
contracted for, charged or received under the Transaction Agreements, or in the
event the maturity of the indebtedness evidenced by such Transaction Agreements
is accelerated in whole or in part, so that under any such circumstance, the
amount of interest contracted for, charged or received shall exceed the maximum
amount of interest permitted by
41
43
the applicable usury laws, then in any such event (a) the provisions of this
paragraph shall govern or control, (b) neither the Company nor any other person
or entity now or hereafter liable for repayment of the Convertible Note shall be
obligated to pay the amount of such interest not permitted by the applicable
usury laws, (c) any such excess which may have been collected shall be refunded
to the Company and (d) the effective rate of interest for the Convertible Note
shall be automatically reduced to the maximum lawful rate allowed under
applicable usury laws.
13.7 Successors and Assigns. This Agreement, the Schedules and Exhibits
hereto, and the documents and instruments and other agreements among the parties
hereto referenced herein: (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof; (b) shall be binding upon the Company and upon the
Purchaser and its successors and assigns; (c) are not intended to confer upon
any other person any rights or remedies hereunder; and (d) shall not be assigned
by operation of law or otherwise except as otherwise specifically provided,
except that Purchaser may assign its rights and delegate its respective
obligations hereunder and thereunder to Andrx Corporation or another of its
Affiliates. All provisions hereunder purporting to give rights to Purchaser and
its affiliates or to holders of Securities are for the express benefit of such
Persons and their successors and assigns.
13.8 Brokers. The Company represents and warrants that it has not employed
any broker, finder, financial advisor or investment banker who would be entitled
to any brokerage, finder's or other fee or commission payable by the Company or
the Purchaser in connection with the sale of the Securities. Purchaser hereby
warrants that it has not employed any broker, finder, financial advisor or
investment banker who would be entitled to any brokerage, finder's or other fee
or commission payable by the Company in connection with the sale of the
Securities.
13.9 CHOICE OF LAW. THIS AGREEMENT AND ALL CLAIMS ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR ANY TRANSACTION AGREEMENT, WHETHER ASSERTED IN CONTRACT OR
TORT, SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF DELAWARE. EACH PARTY HERETO HEREBY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT IN THE SOUTHERN DISTRICT OF
FLORIDA AND OF ANY FLORIDA STATE COURT SITTING IN PALM BEACH COUNTY, FLORIDA FOR
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH
A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM.
13.10 Waiver of Jury Trial. The parties hereto each knowingly, voluntarily
and intentionally waive their respective rights to a trial by jury in respect of
any litigation related to or arising from this Agreement, or any course of
conduct, course of dealing, statement or actions of any of the parties hereto.
42
44
13.11 Further Assurance. The Company and the Purchaser shall each take such
further actions as requested by any party hereto which are necessary, desirable
or proper to carry out the purposes of this Agreement and each Transaction
Agreement.
13.12 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated unless a failure of consideration
would result thereby.
13.13 Survival. All provisions contained in this Agreement (unless
specifically noted to the contrary) shall survive the payment in full of the
Convertible Note and shall remain operative and in full force and effect.
13.14 Counterparts. This Agreement may be executed by telecopy signature and
in any number of counterparts each of which shall be an original with the same
effect as if the signatures there to and hereto were upon the same instrument.
[signatures on following page]
43
45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
AHT CORPORATION CYBEAR, INC.
By: /s/ ββββββββ βββββββ By: /s/ ββββ Moscow
--------------------------- ---------------------------
Name: ββββββββ βββββββ Name: ββββ ββββββ, M.D.
Title: Chairman and Chief Executive Officer Title: Executive Vice President
44
46
EXHIBIT A
FORM OF 10% SENIOR SECURED CONVERTIBLE NOTE
47
EXHIBIT B
FORM OF WARRANT
48
EXHIBIT C
FORM OF REGISTRATION RIGHTS AGREEMENT
49
EXHIBIT D
FORM OF NOTICE OF CONVERSION
The undersigned hereby irrevocably elects to convert $__________ of the
Company's 10% Senior Secured Convertible Note (the Convertible Note") into
shares of Common Stock of AHT Corporation, par value $.01 per share, according
to the conditions set forth in such Convertible Note, as of the date written
below.
If Shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer and other taxes and charges
payable with respect thereto.
Date of Conversion: _________, 20__
Applicable
Conversion Price: $_________ per share
Signature of Holder: ___________________________
Name:_____________________
Title: _____________________
SSN or EIN of Holder: ____________________
Address of Holder: ____________________________
____________________________
SHARES ARE TO BE REGISTERED IN THE FOLLOWING NAME:
Name: ____________________
SSN or EIN: ____________________
Address: ____________________________
____________________________
Telephone Number: (___) ___-____
Fax Number: (___) ___-____
SHARES ARE TO BE SENT OR DELIVERED TO THE FOLLOWING ACCOUNT:
Account Name: ____________________
Address: ____________________________
____________________________
50
EXHIBIT E
FORM OF SECURITY AGREEMENT
51
EXHIBIT F
SUBORDINATION TERMS
Any Debt to be issued as permitted by clause (e) of the definition of
Permitted Debt in the Securities Purchase Agreement shall contain the following
provisions and no provision inconsistent with the following provisions:
ARTICLE __ -- SUBORDINATION
1. AGREEMENT OF SUBORDINATION. The Company covenants and agrees, and each
holder of the indebtedness created by this instrument (this "Debt") by its
acceptance hereof or thereof covenants and agrees, expressly for the benefit of
holders of Senior Debt, that this Debt shall be issued subject to the provisions
of this Article; and each person holding this Debt, whether upon original issue
or upon transfer, assignment or exchange thereof, accepts and agrees to be bound
by such provisions.
The payment of the principal of, premium, if any, and interest on this Debt
(including, without limitation, upon any redemption or repurchase of this Debt)
shall, to the extent and in the manner hereinafter set forth, be subordinated
and subject in right of payment to the prior payment in full of all Senior Debt
in cash or other payment satisfactory to the holders of such Senior Debt.
No provision of this Article shall prevent the occurrence of any default or
event of default with respect to this Debt.
2. PAYMENTS TO HOLDERS OF THIS DEBT.
(a)(1) No payment shall be made with respect to the principal of, premium, if
any, or interest on this Debt (including, without limitation, the redemption
price with respect to any of this Debt to be called for redemption in accordance
with its terms or any repurchase of this Debt) if:
(i) a default in the payment of principal, premium, if any, interest or other
obligations in respect of the Senior Debt occurs and is continuing (a "Payment
Default"), unless and until such Payment Default shall have been cured or waived
or shall have ceased to exist; or
(ii) a default, other than a Payment Default, on any Senior Debt occurs and is
continuing that then permits holders of such Senior Debt to accelerate its
maturity and the holder of this Debt (or indenture trustee or other
representative thereof) receives a notice of the default (a "Payment Blockage
Notice") from a holder of Senior Debt, a representative of the holder of such
Senior Debt or the Company (a "Non-Payment Default").
If the holder of this Debt (or indenture trustee or representative thereof)
receives any Payment Blockage Notice pursuant to the immediately preceding
clause (ii), no subsequent Payment Blockage Notice shall be effective for
purposes of this Section __ unless and until (A) at least 365 days shall have
elapsed since the initial effectiveness of the immediately prior Payment
Blockage Notice and (B) all scheduled payments of principal, premium, if any,
and interest on this Debt that have become due and are required by the terms of
this Debt to be paid in cash have been paid in full in cash. No
52
Non-Payment Default that existed or was continuing on the date of delivery of
any Payment Blockage Notice to the holder of this Debt (or indenture trustee or
other representative thereof) shall be, or be made, the basis for a subsequent
Payment Blockage Notice, unless such Non-Payment Default is based upon facts or
events arising after the date of delivery of such Payment Blockage Notice.
(2) The Company may and shall resume payments on and distributions in respect of
this Debt upon: (A) in the case of a Payment Default, the date upon which any
such Payment Default is cured or waived or ceases to exist, or (B) in the case
of a Non-Payment Default, the earlier of (a) the date upon which such default is
cured or waived or ceases to exist or (b) 179 days after the applicable Payment
Blockage Notice is received by the holder of this Debt (or indenture trustee or
other representative thereof) if the maturity of such Senior Debt has not been
accelerated and no Payment Default with respect to any Senior Debt has occurred
which has not been cured or waived (in which case clause (A) shall be
applicable), unless this Section __ otherwise prohibits the payment or
distribution at the time of such payment or distribution.
(b) A "Reorganization" shall include and mean any dissolution, winding up, total
or partial liquidation or reorganization of the Company, or any similar
transaction resulting in any payment or distribution of cash, securities or
other property ("Distributions") to creditors, whether voluntary or involuntary
or in bankruptcy, insolvency, receivership or other proceedings.
(c) Upon any Reorganization, all amounts due or to become due upon all Senior
Debt shall first be paid in full in cash or other payment satisfactory to the
holders of such Senior Debt, or payment thereof provided for in cash or other
payment satisfactory to the holders of such Senior Debt, before any Distribution
is made to, for, or on account of this Debt or any portion thereof (including,
without limitation, any Distribution in connection with a payment of principal,
interest or premium or the redemption or repurchase of all or any portion of
this Debt) (other than Distributions in the form of junior securities as defined
in Section 7).
(d) Upon any Reorganization, all Distributions (other than Distributions in the
form of Junior Securities) on account of this Debt shall be made by the Company
or by any receiver, trustee in bankruptcy, liquidating trustee, agent, assignee
for the benefit of creditors or other person making such Distribution directly
to the holders of Senior Debt (pro rata to such holders on the basis of the
respective amounts of Senior Debt held by such holders, or as otherwise required
by law or a court order or the terms of any subordination as between or among
such Senior Debt) or their respective representative or representatives, as
their respective interests may appear, to the extent necessary to pay all Senior
Debt in full in cash or other payment satisfactory to the holders of such Senior
Debt, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt, before any Distribution is made on account of this
Debt.
(e) In the event that, notwithstanding the foregoing, a Distribution (other than
a Distribution in the form of Junior Securities) on account of this Debt is
received by a holder thereof (or indenture trustee or other representative
thereof) from the Company (including, without limitation, by way of set-off) or
from the holder (or indenture trustee or other representative thereof) of any
indebtedness subordinated to this Debt, such Distribution shall be held by the
recipient or recipients thereof in trust for the benefit of, and shall be paid
over or delivered to, the holders of Senior Debt, or their
F-2
53
respective representative or representatives, in the same manner and fashion as
the Company is obligated to make the same under paragraphs (d) and (e) above.
(f) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (including, without limitation, by way of set-off or
otherwise), prohibited by the foregoing, shall be received by any holder of this
Debt (or indenture trustee or other representative thereof) before all Senior
Debt is paid in full in cash or other payment satisfactory to the holders of
such Senior Debt, or provision is made for such payment in accordance with its
terms in cash or other payment satisfactory to the holders of such Senior Debt,
such payment or distribution shall be held by the recipient or recipients in
trust for the benefit of, and shall be paid over or delivered to, the holders of
Senior Debt or their respective representative or representatives, as their
respective interests may appear, as calculated by the Company, for application
to the payment of all Senior Debt remaining unpaid to the extent necessary to
pay all Senior Debt in full in cash or other payment satisfactory to the holders
of such Senior Debt, after giving effect to any concurrent payment or
distribution (or provision therefor) to or for the holders of such Senior Debt.
(g) In the event of the acceleration of this Debt because of an event of default
or any amount of principal of or premium on this Debt becomes due prior to the
maturity date of this Debt, no payment or distribution (other than junior
securities) shall be made any holder of this Debt (or indenture trustee or other
representative thereof) in respect of the principal of, premium, if any, or
interest on this Debt (including, without limitation, any redemption or
repurchase price of any of this Debt called for redemption in accordance with
its terms or submitted for redemption or repurchase at the option of the holder
of this Debt in accordance with its terms, as the case may be), until all Senior
Debt has been paid in full in cash or other payment satisfactory to the holders
of such Senior Debt or such acceleration is rescinded in accordance with the
terms of this Debt. If payment of this Debt is accelerated because of an event
of default, the Company, the holder of this Debt (or indenture trustee or other
representative thereof) shall promptly notify holders of the Senior Debt of such
acceleration.
(h) Except as shall be specifically prohibited by this Section _, nothing
contained in this Article shall prevent the Company from making any scheduled
payment of principal or interest on this Debt.
3. SUBROGATION OF THIS DEBT. Subject to the payment in full of all Senior
Debt in cash or other payment satisfactory to the holders of such Senior Debt,
the rights of the holders of this Debt shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Debt pursuant to
the provisions of this Article (equally and ratably with the holders of all
indebtedness of the Company which by its express terms is subordinated to Senior
Debt to substantially the same extent as this Debt is subordinated and is
entitled to like rights of subrogation) to the rights of the holders of Senior
Debt to receive payments or distributions of cash, property or securities of the
Company applicable to the Senior Debt until the principal of (and premium, if
any) and interest on this Debt shall be paid in full; and, for the purposes of
such subrogation, no payments or distributions to the holders of the Senior Debt
of any cash, property or securities to which the holders of this Debt would be
entitled except for the provisions of this Article, and no payment over pursuant
to the provisions of this Article, to or for the benefit of the holders of
Senior Debt by holders of this Debt (or indenture trustee or other
representative thereof), shall, as among the Company, its creditors other
F-3
54
than holders of Senior Debt, and the holders of this Debt, be deemed to be a
payment by the Company to or on account of the Senior Debt; and no payments or
distributions of cash, property or securities to or for the benefit of the
holders of this Debt pursuant to the subrogation provisions of this Article,
which would otherwise have been paid to the holders of Senior Debt, shall be
deemed to be a payment by the Company to or for the account of this Debt.
4. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS. It is understood that the
provisions of this Article are and are intended solely for the purposes of
defining the relative rights of the holders of this Debt, on the one hand, and
the holders of the Senior Debt, on the other hand. Nothing contained in this
Article or in the terms of this Debt is intended to or shall impair, as among
the Company, its creditors other than the holders of Senior Debt, and the
holders of this Debt, the obligation of the Company, which is absolute and
unconditional, to pay to the holders of this Debt the principal of (and premium,
if any) and interest on this Debt as and when the same shall become due and
payable in accordance with its terms, or is intended to or shall affect the
relative rights of the holders of this Debt and creditors of the Company other
than the holders of the Senior Debt, nor shall anything herein or therein
prevent any holder of this Debt from exercising all remedies otherwise permitted
by applicable law upon default under this Debt, subject to the rights, if any,
under this Article of the holders of Senior Debt in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.
5. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT. Upon
any payment or distribution of assets of the Company referred to in this
Article, the holders of this Debt shall be entitled to rely upon any order or
decree made by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization
or similar case or proceeding is pending, or a certificate of the receiver,
trustee in bankruptcy, liquidating trustee, custodian, agent, assignee for the
benefit of creditors, or other person making such payment or distribution,
delivered to the holders of this Debt (or indenture trustee or other
representative thereof), for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Debt and other
indebtedness of the Company, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article.
6. NO IMPAIRMENT OF SUBORDINATION. No right of any present or future
holder of any Senior Debt to enforce subordination as herein provided shall at
any time in any way be prejudiced or impaired by any act or failure to act on
the part of the Company or by any act or failure to act, in good faith, by any
such holder, or by any noncompliance by the Company with the terms, provisions
and covenants of the Convertible Note or the documents, agreements and
instruments relating thereto or to this Debt, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
7. CERTAIN CONVERSIONS DEEMED PAYMENT. If this Debt is convertible into
securities of the Company, for the purposes of this Article only, (1) the
issuance and delivery of junior securities upon conversion of this Debt in
accordance with such conversion rights shall not be deemed to constitute a
payment or distribution on account of the principal of (or premium, if any) or
interest on this Debt or on account of the purchase or other acquisition of this
Debt, and (2) the payment, issuance or delivery of cash, property or securities
(other than junior securities) upon conversion of this Debt
F-4
55
shall be deemed to constitute payment on account of the principal of (and
premium, if any) and interest on this Debt. For the purposes of this Section,
the term "junior securities" means (a) shares of any stock of any class of the
Company, (b) securities of the Company that are subordinated in right of payment
to all Senior Debt to substantially the same extent as, or to a greater extent
than, this Debt is so subordinated as provided in this Article and (c)
securities, if any, into which this Debt becomes convertible in connection with
any business combination transaction if so provided in the terms of this Debt.
Nothing contained in this Article or elsewhere in the terms of this Debt is
intended to or shall impair, as among the Company, its creditors other than
holders of Senior Debt and the holders of this Debt, the right, if any, which is
absolute and unconditional, of the holder of this Debt, if by the terms of this
Debt this Debt is convertible into securities of the Company, to convert this
Debt in accordance with the terms of this Debt.
8. SENIOR DEBT ENTITLED TO RELY. The holders of Senior Debt shall have the
right to rely upon this Article, and no amendment or modification of the
provisions contained herein shall diminish the rights of such holders unless
such holders shall have agreed in writing thereto.
9. DEFINITIONS. As used in this Article, the following terms shall have
the following meanings:
"Company" means AHT Corporation, a Delaware corporation, and
shall include its successors and assigns.
"Convertible Note" means the 10% Senior Secured Convertible
Note due 2001 at any one time outstanding not in excess of the original
aggregate authorized amount of $4,000,000, issued by the Company pursuant to the
Securities Purchase Agreements, including any such note issued upon transfer
thereof or in lieu of any such note that is mutilated, destroyed, lost or
stolen.
"Securities Purchase Agreement" means the Securities Purchase
Agreement, dated March 27, 2000, by and between the Company and Cybear, Inc., as
amended from time to time.
"Senior Debt" means the principal of, premium, if any, and
interest on (including any interest accruing after the filing of a petition by
or against the Company under any bankruptcy law, whether or not allowed as a
claim after such filing in any proceeding under such bankruptcy law), and any
other payment, due pursuant to the Convertible Note and all renewals,
extensions, refundings, deferrals, amendments or modifications of the
Convertible Note, whether outstanding at the time of issuance of this Debt or
thereafter incurred or created; unless in the case of any such renewal,
extension, refunding, amendment, modification or supplement, the instrument or
other document creating or evidencing the same or the assumption or guarantee of
the same expressly provides that such renewal, extension, refunding, amendment,
modification or supplement is not superior in right of payment to, or is pari
passu with, this Debt.
F-5
56
EXHIBIT G
FORM OF LICENSE AGREEMENT
57
EXHIBIT H
FORM OF GUARANTY AGREEMENT