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EXHIBIT 10.1
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EDUCATIONAL MEDICAL, INC.
$4,000,000
13% SENIOR SUBORDINATED NOTES DUE JULY 23, 1996
AND
WARRANTS TO PURCHASE COMMON STOCK
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SECURITIES PURCHASE AGREEMENT
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DATED AS OF JULY 23, 1991
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EDUCATIONAL MEDICAL, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of
July 23, 1991
To each of the Investors listed
on the Purchaser Schedules hereto
Ladies and Gentlemen:
The undersigned EDUCATIONAL MEDICAL, INC., a Delaware corporation (the
"Company"), and each of the investors named on the Purchaser Schedules attached
hereto (collectively, the "Investors"), hereby agree as follows;
1. Preliminary Statement.
1A. Authorization of Units. As of the date hereof. the Company
will have authorized the issuance and sale to the Investors of 4,000 Units (the
"Units"), each Unit comprising (i) $1,000 principal amount of 13% Senior
Subordinated Promissory Notes of the Company substantially in the form attached
hereto as Exhibit A (the "Notes") in the aggregate principal amounts set forth
on the respective Purchaser Schedules attached hereto; and (ii) warrants to
purchase 200 shares of Common Stock substantially in the form attached hereto
as Exhibit B (the "Warrants"), in accordance with and subject to the terms and
provisions of this Agreement.
1B. References. Certain capitalized terms used in this Agreement
are defined in paragraph 14. References to a paragraph are, unless otherwise
specified, to one of the paragraphs of this Agreement and references to an
"Exhibit" or "Schedule" are, unless otherwise specified, to one of the exhibits
or schedules attached to this Agreement.
2. Purchase and Sale of Units; Closing.
2A. Purchase and Sale of Units. The Company, subject to the terms
and conditions set forth herein, hereby agrees to issue, sell and deliver to
the Investors and, subject to the terms and conditions set forth herein, the
Investors severally agree to purchase from the Company the number of Units set
forth opposite the name of each of the Investors in the Purchaser Schedule
attached hereto. The purchase price of each Unit purchased and sold hereunder
shall be $1,000.
2B. Closing. The purchase and delivery of the Units to be
purchased by the Investors shall take place at a closing (the "Closing") at the
offices of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, at 9:00 a.m., New York time, on July 23,
1991 (the "Closing Date"). On the Closing Date, the Company
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will deliver to the Investors the Securities comprising the Units, against
receipt of the purchase price therefor by wire transfer of immediately
available funds, by certified check payable to the order of the Company or by
such other payment method as the Investors and the Company shall agree. The
Notes shall be made payable to and shall be registered in the names of, and the
warrants shall be issued and registered in the names of, the Investors or the
Investors' nominees or other designees (each thereof a "Designee"). The Notes
shall be issued to each Investor in the aggregate principal amount and the
Warrants shall enable such Investor to purchase the total number of shares set
forth opposite the name of such Investor on the signature pages hereof.
3. Conditions of Closing. The Investors' obligation to purchase
and pay for the Securities to be purchased by them hereunder is subject to the
satisfaction, on or before the Closing Date, of the following conditions and if
by the Closing Date the following conditions shall not have been satisfied or
waived by the Investors, the Investors shall, at their election, be relieved of
all further obligations under this Agreement, without thereby waiving any other
rights they may have by reason of such failure or such nonfulfillment provided,
that if the Closing occurs notwithstanding such failure or nonfulfillment, such
failure or nonfulfillment shall not constitute a ground for relief hereunder
independent of any other provision of this Agreement or of any opinion,
certificate,' instrument or other document issued or delivered hereunder or
pursuant hereto:
3A. Opinion of the Company's Counsel. The Investors and their
special counsel shall have received from ▇▇▇▇▇▇, ▇▇▇▇▇ & Bockius, counsel for
the Company, a favorable opinion addressed to the Investors, dated the Closing
Date, reasonably satisfactory to the Investors and substantially in the form of
Exhibit C attached hereto.
3B. Representations and Warranties; Events of Default. The
representations and warranties contained in paragraph 11 hereof shall be true
in all material respects on and as of the Closing Date, except to the extent of
changes caused by the transactions herein contemplated; there shall exist on
the Closing Date no Event of Default or Default; and the Company shall have
delivered to each of the Investors an Officer's Certificate, dated the Closing
Date, to both such effects.
3C. Charter Documents and By-Laws. Each Investor shall have
received a certificate, dated the Closing Date, of the Secretary of the Company
attaching (i) a true and complete copy of the Certificate of Incorporation of
the Company and each Subsidiary with all amendments thereto, as filed with the
Secretary of State or other appropriate official of their respective states of
incorporation; (ii) true and complete copies of the By-Laws of the Company and
each Subsidiary in effect as of such date; (iii) certificates of good standing
of the appropriate officials of the jurisdiction of incorporation of the
Company and each Subsidiary and of each state or other jurisdiction in which
the Company and each Subsidiary is qualified to do business, and is doing
business, as a foreign corporation; and (iv) resolutions of the Board of
Directors of the Company, authorizing the execution and delivery of this
Agreement, the Coinvestors Agreement, the Registration Rights Agreement, the
Securities, the issuance and delivery of the Securities and the
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reservation for issuance of a sufficient number of shares of Common Stock for
which the Warrants may be exercised.
3D. Purchase Permitted by Applicable Laws. The purchase of and
payment for the Securities to be purchased by the Investors hereunder
(including the use of the proceeds of such Securities by the Company) shall not
be prohibited by any applicable law or governmental regulation (including,
without limitation, section 5 of the Securities Act of 1933, as amended (the
"1933 Act") or Regulations G, T, U or X of the Board of Governors of the
Federal Reserve System) and shall not subject the Investors to any tax,
penalty, liability or other onerous condition under or pursuant to any
applicable law or governmental regulation, and the Investors shall have
received such certificates or other evidence as they may request to establish
compliance with this condition.
3E. Proceedings. All corporate and other proceedings taken or to
be taken in connection with the transactions contemplated hereby, and all
documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors and their special counsel, and the Investors and
their special counsel shall have received all such counterpart originals or
certified or other copies of such documents as each of them may reasonably
request.
3F. Registration Rights and Coinvestors Agreement. The Investors
shall have received a fully executed counterpart of each of the Registration
Rights Agreement and the Coinvestors Agreement satisfactory in form and
substance to the Investors and to special counsel to the Investors and such
agreement shall be in full force and effect and no term or condition thereof
shall have been amended, modified or waived.
3G. Letter of Accountants: Accompanying Officer's Certificate.
Each of the Investors shall have received copies of a letter from the
independent public accountants of the Company, dated as of a date no less than
five days before the Closing Date, in form and substance satisfactory to the
Investors. Each of the Investors shall also have received a certificate from
the Chief Financial Officer of the Company, dated the Closing Date, in form and
substance satisfactory to the Investors, stating that; (i) the financial
statements for the fiscal years ended March 31, 1989, 1990 and 1991 have been
prepared in accordance with GAAP, (ii) the Company's monthly report for the
month of April 1991 reflects the operations of the Company for such month
subject to normal adjustments and (iii) the Company s accounting books and
records of accounts have been maintained properly and materially true and
correct entries therein have been made of all dealings and transactions in
relation to its business activities.
3H. No Adverse U.S. Legislation, Action or Decision. There shall
be no action, suit, investigation or proceeding pending, or, to the best of the
Investors' or the Company s knowledge, threatened, against the Company or the
Company's respective properties or rights, or the Company's affiliates,
associates, officers or directors, before any court, arbitrator or
administrative or governmental body which seeks to restrain, enjoin, prevent,
question the validity or legality of, or seek to recover damages or to obtain
other relief in connection with, the issuance of the Securities or the
Company's performance of its obligations pursuant to this
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Agreement, and, to the best of the Investors' or the Company s knowledge, there
shall be no valid basis for any such action, proceeding or investigation.
3I. Compliance with Securities Laws. The offering and sale of the
Securities under this Agreement, shall have complied with all applicable
requirements of federal and state securities laws, and the Investors shall have
received evidence of such compliance in form and substance satisfactory to
them.
3J. Approval and Consents. The Company shall have duly received
all authorizations, consents, approval, licenses, franchises, permits and
certificates by or of all federal, state and local governmental authorities
necessary for the issuance of the Securities and all thereof shall be in full
force and effect at the time of the Closing. The Company shall have delivered
to the Investors an Officer's Certificate, dated the Closing Date, to such
effect.
3K. Material Changes. Since March 31, 1991, there shall not have
been any changes in the business of the Company which shall individually or in
the aggregate, have a material adverse effect on the business, financial
condition, results of operations or prospects of the Company, nor has the
Company incurred any material liability, contingent or otherwise, which has
such effect.
3L. Compliance with Financial Covenants. The Company shall have
delivered to the Investors an Officer's Certificate, dated the Closing Date, in
form and substance satisfactory to the Investors, stating that immediately
subsequent to the financing made pursuant to this Agreement, the Company shall
be in material compliance with all covenants, agreements and undertakings in
agreements, contracts or documents evidencing or governing Indebtedness of the
Company and no default or event of default, or event which with notice, lapse
of time or both shall constitute a default or event of default, shall have
occurred and be continuing under the terms of any such agreements, contracts or
documents.
3M. Cumulative Convertible Preferred Stock.
(a) The Company shall have converted all the accrued and unpaid
dividends on its Cumulative Convertible Preferred Stock to Common Stock at
$5.00 per share and on the Closing Date there shall be no accrued and unpaid
dividends on the Cumulative Convertible Preferred Stock.
(b) The Company shall have amended its organizational documents to
eliminate all future accruals of dividends on its Cumulative Convertible
Preferred Stock except to the extent such Cumulative Convertible Preferred
Stock is entitled to participate on a pari passu basis with respect to
dividends declared on Common Stock, based on the number of shares of Common
Stock into which such Cumulative Convertible Preferred Stock is convertible.
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3N. Delivery of Securities. At the Closing, the Company shall
tender to all of the Investors the Securities to be purchased by them, in form
and substance satisfactory to the Investors and their special counsel.
4. Conditions to the Obligations of the Company. The Company's
obligation to sell the Securities to the Investors hereunder is subject to the
satisfaction, on or before the Closing Date, of the following conditions and if
by the Closing Date the following conditions shall not have been satisfied or
waived by the Company, the Company may, at its election, be relieved of all
further obligations under this Agreement, without thereby waiving any other
rights it may have by reason of such failure or such nonfulfillment:
4A. Accuracy of Representations and Warranties. The
representations and warranties of the Investors contained in paragraph 12
hereof shall be true in all material respects on and as of the Closing Date,
except to the extent of changes caused by the transactions herein contemplated.
4B. Blue Sky Approvals. The Company shall have received any
requisite approvals of state securities commissioners and such approvals shall
be in full force and effect on the Closing Date.
4C. Purchase of All Securities. Each Investor shall have tendered
full payment for the number of Units set forth opposite the name of such
Investor in the Purchaser Schedule.
5. Prepayments of Notes.
5A. Prepayments of Notes in General.
(i) The outstanding principal amount of the Notes shall be subject
to prepayment, repurchase or redemption prior to maturity only under the
circumstances set forth in this paragraph 5. No partial prepayment of the
outstanding principal amount of the Notes pursuant to paragraph 5C shall
relieve the Company of its obligation to make any of the required prepayments
pursuant to paragraph so.
(ii) If there is more than one holder of the Notes, the aggregate
principal amount of each partial prepayment of the Notes shall be allocated
among the holders of the Notes at the time outstanding in proportion to the
unpaid principal amounts of the Notes respectively held by each such holder.
5B. Mandatory Prepayments of the Notes.
(i) On the last day of June, September and December of 1993,
March, June, September and December of 1994 and 1995 and March of 1996, the
Company shall prepay $100,000 outstanding principal amount of the Notes,
without premium or penalty, together with accrued and unpaid interest thereon
to each such prepayment date, and such principal amount of
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the Notes and accrued and unpaid interest thereon shall become due and payable
on each such prepayment date.
(ii) Concurrently with the consummation of any transaction
resulting in a Change of Control, regardless whether such transaction requires
the consent of the holders of the Notes, the Company shall prepay all
outstanding principal amount of the Notes, without premium or penalty, together
with accrued and unpaid interest thereon to such prepayment date, and such
principal amount of Notes and accrued and unpaid interest thereon shall
thereupon become due and payable on such date. Nothing in this paragraph 5B
shall be deemed to permit a transaction prohibited under paragraph 8G.
5C. Optional Prepayments of the Notes.
(i) At any time prior to maturity, the Company may, in its sole
discretion but subject to compliance with subparagraph (ii) below, prepay
outstanding principal amount of Notes, without premium or penalty, provided
that no holder of Notes shall receive a payment of principal in other than an
integral multiple of $1,000, together with accrued and unpaid interest thereon
to any such prepayment date.
(ii) The Company shall give each holder of Notes written notice of
each prepayment pursuant to subparagraph (i) of this paragraph 5C, not less
than 30 days but not more than 60 days prior to the prepayment date, specifying
such prepayment date, the principal amount of the Notes to be prepaid on such
date and that such prepayment is to be made pursuant to paragraph 5C Notice of
prepayment having been given as aforesaid, the principal amount of the Notes
specified in such notice, together with accrued and unpaid interest thereon to
the prepayment date, shall become due and payable on such prepayment date
unless (a) the holder of such Notes shall have prior to such prepayment date
tendered such Notes pursuant to an exercise of Warrants or (b) a holder of
Warrants or Common Stock purchased upon exercise thereof shall have requested
filing pursuant to the Registration Rights Agreement of, or the Company shall
otherwise have filed, a registration statement for Common Stock under the 1933
Act with the Commission, in which case prepayment shall be effected upon the
lapse of 60 days after the declaration of effectiveness of such registration
statement by the Commission and shall be effected only as to Notes that are not
tendered on or before such date pursuant to an exercise of Warrants.
6. Buyback of Warrants.
6A. Buyback of Warrants in General. The Warrants shall be subject
to call, repurchase or redemption prior to exercise or expiration only under
the circumstances set forth in this paragraph 6. No partial call of the
Warrants pursuant to paragraph 6C shall relieve the Company of its obligation
to purchase Warrants pursuant to paragraph 6B. If there is more than one
holder of the Warrants, the aggregate number of Warrants to be redeemed under
any partial redemption shall be allocated among the holders of the Warrants at
the time outstanding in proportion to the amounts of the shares purchasable
upon exercise of the Warrants respectively held by each such holder.
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6B. Put of the Warrants.
(i) At any time after March 31, 1998 but on or before March 31,
1999, a holder of Warrants may provide the Company with a written request for
the purchase of warrants and within 60 calendar days following receipt of such
request, the Company shall purchase from such holder Warrants representing 50%
of the shares purchasable upon exercise of all Warrants held by such holder, at
a price equal to the product of $5.00 and the number of shares purchasable upon
exercise of such purchased Warrants.
(ii) At any time after March 31, 1999, a holder of Warrants may
provide the Company with a written request for the purchase of Warrants and
within 60 calendar days following receipt of such request, the Company shall
purchase from such holder all Warrants held by such holder, at a price equal to
the product of $5.00 and the number of shares purchasable upon exercise of such
holder's Warrants.
(iii) Concurrently with the consummation of any transaction
resulting in a Change of Control, if requested in writing by a holder of
Warrants the Company shall purchase all Warrants held by such holder at an
aggregate price equal to the product of (x) (A) $1.00 (if the purchase occurs
on or before June 30, 1992), (B) $1.50 (if the purchase occurs after June 30,
1992 but on or before June 30, 1993), (C) $2.00 (if the purchase occurs after
June 30, 1993 but on or before June 30, 1994), or (D) $2,50 (if the purchase
occurs after June 30, 1994) and (y) the number of shares purchasable upon
exercise of such holder's Warrants, which amount shall thereupon become due and
payable on such date.
6C. Call of the Warrants.
(i) On or after the later of (i) the second anniversary of the
Closing Date or (ii) the date which is six months after the Company has
consummated an Initial Public Offering, the Company may, in its sole discretion
but subject to compliance with subparagraph (ii) below, purchase, and the
holders of outstanding Warrants shall, if the Company complies with
subparagraph (ii) below, sell to the Company, all outstanding Warrants at a
price equal to the product of $1.00 and the number of shares purchasable upon
exercise of such Warrants, provided that no such purchase and sale shall occur
unless, for at least 30 days within a period of 40 consecutive trading days
ending on the proposed purchase date, the closing bid or sale price of the
Company's Common Stock as reported on NASDAQ or the New York Stock Exchange has
been equal to or in excess of 200% of the Exercise Price in effect on such
proposed purchase date.
(ii) The Company shall give each holder of Warrants written notice
of a purchase of Warrants pursuant to subparagraph (i) of this paragraph 6C not
less than 60 days prior to the purchase date, specifying such date, the number
of the Warrants (computed by reference to the number of shares purchasable by
exercise thereof) to be purchased on such date and that such purchase is to be
made pursuant to this paragraph 6C. Each such notice shall be accompanied by
an Officer's Certificate stating that all of the applicable conditions set
forth in subparagraph
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(i) of this paragraph 6C have been fulfilled. Notice of purchase having been
given as aforesaid, the purchase price under this paragraph 6C shall become due
and payable on such purchase date unless (a) the holder of such Warrants shall
have exercised such Warrants previously pursuant to paragraph 11, (b) the
holder of such Warrants shall have made a request for purchase of its shares
pursuant to any provision of paragraph 6B or (c) a holder of Warrants or Common
Stock purchased upon exercise thereof shall have requested filing pursuant to
the Registration Rights Agreement of, or the Company shall otherwise have
filed, a registration statement for Common Stock under the 1933 Act with the
Commission, in which case purchase and sale shall not be effected until the
lapse of 60 days after the declaration of effectiveness of such registration
statement by the Commission. Should the Warrants not be purchased on such
purchase date due to the Company's failure to perform its obligations under
this paragraph 6C, any subsequent purchase may be effected only after
compliance with the provisions of this subparagraph (ii) from and after such
purchase date.
7. Affirmative Covenants. All covenants contained herein shall
be given independent effect so that if a particular action or condition is not
permitted by any such covenants, the fact that such action or condition would
be permitted by an exception to, or otherwise be within the limitations of,
another covenant shall not avoid the occurrence of a Default if such action is
taken or condition exists. The provisions of this paragraph 7 are for the
benefit of Investors so long as they hold any Securities and for the benefit of
each other holder of Securities; provided that (i) except for paragraphs 7A,
7B, 7H and 7I, such provisions shall have no further force or effect upon
payment in full of all Indebtedness under the Notes and (ii) upon payment in
full of all Indebtedness under the Notes and completion of an Initial Public
Offering, paragraphs 7A and 7B shall have no further force and effect.
7A. Financial Statements. The Company covenants that it will
deliver to each of the Investors and each other holder of Securities;
(i) as soon as practicable and in any event within 30 days after
the end of each month (other than the last month) in each fiscal year, the
consolidated statements of income for such month and for the period from the
beginning of the current fiscal year to the end of such month and a
consolidated balance sheet of the Company and its Subsidiaries as at the end of
such month, setting forth in each case in comparative form figures for the
current year operating plan, all in reasonable detail to indicate the results
of the Company's operations for such period on a basis consistent with past
practice, and certified by the chief financial officer or chief accounting
officer of the Company as fairly presenting the financial condition of the
Company and its Subsidiaries, subject to the changes resulting from normal
adjustments (including audit and year-end adjustments), provided, however, that
all obligations pursuant to this clause (i) shall terminate upon consummation
of an Initial Public Offering;
(ii) as soon as practicable and in any event within 45 days after
the end of each quarterly period for which the Company shall prepare statements
for such period (other than the last quarterly period) in each fiscal year, the
consolidated statements of income, changes in stockholders, equity and cash
flow of the Company and its Subsidiaries for such quarterly period
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and for the period from the beginning of the current fiscal year to the end of
such quarterly period, and a consolidated and consolidating balance sheet of
the Company and its Subsidiaries as at the end of such quarterly period,
setting forth in each case in comparative form figures for the corresponding
period in the preceding fiscal year, all in reasonable detail, prepared in
accordance with GAAP on a basis consistent with past practice, and certified by
the chief financial officer or chief accounting officer of the Company as
fairly presenting the financial condition of the Company and its Subsidiaries,
subject to the changes resulting from audit and year-end adjustments;
(iii) as soon as practicable and in any event within 90 days after
the end of each fiscal year, consolidated and consolidating statements of
income, changes in stockholders' equity and cash flow of the Company and its
Subsidiaries for such year, and a consolidated balance sheet of the Company and
its Subsidiaries as at the end of such year, setting forth in each case
(commencing with any such reports delivered after the close of the Company's
first full fiscal year following the date hereof) in comparative form
corresponding figures from the preceding annual audit, and accompanied by a
report, with respect to the consolidated financial statements, of independent
public accountants of recognized national standing selected by the Company and
reasonably satisfactory to the Investors, whose report shall state, without
qualification as to the scope of its audit, that such consolidated financial
statements present fairly the financial condition of the Company and its
Subsidiaries in accordance with GAAP on a basis consistent with past practice
and that the examination by such accountants has been made in accordance with
generally accepted auditing standards;
(iv) as soon as practicable and in any event no later than 30 days
before commencement of a new fiscal year, a business plan and operating budget
(including, without limitation, revenue accounts, cash flow and balance sheets)
of the Company for such fiscal year setting forth in each case in comparative
form corresponding figures from the preceding fiscal year, in reasonable
detail, provided, however, that all obligations pursuant to this clause (iv)
shall terminate upon consummation of an Initial Public Offering;
(v) promptly upon transmission thereof, copies of all financial
statements, proxy statements and reports as the Company shall send to its
stockholders and copies of all registration statements (without exhibits) and
all reports which it files with the Commission (or any governmental body or
agency succeeding to the functions of the Commission) or with any domestic
securities exchange on which any of its securities are listed and copies of any
such reports filed by the Company s directors or officers in their capacity as
such if the Company has received a copy of such report, and copies of all press
releases and other statements made available generally by the Company or its
Subsidiaries to the public concerning material developments in the business of
the Company and its Subsidiaries;
(vi) promptly upon receipt thereof, a copy of each other report
submitted to the Company or any of its Subsidiaries by independent accountants
in connection with any annual, interim or special audit made by them of the
books of the Company or any of its Subsidiaries; and
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(vii) with reasonable promptness, such other financial and/or
operating data as the Investors may reasonably request.
Together with each delivery of financial statements required by clauses (i),
(ii) and (iii) above, the Company will deliver to the Investors an Officer's
Certificate (a) setting forth in narrative form the consolidated operational
results for the Company for the fiscal period covered by such financial
statements and (except to the extent specifically set forth in such financial
statements) the aggregate amount of Indebtedness, fixed charges and pretax cash
provided by operations, on a consolidated basis, of the Company outstanding at
the end of such fiscal period, and the aggregate amounts of interest expense
(stated separately) on Indebtedness, on a consolidated basis, of the Company,
in each instance during such fiscal period, (b) in the case of the financial
statements provided in clauses (ii) and (iii) above, demonstrating (with
computations in reasonable detail) compliance by the Company with the
provisions of paragraphs 8A, 8B, 8D, 8E and 8K, and (c) stating that there
exists no Event of Default or Default or, if any Event of Default or Default
exists, specifying the nature thereof, the period of existence thereof and what
action the Company, proposes to take with respect thereto. Together with each
delivery of financial statements required by clause (iii) above, the Company
will also deliver to the Investors a certification of the accountants referred
to in such clause (iii) stating that, in making the audit necessary to the
certification of such financial statements, they have obtained no knowledge of
any Event of Default or Default, or, if, to their knowledge, any Event of
Default or 'Default exists, specifying the nature and period of existence
thereof; provided that such accountants shall not be liable to anyone by reason
of their failure to obtain knowledge of any such Event of Default or Default
which would not be disclosed in the course of an audit conducted in accordance
with generally accepted auditing standards. Forthwith upon the discovery by an
executive officer of the Company of any Event of Default or Default, the
Company will deliver to the Investors an Officer's Certificate specifying the
nature thereof, the period of existence thereof and what action it proposes to
take with respect thereto. Each Investor is hereby authorized to deliver a
copy of any financial statement or certificate delivered pursuant to this
paragraph 7A to any regulatory body having jurisdiction over such Investor.
7B. Books and Records; Inspection of Property. The Company will
keep, and will cause each of its Subsidiaries to keep, proper books of record
and accounts in which full, true and correct entries shall be made of all
dealings and transactions in relation to its business and activities so that
the financial statements of the Company may be presented in accordance with
GAAP. The Company covenants that it will permit any Person representing the
Investors and designated in writing by such Investors, at the Investors'
expense, to visit and inspect any of the properties of the Company and its
Subsidiaries, to examine the corporate, financial and operating records of the
Company and its Subsidiaries and make copies thereof or extracts therefrom and
to discuss the affairs, finances and accounts of any of such corporations with
the directors, officers and independent accountants of the Company and its
Subsidiaries, all at such reasonable times and as often as the Investors may
reasonably request.
7C. Additional Covenants Pending the Closing. The Company
covenants that pending the Closing it will not, without the prior written
consent of the Investors, take any action which
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would result (i) in any of the representations or warranties contained in this
Agreement not being true in all material respects at and as of the time
immediately after such action or (ii) in any of the covenants contained in this
Agreement becoming unperformable. Pending the Closing, the Company will
promptly advise the Investors of any action or event of which it becomes aware
which has the effect of making incorrect any of such representations or
warranties or which has the effect of rendering unperformable any of such
covenants.
7D. Compliance with Laws, etc. The Company covenants that it will
exercise reasonable diligence in order to assure that it complies with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, noncompliance with which would materially adversely
affect the business, condition (financial or other), assets, property or
operations of the Company and its Subsidiaries, taken as a whole.
7E. ERISA. Promptly (and in any event within 30 days) after the
Company or any of its Subsidiaries knows or, in the case of a single-employer
Pension Plan has reason to know, that a Reportable Event with respect to any
Pension Plan has occurred, that any Pension Plan is or may be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA or that
the Company or any of its Subsidiaries will or may incur any liability to or on
account of a Pension Plan under Sections 4062, 4063, 4064, 4201 or 4204 of
ERISA, the Company will deliver to the Investors, so long as they shall hold
any of the Securities, a certificate of the chief financial officer of the
Company setting forth information as to such occurrence and what action, if
any, the Company is required or proposes to take with respect thereto, together
with any notices concerning such occurrences which are (a) required to be filed
by the Company or the plan administrator of any such Pension Plan controlled by
the Company or its Subsidiaries, with the PBGC or (b) received by the Company
or its Subsidiaries from any plan administrator of a Multiemployer Plan or
other Pension Plan not under its control, The Company shall furnish to the
Investors, so long as they shall hold any of the Securities, a copy of each
annual report (Form 5500 Series) of any Pension Plan received or prepared by
the Company or any of its Subsidiaries. Each annual report and any notice
required to be delivered hereunder shall be delivered no later than 10 days
after the later of the date such report or notice is filed with the Internal
Revenue Service or the PBGC or the date such report or notice is received by
the Company or any of its Subsidiaries, as the case may be.
7F. Corporate Existence; Maintenance of Properties. The Company
covenants that it: (i) will do or cause to be done all things necessary to
preserve and keep in full force and effect the corporate existence and rights
of the Company and its Subsidiaries (except that the corporate existence of any
of its Subsidiaries may be terminated if such termination is, in the judgment
of the Board of Directors of the Company, in the best interest of the Company
and is not materially disadvantageous to the holders of the Securities or any
securities issued in exchange therefor) ; (ii) will cause its properties and
the properties of its Subsidiaries used or useful in the conduct of their
respective businesses, other than properties which in the aggregate are not
material to the business and operations of the Company and its Subsidiaries,
taken as a whole, to be maintained and kept in good condition, repair and
working order and will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereto, all as in the judgment of
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the Company may be necessary so that the businesses carried on in connection
therewith may be properly and advantageously conducted at all times; and (iii)
will, and will cause each of its Subsidiaries to, qualify and remain qualified
to conduct business in each jurisdiction where the nature of the business of or
ownership of property by the Company or such Subsidiary, as the case may be,
may require such qualification.
7G. Insurance. The Company covenants that, so long as the
Investors shall hold any of the Securities, it will maintain, and will cause
each of its Subsidiaries to maintain, with financially sound and reputable
insurance companies, funds or underwriters, insurance for the Company and its
Subsidiaries of the kinds, covering the risks and in the relative proportionate
amounts usually carried by companies conducting business activities similar to
those of the Company and its Subsidiaries.
7H. Filing of Reports under the 1934 Act. The Company shall give
prompt notice to each of the Investors of the filing of any registration
statement (an "Exchange Act Registration Statement") pursuant to the 1934 Act,
relating to any class of equity securities of the Company and the effectiveness
of such Exchange Act Registration Statement and the number of shares of such
class of equity security outstanding as reported in such Exchange Act
Registration Statement. If the Company shall have filed an Exchange Act
Registration Statement or a registration statement (including an offering
circular under Regulation A promulgated under the ▇▇▇▇ ▇▇▇) pursuant to the
requirements of the 1933 Act, the Company shall use all reasonable efforts to
(i) comply with the reporting requirements of the 1934 Act, and (ii) comply
with all other public information reporting requirements of the Commission that
are a condition to the availability of an exemption from the 1933 Act (under
Rule 144 thereof, as amended from time to time, or successor rule thereto or
otherwise) for the sale of shares of Common Stock issuable upon exercise of the
Warrants by any Investor. The Company shall cooperate with each Investor in
supplying such information as may be necessary for such Investor to complete
and file any information reporting forms at present or hereafter required by
the Commission, including, without limitation, any information required as a
condition to the availability of an exemption from the 1933 Act (under Rule 144
thereof or otherwise), for the sale of shares of Common Stock issuable upon
exercise of the Warrants by any ▇▇▇▇▇▇▇▇.
▇▇. 1933 Act Registration Statements. The Company covenants that
it shall not file any registration statement under the 1933 Act (other than a
Form S-8 registration statement, or any successor to the Form S-8 registration
statement) covering any securities unless it shall first have given each
Investor written notice thereof. The Company further covenants that each
Investor shall have the right, at any time when it may be deemed by the Company
to be a controlling person of the Company, to participate in the preparation of
such registration statement (regardless of whether or not an Investor will be a
selling security holder in connection with such registration statement) and to
request the insertion therein of material furnished to the Company in writing
which in such Investor's judgment should be included. In connection with any
registration statement referred to in this paragraph 7I, the Company will
indemnify each Investor, its partners, officers and directors and each person,
if any, who controls such Investor within the meaning of section 15 of the 1933
Act, against all losses, claims, damages, liabilities and
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expenses caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus or any
preliminary prospectus or any amendment thereof or supplement thereto or caused
by any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any untrue statement or alleged untrue statement or
omission or alleged omission contained in written information furnished to the
Company by such Investor expressly for use in such registration statement. If,
in connection with any such registration statement, such Investor shall furnish
written information to the Company expressly for use in the registration
statement, such Investor will indemnify the Company, its directors, each of its
officers who signs such registration statement and each person, if any, who
controls the Company within the meaning of the 1933 Act against all losses,
claims, damages, liabilities and expenses caused by any untrue statement or
alleged untrue statement of a material fact or any omission or alleged omission
of a material fact required to be stated in the registration statement or
prospectus or any preliminary prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or alleged untrue statement or such
omission or alleged omission is contained in information so furnished in
writing by such Investor for use therein. The provisions of this paragraph 7I
are in addition to, and not in limitation of, the provisions of the
Registration Rights Agreement.
8. Negative Covenants. All covenants contained herein shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that such action or condition
would be permitted by an exception to, or otherwise be within the limitations
of, another covenant shall not avoid the occurrence of a Default if such action
is taken or condition exists. The provisions of this paragraph 8 are for the
benefit of Investors so long as they hold any of the Securities and for the
benefit of each other holder of any of the Securities, and, except for
paragraph 8F, such provisions shall have no further force or effect following
the payment of all Indebtedness under to the Notes.
8A. Restricted Payments.
(i) The Company covenants that before the consummation of an
Initial Public Offering it will not make, and will not permit any Subsidiary to
make, any Restricted Payments.
(ii) The Company covenants that after the consummation of an
Initial Public Offering it will not make, and will not permit any Subsidiary to
make, any Restricted Payments (a) until after the end of a fiscal quarter and
(b) then only to the extent of (x) 25% of Net Income of the Company in such
quarter reduced by (y) the amount of consolidated net losses of the Company for
the period commencing the first day of the fiscal year in which such Initial
Public Offering is consummated and ending the last date of the preceding fiscal
quarter, as such consolidated net losses would appear on a consolidated
statement of income for the Company for such period prepared in accordance with
GAAP, but only to the extent of such consolidated net losses that have not been
offset previously against Net Income under this subparagraph (ii).
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8B. Restrictions on Indebtedness. The Company covenants that it
will not incur, create, assume or suffer to exist any Indebtedness or permit
any of its Subsidiaries to do any of the foregoing, other than any of the
following;
(i) Indebtedness represented by the Notes and this Agreement;
(ii) additional unsecured Senior Debt or Senior Debt secured by
Liens as permitted by subparagraph 8C(v);
(iii) Indebtedness that is subordinated or pari passu to
Indebtedness evidenced by the Notes and subordinated to Senior Debt;
(iv) other Indebtedness of the Company and its Subsidiaries
outstanding on the date hereof as described in, and in the amounts set forth
in, Schedule 11E;
(v) any operating lease obligations; and
(vi) any Indebtedness secured by Liens as permitted by
subparagraphs 8C(iii) or (iv).
8C. Restrictions on Liens. Except as set forth in Schedule 8C,
the Company covenants that it will not and will not permit any Subsidiary to
create, assume or suffer to exist any Lien upon any of its property or assets,
whether now owned or hereafter acquired, except;
(i) Liens for taxes not yet due or which are being actively
contested in good faith by appropriate proceedings and for which adequate
reserves have been established;
(ii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other similar Persons and other Liens
imposed by law incurred in the ordinary course of business for sums not yet
delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, in accordance with GAAP shall have been made
therefor;
(iii) purchase money security interests (including mortgages, leases
and other deferred purchase devices) attaching only to the property or assets
purchased;
(iv) security interests granted in connection with the purchase by
the Company of corporations or other entities which upon purchase thereof
become Subsidiaries, which security interests are (a) granted only to the
sellers of such Subsidiaries and (b) attach only to the stock of such
Subsidiaries;
(v) security interests in the assets of the Company securing
Senior Debt; and
(vi) security interests securing Indebtedness on Schedule 11E
hereof.
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8D. Loans, Advances and Investments. The Company covenants that
it will not, and will not permit any of its Subsidiaries to make or permit to
remain outstanding any loan or advance to, or guarantee, endorse or otherwise
be or become contingently liable, directly or indirectly, in connection with
the obligations, stock or dividends of, or own, purchase or acquire any stock,
obligations or securities of, or make any Investment in, any Person, except
that the Company or any Subsidiary may;
(i) make or permit to remain outstanding loans or advances to any
Subsidiary or, as to a Subsidiary, any such loan or advance to the Company;
(ii) own, purchase or acquire stock, obligations or securities of a
Subsidiary or of a corporation which immediately after such purchase or
acquisition will be a Subsidiary;
(iii) own, purchase or acquire (a) commercial paper rated P1 or
higher by ▇▇▇▇▇'▇ Investors Service Inc., or A1 or higher by Standard & Poor's
Corporation on the date of acquisition, (b) certificates of deposit of United
States commercial banks (having a combined capital and surplus in excess of
$500,000,000), (c) obligations of or guaranteed by the United States government
or any agency thereof, and (d) money market funds organized under the laws of
the United States or any state thereof that invest substantially all of its
assets in any of the types of investments described in clauses (a), (b) or (c)
of this clause (iii);
(iv) endorse negotiable instruments for collection in the ordinary
course of business, make or permit to remain outstanding travel, moving and
other like advances to officers, employees and consultants in the ordinary
course of business or make or permit to remain outstanding lease, utility and
other similar deposits in the ordinary course of business;
(v) guarantee Indebtedness of any Subsidiary to the extent such
Subsidiary's Indebtedness is permitted by paragraph 8B; and
(vi) make loans or advances to employees in the ordinary course of
business, provided that such loans shall not exceed $25,000 per employee unless
a majority of disinterested members of the Company's Board of Directors
approves such loan.
8E. Shareholders' Equity.
(i) The Company covenants that it will not at any time permit its
Shareholders Equity to be less than (x) $4,000,000 plus (y) 50% of consolidated
earnings (less, without duplication, all provision for taxes) as the same would
appear on a consolidated statement of operations of the Company for the period
beginning April 1, 1991 and ending at the time of determination of Shareholders
Equity, prepared in accordance with GAAP.
(ii) The Company covenants that it will not at any time incur any
additional Indebtedness if its ratio of Indebtedness to Shareholders Equity is,
or if the effect of such incurrence is to cause such ratio to be, greater than
2 to 1.
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8F. Transactions with Affiliates. The Company covenants that it
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, enter into or permit to exist any transactions (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service), with any Person who, prior to such transaction, is
the holder of 5% or more of any class of equity securities of the Company or
with any Affiliate of the Company or of any such holder on terms that are less
favorable to such Subsidiary or the Company, as the case may be, than those
that would be obtainable at the time from any Person who is not such a holder
or Affiliate, except that the Company may give guaranties and make loans and
advances in accordance with paragraph 8D(i), (v) and (vi).
8G. Merger and Asset Sales. The Company covenants that it will
not enter into any transaction of merger or consolidation or liquidate, wind up
or dissolve itself (or suffer any liquidation or dissolution), or convey, sell,
lease, transfer or otherwise dispose of, in one transaction or a series of
transactions, all or substantially all of the Company's business, property or
fixed assets (either through a sale of assets or stock), whether now owned or
hereafter acquired, except (i) if the Notes and all interest accrued thereon
have been paid in full or provided for at the closing of such transaction out
of the proceeds of it or (ii) that the Company may merge or consolidate if (a)
the Company is the surviving entity and remains an entity incorporated under
the laws of a state of the United States of America, (b) immediately after such
merger or consolidation (and giving effect thereto) no Default shall have
occurred and be continuing, and (c) after giving effect to such merger or
consolidation the Company would be able to incur at least $1.00 of additional
Indebtedness in accordance with paragraph 8E (ii) without a Default resulting.
8H. Certain Contracts. Except as otherwise specifically permitted
by any other provision of paragraph 8, the Company covenants that it will not,
and will not permit any of its Subsidiaries to, enter into or be a party to (i)
any contract providing for the making of loans, advances or capital
contributions to any Person other than a Subsidiary, or for the purchase of any
property from any Person (except as permitted by paragraph SD), in each case
primarily in order to enable such Person to maintain working capital, net worth
or any other balance sheet condition or to pay debts, dividends or expenses, or
(ii) any contract for the purchase of materials, supplies or other property or
services if such contract (or any related document) requires that payment for
such materials, supplies or other property or services shall be made regardless
of whether or not delivery of such materials, supplies or other property or
services is ever made or tendered, or (iii) any contract to rent or lease (as
lessee) any real or personal property if such contract (or any related
document) provides that the obligation to make payments thereunder is absolute
and unconditional under conditions not customarily found in commercial leases
then in general use or requires that the lessee purchase or otherwise acquire
securities or obligations of the lessor, or (iv) any contract for the sale or
use of materials, supplies or other property, or the rendering of services, if
such contract (or any related document) requires that payment for such
materials, supplies or other property, or the use thereof, or payment for such
services, shall be subordinated to any indebtedness (of the purchaser or user
of such materials, supplies or other property or the Person entitled to the
benefit of such services) owed or to be
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owed to any Person, or (v) any other contract which, in economic effect, is
substantially equivalent to a guarantee.
8I. Conduct of Business. The Company covenants that it will not,
and will not permit any of its Subsidiaries to, engage in any business other
than the business engaged in by the Company and its Subsidiaries on the date
hereof which includes the provision of training to individuals to improve or
create skills with respect to personal interests, existing careers or new
careers, and any businesses or activities substantially similar or related
thereto.
8J. No Amendments. The Company will not amend its Certificate of
Incorporation (including, without limitation, the Cumulative Convertible
Preferred Stock) or By-laws in any manner to cause the Investors to be unable
to exercise any right or privilege, or in such a way as to cause the Company to
be unable to perform any of its obligations to the Investors specifically
provided for in this Agreement, the Registration Rights Agreement or the
Coinvestors Agreement; without limiting the provisions of the preceding clause,
nothing in this paragraph 8J shall limit the Company's right to amend its
Certificate of Incorporation or take any other action with respect to the
authorization or issuance of capital stock, including the authorization or
issuance in the number of shares of common or preferred stock or the
designation of preferences as to distributions on liquidation, so long as
compliance by the Company with such terms will not conflict with the
prohibition contained in such clause; provided, however, that the Company shall
not create any class of capital stock having a preference superior to its
common stock with respect to dividends, or change the number of its directors.
8K. Interest Coverage Ratio. The Company covenants that it will
not permit, its Interest Coverage Ratio to be less than (i) 1 to 1 for any two
consecutive fiscal quarters or (ii) 1.5 to 1 at the end of any fiscal quarter,
for the twelve-month period then ended.
9. Subordination.
9A. Subordinated Debt Subordinate to Senior Debt. All
Subordinated Debt shall be junior and subordinate to all Senior Debt (as
defined in paragraph 14) to the extent and in the manner provided in this
paragraph 9 and each holder of a Note, by its acceptance thereof, agrees to be
bound by the provisions of this paragraph 9. Subordinated Debt shall not be
junior or subordinate to any Indebtedness of the Company other than Senior
Debt.
9B. Suspension of Right to Receive Payments of Subordinated Debt;
Other Defaults.
9B(l). Failure to Pay Principal of or Interest on Senior Debt. If at
the time any payment or prepayment with respect to any Subordinated Debt or any
purchase, redemption or other retirement (whether at the option of the holder
or otherwise) of Subordinated Debt is to be made, directly or indirectly, or
immediately after giving effect thereto there shall have occurred a Default in
the payment of principal or interest due on Senior Debt (whether by lapse of
time, acceleration or otherwise), then any payment or distribution of any kind
or character, whether in cash, property or securities, which may be payable or
deliverable with respect to Subordinated
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Debt shall be paid or delivered by the Company directly to the holders of
Senior Debt, ratably, for application in payment thereof, unless and until all
Senior Debt shall have been paid in full.
9B(2). Acceleration of Payment of Senior Debt or Subordinated Debt.
(a) If at the time any payment or prepayment with respect to any
Subordinated Debt or any purchase, redemption or other retirement (whether at
the option of the holder or otherwise) of Subordinated Debt is to be made,
directly, or indirectly, or immediately after giving effect thereto (i) the
Senior Debt or the Subordinated Debt shall have been declared by the holders
thereof due and payable before its expressed maturity and (ii) such
acceleration shall not have been expressly rescinded in writing by the holders
of Senior Debt pursuant to the relevant Senior Debt Agreement or by the holders
of Subordinated Debt pursuant to the relevant Subordinated Debt Agreement, as
the case may be, then any payment or distribution of any kind or character,
whether in cash, property or securities, which may be payable or deliverable
with respect to Subordinated Debt shall be paid or delivered by the Company
directly to the holders of Senior Debt, ratably, for application in payment
thereof, unless and until all Senior Debt shall have been paid in full or such
acceleration shall have been rescinded.
(b) Prior to the payment in full of all Senior Debt, the holders
of Notes will not, upon the occurrence of an Event of Default referred to in
paragraph 10 hereof (other than an Event of Default which, by the terms of
such paragraph 10, causes an immediate and automatic acceleration of all
payment obligations in respect of the Notes), declare any or all of the Notes
due and payable or demand or ▇▇▇ for the payment of any amount owing on the
Notes, unless and until the holders of the Notes have notified the holders of
Senior Debt of the occurrence of such particular Event of Default and 90 days
shall have elapsed since the date of such notice and such Event of Default
shall not have been cured; provided, however, that if such Event of Default is
of the nature set forth in paragraph 1OA(iii) and the event giving rise thereto
does not result in any other Event of Default described in such paragraph
1OA(iii), then the holders of Notes shall not, prior to the payment in full of
all Senior Debt, declare any or all of the Notes due and payable on demand or
▇▇▇ for the payment of any amount owing on the Notes (such period of time
during which such rights are suspended being called the "Continuous Standstill
Period"); provided, further, however, that, notwithstanding the foregoing, if
any holder of Senior Debt shall accelerate the maturity of such Senior Debt
prior to the expiration of such 90-day period or during the Continuous
Standstill Period, the holders of Notes may forthwith accelerate the maturity
of the Notes. Nothing in this paragraph 9B(2)(b) shall be deemed to permit any
payment with respect to the Notes at a time when such payment would be
prohibited by paragraphs 9B(l) or 9b(2)(a).
9B(3). Bankruptcy or Insolvency. In the event of (i) any insolvency,
bankruptcy, liquidation, reorganization or other similar proceedings, or any
receivership proceedings in connection therewith, relative to the Company or
(ii) any proceedings for voluntary liquidation, dissolution or other winding-up
of the Company, whether or not involving insolvency or bankruptcy proceedings,
then all Senior Debt shall first be paid in full, or such payment shall have
been duly provided for, before any further payment is made with respect to
Subordinated
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Debt. In any of such proceedings, any payment or distribution of any kind or
character, whether in cash, property or securities, which may be payable or
deliverable with respect to Subordinated Debt shall be paid or delivered
directly to the holders of Senior Debt, ratably, for application in payment
thereof, unless and until all Senior Debt shall have been paid in full;
provided that in the event that payment or delivery of any cash, property or
securities to any holders of Subordinated Debt is authorized by a final
nonappealable order or decree giving effect, and stating in such order or
decree that effect is given, to the subordination of Subordinated Debt to
Senior Debt, and made by a court of competent jurisdiction in a reorganization
proceeding under any applicable law, no payment or delivery of such cash,
property or securities payable or deliverable with respect to Subordinated Debt
shall be made to the holders of Senior Debt. Anything in this paragraph 9 to
the contrary notwithstanding, no payment or delivery shall be made to holders
of Senior Debt of securities that are issued and delivered to holders of
Subordinated Debt pursuant to reorganization, dissolution or liquidation
proceedings, or upon any merger, consolidation, sale, lease, transfer or other
disposal not prohibited by the provisions of this Agreement, by the Company, as
reorganized, or by the corporation succeeding to the Company or acquiring its
property and assets, if such securities are subordinate and junior at least to
the extent provided in this paragraph 9 to the payment of all Senior Debt then
outstanding and to the payment of any securities that are issued in exchange or
substitution for any Senior Debt then outstanding.
9C. Rights of Holders of Senior Debt Not to Be Impaired. 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 by any such holder, or by any noncompliance by the
Company with the terms and provisions and covenants herein contained,
regardless of any knowledge thereof any such holder may have or otherwise be
charged with. The provisions of this paragraph 9 are intended to be for the
benefit of, and shall be enforceable directly by, the holders from time to time
of the Senior Debt. Each of the holders of Subordinated Debt waives notice of
or proof of reliance on this Agreement and protest, demand for payment and
notice of default by the holders of Senior Debt.
9D. Company's Obligation Unconditional. The provisions of this
paragraph 9 are solely for the purpose of defining the relative rights of the
holders of Senior Debt, on the one hand, and the holders of Subordinated Debt,
on the other hand, against the Company and its property. Nothing herein shall
impair, as between the Company and the holders of Subordinated Debt, the
obligation of the Company, which is unconditional and absolute, to pay to the
holders thereof the full amount of the Subordinated Debt in accordance with the
terms thereof and the provisions hereof and nothing herein shall prevent the
holder of any Subordinated Debt from exercising all remedies otherwise
permitted by applicable law or hereunder upon Default hereunder or under any
Subordinated Debt (including, without limitation, the right to demand and ▇▇▇
for payment and performance hereof and the Subordinated Debt and to accelerate
the maturity hereof as provided in paragraph 10), subject to the provisions of
Section 9B(2) and subject to the rights under this paragraph 9 of holders of
Senior Debt to receive cash, property or securities otherwise payable or
deliverable to the holders of Subordinated Debt, The failure to make any
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payment with respect to the Subordinated Debt by reason of any provision of
this paragraph 9 shall not be construed as preventing the occurrence of an
Event of Default under paragraph 10.
9E. Payments Held in Trust. If the holder of any Subordinated
Debt shall receive any payment or delivery of cash, property or securities in
respect of such Subordinated Debt which such holder is not entitled to receive
under the provisions of this paragraph 9, such holder will hold any amount so
received in trust for the holders of Senior Debt and will forthwith turn over
to the agent for the account of the holders of Senior Debt such payment or
delivery in the form received to be applied in payment or prepayment of Senior
Debt.
9F. Subrogation. Upon the payment in full of all Senior Debt and
termination of any Senior Debt Agreement, the holders of Subordinated Debt
shall be subrogated to the rights of the holders of Senior Debt to receive
payments or distributions of assets of the Company applicable to Senior Debt
until all Subordinated Debt shall have been paid in full. For the purpose of
subrogation, no payments to the holders of Senior Debt of any cash, property or
securities that the holders of Subordinated Debt would be entitled to receive
and retain but for the provisions of this paragraph 9, and no payment pursuant
to the provisions of this paragraph 9, to holders of Senior Debt by holders of
Subordinated Debt, shall, as between the Company and its creditors (other than
the holders of Senior Debt), on the one hand, and the holders of Subordinated
Debt, on the other, be deemed to be a Payment by the Company with respect to
the Senior Debt.
9G. Reliance by Holders on Final Order or Decree. Anything in
this paragraph 9 to the contrary notwithstanding, in the event that payment or
delivery of any cash, property or securities to any holders of the Notes is
authorized by a final non-appeal able order or decree giving effect to the
subordination of the Indebtedness represented by the Notes to Senior Debt, and
made by a court of competent jurisdiction in a liquidation or dissolution of
the Company or in a bankruptcy, reorganization, insolvency, receivership, or
similar proceedings under any applicable law, no payment or delivery of such
cash, property or securities payable or deliverable with respect to the
Indebtedness represented by the Notes shall be made to the holders of Senior
Debt, nor shall any payment or delivery be made to holders of Senior Debt of
securities that are issued and delivered to holders of Notes pursuant to
liquidation or dissolution of the Company or in a bankruptcy, reorganization,
insolvency, receivership, or similar proceedings, or upon any merger,
consolidation, sale, lease, transfer or other disposal not prohibited by the
provisions of this Agreement, by the Company, as reorganized, or by the
corporation succeeding to the Company or acquiring its properties and assets,
if such securities are subordinate and junior at least to the extent provided
in this paragraph 9 to the payment of all Senior Debt then outstanding and to
the payment of any securities that are issued in exchange or substitution for
any Senior Debt then outstanding.
10. Events of Default; Remedies.
10A. Events of Default. If any of the following events shall occur
and be continuing for any reason whatsoever (and whether such occurrence shall
be voluntary or involuntary or come about or be effected by operation of law or
otherwise);
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(i) the Company defaults in the payment of any principal of or
premiums on any Note or any mandatory prepayment of any Note after such payment
becomes due, either by the terms thereof or otherwise as herein provided; or
(ii) the Company defaults in the payment of any interest on any
Note for a period of 10 days after such payment becomes due; or
(iii) the Company or any Subsidiary defaults in any payment of
principal of or interest on any other obligation for money borrowed (or any
Capitalized Lease Obligation, any obligation under a conditional sale or other
title retention agreement, any obligation issued or assumed as full or partial
payment for property whether or not secured by a purchase money mortgage or any
obligation under notes payable or drafts accepted representing extensions of
credit) beyond any period of grace provided with respect thereto, or the
Company or any Subsidiary fails to perform or observe any other agreement, term
or condition contained in any agreement under which any such obligation is
created (or if any other event thereunder or under any such agreement shall
occur and be continuing) and the effect of such failure or other event is to
cause, or to permit the holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to cause, such obligation to become due prior
to any stated maturity; provided that the aggregate amount of all obligations
as to which such a payment default shall occur and be continuing or such a
failure or other event causing or permitting acceleration shall occur and be
continuing is equal to or greater than $100,000; or
(iv) any representation or warranty made by the Company herein or
in any writing furnished pursuant to this Agreement shall be false in any
material respect on the date as of which made; or
(v) the Company defaults in any material respect in the
performance or observance of any of its agreements contained in paragraphs 5, 6
7D, 7E, 7F or 8; or
(vi) the Company fails in any material respect to perform or
observe any other agreement, term or condition contained herein and such
failure shall not have been remedied within 30 days after notice by an Investor
to the Company; or
(vii) the Company or any of its Subsidiaries makes an assignment for
the benefit of creditors or is generally not paying its debts as such debts
become due; or
(viii) any decree or order for relief in respect of the Company or
any Subsidiary is entered under any bankruptcy, reorganization, compromise,
arrangement, insolvency, readjustment of debt, dissolution or liquidation or
similar law, whether now or hereafter in effect (herein called "Bankruptcy
Law"), of any jurisdiction; or
(ix) the Company or any Subsidiary petitions or applies to any
tribunal for, or consents to, the appointment of, or taking possession by, a
trustee, receiver, custodian, liquidator or similar official of the Company or
any Subsidiary, or of any substantial part of the assets of the
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Company or any Subsidiary, or commences a voluntary case under the Bankruptcy
Law of the United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Subsidiary) relating to the Company
or any Subsidiary under the Bankruptcy Law of any other jurisdiction; or
(x) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and the
Company or such Subsidiary by any act indicates its approval thereof, consent
thereto or acquiescence therein, or an order, judgment or decree is entered
appointing any such trustee, receiver, custodian, liquidator or similar
official, or approving the petition in any such proceedings, and such order,
judgment or decree remains unstayed and in effect for more than 60 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company or any of its Subsidiaries decreeing the dissolution of the
Company or such Subsidiary and such order, judgment or decree remains unstayed
and in effect for more than 90 days; or
(xii) any order, judgment or decree is entered in any proceedings
against the Company or any of its Subsidiaries decreeing a split-up of the
Company or such Subsidiary which requires the divestiture of substantial assets
of the Company and its Subsidiaries, taken as a whole, and such order, judgment
or decree remains unstayed and in effect for more than 90 days; or
(xiii) a final judgment in an amount in excess of $100,000 is
rendered against the Company or any of its Subsidiaries and, within 30 days
after entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within 60 days after expiration of any such stay,
such judgment is not discharged; or
(xiv) any Pension Plan fails to maintain the minimum funding
standard required by Section 412 of the Code for any plan year or a waiver of
such standard is sought or granted under Section 412 (d) of the Code, or any
Pension Plan subject to Title IV of ERISA is, has been or is likely to be
terminated or the subject of termination proceedings under ERISA, or the
Company or only Subsidiary or an ERISA Affiliate has incurred or is likely to
incur a liability to or on account of any Pension Plan under Sections 4062,
4063, 4064, 4201 or 4204 of ERISA, and there results from any such event or
events a liability or a material risk of incurring a liability to the PBGC or
any Pension Plan which, if incurred, could have a material adverse effect upon
the business, operations or financial condition of the Company or a Subsidiary
of the Company, or the Company or a Subsidiary has engaged in a prohibited
transaction that would result in a liability, penalty or tax under ERISA or
Section 4975 of the Code, as the case may be, which could have a material
adverse effect upon the business, operations or financial condition of the
Company or any Subsidiary of the Company; then (a) upon the occurrence of any
Event of Default described in the foregoing clauses (vii), (viii), (ix), (x),
(xi) or (xii), the unpaid principal amount of and accrued interest on the Notes
outstanding shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which
are hereby expressly waived by the Company, and (b) upon the occurrence of any
other Event of Default, the holder or holders of at least a majority of the
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aggregate unpaid principal amount of the Notes at the time outstanding may, at
its or their option and in addition to any right, power or remedy permitted by
law or equity, by notice in writing to the Company, declare all of the Notes to
be, and all of the Notes shall thereupon be and become, immediately due and
payable together with interest accrued thereon, without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Company.
10B. Other Remedies. If any Event of Default shall occur and be
continuing, the holder of any Note may proceed to protect and enforce its
rights under this Agreement and such Note by exercising such remedies as are
available to such holder in respect thereof under applicable law, either by
suit in equity or by action at law, or both, whether for specific performance
of any covenant or other agreement contained in this Agreement or in aid of the
exercise of any power granted in this Agreement. No remedy conferred in this
Agreement upon the Investors or any other holder of any Note is intended to be
exclusive of any other remedy, and each and every such remedy shall be
cumulative and shall be in addition to every other remedy conferred herein or
now or hereafter existing at law or in equity or by statute or otherwise.
11. Representations, Covenants and Warranties. The Company
represents, covenants and warrants to each Investor that;
11A. Organization; Qualification and Authority. The Company is a
corporation duly organized and validly existing in good standing under the laws
of the State of Delaware, At the Closing Date, each Subsidiary of the Company
will be a corporation duly organized and existing under the laws of the
jurisdiction of its incorporation. As of the Closing Date, the Company and
each subsidiary will be duly qualified to do business as a foreign corporation
and in good standing in each jurisdiction in which the character of its
properties or the nature of its business makes such qualification necessary and
in which the failure to so qualify would have a materially adverse effect on
the operations or financial condition of the Company. The Company has, and as
of the Closing Date each of its Subsidiaries will have, the corporate power to
own its properties and to carry on its business as now being conducted. The
Company has all requisite corporate power and authority to enter into this
Agreement and each agreement executed by it, to issue and sell the Notes and
Warrants hereunder and to issue Common Stock upon exercise of the Warrants and
has the requisite corporate power and authority to carry out the transactions
contemplated hereby and thereby to be performed by it, and the execution,
delivery and performance hereof and thereof have been duly authorized by all
necessary corporate action. This Agreement constitutes, and each other
agreement or instrument executed and delivered by the Company pursuant hereto
or thereto or in connection herewith or therewith will constitute, legal, valid
and binding obligations of the Company enforceable against the Company in
accordance with their respective terms.
11B. Financial Statements. The Company has furnished the Investors
with the following financial statements: audited consolidated balance sheets of
the Company as of March 31, 1989, 1990 and 1991, and the related consolidated
statements of income, retained earnings and cash flows of the Company for the
fiscal years then ended, together with the independent auditor's
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reports thereon, and a consolidated balance sheet as of April 30, 1991 and the
related consolidated statements of income, retained earnings and cash flows of
the Company for the calendar month then ended. Such financial statements
(including any related schedules and notes and except for the monthly financial
statements) have been prepared in accordance with GAAP consistently applied
throughout the period or periods in question and all of such financial
statements (including any related schedules and notes) show all liabilities,
direct or contingent, of the Company required to be shown in accordance with
GAAP consistently applied throughout the period or periods in question and
fairly present the consolidated financial position and the consolidated results
of the Company for the periods indicated therein, subject, in the case of the
monthly statements, to normal adjustments. There have been no material adverse
changes in the condition (financial or other), results of operations, business
or prospects of the Company since March 31, 1991.
11C. Capital Stock and Related Matters. As of the Closing Date and
after giving effect to the transactions contemplated in this Agreement, (i) the
Company's authorized capital stock will consist of (a) 3,500,000 shares of
Common Stock, par value $.0l per share, of which 823,982 shares will be issued
and outstanding; 1,000,000 shares will be reserved for issuance upon exercise
of the Warrants; and 838,888 shares will be issuable upon exercise of
outstanding Common Stock warrants; (b) 1,100,000 shares of Cumulative
Convertible Preferred Stock, par value $.0l per share, of which 1,020,000
shares will be issued and outstanding; 54,931 shares will be issuable upon
exercise of outstanding Cumulative Convertible Preferred Stock warrants; and
all issued and outstanding shares shall have been duly and validly issued,
fully paid and non-assessable; (ii) the Warrants, if exercised in full, would
represent approximately 27% of the Company's outstanding Common Stock on a
fully diluted basis; (iii) no shares of Common Stock will be owned or held by
or for the account of the Company or any of its Subsidiaries; (iv) neither the
Company nor any of its Subsidiaries will have outstanding any stock or other
securities convertible into or exchangeable for any shares of capital stock,
any rights to subscribe for or to purchase or, options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any other character relating to the issuance
of, any capital stock, or any stock or securities convertible into or
exchangeable for any capital stock which have not been waived (other than the
Notes and the Warrants and except as set forth on Schedule 11C hereto); (v)
except as contemplated hereby neither the Company nor any of its Subsidiaries
will be subject to any obligation (contingent or otherwise) to repurchase or
otherwise acquire or retire any shares of capital stock; and (vi) the Company
will not have filed or be required to file, pursuant to Section 12 of the 1934
Act a registration statement relating to any class of debt or equity
securities. Except as contemplated by this Agreement and as disclosed by the
Company on Schedule 11C, there are no agreements, written or oral, between the
Company and any holder of its capital stock, or to the best knowledge of the
Company, among any holder of its capital stock relating to ownership or voting
of the capital stock of the Company.
11D. Actions Pending. Except as set forth in Schedule 11D, there
is no action, suit, investigation or proceeding pending or, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries or any
of their properties or rights, by or before any court,
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arbitrator or administrative or governmental body, which, if adversely decided,
would have a materially adverse effect on the Company or its Subsidiaries.
11E. Outstanding Debt. Except as set forth on the Company's
audited balance sheet as of March 31, 1991 or in Schedule 11E, neither the
Company nor any of its Subsidiaries has outstanding any material amount of
Indebtedness, and there exists no default or event of default, or event which
with notice or lapse of time or both will constitute a default or event of
default under the provisions of any instrument evidencing such Indebtedness or
of any agreement or document relating thereto.
11F. Title to Properties. Each of the Company and its Subsidiaries
has (i) good, sufficient and legal title to its respective real property (other
than real properties which it leases from others) subject to no Lien of any
kind except Liens permitted by paragraph 8C, and (ii) good title to all of its
other respective properties and assets which are material to the current
conduct of its business (other than properties and assets which it leases from
others and other than properties and assets disposed of in the ordinary course
of business), subject to no Lien of any kind except Liens permitted by
paragraph 8C. To the extent material to the Company's ability to carry on its
business in substantially the same manner as it is now being conducted, each of
the Company and its Subsidiaries enjoys peaceful and undisturbed possession
under all leases necessary in any material respect for the operation of its
respective properties and assets, none of which contains any unusual or
burdensome provisions which might materially affect or impair the operation of
such properties and assets, and all such leases are valid and subsisting and in
full force and effect.
11G. Taxes. Each of the Company and its Subsidiaries has filed all
federal, state and other income tax returns which are required to be filed, and
each has paid all taxes as shown on said returns and on all assessments
received by it to the extent that such taxes have become due or except such as
are being contested in good faith by appropriate proceedings for which adequate
reserves have been established in accordance with GAAP.
11H. Conflicting Acrreements. Neither the execution or delivery of
this Agreement, the Registration Rights Agreement, the Coinvestors Agreement or
the Securities, the offering, issuance and sale of the Securities, nor
fulfillment of or compliance with the terms and provisions hereof and thereof,
will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation of, or
result in the creation of any Lien upon any of the properties or assets of the
Company or any of its Subsidiaries pursuant to (i) the charter or By-Laws of
the Company or any of its Subsidiaries, or (ii) any award of any arbitrator or
any agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the Company or any
of its Subsidiaries is subject. Neither the Company nor any of its
Subsidiaries is a party to, or otherwise subject to any provision contained in,
any instrument evidencing indebtedness for borrowed money of the Company or any
of its Subsidiaries, any agreement relating thereto or any other contract or
agreement (including its charter) which limits the amount of, or otherwise
imposes restrictions
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on the incurring of, Indebtedness of the type to be evidenced by the Notes, or
contains dividend or redemption limitations on any capital stock of the
Company, except for this Agreement.
11I. Offering of Securities. Neither the Company nor any Person
acting on its behalf has, directly or indirectly, offered any of the Securities
or any similar security of the Company for sale to, or solicited any offers to
buy any of the Securities or any similar security of the Company from, or
otherwise approached or negotiated with respect thereto with any Person other
than the Investors and their affiliates and other accredited investors (as such
term is defined in Regulation D promulgated under the 1933 Act); and the
Company has not taken and will not take any action which would subject the
issuance or sale of any of the Securities to the provisions of section 5 of the
1933 Act or violate the provisions of any securities, Blue Sky law of any
applicable jurisdiction.
11J. Broker's or Finder's Commissions. No broker's or finder's fee
or commission will be payable by the Company with respect to the issuance and
sale of the Securities or the transactions contemplated hereby except for fees
payable to Equitable Securities Corporation (which fees shall be the sole
responsibility of the Company).
11K. Regulation G, Etc.; Use of Proceeds. Neither the Company nor
any of its Subsidiaries owns or has any present intention of acquiring any
"margin stock" as defined in Regulation G (12 CFR Part 207) of the Board of
Governors of the Federal Reserve System (herein called a "margin stock"). All
of the proceeds of the sale of the Securities will be used by the Company for
general corporate purposes and for the repayment of outstanding Indebtedness.
None of such proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin stock or for the purpose of reducing or
retiring any indebtedness which was originally incurred to purchase or carry
margin stock or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of Regulation G. Neither the Company, any
of its Subsidiaries nor any agent acting on its behalf has taken or will take
any action which might cause this Agreement or the Notes to violate Regulation
G, Regulation T, Regulation U or Regulation X or any other regulation of the
Board of Governors of the Federal Reserve System or to violate the 1934 Act, in
each case as in effect now or as the same may hereafter be in effect.
11L. Pollution and Other Regulations. To the best of the Company's
knowledge, the Company and its Subsidiaries are in compliance in all material
respects with all laws and regulations including, without limitation, those
relating to pollution and environmental control, equal employment opportunity,
employee safety and other like governmental laws and regulations affecting the
general conduct of its business in all jurisdictions in which it is presently
doing business, and the Company will use its best efforts to comply and to
cause each of its Subsidiaries to comply in all material respects with all such
laws and regulations which may be legally imposed in the future in
jurisdictions in which the Company or any Subsidiary may then be doing
business.
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11M. Absence of Pension Plans. The Company neither maintains nor
has any present intention to implement any funded pension plan subject to ERISA
for the benefit of any of its employees.
11N. Agreements with Affiliates. Neither the Company nor any of
its Subsidiaries is a party to any contract or agreement with, or any other
commitment to, any Affiliate of the Company or any of its Subsidiaries, except
as contemplated hereby.
11O. Possession of Franchises, Licenses, Etc. To the best of the
Company's knowledge, the Company and its Subsidiaries possess all franchises,
certificates, licenses, permits and other authorizations from governmental
political subdivisions or regulatory authorities, that are necessary in any
material respect for the ownership, maintenance and operation of its properties
and assets, and neither the Company nor any of its Subsidiaries is in violation
of any thereof in any material respect.
11P. Patents, Etc. The Company and its Subsidiaries own or have
the right to use all patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, which
are necessary for the operation of its business substantially as presently
conducted. As of the Closing Date and after giving effect to the transactions
contemplated hereby, nothing has come to the attention of the Company, any of
its Subsidiaries or, to the best of the Company's knowledge, any of their
respective directors and officers to the effect that (i) any product, process,
method, substance, part or other material presently contemplated to be sold by
or employed by the Company or any of its Subsidiaries in connection with its
business may infringe any patent, trademark, service ▇▇▇▇, trade name,
copyright, license or other right owned by any other Person, (ii) there is
pending or threatened any claim or litigation against or affecting the Company
or any of its Subsidiaries contesting its right to sell or use any such
product, process, method, substance, part or other material or (iii) there is,
or there is pending or proposed, any patent, invention, device, application or
principle or any statute, law, rule, regulation, standard or code relating
thereto which would prevent, inhibit or render obsolete the production or sale
of any products of, or substantially reduce the projected revenues of, or
otherwise adversely affect in any material respect the business, condition or
operations of the Company and its Subsidiaries, taken as a whole.
11Q. Holding Company and Investment Company Status. Neither the
Company nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", or a "public utility", within
the meaning of the Public Utility Holding Company Act of 1935, as amended, or a
"public utility" within the meaning of the Federal Power Act, as amended.
Neither the Company nor any of its Subsidiaries is an "investment company" or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or an "investment adviser" within
the meaning of the Investment Advisers Act of 1940, as amended.
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11R. Governmental Consents. Neither the nature of the Company or
any of its Subsidiaries, nor any of their respective businesses or properties,
nor any relationship between the Company and any other Person, nor any
circumstance (other than circumstances relating to the Investors) in connection
with the offer, issue, sale or delivery of the Securities being purchased by
the Investors hereunder is such as to require on behalf of the Company or any
of its Subsidiaries any consent, approval or other action by or any notice to
or filing with any court or administrative or governmental body in connection
with the execution and delivery of this Agreement, the offer, issue, sale or
delivery of the Securities being purchased hereunder or fulfillment of or
compliance with the terms and provisions hereof or the Securities being
purchased hereunder.
11S. Insurance Coverage. The properties of the Company and each of
its Subsidiaries are insured for the benefit of the Company or such Subsidiary
of the Company in amounts deemed adequate by the Company's management against
general and professional liability risks usually insured against by Persons
operating businesses similar to those of the Company or its Subsidiaries in the
localities where such properties are located.
11T. Subsidiaries. Schedule 11T correctly sets forth the name of
each Subsidiary of the Company as of the Closing Date and the jurisdiction of
its incorporation. As of the Closing Date and after giving effect to the
transactions contemplated hereby, all the outstanding shares of stock of each
Subsidiary of the Company have been validly issued and are fully paid and
non-assessable and all such outstanding shares are owned by the Company or
another wholly owned Subsidiary of the Company free of any Lien or claim, and
no such Subsidiary has outstanding stock or securities convertible into or
exchangeable or exercisable for any shares of capital stock, nor does it have
outstanding any rights to subscribe for or to purchase, any options for the
purchase of, any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any other character
relating to the issuance of, any shares of capital stock or any securities
convertible into or exchangeable or exercisable for any shares of capital
stock.
11U. Disclosure. Neither this Agreement nor any other document,
certificate or written statement furnished to the Investors by or on behalf of
the Company in connection herewith (including, without limitation, the Private
Placement Memorandum as supplemented by an addendum dated June 26, 1991 and by
the audited financial statements for the year ended March 31, 1991) contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading. To the best of the Company's knowledge, there is no fact peculiar
to the Company which materially adversely affects the business, property or
assets, financial condition or prospects of the Company which has not been set
forth in this Agreement or in the other documents, certificates and written
statements furnished to the Investors by or on behalf of the Company prior to
the date hereof in connection with the transactions contemplated hereby.
11V. Registration Rights. Except as provided in the Registration
Rights Agreement or as disclosed on Schedule 11V, no person has the right to
cause the Company to effect the
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registration under the 1933 Act of any shares of Common Stock or any other
securities (including debt securities) of the Company.
11W. Absence of Foreign or Enemy Status. Neither the Company nor
any of its Subsidiaries is (i) a "national" of a foreign country designated in
Executive Order No. 8389, as amended, or of any "designated enemy country" as
defined in Executive Order No. 9193, as amended, of the President of the United
States of America within the meaning of said Executive Orders, as amended, or
of any regulation issued thereunder, or a "national" of any "designated foreign
country" within the meaning of the Foreign Assets Control regulations, 31 CFR,
Part 500, as amended, or of the Cuban Assets Control Regulations, 31 CFR, Part
515, as amended, of the United States Treasury Department or (ii) an entity
"owned or controlled by" the Government of South Africa, within the meaning of
Executive Order ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ of America.
12. Representations of the Investors.
12A. Investment: ERISA.
(i) The Investors represent, and in making this sale to the
Investors it is specifically understood and agreed, that the Investors are
acquiring the Securities to be purchased by them hereunder for their own
account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof; provided, however, that nothing
herein contained shall prevent the Investors from selling or transferring any
Securities in any transaction that, in the opinion of their special counsel, is
exempt from the registration provisions of the 1933 Act.
(ii) The Investors also represent that no part of the funds being
used by them to pay the purchase price of the Securities being purchased by the
Investors hereunder constitutes assets allocated to any separate account
maintained by you in which any employee benefit plan, other than employee
benefit plans identified on a list which has been furnished by the Investors to
the Company, participates to the extent of 5% or more. For the purpose of this
paragraph 12, the terms "separate account" and "employee benefit plan" shall
have the respective meanings specified in section 3 of ERISA.
12B. Authority. Such Investor has full power and authority to
enter into and perform this Agreement in accordance with its terms. Any
investor which is a corporation, partnership or trust represents that it has
not been organized, reorganized or recapitalized specifically for the purpose
of investing in the Company.
13. Exercise of Warrants.
13A. Exercise Price and Method of Payment. Subject to and upon
compliance with the provisions hereof, the holder of any Warrant shall have the
right on or before June 30, 2001, at such holder's option, at any time or, in
the event that any Warrant has been called for redemption pursuant to paragraph
6, then until, but (unless the Company shall default in the payment due
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upon the redemption date) not after, the close of business on the last Business
Day before the date fixed for redemption, to exercise all or any part of such
Warrants into Common Stock at (i) a price equal to the lower of (a) $5.00 per
share or (b) 70% of the cash purchase price before paid per share deductions
for underwriting discounts and commissions in an Initial Public Offering or
(ii) in case an adjustment of such price has taken place pursuant to the
further provisions of this paragraph 11, then at the price as last adjusted and
in effect at the date such Warrant is surrendered for exercise (such price, as
adjusted, the "Exercise Price"). In order to exercise such right, the holder
thereof shall surrender (in person or by mail) such Warrant to the Company at
its office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ATTN:
Treasurer (or such other office or agency as the Company may designate by
notice in writing to the holders of the Warrants), together with a written
notice that the holder elects to exercise such Warrants, or a specified
principal amount thereof, in accordance with the provisions of this paragraph
13, Such notice shall also state the name or names (with addresses) in which
the certificate or certificates for Common Stock shall be issued. Together
with such notice there shall be paid an amount equal to the Exercise Price
times the number of shares of Common Stock as to which the Warrant is being
exercised. Such payment shall be by (i) certified or bank cashier's check, or
(ii) the delivery and surrender to the Company of Notes in an aggregate
principal amount equal to the amount of such payment. If Notes are so
delivered and surrendered, the Company shall pay to the holder thereof accrued
and unpaid interest on such Notes to the date of such delivery and surrender.
13B. Issuance of Certificates; When Exercise Effected. Promptly
after the receipt of the written notice referred to in paragraph 13A and
surrender of such Warrants as aforesaid, the Company shall issue and deliver to
such holder registered in such name or names as such holder may direct, a
certificate or certificates for the number of full shares of Common Stock
issuable upon the exercise of such Warrant (or specified portion thereof),
bearing any appropriate restrictive legend. To the extent permitted by law,
such exercise shall be deemed to have been effected and the Exercise Price
shall be determined as of the close of business on the date by which both (i)
such written statement shall have been received by the Company and (ii) such
Warrant shall have been surrendered as aforesaid, and at such time the rights
of the holder of such Warrant (or specified portion thereof), as such holder
shall cease, and the Person or Persons in whose name or names any certificate
or certificates for shares of Common Stock shall then be issuable upon such
exercise shall be deemed to have become the holder or holders of record of the
shares of Common Stock represented thereby.
13C. Fractional Shares; Accrued Interest; Partial Exercise. No
fractional shares shall be issued upon exercise of Warrants and no payment or
adjustment shall be made upon any exercise on account of any cash dividends on
the Common Stock issued upon such exercise. In the case of any Warrant which
is exercised in part only the Company shall, upon such exercise, execute and
deliver to the holder thereof, at the expense of the Company, a new Warrant or
Warrants of authorized denominations in principal amount equal to the
unexercised portion of such Warrant, If any fractional interest in a share of
Common Stock would, except for the provisions of the first sentence of this
paragraph 13C, be deliverable upon the exercise of any
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Warrant, the Company shall, in lieu of delivering the fractional share
therefor, pay to the holder surrendering such Warrant an amount in cash equal
to the market price of such fractional interest.
13D. Adjustment of Price upon Issuance of Common Stock. If and
whenever the Company shall issue or sell any shares of its Common Stock
(except, for purposes of this paragraph 13D and for all of its subsections, as
provided in paragraph 13G) for a consideration per share less than the Exercise
Price, on the date of such issue or sale, then, forthwith upon such issue or
sale, the Exercise Price shall be reduced to the lowest consideration
(calculated to the nearest cent) per share received or deemed received by the
Company upon the date of such issue or sale of shares of Common Stock.
No adjustment of the Exercise Price shall be made in an amount less
than $.Ol per share, but any such lesser adjustment shall be carried forward
and shall be made at the time and together with the next subsequent adjustment
which together with any adjustments so carried forward shall amount to $.0l per
share or more.
For the purposes of this paragraph 13D, the following subparagraphs
13D(l) to 13D (6) inclusive, also shall be applicable:
13D(l). Issuance of Convertible Securities. If at any time the
Company shall in any manner grant (whether directly or by assumption in a
merger or otherwise) any rights to subscribe for or to purchase, or any options
or warrants for the purchase of Common Stock or any stock or securities
convertible into or exchangeable for Common Stock (such convertible or
exchangeable stock or securities being herein called "Convertible Securities"),
whether or not such rights or options or warrants or the right to convert or
exchange any such Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon the exercise of such
rights or options or warrants or upon conversion or exchange of such
Convertible Securities (determined by dividing (a) the total amount, if any,
received or receivable by the Company as consideration for the granting of such
rights or options or warrants, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such rights or
options or warrants, plus, in the case of such rights or options or warrants
which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (b) the
total maximum number of shares of Common Stock issuable upon the exercise of
such rights or options or warrants or upon the conversion or exchange of all
such Convertible Securities issuable upon the exercise of such rights or
options or warrants) shall be less than the Exercise Price determined as of the
date of granting such rights or options or warrants for each such grant, then
the total maximum number of shares of Common Stock issuable upon the exercise
of such rights or options or warrants or upon conversion or exchange of the
total maximum amount of such Convertible Securities issuable upon the exercise
of such rights or options or warrants shall (as of the date of granting of such
rights or options or warrants) be deemed to be outstanding and to have been
issued for such price per share. If any such issue or sale of such Convertible
Securities is made upon exercise of any rights to subscribe for or to purchase
or any option or warrant to purchase any such Convertible Securities
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for which adjustments of the Exercise Price have been or are to be made
pursuant to other provisions of this subparagraph 13D, no further adjustment of
the Exercise Price shall be made by reason of such issue or sale. Except as
provided in subparagraph 13D(2) below, no adjustment of the Exercise Price
shall be made upon the actual issue of such Common Stock or of such Convertible
Securities upon exercise of such rights or options or warrants or upon the
actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities.
13D(2). Change in Option Price or Conversion Rate. Upon the happening
of any of the following events, namely, if the purchase price provided for in
any right or option or warrant referred to in subparagraph 13D(l), the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Security referred to in subparagraph 13D (1), or the rate at
which any Convertible Securities referred to in subparagraph 13D(l) are
convertible into or exchangeable for Common Stock, shall change at any time
(other than under or by reason of provisions designed to protect against
dilution), the Exercise Price in effect at the time of such event shall
forthwith be readjusted to the Exercise Price which would have been in effect
at such time had such rights, options, warrants or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration
or conversion rate, as the case may be, at the time initially granted, issued
or sold, and on the expiration of any such right to convert or exchange such
Convertible Securities, the Exercise Price then in effect hereunder shall
forthwith be increased to the Exercise Price which would have been in effect at
the time of such expiration or termination had such right, option, warrant or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued, and the Common Stock issuable
thereunder shall no longer be deemed to be outstanding. If the purchase price
provided for in any right, option or warrant referred to in subparagraph 13D(l)
or the rate at which any Convertible Securities referred to in subparagraph
13D(l) is convertible into or exchangeable for Common Stock, shall decrease at
any time under or by reason of provisions with respect thereto designed to
protect against dilution, then in case of the delivery of Common Stock upon the
exercise of any such right, option, warrant, or upon conversion or exchange of
any such Convertible Securities, the Exercise Price then in effect hereunder
shall forthwith be adjusted to such respective amount as would have obtained
had such right, option, warrant or Convertible Security never been issued as to
such Common Stock and had adjustments been made upon the issuance of the shares
of Common Stock delivered as aforesaid, but only if as a result of such
adjustment the Exercise Price then in effect hereunder is thereby decreased.
13D(3). Stock Dividends. In case the Company shall declare a dividend
or make any other distribution upon any stock of the Company payable in Common
Stock or Convertible Securities, the Exercise Price then in effect shall be
reduced by multiplying such price by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on
the date fixed for such determination and the denominator shall be the sum of
such number of shares and the total number of shares constituting such dividend
or other distribution.
13D(4). Consideration for Stock. In case any shares of Common Stock
or Convertible Securities or any rights, options or warrants to purchase any
such Common Stock or Convertible
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Securities shall be issued or sold for cash, the consideration received
therefor shall be deemed to be the amount received by the Company therefor,
without deduction therefrom of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Company in connection
therewith. In case any shares of Common Stock or Convertible Securities or any
rights, options or warrants to purchase any such Common Stock or Convertible
Securities shall be issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined by the Board of
Directors of the Company in good faith, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case any shares of Common Stock or
Convertible Securities or any rights, options or warrants to purchase such
Common Stock or Convertible Securities shall be issued in connection with any
merger of another corporation into the Company in which the Company is the
surviving corporation, the amount, of consideration therefor shall be deemed to
be the fair value, as determined by the Board of Directors of the Company in
good faith of such portion of the assets of the nonsurviving corporation or
corporations as such Board shall determine to be attributable to such Common
Stock, Convertible Securities, rights, options or warrants, as the case may be.
In the event of any consolidation or merger of the Company in which the Company
is not the surviving corporation or in the event of any sale of all or
substantially all of the assets of the Company for stock or other securities of
any corporation or in connection with which the Company shall be the survivor
but in which the shares of outstanding Common Stock shall be changed into stock
or other securities of another corporation, the Company shall be deemed to have
issued a number of shares of its Common Stock for stock or securities of the
other corporation computed on the basis of the actual exchange ratio on which
the transaction was predicated and for a consideration equal to the fair market
value on the date of such transaction of such stock or securities of the other
corporation, and if any such calculation results in adjustment of the Exercise
Price, the determination of the number of shares of Common Stock receivable
upon exercise of the Warrants immediately prior to such merger, consolidation
or sale, for purposes of paragraph 136, shall be made after giving effect to
such adjustment of the Exercise Price.
13D(5). Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock or in Convertible
Securities, or (b) to subscribe for or purchase Common Stock or Convertible
Securities, then such record date shall be deemed to be the date of the issue
or sale of the shares of Common Stock deemed to have been issued or sold upon
the declaration of such dividend or the making of such other distribution or
the date of the granting of such right of subscription or purchase, as the case
may be.
13D(6). Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purposes of this paragraph
13D.
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13E. Subdivision or Combination of Stock. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to
such subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased.
13F. Adjustment of Number of Shares Subject to the Warrants.
(a) If the Company shall pay a dividend in shares of its Common
Stock, subdivide (split) its outstanding shares of Common Stock, combine
(reverse split or stock consolidation) its outstanding shares of Common Stock,
issue by reclassification of its shares of Common Stock any shares or other
securities of the Company, or distribute to holders of its Common Stock any
securities of the Company or of another entity, the number of shares of Common
Stock or other securities the holder of a Warrant is entitled to purchase
pursuant to such Warrant immediately prior thereto shall be adjusted so that
such holder shall be entitled to receive upon exercise the number of shares of
Common Stock or other securities of the Company which he or she would have
owned or would have been entitled to receive after the happening of any of the
events described above had such Warrant been exercised immediately prior to the
happening of such event and the Exercise Price per share shall be
correspondingly adjusted; provided, however, that no adjustment in the number
of shares and/or the Exercise Price shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in such
number of shares and/or price; and provided further, however, that any
adjustments which by reason of this paragraph 13F are not required to be made
shall be carried forward and taken into account in any subsequent adjustment.
An adjustment made pursuant to this paragraph 13F shall become effective
immediately after the record date in the case of the stock dividend or other
distribution and shall become effective immediately after the effective date in
the case of a subdivision, combination or reclassification. The holder of such
Warrant shall be entitled to participate in any subscription or other rights
offering made to holders of Common Stock to the same extent as though the
holder had purchased the full number of shares as to which such Warrant remains
unexercised immediately prior to the record date for such rights offering. If
the Company is consolidated or merged with or into another corporation or if
all or substantially all of its assets are conveyed to another corporation,
such Warrant shall thereafter be exercisable for the purchase of the kind and
number of shares of stock or other securities or property, if any, receivable
upon such consolidation, merger or conveyance by a holder of the number of
shares of Common Stock of the Company which could have been purchased on the
exercise of such Warrant immediately prior to such consolidation, merger or
conveyance; and, in any such case, appropriate adjustment (as determined by the
Board of Directors) shall be made in the application of the provisions herein
set forth with respect to the rights and interest thereafter of the holder of
such Warrant to the end that the provisions set forth herein (including
provisions with respect to changes in and other adjustments of the number of
shares of Common Stock the holder of such Warrant is entitled to purchase)
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any shares of stock or other property thereafter deliverable upon the exercise
of such Warrant. Upon any adjustment of the number of shares of Common Stock
or other securities the holder
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of such Warrant is entitled to purchase, and of any change in Exercise Price
per share, then in each such case the Company shall give written notice thereof
to the then registered holder of such Warrant at the address of such holder as
shown on the books of the Company, which notice shall state such change and set
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. Upon the request of any such holder there shall be
transmitted promptly to all holders a statement of the firm of independent
certified public accountants retained to audit the financial statements of the
Company to the effect that such firm concurs in the Company's calculation of
the change.
(b) Upon each adjustment of the Exercise Price, each Warrant
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Exercise Price, that number of
shares (calculated to the nearest whole share) obtained by (i) multiplying the
number of shares covered by a Warrant immediately prior to this adjustment by
the Exercise Price in effect immediately prior to such adjustment of the
Exercise Price, and (ii) dividing the product so obtained by the Exercise Price
in effect immediately after such adjustment of the Exercise Price.
13G. Certain Issues of Common Stock Excepted. Anything herein to
the contrary notwithstanding, the Company shall not be required to make any
adjustment of the Exercise Price in the case of (i) the issuance of the
Securities pursuant to this Agreement; (ii) the issuance of shares of capital
stock of the Company upon exercise of the Warrants; (iii) the issuance of up to
1,020,000 shares of Common Stock upon conversion of the Company's Cumulative
Convertible Preferred Stock issued and outstanding as of the Closing Date; and
(iv) the issuance of shares of Common Stock upon the exercise of existing stock
options granted prior to the Closing and the issuance of shares of Common Stock
after the Closing to employees, consultants or directors (and the grant of
options therefor) so long as such shares in the aggregate do not exceed at any
time 10% of the total number of shares of the Company's Common Stock on a fully
diluted basis (as adjusted for stock splits, stock dividends,
reclassifications, recharacterizations or similar events) and the exercise
price of the options is equal to or greater than the then Exercise Price. If
an option to an employee, director or consultant shall expire or terminate for
any reason without having been exercised in full, the unpurchased shares shall
again be available for subsequent option grants and such shares shall be
considered as having been issued only one time.
13H. Reorganization, Reclassification, Consolidation, Merger or
Sale. If any capital reorganization or reclassification or change of the
outstanding capital stock of the Company, or any consolidation or merger of the
Company with another corporation, or the sale of all or substantially all of
its assets to another corporation, shall be effected in such a way that holders
of Common Stock shall be entitled to receive any stock, securities or assets
with respect to or in exchange for Common Stock, then, as a condition of such
reorganization, adequate provision shall be made whereby each holder of any
Warrant shall thereafter have the right to receive upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of the Common
Stock of the Company immediately theretofore receivable upon the exercise of
such Warrant, such shares of stock, securities or assets as may be issued or
payable with respect to or in exchange for a number of outstanding shares of
such Common Stock equal to the number of
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shares of such stock immediately theretofore so receivable had such
reorganization, reclassification, change, consolidation, merger or sale not
taken place, and in any such case appropriate provision shall be made with
respect to the rights and interests of such holder to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Exercise Price and the provisions of paragraph 13) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of such conversion rights
(including an immediate adjustment, by reason of such consolidation or merger,
of the Exercise Price to the value of the Common Stock reflected by the terms
of such consolidation or merger if the value so reflected is less than the
Exercise Price in effect immediately prior to such consolidation or merger).
The Company shall not effect any such reorganization, reclassification, change,
consolidation, merger or sale, unless prior to the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger or the corporation purchasing such assets or the
corporation issuing the securities into which such shares of Common Stock shall
be changed (if other than the Company) shall assume by written instrument
executed and mailed or delivered to each holder of any Warrant the obligation
to deliver to such holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holder may be entitled to
receive. If a purchase, tender or exchange offer is made to and accepted by
the holders of more than 50% of the outstanding shares of Common Stock of the
Company, the Company shall not effect any consolidation, merger or sale with
the Person having made such purchase, tender or exchange offer or with any
Affiliate of such Person, unless prior to the consummation of such
consolidation, merger or sale, each holder of any Warrant shall have been give
a reasonable opportunity to then elect to receive on exercise of any Warrant
held by such holder either the stock, securities or assets then issuable with
respect to the Common Stock of the Company or the stock, securities or assets
issued to previous holders of the Common Stock in accordance with such
purchase, tender or exchange offer.
13I. Notice of Adjustment. Upon any adjustment of the Exercise
Price then and in each such case the Company shall give written notice thereof
to the holder of each Warrant which notice shall state the Exercise Price
resulting from such adjustment, and shall set forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.
13J. Other Notices. In case at any time:
(a) the Company shall declare any dividend upon its Common Stock
payable in stock;
(b) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class or
other rights;
(c) there shall be any capital reorganization or reclassification
of the capital stock of the Company, or consolidation or merger of the Company
with, or sale of all or substantially all of its assets to, another
corporation; or
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(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give to the holder of
each Warrant (i) at least 20 days' prior written notice of the date on which a
record shall be taken for such dividend, distribution or subscription rights or
for determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, and (ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, at least
20 days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (i) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (ii) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock
for securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, as the case may be.
13K. Stock to be Reserved. The Company will at all times keep
available, out of its authorized Common Stock, solely for the purpose of issue
upon the exercise of Warrants as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of all outstanding
Warrants. The Company covenants and agrees that all shares of Common Stock
which shall be so issuable will, upon issuance, be duly authorized and issued,
fully paid and nonassessable and free from all taxes, liens and charges with
respect to the issuance thereof. The Company will not take any action which
results in any adjustment of the Exercise Price if the total number of shares
of Common Stock issuable after such action upon exercise of the Warrants (a)
would exceed the total number of shares of Common Stock then authorized by the
Company's Certificate of Incorporation or (b) would conflict with, or result in
any violation of, or require the consent or approval (unless the same shall be
obtained) of any court or administrative or governmental body pursuant to, or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, the Certificate of Incorporation or By-Laws of the Company or
any of its Subsidiaries or any agreement or instrument to which the Company or
any of its Subsidiaries is then subject. The Company will take all such action
as may be necessary to assure that all such shares of Common Stock may be so
issued without violation of any applicable requirements of any exchange upon
which the Common Stock of the Company may be listed or in respect of which the
Common Stock has qualified for unlisted trading privileges.
13L. Issuance Tax. The issuance of certificates for shares of
Common Stock upon the exercise of any Warrant shall be made without charge to
the holder of such Warrant for any issuance tax in respect thereto; provided
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the holder of the Warrant exercised.
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13M. Listing. If any shares of Common Stock issuable upon exercise
of Warrants hereunder require listing on any securities exchange, before such
shares may be issued upon exercise the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
listed on such securities exchange immediately prior to the issuance of such
shares.
13N. Closing of Books. The Company will not close its books
against the issuance or transfer of any shares of Common Stock issuable upon
exercise of the Warrants.
14. Definitions. For the purpose of this Agreement, and in
addition to terms defined elsewhere in this Agreement, the following terms
shall have the following meanings. In addition, all terms of an accounting
character not specifically defined herein shall have the meanings assigned
thereto by accounting principles generally accepted in the United States of
America.
"Affiliate" shall mean, with respect to any Person, a Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person, except a Subsidiary of such Person. A
Person shall be deemed to control a corporation if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Bankruptcy Law" shall have the meaning specified in clause (viii) of
paragraph 10A.
"Board" shall mean the Board of Directors of the Company or a committee
of directors lawfully exercising the relevant powers of the Board.
"Business Day" shall mean any day which is not a Saturday, Sunday or
day on which banks are authorized by law to close in the State of New York.
"Capital Asset" shall mean each asset of the Company or its
Subsidiaries which is not classified as a current asset under GAAP and each
operating business of the Company or its Subsidiaries (including the current
assets thereof).
"Capitalized Lease Obligation" shall mean any rental obligation which,
under GAAP in effect on the day such obligation is incurred, is required to be
capitalized on the books of the Company or any Subsidiary, taken at the amount
thereof accounted for as indebtedness (net of interest expense) in accordance
with such principles.
"Change of Control" shall mean any event the effect of which is to
cause any Person or group of Persons acting in concert (other than the
Investors and shareholders of the Company on the date hereof, or Affiliates
thereof) to own more than 49.9% of the then outstanding Common Stock on a
fully diluted basis other than (i) the issuance of securities pursuant to an
offering which is the subject of a Registration Statement filed pursuant to
the 1933 Act, (ii) private sales of equity or equity-related securities by the
Company to institutional or qualified investors for
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investment purposes only and not with any intent to effect a change of control
of the Company, (iii) sales of Notes or shares of Common Stock issuable upon
conversion of the Notes or exercise of the Warrants or (iv) any distribution to
the constituent partners of Investech, L.P. as contemplated under the
Coinvestors Agreement.
"Code" shall mean the Internal Revenue Code of 1986 or any successor
or amendatory provision thereto.
"Coinvestors Agreement" shall mean the Coinvestors Agreement in the
form attached hereto as Exhibit E.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall mean any of the shares of Common Stock of the
Company.
"Company" shall mean the corporation that originally executed this
Agreement as borrower until any corporation becomes a successor or transferee
in a transaction permitted by paragraph 86, and thereafter shall mean any such
successor or transferee corporation.
"Convertible Securities" shall have the meaning specified in paragraph
13D (1).
"Cumulative Convertible Preferred Stock" shall mean any of the shares
of the Cumulative Convertible Preferred Stock of the Company.
"Designee" shall have the meaning specified in paragraph 2.
"Dollars" and the sign "$" shall mean such coin or currency of the
United States of America as is, at the relevant time, legal tender for the
payment of public and private debts.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time. Section references to ERISA are to ERISA as in
effect at the date of this Agreement and any subsequent provisions of ERISA
amendatory thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each trade or business (whether or not
incorporated) which together with the Company or a Subsidiary of the Company
would be deemed to be a "single employer" within the meaning of Section 4001 of
ERISA immediately following the Closing.
"Event of Default" shall mean any of the events specified in paragraph
10, provided that there has been satisfied any requirement in connection with
such event for the giving of notice, or the lapse of time, or the happening of
any further condition, event or act, and "Default" shall mean any of such
events, whether or not any such requirement has been satisfied.
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"Exercise Price" shall mean the price at which the Warrants are
convertible into shares of Common Stock as determined in accordance with
paragraph 13.
"GAAP" shall mean generally accepted accounting principles
consistently applied throughout the period or periods in question.
"Indebtedness" of any Person as of any date shall mean and include (i)
all indebtedness for money borrowed of such Person or evidenced by notes,
bonds, debentures or similar evidences of indebtedness of such Person, (ii)
indebtedness of such Person under leases which are capitalized under GAAP as of
the time they were entered into, (iii) indebtedness of such Person representing
the deferred and unpaid purchase price of any property or business (excluding
in any event trade and service payables incurred in the ordinary course of
business and constituting current liabilities), (iv) all guarantees by such
Person of Indebtedness of others (including repurchase arrangements and
financial condition or liquidity maintenance arrangements), (v) all obligations
of such Person in respect of interest rate protection agreements and foreign
currency hedging arrangements and (vi) all obligations of such Person as an
account party in respect of letters of credit (other than documentary letters
of credit) and in respect of banker's acceptances, in the case of each of the
foregoing clauses, in the principal amount that such indebtedness would be
shown on a balance sheet of such Person prepared as of such date in accordance
with GAAP.
"Initial Public Offering" shall mean the Company 5 initial public
offering of equity securities pursuant to a registration statement under the
1933 Act as declared effective by the Commission.
"Interest Coverage Ratio" shall mean for any period the ratio of (i)
the sum of, without duplication, (a) Net Income for such period and before
gains and losses on sale of Capital Assets realized during such period and
taxes incurred in respect of such dispositions ("Adjusted Net Income"), plus
(b) provision for taxes based on income or profits to the extent such taxes
were paid on, or accruals therefor were taken into account in, income or
profits included in computing Adjusted Net Income for such period, plus (c)
consolidated interest expense (including amortization of original issue
discount and non-cash interest payments or accruals and the interest component
of capital leases) to the extent such expenses were paid on, or accruals
therefor were taken into account in, Adjusted Net Income for such period, plus
(d) all non-cash charges (including depreciation, depletion and amortization)
deducted from consolidated revenues in determining Adjusted Net Income for such
period over (ii) consolidated interest expense of the Company and its
Subsidiaries (including amortization of original issue discount and non-cash
interest, payments or accruals and the interest component of capital leases).
"Investment" shall mean any stock or other security, any loan, advance,
contribution to capital, extension of credit (except for deferred franchise
fees and trade and customer accounts receivable for inventory sold or services
rendered in the ordinary course of business and payable in accordance with
customary trade terms), any acquisitions of real or personal property (other
than real and personal property acquired in the ordinary course of business)
and any purchase or
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commitment or option to purchase stock or other securities of or any interest
in another Person or any integral part of any business or the assets comprising
such business or part thereof if the aggregate consideration for such purchase,
commitment or option was in excess of $10,000, or any other investment, and
whether existing on the date of this Agreement or hereafter made.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction).
"Multiemplover Plan" shall mean a plan defined as such in Section 3
(37) of ERISA to which contributions have been made by the Company or any ERISA
Affiliate and which is covered by Title IV of ERISA.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotations System.
"Net Income" shall mean consolidated gross revenues (excluding
extraordinary gains) of the Company and its Subsidiaries less all operating and
non-operating expenses (including extraordinary losses) of the Company and its
Subsidiaries including, without limitation, all charges of a proper character
(including current and deferred taxes on income and current additions to
reserves) but not including in net revenues any gains (net of expenses and
taxes applicable thereto) in excess of losses resulting from the sale,
conversion or other disposition of assets other than current assets, any gains
resulting from the write-up of assets, any equity of the Company or any
Subsidiary in the unremitted earnings of any corporation which is not a
Subsidiary, any earnings of any Person acquired by the Company or any
Subsidiary through purchase, merger or consolidation or otherwise for any year
prior to the year of acquisition or any deferred credit representing the excess
of equity in any Subsidiary at the date of acquisition over the cost of the
investment in such Subsidiary, all determined in accordance with GAAP.
"1934 Act" shall mean the Securities Exchange Act of 1934.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"Note" and "Notes" shall have the meaning specified in paragraph 1.
"Officer's Certificate" shall mean a certificate signed in the name of
the Company, by its President, one of its Vice Presidents or its Treasurer.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor entity thereto.
"Pension Plan" shall mean any employee benefit or other plan, other
than a Multiemployer Plan, as defined in Section 4001 of ERISA and subject to
Title IV of ERISA, which is
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maintained after the Closing for employees of the Company, any of its
Subsidiaries or any ERISA Affiliates.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"Registration Rights Agreement" shall mean the Registration Rights
Agreement in the form attached hereto as Exhibit D.
"Reportable Event" shall mean an event described in Section 4043(b) of
ERISA with respect to which the 30-day notice requirement has not been waived
by the PBGC.
"Restricted Payment" shall mean (i) any dividend or other distribution
(including, but not limited to, any payments made with respect to the capital
stock of the Company upon the dissolution, liquidation or winding up of the
Company) on any shares of capital stock (except dividends or distributions
payable solely in shares of such capital stock) of the Company; and (ii) any
payment on account of the purchase, redemption, retirement or other acquisition
of (a) any shares of capital stock of the Company or (b) any option, warrant,
convertible security or other right to purchase or acquire shares of capital
stock of the Company, other than (i) repurchases of shares of Common Stock from
employees or consultants of the Company upon termination of their employment or
consulting pursuant to written agreements, and (ii) repurchases of the
Warrants.
"Securities" shall mean the securities evidencing the Notes and the
Warrants.
"Senior Debt" shall mean all obligations (whether now outstanding or
hereafter incurred) for the payment of which the Company is responsible or
liable as obligor, guarantor or otherwise in respect of the principal, premium
(if any), and unpaid interest on, and all other amounts due with respect to (i)
any Indebtedness for money borrowed or evidenced by bonds, notes, debentures,
or similar instruments whether now existing or hereafter arising, absolute or
contingent, direct or indirect, due or to become due, (ii) Indebtedness under
leases which are capitalized under GAAP, (iii) any Indebtedness representing
the deferred and unpaid purchase price of any property or business, and (iv)
all deferrals, renewals, extensions and refundings of any such Indebtedness or
obligations; provided, that the following shall not constitute Senior Debt: (a)
Indebtedness evidenced by the Notes or any extension or refunding thereof, (b)
Indebtedness which is expressly made equal in right of payment with the Notes
or subordinate and subject in right of payment to the Notes, (c) Indebtedness
for goods or materials purchased in the ordinary course of business or (d)
Indebtedness which purports to be senior to Subordinated Debt, including the
Notes, and subordinate to the Indebtedness described in clauses (i) through
(iv) above.
"Senior Debt Agreement" shall mean any agreement pursuant to which
Senior Debt is incurred.
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"Shareholders Equity" shall mean shareholders' equity as the same
would be shown on a consolidated balance sheet of the Company prepared in
accordance with GAAP.
"Single-Employer Pension Plan" shall mean a Pension Plan which is a
"single-employer plan" as defined in Section 4001 of ERISA.
"Subordinated Debt" shall mean Indebtedness evidenced by the Notes.
"Subordinated Debt Agreement" shall mean any agreement pursuant to
which Subordinated Debt is incurred.
"Subsidiary" shall mean any corporation or similar entity, which at the
time as of which any determination is being made, would be consolidated under
GAAP.
"Warrants" shall have the meaning specified in paragraph I.
15. Miscellaneous.
15A. Home Office Payment. The Company agrees that, so long as the
Investors shall hold any Registered Note in registered form (or any Note in
order form with respect to which such Investors shall have requested in writing
that the provisions of this paragraph 15A shall apply), it will make payments
of principal of, premium (if any), interest and redemption payments on such
Notes not later than 12:00 o'clock noon, New York time, on the date such
payment is due, by transfer of immediately available funds (or by check, if
acceptable to the Investor receiving such payment) for credit to the Investors.
Payments shall be made to the account of the Investors specified in the
Purchaser Schedule attached hereto or such other account in the United States
as the Investors may designate in writing, notwithstanding any contrary
provision contained herein or in the Notes with respect to the place of
payment. The Investors agree that, before disposing of any Note, they will
make a notation thereon of all principal payments previously made thereon and
of the date to which interest thereon has been paid. The Company agrees to
afford the benefits of this paragraph 15A to any institutional investor of
recognized standing which is the direct or indirect transferee of any Note and
which, in the case of the transferee of any Note, has made the same agreement
relating to such Note as the Investors have made in this paragraph 15A.
15B. Expenses; Indemnification. The Company agrees, whether or not
the transactions hereby contemplated shall be consummated, to pay, and save the
Investors harmless against liability for the payment of, all reasonable out-
of-pocket expenses arising in connection with the transactions and other
agreements and instruments contemplated by this Agreement, including (i) travel
and travel-related expenses, including travel by and hotel accommodations for
any officer of Pecks Management Partners Ltd. in connection with conducting due
diligence inspections of the Company, attending board or shareholder meetings
or inspecting any properties of the Company or any Subsidiary following an
Event of Default; (ii) fees and expenses of ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, special
counsel to the Investors in connection with this Agreement, including fees
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and expenses of such counsel incurred in connection with the exercise, call,
exchange and conversion provisions of this Agreement, any other agreement or
instrument to be executed and delivered in connection with this Agreement, and
any subsequent modification hereof or thereof or consent hereunder or
thereunder regardless of whether any such modification or consent becomes
effective; and (iii) the cost and expenses, including reasonable attorneys fees
(which shall include allocated costs of in-house counsel of the Investors),
incurred by any Investor in enforcing any of its rights hereunder or
thereunder, including without limitation costs and expenses incurred in any
bankruptcy case. The Company agrees to indemnify the Investors and hold the
Investors harmless from and against any and all liabilities, losses, damages,
costs and expenses of any kind (including, without limitation, the reasonable
fees and disbursements of the Investors' special counsel in connection with any
investigative, administrative or judicial proceeding, whether or not the
Investors shall be designated a party thereto) which may be incurred by the
Investors, relating to or arising out of this Agreement, the Securities, or any
actual or proposed use of the proceeds of the sale of the securities hereunder,
provided that the Investors shall not have the right to be indemnified
hereunder for their own gross negligence or willful misconduct as determined by
a court of competent jurisdiction. The obligations of the Company under this
paragraph 15B shall survive the transfer of any of the Securities and the
payment of any Note.
15C. Consent to Amendments. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act of the holder
or holders of not less than 510-aggregate principal amount of Notes at the
time outstanding. Each holder of any Note or any Warrant, as the case may be,
at the time or thereafter outstanding shall be bound by any consent authorized
by this paragraph 15C, whether or not such Note or such Warrant, as the case
may be, shall have been marked to indicate such consent; provided that
notwithstanding anything in this paragraph 15C to the contrary, without the
written consent of the holder or holders of all Notes at the time outstanding,
no consent, amendment or waiver to or under this Agreement shall (i) extend or
reduce the maturity of any Note, or reduce the rate or affect the time of
payment of interest or any premium payable with respect to any Note, or affect
the time, amount or allocation of any required or optional prepayments, or
reduce the proportion of the principal amount of the Notes required with
respect to any consent, amendment or waiver; (ii) change the terms on which the
Warrants are exercisable as provided in paragraph 13; or (iii) amend the
provisions of this paragraph 15C. The Company shall promptly send copies of
any amendment, waiver or consent (and any request for any such amendment,
waiver or consent) relating to this Agreement or the Securities to each holder
of the Securities and, to the extent practicable, shall consult with each
Investor and such other holders in connection with each such amendment, consent
and waiver. No course of dealing between the Company and the holder of any
Note or any Warrant, as the case may be, nor any delay in exercising any rights
hereunder or under any Note or any Warrant, as the case may be, shall operate
as a waiver of any rights of any holder of such Note or such Warrant, as the
case may be. As used herein and in the Note and the Warrant, the term "this
Agreement" and references thereto shall mean this Agreement as it may, from
time to time, be amended or supplemented.
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15D. Form, Registration, Transfer and Exchange of Notes or
Warrants; Lost Notes or Warrants. The Notes and Warrants are issuable as
Registered Notes and Registered Warrants, respectively, each transferable by
endorsement and delivery, and the Notes without coupons in the denominations of
$1,000 and any larger integral multiple of $1,000 and the Warrants in multiples
representing 200 shares of Common Stock. The Company shall keep at its
principal offices registers in which the Company shall provide for the
registration of the Notes and the Warrants, respectively. Upon surrender for
registration of transfer of any Registered Note or Registered Warrant at such
office, the Company shall, at its expense, execute and deliver one or more
replacing Notes or Warrants, as the case may be, of like tenor and of a like
aggregate principal amount or representing a like amount of shares of Common
Stock, as the case may be, which replacing Notes shall, at the option of such
holder and subject to the following provisions of this paragraph 15D, be
Registered Notes. At the option of the holder of any Note or Warrant, as the
case may be, such Note or Warrant may be exchanged for other Notes or Warrants,
as the case may be, of any authorized denominations, of a like tenor, of a like
aggregate principal amount or representing a like amount of shares of Common
Stock, as the case may be, and, in the case of Notes, subject to the following
provisions of this paragraph 15D, upon surrender of the Note or Warrant, as the
case may be, to be exchanged at the office of the Company. Whenever any Notes
or Warrants, as the case may be, are so surrendered for exchange, the Company
shall execute and deliver, at its expense, the Notes or Warrants which the
holder thereof making the exchange is entitled to receive. Every Note or
Warrant presented or surrendered for registration of transfer shall be duly
endorsed, or accompanied by a written instrument of transfer duly executed, by
the holder of such Note or Warrant, or his attorney duly authorized in writing.
Any Note issued in exchange for or upon transfer shall carry the rights to
unpaid interest and interest to accrue which were carried by the Note so
exchanged or transferred, so that neither gain nor loss of interest shall
result from any such transfer or exchange. Upon receipt of written notice from
the Investor or other evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of any Note or Warrant, as the case may
be, held by the Investor and, in the case of any such loss, theft or
destruction, upon receipt of its unsecured indemnity agreement, or other
indemnity reasonably satisfactory to the Company, or in the case of any such
mutilation upon surrender and cancellation of such Note or Warrant, as the case
may be, the Company will make and deliver a replacing Note or Warrant, as the
case may be, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note or Warrant.
15E. Provisions Applicable If Any of the Securities Are Sold. In
the event that the Investors should sell or otherwise transfer any Note or
Warrant or any part thereof to any Person other than the Company, the following
provisions shall apply:
15E(1). Notices to Subsequent Holder. If any Note or Warrant shall
have been transferred to another holder and such holder shall have designated
in writing the address to which communications with respect to such Note or
Warrant, as the case may be, shall be mailed, all notices, certificates,
requests, statements and other documents required to be delivered to the
transferring Investors by any provision hereof by reason of the holding of the
transferred Securities shall also be delivered to such holder, except that
financial statements and other
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documents provided for in paragraph 7A need be delivered only to any such
holder holding at least 5% of the aggregate principal amount of the Notes or 5%
of the aggregate number of Warrants then outstanding.
15E(2). Pro Rata Payments. All interest payments and payments or
prepayments of principal and premium (if any) on the Notes shall be made and
applied pro rata on all Notes outstanding including, for the purposes of this
paragraph 15E(2) only, all Notes acquired by the Company or any Affiliate of
the Company or any of its Subsidiaries other than by prepayment in accordance
with the terms of this Agreement.
15F. Registration Rights. The Company covenants that it will not
hereafter enter into any agreement with respect to its securities which is
inconsistent with the rights granted in the Registration Rights Agreement. The
Company further covenants that it will not grant any registration rights
relating to any shares of its stock or any other of its securities to any
Person, which are more favorable than the rights granted in the Registration
Rights Agreement.
15G. Restrictive Legend. Each Security and any Security issued in
exchange therefor shall bear the following (or substantially equivalent) legend
thereon;
"The transfer of these securities is subject to certain restrictions
set forth in a Securities Purchase Agreement, dated as of July 23,
1991, and any amendments thereto. The securities represented hereby
have not been registered under the Securities Act of 1933, as amended,
or applicable state securities laws, and the securities may not be
sold, transferred or otherwise disposed of in the absence of such
registration or an exemption therefrom under said Act and such laws
and the respective rules and regulations thereunder."
15H. Persons Deemed Owners. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Registered Note or Registered Warrant, as the case may be, is registered as the
owner and holder of such Note or Warrant, as the case may be, for the purpose
of receiving payment of principal of (and premium, if any) and interest on such
Note or all such rights under such Warrant, and for all other purposes
whatsoever, whether or not, in the case of such Note, such Note shall be
overdue, and the Company shall not be affected by notice to the contrary.
15I. Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by or on
behalf of any party to this Agreement in connection herewith shall survive the
execution and delivery of this Agreement, regardless of any investigation made
by the Investors or on their behalf.
15J. Successors and Assigns. All covenants and agreements in this
Agreement contained by or on behalf of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto,
whether so expressed or not.
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15K. Notices. All communications provided for hereunder shall be
sent by first class mail or nationwide overnight delivery services (with
charges prepaid) and, if to the Investors, addressed to the Investors in the
manner (except as otherwise provided in paragraph 15A with respect to payments
of principal of, premium (if any), and interest on the Notes) in which its
address appears in the Purchaser Schedule attached hereto, with a copy to
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇., Esq., at ▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, One Citicorp Center,
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, if to the Company, addressed to
it at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn:
President, with a copy to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., at ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇,
5300 Southeast Financial Center, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇, or to such other address with respect to any party as such party shall
notify the other in writing; provided, however, that the Company may also, at
the option of the Investors, have any such communication be either delivered to
the Company at the Company's address set forth above or to any officer of the
Company.
15L. Descriptive Headings. The descriptive headings of the several
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
15M. Satisfaction Requirement. If any agreement, certificate or
other writing, or any action taken or to be taken, is by the terms of this
Agreement required to be satisfactory to the Investors, the determination of
such satisfaction shall be made by the Investors in their sole and exclusive
judgment exercised in good faith. Unless otherwise provided, holders of at
least 510- of the principal amount of the then outstanding Notes shall have the
power to make such determination.
15N. Governing Law, Consent to Jurisdiction. This Agreement is
being executed by the Investors in the State of New York, and shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the law of such State. Any legal action or proceeding with
respect to this Agreement shall be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, the Company hereby accepts
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Company irrevocably consents to the
service of process out of any of the aforementioned courts in any such action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the Company at its address, such service to become
effective 30 days after such mailing. Nothing herein shall affect the right of
the Investors or any holder of a Note or Warrant to serve process in any other
manner permitted by law or to commence legal proceedings or otherwise proceed
against the Company in any other jurisdiction.
15O. Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the Company
or any Investor, the Company or the Investors (or any of them), as applicable,
may proceed to protect and enforce its or their rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages
as a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Agreement. The Company or an
Investor acting pursuant
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to this paragraph 15O shall be indemnified against all liability, loss or
damage, together with all reasonable costs and expenses related thereto
(including reasonable legal and accounting fees and expenses) in accordance
with paragraph 15B.
15P. Entire Agreement. This Agreement and the other writings
referred to herein or delivered pursuant hereto contain the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior and contemporaneous arrangements or understandings with respect thereto.
15Q. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
15R. Amendments. This Agreement may not be changed orally, but
(subject to the provisions of paragraphs 15C) only by an agreement in writing
signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
15S. Payment Date. Notwithstanding any provision of this Agreement
to the contrary, any payment on account of principal of or premium, if any, or
interest on any Note which is due on a date which is not a Business Day shall
be paid on the next succeeding Business Day, and the amount of interest
included in any such payment shall be computed to the date on which such
payment is actually made.
15T. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one such counterpart.
15U. Confidentiality. Each Investor agrees that he or it will keep
confidential and will not disclose or divulge any confidential, proprietary or
secret information which such Investor may obtain from the Company pursuant to
this Agreement and which the Company has advised the Investor is protected
information, unless such information is known, or until such information
becomes known, to the public; provided, however, that such information may be
disclosed by the Investor to comply with applicable laws or governmental
regulations, in any court proceeding, in any action the Investor must take to
protect and enforce its rights under this Agreement if any Event of Default
shall occur and be continuing, or pursuant to an audit, provided that the
Investor provides prior written notice of such disclosure to the Company and
takes reasonable and lawful action to avoid or minimize the extent of such
disclosure; provided further, however, that an Investor may disclose such
information to any Affiliate of such Investor or to a partner or shareholder of
such Investor.
15V. Transfers of Certain Rights. The rights granted to an
Investor under this Agreement may be transferred by such Investor to another
Investor, to any affiliate of the
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Investor or to any Person or entity, provided, however, that the rights set
forth in paragraphs 7A and 7B may not be transferred to a company in the
business of selling or producing products which the Company in good faith
reasonably determines are competitive with its own products.
If you are in agreement with the foregoing, please sign the form of
acceptance in the space provided below, whereupon this letter shall become a
binding agreement between the parties hereto.
Very truly yours,
EDUCATIONAL MEDICAL, INC.
By:
---------------------------------
Authorized Signing Officer
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: CEO & Chairman
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The foregoing Agreement is
hereby accepted as of the
date first above written.
TRUST FOR DEFINED BENEFIT PLAN
OF ICI AMERICAN HOLDING, INC.
By: Pecks Management Partners Ltd.
its Investment Adviser
By:
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Principal Amount of Convertible
Managing Director Subordinated Notes: $1,100,000
Fuelship & Company Warrants to Purchase
---------------------------------- Common Stock: 220,000 Shares
(Name of Designee, if any)
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The foregoing Agreement is
hereby accepted as of the
date first above written.
STATE EMPLOYEES' RETIREMENT
FUND OF THE STATE OF DELAWARE
By: Pecks Management Partners Ltd.
its Investment Adviser
By:
----------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Principal Amount of Convertible
Managing Director Subordinated Notes: $2,900,000
NAP & Company Warrants to Purchase
-------------------------------------- Common Stock: 580,000 Shares
(Name of Designee, if any)
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TABLE OF CONTENTS
Page
----
1. Preliminary Statement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1A. Authorization of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1B. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Purchase and Sale of Units; Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2A. Purchase and Sale of Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2B. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. Conditions of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3A. Opinion of the Company's Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3B. Representations and Warranties; Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 2
3C. Charter Documents and By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3D. Purchase Permitted by Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3E. Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3F. Registration Rights and Coinvestors Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3G. Letter of Accountants: Accompanying Officer's Certificate . . . . . . . . . . . . . . . . . . . . . 3
3H. No Adverse U.S. Legislation, Action or Decision . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3I. Compliance with Securities Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3J. Approval and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3K. Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3L. Compliance with Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3M. Cumulative Convertible Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3N. Delivery of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. Conditions to the Obligations of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4A. Accuracy of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4B. Blue Sky Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4C. Purchase of All Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. Prepayments of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5A. Prepayments of Notes in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5B. Mandatory Prepayments of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5C. Optional Prepayments of the Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. Buyback of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6A. Buyback of Warrants in General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6B. Put of the Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
6C. Call of the Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
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Page
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7. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7A. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7B. Books and Records; Inspection of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7C. Additional Covenants Pending the Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7D. Compliance with Laws, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7E. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7F. Corporate Existence; Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7G. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7H. Filing of Reports under the 1934 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7I. 1933 Act Registration Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8. Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8A. Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8B. Restrictions on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8C. Restrictions on Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8D. Loans, Advances and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8E. Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8F. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8G. Merger and Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8H. Certain Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8I. Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8J. No Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8K. Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9A. Subordinated Debt Subordinate to Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9B. Suspension of Right to Receive Payments of Subordinated
Debt; Other Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9B(l). Failure to Pay Principal of or Interest on Senior Debt . . . . . . . . . . . . . . . . . . 17
9B(2). Acceleration of Payment of Senior Debt or Subordinated Debt . . . . . . . . . . . . . . . . 18
9B(3). Bankruptcy or Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9C. Rights of Holders of Senior Debt Not to Be Impaired . . . . . . . . . . . . . . . . . . . . . . . . 19
9D. Company's Obligation Unconditional . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9E. Payments Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9F. Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
9G. Reliance by Holders on Final Order or Decree . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10. Events of Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10A. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
10B. Other Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ii
55
Page
----
11. Representations, Covenants and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11A. Organization; Qualification and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11B. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
11C. Capital Stock and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11D. Actions Pending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
11E. Outstanding Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11F. Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11G. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11H. Conflicting Acrreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
11I. Offering of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11J. Broker's or Finder's Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11K. Regulation G, Etc.; Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11L. Pollution and Other Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11M. Absence of Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11N. Agreements with Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11O. Possession of Franchises, Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11P. Patents, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11Q. Holding Company and Investment Company Status . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11R. Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11S. Insurance Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11T. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11U. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11V. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11W. Absence of Foreign or Enemy Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12. Representations of the Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12A. Investment: ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12B. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13. Exercise of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13A. Exercise Price and Method of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
13B. Issuance of Certificates; When Exercise Effected . . . . . . . . . . . . . . . . . . . . . . . . . . 30
13C. Fractional Shares: Accrued Interest; Partial Exercise . . . . . . . . . . . . . . . . . . . . . . . 30
13D. Adjustment of Price upon Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 31
13D(l). Issuance of Convertible Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
13D(2). Change in Option Price or Conversion Rate . . . . . . . . . . . . . . . . . . . . . . . . . 32
13D(3). Stock Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13D(4). Consideration for Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
13D(5). Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13D(6). Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
13E. Subdivision or Combination of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
13F. Adjustment of Number of Shares Subject to the Warrants . . . . . . . . . . . . . . . . . . . . . . . 34
iii
56
Page
----
13G. Certain Issues of Common Stock Excepted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13H. Reorganization, Reclassification, Consolidation, Merger or Sale . . . . . . . . . . . . . . . . . . 35
13I. Notice of Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13J. Other Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13K. Stock to be Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13L. Issuance Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13M. Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13N. Closing of Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
14. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15A. Home Office Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15B. Expenses; Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
15C. Consent to Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
15D. Form, Registration, Transfer and Exchange of Notes or Warrants: Lost Notes or Warrants . . . . . . . 44
15E. Provisions Applicable If Any of the Securities Are Sold . . . . . . . . . . . . . . . . . . . . . . 45
15E(1). Notices to Subsequent Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
15E(2). Pro Rata Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15F. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15H. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15I. Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15J. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
15K. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15L. Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15M. Satisfaction Requirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15N. Governing Law, Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15O. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
15P. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15Q. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15R. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15S. Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15T. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15U. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
15V. Transfers of Certain Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
iv
57
PURCHASER SCHEDULE
============================================================================================================
Aggregate
Principal
Amount of Purchase
Notes to Be Shares of
PURCHASER Purchased Common Stock
------------------------------------------------------------------------------------------------------------
TRUST FOR DEFINED BENEFIT PLAN OF ICI AMERICAN $1,100,000 220,000 Shares
HOLDINGS, INC.
(1) The Notes shall be registered in the name of:
Fuelship & Company
------------------------------------------------------------------------------------------------------------
(2) All payments on account of Notes held by such
purchaser shall be made by wire transfer of
immediately available funds for credit to:
ABA Routing Number 0110-00028 for Master
Trust/State Street
Acct. JG10
Attn: ▇▇ ▇▇▇▇▇▇▇▇▇ in State Street
Bank & Trust Company
Master Trust Division
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Each such wire transfer shall set forth the name of the
Purchaser, the full title (including the interest rate
and final maturity date) of the Notes, and the due date
and application (as among principal, premium and
interest) of the payment being made.
------------------------------------------------------------------------------------------------------------
58
============================================================================================================
Aggregate
Principal
Amount of Purchase
Notes to Be Shares of
PURCHASER Purchased Common Stock
------------------------------------------------------------------------------------------------------------
(3) The Notes and Warrants shall be physically
delivered to:
State Street Bank & Trust Company
▇▇ ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Account Name: ICI Americas
#JG10
Attn: ▇▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------------------------------------------------------------------------------
(4) Address for all communications and notices:
Pecks Management Partners Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
============================================================================================================
59
PURCHASER SCHEDULE
=========================================================================================================
Aggregate
Principal Warrants to
Amount of Purchase
Notes to Be Shares of
PURCHASER Purchased Common Stock
---------------------------------------------------------------------------------------------------------
STATE EMPLOYEES' RETIREMENT FUND OF THE STATE OF $2,900,000 580,000 Shares
DELAWARE
(1) The Notes shall be registered in the name of:
NAP & Company
---------------------------------------------------------------------------------------------------------
(2) All payments on account of Notes held by such
purchaser shall be made by wire transfer of
immediately available funds for credit to:
ABA Routing Number 052-00618
for State of Delaware Account
Acct. #214380 in
Mercantile Safe Deposit & Trust
Company
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Each such wire transfer shall set forth the name of the
Purchaser, the full title (including the interest rate
and final maturity date) of the Notes, and the due date
and application (as among principal, premium and
interest) of the payment being made.
---------------------------------------------------------------------------------------------------------
(3) The Notes and Warrants shall be physically
delivered to:
Mercantile Safe Deposit & Trust
Company
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------------------------------------------------------------------------------
60
================================================================================================================
Aggregate
Principal Warrants to
Amount of Purchase
Notes to Be Shares of
PURCHASER Purchased Common Stock
----------------------------------------------------------------------------------------------------------------
(4) Address for all communications and notices:
Pecks Management Partners Ltd.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Managing Director
================================================================================================================
61
SCHEDULE 8C TO SECURITIES PURCHASE AGREEMENT
(LIENS)
Pledge securing $350,000.00 Note issued in connection
with the acquisition of ▇▇▇▇▇▇▇ College of Business.
62
SCHEDULE 11C TO SECURITIES PURCHASE AGREEMENT
EDUCATIONAL MEDICAL, INC.
EQUITY OWNERSHIP
AS OF JULY 23, 1991
============================================================================================================
Preferred Common Preferred Common
Stock Stock* Warrants Warrants
----- ------ -------- --------
Sprout/DLJ 382,500 159,384 21,697 9,041
----------------------------------------------------------------------------------------------------------
LTOS 382,500 159,383 18,768 7,820
----------------------------------------------------------------------------------------------------------
Investech 255,000 106,256 14,466 6,027
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ 0 192,267 0 0
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇ 0 94,222 0 0
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ 0 92,721 0 0
----------------------------------------------------------------------------------------------------------
▇▇▇▇▇▇ 0 17,499 0 0
----------------------------------------------------------------------------------------------------------
Equitable Securities 0 0 0 16,000
----------------------------------------------------------------------------------------------------------
Corporation
----------------------------------------------------------------------------------------------------------
Other Management 0 2,250 0 0
----------------------------------------------------------------------------------------------------------
TOTAL ISSUED 1,020,000 823,982 54,931 38,888
AND OUTSTANDING
============================================================================================================
* 18,000 SHARES OF COMMON STOCK ARE RESERVED FOR ISSUANCE PURSUANT TO THE
INCENTIVE COMPENSATION AGREEMENT.
==============================================================================
NOTES:
The Company has agreed to issue to ▇▇▇▇▇▇ Heidric, an executive search
agent, warrants (the "Heidric Warrants") to purchase 10,000 shares of its
common stock at the offering price of such shares in an Initial Public
Offering, such warrants to have a term of 5 years from the date of such Public
Offering.
The Company is issuing approximately 250,000 shares of common stock to
the holders of its cumulative preferred stock in connection with the
transactions provided for in the Securities Purchase Agreement to which this
Schedule is attached.
63
SCHEDULE 11D TO SECURITIES PURCHASE AGREEMENT
(ACTIONS PENDING)
1. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III v. Educational
Medical, Inc., a Delaware corporation, et al., Case No.
631689, in the Superior Court of California for the County of
San Diego, filed December 11, 1990.
The sellers of the Maric Schools brought this action against
the Company to enforce payment of Notes (the "Notes") in the principal amount
of $180, 000 issued in connection with the purchase of the Maric Schools by the
Company. The Company has withheld payments on the Notes because of alleged
breaches by the sellers of the agreement pursuant to which the sale occurred,
relating to the notice of deficiency described below, and has asserted such
counterclaims in the litigation. Discovery has not yet been completed, and
although the Company is vigorously pursuing its claims, we are unable to
predict the outcome of the litigation. Substantially all of the payments
provided for in the promissory notes have been placed into escrow and will be
disbursed upon completion of the litigation.
2. Notice of Deficiency from the U.S. Department of Education
with respect to Maric College of San Diego for the period ended June 30, 1985
(see page 10 of the Private Placement Memorandum dated October 24, 1990).
Reaudited results have been filed and the Company is awaiting a response.
64
SCHEDULE 11E TO SECURITIES PURCHASE AGREEMENT
(OUTSTANDING DEBT OF EDUCATIONAL MEDICAL, INC.
OR ANY OF ITS SUBSIDIARIES)
NONE OTHER THAN DISCLOSED
IN FINANCIAL STATEMENTS.
65
SCHEDULE 11T TO SECURITIES PURCHASE AGREEMENT
(SUBSIDIARIES OF
EDUCATIONAL MEDICAL, INC.)
1. Andon Colleges, Inc., a California corporation.
a) Dest Education Corporation, a California corporation, a
subsidiary of Andon Colleges, Inc.
2. Maric Learning Systems, a California corporation.
3. ▇▇▇▇▇▇▇ Acquisition Corp., a Delaware corporation.
4. Palo Vista College of Nursing and Allied Health Services, Inc., a
California corporation.
5. Scottsdale Educational Center for Allied Health Careers, Incorporated.
66
SCHEDULE 11V TO SECURITIES PURCHASE AGREEMENT
(REGISTRATION RIGHTS)
NONE OTHER THAN AS CONTAINED IN OR REFERRED TO IN
THE REGISTRATION RIGHTS AGREEMENT DATED JULY 23, 1991.
67
EXHIBIT "A"
[Form of Senior Subordinated Note]
THE TRANSFER AND PAYMENT OF THIS NOTE IS SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN A SECURITIES PURCHASE AGREEMENT, DATED AS OF JULY __,
1991, AND ANY AMENDMENTS THERETO. THE NOTE REPRESENTED HEREBY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND IT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT
AND SUCH LAWS AND THE RESPECTIVE RULES AND REGULATIONS THEREUNDER.
EDUCATIONAL MEDICAL, INC.
13% SENIOR SUBORDINATED NOTE
DUE JULY ____, 1996
R-_______________ __________________________
$ _______________ [Date]
FOR VALUE RECEIVED, the undersigned, EDUCATIONAL MEDICAL, INC., a
corporation organized and existing under the laws of the State of
_______________ (herein called the "Company"), hereby promises to pay to
__________________ or ________________ registered assigns, the principal sum of
____________________ DOLLARS ($) on July ___, 1996, with interest (computed for
the actual number of days elapsed on the basis of a 365-day year) (a) on the
unpaid balance thereof at the rate of 13% per annum from the date hereof,
payable quarterly on the last day of March, June, September and December in
each year, commencing with the March, June, September or December next
succeeding the date hereof, until the principal hereof (or any portion thereof)
shall have become due and payable, and (b) on any overdue payment (including
any overdue prepayment) of principal and, to the extent permitted by applicable
law, any overdue payment of interest, payable quarterly as aforesaid (or, at
the option of the registered holder hereof, on demand), at a rate per annum
from time to time equal to 16%.
Payments of both principal and interest are to be made at the main
office of Chase Manhattan Bank in New York, or such other place as the holder
hereof shall designate to the Company in writing, in lawful money of the United
States of America.
This Note is issued pursuant to a Securities Purchase Agreement dated
as of July __, 1991 (the "Agreement"), between the Company and the Investors
named on the signature page thereof and is entitled to the benefits of the
Agreement. As provided in the Agreement, this Note is subject to prepayment,
in whole or in part, in certain cases without premium and in other cases with a
premium as specified in the Agreement.
68
PAYMENTS OF PRINCIPAL, PREMIUM (IF ANY) AND INTEREST IN RESPECT OF
THIS NOTE ARE SUBORDINATE TO SENIOR DEBT (AS DEFINED IN THE AGREEMENT).
This Note is a registered Note and, as provided in the Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the
registered holder hereof or such holder's attorney duly authorized in writing,
a new Note for a like principal amount will be issued to, and registered in the
name of, the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
The Company agrees to make prepayments of principal of the Notes on
the dates and in the amounts specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall occur
and be continuing, the principal of this Note may be declared due and payable
in the manner and with the effect provided in the Agreement. The Company
agrees to pay, and save the holder hereof harmless against any liability for,
any expenses arising in connection with the enforcement by the holder hereof of
any of its rights under this Note or the Agreement.
Payment of principal, premium (if any) and interest in respect of this
Note are subordinate, to the extent set forth in the Agreement, to all
principal of and interest on Senior Debt (as defined in the Agreement).
This Note is intended to be performed in the State of New York, and
shall be construed and enforced in accordance with the law of such State.
EDUCATIONAL MEDICAL, INC.
By:
-------------------------------------------------
Name:
-------------------------------------------
Title:
------------------------------------------
69
EXHIBIT "B"
[Form of Warrant Certificate]
Warrant No. R-_____________________________________
THE TRANSFER OF THIS WARRANT IS SUBJECT TO CERTAIN RESTRICTIONS SET FORTH IN A
SECURITIES PURCHASE AGREEMENT, DATED AS OF JULY 11, 1991, AND ANY AMENDMENTS
THERETO. THE WARRANT REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND IT
MAY NOT BE SOLD, Transferred OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
Registration OR AN EXEMPTION THEREFROM UNDER SAID ACT AND SUCH LAWS AND THE
RESPECTIVE RULES AND REGULATIONS THEREUNDER.
WARRANT TO PURCHASE COMMON STOCK OF
EDUCATIONAL MEDICAL, INC.
Exercisable Commencing
------------
Void After
June 30, 2001
THIS CERTIFIES that, for value received, or registered assigns, is
entitled, subject to the terms and conditions set forth in this Warrant
Certificate, to purchase from EDUCATIONAL MEDICAL, INC., a _______________
corporation (the "Company"), _______________ fully paid and non-assessable
shares of Common Stock of the Company (the "Common Stock"), at any time
commencing __________ and continuing up to 5 p.m. New York time on June 30,
2001, originally at a price of $5.00 per share and thereafter at the price
calculated pursuant to the Purchase Agreement (as hereinafter defined) (the
"Exercise Price").
This Warrant is issued pursuant to a Securities Purchase Agreement
dated as of July 1991 (the "Purchase Agreement"), between the Investors listed
on the Purchaser Schedules thereto and the Company. The Purchase Agreement is
hereby incorporated by reference in and made a part of this Warrant and is
hereby referred to for a description of the rights, obligations, duties and
immunities thereunder of the Company and the registered holder or registered
holders of the Warrants (the "Holder(s)"). A copy of the Purchase Agreement
may be obtained by the Holder(s) hereof upon written request directed to the
Company. Capitalized terms used herein shall have the meaning ascribed to them
in the Purchase Agreement.
Warrants may be exercised at such times and in such amounts as are
provided for in the Purchase Agreement, but in no event later than 5:00 p.m.,
New York time, on June 30, 2001.
The Holder(s) of Warrants evidenced by this Warrant Certificate may
exercise them by surrendering this Warrant Certificate, with the form of
election to purchase attached hereto
70
properly completed and executed, together with payment of the Exercise Price at
the principal office of the Company (or at such other address as the Company
may designate by notice in writing to the Holder(s) hereof at the address of
such Holder(s) appearing on the books of the Company). Payment of the Exercise
Price may be made in cash, by certified check payable to the order of the
Company, or by payment by way of a call on the Notes with a concurrent
direction to the Company to credit such amount in payment of the Exercise
Price, or any combination thereof. In the event that upon any exercise of
Warrants evidenced hereby, the number of Warrants exercised shall be less than
the total number of Warrants evidenced hereby, there shall be issued to the
Holder(s) hereof or the assignee of the Holder (s), without charge, a new
Warrant Certificate evidencing the number of Warrants not exercised.
The Purchase Agreement provides that upon the occurrence of certain
events, the Exercise Price or number of shares of Common Stock set forth on the
face hereof may be adjusted, subject to certain conditions. "No fractions of a
share of Common Stock shall be issued upon the exercise of any Warrant, but the
Company shall pay the cash value thereof determined as provided in the Purchase
Agreement.
Warrant Certificates, when surrendered at the office of the Company by
the registered Holder(s) thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Purchase Agreement, but without
payment of any service charge, for another Warrant Certificate of like tenor
evidencing in the aggregate a like number of Warrants.
The Company agrees to provide the Holder(s) hereof with written notice
of the expiration of the Warrants at least sixty days prior to the date of
expiration. Such notice shall be sent by first class mail or nationwide
overnight delivery services (with charges prepaid) to the Holder(s) hereof at
the address of such Holder(s) appearing on the books of the Company.
Upon due presentation for registration of a transfer of this Warrant
Certificate at the office of the Company, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants will be issued to the transferees) in exchange for this Warrant
Certificate, subject to the limitations provided in the Purchase Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company may deem and treat the Holder(s) hereof as the absolute
owner(s) of this Warrant Certificate (notwithstanding any notation of ownership
or other writing hereof made by anyone), for the purpose of any exercise
hereof, of any distribution to the Holder(s) hereof, and for all other
purposes, and the Company shall not be affected by any notice to the contrary.
Except as otherwise referred to in the Purchase Agreement, neither the Warrants
nor this Warrant Certificate entitles any Holder(s) hereof to any rights of a
stockholder of the Company.
The Warrants are callable by the Company and redeemable at certain
times and in certain events.
This Warrant Certificate is intended to be performed in the State of
New York and shall be construed and enforced in accordance with the law of such
State.
71
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by its duly authorized officer on this _____ day of July, 1991.
EDUCATIONAL MEDICAL, INC.
By:
-------------------------------------------------
Name:
-----------------------------------------------
Title:
72
FORM OF ELECTION TO PURCHASE
TO: EDUCATIONAL MEDICAL, INC.
The undersigned holder of this Warrant (1) hereby irrevocably elects
to exercise the right to purchase hereunder (______________ ) fully-paid shares
of the Common Stock of EDUCATIONAL MEDICAL, INC., (2) makes paint in full of
the purchase price of such shares, (3) requests that certificates for such
shares be issued in the name of ___________
_________________________________________________ and (4) if said number of
shares shall not be all the shares the holder is entitled to purchase under
this Warrant, requests that a new warrant for the unexercised portion of this
Warrant be issued. If payment is being made by delivery of 13% Senior
Subordinated Notes due July _____, 1996 to the Company, the undersigned hereby
directs the Company to apply such payment on the Notes on account of the
Exercise Price.
Dated:________________________
__________________________________________________
(SIGNATURE)
73
EXHIBIT "C"
[Form of Opinion of Company Counsel]
July 1991
State Employees' Retirement Fund
of the State of Delaware
Baltimore, Maryland
Trust for Defined Benefit Plan
of ICI American Holdings Inc.
New York, New York
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇
New York, New York
Re: Educational Medical, Inc.
13% Senior Subordinated Notes and
Warrants to Purchase Common Stock
Gentlemen:
We refer to the Securities Purchase Agreement (the "Securities
Purchase Agreement") dated July 23, 1991 by and among Educational Medical, Inc.
(the "Company"), a Delaware corporation, and the investors listed on the
Purchaser Schedules thereto (the "Investors"), which provides for the issuance
and sale by the Company to the Investors of 4,000 Units (the "Units"), each
Unit comprising (i) $1,000 principal amount of 13% Senior Subordinated
Promissory Notes of the Company (the "Notes") and (ii) warrants to purchase 200
shares of Common Stock (the "Warrants") . This opinion is being rendered to you
pursuant to Paragraph 3A of the Securities Purchase Agreement. Capitalized
terms used herein without definition have the respective meanings ascribed to
such terms in the Securities Purchase Agreement.
We have acted as counsel to the Company in connection with the
issuance and sale to the Investors of the Units pursuant to the Securities
Purchase Agreement. In connection with the foregoing, we have examined
originals or copies satisfactory to us of: (i) the Securities Purchase
Agreement and the schedules and exhibits thereto, (ii) the Restated Certificate
of Incorporation of the Company, (iii) the By-laws of the Company, (iv) the
Registration Rights Agreement, (v) the Coinvestors Agreement, (vi) the form of
Note and (vii) the form of Warrant.
We have also examined originals or copies satisfactory to us of all
such corporate records and of all such agreements, certificates, governmental
orders and permits and other documents as we have deemed relevant and necessary
as a basis for the opinions hereinafter expressed. In our examination we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals and the conformity with the original documents of
all documents submitted to us as copies. As to any facts material to such
opinions, we have, to the
74
State Employees' Retirement Fund Trust for Defined Benefit Plan
of the State of Delaware of ICI American Holdings Inc.
Baltimore, Maryland New York, New York
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ July ______, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ Page 2
extent that such facts were not independently established by us, relied upon
certificates of public officials and officers of the Company.
Based upon the foregoing, we are of the opinion that:
The Company is a corporation, duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. The Company is duly
qualified to do business as a foreign corporation and in good standing in each
jurisdiction in which the character of its properties or the nature of its
business makes such qualification necessary. Each of the Company's
Subsidiaries is duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, and each of the Company's
Subsidiaries is duly qualified to do business as a foreign coloration and in
good standing in each jurisdiction in which the character of its properties or
the nature of its business makes such qualification necessary. The Company and
each of its Subsidiaries have all requisite corporate power and authority to
own, and in all material respects to operate, their respective properties and
to carry on their respective businesses as now conducted in all material
respects.
The Company has all requisite corporate power and authority to enter
into and carry out the transactions contemplated by the Securities Purchase
Agreement and each agreement executed by the Company pursuant thereto and to
issue and sell the Units and to issue Common Stock upon exercise of the
Warrants. The execution, delivery and performance of the Securities Purchase
Agreement, the Shareholders Agreement and the Registration Rights Agreement
have been duly authorized by all necessary corporate action on the part of the
Company, and such Agreements have been duly executed and delivered by the State
Employees' Retirement Fund of the Company and constitute legal, valid and
binding obligations of the Company, enforceable against it in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization and other laws relating to
or affecting the enforcement of the rights and remedies of creditors generally
and by general principles of equity. The Company's authorized capital stock is
as set forth in Section 11C of the Securities Purchase Agreement.
The Warrants to be issued and sold on the Closing Date have been
issued and sold by the Company pursuant to the Securities Purchase Agreement.
The shares of Common Stock issuable upon exercise of the Warrants have been
duly authorized by all necessary corporate action on the part of the Company
and have been validly reserved for issuance upon such exercise; such shares,
when issued upon such exercise, will be validly issued, fully paid and
nonassessable. Neither the issuance, sale and delivery of the Warrants nor the
issuance of the Common Stock issuable upon exercise of the Warrants is subject
to any applicable preemptive rights of shareholders of the
75
State Employees' Retirement Fund Trust for Defined Benefit Plan
of the State of Delaware of ICI American Holdings Inc.
Baltimore, Maryland New York, New York
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ July ______, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ Page 3
Company which have not been waived or, to our best knowledge, after due
inquiry, to any right of first refusal or other similar right in favor of any
person or entity.
To the best of our knowledge after due inquiry, and except as set
forth in Schedule 11D of the Securities Purchase Agreement, there is no action,
suit, investigation or proceeding pending or threatened against the Company or
any of its Subsidiaries or any of their properties by or before any court,
arbitrator or administrative or governmental body.
To the best of our knowledge after due inquiry, except as set forth on
Schedule 11D of the Securities Purchase Agreement, there exists no default,
which has not been waived or cured, under the provisions of any instrument of
which we have actual knowledge evidencing Indebtedness of the Company or any of
its Subsidiaries or of any agreement of which we have actual knowledge relating
thereto.
To the best of our knowledge after due inquiry, and except as
otherwise disclosed in the Securities Purchase Agreement, neither the execution
nor the delivery of State Employees' Retirement Fund of the Securities Purchase
Agreement, the Registration Rights Agreement, the Co investors Agreement or
fulfillment of or compliance with the terms and provisions of any thereof,
including, without limitation, the exercise of Warrants for Common Stock, will
conflict with, or result in a breach of the terms, conditions or provisions of,
or constitute a default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the Company or any
of its Subsidiaries pursuant to, the Amended and Restated Certificate of
Incorporation or By-Laws of the Company or any of its Subsidiaries, any award
of any arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment or decree, statute, law, rule or regulation to
which the Company or any of its Subsidiaries is subject, and neither the
Company nor any of its Subsidiaries is a party to, or otherwise subject to any
provision contained in, any instrument evidencing indebtedness for borrowed
money of the Company or any of its Subsidiaries, any agreement relating thereto
or any other contract or agreement (including its Amended and Restated
Certificate of Incorporation) which contains dividend or redemption limitations
on any capital stock of the Company, except for the Securities Purchase
Agreement, the Notes and the Warrants.
To the best of our knowledge, the Company and its Subsidiaries possess
all franchises, certificates, licenses, permits and other authorizations from
governmental political subdivisions or regulatory authorities that are
necessary in any material respect for the ownership, maintenance and operation
of its properties and assets when taken as a whole.
76
State Employees' Retirement Fund Trust for Defined Benefit Plan
of the State of Delaware of ICI American Holdings Inc.
Baltimore, Maryland New York, New York
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ July ______, ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ Page 4
Neither the Company nor any of its Subsidiaries is, or upon the sale
of the Units will be, an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or an "investment advisor" within the meaning of the Investment
Advisors Act of 1940, as amended.
The offer, issue, sale and delivery of the Units under the
circumstances contemplated by the Securities Purchase Agreement do not require
registration under the Securities Act of 1933, as amended. The Company is not
required to file, nor has the Company filed, pursuant to Section 12 of the
Securities Exchange Act of 1934, a registration statement relating to any class
of debt or equity securities.
This opinion is furnished solely to you and may not be relied upon by
any other party and may not be quoted or referred to without our prior written
approval.
Very truly yours,
▇▇▇▇▇▇, ▇▇▇▇▇ & BOCKIUS