Exhibit 99.2
SERIES B CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
between
ENERGY Biosystems CORPORATION
and
THE PURCHASER LISTED ON SCHEDULE I
Dated as of February 21, 1997
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT dated as of February 21, 1997 by and between
Energy Biosystems Corporation, a Delaware corporation (the "Company"), and the
Purchaser listed on Schedule I of this Agreement (the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Company desires to sell to the Purchaser and the Purchaser
desires to purchase from the Company shares of the authorized but unissued
Series B Convertible Preferred Stock, par value $0.01 per share, of the
Company (the "Series B Preferred Stock"), upon the terms and provisions
hereinafter set forth.
WHEREAS, concurrently with this offering, the Company has made an
exchange offer whereby holders of Series A Preferred Stock will exchange
shares of Series A Preferred Stock for shares of the authorized but unissued
Series B Preferred Stock, par value $0.01 per share, of the Company (the
"Exchange Offer") to exchanging parties who will be executing Stock Exchange
Agreements substantially similar to this Agreement, containing similar
representations and warranties by the Company, covenants of the Company,
registration rights, conditions and other terms.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF THE PREFERRED SHARES
(a) The Company agrees to sell to the Purchaser and, subject to the
terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, the
Purchaser agrees to purchase from the Company on the Closing Date specified in
Section 2 hereof, the number of shares of Series B Preferred Stock set forth
opposite the Purchaser's name on Schedule I hereto. The shares of Series B
Preferred Stock being acquired under this Agreement and by the other
Purchasers under the other Stock Purchase Agreements (as hereinafter defined)
are collectively herein referred to as the "Shares", containing rights and
privileges as more fully set forth in the Certificate of Designations for the
Series B Preferred Stock of the Board of Directors of the Company which shall
be substantially in the form attached hereto as Exhibit A (the "Series B
Certificate of Designations").
(b) The aggregate purchase price to be paid to the Company by the
Purchaser for the Shares to be purchased by the Purchaser pursuant to this
Agreement shall be the amount set forth opposite the Purchaser's name on
Schedule I hereto. No further payment shall be required from the Purchaser
for the Shares.
(c) The Shares are being sold to the Purchaser listed on Schedule I
hereto and to other Purchasers under substantially identical agreements
(collectively, the "Purchasers") pursuant to this Agreement and other
substantially identical agreements dated as of the date hereof (all such
agreements collectively, as from time to time assigned, supplemented or
amended or as the terms thereof may be waived, the "Stock Purchase
Agreements"). All Stock Purchase Agreements shall be dated the date hereof
and shall be identical except as to the identities of the respective
Purchasers. The sale of Shares to each Purchaser under each Stock Purchase
Agreement is to be a separate sale, and no Purchaser shall have any liability
under any Stock Purchase Agreement other than the Stock Purchase Agreement to
which it is a party.
(d) The Company will use the proceeds from the sale of the Shares as
described in the section of the Memorandum entitled "Use of Proceeds."
(e) If an aggregate of fewer than 280,000 Shares are sold at the
Closing under the Stock Purchase Agreements, the Company shall have the right,
from time to time thereafter, but not later than March 31, 1997, to sell
additional Shares up to an overall aggregate of 400,000 Shares pursuant to
Stock Purchase Agreements substantially identical to this Stock Purchase
Agreement. Upon completion of any such sale, such additional Shares shall be
"Shares" hereunder, the purchasers of such additional Shares shall be
"Purchasers" hereunder and such additional Stock Purchase Agreements shall be
"Stock Purchase Agreements" hereunder.
SECTION 2. THE CLOSING
(a) Subject to the terms and conditions hereof, the closing of the
purchase and sale of the Shares to be purchased by the Purchaser (the
"Closing") will take place at the offices of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ at 10:00 A.M., Houston, Texas time, on
February 26, 1997, or such other location, time and date as shall be
determined by the Company and the Agent. Such time and date are herein
referred to as the "Closing Date."
(b) Subject to the terms and conditions hereof, on the Closing Date
(i) the Company will deliver to the Purchaser a certificate registered in the
Purchaser's name (or the name of its nominee, if any, as specified on Schedule
I hereto) evidencing the number of Shares equal to that number of Shares set
forth opposite the Purchaser's name on Schedule I, and (ii) upon the
Purchaser's receipt thereof, the escrow agent (the "Escrow Agent") for the
Purchaser's funds previously deposited in an escrow account will release from
such escrow account and deliver to the Company a certified or official bank
check (or wire transfer) in an amount equal to the purchase price (as
specified in Section l(b) hereof) for the Shares to be purchased by the
Purchaser payable to the order of the Company in next day funds.
SECTION 3. DEFINITIONS
(a) For purposes of this Agreement, the following definitions shall
apply (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"Affiliate", when used with respect to any Person, means (i) if such
Person is a corporation, any executive officer or director thereof (other
than a director nominated pursuant to the Series B Certificate of
Designations) and any Person which is, directly or indirectly, the
beneficial owner (by itself or as part of any group) of more than five
percent (5%) of any class of any equity security (within the meaning of
the Securities Exchange Act) thereof, and, if such beneficial owner is a
partnership, any general partner thereof, or if such beneficial owner is
a corporation, any Person controlling, controlled by or under common
control with such beneficial owner, or any executive officer or director
of such beneficial owner or of any corporation occupying any such control
relationship, (ii) if such Person is a partnership, any general partner
thereof, and (iii) any other Person which, directly or indirectly,
controls or is controlled by or is under common control with such Person.
For purposes of this definition, "control" (including the correlative
terms "controlling", "controlled by" and "under common control with"),
with respect to any Person, shall mean possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities or by contract or otherwise. Except as provided above,
the holding of Shares (or Conversion Shares obtained upon conversion of
Shares), and the rights under any Stock Purchase Agreement or under the
Series B Certificate of Designations (or the exercise of any such rights,
including, without limitation, nominating a director to the Board of the
Company or sending an observer to Board meetings of the Company or any of
the Subsidiaries), shall not, by themselves, cause a Purchaser to be
deemed to be an "Affiliate" of the Company or of any Subsidiary.
"Agreement" means this Stock Purchase Agreement (together with
exhibits and schedules) as from time to time assigned, supplemented or
amended or as the terms hereof may be waived.
"Board" or "Board of Directors" means with respect to any Person
which is a corporation, a business trust or other entity, the board of
directors or other group, however designated, which is charged with legal
responsibility for the management of such Person, or any committee of
such board of directors or group, however designated, which is authorized
to exercise the power of such board or group in respect of the matter in
question.
"Business Day" means any day other than a Saturday, Sunday or a day
on which banking institutions in the State of New York or the State of
Texas are authorized or obligated by law or executive order to close.
"Capitalized Leases" means any lease to which the Company or a
Subsidiary is a party as lessee, or by which it is bound, under which it
leases any property (real, personal or mixed) from any lessor other than
the Company or a Subsidiary, and which is required to be capitalized in
accordance with generally accepted accounting principles consistently
applied.
"Closing" has the meaning set forth in Section 2(a) hereof.
"Closing Date" has the meaning set forth in Section 2(a) hereof.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, and the regulations and interpretations thereunder.
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering
the Securities Act or the Securities Exchange Act.
"Common Stock" of the Company or of a Subsidiary (as the case may
be) shall mean the Company's or a Subsidiary's (as the case may be)
present authorized common stock and any stock into which such Common
Stock may hereafter be changed or for which such Common Stock may be
exchanged after giving effect to the terms of such change or exchange (by
way of reorganization, recapitalization, merger, consolidation or
otherwise) and shall also include any common stock of the Company or of
a Subsidiary (as the case may be) hereafter authorized and any capital
stock of the Company or of a Subsidiary (as the case may be) of any other
class hereafter authorized which is not preferred as to dividends or
assets over any other class of capital stock of the Company or of a
Subsidiary (as the case may be) or which has ordinary voting power for
the election of directors of the Company or of a Subsidiary (as the case
may be); provided that preferred stock of the Company or a Subsidiary
with the right to vote together with the common stock of such entity on
various matters shall not be treated as "Common Stock" hereunder.
"Company" means Energy Biosystems Corporation, a Delaware
corporation, its successors and assigns.
"Consent and Exchange Agreement" is the agreement by which holders
of Series A Preferred Stock elect to exchange shares of Series A
Preferred Stock for shares of Series B Preferred Stock on a one-for-one
basis.
"Conversion Price" has the meaning specified in Section 2 of the
Series B Certificate of Designations.
"Conversion Share" or "Conversion Shares" means the shares of the
Company's Common Stock, par value $0.01 per share, obtained or obtainable
upon conversion of the Shares and shall also include any capital stock or
other securities into which Conversion Shares are changed and any capital
stock or other securities resulting from or comprising a
reclassification, combination or subdivision of, or a stock dividend on,
any Conversion Shares. In the event that any Conversion Shares are sold
either in a public offering pursuant to a registration statement under
Section 6 of the Securities Act or pursuant to a Rule 144 Transaction,
then the transferees of such Conversion Shares shall not be entitled to
any benefits under this Agreement with respect to such Conversion Shares
and such Conversion Shares shall no longer be considered to be
"Conversion Shares" for purposes of Section 8 hereof, for purposes of the
definition of Majority Shareholders or for purposes of any consent or
waiver provision or any other provision of this Agreement.
"Eligible Holder" means any holder (or group of affiliated holders)
which is a Purchaser (or transferee of a Purchaser approved by the
Company, such approval not to be unreasonably withheld) or a purchaser of
Series A Preferred Stock that has elected to exchange its shares of
Series A Preferred Stock for Shares (or a transferee of such exchanging
party approved by the Company, such approval not to be unreasonably
withheld) and which holds 100,000 or more Shares, or Conversion Shares
issued on conversion of 100,000 or more Shares, or an equivalent
combination of the foregoing.
"Environmental Lien" has the meaning set forth in Section 7.7
hereof.
"ERISA" means, collectively, the Employee Retirement Income Security
Act of 1974, as amended, and the regulations and interpretations
thereunder.
"Exchange Agreement" means the Series B Convertible Preferred Stock
Exchange Agreement, dated the date hereof, by which holders of Series A
Preferred Stock agree to exchange shares of Series A Preferred Stock for
shares of Series B Preferred Stock on a one-for-one basis consistent with
their election reflected in the Consent and Exchange Agreement. The
Exchange Agreement is substantially similar to this Agreement, containing
similar representations and warranties by the Company, covenants of the
Company, registration rights, conditions and other terms.
"Guaranty" means (i) any guaranty or endorsement of the payment or
performance of, or any contingent obligation in respect of, any
indebtedness or other obligation of any other Person, (ii) any other
arrangement whereby credit is extended to one obligor (directly or
indirectly) on the basis of any promise or undertaking of another Person
(a) to pay the indebtedness of such obligor, (b) to purchase an
obligation owed by such obligor, (c) to purchase or lease assets (or to
provide funds, goods or services) under circumstances that would enable
such obligor to discharge one or more of its obligations or (d) to
maintain the capital, working capital, solvency or general financial
condition of such obligor, in each case whether or not such arrangement
is disclosed in the balance sheet of such other Person or is referred to
in a footnote thereto and (iii) any liability as a general partner of a
partnership in respect of indebtedness or other obligations of such
partnership; provided, however, that the term "Guaranty" shall not
include (1) endorsements for collection or deposit in the ordinary course
of business or (2) obligations of the Company or its Subsidiaries which
would constitute Guaranties solely by virtue of the continuing liability
of a Person which has sold assets subject to liabilities for the
liabilities which were assumed by the Person acquiring the assets, unless
such liability is required to be carried on the consolidated balance
sheet of the Company. The amount of any Guaranty and the amount of
indebtedness resulting from such Guaranty shall be the maximum amount of
the guarantor's potential obligation in respect of such Guaranty.
"Hazardous Materials" means any pollutant, toxic substance,
petroleum or petroleum by-products, hazardous waste, or any material,
compound, element or chemical identified as a pollutant, toxic substance
or hazardous waste or determined to be hazardous or toxic by a
governmental agency under the Comprehensive Environmental Response
Compensation and Liability Act (CERCLA), 42 U.S.C. 9601 et seq., the
Resource Conservation and Recovery Act (RCRA), 42 U.S.C. 6901 et seq.,
the Toxic Substances Control Act (TSCA), 15 U.S.C. 2601 et seq., the
Water Pollution Control Act (CWA), 33 U.S.C. 1251 et seq., the Clean Air
Act (CAA), 42 U.S.C. 7501 et seq., the Occupational Safety and Health Act
(OSHA), 29 U.S.C. 655 and any other federal, state, local or municipal
laws, statutes, ordinances, codes, rules or regulations imposing
liability or establishing standards of conduct for environmental
protection. The term "Hazardous Materials" shall also include: raw
materials used or stored by the Company that contain Hazardous Materials;
building components (including but not limited to asbestos-containing
materials) that contain Hazardous Materials and manufactured products
containing Hazardous Materials.
"Indebtedness" of any Person means, without duplication, as of any
date as of which the amount thereof is to be determined, (i) all
obligations of such Person to repay money borrowed (including, without
limitation, all notes payable and drafts accepted representing extensions
of credit, all obligations under letters of credit, all obligations
evidenced by bonds, debentures, notes or other similar instruments and
all obligations upon which interest charges are customarily paid), (ii)
all Capitalized Leases in respect of which such Person is liable as
lessee or as the guarantor of the lessee, (iii) all monetary obligations
which are secured by any Lien existing on property owned by such Person
whether or not the obligations secured thereby have been incurred or
assumed by such Person, (iv) all conditional sales contracts and similar
title retention debt instruments under which such Person is obligated to
make payments, (v) all Guaranties by such Person and (vi) all contractual
obligations (whether absolute or contingent) of such Person to repurchase
goods sold or distributed. "Indebtedness" shall not include, however,
Indebtedness of the Company to any of its wholly-owned Subsidiaries or
Indebtedness of any wholly-owned Subsidiary to the Company or to another
wholly-owned Subsidiary.
"Lien" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority or other security interest of any kind or nature
whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the
same effect as any of the foregoing, any assignment or other conveyance
of any right to receive income and any assignment of receivables with
recourse against the assignor), any filing of a financing statement as
debtor under the Uniform Commercial Code or any similar statute and any
agreement to give or make any of the foregoing.
"Majority Shareholders" means the holder or holders, at the time, of
at least a majority of the Conversion Shares, including the Conversion
Shares then outstanding and the Conversion Shares then obtainable under
outstanding Shares; provided that such majority must in any event include
each Eligible Holder.
"Material Adverse Effect" means any material and adverse effect on
the assets, properties, liabilities, business affairs, results of
operations, condition (financial or otherwise) or prospects of the
Company.
"Memorandum" means that certain Confidential Offering Memorandum
dated February 14, 1997 relating to the Shares.
"Outstanding" or "outstanding" means (a) when used with reference to
the Shares or the Conversion Shares as of a particular time, all Shares
or Conversion Shares theretofore duly issued except (i) Shares and
Conversion Shares theretofore reported as lost, stolen, mutilated or
destroyed or surrendered for transfer, exchange or replacement, in
respect of which new or replacement Shares or Conversion Shares have been
issued by the Company, (ii) Shares and Conversion Shares theretofore
canceled by the Company and (iii) Shares and Conversion Shares registered
in the name of, as well as Shares and Conversion Shares owned
beneficially by, the Company, any Subsidiary or any of their Affiliates
and (b) when used with reference to the number of shares of Common Stock
of the Company as of a particular time, the then issued and outstanding
shares of Common Stock of the Company (not including treasury shares or
any other shares registered in the name of the Company, any Subsidiary or
any of their Affiliates), together with shares of Common Stock of the
Company issuable pursuant to any then outstanding warrants, options,
convertible securities or other rights to acquire shares of Common Stock
of the Company. For purposes of the preceding sentence, in no event
shall "Affiliates" include (x) the persons which are identified as
"Purchasers" on Schedule I hereto or (y) any Affiliates of any such
persons, except if such persons would otherwise fall within the
definition of "Affiliate" described above.
"Person" or "person" means an individual, corporation, partnership,
firm, association, joint venture, trust, unincorporated organization,
government, governmental body, agency, political subdivision or other
entity.
"Preferred Stock" means any class of the capital stock of a
corporation (whether or not convertible into any other class of such
capital stock) which has any right, whether absolute or contingent, to
receive dividends or other distributions of the assets of such
corporation (including, without limitation, amounts payable in the event
of the voluntary or involuntary liquidation, dissolution or winding-up of
such corporation), which right is superior to the rights of another class
of the capital stock of such corporation. "Preferred Stock" includes
without limitation the Series B Preferred Stock.
"Purchaser" means the person who accepts and agrees to the terms
hereof as indicated by such person's signature (as "the undersigned
Purchaser") on the execution page of this Agreement, together with such
person's successors and assigns.
"Purchasers" has the meaning set forth in Section l(c) hereof,
together with their respective successors and assigns.
"Registered Securities" means the Conversion Shares, any Common
Stock issued in payment of dividends on, or in connection with the
redemption or repurchase of, the Shares and any Shares included herein
pursuant to Section 8.1(g) hereof.
"Restricted Payment" means (i) every dividend or other distribution
paid, made or declared by the Company or any Subsidiary on or in respect
of any class of its capital stock (as defined below), and (ii) every
payment in connection with the redemption, purchase, retirement or other
acquisition by or on behalf of the Company or any Subsidiary of any
shares of the Company's or a Subsidiary's capital stock (as defined
below), whether or not owned by the Company or any Subsidiary; provided,
however, that the restrictions of the foregoing clauses (i) and (ii)
shall not apply to (a) any dividend, distribution or other payment on or
in respect of capital stock of the Company to the extent payable in
shares of Common Stock of the Company, (b) any payments from the Company
to a wholly-owned Subsidiary, from a Subsidiary to the Company or from a
Subsidiary to a wholly-owned Subsidiary, (c) any repurchase of Common
Stock under stock purchase or option agreements from employees, advisors,
consultants or directors of the Company or otherwise upon termination of
such relationship with the Company (provided, that the aggregate amount
paid pursuant to such repurchases after the Closing Date shall not exceed
$300,000 without the consent of the Majority Shareholders), (d) any
payments, dividends, distributions or other transfers or actions (I) on
or with respect to the Company's Series A Preferred Stock or the shares
of Common Stock issuable upon conversion thereof pursuant to the terms of
the Stock Purchase Agreements or the Certificate of Designations relating
to the Series A Preferred Stock or (II) on or with respect to the Shares
or the Conversion Shares pursuant to terms of the Stock Purchase
Agreements, Stock Exchange Agreements or the Series B Certificate of
Designations and (e) any payments or distributions in respect of the
liquidation and dissolution, or winding up of the business and affairs,
of the Company. For purposes of this definition, "capital stock" shall
also include warrants and other rights and options to acquire shares of
capital stock (whether upon exercise, conversion, exchange or otherwise).
"Rights Expiration Date" means, with respect to any Eligible Holder,
the earlier of (a) the date on which such Eligible Holder owns neither
(i) 100,000 or more Shares nor (ii) Conversion Shares issued on
conversion of a number of Shares at least equal to 100,000 less the
number of any Shares remaining owned by such Eligible Holder, and (b) the
third anniversary of the Closing Date, unless such Eligible Holder then
owns 100,000 or more Shares.
"Rule 144" means (i) Rule 144 under the Securities Act as such Rule
is in effect from time to time and (ii) any successor rule, regulation or
law, as in effect from time to time.
"Rule 144A" means (i) Rule 144A under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"Rule 144 Transaction" means a transfer of Shares or Conversion
Shares (A) complying with Rule 144 as such Rule is in effect on the date
of such transfer (but not including a sale other than pursuant to (i)
"brokers' transactions" as defined in clauses (1) and (2) of paragraph
(g) or (ii) paragraph (k) of such Rule as in effect on the date hereof)
and (B) occurring at a time when Shares (in the case of a transfer of
Shares) or Conversion Shares (in the case of a transfer of Conversion
Shares) are registered pursuant to Section 12 of the Securities Exchange
Act.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules, regulations and interpretations thereunder.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules, regulations and interpretations thereunder.
"Series A Certificate of Designations" has the meaning set forth in
Section 4.2(d) hereof.
"Series A Preferred Stock" has the meaning set forth in Section
4.2(a) hereof.
"Series B Certificate of Designations" has the meaning set forth in
Section l(a) hereof.
"Series B Preferred Stock" means the Company's Series B Convertible
Preferred Stock, par value $0.01 per share, which will be duly authorized
on the Closing Date and which will have the rights, powers and privileges
on the Closing Date as more fully set forth in the Series B Certificate
of Designations.
"Shares" has the meaning set forth in Section l(a) hereof, except
that for purposes of Section 7 and Section 8 hereof and the definition of
"Conversion Shares," the term "Shares" shall include the shares of Series
B Preferred Stock issued upon the exercise of the warrant, dated the date
hereof, granting Alex. ▇▇▇▇▇ & Sons Incorporated (the "Agent") the right
to purchase a specified number of shares of Series B Preferred Stock and
the shares of Series B Preferred Stock issued upon the exchange of the
Series A Preferred Stock pursuant to the Exchange Agreement. In the
event that any Shares are sold either in a public offering pursuant to a
registration statement under Section 6 of the Securities Act or pursuant
to a Rule 144 Transaction, then the transferees of such Shares shall not
be entitled to any benefits under this Agreement with respect to such
Shares and such Shares shall no longer be considered to be ''Shares" for
purposes of Section 8 hereof or any consent or waiver provision or any
other provision of this Agreement.
"Stock Purchase Agreements" has the meaning set forth in Section
l(c) hereof.
"Subsidiary", with respect to any Person, means any corporation,
association or other entity of which more than 50% of the total voting
power of shares of stock or other equity interests (without regard to the
occurrence of any contingency) entitled to vote in the election of
directors, managers or trustees thereof is, at the time as of which any
determination is being made, owned or controlled, directly or indirectly,
by such Person or one or more of its Subsidiaries, or both. The term
"Subsidiary" or "Subsidiaries" when used herein without reference to any
particular Person, means a Subsidiary or Subsidiaries of the Company.
(b) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and
not to any particular Section or other subdivision;
(ii) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles consistently applied (except as otherwise
provided herein);
(iii) all computations provided for herein, if any, shall
be made in accordance with generally accepted accounting
principles consistently applied (except as otherwise expressly
provided herein);
(iv) any uses of the masculine, feminine or neuter gender shall
also be deemed to include any other gender, as appropriate;
(v) all references herein to actions by the Company or any
Subsidiary, such as "create", "sell", "transfer", "dispose of",
etc., mean such action whether voluntary or involuntary, by
operation of law or otherwise;
(vi) the exhibits and schedules to this Agreement shall be
deemed a part of this Agreement;
(vii) each of the representations of the Company contained
in Section 4 hereof is separate and is not limited, qualified
or modified by the existence, wording or satisfaction of any
other representation of the Company in Section 4 or otherwise;
(viii) each of the covenants of the Company contained in
Section 7 hereof or otherwise contained in any Stock Purchase
Agreement or the Series B Certificate of Designations is
separate and is not limited or satisfied by the existence,
wording or satisfaction of any other covenant of the Company in
Section 7 or otherwise; and
(ix) all references herein (in covenants or otherwise) to any
action(s) which are to be taken (or which are prohibited from
being taken) by any Person, the Company or any Subsidiary shall
apply to such Person, the Company or such Subsidiary, as the
case may be, whether such action is taken directly or
indirectly.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows as of the
date hereof and as of the Closing Date:
4.1. Corporate Existence, Power and Authority.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. The Company is
duly qualified, licensed and authorized to do business and is in good standing
in each jurisdiction in which it owns or leases any material property or in
which the conduct of its business requires it to so qualify or be so licensed.
(b) The Company has no Subsidiaries, and does not control, directly
or indirectly, any other entity and does not own of record or beneficially,
directly or indirectly, (i) any shares of capital stock or securities
convertible into capital stock of any other corporation (except for short-term
investments of the Company's cash reserves and publicly-traded mutual funds)
or (ii) any participating interest in any partnership, joint venture or other
non-corporate business enterprise, except for the strategic alliances
described in the Memorandum.
(c) No proceeding has been commenced looking toward the dissolution
or merger of the Company or the amendment of its certificate of incorporation
(other than the Series B Certificate of Designations). The Company is not in
violation in any respect of its certificate of incorporation or bylaws.
(d) The Company has all requisite power, authority (corporate and
other) and legal right to own or to hold under lease and to operate the
properties it owns or holds and to conduct its business as now being conducted
and as proposed to be conducted, except where the failure to have such
requisite power, authority and legal right would not result in a Material
Adverse Effect.
(e) The Company has all requisite power, authority (corporate and
other) and legal right to execute, deliver, enter into, consummate and perform
the Stock Purchase Agreements, including, without limitation, the issuance,
sale and delivery by the Company of the Shares and to issue and deliver the
Conversion Shares issuable upon conversion of the Shares as contemplated
herein and therein and in the Series B Certificate of Designations. The
execution, delivery and performance of the Stock Purchase Agreements by the
Company (including, without limitation, the issuance, sale and delivery by the
Company of the Shares and the issuance and delivery of the Conversion Shares
upon conversion of the Shares as contemplated herein and therein and in the
Series B Certificate of Designations) have been duly authorized by all
required corporate and other actions. As described in the Memorandum, the
Company may not have the ability to pay dividends on the Shares under certain
circumstances. The Company has duly executed and delivered the Stock Purchase
Agreements. The Stock Purchase Agreements constitute the legal, valid and
binding obligations of the Company enforceable in accordance with their
respective terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to the rights of creditors
generally and except that the enforceability of the indemnification provisions
contained in the Stock Purchase Agreements may be subject to considerations of
public policy.
4.2. Stock.
(a) The authorized capital stock of the Company consists of (i)
30,000,000 shares of Common Stock, par value $0.01 per share, and (ii)
5,000,000 shares of Preferred Stock, par value $0.01 per share, issuable in
one or more series, of which, after giving effect to the Series B Certificate
of Designations, (w) 508,800 shares have been designated as Series A
Convertible Preferred Stock ("Series A Preferred Stock"), (x) 904,000 shares
have been designated as Series B Preferred Stock, (y) 300,000 shares have been
designated as Series One Junior Participating Preferred Stock and (z)
3,287,200 shares are Undesignated Preferred Stock. On the Closing Date and
before giving effect to the exchange of any shares of Series A Preferred Stock
into shares of Series B Preferred Stock: (A) 11,505,395 shares of the
Company's Common Stock, par value $0.01 per share, will be issued and
outstanding (plus any shares of Common Stock issued after February 13, 1997
pursuant to stock options in effect on such date), (B) 480,000 shares of
Series A Preferred Stock will be issued and outstanding and (C) up to 280,000
Shares of the Series B Preferred Stock will be outstanding. The number of
shares of Series A Preferred Stock will be reduced and the number of shares of
Series B Preferred Stock will be increased on a one-for-one basis to the
extent that shares of Series A Preferred Stock are exchanged for shares of
Series B Preferred Stock in the Exchange Offer. All of such outstanding
shares will be duly authorized, validly issued and outstanding, fully paid and
non-assessable with no personal liability attaching to the ownership thereof.
The Shares issued and delivered pursuant to this Stock Purchase Agreement will
be free and clear of all liens, charges, restrictions, claims and encumbrances
imposed by or through the Company. The Conversion Shares have been reserved
for issuance upon conversion of the Shares and, when issued in accordance with
the terms of the Shares, will be duly authorized, validly issued, fully paid
and non-assessable. None of the shares of the Company's capital stock
outstanding at Closing (including, without limitation, the Shares issued under
the Stock Purchase Agreements) (i) are subject to preemptive rights or (ii)
provide the holders thereof with any preemptive rights with respect to any
issuances of capital stock. Neither the issuance, sale or delivery of the
Shares nor the issuance or delivery of the Conversion Shares is subject to any
preemptive right of stockholders of the Company or to any right of first
refusal or other right in favor of any person.
(b) The only shares of the Company's Common Stock reserved for
issuance by the Company are as follows (before giving effect to the exchange
of any shares of Series A Preferred Stock into shares of Series B Preferred
Stock): (i) 3,083,636 shares issuable upon conversion of the Series A
Preferred Stock (including the Series A Preferred Stock issuable upon the
exercise of warrants issued to the placement agents in connection with the
offering of the Series A Preferred Stock), (ii) 2,105,862 shares issuable upon
conversion of the Series B Preferred Stock (including the Series B Preferred
Stock issuable upon the exercise of warrants issued to the Agent in connection
with the offering of the Series B Preferred Stock), (iii) 2,030,964 shares
issuable upon exercise of currently outstanding stock options pursuant to the
Company's 1992 Stock Compensation Plan, its Non-Employee Director Stock Option
Plan and director and consultant stock option agreements and (iv) 263,020
shares reserved for issuance pursuant to the 1992 Stock Compensation Plan, the
Non-Employee Director Stock Option Plan and the Company's 1997 Stock Option
Plan with respect to which no options are presently outstanding.
(c) Except as referred to in Section 4.2(b) or in the Company's
Amended and Restated Certificate of Incorporation, there are no outstanding
options, warrants, subscriptions, rights, convertible securities or other
agreements or plans under which the Company may become obligated to issue,
sell or transfer shares of its capital stock or other securities.
(d) The designations, powers, preferences, rights, qualifications,
limitations and restrictions in respect of each class and series of authorized
capital stock of the Company are as set forth in the Amended and Restated
Certificate of Incorporation of the Company and the Certificate of
Designations with respect to the Series A Preferred Stock (the "Series A
Certificate of Designations"), a copy of each of which is attached hereto as
Exhibit B and Exhibit C, respectively, and the Series B Certificate of
Designations.
(e) Except as contemplated by Section 8 hereof or as summarized on
Schedule II hereto, there are no outstanding registration rights with respect
to any capital stock of the Company.
(f) Except as provided in the Series A Certificate of Designations
and the Series B Certificate of Designations, the Company has no obligation
(contingent or other) to purchase, redeem or otherwise acquire any of its
capital stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
(g) The Company has no knowledge of any voting agreements, voting
trusts, stockholders' agreements, proxies or other agreements or
understandings that are currently in effect or that are currently contemplated
with respect to the voting of any capital stock of the Company.
(h) There are no anti-dilution protections or other adjustment
provisions in existence with respect to any capital stock of the Company or
any capital stock referred to in Section 4.2(b) or 4.2(c) above, except with
respect to the Shares and except as provided in the Amended and Restated
Certificate of Incorporation of the Company, the Series A Certificate of
Designations and for standard provisions in option agreements under the
Company's plans for employees, directors, consultants and advisors and in the
warrants and warrant agreements issued by the Company and described in (b)
above.
(i) All of the outstanding securities of the Company were issued in
compliance with all applicable federal and state securities laws.
(j) The Series B Certificate of Designations has been duly adopted
by the Company and is fully effective. The Series B Certificate of
Designations accurately describes all of the rights, priorities and terms of
the Shares.
4.3. Business.
The Company is engaged in the business of developing and commercializing
innovative biotechnology-based processes for the petroleum refining and
production industries. The Company does not currently engage in, or have any
intention of engaging in, any other business other than that which is
described in the Memorandum.
4.4. No Defaults or Conflicts.
(a) The Company is not in violation or default in any material
respect under any indenture, agreement or instrument to which it is a party or
by which it or its properties may be bound. The Company is not in violation
of or default in any material respect under any law, rule, regulation, order,
writ, injunction, judgment, decree, award or other action of any court or
governmental authority or arbitrator(s). The Company is not in violation of
its certificate of incorporation or bylaws.
(b) The execution, delivery and performance by the Company of the
Stock Purchase Agreements and any of the transactions contemplated hereby or
thereby (including, without limitation, the issuance of the Shares and the
Conversion Shares as contemplated herein and therein and in the Series B
Certificate of Designations and the adoption of the Series B Certificate of
Designations) does not and will not (i) violate or conflict with, with or
without the giving of notice or the passage of time or both, any provision of
(A) the certificate of incorporation or bylaws of the Company or (B) any law,
rule, regulation or order of any federal, state, county, municipal or other
governmental authority, or any judgment, writ, injunction, decree, award or
other action of any court or governmental authority or arbitrator(s), or any
agreement, indenture or other instrument applicable to the Company or any of
its properties, except in the case of this clause (B) for such violations or
conflicts that will not individually or in the aggregate have a Material
Adverse Effect, (ii) result in the creation of any Lien upon any of the
Company's properties, assets or revenues, (iii) require the consent, waiver,
approval, order or authorization of, or declaration, registration,
qualification or filing with, any Person (whether or not a governmental
authority and including, without limitation, any shareholder approval) except
for required securities law filings and board of director approvals, certain
approvals of the holders of Series A Preferred Stock and certain registration
rights modifications, which board of director and Series A Preferred
Stockholder approvals and registration rights modifications have been obtained
or (iv) cause anti-dilution clauses of any outstanding securities to become
operative except with respect to the Series A Preferred Stock pursuant to the
Series A Certificate of Designations or give rise to any preemptive rights.
No provision referred to in the preceding clause (i) materially adversely
affects or reasonably may be expected to materially adversely affect the
continued conduct of the Company's business as described in the Memorandum or
the ability of the Company to perform its obligations under the Stock Purchase
Agreements, the Series B Certificate of Designations or any of the
transactions contemplated hereby or thereby.
4.5. Disclosure Materials: Other Information.
(a) The Company has previously furnished to the Purchaser the
Confidential Offering Memorandum dated October 21, 1996 of the Company (Alex.
▇▇▇▇▇ & Sons Incorporated as exclusive agent), as updated by the Confidential
Offering Memorandum dated January 10, 1997, the Memorandum and the documents
incorporated therein (the "Disclosure Material"). The audited and unaudited
financial statements referred to or contained in the Disclosure Material
fairly present the financial condition of the Company as of the respective
dates thereof and the results of the operations of the Company for such
periods and have been prepared in accordance with generally accepted
accounting principles consistently applied, except that any such unaudited
statements may omit notes and may be subject to normal year-end adjustments.
(b) Since December 31, 1995, (i) the business of the Company has
been conducted in the ordinary course and (ii) there has been no material
adverse change in the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company that has not been described in the Disclosure Material. As of the
Closing Date and as of the date hereof, there are no material liabilities of
the Company which would be required to be provided for in a balance sheet of
the Company as of either such date prepared in accordance with generally
accepted accounting principles consistently applied, other than liabilities
provided for in the financial statements referred to in Section 4.5(a) above.
Since December 31, 1995, no amount or property has directly or indirectly been
declared, ordered, paid, made or set aside for any Restricted Payment nor has
any such action been agreed to.
(c) The Company is not aware of any material liabilities, contingent
or otherwise, of the Company that have not been disclosed in the financial
statements (including the notes thereto) referred to in Section 4.5(a) above
or otherwise disclosed in the Disclosure Material.
(d) Nothing has come to the attention of the Company that would
cause it to believe that any of the Disclosure Material contained or contains
a false or misleading statement of a material fact or omits to state any
material fact necessary in order to make the statements made in such material,
in light of the circumstances under which they were made, not misleading.
(e) There is no fact known to the Company which is not in the
Disclosure Material and which materially and adversely affects, or would
reasonably be expected to materially and adversely affect, the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company.
4.6. Litigation.
There is no action, suit, proceeding, investigation or claim pending
against the Company or, to the knowledge of the Company, threatened against
the Company in law, equity or otherwise before any federal, state, municipal
or local court, administrative agency, commission, board, bureau,
instrumentality or arbitrator which either (i) questions the validity of the
Stock Purchase Agreements, the Series B Certificate of Designations, the
Shares or the Conversion Shares or any action taken or to be taken pursuant
hereto or thereto, or (ii) might adversely affect the right, title or interest
of any Purchaser to the Shares or the Conversion Shares or (iii) might result
in a material adverse change in the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or
prospects of the Company. The Company has not received any opinion or
memorandum or legal advice from legal counsel to the effect that it is
exposed, from a legal standpoint, to any liability or disadvantage which may
be material to its assets, properties, liabilities, business, affairs, results
of operations, condition (financial or otherwise) or prospects. There is no
action or suit by the Company pending or threatened against others.
4.7. Taxes.
The Company has filed all federal, state, local and other tax returns
and reports (except for foreign returns and reports the failure to file which
will not result in any material liability to the Company), and any other
material returns and reports with any governmental authorities (federal, state
or local), required to be filed by it. The Company has paid or caused to be
paid all taxes (including interest and penalties) that are due and payable,
except those which are being contested by it in good faith by appropriate
proceedings and in respect of which adequate reserves are being maintained on
its books in accordance with generally accepted accounting principles
consistently applied. The Company does not have any material liabilities for
taxes other than those incurred in the ordinary course of business and in
respect of which adequate reserves are being maintained by it in accordance
with generally accepted accounting principles consistently applied. Federal
and state income tax returns for the Company have not been audited by the
Internal Revenue Service or state authorities. No deficiency assessment with
respect to or proposed adjustment of the Company's federal, state, local or
other tax returns is pending or, to the best of the Company's knowledge,
threatened. There is no tax lien, whether imposed by any federal, state,
local or other tax authority outstanding against the assets, properties or
business of the Company. There are no applicable taxes, fees or other
governmental charges payable by the Company in connection with the execution
and delivery of the Stock Purchase Agreements or the issuance by the Company
of the Shares or the Conversion Shares, except for governmental fees paid in
connection with securities law filings.
4.8. Employees; ERISA.
The Company has good relationships with its employees and has not had
and does not expect to have any substantial labor problems. The Company does
not have any knowledge as to any intentions of any key employee or any group
of employees to leave the employ of the Company. Each of the officers of the
Company, each key employee and each other employee now employed by the Company
who has access to proprietary business information of the Company has executed
a confidentiality and non-disclosure agreement and such agreements are in full
force and effect. Other than the Company's Simplified Employee Pension Plan
adopted in April 1992, the Company has not established, sponsored, maintained,
made any contributions to or been obligated by law to establish, maintain,
sponsor or make any contributions to any "employee pension benefit plan" or
"employee welfare benefit plan" (as such terms are defined in ERISA),
including, without limitation, any "multi-employer plan". The Company has
complied in all material respects with all applicable laws relating to the
employment of labor, including provisions relating to wages, hours, equal
opportunity, collective bargaining and the payment of Social Security and
other taxes, and with ERISA.
4.9. Legal Compliance.
(a) The Company has complied with all applicable laws, rules,
regulations, orders, licenses, judgments, writs, injunctions, decrees or
demands, except to the extent that failure to comply would not materially
adversely affect the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company. The Company has all necessary permits, licenses and other
authorizations required to conduct its business as currently conducted, and as
proposed to be conducted, in all material respects.
(b) There are no adverse orders, judgments, writs, injunctions,
decrees or demands of any court or administrative body, domestic or foreign,
or of any other governmental agency or instrumentality, domestic or foreign,
outstanding against the Company.
(c) There is no existing law, rule, regulation or order, and the
Company is not aware of any proposed law, rule, regulation or order, which
would prohibit or materially restrict the Company from, or otherwise
materially adversely affect the Company in, conducting its business as now
being conducted and as proposed to be conducted.
4.10. Permits, Licenses and Approvals.
The Company owns or possesses and holds free from restrictions or
conflicts with the rights of others all franchises, licenses, permits,
consents, approvals and other authority (governmental or otherwise), and all
rights and privileges with respect to the foregoing, as are necessary for the
conduct of its business as now being conducted, and as proposed to be
conducted, except where the failure to own or possess and hold such
franchises, licenses, permits, consents, approvals and other authority
(governmental or otherwise) would not have a Material Adverse Effect, and none
is in default in any material respects under any of such franchises, licenses,
permits, consents, approvals or other authority.
4.11. Patents, Trademarks and Other Rights.
The Company has sufficient trademarks, trade names, service marks,
patent rights, copyrights, manufacturing processes, formulae, applications,
trade secrets, know how, licenses, approvals and governmental authorizations
(or rights thereto)(collectively, the "Intellectual Property") to conduct its
business as now conducted and the Company believes that it will be able to
obtain such Intellectual Property as will be necessary to conduct its business
as proposed to be conducted except in either case where the absence of such
Intellectual Property would not have a Material Adverse Effect. No claim is
pending or, to the Company's knowledge, threatened to the effect that any such
Intellectual Property owned or licensed by the Company, or which the Company
otherwise has the right to use, is invalid or unenforceable by the Company,
and, to the best of the Company's knowledge, there is no basis for any such
claim (whether or not pending or threatened). To the best of the Company's
knowledge, all proprietary technology developed by or belonging to the Company
and material to its business which has not been patented has been kept
confidential by the Company, its employees and agents. The Company has no
knowledge of any infringement by it of any Intellectual Property or other
similar rights of others, and there is no claim being made or, to the
Company's knowledge, threatened against the Company regarding infringement by
the Company on such Intellectual Property of others which could reasonably be
expected to have a Material Adverse Effect and, to the Company's knowledge,
there is no basis for any such claim (whether or not pending or threatened).
4.12. Status Under Certain Statutes.
The Company is not: (i) a "public utility company" or a "holding
company", or an "affiliate" or a "subsidiary company" of a "holding company",
or an "affiliate" of such a "subsidiary company", as such terms are defined in
the Public Utility Holding Company Act of 1935, as amended, (ii) a "public
utility" as defined in the Federal Power Act, as amended, or (iii) an
"investment company" or an "affiliated person" thereof or an "affiliated
person" of any such "affiliated person", as such terms are defined in the
Investment Company Act of 1940, as amended .
4.13. Title to Properties; Leasehold Interests.
The Company has good and marketable title to each of the properties
and assets owned by it. The Company does not own any real property. Certain
real property used by the Company in the conduct of its business is held under
lease, and the Company is not aware of any pending or threatened claim or
action by any lessor of any such property to terminate any such lease. None
of the properties owned or leased by the Company is subject to any Liens which
could reasonably be expected to materially and adversely affect the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company. Each lease or agreement
to which the Company is a party under which it is the lessee of any property,
real or personal, is a valid and subsisting agreement without any material
default of the Company thereunder and, to the best of the Company's knowledge,
without any material default thereunder of any other party thereto. No event
has occurred and is continuing which, with due notice or lapse of time or
both, would constitute a default or event of default by the Company under any
such lease or agreement or, to the best of the Company's knowledge, by any
party thereto, except for such defaults that would not individually or in the
aggregate have a Material Adverse Effect. The Company's possession of such
property has not been disturbed and, to the best of the Company's knowledge,
no claim has been asserted against it adverse to its rights in such leasehold
interests.
4.14. Environmental Compliance.
(a) There is no Hazardous Material about or in, any property, real
or personal, in which the Company has any interest, in violation of law in a
manner which could reasonably be expected to materially and adversely affect
the assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company.
(b) There is no (and has not been any) off-site disposal or on-site
disposal at any locations currently or formerly owned or occupied by the
Company as a result of which disposal there would exist a reasonably
foreseeable risk that the Company would incur a material liability or
obligation under federal, state or local environmental or other laws,
regulations or ordinances.
(c) Neither the Company nor, to the best of the knowledge of the
Company, any prior or present owner, operator, tenant, subtenant or invitee of
any of the real property (including improvements) currently or formerly owned
or occupied by the Company has (i) used, installed, stored, spilled, released,
transported, disposed of or discharged any Hazardous Material upon, into,
beneath, from or affecting such real property (including improvements) in
violation of law in a manner which could reasonably be expected to materially
and adversely affect the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company, or (ii) received any verbal or written notice, citation, subpoena,
summons, complaint or other correspondence or communication from any Person
(not previously satisfactorily resolved) with respect to the presence of
Hazardous Material upon, into, beneath, or emanating from or affecting any of
the real property (including improvements) currently or formerly owned or
occupied by the Company which could materially and adversely affect the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company.
(d) There has been no intentional or unintentional, gradual or
sudden, release, disposal or discharge upon, into or beneath the real property
(including improvements) currently or formerly owned or occupied by the
Company by the Company or, to the best of the knowledge of the Company, by any
prior owner, operator, tenant, subtenant or invitee with respect thereto, that
has caused or is causing soil or ground water contamination which under
applicable environmental laws, regulations or ordinances could require
investigation or remediation or could otherwise create a material liability or
obligation on the part of the Company.
4.15. Disaster.
Neither the business nor the properties of the Company is currently
affected (or has been affected at any time since December 31, 1995) by any
fire, explosion, accident, strike, lockout or other dispute, drought, storm,
hail, earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), of a kind which (individually or in the
aggregate) has materially adversely affected, or could reasonably be expected
to materially adversely affect, the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or
prospects of the Company.
4.16. No Burdensome Agreements; Transactions with Affiliates.
Except as disclosed in the Disclosure Material, the Company is not
a party to, or bound by (nor is any of its properties affected by), any
commitment, contract or agreement, any term of which materially adversely
affects, or which the Company expects in the future to materially adversely
affect, the assets, properties, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company. Except as
disclosed in the Disclosure Material, the Company is not a party to any
contract or agreement with any Affiliate of the Company. The terms of any
contracts or agreements between the Company and any of its Affiliates are no
less favorable to the Company than those which might have been obtained, at
the time such contract or agreement was entered into, from a person who was
not such an Affiliate.
4.17. Other Names.
The business previously or presently conducted by the Company has not
been conducted under any corporate, trade or fictitious name other than
"Energy Biosystems Corporation" and "Environmental BioScience Corporation",
which was the name of the Company until it was so changed in March 1992.
4.18. Offering of the Shares.
Neither the Company nor, to the knowledge of the Company, any person
authorized or employed by the Company as agent, broker, dealer or otherwise
acting on its behalf, directly or indirectly, (i) offered any of the Shares or
any similar security of the Company (A) by any form of general solicitation or
general advertising (within the meaning of Regulation D under the Securities
Act) or (B) for sale to or solicited offers to buy any thereof from, or
otherwise approached or negotiated with respect thereto with, any person which
the Company did not reasonably believe was an "accredited investor" within the
meaning of Regulation D under the Securities Act or (ii) has done or caused to
be done (or has omitted to do or to cause to be done) any act, which act (or
which omission) would result in bringing the issuance or sale of the Shares
within the provisions of Section 5 of the Securities Act or the filing,
notification or reporting provisions of any state securities laws, except for
filings, notices or reports pursuant to state securities laws which have
already been made or which are contemplated in connection with the offering
and sale of the Shares.
4.19. No Foreign Assets Control Regulation Violation.
The transactions contemplated by this Agreement will not result in
a violation of any of the foreign assets control regulations of the United
States Treasury Department, 31 C.F.R., Subtitle B, Chapter V, as amended
(including, without limitation, the Foreign Assets Control Regulations, the
Transaction Control Regulations, the Cuban Assets Control Regulations, the
Foreign Funds Control Regulations, the Iranian Assets Control Regulations, the
Nicaraguan Trade Control Regulations, the South African Transactions
Regulations, the Libyan Sanctions Regulations, the Soviet Gold Coin
Regulations, the Panamanian Transactions Regulations, the Kuwaiti Assets
Control Regulations and the Iraqi Sanctions Regulations contained in said
Chapter V), or any ruling issued thereunder or any enabling legislation or
other Presidential Executive Order granting authority therefor, and the
proceeds of the sale of the Shares will not be used by the Company in a manner
which would violate any such regulations.
4.20. Indebtedness.
Schedule II hereto sets forth (i) the amount of all Indebtedness of
the Company outstanding on the Closing Date (excluding Indebtedness in
individual amounts of less than $35,000, but not exceeding an aggregate
excluded amount of $75,000), (ii) any Lien with respect to such Indebtedness
and (iii) a brief description of each instrument or agreement governing such
Indebtedness. The Company has made available to the Purchaser a complete and
correct copy of each such instrument or agreement (including all amendments,
supplements or modifications thereto). No default exists with respect to or
under any such Indebtedness or any instrument or agreement relating thereto.
4.21. Proprietary Information of Third Parties.
No third party has claimed or, to the best of the Company's
knowledge, has reason to claim that any person now or previously employed or
engaged as a consultant by the Company has (a) violated or, to the Company's
knowledge, may be violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such third party, (b)
disclosed or, to the best of the Company's knowledge, may be disclosing or
utilized or, to the best of the Company's knowledge, may be utilizing any
trade secret or proprietary information of documentation of such third party
or violated any confidential relationship which such person may have had with
such third party in connection with the business of the Company or (c)
interfered or may be interfering in the employment relationship between such
third party and any of its present or former employees. No third party has
requested information from the Company which reasonably suggests that such a
claim might be contemplated. To the best of the Company's knowledge, none of
the execution or delivery of the Stock Purchase Agreements, or the carrying on
the business of the Company as officers, employees or agents by any officer,
director or key employee of the Company, or the conduct or proposed conduct of
the business of the Company, will conflict with or result in a breach of the
terms, conditions or provisions of or constitute a default under any contract,
covenant or instrument under which any such individual is obligated.
4.22 Insurance.
The Company holds valid policies covering insurance in the amounts
and type that the Company reasonably believes is appropriate and customary for
companies in the same or similar businesses to that of the Company or
otherwise required to be maintained by it.
4.23 Material Contracts and Agreements.
With respect to all material contracts, agreements, indentures or
instruments not otherwise specifically referred to herein, the Company and, to
the best of the Company's knowledge, each other party thereto have in all
material respects performed all the obligations required to be performed by
them to date, have received no notice of default and are not in default, in
any material respect, (with due notice or lapse of time or both) under any
material contract, agreement, indenture or other instrument now in effect to
which the Company is a party or by which it or its property may be bound. The
Company has no present expectation or intention of not fully performing all
its obligations under each such material contract, agreement, indenture or
other instrument and the Company has no knowledge of any breach and has
received no written notice of any anticipated breach by the other party to any
material contract or commitment which the Company is a party.
4.24. Governmental Approvals.
Subject to the accuracy of the representations and warranties of the
Purchaser set forth in Section 5 hereof, no registration or filing with, or
consent or approval of or other action by, any federal, state or other
governmental agency or instrumentality is or will be necessary for the valid
execution, delivery and performance by the Company of this Stock Purchase
Agreement, the issuance, sale and delivery of the Shares to the Purchaser or,
upon conversion thereof, the issuance and delivery of the Conversion Shares,
other than filings pursuant to federal and state securities laws (all of which
filings have been or, with respect to those filings which may be duly made
after the Closing will be, made by or on behalf of the Company) in connection
with the sale of the Shares.
4.25. Brokers.
Except with respect to Alex. ▇▇▇▇▇ & Sons Incorporated, which acted
as the exclusive agent on behalf of the Company, the Company has no contract,
arrangement or understanding with any broker, finder or similar agent with
respect to the transactions contemplated by this Agreement.
4.26. Disclosure.
The Disclosure Material, as of its date, does not contain an untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. All of the statements contained in this Stock
Purchase Agreement, including any Schedule or Exhibit hereto, and contained in
any document, certificate or other items prepared or supplied by the Company
directly to the Purchaser with respect to the transactions contemplated hereby
are accurate in all material respects. There is no fact which the Company has
not disclosed to the Purchaser in writing and of which the Company is aware
which materially and adversely affects or could reasonably be expected to
materially and adversely affect the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or
prospects of the Company.
SECTION 5. REPRESENTATIONS OF THE PURCHASER
The Purchaser hereby makes the representations and warranties to the
Company contained in this Section 5.
(a) The Purchaser has all requisite power, authority and legal right
to execute, deliver, enter into, consummate and perform this Agreement. The
execution, delivery and performance of this Agreement by the Purchaser have
been duly authorized by all required corporate, partnership or other actions
on the part of the Purchaser. The Purchaser has duly executed and delivered
this Agreement, and this Agreement constitutes the legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance
with its terms, subject to bankruptcy, insolvency, reorganization, moratorium
and other similar laws relating to the rights of creditors generally.
(b) The Purchaser hereby represents to the Company that it has
substantial knowledge, skill and experience in making investment decisions of
this type, it is capable of evaluating the risk of its investment in the
Shares being purchased by it and is able to bear the economic risk of such
investment, including the risk of losing the entire investment, that (except
as the Purchaser has otherwise advised the Company and the Purchaser's counsel
in writing) it is purchasing the Shares to be purchased by it for its own
account, and that the Shares are being purchased by it for investment and not
with a present view to any distribution thereof in violation of applicable
securities laws. It is understood that the disposition of the Purchaser's
property shall at all times be within the Purchaser's control. If the
Purchaser should in the future decide to dispose of any of its Shares, it is
understood that it may do so only in compliance with the Securities Act,
applicable state securities laws and this Agreement. The Purchaser represents
that it is an "accredited investor" as defined in Rule 501(a) under the
Securities Act.
(c) The Purchaser has received and reviewed the Disclosure Material
and it has had an opportunity to fully discuss the Company's business,
management and financial affairs with the Company's management.
(d) The Purchaser understands that (i) the Shares and the Conversion
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) or Section 3(b) thereof or Rule 506
promulgated under the Securities Act, (ii) the Shares and, upon conversion
thereof, the Conversion Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration and (iii) the Shares and the Conversion Shares will bear a
legend to such effect.
(e) The Purchaser represents that at no time was the Purchaser
presented with or solicited by or through any leaflet (other than the
Memorandum), public promotional meeting, advertisement or any other form of
general or public advertising or solicitation. In addition, the Purchaser
acknowledges that there has never been any representation, guaranty or
warranty made by the Company or any agent or representative of the Company as
to the amount of or type of consideration or profit, if any, to be realized as
a result of any investment by the Purchaser in the Preferred Stock.
(f) If the Purchaser is a resident of the State of Florida, he
understands that he has the privilege of voiding the purchase within three (3)
days after the first tender of consideration is made by such Purchaser to the
Company or an agent of the Company.
(g) If the Purchaser is a resident of the Commonwealth of
Pennsylvania, he will not sell his Shares within 12 months from the date of
purchase unless the Shares are registered under the Pennsylvania Securities
Act of 1972 or the Securities Act.
SECTION 6. RESTRICTIONS ON TRANSFER
(a) The Purchaser agrees that it will not sell or otherwise dispose
of any Shares or Conversion Shares unless (i) such Shares or Conversion Shares
have been registered under the Securities Act and, to the extent required,
under any applicable state securities laws, or (ii) such Shares or Conversion
Shares are sold in accordance with the applicable requirements and limitations
of Rule 144 or Rule 144A, or (iii) the Company has been furnished with an
opinion or opinions from counsel to the Purchaser (which counsel and which
opinion(s) shall be reasonably satisfactory to the Company and which counsel
may be inside counsel to the Purchaser) to the effect that registration under
the Securities Act is not required for the transfer as proposed (which opinion
may be conditioned upon the transferee assuming the obligations of a holder of
Shares or Conversion Shares under this Section) or (iv) the Company has been
furnished with a letter from the Division of Corporate Finance of the
Commission to the effect that such Division would not recommend any action to
the Commission if such proposed transfer were effected without a registration
statement effective under the Securities Act. The Company agrees that within
five (5) Business Days after receipt of any opinion referred to in (iii)
above, it will notify the holder supplying such opinion whether such opinion
is satisfactory to the Company.
(b) The Company may endorse on all certificates evidencing Shares
or Conversion Shares a legend stating or referring to the transfer
restrictions contained in paragraph (a) above; provided, that no such legend
shall be endorsed on any certificates which, when issued, are no longer
subject to the restrictions of this Section 6; provided, further, that if a
transfer is made pursuant to clause (i), (ii) (other than pursuant to Rule
144A) or (iv) of paragraph (a) of this Section 6, or if an opinion of counsel
provided pursuant to clause (iii) of paragraph (a) concludes that the legend
is no longer necessary, the Company will deliver upon transfer, certificates
without such legends.
SECTION 7. COVENANTS OF THE COMPANY
The Company covenants and agrees, so long as (i) any Shares are
outstanding or (ii) there are any Eligible Holders, whichever is longer
(unless such other period is expressly provided in any subsections of this
Section 7, in which case such specific period will govern) as follows:
7.1. Use of Proceeds.
The Company will use the proceeds from the sale of the Shares for
purposes described in the section of the Memorandum entitled "Use of
Proceeds." No portion of such proceeds will be used for the purpose, whether
immediate, incidental or ultimate, of purchasing or carrying, within the
meaning of Regulation U of the Board of Governors of the Federal Reserve
System, as amended from time to time, any "margin stock" as defined in said
Regulation U, or any "margin stock" as defined in Regulation G of the Board of
Governors of the Federal Reserve System, as amended from time to time, or for
the purpose of purchasing, carrying or trading in securities within the
meaning of Regulation T of the Board of Governors of the Federal Reserve
System, as amended from time to time, or for the purpose of reducing or
retiring any indebtedness which both (i) was originally incurred to purchase
any such margin stock or other securities and (ii) was directly or indirectly
secured by such margin stock or other securities. None of the assets of the
Company or any Subsidiary includes any such "margin stock", and neither the
Company nor any Subsidiary has any present intention of acquiring any such
"margin stock."
7.2. Financial Information.
(a) The Company will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with generally accepted accounting
principles consistently applied. The Company will deliver the following to
each Eligible Holder during the period through the Rights Expiration Date for
such Eligible Holder (and, in the case of paragraph (v) below, each other
holder of Shares and/or Conversion Shares):
(i) as soon as practicable but not later than ten (10) Business
Days after their issuance, and in any event within ninety (90) days after the
close of each fiscal year of the Company, (A) a consolidated balance sheet of
the Company and its Subsidiaries as of the end of such fiscal year and (B)
consolidated statements of operations, stockholders' equity and cash flows of
the Company and its Subsidiaries for such fiscal year, in each case setting
forth in comparative form the corresponding figures for the preceding fiscal
year, all such balance sheets and statements to be in reasonable detail and
certified by an independent public accounting firm of recognized national
standing selected by the Company, and such statements shall be accompanied by
management analyses of any material differences between the results for such
fiscal year and the corresponding figures for the preceding fiscal year and
between the budgeted figures (as supplied pursuant to paragraph (ii) below)
and the results for such year and a narrative discussion of the Company's
liquidity and capital resources as of the end of such year materially
conforming to the disclosure requirements contained in Item 303 of Regulation
S-K under the Securities Act. The Company's Annual Report on Form 10-K filed,
or to be filed, with the Commission will satisfy the requirements of this
paragraph, except for the requirement of the management analyses regarding the
comparison of the Company's results for such fiscal year to the budgeted
figures (as supplied pursuant to paragraph (ii) below);
(ii) as soon as reasonably practicable, and in any event within
thirty (30) days after the close of the preceding fiscal year of the Company,
a budget for the current fiscal year (or the upcoming fiscal year, as the case
may be) prepared on a quarterly basis regarding the Company's operations and
capital expenditures on a consolidated basis, together with an analysis of
such budget prepared in reasonable detail by the Vice President of Finance or
the President of the Company; and (A) any operating budget of the Company
otherwise prepared and submitted to the Board and (B) any revisions or
amendments made by the Company (and submitted to its Board) to any budget
delivered under this paragraph (ii);
(iii) as soon as reasonably practicable, and in any event
within forty-five (45) days after the close of each of the first three (3)
fiscal quarters of the Company, (A) a consolidated balance sheet of the
Company and its Subsidiaries as of the end of such fiscal quarter and (B)
consolidated statements of operations and cash flows of the Company and its
Subsidiaries for the quarter just ended and for the portion of the fiscal year
ended with the end of such quarter, in each case in reasonable detail,
certified by the Vice President of Finance or the President of the Company and
setting forth in comparative form the corresponding figures for the comparable
period one year prior thereto (subject to normal year-end adjustments) and the
comparable figures included in the budget for such quarter (as delivered or
modified pursuant to paragraph (ii) above), together with management analyses
of any material differences between such results and the corresponding figures
for such prior period and between such results for such quarter and such
budgeted figures. The Company's Quarterly Report on Form 10-Q filed, or to be
filed, with the Commission will satisfy the requirements of this paragraph,
except for the requirement of the management analyses regarding the comparison
of the Company's results for such quarter to the budgeted figures;
(iv) as soon as reasonably practicable, copies of summary
financial information prepared on a quarterly basis regarding the Company on
a consolidated basis as presented to the Board and any other summary financial
information otherwise prepared and provided to the Board;
(v) as soon as reasonably practicable, copies of (A) all
financial statements, proxy material or reports sent by the Company to the
Company's or any Subsidiary's stockholders, (B) any public announcements or
press releases issued by the Company and (C) all reports or registration
statements (excluding registration statements on Form S-8) filed by the
Company with the Commission pursuant to the Securities Act or the Securities
Exchange Act;
(vi) as soon as reasonably practicable and without duplication
of any of the above items, all materials furnished, from time to time, to the
Board of Directors of the Company (including without limitation all
communications and information furnished to the Board of Directors), and
copies of minutes of meetings of the Boards of Directors of the Company;
(vii) as soon as reasonably practicable and without
duplication of any of the above items, any other materials furnished to
holders of the Company's capital stock or any material information furnished
to holders of the Company's indebtedness, including without limitation any
compliance certificates furnished in respect of such indebtedness; and
(viii) as soon as reasonably practicable, such other material
information as may reasonably be requested by a holder of Shares (unless
reasonably objected to by the Company), regarding the assets, properties,
liabilities, business, affairs, results of operations, conditions (financial
or otherwise) or prospects of the Company or any Subsidiary.
All such financial statements shall be prepared in accordance with generally
accepted accounting principles consistently applied (except for any change in
accounting principles specified in the accompanying certificate and except
that any interim financial statements may omit notes and may be subject to
normal year-end adjustments).
(b) Without limiting the foregoing provisions of this Section 7.2,
the Company agrees that, if requested in writing by any Eligible Holder, it
will not deliver to such Eligible Holder (until otherwise instructed by such
Eligible Holder) (x) any non-public information or non-public materials
regarding the Company or any Subsidiary (whether described in this Section 7.2
or otherwise) and (y) any information (whether or not included in clause (x))
which such holder specifies that it does not want to receive. The Company
shall comply with any such request with respect to each such Eligible Holder
and any subsequent holders of Shares or Conversion Shares acquired directly or
indirectly (through one or more transfers) from such Eligible Holder, until
instructed otherwise in writing by the then holder of such Shares or
Conversion Shares.
7.3. Tax Matters.
Unless otherwise required by the Code or applicable state or local
law, the Company agrees that it will not report the accrual of a dividend
under Section 305 of the Code with respect to any redemption premium with
which the Series B Preferred Stock may have been issued, whether on Form 1099
or any other form, to the Internal Revenue Service or any state or local
taxing authority.
7.4. Inspection.
At the request of an Eligible Holder, and without out of pocket
expenses to the Company, the Company will permit such Eligible Holder and any
authorized representative of such holder, subject to (if requested by the
Company) execution by such Eligible Holder of a reasonable confidentiality
agreement, to visit and inspect any of the properties of the Company and its
Subsidiaries, and to discuss with their officers the business, results of
operations, condition (financial or otherwise) or prospects of the Company or
any Subsidiary, at mutually acceptable times.
7.5. Maintenance of Existence; Properties and Franchises; Compliance with
Law; Taxes; Insurance.
The Company will, and will cause each Subsidiary to:
(a) maintain their respective corporate existences, rights and other
franchises in full force and effect, except as may be affected by a
transaction permitted by Section 7.11; provided, that the Company may
terminate the corporate existence of any Subsidiary, or permit the termination
or abandonment of rights or other franchises, if in the opinion of the Company
it is no longer in the Company's best interests to maintain such existence,
rights or other franchises and such termination or abandonment will not be
prejudicial in any material respect to the holders of the Shares;
(b) maintain their respective tangible assets in good repair,
working order and condition so far as necessary or advantageous to the proper
carrying on of their respective businesses;
(c) comply with all applicable laws and with all applicable orders,
rules, rulings, certificates, licenses, regulations, demands, judgments,
writs, injunctions and decrees, provided, that such compliance shall not be
necessary so long as (i) the applicability or validity of any such law, order,
rule, ruling, certificate, license, regulation, demand, judgment, writ,
injunction or decree shall be contested in good faith by appropriate
proceedings and (ii) failure to comply will not have a Material Adverse Effect
on a consolidated basis;
(d) pay promptly when due all taxes, fees, assessments and other
government charges imposed upon their respective properties, assets or income
and all claims or indebtedness (including, without limitation, materialmen's,
vendor's, workmen's and like claims) which might become a lien upon such
properties or assets; provided, that payment of any such tax, fee, assessment,
charge, claim or indebtedness shall not be necessary so long as (i) the
applicability or validity thereof shall be contested in good faith by
appropriate proceedings and a reserve, if appropriate, shall have been
established with respect thereto and (ii) failure to make such payment will
not have a Material Adverse Effect on a consolidated basis; and
(e) keep adequately insured, by financially sound and reputable
insurers of nationally recognized stature, all their respective properties of
a character customarily insured by entities similarly situated, against loss
or damage of the kinds and in amounts customarily insured against by such
entities and with such deductibles or co-insurance as is customary.
7.6. Office for Payment, Exchange and Registration; Location of Office;
Notice of Change of Name or Office.
(a) So long as any of the Shares is outstanding, the Company will
maintain an office or agency where Shares may be presented for payment,
exchange, conversion or registration of transfer as provided in this
Agreement. Such office or agency initially shall be the office of the
Company's transfer agent and shall be the following: KeyCorp Shareholder
Services, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇.
(b) The Company shall give each holder of Shares at least twenty
(20) days' prior written notice of any change in (i) the name of the Company
as then in effect or (ii) the location of the office of the Company required
to be maintained under this Section 7.6.
7.7. Environmental Matters.
(a) The Company and each Subsidiary shall keep any property either
owned or occupied by the Company or any Subsidiary free and clear of any
material Liens imposed for failure to comply with any environmental laws,
regulations or ordinances (each, an "Environmental Lien"), and the Company and
each Subsidiary, as the case may be, shall keep all such property in material
compliance with all environmental laws, regulations and ordinances; provided,
however, that the Company or any Subsidiary shall have the right at its cost
and expense, and acting in good faith, to contest, object or appeal by
appropriate legal proceeding the validity of any Environmental Lien. The
contest, objection or appeal with respect to the validity of an Environmental
Lien shall suspend the Company's obligation to eliminate such Environmental
Lien under this paragraph pending a final determination by appropriate
administrative or judicial authority of the legality, enforceability or status
of such Environmental Lien, provided that the following conditions are
satisfied: (i) contemporaneously with the commencement of such proceedings,
the Company shall give written notice thereof to each holder of Shares or
Conversion Shares; and (ii) if under applicable law any real property or
improvements thereon are subject to sale or forfeiture for failure to satisfy
the Environmental Lien prior to a final determination of the legal
proceedings, the Company or such Subsidiary must successfully move to stay
such sale, forfeiture or foreclosure pending final determination of the
Company's (or Subsidiary's) action; and (iii) the Company or such Subsidiary
must, if requested, furnish to the holders of Shares or Conversion Shares a
good and sufficient bond, surety, letter of credit or other security
satisfactory to such holders equal to the amount (including any interest and
penalty) secured by the Environmental Lien.
(b) The Company will defend, indemnify and hold harmless each
current, former and future holder of Shares or Conversion Shares, its
employees, officers, directors, stockholders, partners, agents,
representatives and assigns, from and against any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits and claims, joint or
several, and any costs, disbursements and expenses (including attorneys' fees
and expenses and costs of investigation) of whatever kind or nature, known or
unknown, contingent or otherwise, arising out of or in any way related to (i)
the presence, disposal, release, removal, discharge, storage or transportation
of any Hazardous Material upon, into, from or affecting any real property
(including improvements) owned or occupied (or formerly owned or occupied) by
the Company or any Subsidiary; and (ii) any judicial or administrative action,
suit or proceeding, actual or threatened, relating to Hazardous Material upon,
in, from or affecting any real property (including improvements) owned or
occupied (or formerly owned or occupied) by the Company or any Subsidiary; and
(iii) any violation of any environmental law, regulation or ordinance by the
Company or any Subsidiary or any of their agents, tenants, subtenants or
invitees; and (iv) the imposition of any Environmental Lien for the recovery
of costs expended in the investigation, study or remediation of any
environmental liability of (or asserted against) the Company or any
Subsidiary, provided, however, that in no case shall such persons be entitled
to indemnification under this Section 7.7(b) for a decrease in the value of
the Shares or the Conversion Shares resulting from or in any way related to
items (i) though (iv) herein, but that the preceding clause shall in no way
limit any indemnification that a Purchaser may otherwise be entitled to under
any other provisions of this Stock Purchase Agreement. This Section 7.7(b)
shall survive any payment, conversion or transfer of Shares and any
termination of this Agreement.
7.8. No Change in Business.
Neither the Company nor any of its Subsidiaries will engage in any
business other than business of the general nature described in the
Memorandum.
7.9. Restrictive Agreements Prohibited.
Neither the Company nor any of its Subsidiaries shall become a party
to any agreement which by its terms restricts the Company's performance of
this Agreement.
7.10. Restricted Payments.
Neither the Company nor any Subsidiary will declare or make or permit
to be declared or made any Restricted Payment.
7.11. Consolidation, Merger and Sale.
Without the consent of the Majority Shareholders, neither the Company
nor any Subsidiary will do any of the following (or agree to do any of the
following) pursuant to a transaction approved by the Board of Directors of the
Company: (a) wind up, liquidate or dissolve its affairs; (b) sell, lease,
transfer or otherwise dispose of all or substantially all of its assets to any
other Person; (c) consolidate with, merge into or enter into a share exchange
with any other Person; or (d) permit any other Person (other than a wholly-
owned Subsidiary on the date hereof) to merge into or sell, lease or transfer
all or substantially all of its property, assets or capital stock to the
Company or any Subsidiary, unless:
(i) in the case of actions under clause (a) or (b) above, a wholly-
owned Subsidiary is wound-up, dissolved and liquidated into another wholly-
owned Subsidiary or into the Company or a wholly-owned Subsidiary sells,
leases, transfers or otherwise disposes of all or substantially all of its
assets to another wholly-owned Subsidiary or to the Company; or
(ii) in the case of actions under clause (c) or (d) above, each of
the following conditions is satisfied:
(A) if such action involves the Company and if such surviving
Person is a corporation other than the Company, all liabilities and
obligations of the Company under the Stock Purchase Agreements shall remain in
effect and shall have been expressly assumed by such surviving Person
(pursuant to a document in form and substance reasonably satisfactory to the
Majority Shareholders and their counsel) as if such surviving Person were the
"Company" hereunder and thereunder; and
(B) either (x) the Common Stock of such transferee Person into
which the Series B Preferred Stock will thereafter be convertible (or American
Depositary Receipts with respect thereto) is listed on a national securities
exchange in the United States or traded on The Nasdaq Stock Market, or (y) all
of the Series B Preferred Stock is concurrently redeemed for cash in
accordance with Section 5 of the Series B Certificate of Designations.
7.12. Transactions with Affiliates.
The Company will not, and will not permit any Subsidiary to, directly
or indirectly, enter into any transaction or agreement (including, without
limitation, the purchase, sale, distribution, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company or
of any Subsidiary, other than a wholly-owned Subsidiary of the Company, unless
such transaction or agreement (a) is approved by disinterested members of the
Board of Directors of the Company, and (b) is on terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than those
which might be obtained at the time of such transaction from a Person who is
not such an Affiliate; provided, however, that this Section 7.12 shall not
limit, or be applicable to, (i) employment arrangements with any individual
who is an employee of the Company or any Subsidiary if such arrangements are
approved by the Board; and (ii) the payment of reasonable and customary
regular fees to directors who are not employees of the Company.
7.13. Observer Rights.
Each of the Eligible Holders shall have the right, during the period
through the Rights Expiration Date for such Eligible Holder, and (if requested
by the Company) subject to execution by such observer of a reasonable
confidentiality agreement, to send one (1) representative to meetings of the
Company's and each Subsidiary's Board of Directors (and the executive
committee if the executive committee has more than five members) of such
Boards, such representatives to act as observers without a vote or other
rights as a director (except the right to receive sufficient notice to enable
such attendance and the right to receive all other communications, information
and materials furnished, from time to time, to directors of the Company and
each Subsidiary). Any representative acting under this Section 7.13 shall be
chosen from the list of Persons provided to the Company concurrently with
execution of this Agreement (or another individual selected by such holders
and reasonably acceptable to the Company).
7.14. No Dilution or Impairment; No Changes in Capital Stock.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer
of assets, dissolution, issue or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the
terms of the Stock Purchase Agreements or the Series B Certificate of
Designations. The Company will at all times in good faith assist in the
carrying out of all such terms, and in the taking of all such action, as may
be necessary or appropriate in order to protect the rights of the holders of
Shares (as such rights are set forth in the Stock Purchase Agreements and the
Series B Certificate of Designations) against impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value or
the determined or stated value of any shares of the Company's Common Stock
receivable upon the conversion of the Shares to exceed the amount payable
therefor upon such conversion, (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable shares of the Company's Common Stock free
from all taxes, Liens and charges with respect to the issue thereof, upon the
conversion of the Shares from time to time outstanding, (c) will not take any
action which results in any adjustment of the Conversion Price under the
Series B Certificate of Designations if the total number of shares of the
Company's Common Stock (or other securities) issuable after the action upon
the conversion of all of the then outstanding Shares would exceed the total
number of shares of the Company's Common Stock (or other securities) then
authorized by the Company's certificate of incorporation and available for the
purpose of issuance upon such conversion, (d) will not have any authorized
Common Stock other than its existing authorized Common Stock, (e) will not
amend its certificate of incorporation to change any terms of its Common
Stock, (f) will not amend its certificate of incorporation in any manner to
alter or change the powers, privileges or preferences of the holders of the
Series B Preferred Stock (including without limitation changing the Series B
Certificate of Designations after any Shares have been called for redemption),
(g) will not create or authorize the creation of any additional class or
series of shares of capital stock unless the same ranks junior to the Series
B Preferred Stock as to the payment of dividends or the distribution of assets
on the liquidation, dissolution or winding up of the Company, or increase the
authorized amount of the Series B Preferred Stock, or increase the authorized
amount of any additional class or series of shares of stock unless the same
ranks junior to the Series B Preferred Stock as to the payment of dividends or
the distribution of assets on the liquidation, dissolution or winding up of
the Company, or create or authorize any obligation or security convertible
into shares of Series B Preferred Stock or into shares of any other class or
series of stock unless the same ranks junior to the Series B Preferred Stock
as to the payment of dividends or the distribution of assets on the
liquidation, dissolution or winding up of the Company, whether any such
creation, authorization or increase shall be by means of amendment to the
certificate of incorporation or by merger, consolidation or otherwise and (h)
after the date hereof, will not create or establish (or make any grants or
awards under) any phantom stock, stock appreciation rights or other equity
equivalent plan for employees, officers, directors, agents or consultants of
the Company (unless such plans in the aggregate relate to the equivalent of
less than 5% of the Common Stock of the Company) whereby the Company or any
Subsidiary agrees to pay any Person a percentage of, or an amount otherwise
determined by reference to, the earnings of the Company or any Subsidiary, the
value of their stock or the proceeds from a sale of their stock or upon their
liquidation.
7.15. Reservation of Shares.
There have been reserved, and the Company shall at all times keep
reserved, free from preemptive rights, out of its authorized Common Stock, a
number of shares of Common Stock sufficient to provide for the exercise of the
conversion rights of the Shares provided in the Series B Certificate of
Designations. If at any time the number of authorized but unissued shares of
Common Stock of the Company shall not be sufficient to effect the conversion
of the Shares or otherwise to comply with the terms of this Agreement, the
Company will forthwith take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose. The Company will obtain any
authorization, consent, approval or other action by or make any filing with
any court or administrative body that may be required under applicable state
securities laws in connection with the issuance of the Common Stock upon
conversion of the Shares.
7.16. Listing of Shares.
If any shares of the Company's Common Stock or Series B Preferred
Stock are listed on any national securities exchange (or on The Nasdaq Stock
Market or comparable system), then the Company will take such action as may be
necessary, from time to time, to list the Conversion Shares or the Shares, as
the case may be, on such exchange (or system as the case may be). The Company
shall have no obligation to list the Shares if the Series B Preferred Stock is
not so listed.
7.17. Securities Exchange Act Registration.
(a) The Company will maintain effective a registration statement
(containing such information and documents as the Commission shall specify and
otherwise complying with the Securities Exchange Act) under Section 12(b) or
Section 12(g), whichever is applicable, of the Securities Exchange Act, with
respect to the Company's Common Stock, and will file on time such information,
documents and reports as the Commission may require or prescribe for companies
whose stock has been registered pursuant to such Section 12(b) or Section
12(g), whichever is applicable.
(b) The Company will, upon the request of any holder of Shares or
Conversion Shares, make whatever other filings with the Commission, or
otherwise make generally available to the public such financial and other
information, as any such holder may deem reasonably necessary or desirable in
order to enable such holder to be permitted (i) to sell Conversion Shares
pursuant to the provisions of Rule 144 and (ii) after the Company has filed a
registration statement with respect to Series B Preferred Stock under Section
6 of the Securities Act or Section 12(b) or 12(g) of the Securities Exchange
Act, to sell Shares pursuant to the provisions of Rule 144.
7.18. Maintenance of Public Market.
Except as contemplated by Section 7.11, the Company will not (i)
proceed with a program of acquisition of its own Common Stock or of Series B
Preferred Stock (other than by redemption in accordance with the Series B
Certificate of Designations), (ii) initiate a corporate reorganization or
recapitalization or undertake a consolidation or merger or (iii) authorize,
consent to or take any action without the consent of the Eligible Holders,
which would have the effect of:
(a) removing the Company from registration with the Commission
under the Securities Exchange Act with respect to the Company's Common Stock,
(b) requiring the Company to make a filing under Section 13(e)
of the Securities Exchange Act,
(c) reducing substantially or eliminating the public market for
shares of Common Stock of the Company,
(d) if any shares of the Company's Common Stock or Series B
Preferred Stock are at any time listed on The Nasdaq Stock Market, causing a
delisting of the Company's Common Stock or Series B Preferred Stock, as the
case may be, from such systems (unless such stock is delisted as a result of
being listed on a national securities exchange), or
(e) if any shares of the Company's Common Stock or Series B
Preferred Stock are at any time listed on a national securities exchange,
causing a delisting of such stock from such exchange.
7.19. Private Placement Status.
Neither the Company nor any agent nor other Person acting on the
Company's behalf will do or cause to be done (or will omit to do or to cause
to be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares or the Conversion Shares within the provisions
of Section 5 of the Securities Act or the filing, notification or reporting
requirements of any state securities law (other than in accordance with a
registration and qualification of Conversion Shares pursuant to Section 7.17
hereof), except for filings, notices or reports pursuant to state securities
laws which have already been made or which are contemplated in connection with
the offering and sale of the Shares.
7.20. Delivery of Information.
If a holder of Shares or Conversion Shares proposes to transfer any
such Shares or Conversion Shares pursuant to Rule 144A, the Company agrees to
provide (upon the request of such holder or the prospective transferee) to
such holder and (if requested) to the prospective transferee any information
concerning the Company and its Subsidiaries which is required to be delivered
to any transferee of such Shares or Conversion Shares pursuant to such Rule
144A.
7.21. Notices.
The Company will give to all holders of Shares or Conversion Shares
copies of all notices given by the Company to holders of its Common Stock
concurrently with the giving of such notices to such holders of Common Stock.
7.22 No Dividends in Common Stock Unless Registered.
The Company will not declare and cause to be paid dividends on the
Shares in shares of Common Stock until a registration statement covering the
resale of such Common Stock has been filed with the Commission and has been
declared effective thereby.
SECTION 8. REGISTRATION RIGHTS
8.1. Registration of the Shares.
(a) The holders of at least an aggregate of 100,000 Shares may
request the Company to register under the Securities Act the resale of all or
any portion of such Shares, but in no event less than 60,000 Shares, held by
such requesting holder or holders for sale in the manner specified in such
notice.
(b) Following receipt of any notice under this Section 8.1, the
Company shall immediately notify all holders of the Shares from whom notice
has not been received and shall commit to register under the Securities Act,
for public sale in accordance with the method of disposition specified in such
notice from requesting holders, the number of Shares specified in such notice
(and in all notices received by the Company from other holders within 30 days
after the giving of such notice by the Company). All such holders who submit
requests to the Company pursuant to this Section 8.1 shall be referred to
individually as a "Requesting Holder" and collectively as "Requesting
Holders." If the Requesting Holders may elect to have the Shares sold to one
or more persons participating as underwriters ("Underwriters") for an offering
of Shares to the public (an offering of any shares of capital stock of the
Company by means of Underwriters to the public shall be referred to as an
"Underwritten Offering"), the holders of a majority of the Shares to be sold
in such offering may designate the managing Underwriter of such offering,
subject to approval of the Company, which approval will not be unreasonably
withheld or delayed. The Company shall be obligated to register the Shares
pursuant to this Section 8.1 on two occasions only, provided, however, that
such obligation shall be deemed satisfied only when a registration statement
covering at least 60% of the total Shares specified in notices received as
aforesaid, for sale in accordance with the method of disposition specified by
the Requesting Holders, shall have become effective and, if such method of
disposition is an Underwritten Offering, all such shares shall have been sold
pursuant thereto.
(c) Except for registration statements on Form ▇-▇, ▇-▇ or any
successor thereto and except as required under the registration rights
agreements referred to in Schedule II hereto, the Company will not file with
the Commission without the approval of the Requesting Holders any other new
registration statements with respect to its capital stock, whether for its own
account or that of other stockholders, from the date of receipt of a notice
from Requesting Holders pursuant to this Section 8.1 until the earlier of (i)
six (6) months from the date of receipt of such notice and (ii) the completion
of the period of distribution of the registration contemplated thereby. The
registration statement, together with all amendments and supplements,
including post-effective amendments, in each case including the prospectus
contained therein (including the preliminary prospectus and all amendments and
supplements to the prospectus, including post-effective amendments)
(collectively, the "Prospectus"), all exhibits thereto or to the Prospectus
and all material incorporated by reference therein or to the Prospectus, is
referred to as the "Registration Statement".
(d) If and whenever the Company is required by the provisions of
this Section 8.1 to effect the registration of any Shares under the Securities
Act, the Company will, as expeditiously as possible:
(i) prepare and file with the Commission, no later than 60 days
after the receipt of the first notice from the Requesting Holders, a
Registration Statement on Form S-2 (or other appropriate form) with respect to
such securities and use its reasonable best efforts to cause such Registration
Statement to become and remain effective for the period of distribution
contemplated thereby (determined as hereinafter provided);
(ii) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the Prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for the period contemplated in (i) above and comply with the
provisions of the Securities Act with respect to the disposition of all Shares
covered by such Registration Statement in accordance with the sellers'
intended method of disposition set forth in such Registration Statement for
such period;
(iii) register or qualify the Shares, by the time the
Registration Statement is declared effective by the Commission, under all
applicable state securities or "Blue Sky" laws of such jurisdictions as each
Underwriter, if any, or the Requesting Holders shall request in writing,
provided that the Company shall not be obligated to qualify as a foreign
corporation or as a dealer in securities in any jurisdiction in which it is
not so qualified or to subject itself to taxation in respect of doing business
in any jurisdiction in which it is not otherwise so subject;
(iv) keep each such registration or qualification effective
during the period the Registration Statement is required to be kept effective;
(v) upon request by the Requesting Holders, do any and all
other acts and things which may be reasonably necessary to enable such
Underwriter, if any, and the Requesting Holders to consummate the disposition
of the Shares in each such jurisdiction;
(vi) notify the Requesting Holders when the Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective;
(vii) in connection with an Underwritten Offering, if any,
notify the Requesting Holders if, between the effective date of the
Registration Statement and the closing of any sale of Shares, the
representations and warranties of the Company contained in the underwriting
agreement relating to any Underwritten Offering cease to be true and correct
in all material respects or if the Company receives any notification with
respect to the suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation of any proceeding for such purpose;
(viii) furnish or cause to be furnished forthwith to the
Requesting Holders, a "cold comfort" letter of the Company's independent
accountants, as of the effective date of the Registration Statement, as to
such matters as customarily are covered in accountant's letters delivered to
underwriters in underwritten public offerings of securities;
(ix) furnish or cause to be furnished forthwith to the
Requesting Holders, an opinion of counsel to the Company, as of the effective
date of the Registration Statement, in the form customarily provided by
issuer's counsel in underwritten public offerings of securities;
(x) furnish such number of Prospectuses and other documents
incident thereto, including any amendment of or supplement to the Prospectus
as the Requesting Holders from time to time may reasonably request during the
period of distribution of the Shares;
(xi) provide a transfer agent and registrar for all of the
Shares; and
(xii) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission with respect to the
disposition of the Shares covered by such Registration Statement, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first month after the effective date
of the Registration Statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
(e) For purposes of this Section 8.1, the period of distribution of
the Shares in an Underwritten Offering shall be deemed to extend until each
Underwriter has completed the distribution of all securities purchased by it
(but no later than 180 days), and the period of distribution of the Shares in
any other registration shall be deemed to extend until the earlier of the sale
of all Shares covered thereby and 180 days after the effective date thereof.
(f) In connection with each registration under this Section 8.1, and
as a condition to the inclusion of their shares therein, the Requesting
Holders will furnish to the Company in writing such information with respect
to themselves and the proposed distribution by them as reasonably shall be
necessary in order to assure compliance with federal and applicable state
securities laws.
(g) As soon as the Company is eligible to register the Shares on
Form S-3 (or any successor form thereto under the Securities Act), the Company
will, as expeditiously as possible but in any event no later than 60 days
after the Company is eligible to register the Shares on Form S-3, undertake to
amend the "shelf" Registration Statement on Form S-3 referred to in Section
8.2 to include any Shares outstanding or to file and to use its reasonable
best efforts to have declared effective a separate registration statement
registering the resale of the Shares. Any Shares so registered pursuant to
the Company's "shelf" Registration Statement on Form S-3 or such other
registration statement shall be thereinafter included within the definition of
"Registered Securities".
(h) Subject to Section 8.3 below, the Company agrees to supplement
or amend the Registration Statement, if required by the Securities Act.
8.2 Shelf Registration of the Registered Securities.
The Company agrees to use its reasonable best efforts to file with the
Commission a "shelf" Registration Statement on Form S-3 (or other appropriate
form under the Securities Act), providing for the resale of all of the
Registered Securities, within sixty (60) days after the Closing Date. The
Company will use its reasonable best efforts to have the Registration
Statement declared effective by the Commission as soon as practicable after
the filing thereof. Subject to Section 8.3 hereof, the Company will use its
reasonable best efforts to keep the Registration Statement continuously
effective until the earlier of:
(A) the date upon which all of the outstanding Registered Securities
have been sold pursuant to the Registration Statement or are no longer
outstanding, or
(B) such date as the Company and each of the Eligible Holders shall
be satisfied that Rule 144(k) of the regulations under the Securities Act is
available for the resale of the Registered Securities held by them, or, in the
case of Eligible Holders for whom Rule 144(k) is unavailable, such Eligible
Holders have consented in writing to permit the Company to discontinue the
effectiveness of the Registration Statement.
Subject to Section 8.3 below, the Company agrees to supplement or amend the
Registration Statement, if required by the Securities Act.
8.3. Interference with Registration.
(a) For purposes of this Section 8.3, any Registration Statement
pursuant to either Section 8.1 or 8.2 hereof shall collectively be referred to
as the "Registration Statements." If, after the Registration Statements have
been declared effective, a stop order, injunction or other order or
requirement of the Commission or any other governmental agency or court is
issued which suspends the effectiveness of a Registration Statement, (i) upon
receipt of notice from the Company, the Requesting Holders or Purchaser (as
applicable) will discontinue any disposition of Shares or Registered
Securities, respectively, pursuant to that Registration Statement until
receipt of notice from the Company that the suspension of the effectiveness of
the Registration Statement has been withdrawn and (ii) the Company will use
its reasonable best efforts to obtain the withdrawal of such order or to meet
such requirement at the earliest possible time.
(b) If, after the Registration Statements have become effective, an
event occurs as a result of which the Company determines that a Registration
Statement or the related Prospectus contains any untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the Company will
notify the Requesting Holders and any Purchaser (as applicable) thereof and,
if applicable, use its reasonable best efforts to prepare and promptly file a
post-effective amendment or a supplement to the Registration Statement or the
related Prospectus or promptly file any other required document so that, as
thereafter delivered to purchasers of the Shares or Registered Securities,
such Prospectus will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
(c) Without limiting Section 8.3(a) and 8.3(b) hereof, if any
Requesting Holder or Purchaser (as applicable) shall propose to sell any
Shares or Registered Securities, respectively, pursuant to the Registration
Statements, it shall notify the Company of its intent to do so at least three
(3) full Business Days prior to such sale. At any time within such three (3)
Business Day period, the Company may refuse to permit the Requesting Holder or
Purchaser (as applicable) to resell any Shares or Registered Securities,
respectively, pursuant to the Registration Statements; except that the Company
may exercise this right only once in any one hundred eighty (180) day period,
unless the matter giving rise to the exercise by the Company of this right is
beyond the Company's control; and provided, further, that in order to exercise
this right, the Company must deliver a certificate in writing to the
Requesting Holder or Purchaser (as applicable) to the effect that a delay in
such sale is necessary because a sale pursuant to such Registration Statement
in its then-current form would reasonably be expected to constitute a
violation of the federal securities laws. Without limiting Section 8.3(b)
hereof, in no event shall such delay exceed ten (10) Business Days; provided,
however, that if, prior to the expiration of such ten (10) Business Day
period, the Company delivers a certificate in writing to the Requesting Holder
or Purchaser (as applicable) to the effect that a further delay in such sale
beyond such ten (10) Business Day trading period is necessary because a sale
pursuant to the Registration Statement in its then-current form would
reasonably be expected to constitute a violation of the federal securities
laws, the Company may refuse to permit such Requesting Holder or Purchaser (as
applicable) to resell any Shares or Registered Securities, respectively,
pursuant to the Registration Statement for an additional period not to exceed
five (5) Business Days, but in no event shall any such delay exceed in the
aggregate fifteen (15) Business Days, unless the matter giving rise to the
exercise of such right is beyond the Company's control.
8.4. Selection of Underwriters for Registered Securities.
With respect to the registration of Registered Securities pursuant
to Section 8.2 hereof, at any time or from time to time after the Closing, the
Purchaser may elect to have the Registered Securities sold to one or more
persons participating as Underwriters for an Underwritten Offering. In such
event, the Company shall engage (a) Alex. ▇▇▇▇▇ & Sons Incorporated or (b)
another nationally recognized independent investment banking firm reasonably
acceptable to the holders of a majority of the Registered Securities, as
Underwriters; provided, however, that the Company shall not be required to
engage any Underwriter if such engagement would require the consent or
approval of any governmental authority (including the necessity of obtaining
an exemptive order under the Investment Company Act of 1940, as amended);
provided, further, that after three years after the Closing Date such
Underwriters shall be selected by mutual agreement of the Company and the
holders of a majority of the Registered Securities, each acting reasonably.
In such event, the Company and each such Purchaser will cooperate with the
Underwriter or the managing Underwriter and take all customary and reasonable
actions to facilitate the disposition of Registered Securities in an
Underwritten Offering.
8.5. Other Obligations of the Company with respect to the Registered
Securities.
After the Closing, the Company will:
(a) use its reasonable best efforts
(i) to register or qualify the Registered Securities, by the
time the Registration Statement is declared effective by the Commission, under
all applicable state securities or "Blue Sky" laws of such jurisdictions as
each Underwriter, if any, or the Purchaser shall request in writing, provided
that the Company shall not be obligated to qualify as a foreign corporation or
as a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject;
(ii) to keep each such registration or qualification effective
during the period the Registration Statement is required to be kept effective;
and
(iii) upon request by the Purchaser, to do any and all other
acts and things which may be reasonably necessary to enable such Underwriter,
if any, and the Purchaser to consummate the disposition of the Registered
Securities in each such jurisdiction;
(b) notify the Purchaser
(i) when the Registration Statement has become effective and
when any post-effective amendments and supplements thereto become effective
and
(ii) in connection with an Underwritten Offering, if any, if,
between the effective date of the Registration Statement and the closing of
any sale of Registered Securities, the representations and warranties of the
Company contained in the underwriting agreement relating to any Underwritten
Offering cease to be true and correct in all material respects or if the
Company receives any notification with respect to the suspension of the
qualification of the Registered Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose;
(c) Furnish or cause to be furnished forthwith to the Purchaser,
(i) a "cold comfort" letter of the Company's independent
accountants, as of the effective date of the Registration Statement, as to
such matters as customarily are covered in accountant's letters delivered to
underwriters in underwritten public offerings of securities and
(ii) an opinion of counsel to the Company, as of the effective
date of the Registration Statement, in the form customarily provided by
issuer's counsel in underwritten public offerings of securities;
(d) furnish such number of Prospectuses and other documents incident
thereto, including any amendment of or supplement to the Prospectus as a
Purchaser from time to time may reasonably request;
(e) cause all such Registered Securities registered as described
herein to be listed on each securities exchange and quoted on each quotation
service on which securities of the same class and series issued by the Company
are then listed or quoted;
(f) provide a transfer agent and registrar for all Registered
Securities;
(g) otherwise use its reasonable best efforts to comply with all
applicable rules and regulations of the Commission with respect to the
disposition of the Registered Securities, and make available to its security
holders, as soon as reasonably practicable, an earnings statements covering
the period of at least twelve months, but not more than eighteen months,
beginning with the first month after the effective date of the Registration
Statement, which earnings statement shall satisfy the provisions of Section
11(a) of the Securities Act.
8.6. Registration Expenses.
The Company agrees to pay all Registration Expenses in connection
with the registrations pursuant to this Section 8. "Registration Expenses"
means any and all expenses incident to performance of or compliance with the
provisions of this Section 8 by the Company, including without limitation:
(i) all Commission and National Association of Securities Dealers, Inc.
("NASD") registration and filing fees, (ii) all fees and expenses incurred in
connection with compliance with state securities or "Blue Sky" laws and
compliance with the rules of the NASD, (iii) all expenses in preparing,
printing and distributing the Registration Statements and other documents
relating to the performance of and compliance with this Agreement by the
Company, (iv) the reasonable fees and disbursements of counsel for the Company
and of one counsel selected by the Eligible Holders and reasonably acceptable
to the Company and of the independent public accountants of the Company, (v)
any fees and disbursements of Underwriters, dealers and agents, if any,
customarily paid by issuers of securities under similar circumstances relating
to compliance with applicable state securities or "Blue Sky" laws and the fees
and expenses of any special experts retained by the Company in connection with
the Registration Statements; but excluding (x) underwriting discounts and
commissions and (other than as provided in clause (v) of this paragraph) fees
and disbursements of Underwriters, dealers and agents in connection with an
Underwritten Offering of Shares or Registered Securities, if any, and (y)
transfer taxes, if any, relating to the sale and disposition of Shares or
Registered Securities.
8.7. Short Sales.
No Purchaser shall engage in any short-sales of the Company's Common
Stock prior to the effectiveness of the Registration Statement, except to the
extent that any such shortsale is fully covered by freely tradable shares of
Common Stock of the Company.
8.8. Representations of the Company.
The Company represents and warrants to, and agrees with, the
Purchaser that:
(a) The Registration Statements and the Prospectuses contained
therein, when they become effective or are filed with the Commission, as the
case may be, and, in the case of an Underwritten Offering, at the time of the
closing under the underwriting agreement relating thereto, will conform in all
material respects to the requirements of the Securities Act and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading; and at all times subsequent to the effective date of such
Registration Statements when a Prospectus would be required to be delivered
under the Securities Act, except for the periods provided under Section 8.3
hereof, such Registration Statements and Prospectuses will conform in all
material respects to the requirements of the Securities Act and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information furnished
in writing to the Company by the Purchaser or any Underwriter expressly for
use therein.
(b) Any documents incorporated by reference in the Prospectuses,
when they become or became effective or are or were filed with the Commission,
as the case may be, will conform or conformed in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable, and
none of such documents will contain or contained, as of their respective
dates, an untrue statement of a material fact or will omit or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading at the time they become or became effective
or are or were filed with the Commission, as the case may be; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and conformity with information
furnished in writing to the Company by the Purchaser or any Underwriter
expressly for use therein.
8.9. Indemnification.
(a) The Company will indemnify and hold harmless each holder of
Shares and Registered Securities and any underwriter (as defined in the
Securities Act) for such holder and each person, if any, who controls the
holder or underwriter within the meaning of the Securities Act against any
losses, claims, damages or liabilities, joint or several, and expenses
(including reasonable attorneys' fees and expenses and reasonable costs of
investigation) to which the holder or underwriter or such controlling person
may be subject, under the Securities Act or otherwise, insofar as any thereof
arise out of or are based upon (x) any untrue statement or alleged untrue
statement of a material fact contained in a Registration Statement, a
Prospectus or any amendment or supplement thereto, or (y) the omission or
alleged omission to state in any item referred to in the preceding clause 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 arise out of or are based upon any untrue
statement or alleged untrue statement or omission or alleged omission based
upon information furnished to the Company in writing by such holder or by any
underwriter for such holder expressly for use therein (with respect to which
information such holder or underwriter shall so indemnify and hold harmless
the Company, any underwriter for the Company and each person, if any, who
controls the Company or such underwriter within the meaning of the Securities
Act). The foregoing is subject to the condition that, insofar as the
foregoing indemnities relate to any untrue statement, alleged untrue
statement, omission or alleged omission made in any prospectus which is
eliminated or remedied in any amendment, supplement or final prospectus, the
above indemnity obligations of the Company shall not inure to the benefit of
any indemnified person (or to the benefit of any person who controls such
indemnified person within the meaning of the Securities Act) if a copy of such
amendment, supplement or final prospectus was not sent or given by such
indemnified person at or prior to the time such action is required of such
indemnified person by the Securities Act and if delivery of such amendment,
supplement or final prospectus would have eliminated (or been a sufficient
defense to) any liability of such indemnified person with respect to such
statement or omission.
(b) The Purchaser will indemnify and hold harmless the Company, any
other Purchasers, any underwriter (as defined in the Securities Act) and each
person, if any, who controls the Company, such other Purchasers or any
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint and several, and expenses (including
reasonable attorneys' fees and expenses and reasonable costs of investigation)
to which the Company, such other Purchaser, underwriter or such controlling
person may be subject, under the Securities Act or otherwise, insofar as any
thereof arise out of or are based upon (x) any untrue statement or alleged
untrue statement of a material fact contained in a Registration Statement, a
Prospectus or any amendment or supplement thereto, (y) the omission or alleged
omission to state in any item referred to in the preceding clause a material
fact required to be stated therein or necessary to make the statements therein
not misleading or (z) any failure of the Purchaser to perform its obligations
hereunder or under law; provided, however, that the Purchaser will be liable
hereunder in any such case if and only to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in strict conformity with information pertaining to the
Purchaser, as such, furnished in writing to the Company by the Purchaser
stated to be specifically for use in such Registration Statement and
Prospectus; provided, further, however, that the liability of the Purchaser
hereunder shall be limited to the proportion of any such loss, claim, damage,
liability or expense which is equal to the proportion that the public offering
price of the Shares or Registered Securities sold by the Purchaser under such
Registration Statement bears to the total public offering price of all
securities sold thereunder, but not in any event to exceed the proceeds
received by the Purchaser from the sale of the Shares or Registered Securities
covered by such Registration Statement. The foregoing is subject to the
condition that, insofar as the foregoing indemnities relate to any untrue
statement, alleged untrue statement, omission or alleged omission made in any
prospectus which is eliminated or remedied in any amendment, supplement or
final prospectus, the above indemnity obligations of the Purchaser shall not
inure to the benefit of any indemnified person (or to the benefit of any
person who controls such indemnified person within the meaning of the
Securities Act) if a copy of such amendment, supplement or final prospectus
was not sent or given by such indemnified person at or prior to the time such
action is required of such indemnified person by the Securities Act and if
delivery of such amendment, supplement or final prospectus would have
eliminated (or been a sufficient defense to) any liability of such indemnified
person with respect to such statement or omission.
(c) Promptly after receipt by an indemnified party under Section
8.9(a) or (b) hereof of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
an indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the failure to so notify an
indemnifying party shall not relieve the indemnifying party of its obligations
under this Section 8.9 unless such failure to notify materially prejudices the
indemnifying party's defense. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and, after
notice from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party shall not be liable
to such indemnified party under this subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by
such indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. Notwithstanding the foregoing, the
indemnifying party shall pay as incurred the fees and expenses of separate
counsel retained by the indemnified party in the event (i) the indemnifying
party and the indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm for all such
indemnified parties. In addition, an indemnifying party shall not be required
to indemnify, reimburse, or otherwise make any contribution to the amount paid
or payable by the indemnified party for any losses, claims, damages, expenses
or liabilities incurred by the indemnified party in settlement of any actions,
proceedings or investigations otherwise covered hereunder, unless such
settlement has been previously approved by the indemnifying party, which
approval shall not be unreasonably withheld.
(d) If the indemnification provided for in this Section 8.9 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8.9(a) or (b) hereof in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) in such
proportion as is appropriate to reflect not only (i) the relative benefits
received by the Purchaser on the one hand and the underwriter on the other
from the offering of the Shares or the Registered Securities but also (ii) the
relative fault of the Company, the Purchaser and the underwriter in connection
with the statements or omissions which resulted in such losses, claims,
damages or liabilities (or actions or proceedings in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Purchaser on the one hand and the underwriter on the other shall be
deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Purchaser bear to the
total underwriting discounts and commissions received by the underwriter, in
each case as set forth in the table on the cover page of the Prospectus. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact related to information
supplied by the Company, the Purchaser or the underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission.
(e) The Company and the Purchaser agree that it would not be just
and equitable if contributions pursuant to this Section 8.9 were determined by
pro rata allocation (even if several underwriters were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 8.9.
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions or proceedings in respect thereof)
referred to above in this Section 8.9 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8.9, no underwriter, if any, will be required to
contribute any amount in excess of the amount agreed to between the Company
and the underwriter at the time of such offering. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. Any underwriters' obligations to
contribute will be several in proportion to their respective underwriting
obligations and not joint.
(f) In any proceeding relating to a Registration Statement, a
Prospectus or any supplement or amendment thereto, each party against whom
contribution may be sought under this Section 8.9 hereby consents to the
jurisdiction of any court having jurisdiction over any other contributing
party, agrees that process issuing from such court may be served upon him or
it by any other contributing party and consents to the service of such process
and agrees that any other contributing party may join him or it as an
additional defendant in any such proceeding in which such other contributing
party is a party.
8.10. Transferees.
The right to sell Shares and Registered Securities pursuant to a
Registration Statement described herein will automatically be assigned to each
transferee of Shares or Registered Securities, other than any purchaser of
Shares or Registered Securities sold under a Registration Statement. In the
event that it is necessary, in order to permit a Purchaser to sell Shares or
Registered Securities pursuant to a Registration Statement, to amend or
supplement the Registration Statement to name such transferee, such transferee
shall, upon written notice to the Company, be entitled to have the Company
make such amendment or supplement as soon as reasonably practicable.
SECTION 9. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase Shares hereunder is subject to
satisfaction of the following conditions at the Closing (any of which may be
waived by the Purchaser)
9.1. Series B Certificate of Designations.
The Series B Certificate of Designations shall have been filed with
the Delaware Secretary of State in substantially the form attached hereto as
Exhibit A.
9.2. Certificates for Shares.
The Purchaser shall concurrently receive the certificates for Shares
contemplated by Section 2(b) hereof.
9.3. Accuracy of Representations and Warranties.
The representations and warranties of the Company in the Stock
Purchase Agreements or in any certificate or document delivered pursuant
hereto or thereto shall be correct and complete on and as of the Closing Date
with the same effect as though made on and as of the Closing Date (after
giving effect to transactions contemplated by this Agreement).
9.4. Compliance with Agreements.
The Company shall have performed and complied with all agreements,
covenants and conditions contained in the Stock Purchase Agreements and any
other document contemplated hereby or thereby which are required to be
performed or complied with by the Company on or before the Closing Date.
9.5. Officers' Certificates.
The Purchaser shall have received a certificate dated the Closing
Date and signed by the President and by the Secretary of the Company, to the
effect that the conditions of this Section 9 have been satisfied.
9.6. Proceedings.
All corporate and other proceedings in connection with the
transactions contemplated by the Stock Purchase Agreements, and all documents
incident thereto, shall be in form and substance satisfactory to the Purchaser
and its counsel, and the Purchaser shall have received all such originals or
certified or other copies of such documents as the Purchaser or its counsel
may reasonably request.
9.7. Legality; Governmental and Other Authorization.
The purchase of and payment for the Shares shall not be prohibited
by any law or governmental order, rule, ruling, regulation, release,
interpretation or opinion applicable to the Purchaser and shall not subject
the Purchaser to any penalty, tax, liability or other onerous condition. Any
necessary consents, approvals, licenses, permits, orders and authorizations
of, and any filings, registrations or qualifications with, any governmental or
administrative agency or other person with respect to the transactions
contemplated by the Stock Purchase Agreements shall have been obtained or made
and shall be in full force and effect. The Company shall have delivered to
the Purchaser upon its reasonable request factual certificates or other
evidence, in form and substance satisfactory to the Purchaser and its counsel,
setting forth what is required to enable the Purchaser to establish compliance
with this condition.
9.8. Time of Purchase.
The Closing shall not be later than 5:00 P.M., New York City time,
on March 31, 1997.
9.9. No Change in Law, etc.
No legislation, order, rule, ruling or regulation shall have been
proposed, enacted or made by or on behalf of any governmental body, department
or agency, and no legislation shall have been introduced in either House of
Congress, and no investigation by any governmental authority shall have been
commenced or threatened, and no action, suit or proceeding shall have been
commenced before, and no decision shall have been rendered by, any court,
other governmental body or arbitrator, which, in any such case, in the
Purchaser's reasonable judgment could adversely affect, restrain, prevent or
change the transactions contemplated by the Stock Purchase Agreements
(including without limitation the issuance of the Shares hereunder and
thereunder and the issuance of the Conversion Shares under the Series B
Certificate of Designations) or materially and adversely affect the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company.
9.10. Opinions of Counsel.
The Purchaser shall have received an opinion dated the Closing Date
and addressed to the Purchaser of ▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P., counsel for the
Company, which opinion shall be in form and substance reasonably satisfactory
to the Purchaser.
9.11. Other Documents and Opinions.
The Purchaser shall have received such other documents and opinions,
in form and substance satisfactory to the Purchaser and its counsel, relating
to matters incident to the transactions contemplated hereby as the Purchaser
may reasonably request.
9.12 Receipt of Consent and Exchange Agreements.
The Company shall have received a sufficient number of Consent and
Exchange Agreements executed by the holders of Series A Preferred Stock in
order to have the necessary authorization for the parity treatment of the
Series B Preferred Stock and the modification to the registration rights as
contemplated therein.
SECTION 10. CONDITIONS TO COMPANY'S OBLIGATIONS
The Company's obligation to sell and issue the Shares at the Closing is,
at the option of the Company, subject to the fulfillment or waiver of the
following conditions:
10.1. Representations and Warranties Correct.
The representations and warranties made by the Purchaser in Section
5 hereof shall be true and correct in all material respects when made, and
shall be true and correct in all material respects on the Closing Date with
the same force and effect as if they had been made on and as of said date.
10.2. Covenants.
All covenants, agreements and conditions contained in this Agreement
to be performed by the Purchaser on or prior to the Closing Date shall have
been performed or complied with in all material respects.
10.3. Blue Sky.
The Company shall have obtained all necessary blue sky law permits
and qualifications, or secured exemptions therefrom, required by any state for
the offer and sale of the Shares. No stop order or other order enjoining the
sale of the Shares shall have been issued and no proceedings for such purpose
shall be pending or, to the knowledge of the Company, threatened.
SECTION 11. BROKERS
Except for certain fees payable to the Agent (all of which fees will be
paid by the Company), the Company represents and warrants to the Purchaser
that there is no liability for (and the Company will pay and indemnify the
Purchaser against) any fees or expenses (or claims therefor) of any investment
banker, finder or broker retained by the Company or its Affiliates (or that
claims it was retained by the Company or its Affiliates) in connection with
any Stock Purchase Agreement or any of the transactions contemplated hereby or
thereby. The Company will indemnify the Purchaser against all such fees or
expenses payable to the enumerated persons in the preceding sentence and
against any other such fees, expenses or claims of any person, unless such
person was engaged by the Purchaser in connection with this Agreement or any
of the transactions contemplated hereby.
SECTION 12. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations and warranties (as of the date hereof and
as of the Closing Date), covenants and agreements of the Company and the
Purchaser contained in this Agreement or in any document or certificate
delivered pursuant hereto or in connection herewith shall survive, and shall
continue in effect following, the execution and delivery of the Stock Purchase
Agreements, the closings hereunder and thereunder, any investigation at any
time made by the Purchaser or on its behalf or by any other Person, the
issuance, sale and delivery of the Shares, any disposition thereof and any
payment, conversion or cancellation of the Shares provided, that Section 7
(other than Sections 7.1, 7.2, 7.4, 7.5, 7.7, 7.8, 7.9, 7.12, 7.13, 7.16,
7.17, 7.18, 7.20 and 7.21) shall terminate when no Shares are outstanding.
All statements contained in any certificate delivered to the Purchaser by or
on behalf of the Company pursuant hereto shall constitute representations and
warranties by the Company hereunder.
(b) The Company agrees to indemnify and hold the Purchaser harmless
from and against and will pay to the Purchaser the full amount of any loss,
damage, liability or expense (including amounts paid in settlement and
attorneys' fees and expenses) to the Purchaser resulting either directly or
indirectly from any breach of the representations, warranties, covenants or
agreements of the Company contained in any Stock Purchase Agreement, or in any
certificate delivered to the Purchaser pursuant hereto or in connection
herewith.
SECTION 13. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the event that
this Agreement is not specifically enforced, and the parties agree that any
damages available at law for a breach of this Agreement would not be an
adequate remedy. Therefore, the provisions hereof and the obligations of the
parties hereunder shall be enforceable in a court of equity, or other tribunal
with jurisdiction, by a decree of specific performance, and appropriate
injunctive relief may be applied for and granted in connection therewith.
Such remedies and all other remedies provided for in this Agreement shall,
however, be cumulative and not exclusive and shall be in addition to any other
remedies which a party may have under this Agreement or otherwise.
SECTION 14. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company will pay (i) the costs and expenses of the
preparation and production of the Stock Purchase Agreements and the Series B
Certificate of Designations and the issuance of the Shares and the Conversion
Shares and the furnishing of all opinions by counsel for the Company, (ii) the
fees and expenses of Piper & Marbury L.L.P. in connection with the Stock
Purchase Agreements and the Series B Certificate of Designations and the
transactions contemplated hereby and thereby (whether or not a closing occurs
hereunder and if a closing occurs the Company will make such payment on the
Closing Date), (iii) the reasonable fees and expenses of counsel to the
Eligible Holders in connection with any amendments to or modifications or
waivers of any provisions of the Stock Purchase Agreements or the Series B
Certificate of Designations or in connection with any other agreements between
the Purchasers and the Company after the date hereof, any of which are
requested by the Company, (iv) the fees and expenses of any investment banker,
broker or finder retained by the Company or its Affiliates (or that claims it
was retained by the Company or its Affiliates) and involved with the Stock
Purchase Agreements or the Series B Certificate of Designations or any of the
transactions contemplated hereby or thereby, and (v) the fees and expenses
(including reasonable attorneys' fees and expenses) of any holder of Shares or
Conversion Shares in enforcing its rights against the Company if the Company
materially defaults in its obligations hereunder or under the Series B
Certificate of Designations. The obligations of the Company under this
Section 14 shall survive the Closing hereunder and any termination of the
Stock Purchase Agreements.
(b) In addition to all other sums due hereunder or provided for in
this Agreement, the Company shall pay to the Purchaser or its agents,
respectively, an amount sufficient to indemnify such persons (net of any taxes
on any indemnity payments) against all reasonable costs and expenses
(including reasonable attorneys' fees and expenses and reasonable costs of
investigation) and damages and liabilities incurred by the Purchaser or its
agents pursuant to any investigation or proceeding against any or all of the
Company, the Purchasers, or their agents, arising out of or in connection with
the Stock Purchase Agreements, the Shares or the Conversion Shares (or any
transaction contemplated hereby or thereby or any other document or instrument
executed herewith or therewith or pursuant hereto or thereto), whether or not
the transactions contemplated by this Agreement are consummated, which
investigation or proceeding requires the participation of the Purchaser or its
agents or is commenced or filed against the Purchaser or its agents because of
the Stock Purchase Agreements, the Shares or the Conversion Shares or any of
the transactions contemplated hereby or thereby (or any other document or
instrument executed herewith or therewith or pursuant hereto or thereto),
other than any investigation or proceeding in which it is finally determined
that there was gross negligence or willful misconduct on the part of the
Purchaser or its agents which was not taken by them in reliance upon any of
the Company's representations, warranties, covenants or agreements in the
Stock Purchase Agreements or in any other documents or instruments
contemplated hereby or thereby or executed herewith or therewith or pursuant
hereto or thereto, except to the extent that any costs, expenses, damages or
liabilities incurred by the Purchaser is the direct result of its breach of
any of its representations, warranties, covenants or agreements in this Stock
Purchase Agreement or in any other documents or instruments contemplated
hereby or thereby or executed in connection herewith or therewith or pursuant
hereto or thereto. The Company shall assume the defense, and shall have its
counsel represent the Purchaser and such agents, in connection with
investigating, defending or preparing to defend any such action, suit, claim
or proceeding (including any inquiry or investigation); provided, however,
that the Purchaser, or any such agent, shall have the right (without releasing
the Company from any of its obligations hereunder) to employ its own counsel
and either to direct its own defense or to participate in the Company's
defense, but the fees and expenses of such counsel shall be at the expense of
such person unless (i) the employment of such counsel shall have been
authorized in writing by the Company in connection with such defense or (ii)
the Company shall not have provided its counsel to take charge of such defense
or (iii) the Purchaser, or such agent of the Purchaser, shall have reasonably
concluded that there may be defenses available to it or them which are
different from or additional to those available to the Company, then in any of
such events referred to in clauses (i), (ii) or (iii) such reasonable counsel
fees and expenses (but only for one counsel for the Purchasers and their
agents) shall be borne by the Company. Any settlement of any such action,
suit, claim or proceeding shall require the consent of both the Company and
such indemnified person (neither of which shall unreasonably withhold its
consent).
(c) The Company agrees to pay, or to cause to be paid, all
documentary, stamp and other similar taxes levied under the laws of the United
States of America or any state or local taxing authority thereof or therein in
connection with the issuance and sale of the Shares and the execution and
delivery of the Stock Purchase Agreements and any other documents or
instruments contemplated hereby or thereby and any modification of the Series
B Certificate of Designations or the Stock Purchase Agreements or any such
other documents or instruments and will hold the Purchaser harmless without
limitation as to time against any and all liabilities with respect to all such
taxes.
(d) The obligations of the Company under this Section 14 shall
survive the Closing hereunder and any termination of the Stock Purchase
Agreements.
SECTION 15. HOME OFFICE PAYMENTS
As long as the Purchaser or any institutional holder which is a direct or
indirect transferee (as a result of one or more transfers) from the Purchaser
shall be the holder of record of any Shares, the Company will make all
dividends, redemption payments, repurchase payments, liquidation payments and
other distributions by wire transfer to the Purchaser's or such other holder's
(or its nominee's) account at any bank or trust company in the United States
of America, notwithstanding any contrary provision herein or in the Company's
certificate of incorporation with respect to the place of payment. The
Purchaser has provided an address on Schedule I hereto for payments by wire
transfer, and such address may be changed for the Purchaser or any subsequent
holder by notice to the Company. All such payments shall be made in U.S.
dollars and in federal or other immediately available funds.
SECTION 16. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended,
waived, modified or terminated only with the written consent of the Majority
Shareholders; provided, however, that no such amendment, waiver, modification
or termination shall (i) change the provisions of Section 8 hereof in any
material respect, without the consent of the holders of all Shares or
Conversion Shares affected thereby or (ii) change the definition of Majority
Shareholders or this Section 16(a) without the written consent of the holders
of all the Shares and Conversion Shares then outstanding; and provided further
that no such amendment, waiver, modification or termination shall be effective
with respect to a term or provision of this Agreement unless it is also
effective with respect to the corresponding term or provision, if any, of each
other Stock Purchase Agreement and each Stock Exchange Agreement. The
Purchaser acknowledges that by operation hereof, the Majority Shareholders
(which may not include the Purchaser) will have the right and power to
diminish or eliminate certain rights of the Purchaser under this Agreement.
(b) The Company agrees that all holders of Shares and Conversion
Shares shall be notified by the Company in advance of any proposed amendment,
waiver, modification or termination, but failure to give such notice shall not
in any way affect the validity of any such amendment, waiver, modification or
termination. In addition, promptly after obtaining the written consent of the
holders as herein provided, the Company shall transmit a copy of any
amendment, waiver, modification or termination which has been adopted to all
holders of Shares and Conversion Shares then outstanding, but failure to
transmit copies shall not in any way affect the validity of any such
amendment, waiver, modification or termination.
SECTION 17. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES;
REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the request of any
holder of Shares to the Company at its address provided under Section 18
hereof, the Company at its expense (except for any transfer tax arising out of
the exchange) will issue and deliver to or upon the order of the holder in
exchange therefor a new certificate or certificates therefor in such amount or
amounts as such holder may request in the aggregate representing the number of
Shares represented by such surrendered certificates, and registered in the
name of such holder or otherwise as such holder may direct.
(b) Any Share certificate which is converted into Conversion Shares
in whole or in part shall be canceled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into Conversion Shares. The Company shall issue a new certificate with
respect to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part.
(c) Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of any Share certificate and, in the
case of any such loss, theft or destruction, upon delivery of an indemnity
agreement reasonably satisfactory to the Company (unsecured in the case of an
institutional holder), or in the case of any such mutilation, upon surrender
of such Share certificate (which surrendered Share certificate shall be
canceled by the Company), the Company will issue a new Share certificate, of
like tenor in lieu of such lost, stolen, destroyed or mutilated Share
certificate as if the lost, stolen, destroyed or mutilated Share certificate
were then surrendered for exchange.
SECTION 18. NOTICES
All notices, requests, demands, consents and other communications
hereunder shall be in writing and shall be delivered by hand or shall be sent
by telex or telecopy (confirmed by registered, certified or overnight mail or
courier, postage and delivery charges prepaid), if to the Company at the
address indicated below, or if to the Purchaser at the address indicated on
Schedule I hereto, or at such other address as a party may from time to time
designate as its address in writing to the other party to this Agreement.
Whenever any notice is required to be given hereunder, such notice shall be
deemed given and such requirement satisfied only when such notice is delivered
or, if sent by telex or telecopier, when received.
(a) If to the Company:
Energy Biosystems Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: Vice President of Finance
With a copy to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇
(b) If to the Purchaser, at the address
of the Purchaser set forth on Schedule I.
SECTION 19. MISCELLANEOUS
(a) The Stock Purchase Agreements (including all schedules and
exhibits thereto) and, upon the closing hereunder, the Series B Certificate of
Designations, together with any further agreements entered into by the
Purchaser and the Company at the closing hereunder, contain the entire
agreement between the Purchaser and the Company, and supersede any prior oral
or written agreements, commitments, terms or understandings regarding the
subject matter hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent
permitted by applicable law, the parties hereby waive any provision of law
which may render any provision hereof prohibited or unenforceable in any
respect.
(c) If the Company fails to pay any amount required to be paid to
a holder of Shares or Conversion Shares or to a party under this Agreement
(not including dividends not declared by the Board of Directors), within
thirty (30) days after notice from such holder or such party demanding such
payment (together with reasonably detailed supporting information), then the
Company agrees to pay such holder or such party interest on any such overdue
amount at a rate of 10% per annum from the date of such notice from such
holder or such party until such overdue amount is paid in full.
(d) Unless otherwise expressly provided herein, any provision of
this Agreement relating to the consent, determination, decision or waiver of
a holder or holders of Shares or Conversion Shares means such holder's
consent, determination, decision or waiver in such holder's sole discretion.
(e) This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns, whether so
expressed or not; provided, that the Company may not assign any of its rights,
duties or obligations under this Agreement, except in connection with a
transaction permitted by Section 7.11 or with the Purchaser's written consent.
(f) In addition to any assignment by operation of law, the Purchaser
may assign, in whole or in part, any or all of its rights (and/or obligations)
under this Agreement to any permitted transferee of any or all of its Shares
or Conversion Shares, except as provided in Section 8.10, and (unless such
assignment expressly provides otherwise) any such assignment shall not
diminish the rights the Purchaser would otherwise have under this Agreement or
with respect to any remaining Shares or Conversion Shares held by the
Purchaser.
(g) No course of dealing and no delay on the part of any party
hereto in exercising any right, power, or remedy conferred by this Agreement
shall operate as a waiver thereof or otherwise prejudice such party's rights,
powers and remedies. No single or partial exercise of any rights, powers or
remedies conferred by this Agreement shall preclude any other or further
exercise thereof or the exercise of any other right, power or remedy.
(h) The headings and captions in this Agreement are for convenience
of reference only and shall not define, limit or otherwise affect any of the
terms or provisions hereof.
(i) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware (other than any conflict of laws rule
which might result in the application of the laws of any other jurisdiction).
(j) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
(k) WAIVER OF JURY TRIAL. THE COMPANY AND THE PURCHASER HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE SERIES B CERTIFICATE OF
DESIGNATIONS, THE SHARES OR THE CONVERSION SHARES, OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THE COMPANY AND THE
PURCHASER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS OF) THIS AGREEMENT, THE
CERTIFICATE OF DESIGNATIONS, THE SHARES OR THE CONVERSION SHARES. IN THE
EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL (WITHOUT A JURY) BY THE COURT.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ENERGY BIOSYSTEMS CORPORATION
By /s/ ▇▇▇▇ ▇. ▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: President
Accepted and Agreed to as of
the date first above written by
the undersigned Purchaser:
(See Omnibus Signature Page)
By ____________________________
Name:
Title:
Schedule I
to the Stock
Purchase Agreement
Purchase
Name of Purchaser Number of Shares Price
(a) address for communications:
Attn:
(b) address for payments by wire
transfer:
Attn:
(providing sufficient
information with such
wire transfer to identify
the source and application
of such funds)
Schedule II to
the Stock
Purchase Agreement
Summary of Registration Rights
1. Piggyback registration rights granted by the Company pursuant to that
certain First Amendment to License and Technology Assistance Agreement, dated
June 25, 1992, between the Company and Institute of Gas Technology.
2. Demand and piggyback registration rights granted by the Company pursuant
to that certain Registration Agreement, dated January 30, 1992, by and among
the Company, The Travelers Indemnity Company, The Travelers Indemnity Company
of Rhode Island, The Phoenix Insurance Company and Gryphon Ventures II,
Limited Partnership.
3. Demand and piggyback registration rights granted by the Company pursuant
to that certain Registration Agreement, dated April 29, 1991, by and between
the Company and Gryphon Ventures II, Limited Partnership.
4. Registration rights granted by the Company to the holders of the Series A
Preferred Stock pursuant to those certain Stock Purchase Agreements dated
October 27, 1994.
5. Registration rights granted by the Company to the parties exchanging
shares of Series A Preferred Stock for shares of Series B Preferred Stock
pursuant to those certain Stock Exchange Agreements dated February 21, 1997.
Indebtedness
NONE.