COVOL TECHNOLOGIES, INC.
SECURITIES PURCHASE AGREEMENT
Dated as of March 17, 1999
TABLE OF CONTENTS
Page
Article
DEFINITIONS......................................................1
1.1 Definitions; Interpretation......................................1
Article II
ISSUANCE AND SALE OF THE SECURITIES..............................9
2.1 Authorization of the Securities..................................9
2.2 Issuance and Sale of the Securities. ............................9
Article III
CLOSING; CLOSING DELIVERIES.......................................10
3.1 Closing...........................................................10
3.2 Payment for and Delivery of the Securities........................10
Article IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................10
4.1 Existence; Qualification; Subsidiaries............................10
4.2 Authorization and Enforceability; Issuance of the
Securities, the Conversion Shares and the Warrant Shares..........10
4.3 Capitalization....................................................11
4.4 Private Sale......................................................12
4.5 Financial Statements; Disclosure..................................12
4.6 Absence of Certain Changes........................................13
4.7 Litigation........................................................14
4.8 Licenses, Compliance with Law, Other Agreements, Etc..............15
4.9 Third-Party Approvals.............................................15
4.10 No Undisclosed Liabilities........................................15
4.11 Tangible Assets...................................................15
4.12 Inventory.........................................................15
4.13 Owned Real Property...............................................16
4.14 Real Property Leases..............................................16
4.15 Agreements........................................................16
4.16 Intellectual Property.............................................16
4.17 Employees.........................................................17
4.18 ERISA; Employee Benefits..........................................17
4.19 Environmental Laws................................................18
4.20 Transactions With Affiliates......................................19
4.21 Taxes.............................................................19
4.22 Other Investors...................................................20
4.23 Year 2000 Representations.........................................20
(i)
TABLE OF CONTENTS
(continued)
4.24 Seniority.........................................................20
4.25 Investment Company................................................21
4.26 Certain Fees......................................................21
4.27 Solicitation Materials............................................21
4.28 Form S-3 Eligibility..............................................21
4.29 Listing and Maintenance Requirements Compliance...................21
4.30 Registration Rights; Rights of Participation......................21
4.31 Synthetic Fuel Facilities.........................................22
5.1 Authorization and Enforceability..................................22
5.2 Government Approvals..............................................23
Article VI
COMPLIANCE WITH SECURITIES LAWS...................................23
6.1 Investment Intent of .............................................23
6.2 Status of Securities..............................................23
6.3 Accredited Investor Status........................................23
6.4 Access to Information.............................................23
6.5 Transfer of Securities, Conversion Shares and Warrant Shares......23
Article VII
CONDITIONS PRECEDENT..............................................24
7.1 Conditions Precedent..............................................24
7.2 Closing Deliveries to the Company.................................27
Article VIII
COVENANTS OF THE COMPANY..........................................27
8.1 Restricted Actions................................................27
8.2 Required Actions..................................................31
8.3 Reservation of Common Stock.......................................34
8.4 Payments Free of Withholding......................................34
Article IX
SURVIVAL..........................................................34
9.1 Survival..........................................................34
Article X
INDEMNIFICATION...................................................34
10.1 Indemnification...................................................34
(ii)
TABLE OF CONTENTS
(continued)
Article XI
GENERAL PROVISIONS................................................35
11.1 Successors and Assigns............................................35
11.2 Entire Agreement..................................................35
11.3 Notices...........................................................35
11.4 Purchaser Fees and Expenses.......................................36
11.5 Amendment and Waiver..............................................37
11.6 Counterparts......................................................37
11.7 Headings..........................................................37
11.8 Specific Performance..............................................37
11.9 Remedies Cumulative...............................................38
11.10 GOVERNING LAW.....................................................38
11.11 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND VENUE.............38
11.12 WAIVER OF JURY TRIAL..............................................39
11.13 No Third Party Beneficiaries......................................39
11.14 Severability......................................................39
11.15 Right of First Refusal............................................39
Exhibit A Certificate of Designations
Exhibit B Financial Statements
Exhibit C Registration Rights Agreement
Exhibit D Security Agreement
Exhibit E Side Agreements
Exhibit F Termination and Release Agreement
Exhibit G Form of Warrant
Exhibit H Form of Convertible Secured Note
Exhibit I Opinion of Counsel
(iii)
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated
as of March 17, 1999, by and among Covol Technologies, Inc.,
a Delaware corporation (the "Company") and OZ Master Fund,
Ltd. (the "Purchaser").
The Purchaser desires to purchase from the Company,
and the Company desires to issue to the Purchaser, upon the
terms and subject to the conditions set forth herein (i) shares
of the Preferred Stock, (ii) the Convertible Secured Notes of the
Company and (iii) the Warrants (other than the Series E
Warrants).
In consideration of the mutual promises,
representations, warranties, covenants and conditions set forth
in this Agreement, the parties hereto agree as follows:
Article I
DEFINITIONS
1.1 Definitions; Interpretation.
(a) For purposes of this Agreement, the
following terms have the indicated meanings:
"Affiliate" of a Person means any
officer, director or employee of the Company and any other
Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under
common control with such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly,
either to (i) vote 20% or more of the Capital Stock
havingordinary voting power for the election of directors of
such Person or (ii) direct or cause the direction of the
management and policies of such Person whether by contract or
otherwise.
"Board of Directors" means the board of
directors of the Company.
"Business Day" means any day other than a
Saturday, a Sunday or a day on which banks in New York City are
authorized or obligated by law or executive order to close.
"Capital Expenditures" means, with respect to
any Person for any period, the sum, without duplication, of
the aggregate amount of all expenditures of such Person
during such period which, in accordance with GAAP, is required
to be included in, or is properly included by such Person
as additions to property, plant or equipment or other similar
fixed asset accounts of such Person. For purposes of the
definition, the purchase price of equipment which is purchased
simultaneously with the trade-in of existing equipment owned by
such Person or with insurance proceeds shall be included
in Capital Expenditures only to the extent that the gross
amount of such purchase price exceeds the amount of the
trade-in credit or insurance proceeds applied to such purchase,
as the case may be.
1
"Capital Stock" of any Person shall mean any
and all shares, interests (including membership and economic
interests in a limited liability company), rights to purchase,
warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt
securities convertible into such equity prior to such
conversion.
"Capitalized Lease" means any lease which is
required under GAAP to be capitalized on the balance sheet of
the lessee.
"Capitalized Lease Obligation" means
obligations for the payment of rent for any Capitalized Lease;
for purposes hereof, the amount of any such obligation shall
be the capitalized amount thereof determined in accordance
with GAAP.
"CERCLA" shall mean the federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980,
as amended.
"Certificate of Designations" means the
Certificate of Designations, Number, Voting Powers, Preferences
and Rights of the series of the Preferred Stock of the Company to
be designated Series D Cumulative Convertible Preferred Stock,
set forth as Exhibit A hereto, as the same may be amended from
time to time with the requisite consent of the holders of
Preferred Stock.
"Closing" has the meaning set forth in Section
3.1.
"Closing Date" has the meaning set forth in
Section 3.1.
"Code" means the Internal Revenue Code of 1986,
as amended.
"Common Stock" means, collectively, the
Company's Common Stock, $.001 par value per share, and any
capital stock of any class of the Company hereafter authorized
which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders
thereof to participate in dividends or in the distribution of
assets upon any liquidation, dissolution or winding up of the
Company.
"Company" has the meaning set forth in the
recitals hereof.
"Confidential Information" means any
proprietary information concerning the Company's business other
than information that (i) was already known to the Person
having a duty tokeep confidential such information on a
nonconfidential basis prior to the time of disclosure, (ii)
is or becomes generally available to the public through no act
or omission of such Person or (iii) becomes available to such
Person on a nonconfidential basis from a source other than any
party hereto (or any agent or representative thereof) if such
source was not under a prohibition against disclosing the
information or otherwise bound by a confidentiality agreement
with respect thereto.
2
"Conversion Shares" means shares of Common
Stock issued or issuable upon conversion of shares of the
Preferred Stock and the Notes; provided, that if there is a
change such that the securities issuable upon conversion of
the Preferred Stock and the Notes are issued by an entity other
than the Company or there is a change in the securities so
issuable, then the term "Conversion Shares" shall mean
shares or the security issuable upon conversion of the
Preferred Stock and the Notes if such securities are issuable in
shares, or shall mean the equivalent units in which such security
is issuable if such security is not issuable in shares.
"Current Balance Sheet" means the audited
balance sheet of the Company as at September 30, 1998.
"Dividend Shares" means shares of Preferred
Stock issued pursuant to Section 1D of the Certificate of
Designations.
"Employee Plan" means an employee benefit
plan (other than a Multiemployer Plan) covered by Title IV
of ERISA and maintained (or was maintained at any time during
the six (6) calendar years preceding the Closing Date) for
employees of the Company, any Subsidiary or any ERISA Affiliate.
"Environmental Actions" refers to any
complaint, summons, citation, notice, directive, order, claim,
litigation, investigation, judicial or administrative
proceeding, judgment, letter or other communication from any
governmental agency, department, bureau, office or other
authority, or any third party involving violations of
Environmental Laws or Releases of Hazardous Materials (i) from
any assets, properties or businesses of the Company or any of its
Subsidiaries, licensees or predecessors in interest; (ii) from
adjoining properties or business; or (iii) from or onto any
facilities which received Hazardous Materials generated by
the Company or any of its Subsidiaries, licensees or
predecessors in interest.
"Environmental Law" means the Comprehensive
Environmental Response, Compensation and Liability Act (42
U.S.C. ss. 9601, et seq.), the Hazardous Materials
Transpiration Act (49 U.S.C. 42 ss. 1801, et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901,
et seq.), the Federal Water Pollution Control Act (33 U.S.C. ss.
1251, et seq.), the Clean Air Act (42 U.S.C. ss. 7401, et seq.),
the Toxic Substances Control Act (15 U.S.C. ss. 2601, et seq.)
and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et
seq.), as such laws may be amended or supplemented from time to
time, and any other present or future federal (United States or
Canada), state, provincial, local or foreign statute,
ordinance, rule, regulation, order, judgment, decree, permit,
license or other binding determination of any Governmental
Agency imposing liability or establishing standards of conduct
for protection of the environment.
"Environmental Liabilities and Costs" means
all liabilities (including strict liabilities), monetary
obligations, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs and
expenses (including all reasonable out-of-pocket fees,
disbursements and expenses of counsel, out-of-pocket expert and
consulting fees, and out-of-pocket costs for environmental
site assessments, remedial investigations and feasibility
studies),
3
fines, penalties, sanctions and interest incurred as a
result of any Environmental Action filed by any Governmental
Agency or any third party, which relate to any violations of
Environmental Laws, Remedial Actions, Releases or threatened
Releases of Hazardous Materials from or onto (i) any
property presently or formerly owned by the Company or any of its
Subsidiaries, licensees or predecessors in interest or (ii)
any facility which received Hazardous Materials generated
by the Company or any of its Subsidiaries, licensees or
predecessors in interest.
"Environmental Lien" means any Lien in
favor of any Governmental Agency for Environmental Liabilities
and Costs.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and any successor statute of
similar import, and regulations thereunder in each case as in
effect from time to time. References to sections of ERISA shall
be construed also to refer to any successor sections.
"ERISA Affiliate" means, with respect to any
Person, any trade or business (whether or not incorporated)
which is a member of a group of which such Person is a member
and which would be deemed to be a "controlled group" within
the meaning of Sections 414(b), (c), (m) and (o) of the Code.
"Exchange Act" means the Securities Exchange
Act of 1934, as amended.
"Existing Indebtedness" has the meaning set
forth in Section 4.2.
"Facilities" has the meaning set forth in
Section 4.31.
"Family Group" means, with respect to an
individual Purchaser, such Purchaser, such Purchaser's spouse,
siblings, descendants and/or ancestors (whether natural, by
marriage or adopted) and any trust solely for the benefit of such
Purchaser and/or such Purchaser's spouse, siblings, their
respective ancestors and/or descendants (whether natural, by
marriage or adopted).
"Financial Statements" means (i) the unaudited
balance sheets of the Company as at December 31, 1998 and
1997, and the related unaudited statements of income and
consolidated cash flow for the quarterly periods then ended,
and (ii) the audited balance sheets of the Company as at
September 30, 1998 and 1997, and the related audited
statements of income and consolidated cash flow for the fiscal
year periods then ended, all of which are attached as Exhibit B
hereto.
"GAAP" means United States generally
accepted accounting principles as in effect from time to time,
consistently
applied.
"Governmental Agency" means any federal, state,
local, foreign or other governmental agency, instrumentality,
commission, authority, board or body and the National
Association of Securities Dealers.
4
"Hazardous Materials" includes (a) any
element, compound or chemical that is defined, listed or
otherwise classified as a contaminant, pollutant, toxic
pollutant, toxic or hazardous substance, extremely hazardous
substance or chemical, hazardous waste, special waste, or
solid waste under Environmental Laws; (b) petroleum and its
refined products; (c) polychlorinated biphenyls; (d) any
substance exhibiting a hazardous waste characteristic,
including but not limited to corrosivity, ignitability,
toxicity or reactivity as well as any radioactive or explosive
materials; and (e) any raw materials, building components,
including but not limited to asbestos-containing materials and
manufactured products containing hazardous substances.
"Hedging Agreement" means any interest rate
swap, collar, cap, floor or forward rate agreement or other
agreement regarding the hedging of interest rate risk exposure
executed in connection with hedging the interest rate exposure
of the Company, and any confirming letter executed pursuant
to such agreement, all as amended, supplemented, restated or
otherwise modified from time to time.
"includes" and "including" mean includes
and including, without limitation.
"Indebtedness" means, without duplication,
as to any Person (i) indebtedness for borrowed money; (ii)
indebtedness for the deferred purchase price of property or
services (other than current trade payables incurred in the
Ordinary Course of Business and payable in accordance with
customary practices); (iii) indebtedness evidenced by bonds,
debentures, notes or other similar instruments (other than
performance, surety and appeal or other similar bonds arising in
the Ordinary Course of Business); (iv) obligations and
liabilities secured by a Lien upon property owned by such
Person, whether or not owing by such Person and even though such
Person has not assumed or become liable for the payment thereof;
(v) obligations and liabilities directly or indirectly
guaranteed by such Person; (vi) obligations or liabilities
created or arising under any conditional sales contract or
other title retention agreement with respect to property used
and/or acquired by such Person, even though the rights and
remedies of the lessor, seller and/or lender thereunder are
limited to repossession of such property; (vii) Capitalized
Lease Obligations; (viii) all liabilities in respect of letters
of credit, acceptances and similar obligations created for the
account of such Person; (ix) net liabilities of such Person
under Hedging Agreements and foreign currency exchange
agreements, as calculated on a basis satisfactory to the
Purchaser and in accordance with accepted practice; and (x)
the Notes issued hereunder valued at the Optional Redemption
Price (as defined in the Notes) for purposes hereof.
"Intellectual Property" means all
domestic and foreign patents, patent applications,
disclosures, industrial designs, discoveries and inventions;
trademarks, service marks, trade dress, trade names,
d/b/a's, Internet domain names and corporate names and all
goodwill associated therewith; published and unpublished works
of authorship, copyrights; registrations, applications
andrenewals for any of the foregoing; trade secrets,
Confidential Information, know-how, technical and computer
data, databases, proprietary information, documentation and
software, financial, business and marketing plans, customer
and supplier lists and all other intellectual property and
proprietary rights; and all copies and tangible embodiments of
the foregoing.
5
"IRS" means the Internal Revenue Service.
"knowledge" or "know" when used with respect
to the Company means the knowledge of the senior management
(vice president or senior) of the Company, or any other
management personnel that has had significant involvement in the
business and affairs of the Company.
"Liability" means any liability or
obligation (whether absolute or contingent, liquidated or
unliquidated or due or to become due).
"Lien" means any mortgage, deed of trust,
pledge, lien, security interest, charge, encumbrance,
security arrangement, restriction, covenant, encroachment or
other title imperfection of any nature whatsoever, including
but not limited to any conditional sale or title
retention arrangement, and any assignment, deposit arrangement
or lease intended as, or having the effect of security.
"Material Adverse Change" means any material
adverse change in the business, condition (financial or
otherwise), prospects or results of operations of the Company
and its Subsidiaries taken as a whole.
"Material Adverse Effect" means any material
adverse effect on (i) the business, condition (financial or
otherwise), prospects or results of operations of the Company
and its Subsidiaries taken as a whole, or (ii) any of the
transactions contemplated hereby or by the Related Documents.
"Multiemployer Plan" means a "multiemployer
plan" as defined in Section 4001(a)(3) of ERISA of which the
Company or any ERISA Affiliate has contributed to, or has been
obligated to contribute to, at any time during the six (6) years
preceding the Closing Date.
"Notes" has the meaning set forth in Section
2.1.
"ordinary course of business" means the
ordinary course of business of the Company consistent with past
practice (including with respect to quantity, quality and
frequency).
"PBGC" means the Pension Benefit Guaranty
Corporation or any successor thereto.
"Permitted Liens" has the meaning set forth in
Section 8.1(l).
"Person" means any individual, partnership,
joint venture, corporation, trust, unincorporated organization or
other entity.
"Plan" means any employee benefit plan (as
defined in Section 3(3) of ERISA), maintained or contributed to
by the Company, or any predecessor or Subsidiary at any time
during the 5-calendar years immediately preceding the date of
this Agreement.
6
"Preferred Shares" has the meaning set forth in
Section 2.1.
"Preferred Stock" means the Series D
Cumulative Convertible Preferred Stock, $.001 par value per
share, of the
Company.
"RCRA" shall mean the federal Resource
Conservation and Recovery Act, as amended.
"Registration Rights Agreement" means the
Registration Rights Agreement between the Company and the
Purchaser substantially in the form of Exhibit C hereto.
"Related Documents" means all documents and
instruments to be executed or adopted by the Company in
connection herewith, including without limitation the
Certificate of Designations, the Preferred Shares, the Side
Agreements, the Termination and Release Agreement, each of
the Notes, the Security Agreement, the Registration Rights
Agreement, the Warrants and all other documents and
instruments to be executed or adopted by the Company
pursuant thereto.
"Release" means any spilling, leaking,
pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, seeping, migrating, dumping
or disposing of any Hazardous Material (including the
abandonment or discarding of barrels, containers and other
closed receptacles containing Hazardous Materials) into the
indoor or outdoor environment, including ambient air, soil,
surface or ground water.
"Remedial Action" means all actions taken
to (i) clean up, remove, remediate, contain, treat, monitor,
assess, evaluate or in any other way address Hazardous Materials
in the indoor or outdoor environment; (ii) prevent or minimize
a Release or threatened Release of Hazardous Materials so they
do not migrate or endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; (iii)
perform pre-remedial studies and investigations and
post-remedial operation and maintenance activities; or (iv) any
other actions authorized by 42 U.S.C. 9601.
"Reportable Event" means any of the events
set forth in Section 4043 of ERISA.
"SEC" means the Securities and Exchange
Commission.
"Securities" has the meaning given that term in
Section 2.1.
"Securities Act" means the Securities Act of
1933, as amended.
"Security Agreement" means the Security
Agreement by and among the Company, the Purchaser, PC Virginia
Synthetic Fuel #1, L.L.C., a Delaware limited liability
company, PC West Virginia Synthetic Fuel #1, L.L.C., a
Delaware limited liability company, PC West Virginia Synthetic
Fuel #2, L.L.C., a Delaware limited liability company, and PC
West Virginia Synthetic Fuel #3, L.L.C., a Delaware limited
liability company, substantially in the form attached as Exhibit
D hereto.
7
"Series E Warrants" has the meaning given
that term in the definition of "Warrants" in this Section 1.1(a).
"Side Agreements" means each of the
Agreements, dated as of the Closing Date, by and between
the Company and each of (i) PC Virginia Synthetic Fuel #1,
L.L.C., a Delaware limited liability company, (ii) PC West
Virginia Synthetic Fuel #1, L.L.C., a Delaware limited liability
company, (iii) PC West Virginia Synthetic Fuel #2, L.L.C.,
a Delaware limited liability company, and (iv) the PC West
Virginia Synthetic Fuel #3, L.L.C., a Delaware limited
liability company, substantially in the form of Exhibit E hereto.
"Subsidiary" means any corporation,
partnership, association or other business entity of which (i)
if a corporation, a majority of the total voting power of shares
of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled,
directly or indirectly, by the Company or (ii) if a
partnership, association or other business entity, a
majority of the partnership or other similar ownership interest
thereof is at the time owned or controlled, directly or
indirectly, by the Company. For purposes hereof, the
Company shall be deemed to have a majority ownership interest
in a partnership, association or other business entity if the
Company, directly or indirectly, is allocated a majority of
partnership, association or other business entity gains or
losses, or is or controls the managing director or general
partner of such partnership, association or other business
entity.
"Tax" means any federal, state, local, or
foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code
ss.59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on
minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether
disputed or not.
"Tax Returns" means any return, declaration,
report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.
"Termination and Release Agreement" means the
Termination and Release Agreement, dated as of the Closing Date,
by and between the Company and Trans Pacific Stores, LTD., a
Hawaiian corporation, substantially in the form of Exhibit F
hereto.
"Termination Event" means (i) a Reportable
Event with respect to any Employee Plan, (ii) any event that
causes the Company or any of its ERISA Affiliates to incur
liability under Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201 or 4212 of ERISA or Section 4971 or 4975 of
the Code, (iii) the filing of a notice of intent to terminate
an Employee Plan or the treatment of an Employee Plan
amendment as a termination under Section 4041 of ERISA, (iv)
the institution of proceedings by the PBGC to terminate an
Employee Plan, or (v) any other event or condition which might
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer any
Employee Plan.
8
"Warrants" means, collectively (i) the Series A
Stock Purchase Warrants of the Company initially exercisable
for 200,000 shares of Common Stock, (ii) the Series B Stock
Purchase Warrants of the Company initially exercisable for
200,000 shares of Common Stock, (iii) the Series C Stock
Purchase Warrants initially exercisable for 228,572 shares of
Common Stock and (iv) the Series D Stock Purchase Warrants
initially exercisable for 342,858 shares of Common Stock, to
be issued by the Company on the Closing Date and (v) the Series E
Stock Purchase Warrants (the "Series E Warrants") of the
Company initially exercisable for 312,196 shares of Common
Stock, to be issued by the Company on the Closing Date, each of
(i) through (v) substantially in the form of Exhibit G hereto.
"Warrant Shares" means shares of the Common
Stock obtained or obtainable upon exercise of the Warrants;
provided, that if there is a change such that the securities
issuable upon exercise of the Warrants are issued by an entity
other than the Company or there is a change in the class of
securities so issuable, then the term "Warrant Shares" shall
mean shares of the security issuable upon exercise of the
Warrants if such security is issuable in shares, or shall mean
the equivalent units in which such security is issuable if
such security is not issuable in shares.
(b) The words "herein," "hereof"
and "hereunder" refer to this Agreement as a whole and not to
any particular article, section or other subdivision of this
Agreement.
Article II
ISSUANCE AND SALE OF THE SECURITIES
2.1 Authorization of the Securities. The Company has
authorized the issuance and sale to the Purchaser of (a) 60,000
shares of Preferred Stock (the "Preferred Shares"), (b) the
Warrants (other than the Series E Warrants) and (c) its
Convertible Secured Notes in an aggregate principal amount of
$20,000,000 and containing the terms and conditions and in the
form of the Note set forth in Exhibit H attached hereto (the
"Notes" and, together with the Preferred Shares, the Warrants
and the Dividend Shares, the "Securities"). The Preferred
Shares and the Notes are convertible into and the Warrants are
exercisable for shares of the Company's Common Stock and the
Notes are secured by a first priority security interest in the
collateral described in the Security Agreement.
2.2 Issuance and Sale of the Securities. At the
Closing, on the terms and subject to the conditions of this
Agreement, the Company shall issue to the Purchaser (a) 60,000
Preferred Shares, (b) Warrants (other than the Series E
Warrants) initially exercisable for an aggregate of 971,430
Warrant Shares, and (c) a Note in the aggregate principal
amount of $20,000,000, for an aggregate purchase price of
$16,000,000. For federal income tax purposes, the Company and
the Purchaser agree that the aggregate amount paid by the
Purchaser for (i) the Preferred Shares is $6,000,000, (ii) the
Warrants (other than the Series E Warrants) is $0, and (iii)
the Notes is $10,000,000. Neither the Company nor the Purchaser
shall file any Tax Return or take any position with any
taxing authority inconsistent with the preceding sentence.
9
Article III
CLOSING; CLOSING DELIVERIES
3.1 Closing. The closing of the transactions
contemplated hereby (the "Closing") shall take place at 10:00
a.m. on March 17, 1999, at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, New
York, New York or at such other time, place and/or date as shall
be agreed upon by the parties hereto. The date upon which the
Closing occurs is referred to herein as the "Closing Date".
3.2 Payment for and Delivery of the Securities. At the
Closing, the Company shall issue and deliver to the Purchaser,
(a) stock certificates for 60,000 Preferred Shares duly
registered in the name of the Purchaser, (b) duly issued
Warrants of the relevant series and initially exercisable
for an aggregate of 971,430 Warrant Shares and (c) a Note in
the aggregate principal amount of $20,000,000, against
payment by the Purchaser, by wire transfer of
immediately-available funds to the account designated by the
Company not less than two (2) days prior to the Closing Date, of
$16,000,000.
Article IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each
Purchaser as follows:
4.1 Existence; Qualification; Subsidiaries. Each of the
Company and its Subsidiaries is a corporation, partnership or
limited liability company, as the case may be, duly organized,
validly existing and in good standing under the laws of the
state of its incorporation or formation and has full corporate
or partnership power and authority, as the case may be, to
conduct its business and own and operate its properties as now
conducted, owned and operated. The copies of the Certificate of
Incorporation, as amended, and By-Laws of the Company and all
amendments thereto previously delivered to the Purchaser are
true, correct and complete copies of such documents. The
Company and each Subsidiary is licensed or qualified as a
foreign corporation, partnership or limited liability company
and is in good standing in all jurisdictions where such
person is required to be so licensed or qualified, except
where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect. Except as
set forth on Schedule 4.1, the Company has no Subsidiaries and
owns no capital stock or other securities of, and has not
made any other investment in, any other entity. All of the
issued shares of capital stock, partnership interests or
membership interests, as the case may be, of each Subsidiary
have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
adverse claims.
4.2 Authorization and Enforceability; Issuance of the
Securities, the Conversion Shares and the Warrant Shares.
(a) The Company has full power and authority
and has taken all required corporate and other action
necessary to permit it to execute and deliver this Agreement
and the Related
10
Documents and to carry out the terms hereof and thereof and to
issue and deliver the Securities, the Conversion Shares and the
Warrant Shares (including adoption and filing in Delaware of the
Certificate of Designations for the Preferred Stock), and
none of such actions will violate any provision of the
Certificate of Incorporation of the Company, the By-Laws of the
Company or of any applicable law, regulation, order, judgment
or decree or rule of any stock exchange where the Company's
Common Stock is listed, or result in the breach of or constitute
a default (or an event which, with notice or lapse of
time or both would constitute a default) under any material
agreement (including the Company's current secured debt
instruments set forth on Schedule 4.2 (the "Existing
Indebtedness")), instrument or understanding to which the
Company is a party or by which it is bound or by which it
will become bound as a result of the transactions contemplated
by this Agreement. This Agreement, each of the Related Documents
and all other agreements and instruments contemplated hereby to
which the Company is a party, have been duly executed and
delivered by the Company and each constitutes a legal, valid
and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except to the
extent that enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws of general application related to the
enforcement of creditor's rights generally and (ii) general
principles of equity.
(b) The Preferred Stock has been duly and
validly authorized and, when issued and delivered in accordance
with this Agreement and, in the case of Dividend Shares, the
Certificate of Designations, will be validly issued, fully
paid, nonassessable, and outstanding. The execution, delivery
and performance of this Agreement, each of the Related
Documents and all other agreements and instruments contemplated
hereby to which the Company is a party have been duly authorized
by the Company. The Preferred Shares and, when issued, the
Dividend Shares, Conversion Shares and the Warrant Shares,
will be fully paid and nonassessable. The Dividend Shares have
been duly reserved for issuance and when issued in accordance
with the Certificate of Designations will be duly authorized,
validly issued and outstanding, fully paid and nonassessable
shares of Preferred Stock. The Conversion Shares and the Warrant
Shares have been duly reserved for issuance upon conversion of
the Preferred Stock and the Notes and exercise of the Warrants,
as the case may be, and, when so issued, will be duly authorized,
validly issued and outstanding, fully paid and nonassessable
shares of Preferred Stock or Common Stock, as the case may be.
Neither the issuance and delivery of the Preferred Shares nor
the issuance and delivery of Dividend Shares, nor the
issuance and delivery of any Conversion Shares upon conversion
of any Preferred Stock or Notes or the issuance and delivery
of any Warrant Shares upon exercise of the Warrants is subject to
any preemptive right of any stockholder of the Company or to
any right of first refusal or other similar right in favor of
any Person.
4.3 Capitalization. The authorized capital stock
of the Company consists of (a) 25,000,000 shares of Common
Stock, par value $.001 per share, of which, as of March 8, 1999,
12,494,029 shares were outstanding, 4,142,858 shares are reserved
for issuance upon conversion of the Preferred Stock and the
Notes, 1,283,626 shares are reserved for issuance upon exercise
of the Warrants, and 5,363,917 shares are reserved for issuance
upon the exercise of certain stock options
11
and warrants, and (b) 10,000,000 shares of preferred stock, par
value $.001 per share, of which (i) 3,000 shares have been
designated Series A Preferred Stock, of which 3,000 shares are
issued and outstanding, (ii) 312,882 shares have been designated
Series B Preferred Stock, of which 27,168 shares are issued
and outstanding, (iii) 1,500 shares have been designated Series
C Preferred Stock, of which 1,000 shares are issued and
outstanding, and (iv) 80,000 shares have been designated
Series D Preferred Stock. Upon the purchase and sale of the
shares of the Preferred Stock to the Purchaser pursuant to this
Agreement, all of such shares will be duly and validly
issued and outstanding. All of the outstanding capital stock
has been validly issued and is fully paid and nonassessable
and has been issued in compliance with all applicable securities
laws (including the provisions of the Securities Act and
the rules and regulations promulgated thereunder) and (ii)
no outstanding capital stock or other equity securities of
the Company ranks senior or pari passu with the Preferred
Stock in right of payment of dividends, or rights upon
liquidation or redemption. There are no options, convertible
securities, warrants, calls, pledges, transfer restrictions
(except restrictions imposed by federal and state securities
laws), voting restrictions, liens, rights of first offer,
rights of first refusal, antidilution provisions or commitments
of any character relating to any issued or unissued shares of
capital stock of the Company other than as contemplated in the
Related Documents. Except as contemplated by this Agreement and
the Related Documents or as set forth inSchedule 4.3,
there are no preemptive or other preferential rights
applicable to the issuance and sale of securities of the Company,
including the Securities, the Dividend Shares, the Conversion
Shares and the Warrant Shares.
4.4 Private Sale. Assuming the accuracy of the
representations and warranties made by recipients of the
Company's capital stock in connection with the acquisition of
such capital stock, the Company has not violated any
applicable federal or state securities laws in connection with
the offer, sale and issuance of any of its capital stock.
Subject to the accuracy of the Purchaser's representations
contained herein, neither the offer, sale and issuance of
the Securities hereunder nor the issuance and delivery of
any Dividend Shares, Conversion Shares upon conversion of any
shares of Preferred Stock or Notes or any Warrant Shares upon
exercise of any Warrants requires registration under the
Securities Act or any state securities laws.
4.5 Financial Statements; Disclosure.
(a) The Financial Statements (together with the
notes thereto, as applicable), (i) are true, correct and
complete in all material respects, (ii) are in accordance with
the books and records of the Company and (iii) fairly present
the financial condition and results of operations of the Company
as of the dates and for the periods indicated in accordance
with GAAP, except that the unaudited balance sheets and
related financial statements do not contain an auditors'
opinion and do not contain footnotes and are subject to normal,
recurring year-end audit adjustments which are not material.
(b) This Agreement together with the
schedules, attachments, exhibits, written statements and
certificates supplied to the Purchaser by or on behalf of the
Company with respect to the transactions contemplated hereby
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
contained herein
12
or therein, in light of the circumstances in which they
were made, not misleading. There is no fact which has not been
disclosed to the Purchaser in writing of which the Company
has knowledge, and which has had or could reasonably be
anticipated to have a Material Adverse Effect.
(c) As of its filing date, each document filed
with the SEC by the Company, as amended or supplemented
prior to the Closing Date, if applicable, pursuant to the
Securities Act and/or the Exchange Act, true and correct
copies of which have been given to the Purchaser (i) complied
in all material respects with the applicable requirements of the
Securities Act and/or Exchange Act and (ii) did not contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein,
in the light of the circumstances under which they were made,
not misleading. Each final registration statement filed with the
SEC by the Company pursuant to the Securities Act, as of the date
such statement became effective (i) complied in all material
respects with the applicable requirements of the Securities Act
and (ii) did 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 not misleading (in
the case of any prospectus, in light of the circumstances under
which they were made).
4.6 Absence of Certain Changes.
(a) Except as set forth on Schedule 4.6(a)
since the date of the Current Balance Sheet, neither the Company
nor any Subsidiary has:
(i) incurred any Liabilities other
than current Liabilities incurred, or obligations under
contracts entered into, in the ordinary course of business
and for individual amounts not greater than $250,000;
(ii) paid, discharged or satisfied any
claim, Lien or Liability, other than any claim, Lien or
Liability (A) reflected or reserved against on the Current
Balance Sheet and paid, discharged or satisfied in the ordinary
course of business since the date of the Current Balance Sheet
or (B) incurred and paid, discharged or satisfied since the date
of the Current Balance Sheet, in each case in the ordinary course
of business;
(iii) sold, leased, assigned or
otherwise transferred any of its assets, tangible or intangible
(other than sales of inventory in the ordinary course of
business and use of supplies in the ordinary course of
business);
(iv) permitted any of its assets,
tangible or intangible, to become subject to any Lien (other
than any Permitted Lien);
(v) written off as uncollectible
any accounts receivable other than (A) in the ordinary course
of business or (B) for amounts not greater than $50,000 in the
aggregate;
13
(vi) terminated or amended or
suffered the termination or amendment of, or other than in the
ordinary course of business, failed to perform in all material
respects all of its obligations or suffered or permitted any
material default to exist under, any material agreement,
license or permit;
(vii) suffered any damage,
destruction or loss of tangible property (whether or not
covered by insurance) which in the aggregate exceeds $100,000;
(viii) made any loan (other than
intercompany advances) to any other Person (other than advances
to employees in the ordinary course of business which do not
exceed $5,000 individually or $25,000 in the aggregate);
(ix) canceled, waived or released any
debt, claim or right in an amount or having a value exceeding
$100,000;
(x) paid any amount to or entered into
any agreement, arrangement or transaction with, or any series of
agreements, arrangements or transactions with, any Affiliate
(including its officers, directors and employees) having a
value of in excess of $5,000 in the aggregate (other than as
Company-wide employee benefits paid in the ordinary course of
business);
(xi) declared, set aside, or paid
any dividend or distribution with respect to its capital
stock or redeemed, purchased or otherwise acquired any of its
capital stock;
(xii) other than in the ordinary
course of business, granted any increase in the compensation of
any officer or employee or made any other change in employment
terms of any officer or employee;
(xiii) made any change in any method
of accounting or accounting practice;
(xiv) suffered or caused any other
occurrence, event or transaction outside the ordinary course
of business or which could have a Material Adverse Effect; or
(xv) agreed, in writing or otherwise,
to any of the foregoing.
(b) Since the date of the Current Balance
Sheet, there has been no Material Adverse Change.
(c) Schedule 4.6(c) hereto sets forth a
complete and accurate list as of the date hereof of (i) each
place of business of the Company and each of its Subsidiaries
and (ii) the chief executive office of the Company and each of
its Subsidiaries.
4.7 Litigation. No claim, suit, proceeding or
investigation is pending or, to the knowledge of the Company,
threatened against or affecting the Company, any Subsidiary
or any
14
licensee or any officer or director thereof or the Company's,
the Subsidiaries' or the licensee's business which if decided
adversely to any such person could have a Material Adverse
Effect. Schedule 4.7 hereto sets forth all litigation to which
the Company is currently a party.
4.8 Licenses, Compliance with Law, Other Agreements,
Etc. Each of the Company, its Subsidiaries and, to the
knowledge of the Company, its licensees has all material
franchises, permits, licenses and other rights to allow it to
conduct its business and is not in violation, in any material
respects of any order or decree of any court, or of any law,
order or regulation of any Governmental Agency, or of the
provisions of any contract or agreement to which it is a party
or by which it is bound, and neither this Agreement nor the
Related Documents nor the transactions contemplated hereby
or thereby will result in any such violation. Each of the
Company's, its Subsidiary's and, to the knowledge of the
Company, its licensee's business has been conducted in
compliance with all federal, state and local laws,
ordinances, rules and regulations, in all material respects.
4.9 Third-Party Approvals. Assuming the accuracy of the
representations and warranties of each Purchaser contained in
this Agreement, the Company is not required to obtain any order,
consent, approval or authorization of, or to make any
declaration or filing with, any Governmental Agency or other
third party (including under any state securities or "blue sky"
laws) inconnection with the execution and delivery of this
Agreement or the Related Documents, or the consummation of the
transactions contemplated hereby or thereby to occur on the
Closing Date, except for any consents, approvals or
authorizations set forth on Schedule 4.9, all of which have been
obtained.
4.10 No Undisclosed Liabilities. Neither the Company
nor any of its Subsidiaries has any Liabilities (other than
contingent Liabilities) except (i) as and to the extent of the
amounts reflected or reserved against on the Current Balance
Sheet (excluding the footnotes thereto) and (ii)
liabilities and obligations incurred in the ordinary course of
business since the date thereof that in the aggregate could not
result in a Material Adverse Effect. To the Company's
knowledge, there are no contingent Liabilities.
4.11 Tangible Assets. Each of the Company and its
Subsidiaries has good and marketable title to, or valid leasehold
interests in, all material tangible assets used or reasonably
necessary in connection with the conduct of its business.
All material tangible assets are free from any Liens (other
than Permitted Liens) and, to the knowledge of the Company,
are free from any material defects, have been maintained in
accordance with normal industry practice and any regulatory
standard or procedure to which such assets are subject, are
in good operating condition and repair (subject to normal wear
and tear) and are suitable for the purposes for which such
assets are used or proposed to be used, other than defects and
wear and tear which in the aggregate could not be expected to
have a Material Adverse Effect.
4.12 Inventory. All inventory of each of the
Company and its Subsidiaries, whether reflected on the
Current Balance Sheet or otherwise, consists of a quality and
quantity usable or
15
salable in the ordinary course of business, subject to normal
rates of defect or obsolescence consistent with the Company's
historical experience.
4.13 Owned Real Property. Set forth on Schedule
4.13 is a true and correct description of all real property
owned by the Company and its Subsidiaries. The Company and
each of its Subsidiaries has good and marketable title in fee
simple, free and clear of all Liens (other than any
Permitted Lien), to all of the real property owned by the
Company and each of its Subsidiaries.
4.14 Real Property Leases. Except as set forth on
Schedule 4.14, there exists no event of default (nor any event
which with notice or lapse of time would constitute an event
of default) with respect to the Company, any Subsidiary
and, to the Company's knowledge, with respect to any other
party thereto under any agreement pursuant to which the
Company is the lessee or lessor of any real property,
except for such defaults and defects in enforceability as
could not in the aggregate be expected to have a Material
Adverse Effect, and all such agreements are in full force
and effect and enforceable against the lessor or lessee in
accordance with their terms except for such defaults and defects
in enforceability as could not in the aggregate be expected to
have a Material Adverse Effect.
4.15 Agreements. Except as set forth on Schedule
4.15, none of the Company, any Subsidiary or, to the knowledge
of the Company, any licensee is in default, nor to the
knowledge of the Company is there any basis for a valid claim
of default, and to the Company's knowledge no event has
occurred which, with notice or lapse of time, would constitute
a default, under any agreement, arrangement or understanding
to which the Company, any Subsidiary or any licensee is
aparty, and to the knowledge of the Company, no Person other
than the Company is in default under any such agreement, in
each case other than defaults which in the aggregate could not be
expected to have a Material Adverse Effect. Additionally, none
of the Company, any Subsidiary or, to the knowledge of the
Company, any licensee is party to any agreement the performance
of which in accordance with its terms (including any termination
provision thereof) could be expected to have a Material Adverse
Effect.
4.16 Intellectual Property. Schedule 4.16 sets forth a
complete list of (i) all patented, registered, applied for or
otherwise material Intellectual Property owned, filed or used
by the Company; and (ii) all trade names and material
unregistered trademarks and other designations used by the
Company in connection with its business. The Company owns and
possesses all right, title and interest in and to, or has a
valid and enforceable license to use, all Intellectual
Property used by the Company in its business as currently
conducted and as currently proposed to be conducted. No
claim by any third party contesting the validity,
enforceability, use or ownership of Intellectual Property
owned, held or used by the Company has been made or, to the
knowledge of the Company, is threatened. To the knowledge of the
Company, neither it nor its indemnitees has violated or
misappropriated the Intellectual Property of any third party and
no third party has violated or misappropriated Intellectual
Property owned, held or used by the Company. No claim by any
third party has been asserted, or to the knowledge of the
Company threatened, that the Company or its indemnitees is
violating or misappropriating Intellectual Property. To the
knowledge of the Company, all Intellectual Property owned or
held by the Company is valid, subsisting and
16
enforceable, and all such Intellectual Property is free of
all Liens, and, except as set forth on Schedule 4.16, is fully
assignable by the Company to any Person, without payment,
consent of any Person or other condition or restriction.
The Company has taken all reasonable measures to protect
the secrecy, confidentiality and value of all Confidential
Information, proprietary information and trade secrets owned,
held or used by the Company (including, without limitation,
entering into appropriate confidentiality agreements with all
officers, directors, employees, and other Persons with
access to such information and trade secrets). To the
knowledge of the Company, such information and trade secrets
have not been disclosed to any Persons other than Company
employees or Company contractors who had a need to know and
use such information and trade secrets in the ordinary course
of employment or contract performance and who executed
appropriate confidentiality agreements.
4.17 Employees. Except as set forth on Schedule 4.17,
since the date of the Current Balance Sheet, no key employees
and no group of employees has terminated, or to the knowledge
of the Company plans to terminate, employment with the Company
or any Subsidiary, as applicable. Except as set forth on
Schedule 4.17, the Company is not a party to or bound by
any collective bargaining agreement, nor has it experienced
any strike, material grievance, material claim of unfair labor
practice or other collective bargaining dispute. Except as set
forth on Schedule 4.17, to the knowledge of the Company there
is no organizational effort being made or threatened by or on
behalf of any labor union with respect to its employees. To the
knowledge of the Company, it has not committed any unfair labor
practice or violated any federal, state or local law or
regulation regulating employers or the terms and conditions of
its employees' employment, including laws regulating employee
wages and hours, employment discrimination, employee civil
rights, equal employment opportunity and employment of
foreign nationals, except for such violations as could not be
expected to have a Material Adverse Effect.
4.18 ERISA; Employee Benefits. Each Plan (other than a
Plan which is a Multiemployer Plan) that is intended to be
qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue
Service or has timely filed for a favorable determination
letter from the Internal Revenue Service and no event has
occurred since the date of the last determination letter that
could reasonably be expected to materially adversely affect the
qualified status of such Plan. Each Plan (other than a Plan
which is a Multiemployer Plan) is in full force and effect and
has been administered in all material respects in accordance
with its terms and is and has been, and each plan administrator
and fiduciary of a Plan is acting and has been acting, in
compliance in all material respects with all applicable
requirements of the Code and ERISA (including the funding,
reporting and disclosure and prohibited transaction
provisions thereof) and other applicable laws, regulations
and rulings in connection with each such Plan. No Plan has
been terminated or partially terminated. With respect to each
Plan which is a Multiemployer Plan, no complete or partial
withdrawal (within the meaning of Sections 4203 and 4205 of
ERISA) has occurred, no such Plan is in reorganization or
insolvency (within the meaning of Title IV of ERISA) and no
material withdrawal liability has been or could be assessed
against the Company. The Company or one of its Subsidiaries has
made, accrued or provided for all contributions required under
each Plan. To the knowledge of the Company, no event has occurred
or is reasonably expected to occur with respect to any employee
pension benefit plan of the Company or any member
17
of the Company's controlled group (within the meaning of
Section 414 of the Code), which could reasonably be expected to
directly or indirectly result in any material liability (other
than liability arising in the ordinary course) to the Company or
any member of its controlled group pursuant to Title IV of ERISA
or Section 412 of the Code. No Plan (other than a Plan which is a
Multiemployer Plan) has incurred an "accumulated funding
deficiency" within the meaning of Section 412 of the Code or
Section 302 of ERISA.
4.19 Environmental Laws. Except as set forth on Schedule
4.19:
(a) Each of the Company (as used in this
Section 4.19, Company shall include any predecessor and the
Company's Subsidiaries) and, to the knowledge of the Company,
its licensees has complied and is in compliance with all
Environmental Laws.
(b) The Company and, to the knowledge of the
Company, its licensees have obtained and complied with, and
are in compliance with, all permits, licenses and other
authorizations that are required pursuant to Environmental
Laws to operate its facilities, assets, and its businesses.
(c) No Environmental Actions have been
asserted against the Company or, to the knowledge of the
Company, against any licensee or facility that may have
received Hazardous Materials generated by the Company or any
licensee, regarding any actual, threatened, or alleged
violation of Environmental Laws, or any liabilities or
potential liabilities (whether accrued, absolute, contingent,
unliquidated, or otherwise), including any investigatory,
remedial, or corrective obligations, relating to it or its
operations under Environmental Laws.
(d) To the knowledge of the Company, none of
the following exists at any property or facility currently or
formerly owned or operated by either the Company or, to the
knowledge of the Company, any licensee: (i) underground
storage tanks, (ii) asbestos-containing material in any form
or condition, (iii) materials or equipment containing
polychlorinated biphenyls, or (iv) landfills, surface
impoundments, or waste disposal areas, except for feed-stock
properties for Company facilities.
(e) Except as disclosed on Schedule 4.19,
neither the Company nor, to the knowledge of the Company, any
licensee has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled, or Released any
substance, including without limitation any Hazardous Material,
or owned or operated any property or facility (and no such
property or facility is contaminated by any such substance)
in a manner that has given or would give rise to Environmental
Liabilities and Costs. There has been no Release at any of the
properties owned or operated by the Company or, to the
knowledge of the Company, at any of the properties owned or
operated by its licensees or, to the knowledge of the Company,
at any disposal treatment facility which received Hazardous
Materials generated by the Company or any licensee which is
reasonably likely to result in Environmental Liabilities and
Costs.
18
(f) Except as disclosed on Schedule 4.19,
neither this Agreement nor the consummation of the transactions
that are contemplated by this Agreement will result in any
obligations for site investigation, cleanup or notification
pursuant to any so-called "transaction-triggered" or
"responsible property transfer" Environmental Laws.
(g) Neither the Company nor, to the knowledge
of the Company, any licensee has, either expressly or by
operation of law, assumed or undertaken any liability,
including without limitation any obligation for corrective or
Remedial Action, of any other Person relating to Environmental
Laws.
(h) The Company has provided to the Purchaser
copies of all of the following in the Company's possession:
(i) the environmental compliance audits or any so-called "Phase
I" or "PhaseII" environmental assessments, all of which are
listed on Schedule 4.19; (ii) notices of Environmental Actions,
CERCLA information requests and responses, and similar
documents, relating to violations of Environmental Laws,
or Environmental Liabilities and Costs, relating to the
Company or its licensees; (iii) correspondence alleging
nuisance, injury or property damage arising from odors,
noise, pollution or contamination associated with the Company's
business; (iv) reports prepared in connection with any Remedial
Action, RCRA corrective actions, or other site investigations
or cleanups required or undertaken pursuant to Environmental Laws
and associated with properties owned, leased, used or operated
by the Company and its licensees; (v) documents describing or
explaining cost estimates for closure and post-closure care of
the Company's and its licensees' facilities involved in the
treatment, storage or disposal of hazardous wastes; (vi) and
documents alleging, describing or explaining the Company's
liability or potential liability pursuant to Environmental Laws.
4.20 Transactions With Affiliates. Except as set
forth on Schedule 4.20, neither the Company nor any
Subsidiary is party to any agreement, arrangement or
transaction or series of agreements, arrangements or transactions
with any Affiliate which agreements, arrangements,
transactions and series of transactions in the aggregate have
a value over $5,000 (other than as Company-wide employee
benefits paid in the ordinary course of business).
4.21 Taxes.
(a) Except as disclosed on Schedule 4.21, each
of the Company and its Subsidiaries has filed all Tax Returns
that it was required to file, and has paid all Taxes due with
respect to the periods covered by such Tax Returns.
(b)None of the Company and its Subsidiaries
(i) has been a member of an affiliated group filing a
consolidated federal Tax Return (other than a group the common
parent of which was the Company) or (ii) has any Liability
for the Taxes of any Person (other than any of the Company and
its Subsidiaries) under Treas. Reg. ss.1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
19
(c) Each of the Company and its Subsidiaries
has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor,
stockholder, or other third party.
(d) Except as set forth on Schedule 4.21,
there is no dispute or claim concerning any Tax Liability of any
of the Company and its Subsidiaries either (i) claimed or raised
by any authority in writing or (ii) as to which any of the
directors and officers (and employees responsible for Tax
matters) of the Company and its Subsidiaries has knowledge based
upon personal contact with any agent of such authority.
4.22 Other Investors. Set forth on Schedule 4.22
is a list of all shareholders (including option and convertible
securityholders) of the Company who as of the date hereof,
based on SEC filings of such shareholders, after giving effect
to the terms hereof, own more than 5% of the fully diluted
common equity of the Company and sets forth such percentage
ownership.
4.23 Year 2000 Representations. The Company
represents and warrants that:
(a) The Company does not have any computer
applications that it believes are mission critical to the
operation of synthetic fuel facilities that it operates. While
the Company has not formally verified Year 2000 compliance
with licensees that utilize the Company's technology in
their synthetic fuel facilities, the Company believes that the
computer applications used in the operations of these
facilities are not mission critical. Accordingly, the
Company believes that Year 2000 issues will not be significant to
these computer applications and accordingly, upgrading or
modifications to these applications to make them Year 2000
compliant will not be significant.
(b) During 1998 the Company upgraded its
network operating system and believes that system is Year 2000
compliant and that any additional upgrading to that system will
not be significant. The Company utilizes computer applications
in the finance and accounting departments and in the
corporate office that utilize a two-digit date that will need
to be upgraded in order to be Year 2000 compliant. The Company
has contacted the providers of this software and they have
indicated that Year 2000 compliant software will be available
in early 1999. The Company believes the cost to purchase this
upgraded software and to convert the applicable applications
to this new software will be less than $50,000. The Company
anticipates that this conversion will be completed by June 30,
1999. The costs incurred during 1998 to upgrade the network
operating systems was approximately $25,000 and is included
in selling, general and administrative expenses.
4.24 Seniority. No Capital Stock of the Company
whether or not currently outstanding is senior to or pari
passu with the Preferred Stock in right of payment, whether
with respect to dividends or redemption or upon liquidation,
dissolution or otherwise.
20
4.25 Investment Company. The Company is not, and is
not controlled by or under common control with an affiliate of,
an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
4.26 Certain Fees. Other than fees and expenses due and
payable to the Purchaser (pursuant to Sections 8.2(l) and 11.4),
Havenwood Capital Markets, LLC and Leeds Group Inc., no fees or
commissions will be payable by the Company to any broker,
financial advisor, finder, investment banker, or bank with
respect to the transactions contemplated by this Agreement. The
Purchaser shall not have any obligation with respect to any fees
or with respect to any claims made by or on behalf of Havenwood
Capital Markets, LLC or other Persons (other than any fees
that may be payable to the Leeds Group Inc. by the Purchaser
pursuant to a separate written agreement between the Purchaser
and the Leeds Group Inc.) for fees of a type contemplated in
this section that may be due in connection with the transactions
contemplated by this Agreement. The Company shall indemnify and
hold harmless the Purchaser, its employees, officers,
directors, agents and partners,and their respective Affiliates
from and against all claims, losses, damages, costs (including
attorney's fees) and expenses suffered in respect to any such
claimed or existing fees.
4.27 Solicitation Materials. The Company has not (i)
distributed any offering materials in connection with the
offering and sale of the Securities other than the disclosure
materials delivered to the Purchaser (the "Disclosure Materials")
or (ii) solicited any offer to buy or sell the Securities by
means of any form of general solicitation or general advertising
within the meaning of Regulation D under the Securities Act.
None of the Disclosure Materials or any other information
provided to the Purchaser by or on behalf of the Company
contain any untrue statement of material fact or omit to state
a material fact required to be stated therein or necessary to
make the statements therein not misleading.
4.28 Form S-3 Eligibility. The Company is
eligible to register securities for resale with the SEC on Form
S-3 promulgated under the Securities Act.
4.29 Listing and Maintenance Requirements Compliance.
(a) The Company has not received notice (written or oral) from
the National Association of Securities Dealers that the
Company is not in compliance with its listing or maintenance
requirements.
(b) Upon conversion of shares of the
Preferred Stock or the Notes into Conversion Shares or the
exercise of the Warrants for the Warrant Shares, all such
Conversion Shares and Warrant Shares shall be listed on the
Nasdaq National Market System.
4.30 Registration Rights; Rights of Participation.
Except as described on Schedule 4.30 hereto, (a) the Company
has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any
securities of the Company registered with the SEC or any
other Governmental Agency which has not expired or been
satisfied in full and (b) no Person, including, but not
limited to, current or former shareholders of the Company,
underwriters, brokers or agents, has any right of first
refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated
by this Agreement or any other
21
related document which has not been waived. None of the rights
granted to the Purchaser hereunder and under the Related
Documents conflicts with or would cause a default under any of
the agreements or arrangements listed on Schedule 4.30 hereto.
4.31 Synthetic Fuel Facilities.
(a) The Company shall take all reasonably
necessary action to ensure that the credit for producing fuel
from a nonconventional source provided under Section 29 of the
Code is available and is maintained with respect to each of the
Company's and its licensee's facilities for producing
synthetic fuels ("Facilities") including, without limitation,
ensuring that the Facilities produce "qualified fuels" (as
defined in Section 29(c) of the Code) and such qualified fuels
are sold to persons that are not "related persons" (as defined
in Section 29(d)(7) of the Code). Each of the Facilities was
placed in service before July 1, 1998, in each case pursuant
to a binding written contract in effect on or before December
31, 1996. For purposes of this Section 4.31, each representation
made regarding licensees of the Company is made to the knowledge
of the Company.
(b) Each of the representations and warranties
made by any of the Company, its Subsidiaries or its licensees
in obtaining any private letter ruling from the Internal
Revenue Service was true and correct in all material respects
when made and as of the date the ruling was issued.
(c) Set forth on Schedule 4.31 is each private
letter ruling obtained from the Internal Revenue Service
regarding the Facilities which is addressed to the Company or
any of its licensees or is otherwise able to be relied upon
by the Company. To the Company's Knowledge, (i) no private
letter ruling listed on Schedule 4.31 has been amended,
rescinded or revoked since the date of issuance, and (ii) there
exists no reason that the Internal Revenue Service would deny a
request by the Company or any owner of the Facilities for a
private letter ruling with regard to the Facilities owned by the
Company or any of its licensees.
Article V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the
Company as follows:
5.1 Authorization and Enforceability. The Purchaser has
full power and authority and has taken all action necessary to
permit him/it to execute and deliver this Agreement and the
other documents and instruments to be executed by it pursuant
hereto and to carry out the terms hereof and thereof. This
Agreement and each such other document and instrument, when duly
executed and delivered by the Purchaser, will constitute a valid
and binding obligation of the Purchaser, enforceable against the
Purchaser in accordance with its terms, except to the extent
limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws of general
application related to the enforcement of creditors' rights
generally and (ii) general principles of equity.
22
5.2 Government Approvals. To the knowledge of Purchaser,
the Purchaser is not required to obtain any order, consent,
approval or authorization of, or to make any declaration or
filing with, any Governmental Agency in connection with the
execution and delivery of this Agreement and the other
documents and instruments to be executed by it pursuant hereto
or the consummation of the transactions contemplated hereby
and thereby, except for any such order, consent, approval,
authorization, declaration or filing which (i) has been or will
be obtained or made, or (ii) is related to the nature of the
business in which the Company is engaged.
Article VI
COMPLIANCE WITH SECURITIES LAWS
6.1 Investment Intent of the Purchaser. The Purchaser
represents and warrants to the Company that it is acquiring the
Securities for its own account, with no present intention of
selling or otherwise distributing the same in violation of the
Securities Act.
6.2 Status of Securities. The Purchaser has been
informed by the Company that the Securities have not been and
will not be registered under the Securities Act or under any
state securities laws and are being offered and sold in reliance
upon federal and state exemptions for transactions not involving
any public offering.
6.3 Accredited Investor Status. The Purchaser
represents and warrants to the Company that it is an "Accredited
Investor" as defined in Regulation D under the Securities Act.
6.4 Access to Information. The Purchaser has had
access to management of the Company and has been able to ask
questions of management related to the Company and has reviewed
the Company's filings pursuant to the Exchange Act.
Notwithstanding any due diligence investigations conducted by
or on behalf of the Purchaser, it is understood and agreed by
each of the parties hereto that the Purchaser is entitled to
rely, and is relying, on the representations and warranties
made by the Company herein and in the Related Documents.
6.5 Transfer of Securities, Conversion Shares and
Warrant Shares.
(a) Securities, Conversion Shares and
Warrant Shares may be transferred (i) pursuant to public
offerings registered under the Securities Act, (ii) pursuant
to Rule 144 of the SEC (orany similar rule then in force), (iii)
to an Affiliate or member of the Family Group of the transferor
(provided that the subsequent transfer of the Securities,
Conversion Shares or Warrant Shares is restricted), or (iv)
subject to the conditions set forth in Section 6.5(b), any other
legally-available means of transfer.
(b) In connection with any transfer of
any Securities, Conversion Shares or Warrant Shares (other than
a transfer described in Section 6.5(a)(i), (ii) or (iii)), the
holder of such shares shall deliver written notice to the
Company describing in reasonable detail the proposed
transfer, together with an opinion of counsel (which, to
the Company's reasonable satisfaction,
23
is knowledgeable in securities law matters), to the effect
that such transfer may be effected without registration of such
shares under the Securities Act.
(c) Until transferred pursuant to clauses
(a)(i) or (ii) above, each Note, Warrant and each certificate for
Preferred Shares, Conversion Shares and Warrant Shares shall be
imprinted with a legend substantially in the following form:
THE SECURITIES REPRESENTED BY THIS
[NOTE/CERTIFICATE/WARRANT] WERE ORIGINALLY ISSUED ON
MARCH 17, 1999 AND HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
APPLICABLE STATE SECURITIES LAW.
THE TRANSFER OF THE SECURITIES
REPRESENTED BY THIS [NOTE/CERTIFICATE/WARRANT] IS
SUBJECT TO THE CONDITIONS SET FORTH IN THE
SECURITIES PURCHASE AGREEMENT, DATED AS OF MARCH 17, 1999,
BETWEEN THE ISSUER (THE "COMPANY") AND THE
PURCHASER NAMED THEREIN. THE COMPANY RESERVES THE RIGHT TO
REFUSE ANY TRANSFER OF SUCH SECURITIES UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH
TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE
FURNISHED WITHOUT CHARGE TO THE HOLDER HEREOF UPON
WRITTEN REQUEST TO THE COMPANY.
Article VII
CONDITIONS PRECEDENT
7.1 Conditions Precedent. The obligation of the
Purchaser to purchase the Securities hereunder is subject to the
satisfaction of each of the following conditions precedent:
(a) The issuance and sale of the
Securities shall not contravene any law, rule or regulation
applicable to the Purchaser or the Company or any of its
Subsidiaries;
(b) The following conditions have been
satisfied as of the Closing Date,
(i) The representations and warranties
of the Company contained herein and in any Related Document
and in any writing delivered pursuant hereto or thereto shall
be true and correct when made and materially true and correct as
of the time of the Closing;
(ii) No action, suit, investigation or
proceeding shall be pending or threatened before any court
or Governmental Agency to restrain, prohibit, collect damages
as a result of or otherwise challenge this Agreement or any
Related Document or any transaction contemplated hereby or
thereby;
24
(iii) All acts or covenants required
hereunder to be performed by the Company prior to the Closing
shall have been fully performed by it; and
(iv)No Material Adverse Change
shall have occurred between the date of the Current Balance
Sheet and the Closing Date and no event or occurrence shall have
occurred that could have a Material Adverse Effect.
(c) The following documents and items shall
be delivered to the Purchaser at or prior to the Closing:
(i) Stock Certificates for the
Preferred Shares duly registered in the name of the Purchaser and
evidence acceptable to the Purchaser of adoption and filing with
the Secretary of State of the State of Delaware by the Company
of the Certificate of Designations;
(ii) Fully executed Notes and a fully
executed counterpart of this Agreement, the Security Agreement
and the UCC-1 financing statements related thereto, the
Registration Rights Agreement, the Side Agreements, the
Termination and Release Agreement and the Warrants;
(iii) The written opinion of
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, counsel for the Company, in the
form of Exhibit I hereto;
(iv) Certificates of a duly authorized
officer of the Company dated as of the Closing Date:
(A) Stating that the following
conditions have been satisfied as of the Closing Date,
(1) The representations and warranties
of the Company contained herein and in any
writing delivered pursuant hereto were true
and correct when made and are materially
true and correct as of the time of the Closing;
(2) No action, suit, investigation
or proceeding is pending or threatened
before any court or Governmental Agency to
restrain, prohibit, collect damages as a
result of or otherwise challenge this Agreement or any
Related Document or any transaction contemplated
hereby or thereby;
(3) All acts or covenants required hereunder
to be performed by the Company prior to the Closing have
been fully performed by it; and
(4) No Material Adverse Change
shall have occurred between the date of the
Current Balance Sheet and the Closing Date and
there shall have
25
been no event or occurrence that could result in a
Material Adverse Effect; and
(B) Setting forth the resolutions of the Board of
Directors authorizing (i) the execution and
delivery of this Agreement and the Related
Documents (including the Certificate of
Designations) and the consummation of the transactions
contemplated hereby and thereby, (ii) the
increase of the Board of Directors to eight
(8) members and (iii) the appointment of an
individual designated by the Purchaser to the
Board of Directors, and certifying that such resolutions
were duly adopted and have not been rescinded or
amended;
(v)The Company shall have paid fees
payable pursuant to Section 11.4 hereof and a fee of
$400,000 and Series E Warrants to purchase 156,098 shares of
Common Stock payable to Leeds Group Inc.;
(vi) An executed Termination and Release
Agreement and evidence satisfactory to the Purchaser in its sole
discretion that Trans Pacific Stores Ltd., a Hawaiian
corporation, has no lien on any of the Company's, any of its
Subsidiaries' or its licensee's property or assets with respect
to its loan to the Company pursuant to the Secured Draw Down
Promissory Note, dated as of March 17, 1998;
(vii) Lien search results satisfactory to the
Purchaser in its sole discretion;
(viii)A certificate of an authorized officer
of the Company, certifying the names and true signature of the
representatives of such Person authorized to sign this Agreement
and the Related Documents to which such Person is or will be a
party and the other documents to be executed and delivered by
such Person in connection herewith, together with evidence of
the incumbency of such authorized officers;
(ix) A certificate of the appropriate
official(s) of the state of organization and each state of
foreign qualification of the Company and each of its
Subsidiaries certifying asto the subsistence in good standing of,
and the payment of taxes by, such Person in such states,
together with confirmation by telephone, facsimile or telegram
on the Closing Date as to such matters from such official(s)
or from a recognized service company specializing in the
verification of organizational good standing;
(x) A true and complete copy of the
Certificate of Incorporation, as amended, of the Company,
certified as of a date not more than 30 days prior to the
Closing Date by an appropriate official of the state of
organization of each such Person and a true and complete copy
of the Bylaws of the Company, certified as of the Closing Date
by the Secretary of the Company; and
(xi) Such other documents relating to
the transactions contemplated hereby as the Purchaser may
reasonably
request.
26
(d) The Company shall have executed
and delivered to the Purchaser the Certificates (in such
denominations as the Purchaser shall request) for the
Preferred Stock and the Warrants being purchased by such
Purchaser at the Closing.
7.2 Closing Deliveries to the Company. The Purchaser
will deliver to the Company the aggregate purchase price for
the Securities to be acquired by the Purchaser.
Article VIII
COVENANTS OF THE COMPANY
8.1 Restricted Actions. Without the prior written
consent of the holders of (i) two-thirds (2/3) (or such higher
percentage of holders as may then be required by law) of the
then outstanding shares of Preferred Stock and (ii) two-thirds
(2/3) of the then outstanding aggregate principal amount of the
Notes, and for so long as any of the Preferred Stock or
Notes remain outstanding, the Company shall not, and shall not
permit any Subsidiary to:
(a) become subject to any agreement or
instrument which by its terms would (under any circumstances)
restrict or impair the Company's right to comply with or fulfill
its obligations under the terms of this Agreement or any of the
Related Documents;
(b) use the proceeds from the sale of the
Securities other than for repayment of indebtedness, working
capital and other general corporate purposes; provided, that the
Company will in no event use the proceeds to invest in any
securities other than short-term, interest-bearing government
securities;
(c) enter into any transaction or series of
transactions with any stockholder, director, officer, employee
or Affiliate, including, without limitation, the purchase,
sale, lease orexchange of any property, the rendering of any
service or any investment, loan or advance, unless such
transaction (i) is consummated by the Company in good faith on an
arm's-length basis, (ii) is less than $100,000 per occurrence
or $250,000 in the aggregate, and (iii) is approved by the
Board of Directors, including by a majority of the Company's
disinterested directors;
(d) expand the Board of Directors to greater
than eight (8) members;
(e) except with respect to the sale of the
synthetic fuel facilities of the Company set forth on Schedule
8.1(e), sell all or any material portion of its assets,
determined on a consolidated basis;
(f) declare or pay any dividends, purchase
or otherwise acquire for value any of its membership interests
or other Capital Stock now or hereafter outstanding, return any
capital to its members as such, or make any other payment or
distribution of assets to its stockholders as such, or permit
any of its Subsidiaries to do any of the foregoing or to
27
purchase or otherwise acquire for value any Capital Stock of the
Company or its Subsidiaries, or make any payment or prepayment
of principal of, premium, if any, or interest on, or redeem,
decrease or otherwise retire, any Indebtedness before its
scheduled due date;
(g) materially alter or change the business of
the Company;
(h) issue any stock option at less than the
fair market value at the time of grant;
(i) create, incur or suffer to exist,
or permit any of its Subsidiaries to create, incur or suffer to
exist, any Indebtedness, other than:
(i) Indebtedness created hereunder
and under the Notes;
(ii) Indebtedness existing on the date
hereof, as set forth in Schedule 8.1(i) hereto, and any
extension of maturity, refinancing or modification of the terms
thereof; provided, however, that such extension, refinancing
or modification (A) is pursuant to terms that are not
materially less favorable to the Purchaser than the terms
of the Indebtedness being extended, refinanced or modified and
(B) after giving effect to the extension, refinancing or
modification, such Indebtedness is not greater than the amount of
Indebtedness outstanding immediately prior to such extension,
refinancing or modification;
(iii) Indebtedness under Capitalized
Leases permitted by subparagraph (p) of this Section 8.1; and
(iv) additional Indebtedness at any one
time outstanding not to exceed $4,000,000.
(j) enter into any merger, combination,
consolidation, reorganization, recapitalization, liquidation or
other similar transaction of the Company or any agreement with
respect to any of the foregoing, other than a transaction for
the purpose of changing the Company's domicile;
(k) amend the Certificate of Incorporation or
Bylaws, or alter the rights, preferences and privileges of the
Securities, the Conversion Shares or the Warrant Shares;
(l) create or suffer to exist, or
permit any of its Subsidiaries to create or suffer to exist,
any Lien upon or with respect to any of its properties, rights
or other assets, whether now owned or hereafter acquired,
or assign or otherwise transfer, or permit any of its
Subsidiaries to assign or otherwise transfer, any right to
receive income, other than the following ("Permitted Liens"):
28
(i) Liens existing on the date
hereof, as set forth in Schedule 8.1(l) hereto, but not the
extension of coverage thereof to other property or the extension
of maturity, refinancing or other modification of the terms
thereof or of the Indebtedness secured thereby;
(ii) Liens created by operation of law
(other than Environmental Liens), such as materialmen's liens,
mechanics' liens and other similar Liens arising in the ordinary
course of business;
(iii) deposits, pledges or Liens
(other than Liens arising under ERISA or the Code) securing (A)
obligations incurred in respect of workers' compensation,
unemployment insurance or other forms of governmental insurance
or benefits, (B) the performance of bids, tenders, leases,
contracts (other than for the payment of money) and
statutory obligations, or (C) obligations on surety or appeal
bonds, but only to the extent such deposits, pledges or Liens
are incurred or otherwise arise in the ordinary course of
business and secure obligations which are not past due;
(iv) restrictions or covenants on
the use of real property and minor irregularities in the title
thereto which do not (A) secure obligations for the payment of
money or (B) materially adversely impair the value or
marketability of such property or its use by the Company or any
of its Subsidiaries in the normal conduct of such Person's
business; provided, that in all such cases the Company or
relevant Subsidiary complies in all material respects with
all of its obligations under such title restrictions or
covenants;
(v) Liens securing Capitalized
Leases permitted by subparagraph (p) of this Section 8.1; and
(vi) non-consensual Liens, but only
if the Company has posted a bond or other financial assurance
sufficient to satisfy the Indebtedness secured by such Lien.
(m) assume, guarantee, endorse or otherwise
become directly or contingently liable (including, without
limitation, liable by way of agreement, contingent or otherwise,
to purchase, to provide funds for payment, to supply funds to
or otherwise invest in the debtor or otherwise to assure the
creditor against loss), in connection with any Indebtedness of
any other Person (other than, in the case of the Company,
guaranties of Indebtedness of any Subsidiaries), other than
(i) guaranties by endorsement
of negotiable instruments for deposit or collection in the
ordinary course of business; and
(ii) guaranties existing on the date
hereof, as set forth in Schedule 8.1(m) hereto, but not any
renewal or other modification thereof;
29
(n) make, or permit any of its Subsidiaries to
make, any loan or advance to any Person or purchase or otherwise
acquire or permit any of its Subsidiaries to purchase or
otherwise acquire, any capital stock, properties, assets or
obligations of, or any interest in, any Person, other than (i)
raw material purchased in the ordinary course of business
and (ii) trade credit extended in the ordinary course of
business;
(o) create, incur or suffer to exist, or
permit any of its Subsidiaries to create, incur or suffer to
exist, any obligations as lessee (i) for the payment of rent for
any real or personal property in connection with any sale and
leaseback transaction, or (ii) for the payment of rent for any
real or personal property under Capitalized Leases which
would cause the aggregate amount of all obligations under
Capitalized Leases entered into after the Closing Date owing
by the Company in any fiscal year to exceed the amounts set
forth in subsection (p) of this Section 8.1;
(p) except as set forth on Schedule
8.1(p), make or be committed to make, or permit any of its
Subsidiaries to make or be committed to make, any Capital
Expenditure (by purchase or capitalized lease) other than
Capital Expenditures (including obligations under Capitalized
Leases) which would not cause the aggregate amount of all such
Capital Expenditures to exceed the greater of (i) $300,000
and (ii) 15% of the greater of (A) Consolidated EBITDA (as
defined in the Notes) for the prior fiscal year of the Company
and (B) Consolidated EBITDA for the current fiscal year of
the Company, in any fiscal year of the Company;
(q) allow the use, handling, generation,
storage, treatment, release or disposal of Hazardous Materials
at any property owned or leased by the Company or any of its
Subsidiaries except in compliance with Environmental Laws and
so long as such use, handling, generation, storage, treatment,
release or disposal of Hazardous Materials does not
result in a violation of Environmental Law which would result
in a Material Adverse Change;
(r) (A) engage or permit any ERISA Affiliate
to engage in any transaction described in Section 4069 of ERISA;
(B) engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction described in Section 406 of ERISA or
4975 of the Code for which a statutory or class exemption
is not available or a private exemption has not previously
been obtained from the Department of Labor; (C) adopt or
permit any ERISA Affiliate to adopt any employee welfare
benefit plan within the meaning of Section 3(1) of ERISA which
provides benefits to employees after termination of employment
other than as required by Section 601 of ERISA or
applicable law; (D) fail to make any contribution or payment
to any Multiemployer Plan which the Company or any Subsidiary
or any ERISA Affiliate may be required to make under any
agreement relating to such Multiemployer Plan, or any law
pertaining thereof; (E) fail, or permit any ERISA Affiliate to
fail, to pay any required installment or any other payment
required under Section 412 of the Code on or before the due
date for such installment or other payment; and
30
(s) grant any rights of registration under the
Securities Act relating to any of its shares of capital stock or
other securities to any Person other than pursuant to this
Agreement, unless (i) the rights so granted to another Person
do not limit, restrict or impair the rights of the Purchaser
under this Agreement and under the Related Documents and (ii)
such rights so granted to another Person do not grant priority in
registration rights to such other Person over rights granted to
Purchaser under this Agreement and under the Related Documents.
8.2 Required Actions. For so long as any shares of
Preferred Stock or the Notes remain outstanding, the Company
shall, and shall cause each Subsidiary to:
(a) cause all properties owned by the
Company or any of its Subsidiaries or used or held for use in
the conduct of its business or the business of any of its
Subsidiaries to be maintained and kept in good condition, repair
and working order (reasonable wear and tear excepted) and
supplied with all necessary equipment and will cause to be
made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment
of the Board of Directors may be necessary so that the business
carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that
the foregoing shall not prevent the Company from discontinuing
the maintenance of any of such properties if such discontinuance
is, in the judgment of the management of the Company, desirable
in the conduct of its business or the business of any of
its Subsidiaries and is not disadvantageous in any material
respect to the holders of the Securities;
(b) preserve and keep in full force and effect
the corporate existence, rights (charter and statutory),
licenses and franchises of the Company and each of its
Subsidiaries; provided, however, that the Company shall not be
required to preserve any such right, license or franchise if the
Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the
holders of Securities;
(c) maintain the books, accounts and records
of the Company and its Subsidiaries in accordance with past
custom and practice as used in the preparation of the Financial
Statements except to the extent permitted or required by
GAAP;
(d) keep all of its and its Subsidiaries'
properties which are of an insurable nature insured with
insurers, believed by the Company in good faith to be
financially sound and responsible, against loss or damage to
the extent that property of similar character is usually so
insured by corporations similarly situated and owning like
properties (which may include self-insurance, if reasonable and
in comparable form to that maintained by companies similarly
situated);
31
(e) comply with all material legal
requirements and material contractual obligations applicable to
the operations and business of the Company and its Subsidiaries
and pay all applicable Taxes as they become due and
payable;
(f) permit representatives of any holder of the
Securities and its agents (including their counsel,
accountants and consultants) to have reasonable access upon
reasonable notice during business hours to the Company's books,
records, facilities, key personnel, officers, directors,
customers, independent accountants and legal counsel so long
as such access does not violate any applicable Federal or
state law or cause the loss of the attorney-client
privilege;
(g) at all times (i) file all reports
(including annual reports, quarterly reports and the
information, documentation and other reports) required to be
filed by the Company under the Exchange Act and Sections 13 and
15 of the rules and regulations adopted by the SEC thereunder,
and the Company shall use its best efforts to file each of such
reports on a timely basis, and take such further action as
any holder or holders of the Securities, the Conversion
Shares or the Warrant Shares may reasonably request
(including providing copies of such reports to the holders
of the Securities, the Conversion Shares or the Warrant
Shares), all to the extent required to enable such holders to
sell Securities pursuant to Rule 144 adopted by the SEC under
the Securities Act (as such rule may be amended from time
to time) or any similar rule or regulation hereafter adopted
by the SEC and to enable the Company to register securities
with the SEC on Form S-3 or any similar short-form
registration statement and upon the filing of each such
report deliver a copy thereof to each holder of the Securities,
the Conversion Shares or the Warrant Shares, (ii) if the
Company is no longer subject to the requirements of the
Exchange Act, provide reports to the holders of the
Securities, the Conversion Shares or the Warrant Shares in
substantially the same form and at the same times as would be
required if the Company were subject to the Exchange Act, and
(iii) provide to each initial holder of the Securities, the
Conversion Shares or the Warrant Shares and each other
holder who has entered into a confidentiality agreement with the
Company, pursuant to mutually agreeable terms, any material
information distributed to the Board of Directors);
(h) maintain at all times a valid listing for
the Common Stock on a national securities exchange, the Nasdaq
National Market System or the Nasdaq SmallCap Market;
(i) maintain all material
Intellectual Property Rights necessary to the conduct of its
business and own or have a valid license to use all right, title
and interest in and to, such material Intellectual Property
Rights;
(j) on the Closing Date and at each
subsequent election of directors, to elect to the Board of
Directors an individual designated by OZ Master Fund, Ltd., as
long as any Preferred Stock or Notes are outstanding;
32
(k) deliver Dividend Shares and
Conversion Shares in accordance with the terms and
conditions, and time periods, set forth in the Certificate of
Designation and the Notes;
(l) on the earlier to occur of (i) a
redemption pursuant to either Section 4 of the Certificate of
Designations or paragraph 3 of the Notes and (ii) the third
anniversary of the Closing Date, pay to the Purchaser a
financing fee of $100,000;
(m) by March 31, 2000, obtain the vote of the
shareholders of the Company approving the sale and issuance of
Securities and Conversion Shares, Warrant Shares and Dividend
Shares upon conversion and exercise of the Securities to
the extent the issuance thereof equals 20% or more of the
Common Stock as required by the Nasdaq Stock Market or any other
national securities exchange on which the Common Stock shall at
the time be listed; provided, that the Company shall file a
proxy statement with the SEC related thereto no later than June
30, 1999 and use its good faith efforts to obtain such
approval by June 30, 1999 or as soon thereafter as is possible.
The proxy statement shall comply in all material respects with
federal and state securities laws and the rules and regulations
promulgated thereunder and the Company agrees that it will
recommend to its shareholders that the approval of the issuance
of such shares to the Purchaser is in the best interests of the
Company and its shareholders;
(n) (i) Keep any property either owned or
operated by it or any of its Subsidiaries free of any
Environmental Liens or post bonds or other financial assurances
sufficient to satisfy the obligations or liability
evidenced by such Environmental Liens; (ii) comply, and cause
its Subsidiaries to comply, in all material respects with
Environmental Laws and shall provide to the Purchaser
documentation of such compliance which the Purchaser reasonably
requests; (iii) promptly notify the Purchaser of any Release
of a Hazardous Material in excess of any reportable quantity
from or onto property owned or operated by the Company, any of
its Subsidiaries or, to the knowledge of the Company, any of
its licensees and take any Remedial Actions required to ▇▇▇▇▇
said Release or otherwise to come into compliance with applicable
Environmental Law; and (iv) promptly provide the Purchaser with
written notice within ten (10) days of the receipt of any of the
following: (a) notice that an Environmental Lien has been filed
against any of the real or personal property of the Company, any
of its Subsidiaries or, to the knowledge of the Company,
any of its licensees; (b) commencement of any Environmental
Action or notice that an Environmental Action will be filed
against the Company or any Subsidiary; and (c) notice of a
violation, citation or other administrative order which would
reasonably be expected to cause a Material Adverse Effect; and
(o) Take such actions and execute,
acknowledge and deliver, and cause each of the Subsidiaries to
take such actions and execute, acknowledge and deliver, at its
sole cost and expenses such agreements, instruments or other
documents as the Purchaser may reasonably require from time to
time in order to (i) carry out more effectively the purposes of
this Agreement and the Related Documents, (ii) maintain the
validity and effectiveness of any of the Related Documents, and
(iii) to better assure, convey, grant, assign, transfer and
33
confirm unto the Purchaser the rights now or hereafter intended
to be granted to the Purchaser under this Agreement or any
Related Document.
8.3 Reservation of Common Stock. The Company shall at
all times reserve and keep available out of its authorized but
unissued shares of Common Stock, solely for the purposes of
issuance upon conversion of the Preferred Shares, any Dividend
Shares and the Notes and the exercise of the Warrants, such
number of shares of Common Stock as are issuable upon the
conversion or exercise of all outstanding shares of Preferred
Stock, Notes and Warrants. All shares of Common Stock which are
so issuable shall, when issued, be duly and validly issued,
fully paid and nonassessable and free from all Taxes, liens
and charges. The Company shall take all such actions as may be
necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be
listed (except for official notice of issuance which shall be
immediately transmitted by the Company upon issuance).
8.4 Payments Free of Withholding. All payments by the
Company hereunder or under the Preferred Stock, the Notes, or
the Warrants shall be made free and clear of, and without any
deduction for, any Tax imposed by any taxing jurisdiction,
domestic or foreign.
Article IX
SURVIVAL
9.1 Survival. The representations, warranties, covenants
and agreements of the parties hereto contained herein, or in
any writing delivered pursuant hereto, shall survive the
Closing of the transactions contemplated hereby and by the
Related Documents notwithstanding any due diligence
investigation conducted by or on behalf of Purchaser.
Article X
INDEMNIFICATION
10.1 Indemnification. In consideration of the
Purchaser's execution and delivery of this Agreement and
acquiring the Securities hereunder and in addition to all of
the Company's other obligations under this Agreement, the
Company shall defend, protect, indemnify and hold harmless,
on an after-tax basis, the Purchaser and each other holder of
the Securities and each of their respective officers,
directors, employees and agents (including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions, causes of
action, suits, claims, Environmental Actions, losses, costs,
penalties, fees, liabilities, Environmental Liabilities and
Costs and damages, and expenses (including, without limitation,
costs of suit and attorneys' fees and expenses) in connection
therewith (irrespective of whether any such Indemnitee is a
party to the action for which indemnification hereunder is
sought) (the "Indemnified Liabilities"), incurred by the
Indemnitees or any of them as a result of, or arising out of,
or relating to (a) the breach or inaccuracy of any
34
representation or warranty contained in this Agreement or any
Related Document or any other instrument, agreement or document
delivered to the Purchaser in accordance herewith or therewith,
(b) the execution, delivery, performance or enforcement of this
Agreement, any Related Document and any other instrument,
document or agreement executed pursuant hereto or thereto
by any of the Indemnitees or (c) resulting from any
breach or inaccuracy of any representation, warranty,
covenant or agreement made by the Company herein or in any
Related Document. The Company shall reimburse the
Indemnitees for the Indemnified Liabilities as such
Indemnified Liabilities are incurred. To the extent that the
foregoing undertaking by the Company may be unenforceable for
any reason, the Company shall make the maximum contribution to
the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
Article XI
GENERAL PROVISIONS
11.1 Successors and Assigns. This Agreement shall bind
and inure to the benefit of the parties hereto and their
respective successors and assigns, including each subsequent
holder of Securities, Conversion Shares or Warrant Shares.
Except as otherwise specifically provided herein, this Agreement
shall not be assignable by the Company without the prior
written consent of the Purchaser.
11.2 Entire Agreement. This Agreement and the other
writings referred to herein or delivered pursuant hereto
constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior oral or
written arrangements or understandings.
11.3 Notices. All notices, requests, consents and other
communications provided for herein shall be in writing and
shall be (i) delivered in person, (ii) transmitted by
telecopy, (iii) sent by registered or certified mail,
postage prepaid with return receipt requested, or (iv)
sent by reputable overnight courier service, fees prepaid,
to the recipient at the address or telecopy number set forth
below, or such other address or telecopy number as may hereafter
be designated in writing by such recipient. Notices shall be
deemed given upon personal delivery, upon receipt of return
receipt in the case of delivery by mail, upon acknowledgment
by the receiving telecopier or one day following deposit with an
overnight courier service.
(a) If to the Company:
Covol Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
35
with a copy to (which shall not constitute notice to the
Company):
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇
Ten ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
(b) If to the Purchaser:
OZ Master Fund, Ltd.
c/o Och-Ziff Management, L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇
with a copy to (which shall not constitute notice to the
Purchaser):
▇▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
11.4 Purchaser Fees and Expenses.
(a) The Company shall reimburse the Purchaser
upon demand for (i) the reasonable fees and expenses of
counsel(s) to the Purchaser incurred in connection with the
documentation, negotiation and consummation of the
transactions contemplated by this Agreement and the Related
Documents and (ii) reasonable due diligence expenses incurred by
the Purchaser. The Company shall reimburse the Purchaser for
the reasonable fees and expenses of counsel(s) to the Purchaser
incurred in connection with any future amendment or waiver to
this Agreement or any of the Related Documents.
(b) The Company also agrees to pay or cause
to be paid, on demand, and to save the Purchaser harmless
against liability for the payment of all reasonable
out-of-pocket expenses incurred by the Company from time to time
arising from or relating to: (i) the preservation and
protection of any of the Company's rights under this Agreement or
the Related Documents, (ii) the defense of any claim or action
asserted or brought against the Purchaser by any Person that
arises from or relates to this Agreement, any Related
Document, the Purchaser's claims against the Company, or any
and all matters in connection therewith, (iii) the
commencement or defense of, or intervention in, any court
proceeding arising from or related to this Agreement or any
Related Document, (iv) the filing of any petition, complaint,
answer, motion or other pleading by the Purchaser in connection
with
36
this Agreement or any Related Document, (v) any attempt to
collect from the Company, (vi) the receipt of any advice with
respect to any of the foregoing, (vii) all liabilities and
costs arising from or in connection with the past, present or
future operations of the Company or any Subsidiary involving
any damage to real or personal property or natural resources
or harm or injury alleged to have resulted from any Release of
Hazardous Materials on, upon or into such property, (viii) any
Environmental Liabilities and Costs incurred in connection with
the investigation, removal, cleanup and/or remediation of any
Hazardous Materials present or arising out of the operations of
any facility of the Company or any Subsidiary, or (ix) any
Environmental Liabilities and Costs incurred in connection with
any Environmental Lien. Without limitation of the foregoing or
any other provision of any Related Document: (A) the Company
agrees to pay all stamp, document, transfer, recording or
filing taxes or fees and similar impositions now or hereafter
determined by the Purchaser to be payable in connection with
this Agreement or any Related Document, and the Company
agrees to save the Purchaser harmless from and against any and
all present or future claims, liabilities or losses with
respect to or resulting form any omission to pay or delay in
paying any such taxes, fees or impositions, and (B) if the
Company fails to perform any covenant or agreement contained
herein or in any Related Document, the Purchaser may itself
perform or cause performance of such covenant or agreement,
and the expenses of the Purchaser incurred in connection
therewith shall be reimbursed on demand by the Company.
11.5 Amendment and Waiver. No amendment of any
provision of this Agreement shall be effective, unless the same
shall be in writing and signed by the Company and the holders of
at least 662/3% of the shares of Preferred Stock and at least
662/3% of the aggregate principal amount of the Notes then
outstanding, in each case, voting separately as one class. Any
failure of the Company to comply with any provision hereof may
only be waived in writing by the holders of at least 662/3% of
the shares of Preferred Stock and at least 662/3% of the
aggregate principal amount of the Notes outstanding, in each
case, voting separately as one class, and any failure of any
holder of the Securities, the Conversion Shares or the Warrant
Shares to comply with any provision hereof may only be waived in
writing by the Company. No such waiver shall operate as a
waiver of, or estoppel with respect to, any subsequent or
other failure. No failure by any party to take any action
against any breach of this Agreement or default by any other
party shall constitute a waiver of such party's right to
enforce any provision hereof or to take any such action.
11.6 Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to
be an original, but all of which together shall constitute one
agreement.
11.7 Headings. The headings of the various sections of
this Agreement have been inserted for reference only and shall
not be deemed to be a part of this Agreement.
11.8 Specific Performance. The Company, on the one
hand, and the Purchaser, on the other hand, acknowledge that
money damages would not be a sufficient remedy for any breach
of this Agreement. It is accordingly agreed that the parties
shall be entitled to specific
37
performance and injunctive relief as remedies for any such
breach, these remedies being in addition to any of the remedies
to which they may be entitled at law or equity.
11.9 Remedies Cumulative. Except as otherwise
provided herein, the remedies provided herein shall be
cumulative and shall not preclude the assertion by any
party hereto of any other rights or the seeking of any other
remedies against any other party hereto.
11.10 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL SUBSTANTIVE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE LAWS
OF CONFLICT OR CHOICE OF LAWS OF THE STATE OF NEW YORK OR OF ANY
OTHER JURISDICTION THAT WOULD RESULT IN THE APPLICATION OF ANY
LAWS OTHER THAN THOSE OF THE STATE OF NEW YORK.
11.11 CONSENT TO JURISDICTION; SERVICE OF PROCESS AND
VENUE. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY RELATED DOCUMENT MAY BE BROUGHT IN ▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ IN THE COUNTY OF NEW YORK OR IN THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
COMPANY HEREBY IRREVOCABLY ACCEPTS IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THE AFORESAID COURTS. THE COMPANY FURTHER IRREVOCABLY CONSENTS
TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS AND IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE COMPANY AT ITS ADDRESS FOR NOTICES AS SET FORTH
IN SECTION 11.3, SUCH SERVICE TO BECOME EFFECTIVE TEN (10) DAYS
AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
PURCHASER TO SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
THE COMPANY IN ANY OTHER JURISDICTION. THE COMPANY HEREBY
EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
JURISDICTION OR LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT
IN ANY SUCH COURT REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH
LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. TO THE
EXTENT THAT THE COMPANY HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL
PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR
TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR OTHERWISE)
WITH RESPECT TO ITSELF OR ITS PROPERTY, THE COMPANY
HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT AND THE RELATED DOCUMENTS.
38
11.12 WAIVER OF JURY TRIAL. THE COMPANY AND THE
PURCHASER HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS
UNDER THIS AGREEMENT OR RELATED DOCUMENTS, OR UNDER ANY
AMENDMENT, WAIVER, CONSENT, INSTRUMENT, DOCUMENT OR OTHER
AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE DELIVERED IN
CONNECTION THEREWITH, OR ARISING FROM ANY RELATIONSHIP EXISTING
IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH
ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY. THE COMPANY CERTIFIES THAT NO
OFFICER, REPRESENTA TIVE, AGENT OR ATTORNEY OF THE PURCHASER
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PURCHASER
WOULD NOT, IN THE EVENT OF ANY ACTION, PROCEEDING OR
COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE COMPANY
HEREBY ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE PURCHASER ENTERING INTO THIS AGREEMENT.
11.13 No Third Party Beneficiaries. Except as
specifically set forth or referred to herein, nothing herein is
intended or shall be construed to confer upon any person or
entity other than the parties hereto and their successors or
assigns, any rights or remedies under or by reason of this
Agreement.
11.14 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
11.15 Right of First Refusal. For as long as any
Preferred Stock or Notes are outstanding, the Company shall
provide the Purchaser with written notice, prior to the
execution by the Company of any binding commitment or
contract, of its intention to obtain debt or equity financing
from a party other than the Purchaser, with such notice to
provide the terms of such debt or equity financing. The
Purchaser may, within five (5) Business Days of its receipt of
such notice, provide the Company with written notice of its
willingness to provide all of such debt financing or all or a
portion of such equity financing, as applicable, on such terms,
in which case the Company may not consummate such debt or equity
financing on such terms except with the Purchaser. In addition
and subject to the notice provisions of this section, for so
long as any of the Preferred Stock or Notes are outstanding, the
Purchaser shall have the right to subscribe for and receive
additional securities of the Company upon all additional
issuances of stock by the Company (other than issuances pursuant
to employee stock or stock option benefit plans of the Company
or in connection with any stock split or stock dividend) of any
or all classes or series thereof, or securities of the Company
convertible into or exchangeable for such stock, such that the
Purchaser may, by purchasing such additional securities,
maintain the percentage interest it had immediately prior to
such issuance of the voting power of the capital stock of the
Company voting together as a single class and/or its economic
interest in the Company.
* * * * *
39
IN WITNESS WHEREOF, the parties have caused their
duly authorized officers to execute this Agreement as of the
date first above written.
COVOL TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: CFO
OZ MASTER FUND, LTD.
By: /s/ ▇▇▇▇▇▇ ▇. Och
---------------------------------
Name: ▇▇▇▇▇▇ ▇. Och
Title: Managing Member
The following schedules and exhibits have been omitted from
the Securities Purchase Agreement attached to this report as
Exhibit 10.58:
Schedules
Schedule 4.1 Subsidiaries
Schedule 4.3 Capitalization
Schedule 4.6(a) Certain Changes
Schedule 4.6(e) Places of Business
Schedule 4.7 Litigation
Schedule 4.13 Owned Real Property
Schedule 4.16 Intellectual Property
Schedule 4.17 Employees
Schedule 4.19 Environmental Laws
Schedule 4.20 Transactions with Affiliates
Schedule 4.21 Taxes
Schedule 4.22 Other Investors
Schedule 4.29 Registration Rights
Schedule 4.31 Synthetic Fuel Facilities
Schedule 8.1(e) Synthetic Fuel Facilities for Sale
Schedule 8.1(i) Indebtedness
Schedule 8.1(l) Permitted Liens
Schedule 8.1(m) Guarantees
Schedule 8.1(p) Capital Expenditures
Exhibits
Exhibit A Certificate of Designations
Exhibit B Financial Statements
Exhibit C Registration Rights Agreement
Exhibit D Security Agreement
Exhibit E Side Agreements
Exhibit F Termination and Release Agreement
Exhibit G Form of Warrant
Exhibit H Form of Convertible Secured Note
Exhibit I Opinion of Counsel
The Registrant agrees to furnish supplementally a copy of any
omitted schedule or exhibit to the Securities and Exchange
Commission upon request.