Exhibit 4.C
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
July 28, 2003 is made by and among Parlex Corporation, a Massachusetts
corporation, with headquarters located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Company"), and the investors named on the
signature pages hereto, together with their permitted transferees (the
"Investors").
RECITALS:
A. The Company and the Investors are executing and delivering this
Agreement in reliance upon the exemptions from securities registration
afforded by Section 4(2) of the Securities Act and Rule 506 under
Regulation D.
B. The Investors desire, upon the terms and conditions stated in
this Agreement, to purchase the Company's 7.0% Convertible Notes, which are
convertible into shares of the Company's Common Stock, for an aggregate
purchase price of $6.0 million and to receive, in consideration for such
purchase, Warrants to acquire additional shares of Common Stock.
C. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration
Rights Agreement under which the Company has agreed to provide certain
registration rights under the Securities Act, the rules and regulations
promulgated thereunder and applicable state securities laws.
D. The capitalized terms used herein and not otherwise defined have
the meanings given them in Article 10 hereof.
In consideration of the premises and the mutual covenants contained
herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors
hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF CONVERTIBLE NOTES
1.1 Purchase and Sale of Convertible Notes. At the Closing, subject
to the terms of this Agreement and the satisfaction or waiver of the
conditions set forth in Articles VI and VII hereof, the Company will issue
and sell to each Investor, and each Investor will (on a several and not a
joint basis) purchase from the Company, Convertible Notes in the principal
amount set forth beneath such Investor's name on the signature pages hereof
substantially in the form of Exhibit A hereto (the "Convertible Note(s)".
The Convertible Notes will bear annual interest (the "PIK Interest"),
payable in shares of Common Stock (the "PIK Interest Shares"), at a fixed
rate of 7% of the aggregate number of shares of Common Stock into which a
Convertible Note is convertible. The PIK Interest will be payable quarterly
in arrears. If the PIK Interest Shares are not then-covered by an
effective registration statement, then each Investor, individually and not
severally, may choose in its sole discretion to have the PIK Interest paid
in PIK Interest Shares or cash, with the exception of the first interest
payment payable hereunder, which shall in any event be payable in Common
Stock.
1.2 Payment. Each Investor will pay the principal amount for the
Convertible Notes as is set forth beneath its name on the signature pages
hereof, by wire transfer of immediately available funds in accordance with
the Company's written wire instructions, simultaneously with delivery by
the Company to each Investor of (i) the Convertible Note(s) in the
principal amount(s) so purchased by such Investor and (ii) Warrants in an
amount determined in accordance with Section 1.4 hereof, and the Company
will deliver such Convertible Notes and Warrants against delivery of the
purchase price as described above.
1.3 Closing Date. Subject to the satisfaction or waiver of the
conditions set forth in Articles VI and VII hereof, the Closing will take
place at 10:00 a.m. Central Time on July 25, 2003, or at another date or
time agreed upon by the parties to this Agreement (the "Closing Date").
The Closing will be held at the offices of Faegre & ▇▇▇▇▇▇ LLP, or at such
other place as the parties agree. Each party hereto covenants and agrees
to use his or its best efforts to cause the Closing to be consummated on
the Closing Date. Time is of the essence in this Agreement. If any date
for providing a notice or obtaining consent or approval should fall on any
day which is not a business day in Massachusetts then such date shall be
extended to the next following business day.
1.4 Warrants. In consideration of the purchase of the Convertible
Notes by the Investors, upon the Closing the Company will issue Warrants to
each Investor, substantially in the form of Exhibit B hereto (the
"Warrants"), giving each Investor the right to acquire 400 shares of Common
Stock for each 1,000 shares of Common Stock into which such Investor's
Convertible Note(s) purchased by such Investor at the Closing is
convertible for a period of four years after the date of Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each Investor represents and warrants to the Company, severally and
solely with respect to itself and its purchase hereunder and not with
respect to any other Investor, that:
2.1 Investment Purpose. The Investor is purchasing the Securities
for its own account and not with a present view toward the public sale or
distribution thereof, except pursuant to sales registered or exempted from
registration under the Securities Act; provided, however, that by making
the representations herein, such Investor does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption from the registration requirements
of the Securities Act.
2.2 Accredited Investor Status. The Investor has the knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of an investment in the Securities. The Investor is
an "accredited investor" as defined in Rule 501(a) of Regulation D and was
not organized for the purpose of acquiring the Securities, and shall submit
such further assurances of such status as may be reasonably required by the
Company. The Investor's financial condition is such that it is able to
bear the risk of holding the Securities for an indefinite period of time
and the risk of loss of its entire investment.
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2.3 Disclosure; Reliance on Exemptions. All of the information
provided to the Company or its agents or representatives by the Investor
concerning such Investor's suitability to invest in the Company and the
representations and warranties of such Investor contained herein are
complete, true and correct as of the date hereof. The Investor understands
that the Securities are being offered and sold to it in reliance upon
specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying upon the
truth and accuracy of, and the Investor's compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of the Investor set forth herein in order to determine the availability of
such exemptions and the eligibility of the Investor to acquire the
Securities.
2.4 Information. The Investor and its advisors, if any, have been
furnished with all publicly available materials relating to the business,
finances and operations of the Company, and materials relating to the offer
and sale of the Securities, that have been requested by the Investor or its
advisors, if any. The Investor and its advisors, if any, have been
afforded the opportunity to ask questions of the Company and receive
answers from the Company regarding the terms and conditions of the offering
of the Convertible Notes and the business, properties, prospects and
financial condition of the Company and the Investor is satisfied with the
results of and has completed to its satisfaction said review and analysis.
Neither such inquiries nor any other due diligence investigation conducted
by Investor or any of its advisors or representatives modify, amend or
affect the Investor's right to rely on the Company's representations and
warranties contained in Article III below. The Investor acknowledges and
understands that its investment in the Securities involves a significant
degree of risk, including the risks reflected in the SEC Documents.
2.5 Governmental Review. The Investor understands that no United
States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Securities or an investment therein.
2.6 Transfer or Resale. The Investor understands that:
(a) except as provided in the Registration Rights Agreement,
the Securities have not been and are not being registered under the
Securities Act or any applicable state securities laws and,
consequently, the Investor may have to bear the risk of owning the
Securities for an indefinite period of time because the Securities
may not be transferred unless (i) the resale of the Securities is
registered pursuant to an effective registration statement under the
Securities Act, (ii) the Investor has delivered to the Company an
opinion of counsel (in form, substance and scope customary for
opinions of counsel in comparable transactions) to the effect that
the Securities to be sold or transferred may be sold or transferred
pursuant to an exemption from such registration, (iii) the Securities
are sold or transferred pursuant to Rule 144 (the provisions of which
are known to the Investor), or (iv) the Securities are sold or
transferred to an affiliate (as defined in Rule 144) of the Investor
and (v) in this connection, such Investor represents that it is
familiar with SEC Rule 144, as presently in effect, and understands
the resale limitations imposed thereby and by the Act;
(b) any sale of the Securities made in reliance on Rule 144 may
be made only in accordance with the terms of Rule 144 and, if Rule
144 is not applicable, any resale of the
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Securities under circumstances in which the seller (or the person
through whom the sale is made) may be deemed to be an underwriter (as
that term is defined in the Securities Act) may require compliance
with another exemption under the Securities Act or the rules and
regulations of the SEC thereunder; and
(c) except as set forth in the Registration Rights Agreement,
neither the Company nor any other person is under any obligation to
register the Securities under the Securities Act or any state
securities laws or to comply with the terms and conditions of any
exemption thereunder.
2.7 Legends. The Investor understands that until (a) the
Convertible Notes and the Warrants may be sold by the Investor under Rule
144(k) or (b) such time as the resale of the Securities have been
registered under the Securities Act as contemplated by the Registration
Rights Agreement, the certificates representing the Securities will bear a
restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of the certificates for such
Securities):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES (COLLECTIVELY, THE
"ACTS"). THE SECURITIES MAY NOT BE SOLD, DISTRIBUTED, OFFERED,
PLEDGED, ENCUMBERED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE ABSENCE
OF (1) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE ACTS COVERING THE TRANSACTION, (2) THE COMPANY RECEIVES AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACTS, OR (3) THE COMPANY
OTHERWISE SATISFIES ITSELF THAT REGISTRATION IS NOT REQUIRED UNDER
THE ACTS. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE
PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.
The legend set forth above will be removed and the Company will issue
a certificate without the legend to the holder of any certificate upon
which it is stamped, in accordance with the terms of Article V hereof.
Investor covenants that it shall not transfer any Securities in violation
of any securities laws.
2.8 Authorization; Enforcement; Consents; No Conflict. This
Agreement and the Registration Rights Agreement and any related actions
necessary in connection with the consummation of the transactions herein
and therein contemplated have been duly and validly authorized, executed
and delivered on behalf of the Investor and are the legal, valid and
binding agreements of the Investor enforceable in accordance with their
terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the rights of
creditors generally and the application of general principles of equity.
All consents, approvals, orders and authorizations required on the part of
the Investor in connection with the
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execution, delivery or performance of this Agreement and the consummation
of the transactions contemplated herein have been obtained and are
effective as of the date hereof. The execution and delivery of this
Agreement and the Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby will not conflict with or
result in any violation of any provision of the charter or other
organizational documents of the Investor.
2.9 Residency. The Investor is a resident of the jurisdiction set
forth immediately below such Investor's name on the signature pages hereto.
2.10 Acknowledgements Regarding Placement Agent. The Investor
acknowledges that Investec Inc. is acting as placement agent (the
"Placement Agent") for the Securities being offered hereby and will be
compensated by the Company for acting in such capacity.
2.11 Confidential Information. The Investor agrees and acknowledges
that it is bound by the terms of a Non-Disclosure and Confidentiality
Agreement previously executed by and between itself and the Company (the
"NDA").
2.12 Broker. The Investor has not retained or been represented by
any broker or finder in connection with the transactions contemplated
hereby.
2.13 No Intent to Effect a Change of Control. The Investor has no
present intent to change or influence the control of the Company within the
meaning of Rule 13d-1 of the Exchange Act.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company, and each of its Operating Subsidiaries represents and
warrants to the Investors that:
3.1 Organization and Qualification. Except as set forth on Schedule
3.1, the Company and its Operating Subsidiaries are duly incorporated,
validly existing and in good standing under the laws of the jurisdictions
in which they are incorporated, with full power and authority (corporate
and other) to own, lease, use and operate their properties, if any, and to
carry on their businesses as and where now owned, leased, used, operated
and conducted. The Company is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except where the
failure to be so qualified or in good standing would not have a Material
Adverse Effect.
3.2 Authorization; Enforcement. (a) The Company has all requisite
corporate power and authority to enter into and to perform its obligations
under this Agreement, the Registration Rights Agreement, the Convertible
Notes and the Warrants, to consummate the transactions contemplated hereby
and thereby and to issue the Securities in accordance with the terms hereof
and thereof; (b) the execution, delivery and performance of this Agreement,
the Registration Rights Agreement, the Convertible Notes and the Warrants
by the Company and the consummation by it of the transactions contemplated
hereby and thereby (including without limitation the issuance of the
Convertible Notes, and the issuance and reservation for issuance of the
Conversion Shares and the PIK Interest Shares in accordance with the
Company's Articles of
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Organization, this Agreement and the Convertible Notes, and the Warrant
Shares issuable in accordance with the terms of the Warrants) have been
duly authorized by the Company's Board of Directors and no further consent
or authorization of the Company, its Board or Directors, or its
shareholders is required; (c) this Agreement, the Registration Rights
Agreement, the Convertible Notes and the Warrants have been duly executed
by the Company; and (d) each of this Agreement, the Registration Rights
Agreement, the Convertible Notes and the Warrants constitutes a legal,
valid and binding obligation of the Company enforceable against the Company
in accordance with their respective terms, except as may be limited by any
applicable bankruptcy, insolvency, reorganization, or moratorium or similar
laws affecting the rights of creditors generally and the application of
general principles of equity.
3.3 Capitalization. As of the present date, the authorized capital
stock of the Company consists of (a) 30,000,000 shares of Common Stock, of
which 6,312,216 shares are issued and outstanding; 1,308,193 shares are
reserved for issuance under the Option Plans; 25,000 shares are reserved
for issuance pursuant to that certain Warrant dated June 11, 2003 and
issued to Silicon Valley Bank (the "SVB Warrant"); and no shares reserved
for issuance pursuant to any other securities (other than securities issued
under the foregoing Option Plans or the SVB Warrant); (b) 1,000,000 shares
of preferred stock, par value $1.00 per share, of which no shares are
designated and none are issued and outstanding. All of such outstanding
shares of capital stock have been duly authorized, validly issued, and are
fully paid and nonassessable. No shares of capital stock of the Company,
including the Conversion Shares, PIK Interest Shares and the Warrant Shares
issuable pursuant to this Agreement, are subject to preemptive rights or
any other similar rights of the other shareholders of the Company or any
liens or encumbrances imposed through the actions or failure to act of the
Company. Except for stock options granted under the Option Plans, the SVB
Warrant and except for the transactions contemplated hereby, (i) there are
no outstanding options, warrants, scrip, rights to subscribe for, puts,
calls, rights of first refusal, agreements, understandings, claims or other
commitments or rights of any character whatsoever relating to, or
securities or rights convertible into, exercisable for, or exchangeable for
any shares of capital stock of the Company, or arrangements by which the
Company is or may become bound to issue additional shares of capital stock
of the Company; (ii) there are no agreements or arrangements (other than
the Registration Rights Agreement, and the registration rights agreement
between the Company and Silicon Valley Bank with respect to the SVB
Warrant) under which the Company is obligated to register the sale of any
of its securities under the Securities Act; and (iii) there are no anti-
dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) that
will be triggered by the issuance of the Securities. The Company has
furnished to each Investor true and correct copies of the terms of all
securities convertible into or exercisable for Common Stock of the Company
and the material rights of the holders thereof in respect thereto. The
Company's Articles of Organization, as amended, and the Company's By-laws,
each as in effect on the date hereof, filed as exhibits to the Company's
SEC Documents, are true and correct copies of each such document except as
set forth in Schedule 3.3.
3.4 Issuance of Securities. Each of the Convertible Notes and the
Warrants are duly authorized and, upon issuance in accordance with the
terms of this Agreement, will be validly issued, fully paid and non-
assessable, free from all taxes, liens, claims, encumbrances and charges
with respect to the issue thereof, and will not be subject to preemptive
rights or other similar rights of shareholders of the Company. The
Conversion Shares, PIK Interest Shares and
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Warrant Shares are duly authorized and reserved for issuance, and, when
issued, delivered and paid for in connection with or upon conversion of the
Convertible Notes and exercise of the Warrants in accordance with the terms
thereof, will be validly issued, fully paid and non-assessable, and free
from all taxes, liens, claims and encumbrances, and will not be subject to
preemptive rights or other similar rights or shareholders of the Company.
3.5 Outstanding Debt. The Company has no Indebtedness for Borrowed
Money (as hereinafter defined) except as otherwise set forth in Schedule 3.5.
The Company is not in default in the payment of the principal of or interest
or premium on any such Indebtedness for Borrowed Money, and no event has
occurred or is continuing under the provisions of any instrument, document or
agreement evidencing or relating to any such Indebtedness for Borrowed Money
which with the lapse of time or the giving of notice, or both, would
constitute an event of default thereunder.
3.6 No Conflicts; No Violation.
(a) The execution, delivery and performance of this Agreement,
the Registration Rights Agreement, the Convertible Notes and the
Warrants by the Company and the consummation by the Company of the
transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance of the
Convertible Notes, Conversion Shares, PIK Interest Shares, Warrants,
and Warrant Shares) do not and will not (i) conflict with or result
in a violation of any provision of the Articles of Organization or
By-laws, (ii) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which with notice
or lapse of time or both could become a default) under, or give to
others any rights of termination, amendment (including without
limitation, the triggering of any anti-dilution provision),
acceleration or cancellation of, any agreement, indenture, patent,
patent license, or instrument to which the Company is a party, or
(iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including U.S. federal and state securities laws
and regulations and regulations of any self-regulatory organizations
to which the Company or its securities are subject) applicable to the
Company or by which any property or asset of the Company is bound or
affected (except for such conflicts, breaches, defaults,
terminations, amendments, accelerations, cancellations and violations
as would not, individually or in the aggregate, have a Material
Adverse Effect).
(b) The Company is not in violation of its Articles of
Organization, By-laws or other organizational documents and the
Company is not in default (and no event has occurred which with
notice or lapse of time or both could put the Company in default)
under, and the Company has not taken any action or failed to take any
action that (and no event has occurred which, without notice or lapse
of time or both) would give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture
or instrument to which the Company is a party or by which any
property or assets of the Company is bound or affected, except for
possible defaults as would not, individually or in the aggregate,
have a Material Adverse Effect.
(c) The Company is not conducting, and, so long as any
Investor owns any of the Securities, will not conduct, its business
in violation of any law, ordinance or regulation of
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any governmental entity, the failure to comply with which would,
individually or in the aggregate, have a Material Adverse Effect.
(d) Except as specifically contemplated by this Agreement and
as required under the Securities Act and any applicable state
securities laws or any listing agreement with any securities exchange
or automated quotation system, the Company is not required to obtain
any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency or any regulatory
or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement, the Convertible
Notes, the Warrants or the Registration Rights Agreement, in each
case in accordance with the terms hereof or thereof, or to issue and
sell the Convertible Notes and Warrants in accordance with the terms
hereof and to issue the Conversion Shares and PIK Interest Shares in
connection with or upon conversion of the Convertible Notes and the
Warrant Shares upon exercise of the Warrants. Except as set forth in
Schedule 3.6, all consents, authorizations, orders, filings and
registrations which the Company is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to the
date hereof. The Company is not in violation of the continued
listing requirements of Nasdaq and does not reasonably anticipate
that the Common Stock will be delisted by Nasdaq in the foreseeable
future. The Company is unaware of any facts or circumstances which
might give rise to the foregoing.
3.7 SEC Documents, Financial Statements; ▇▇▇▇▇▇▇▇-▇▇▇▇▇. Since June
30, 2000, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act (all of the
foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC Documents"). The Company has delivered to each
Investor, or each Investor has had access to, true and complete copies of
the SEC Documents (including via ▇▇▇▇▇), except for such exhibits and
incorporated documents. As of their respective dates, the SEC Documents
complied in all material respects with the requirements of the Exchange Act
or the Securities Act, as the case may be, and the rules and regulations of
the SEC promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the SEC, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto. Such financial statements
have been prepared in accordance with U.S. generally accepted accounting
principles, consistently applied, during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in
the financial statements included in the SEC Documents, the Company has no
liabilities, contingent or otherwise, other than liabilities incurred in
the ordinary course of business subsequent to March 30, 2003, and
liabilities of the type not required under generally
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accepted accounting principles to be reflected in such financial
statements. Such liabilities incurred subsequent to March 30, 2003 are
not, in the aggregate, material to the financial condition or operating
results of the Company. The Company is in substantial compliance with the
applicable provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the "▇▇▇▇▇▇▇▇-
▇▇▇▇▇ Act"), and the rules and regulations promulgated thereunder, that are
effective, and intends to comply substantially with other applicable
provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, and the rules and regulations
promulgated thereunder, upon the effectiveness of such provisions and has
no reason to believe that it will not be so compliant upon such
effectiveness. Without limiting the generality of the foregoing, the Chief
Executive Officer and the Chief Financial Officer of the Company have
signed, and the Company has furnished to the SEC, all certifications
required by Section 302 and Section 906 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act; such
certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn; and neither the
Company nor any of its officers has received notice from any governmental
entity questioning or challenging the accuracy, completeness, form or
manner of filing or submission of such certifications. The representations
and warranties herein contained are subject to Schedule 3.7.
3.8 Absence of Certain Changes. Except as disclosed in the SEC
Documents, since March 30, 2003, there has been no material adverse change
in the assets, liabilities, business, properties, operations, financial
condition, prospects or results of operations of the Company or, to the
knowledge of the Company, any development that could reasonably be expected
to have such a material adverse change within the six-month period
following the date hereof.
3.9 Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company, threatened against the Company or any of its
officers or directors acting as such that could, individually or in the
aggregate, have a Material Adverse Effect. The Company is not aware of any
facts or circumstances which would reasonably be expected to give rise to
any such action or proceeding.
3.10 Intellectual Property Rights. The Company owns or possesses
the licenses or rights to use all patents, patent applications, patent
rights, inventions, know-how, trade secrets, trademarks, trademark
applications, service marks, service names, trade names and copyrights
necessary to enable it to conduct its business as now operated (and, to the
best of the Company's knowledge, as presently contemplated to be operated
in the future) (the "Intellectual Property"). There is no claim or action
or proceeding pending or, to the Company's knowledge, threatened that
challenges the right of the Company with respect to any Intellectual
Property. To the best of the Company's knowledge, the Company's current
and intended products, services and processes do not infringe on any
Intellectual Property or other rights held by any person. The Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing. The Company has taken reasonable security measures to protect
the secrecy, confidentiality and value of its Intellectual Property.
3.11 No Materially Adverse Contracts, Etc. The Company is not
subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the reasonable
judgment of the Company's officers has or is expected in the future,
individually or in the aggregate, to have a Material Adverse Effect. The
Company is not a party
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to any contract or agreement which in the reasonable judgment of the
Company's officers has or is expected to have a Material Adverse Effect.
3.12 Tax Status. Except as set forth on Schedule 3.12, the Company
has made or filed all federal, state and foreign income and all other tax
returns, reports and declarations required by any jurisdiction to which it
is subject (unless and only to the extent that the Company has set aside on
its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on
such returns, reports and declarations, except those being contested in
good faith, and has set aside on its books provisions reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid taxes in
any material amount claimed to be due by the taxing authority of any
jurisdiction, and the Company knows of no basis for any such claim. The
Company has not executed a waiver with respect to the statute of
limitations relating to the assessment or collection of any foreign,
federal, state or local tax. Except as set forth on Schedule 3.12, none of
the Company's tax returns is presently being audited by any taxing
authority.
3.13 Certain Transactions. Except as disclosed in the SEC Documents
and except for arm's-length transactions pursuant to which the Company
makes payments in the ordinary course of business upon terms no less
favorable than the Company could obtain from third parties and other than
the grant of stock options, employment agreements or the ownership of other
securities and rights disclosed in filings under the Exchange Act, none of
the officers, directors, or employees of the Company is presently a party
to any transaction with the Company (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing
for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or employee has a substantial interest or is
an officer, director, trustee or partner.
3.14 Environmental Laws. The Company (i) is in compliance with all
applicable foreign federal, state and local laws and regulations relating
to the protection of human health and safety, the environment or hazardous
or toxic substances or wastes, pollutants or contaminants ("Environmental
Laws"), (ii) has received all permits, licenses or other approvals required
of them under applicable Environmental Laws to conduct its business and
(iii) is in compliance with all terms and conditions of any such permit,
license or approval where, in each of the three foregoing clauses, the
failure to so comply would have, individually or in the aggregate, a
Material Adverse Effect.
3.15 Disclosure. All information relating to or concerning the
Company set forth in this Agreement and provided to the Investors pursuant
to Section 2.4 hereof and otherwise in connection with the transactions
contemplated hereby contained no untrue statement of a material fact and
the Company has not omitted to state any material fact necessary in order
to make the statements made herein or therein, in light of the
circumstances under which they were made, not misleading. No event or
circumstance has occurred or information exists with respect to the Company
or its business, properties, operations or financial conditions, which,
under
10
applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed (assuming for this purpose that the Company's reports filed under
the Exchange Act are being incorporated into an effective registration
statement filed by the Company under the Securities Act).
3.16 Acknowledgment Regarding Investors' Purchase of Securities.
The Company acknowledges and agrees that each Investor is acting solely in
the capacity of an arm's-length purchaser with respect to this Agreement
and the transactions contemplated hereby. The Company further acknowledges
that no Investor is acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any statement made by any Investor or
any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to such Investor's purchase of the
Securities and has not been relied on by the Company in any way. The
Company further represents to each Investor that the Company's decision to
enter into this Agreement has been based solely on an independent
evaluation by the Company and its representatives.
3.17 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers
to buy any security under circumstances that would require registration
under the Securities Act of the issuance of the Securities to the
Investors. The issuance of the Securities to the Investors will not be
integrated with any other issuance of the Company's securities (past,
current or future) for purposes of the Securities Act or any applicable
rules of Nasdaq.
3.18 No Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions
contemplated hereby, except for dealings with the Placement Agent, whose
commissions and fees will be paid for by the Company.
3.19 Permits; Compliance. The Company is in possession of all
franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its
business as it is now being conducted except those the failure of which to
possess would not, individually or in the aggregate, have a Material
Adverse Effect (collectively, the "Company Permits"), and there is no
action pending or, to the knowledge of the Company, threatened regarding
suspension or cancellation of any of the Company Permits. The Company is
not in conflict with, or in default or violation of, any of the Company
Permits, except for any such conflicts, defaults or violations which,
individually or in the aggregate, would not reasonably be expected to have
a Material Adverse Effect. Since March 30, 2003, the Company has not
received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations
would have a Material Adverse Effect.
3.20 Title to Property. The Company has good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by it which is material to the business of the
Company. Any real property and facilities held under lease by the
11
Company are held by it under valid and enforceable leases with such
exceptions as would not have a Material Adverse Effect.
3.21 Insurance. The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts
as management of the Company believes to be prudent and customary in the
businesses in which the Company is engaged. The Company has no reason to
believe that it will not be able to renew its existing insurance coverage
as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost
that would not have a Material Adverse Effect.
3.22 Internal Accounting Controls. The Company maintains a system
of internal accounting controls sufficient, in the judgment of the
Company's board of directors, to provide reasonable assurance that (a)
transactions are executed in accordance with management's general or
specific authorizations, (b) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability, (c)
access to assets is permitted only in accordance with management's general
or specific authorization, (d) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences, and (e) financial
reporting and the preparation of financial statements for external purposes
in accordance with U.S. generally accepted accounting principles are
reliable. Except as set forth on Schedule 3.22, the Chief Executive
Officer and Chief Financial Officer of the Company have made all
certifications required by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and the rules and
regulations promulgated thereunder, and the statements contained in any
such certification are complete and correct; the Company maintains
"disclosure controls and procedures" (as currently defined in Rule 13a-
14(c) under the Exchange Act).
3.23 Employment Matters. The Company is in compliance with all
federal, state, local and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment and
wages and hours except where failure to be in compliance would not have a
Material Adverse Effect. There are no pending investigations involving the
Company by the U.S. Department of Labor or any other governmental agency
responsible for the enforcement of such federal, state, local or foreign
laws and regulations. There is no unfair labor practice charge or
complaint against the Company pending before the National Labor Relations
Board or any strike, picketing, boycott, dispute, slowdown or stoppage
pending or, to the best of its knowledge, threatened against or involving
the Company. No representation question exists respecting the employees of
the Company, and no collective bargaining agreement or modification thereof
is currently being negotiated by the Company. No grievance or arbitration
proceeding is currently pending under any expired or existing collective
bargaining agreements of the Company. No material labor dispute with the
employees of the Company exists or, to the knowledge of the Company, is
imminent.
3.24 Investment Company Status. The Company is not and upon
consummation of the sale of the Securities will not be an "investment
company," a company controlled by an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company" as such terms are defined in the Investment Company Act of 1940,
as amended.
12
3.25 No General Solicitation. Neither the Company nor any
distributor participating on the Company's behalf in the transactions
contemplated hereby (if any) nor any person acting for the Company, or any
such distributor, has conducted any "general solicitation," as such term is
defined in Regulation D, with respect to any of the Securities being
offered hereby.
ARTICLE IV
COVENANTS
4.1 Best Efforts. Each party will use its best efforts to satisfy
in a timely fashion each of the conditions to be satisfied by it under
Articles VI and VII of this Agreement.
4.2 Form D; Blue Sky Laws. The Company will file a Notice of Sale
of Securities on Form D with respect to the Securities, as required under
Regulation D, and will provide a copy thereof to each Investor promptly
after such filing. The Company will, on or before the Closing Date, take
such action as it reasonably determines to be necessary to qualify the
Securities for sale to the Investors under this Agreement under applicable
securities (or "blue sky") laws of the states of the United States (or to
obtain an exemption from such qualification), and will provide evidence of
any such action so taken to the Investors on or prior to the date of the
Closing. The Company will file with the SEC a Current Report on Form 8-K
disclosing this Agreement and the transactions contemplated hereby within
the time period required by such form for the transactions contemplated
hereby and will make any required notice filings with state securities law
authorities on a timely basis.
4.3 Reporting Status; Eligibility to Use Form S-3. The Company's
Common Stock is registered under Section 12 of the Exchange Act.
Throughout the Registration Period (as defined in the Registration Rights
Agreement), the Company will timely file all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC
under the reporting requirements of the Exchange Act, and the Company will
not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination. Except as set forth on Schedule
4.3, the Company currently meets, and will take all reasonably necessary
action to continue to meet, the "registrant eligibility" requirements set
forth in the general instructions to Form S-3 (except with respect to the
requirements set forth in Section I.B(1) and I.B(2) thereof).
4.4 Use of Proceeds. The Company will use the proceeds from the
sale of the Securities for certain business development, expansion, and
acquisition purposes and will not otherwise, directly or indirectly, use
such proceeds for any loan to or investment in any other corporation,
partnership, enterprise or other entity other than its Subsidiaries.
4.5 Expenses. Upon the consummation of the sale of the Convertible
Notes and Warrants anticipated by this Agreement or upon failure by the
Company to consummate such sales, the Company will pay the reasonable out-of-
pocket expenses incurred by the Investors in connection with the preparation
of the legal documents for the transactions herein contemplated, as evidenced
by copies of all bills relating to all expenses incurred, including without
limitation reasonable attorneys' fees and out-of-pocket expenses, in
connection with the transactions herein contemplated, up to an aggregate
maximum amount of $50,000. The Company will also pay (a) all fees and
expenses incurred by the Investors with respect to any amendments or waivers
13
requested by the Company (whether or not the same become effective) under or
in respect of this Agreement or the agreements contemplated hereby after the
Date of Closing with said fees and expenses not to exceed $2,500 per
requested amendment/waiver by the Company, and (b) subject to the final
sentence of Section 8.4 hereof, all fees and expenses incurred by the
Investors with respect to the enforcement of the rights granted under this
Agreement or the agreements contemplated hereby, but in no event shall the
Company be obligated to pay more than $50,000 in the aggregate under both (a)
and (b) above.
4.6 Financial Information; Notice of Conversion Price and Events of
Default. The financial statements of the Company will be prepared in
accordance with United States generally accepted accounting principles,
consistently applied, and will fairly present in all material respects the
consolidated financial position of the Company and results of its
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to normal year-end audit adjustments). The Company
will send the following reports to each Investor until such Investor
transfers, assigns, or sells all of the Securities owned by it:
contemporaneously with the making available or giving to the stockholders
of the Company, copies of any notices or other information the Company
makes available or gives to its stockholders that is not electronically
provided via the World Wide Web by the SEC.
4.7 Listing. On or before the twentieth business day after the date
of this Agreement, the Company will secure the listing of the Conversion
Shares, PIK Interest Shares and Warrant Shares upon each national
securities exchange or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to official notice of
issuance) and, so long as any Investor owns any of the Securities, will
maintain such listing of all such Conversion Shares, PIK Interest Shares
and Warrant Shares. The Company will use its best efforts to obtain and,
so long as any Investor owns any of the Securities, maintain the listing
and trading of its Common Stock on Nasdaq, the American Stock Exchange or
the New York Stock Exchange and will comply in all respects with the
Company's reporting, filing and other obligations under the bylaws or rules
of the National Association of Securities Dealers, Inc. and such exchanges
or automated quotation system, as applicable. The Company will promptly
provide to each Investor copies of any notices it receives regarding the
continued eligibility of the Common Stock for listing on Nasdaq or other
principal exchange or quotation system on which the Common Stock is listed
or traded.
4.8 Solvency; Corporate Existence; Compliance with Law. The Company
(both before and after giving effect to the transactions contemplated by
this Agreement) is solvent (i.e., its assets have a fair market value in
excess of the amount required to pay its probable liabilities on its
existing debts as they become absolute and matured) and currently the
Company has no information that would lead it to reasonably conclude that
the Company would not have, nor does it intend to take any action that
would impair its ability to pay its debts from time to time incurred in
connection therewith as such debts mature. The Company will maintain and
cause each Operating Subsidiary to maintain its corporate existence in good
standing. The Company will conduct its business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, including, without limitation, all applicable local,
state and federal environmental laws and regulations, where the failure to
comply with such would have a Material Adverse Effect.
14
4.9 Insurance. The Company will maintain liability, casualty and
other insurance (subject to customary deductions and retentions) with
responsible insurance companies against such risk of the types and in the
amounts customarily maintained by the Company.
4.10 No Integration. The Company will not make any offers or sales
of any security (other than the Securities) under circumstances that would
cause the offering of Securities to be integrated with any other offering
of securities by the Company (i) for the purpose of any shareholders
approval provision applicable to the Company or its securities or (ii) for
purposes of any registration requirement under the Securities Act.
4.11 Reservation of Shares. The Company will at all times have
authorized, and reserved for the purpose of issuance, a sufficient number
of shares of Common Stock to provide for (i) issuance of the PIK Interest
Shares, (ii) the full conversion of the outstanding Convertible Notes and
issuance of the Conversion Shares in connection therewith (based on the
Conversion Price (as defined in the Convertible Notes) of the Convertible
Notes in effect from time to time), and (iii) the full exercise of the
Warrants and the issuance of the Warrant Shares in connection therewith
(based upon the Exercise Price (as defined in the Warrants) of the Warrants
in effect from time to time). The Company will not reduce the number of
shares of Common Stock reserved for issuance (i) of the PIK Interest
Shares, (ii) upon conversion of the Convertible Notes, or (iii) upon
exercise of the Warrants, without the consent of all the Investors. The
Company will use its best efforts at all times to maintain the number of
shares of Common Stock so reserved for issuance at no less than 1,500,000
shares. If at any time during the term of this Agreement the number of
shares of Common Stock authorized and reserved for issuance is below the
number of PIK Interest Shares, Conversion Shares and Warrant Shares issued
and issuable in connection with or upon conversion of the Convertible Notes
and exercise of the Warrants (based on the Conversion Price of the
Convertible Notes and Exercise Price of the Warrants then in effect), the
Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares, including, without limitation,
calling a special meeting of shareholders to authorize additional shares to
meet the Company's obligations under this Section 4.11, in the case of an
insufficient number of authorized shares, and using its best efforts to
obtain shareholder approval of an increase in such authorized number of
shares.
4.12 Sales by Investors. Each Investor will sell any Securities
sold by it in compliance with applicable prospectus delivery requirements,
if any, or otherwise in compliance with the requirements for an exemption
from registration under the Securities Act and the rules and regulations
promulgated thereunder. No Investor will make any sale, transfer or other
disposition of the Securities in violation of federal or state securities
laws.
4.13 Additional Equity Capital; Right of First Refusal.
(a) Subject to the exceptions described below, the Company
will not conduct any equity financing (including debt financing with
an equity component) ("Future Offerings") during the period beginning
on the Closing Date and ending 18 months following the Closing Date,
unless it first delivers to each Investor, at least 30 days prior to
the closing of such Future Offering, written notice describing the
proposed Future Offering, including the terms and conditions thereof
and proposed definitive documentation to be entered into in
connection therewith, and providing each Investor an option during
the ten-day period following delivery of
15
such notice to purchase its pro rata share of the securities being
offered in the Future Offering ("Additional Securities") on the same
terms as contemplated by such Future Offering (the limitations
referred to in this Section 4.13(a) is referred to as the "Capital
Raising Limitation"). In the event that the terms and conditions of
a proposed Future Offering are amended in any material respect after
delivery of the notice to the Investors concerning the proposed
Future Offering, the Company will deliver a new notice to the
Investors describing the amended terms and conditions of the proposed
Future Offering and each Investor thereafter will have an option,
during the ten-day period following delivery of such new notice, to
purchase the Additional Securities on such amended terms. The
foregoing sentence applies to successive amendments to the terms and
conditions of any proposed Future Offering.
(b) The Capital Raising Limitation does not apply to any
transaction involving (i) issuances of securities in a firm
commitment underwritten public offering (excluding a continuous
offering pursuant to Rule 415 under the Securities Act), or (ii)
issuances of securities as consideration for a merger, acquisition,
consolidation or purchase or sale of assets, sale or exchange of
stock or in connection with any strategic investments, joint venture,
manufacturing, marketing or distribution arrangement, technology
transfer or development arrangement, or other similar commercial
relationship (the primary purpose of which is not to raise equity
capital). The Capital Raising Limitation also does not apply to (x)
the issuance of securities upon exercise or conversion of the
Company's options, warrants or other convertible securities
outstanding as of the date hereof including the SVB Warrant or upon
exercise or conversion of or in connection with the Convertible Notes
or the Warrants, or (y) the grant of additional options or warrants,
or the issuance of additional securities pursuant to such additional
options or warrants, under any Company stock option or restricted
stock plan or agreement.
(c) An Investor's "pro rata share" is the number of shares of
Additional Securities (rounded to the nearest whole share or dollar
amount) as is equal to the product of (a)(i) the number of shares of
Common Stock issuable upon the conversion of the Convertible Notes
and Warrants held by such Investor immediately prior to the issuance
of the Additional Securities being offered plus any shares of Common
Stock held by such Investor, divided by (ii) the total number of
shares of Common Stock issuable upon conversion of all outstanding
options, warrants and other convertible securities by the Company
immediately prior to the issuance of the Additional Securities,
multiplied by (b) the entire offering of Additional Securities.
4.14 Pledge of Securities. The Company acknowledges and agrees that
the Securities may be pledged by an Investor in connection with a bona fide
margin agreement or other loan or financing arrangement that is secured by
the Securities. The pledge of Securities shall not be deemed to be a
transfer, sale or assignment of the Securities hereunder, and no Investor
effecting a pledge of Securities shall be required to provide the Company
with any notice thereof or otherwise make any delivery to the Company
pursuant to this Agreement; provided that an Investor and its pledgee shall
be required to comply with the provisions of Section 2.6 hereof in order to
effect a sale, transfer or assignment of Securities to such pledgee. The
Company hereby agrees to execute and deliver such documentation as a
pledgee of the Securities may reasonably request in connection with a
pledge of the Securities to such pledgee by an Investor.
16
4.15 Disclosure of Transactions and Other Material Information.
From and after the filing of the Company's Form 10-Q for the quarter ending
September 30, 2003 with the SEC, to the best of its knowledge, SF Capital,
one of the Investors, shall not be in possession of any material, nonpublic
information received from the Company or any of its respective officers or
directors that is not disclosed. The Company shall not, and shall cause
each Subsidiary and each of its respective officers, directors, employees
and agents, not to, provide any Investor with any material nonpublic
information regarding the Company or any Subsidiary from and after the
Closing Date without the express written consent of such Investor. In the
event of a breach of the foregoing covenant by the Company, any Subsidiary,
or its each of respective officers, directors, employees and agents, in
addition to any other remedy provided herein or in the Transaction
Documents, an Investor shall have the right to demand that the Company make
a public disclosure, and if the Company fails to do so within five business
days, the Investor may make a public disclosure, in the form of a press
release, public advertisement or otherwise, of such material nonpublic
information without the prior approval by the Company, each Subsidiary, or
each of its respective officers, directors, employees or agents. In such
event, such Investor shall provide a copy of such public disclosure to the
Company at or prior to the dissemination of such disclosure to the public.
No Investor shall have any liability to the Company, any Subsidiary, or any
of its or their respective officers, directors, employees, shareholders or
agents for any such disclosure unless such Investor acts with negligence or
willful misconduct. Subject to the foregoing, neither the Company nor any
Investor shall issue any press releases or any other public statements with
respect to the transactions contemplated hereby without the prior approval
of the other party; which approval shall not be unreasonably withheld or
delayed, provided, however, that the Company shall be entitled, without the
prior approval of any Investor, to make any press release or other public
disclosure with respect to such transactions (i) in a Current Report on
Form 8-K in compliance with the requirements of the Exchange Act, and (ii)
as may otherwise be required by applicable law and regulations, including
the applicable rules and regulations of the Nasdaq (provided that in the
case of clause (i) each Investor shall be provided a copy of any proposed
press release to be issued by the Company at least one day prior to its
release).
ARTICLE V
TRANSFER AGENT INSTRUCTIONS; REMOVAL OF LEGENDS
5.1 Issuance of Certificates. The Company will instruct its
transfer agent to issue certificates, registered in the name of each
Investor or its nominee, for Conversion Shares, PIK Interest Shares and
Warrant Shares in such amounts as specified from time to time by each
Investor to the Company issuable in connection with or upon conversion of
the Convertible Notes or exercise of the Warrants in accordance with their
terms. All such certificates will bear the restrictive legend described in
Section 2.7, except as otherwise specified in this Article V. In addition,
the Company will issue irrevocable Transfer Agent Instructions to the
transfer agent in the form of Exhibit D hereto. The Company will not give
to its transfer agent any instruction other than as described in this
Article V and stop transfer instructions to give effect to Section 2.7
hereof (prior to registration of the Conversion Shares, PIK Interest Shares
and Warrant Shares under the Securities Act). Nothing in this Section 5.1
will affect in any way the Investors' obligations and agreement set forth
in Section 2.7 hereof to comply with all applicable prospectus delivery
requirements, if any, upon resale of the Conversion Shares, PIK Interest
Shares and Warrant Shares.
17
5.2 Unrestricted Securities. If, unless otherwise required by
applicable state securities laws, (a) the Securities represented by a
certificate have been registered under an effective registration statement
filed under the Securities Act, (b) a holder of Securities provides the
Company and the Transfer Agent with an opinion of counsel, in form,
substance and scope customary for opinions of counsel in comparable
transactions and reasonably acceptable to counsel for the Company, to the
effect that a public sale or transfer of such Securities may be made
without registration under the Securities Act and such sale either has
occurred or may occur without restriction on the manner of such sale or
transfer, (c) such holder provides the Company and the Transfer Agent with
reasonable assurances that such Securities can be sold under Rule 144, or
(d) the Securities represented by a certificate can be sold without
restriction as to the number of securities sold under Rule 144(k), the
Company will permit the transfer of the Conversion Shares, PIK Interest
Shares or Warrant Shares, and the Transfer Agent will issue one or more
certificates, free from any restrictive legend, in such name and in such
denominations as specified by such holder. Notwithstanding anything herein
to the contrary, the Securities may be pledged as collateral in connection
with a bona fide margin account or other lending arrangement; provided that
such pledge will not alter the provisions of this Article V with respect to
the removal of restrictive legends.
5.3 Enforcement of Provision. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to
each Investor by vitiating the intent and purpose of the transaction
contemplated hereby. Accordingly, the Company acknowledges that the remedy
at law for a breach of its obligations under this Article V will be
inadequate and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section, that each Investor will be
entitled, in addition to all other available remedies, to an injunction
restraining any breach.
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL
The obligation of the Company to issue and sell the Convertible Notes
to each Investor at the Closing is subject to the satisfaction by such
Investor, on or before the Closing Date, of each of the following
conditions. These conditions are for the Company's sole benefit and may be
waived by the Company at any time in its sole discretion:
6.1 The Investor will have executed this Agreement and the
Registration Rights Agreement and will have delivered those agreements to
the Company.
6.2 The Investor will have delivered the purchase price for the
Convertible Notes to the Company in accordance with this Agreement.
6.3 The representations and warranties of the Investor must be true
and correct in all material respects as of the Closing Date as though made
at that time (except for representations and warranties that speak as of a
specific date, which representations and warranties must be correct as of
such date), and the Investor will have performed and complied in all
material respects with the covenants and conditions required by this
Agreement to be performed or complied with by the Investor at or prior to
the Closing.
18
6.4 No statute, rule, regulation, executive order, decree, ruling or
injunction will have been enacted, entered, promulgated or endorsed by or
in any court or governmental authority of competent jurisdiction or any
self-regulatory organization having authority over the matters contemplated
hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement. All necessary consents, approvals,
licenses, permits, orders and authorizations of, or registrations,
declarations and filings with, any governmental or administrative agency
with respect to any of the transactions contemplated hereby shall have been
duly obtained or made and shall be in full force and effect.
6.5 Each Investor shall have performed in all material respects all
obligations and conditions herein required to be performed or observed by
the Investors on or prior to the Closing Date.
6.6 No proceeding challenging this Agreement or the transactions
contemplated hereby, or seeking to prohibit, alter, prevent or delay the
Closing, shall have been instituted before any court, arbitrator or
governmental body, agency or official and shall be pending.
6.7 The consent of the Company's lender, Silicon Valley Bank, shall
have been obtained as required pursuant to the Company's Loan Agreement
with such bank. In connection therewith, the Company shall exert all
commercially reasonable best efforts to obtain such consent.
6.8 All authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of
the Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
ARTICLE VII
CONDITIONS TO THE INVESTOR'S OBLIGATION TO PURCHASE
The obligation of each Investor hereunder to purchase the Convertible
Notes from the Company at the Closing is subject to the satisfaction, on or
before the Closing Date, of each of the following conditions. These
conditions are for each Investor's respective benefit and may be waived by
any Investor at any time in its sole discretion:
7.1 The Company will have executed this Agreement and the
Registration Rights Agreement and each such Agreement will have been
delivered the Investor.
7.2 The Company will have delivered to the Investors duly executed
Convertible Notes and duly executed Warrants in the amounts specified in
Sections 1.1 and 1.4 hereof.
7.3 The representations and warranties of the Company must be true
and correct in all material respects as of the Closing as though made at
that time (except for representations and warranties that speak as of a
specific date, which representations and warranties must be true and
correct as of such date) and the Company must have performed and complied
in all material respects with the covenants and conditions required by this
Agreement to be performed or
19
complied with by the Company at or prior to the Closing. The Investor must
have received a certificate or certificates dated as of the Closing Date
and executed by the Chief Executive Officer or the Chief Financial Officer
of the Company certifying as to the matters in contained in this Section
7.3 and Section 7.8 and as to such other matters as may be reasonably
requested by such Investor, including, but not limited to, the Company's
Articles of Organization, By-laws, Board of Directors' resolutions relating
to the transactions contemplated hereby and the incumbency and signatures
of each of the officers of the Company who may execute on behalf of the
Company any document delivered at the Closing.
7.4 No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction will have been enacted, entered, promulgated
or endorsed by or in any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over the
matters contemplated hereby which prohibits the consummation of any of the
transactions contemplated by this Agreement.
7.5 Trading and listing of the Common Stock on the Nasdaq must not
have been suspended by the SEC or the Nasdaq, nor has Nasdaq notified the
Company of any failure of the Company to meet any of the continued listing
standards.
7.6 The Investors will have received an opinion of the Company's
counsel, dated as of the Closing Date, in substantially the form attached
hereto as Exhibit E.
7.7 The Irrevocable Transfer Agent Instructions, in form and
substance substantially like the form attached hereto as Exhibit D and will
have been delivered to the Company's transfer agent and acknowledged in
writing by such transfer agent.
7.8 There shall exist at the time of Closing no condition or event
which would constitute an Event of Default (as hereinafter defined) or which,
after notice or lapse of time or both, would constitute an Event of Default.
7.9 The Company shall have received at least $6.0 million in proceeds
hereunder.
ARTICLE VIII
DEFAULT
8.1 Events of Default. Each of the following events shall be an event
of default (an "Event of Default") for purposes of this Agreement:
(a) if default shall be made in the due and punctual payment of
PIK Interest on the Convertible Notes, and such default shall have
continued for a period of 15 days after written notice thereof to the
Company by the holder of any of the Convertible Notes; or
(b) if default shall be made in the due and punctual payment of
any installment of the principal of the Convertible Notes and such
default shall have continued for a period of 15 days after written
notice thereof to the Company by the holder of any of the Convertible
Notes; or
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(c) if the Company shall default in any other manner with respect
to any of its obligations under the Convertible Notes, including
without limitation obligations to repurchase the Convertible Notes
under certain circumstances or issue Common Stock upon conversion of
any Convertible Note, and such default shall have continued for a
period of 15 days after written notice thereof to the Company by the
holder of any of the Convertible Notes; or
(d) if the Company shall default in any of its obligations under
the Registration Rights Agreement, including without limitation a
default in filing promptly any registration statement required by the
Registration Rights Agreement as to which Investor has given Company
written notice (the "First Notice"), that is not cured within fifteen
(15) days from the First Notice; or
(e) if the Company shall default in any of its obligations under
the Warrants, including without limitation failing to issue Common
Stock upon exercise of any Warrant, and such default shall have
continued for a period of 15 days after written notice thereof to the
Company by the holder of any of the Convertible Notes; or
(f) if the Company or any Subsidiary becomes insolvent or
bankrupt, or admits in writing its inability to pay its debts as they
mature, or makes an assignment for the benefit of creditors, or ceases
doing business as a going concern, or the Company or any Subsidiary
applies for or consents to the appointment of a trustee or receiver for
the Company or any Subsidiary, or for the major part of the property of
either; or
(g) if a trustee or receiver is appointed for the Company or any
Subsidiary or for the major part of the property of either and the
order of such appointment is not discharged, vacated or stayed within
60 days after such appointment; or
(h) if any final judgment, writ or warrant of attachment or of
any similar process in an amount in excess of $400,000 shall be entered
or filed against the Company or any Subsidiary or against any of the
property or assets of either and after expiration of final appeal
rights remains unpaid, unvacated, unbonded or unstayed for a period of
60 days; or
(i) if an order for relief shall be entered in any federal
bankruptcy proceeding in which the Company or any Subsidiary is the
debtor; or if bankruptcy, reorganization, arrangement, insolvency, or
liquidation proceedings, or other proceedings for relief under any
bankruptcy or similar law or laws for the relief of debtors, are
instituted by or against the Company or any Subsidiary and, if
instituted against the Company or any Subsidiary, are consented to or,
if contested by the Company or the Subsidiary, are not dismissed by the
adverse parties or by an order, decree or judgment within 90 days after
such institution; or
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(j) if the Company or any Subsidiary shall default in any
material respect in the due and punctual performance of any payment
obligation in any note (including without limitation any of the
Convertible Notes), bond, indenture, loan agreement, note agreement,
mortgage, security agreement or other instrument evidencing or related
to Indebtedness for Borrowed Money, and such default shall continue for
more than the period of notice and/or grace, if any, therein specified
and shall not have been waived; or
(k) (A) if any representation or warranty made by or on behalf of
the Company in this Agreement or in any certificate, report or other
instrument delivered under or pursuant to any term hereof or thereof
shall prove to have been untrue or incorrect in any material respect as
of the date of this Agreement or as of the Closing Date, or (B) if any
report, certificate, financial statement or financial schedule or other
instrument prepared or purported to be prepared by the Company or any
officer of the Company furnished or delivered under or pursuant to this
Agreement after the Closing Date shall prove to be untrue or incorrect
in any material respect as of the date it was made, furnished or
delivered; or
(l) if default shall be made in the due and punctual performance
or observance of any other material term contained in this Agreement,
and such default shall have continued for a period of 15 days after
written notice thereof to the Company by the holder of any Convertible
Note.
8.2 Remedies Upon Events of Default. For so long as any Convertible
Note or any Warrant remains outstanding, upon the occurrence of an Event of
Default as herein defined and after the expiration of any applicable notice
and cure period, and so long as such Event of Default continues unremedied,
then, each holder of any Securities shall be entitled by notice to declare
the principal of and any accrued PIK Interest on the Convertible Notes, to be
immediately due and payable, and thereupon the Convertible Notes, including
both principal and PIK Interest shall become immediately due and payable;
provided, however, that when any Event of Default described in Section 8.1(i)
hereof has occurred, the Convertible Notes shall immediately become due and
payable without presentment, demand or notice of any kind.
8.3 Notice of Defaults. When, to its knowledge, any Event of Default
has occurred or exists, the Company agrees to give written notice within five
business days of such Event of Default to the holders of all outstanding
Securities. If the holder of any Securities shall give any notice or take
any other actions in respect of a claimed Event of Default, the Company will
forthwith give written notice thereof to all other holders of Securities at
the time outstanding, describing such notice or action and the nature of the
claimed Event of Default.
8.4 Suits for Enforcement. In case any one or more Events of Default
shall have occurred and be continuing, unless such Events of Default shall
have been waived in the manner provided in Section 8.2 hereof, and after the
expiration of any applicable notice and cure period, any holder of the
Securities may proceed to protect and enforce its rights under this Article
VIII by suit in equity or action at law. It is agreed that in the event of
such action such holders of Securities shall be entitled to receive all
reasonable fees, costs and expenses incurred, including
22
without limitation such reasonable fees and expenses of attorneys (whether or
not litigation is commenced) and reasonable fees, costs and expenses of
appeals. Notwithstanding the foregoing, in the event litigation is commenced
by or against the holders of Securities in connection with a dispute arising
between the parties, such holders shall be entitled to receive all reasonable
fees, costs and expenses as set forth above if, and only if, final judgment
is rendered in their favor in such proceeding.
8.5 Remedies Cumulative. No right, power or remedy conferred upon any
holder of Securities shall be exclusive, and each such right, power or remedy
shall be cumulative and in addition to every other right, power or remedy,
whether conferred hereby or by any such security or now or hereafter
available at law or in equity or by statute or otherwise.
8.6 Remedies not Waived. No course of dealing between the Company and
any Investor or the holder of any Securities, and no delay in exercising any
right, power or remedy conferred hereby or by any such security or now or
hereafter existing at law or in equity or by statute or otherwise, shall
operate as a waiver of or otherwise prejudice any such right, power or
remedy; provided, however, that this Section 8.6 shall not be construed or
applied so as to negate the provisions and intent of any statute which is
otherwise applicable.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification by the Company. In consideration of each
Investor's execution and delivery of this Agreement and its acquisition of
the Securities hereunder, and in addition to all of the Company's other
obligations under this Agreement, the Registration Rights Agreement, the
Warrants and the Convertible Notes, the Company will defend, protect,
indemnify and hold harmless each Investor and each other holder of the
Securities and all of their shareholders, officers, directors, employees,
advisors and direct or indirect investors and any of the foregoing person's
agents or other representatives (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Investor Indemnitees") from and against any
and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(regardless of whether any such Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred
by an Investor Indemnitee as a result of, or arising out of, or relating to
(a) any breach of any representation or warranty made by the Company herein
or in any other certificate, instrument or document contemplated hereby or
thereby, (b) any breach of any covenant, agreement or obligation of the
Company contained herein or in any other certificate, instrument or
document contemplated hereby or thereby, (c) any cause of action, suit or
claim brought or made against such Indemnitee and arising out of or
resulting from the execution, delivery, performance, breach or enforcement
of this Agreement, the Registration Rights Agreement, the Warrants or the
Convertible Notes by the Company, (d) any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds of
the issuance of the Securities or (e) the status of such Investor or holder
of the Securities as an investor in the Company to the extent such status
arises solely from actions or inaction by the Company in violation of law.
To the extent that the foregoing undertaking by the Company is
unenforceable
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for any reason, the Company will make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities that is
permissible under applicable law. Notwithstanding the foregoing, this
Section 9.1 shall not subject the Company to liability in any such case to
the extent that any such Indemnified Liabilities arises out of or is based
solely upon (i) an untrue statement or alleged untrue statement or omission
or alleged omission made in any Registration Statement, Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with
written information furnished to the Company by or on behalf of an Investor
for use therein, or (ii) the failure of an Investor to comply with the
requirements of the Securities Act or any state securities laws, which
failure is not caused by the negligence or willful misconduct of the
Company.
9.2 Indemnification by the Investor. Each Investor, severally and
not jointly, will defend, protect, indemnify and hold harmless the Company
all of its shareholders, officers, directors, employees and direct or
indirect investors and any of the foregoing person's agents or other
representatives (including, without limitation, those retained in
connection with the transactions contemplated by this Agreement)
(collectively, the "Company Indemnitees") from and against any and all
Indemnified Liabilities incurred by a Company Indemnitee solely as a result
of, or arising solely out of, or relating solely to (a) any breach of any
representation or warranty made by such Investor herein or in any other
certificate, instrument or document contemplated hereby or thereby, (b) any
breach of any covenant, agreement or obligation of the Investor contained
herein or in any other certificate, instrument or document contemplated
hereby or thereby, or (c) the failure of an Investor to comply with the
requirements of the Securities Act or any state securities laws, which
failure is not caused by the negligence or willful misconduct of the
Company.
ARTICLE X
DEFINITIONS
10.1 "Closing" means the closing of the purchase and sale of the
Convertible Notes under this Agreement.
10.2 "Closing Date" has the meaning set forth in Section 1.3.
10.3 "Common Stock" means the common stock, par value $.10 per
share, of the Company.
10.4 "Company" means Parlex Corporation, a Massachusetts
corporation.
10.5 "Company Indemnitees" has the meaning set forth in Section 9.2.
10.6 "Conversion Shares" means the shares of Common Stock issuable
upon conversion of the Convertible Notes or otherwise under Section 2.3 of
the Registration Rights Agreement.
10.7 "Convertible Notes" means the 7% Convertible Notes issuable
pursuant to this Agreement, in the form attached hereto as Exhibit A and
all notes of the Company issued in exchange or substitution therefor.
24
10.8 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, or any similar successor
statute.
10.9 "Indebtedness for Borrowed Money" shall include only (i)
indebtedness of the Company and its Subsidiaries incurred as the result of a
direct borrowing of money, and (ii) guarantees by the Company and its
Subsidiaries of indebtedness of third parties, and shall not include any
other indebtedness including, but not limited to, indebtedness incurred with
respect to trade accounts, equipment leases, and intercompany loans.
10.10 "Indemnified Liabilities" has the meaning set forth in Section
9.1.
10.11 "Investor Indemnitees" has the meaning set forth in Section
9.1.
10.12 "Investors" means the investors whose names are set forth on
the signature pages of this Agreement, and their permitted transferees.
10.13 "Material Adverse Effect" means a material adverse effect on
(a) the business, operations, assets or financial condition of the Company
and its Subsidiaries taken as a whole, (b) the ability of the Company to
perform its obligations pursuant to the transactions contemplated by this
Agreement or under the agreements or instruments to be entered into or
filed in connection herewith or (c) the Securities.
10.14 "Nasdaq" means the Nasdaq National Market.
10.15 "NDA" has the meaning set forth in Section 2.11.
10.16 "Operating Subsidiaries" shall mean and refer to Parlex
Dynaflex Corporation, a California corporation, and Poly-Flex Circuits,
Inc., a Rhode Island corporation.
10.17 "Option Plans" means the Company's (i) 1989 Outside Directors'
Stock Option Plan, (ii) 1989 Employees' Stock Option Plan, (iii) 1996
Outside Directors' Stock Option Plan, and (iv) 2001 Employees' Stock Option
Plan.
10.18 "PIK Interest" has the meaning set forth in Section 1.1.
10.19 "PIK Interest Shares" has the meaning set forth in Section
1.1.
10.20 "Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement and among the parties to
this Agreement, in the form attached hereto as Exhibit C
10.21 "Regulation D" means Regulation D as promulgated by the SEC
under the Securities Act.
10.22 "Rule 144" and "Rule 144(k)" mean Rule 144 and Rule 144(k),
respectively, promulgated under the Securities Act, or any successor rule.
10.23 "SEC" means the United States Securities and Exchange
Commission.
25
10.24 "SEC Documents" has the meaning set forth in Section 3.7.
10.25 "Securities" means the Convertible Notes, Conversion Shares,
PIK Interest Shares, Warrants and Warrant Shares.
10.26 "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations thereunder, or any similar successor statute.
10.27 "Subsidiaries" means any entity in which the Company, directly
or indirectly, owns capital stock or holds an equity or similar interest,
as set forth on Schedule 10.27.
10.28 "SVB Warrant" has the meaning set forth in Section 3.3.
10.29 "Transaction Documents" shall have the meaning set forth in
Section 11.19.
10.30 "Warrant Shares" means the shares of Common Stock issuable
upon the exercise (or otherwise) of the Warrants.
10.31 "Warrants" means the stock purchase warrants of the Company,
in the form attached hereto as Exhibit B, to acquire shares of Common
Stock.
ARTICLE XI
GOVERNING LAW; MISCELLANEOUS
11.1 Governing Law; Jurisdiction. This Agreement will be governed
by and interpreted in accordance with the laws of the Commonwealth of
Massachusetts without regard to the principles of conflict of laws. The
parties hereto hereby submit to the jurisdiction of the United States
federal and state courts located in the Commonwealth of Massachusetts with
respect to any dispute arising under this Agreement, the agreements entered
into in connection herewith or the transactions contemplated hereby or
thereby.
11.2 Counterparts; Signatures by Facsimile. This Agreement may be
executed in two or more counterparts, all of which are considered one and
the same agreement and will become effective when counterparts have been
signed by each party and delivered to the other parties. This Agreement,
once executed by a party, may be delivered to the other parties hereto by
facsimile transmission of a copy of this Agreement bearing the signature of
the party so delivering this Agreement.
11.3 Headings. The headings of this Agreement are for convenience
of reference only, are not part of this Agreement and do not affect its
interpretation.
11.4 Severability. If any provision of this Agreement is invalid or
unenforceable under any applicable statute or rule of law, then such
provision will be deemed modified in order to conform with such statute or
rule of law. Any provision hereof that may prove invalid or unenforceable
under any law will not affect the validity or enforceability of any other
provision hereof.
26
11.5 Entire Agreement. This Agreement, the Registration Rights
Agreement, the NDA, the Convertible Notes and the Warrants (including all
schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein or therein. This Agreement
supersedes all prior agreements and understandings among the parties hereto
with respect to the subject matter hereof.
11.6 Consents; Waivers and Amendments. Except as otherwise
specifically provided herein, in each case in which approval of the Investors
is required by the terms of this Agreement, such requirement shall be
satisfied by a vote or the written consent of each Investor.
11.7 Changes, Waivers, etc. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, except to the extent
provided in Section 11.6 hereof.
11.8 Notices. Any notices required or permitted to be given under
the terms of this Agreement must be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including
a recognized overnight delivery service) or by facsimile and will be
effective five days after being placed in the mail, if mailed by regular
U.S. mail, or upon receipt, if delivered personally, by courier (including
a recognized overnight delivery service) or by facsimile, in each case
addressed to a party. The addresses for such communications are:
If to the Company: Parlex Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Kutchin & ▇▇▇▇, P.C.
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▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to an Investor, to the address set forth immediately below such
Investor's name on the signature pages hereto.
Each party will provide written notice to the other parties of any
change in its address.
11.9 Successors and Assigns. This Agreement is binding upon and
inures to the benefit of the parties and their successors and assigns. The
Company will not assign this Agreement or any rights or obligations
hereunder without the prior written consent of the Investors, and no
Investor may assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Company. Notwithstanding the
foregoing, an Investor may assign all or part of its rights and obligations
hereunder to any of its "affiliates," as that term is defined under the
Securities Act, without the consent of the Company so long as the affiliate
is
27
an accredited investor (within the meaning of Regulation D under the
Securities Act) and agrees in writing to be bound by this Agreement. This
provision does not limit the Investor's right to transfer the Securities
pursuant to the terms of this Agreement or to assign the Investor's rights
hereunder to any such transferee pursuant to the terms of this Agreement.
11.10 Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
11.11 Survival. Notwithstanding any investigation made by any party
to this Agreement, all representations and warranties contained herein shall
survive the execution and delivery of this Agreement. All statements
contained in any certificate, instrument or other writing delivered pursuant
hereto or in connection with or contemplation of the transactions herein
contemplated (other than legal opinions) shall constitute representations and
warranties by the party delivering such certificate, instrument or other
writing.
11.12 Publicity. The Company and each Investor have the right to
review, a reasonable period of time before issuance thereof, any press
releases, or relevant portions of any SEC or Nasdaq filings or any other
public statements, with respect to the transactions contemplated under this
Agreement. However, the Company may make any press release or SEC or
Nasdaq filings with respect to such transactions as are required by
applicable law and regulations (including NASD requirements) without the
prior approval of the Investors (although the Company will make reasonable
efforts to consult with the Investors in connection with any such press
release prior to its release and filing).
11.13 Further Assurances. Each party will do and perform, or cause
to be done and performed, all such further acts and things, and will
execute and deliver all other agreements, certificates, instruments and
documents, as another party may reasonably request in order to carry out
the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
11.14 No Strict Construction. The language used in this Agreement
is deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any
party.
11.15 Equitable Relief. The Company recognizes that, if it fails to
perform or discharge any of its obligations under this Agreement, any
remedy at law may prove to be inadequate relief to the Investors. The
Company therefore agrees that the Investors are entitled to temporary and
permanent injunctive relief in any such case without the necessity of
proving actual damages.
11.16. Termination of Certain Covenants. The obligations of the
Company under Sections 4.13 and 8.1(a) through (c) and (l) hereof, shall,
notwithstanding any provisions hereof apparently to the contrary, terminate
and be of no further force or effect from and after the date on which (i) no
Convertible Notes remain outstanding and/or (ii) with respect to any
Investor, when such Investor ceases to hold Common Stock issuable upon
conversion or exercise of Convertible Notes and Warrants in an amount equal
to less than 20% of such shares originally issuable to such
28
Investor upon such conversion or exercise (subject to adjustment for stock
splits, share dividends and the like).
11.17 Finder's Fee. Except as otherwise set forth in Section 2.10
hereof, each party represents that it neither is, nor will be, obligated
for any finders' fee or commission in connection with this transaction.
Each Investor agrees to indemnify and to hold harmless the Company from any
liability for any commission or compensation in the nature of a finders'
fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers,
partners, employees, or representatives is responsible. The Company agrees
to indemnify and hold harmless each Investor from any liability for any
commission or compensation in the nature of a finders' fee (and the costs
and expenses of defending against such liability or asserted liability) for
which the Company or any of its officers, employees or representatives is
responsible.
11.18 Heartland Value Fund. The Company understands and
acknowledges that Heartland Group, Inc. is entering into this Agreement
solely on behalf of the Heartland Value Fund and that any claims that the
Company may have against Heartland Group, Inc. under this Agreement or
otherwise in connection with the transactions contemplated hereby shall
only be made against the assets of the Heartland Value Fund, provided,
however, that the foregoing shall be of no force or effect in the event of
the distribution of all of the assets of, or dissolution, winding up or
other termination of, the Heartland Value Fund.
11.19 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any of the Convertible Note, Warrant,
Registration Rights Agreement or this Agreement (collectively, the
"Transaction Documents") are several and not joint with the obligations of
any other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under any Transaction
Document. Nothing contained herein or in any Transaction Document, and no
action taken by any Investor pursuant thereto, shall be deemed to
constitute the Investors as a partnership, an association, a joint venture
or any other kind of entity, or create a presumption that the Investors are
in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Document. Each
Investor shall be entitled to independently protect and enforce its rights,
including without limitation the rights arising out of this Agreement or
out of the other Transaction Documents, and it shall not be necessary for
any other Investor to be joined as an additional party in any proceeding
for such purpose. Each Investor has been represented by its own separate
legal counsel in their review and negotiation of the Transaction Documents.
The Company has elected to provide all Investors with the same terms and
Transaction Documents for the convenience of the Company and not because it
was required or requested to do so by the Investors.
11.20 Restrictions Upon Issuances of Securities. Unless Shareholder
Approval has been obtained, the Company shall not make any issuance
whatsoever of any security (whether Common Stock, Preferred Stock or other
convertible instruments) that would result in an adjustment of the Initial
Conversion Price under the Convertible Note(s) (other than pursuant to
Section 3(ii) of the Convertible Note(s)) or the Initial Exercise Price under
the Warrant(s). For purposes of this Section 11.20, "Shareholder Approval"
shall have the meaning set forth in the Convertible Note(s) or Warrant(s), as
the case may be.
29
IN WITNESS WHEREOF, the undersigned Investors and the Company have
caused this Agreement to be duly executed as of the date first above
written.
COMPANY:
PARLEX CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chief Executive Officer & President
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INVESTOR:
▇▇▇▇ Capital Partners Fund, LLC
By ▇▇▇▇ Capital Partners, LLC
Its Managing Member
By ▇▇▇▇ Capital Management, LLC
Its Managing Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Managing Member
Aggregate Principal Amount: $400,000
ADDRESS:
▇▇▇▇ Capital Partners Fund, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
(any notice hereunder to this Investor shall include a copy to):
Faegre & ▇▇▇▇▇▇ LLP
2200 ▇▇▇▇▇ Fargo Center
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇, Esq.
[Signatures continued on next page]
INVESTOR:
SF CAPITAL PARTNERS LTD.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Partner
Aggregate Principal Amount: $2,600,000
ADDRESS:
SF Capital Partners LTD
c/o Staro Asset Management. LLC
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▇▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
[Signatures continued on next page]
INVESTOR:
MIDSUMMER INVESTMENT, LTD.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Director
Aggregate Principal Amount: $1,000,000
ADDRESS:
Midsummer Investment, Ltd.
c/o Midsummer Capital, LLC
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INVESTOR:
ISLANDIA L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Partner
Aggregate Principal Amount: $500,000
ADDRESS:
Islandia L.P.
c/o ▇▇▇▇ ▇▇▇▇, Inc.
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INVESTOR:
HEARTLAND GROUP, INC.
(Solely on behalf of Heartland Value
Fund)
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇
Its: Vice President
Aggregate Principal Amount: $1,500,000
ADDRESS:
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