Exhibit 4.1
SUBORDINATED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
THIS SUBORDINATED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
(this "Agreement") is entered into as of the 13th day of February, 2003, by
and among ▇▇▇▇▇▇ COMPANIES, INC., a Missouri corporation (the "Company"),
and each of the investors listed on Exhibit A attached to this Agreement
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(each an "Investor" and collectively, the "Investors").
RECITAL:
WHEREAS, The Company and the Investors deem it advisable
for the Investors to purchase and the Company to sell to the Investors the
Debentures (as defined below), all upon the terms and subject to the
conditions herein provided.
NOW, THEREFORE, in consideration of the mutual promises
and other consideration hereinafter set forth, the adequacy and receipt of
which hereby are acknowledged by the parties hereto, the parties agree as
follows:
1. DESCRIPTION OF DEBENTURES; COMMITMENT.
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1.1 Description of the Debentures. The Company has
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authorized the issue and sale of Subordinated Convertible Debentures, in an
aggregate principal amount not to exceed $10,000,000 in the form of Exhibit
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B hereto, convertible into shares of the Company's common stock, $.01 par
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value (the "Common Stock"), as set forth in Section 7 hereof (such
Subordinated Convertible Debentures are hereinafter referred to as the
"Debentures"). The Debentures will be dated the date of issue and bear
interest at the rate of 7% per annum, payable semiannually, as provided
therein. Principal of the Debentures shall be due and payable on February
13, 2008. On the Closing Date, the Company shall deliver to each Investor an
executed copy of a Registration Rights Agreement in respect of the
Debentures and the Warrants (as defined in Section 10.4 hereof) in
substantially the form of Exhibit C hereto.
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1.2 Purchase of Debentures. Subject to the terms and
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conditions hereof and on the basis of the representations and warranties
hereinafter set forth, on the Closing Date (as defined below), the Company
agrees to issue and sell to the Investors, and each of the Investors
severally agrees to purchase from the Company, the Debentures in the
respective principal amount set forth opposite such Investor's name on
Exhibit A hereto at a price of 100% of the principal amount thereof.
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1.3 Closing Date. Delivery of the Debentures to be issued
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and purchased pursuant to this Agreement shall be at the offices of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ LLP, One ▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, against
payment to the Company of the purchase price therefor by wire transfer of
immediately available funds (the "Closing"), at 10:00 A.M., St. Louis
time, on February 13, 2003 or such later date as shall be mutually agreed
upon by the Company and Investor (the "Closing Date").
1.4 Future Closings. To the extent the Company issues less
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than the maximum $10,000,000 in face amount of the Debentures at the
Closing, the Company may, in its discretion, issue additional Debentures to
accredited investors until the face amount of all Debentures issued under
this Agreement equals $10,000,000, provided that (a) such accredited
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investors shall execute and deliver to the Company and each other Investor
original counterparts of this Agreement (agreeing to be bound hereby as an
"Investor") and the Registration Rights Agreement (agreeing to be bound
thereby as a "Securityholder"), (b) the consideration for each Debenture and
related Warrant shall be cash in an amount equal to 100% of the face amount
of such Debenture, and (c) such accredited investors shall receive
Debentures and Warrants having terms identical to those issued at the
Closing, but dated as of the respective dates of purchase by such accredited
investors.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
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In order to induce each Investor to enter into this
Agreement and to purchase the Debentures, the Company hereby represents and
warrants to each Investor that:
2.1 Organization. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State
of Missouri. The Company is duly licensed or qualified to transact business
as a foreign corporation and is in good standing in all other jurisdictions
in which the nature of the business transacted by it or the character of the
properties owned or leased by it requires such licensing or qualification,
except where the failure to be so qualified will not have a material adverse
effect on the Company. The Company has furnished counsel to the Investors
true, correct and complete copies of its Amended and Restated Articles of
Incorporation, including all amendments and certificates of designations, as
presently in effect (the "Articles"), and Amended and Restated By-Laws, as
presently in effect (the "By-Laws").
2.2 Authorization and Consents. The Company has all
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requisite corporate power and authority to own or lease and use its
properties and assets, to carry on its business as currently conducted, to
own enter into and to consummate the transactions contemplated by this
Agreement and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement by the Company has been duly and
effectively authorized and approved by all requisite corporate action of the
Company, and no other corporate or shareholder act or proceeding on the part
of the Company shall be necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement constitutes a valid and
legally binding obligation of the Company, enforceable against the Company
in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby nor compliance by the Company with any of
the provisions hereof will violate or conflict with any of the terms,
conditions or provisions of the Articles or Bylaws of the
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Company, or violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company.
2.3 Financial Statements. The Company's audited financial
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statements as of September 30, 2001 and for the fiscal year then ended
contained in its Annual Report on Form 10-K, the Company's unaudited
financial statements as of June 30, 2002 and for the quarter and nine-month
periods then ended contained in its Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002, and the Company's unaudited financial
statements as of December 31, 2002 and for the quarter then ended as
previously furnished to the Investors (collectively, the "Company Financial
Statements") are true and complete copies of such statements. The Company
Financial Statements, taken together with the other disclosures in those
filings, present fairly in all material respects the consolidated financial
position and consolidated results of operations of the Company as of the
respective dates and for the respective periods indicated, and have been
prepared in conformity with generally accepted accounting principles applied
on a basis consistent (except as otherwise noted) with prior periods, except
that the unaudited statements lack full footnote disclosures and are subject
to year end adjustment. Since June 30, 2002, there has been no material
adverse change in the financial condition, results of operations, assets,
liabilities or business of the Company and its subsidiaries, taken as a
whole, from the information presented in the Company Financial Statements.
2.4 Capitalization.
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(a) At Closing, the authorized capital stock of
the Company will consist solely of (i) 50,000,000 shares of Common Stock, of
which 16,285,338 shares are issued and outstanding, and (ii) 1,000,000
shares of Preferred Stock, par value $.01 per share, none of which will be
issued and outstanding on the date hereof.
(b) Except (i) for 1,087,000 shares of Common
Stock reserved for issuance pursuant to options currently held by employees
of the Company, (ii) for 1,000,000 shares of Common Stock reserved for
future issuance pursuant to the Company's employee benefit plans, (iii) for
2,857,143 shares of Common Stock reserved for issuance upon conversion of
the Debentures, (iv) for 500,000 shares of Common Stock reserved for
issuance upon exercise of the Warrants (defined below), and (v) as specified
in the Articles, there are no outstanding preemptive, conversion or other
rights, options, warrants or agreements granted or issued by or binding upon
the Company for the purchase or acquisition of any shares of its capital
stock.
(c) At Closing, sufficient shares of authorized
but unissued Common Stock of the Company will have been reserved by
appropriate corporate action in connection with the prospective conversion
of the Debentures and exercise of the Warrants. The issuance of Common Stock
in connection with the conversion of the Debentures and exercise of the
Warrants in accordance with their respective terms will not require any
further corporate action by the shareholders or directors of the Company,
will not be subject to preemptive rights of any present or future
shareholders of the Company and will not conflict with any provision of any
agreement to which the Company is a party or by which it is bound. The
Common Stock, when issued upon conversion of the Debentures and exercise of
the Warrants in accordance with their
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respective terms, will be duly authorized, fully paid and non-assessable and
will be free of any liens or encumbrances.
2.5 Information Regarding the Company. The Company has
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delivered or made available to Investor true and complete copies of all
reports filed by the Company with the Securities and Exchange Commission
(the "SEC") pursuant to the Securities Exchange Act of 1934, as amended (the
"1934 Act"), within the last two years. The Company has delivered to
Investor a draft of the Company's Amendment No. 1 to Annual Report on Form
10-K/A for the fiscal year ended September 30, 2002, a copy of which is
attached hereto as Schedule 2.5. To the best of the Company's knowledge and
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belief, none of the foregoing reports, nor any other filing made by the
Company with the SEC, contained, at the time thereof, 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 not misleading.
2.6 Litigation. Except as set forth on Schedule 2.6, there
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are no actions, suits, proceedings, claims, investigations or inquiries of
any kind pending or, to the knowledge of the Company, threatened against the
Company before any court, commission, agency or other administrative or
judicial authority which could have a material adverse effect on the
financial condition, results of operations, assets, liabilities or business
of the Company. The Company is not the subject of any judicial or
governmental order or decree, other than those of general application. There
is no suit, claim, action, proceeding or governmental investigation now
pending or, to the Company's knowledge, threatened against the Company which
contests the validity of this Agreement or the ability of the Company to
consummate the transactions contemplated by this Agreement.
2.7 Transactional Approvals. Except as set forth on
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Schedule 2.7, no approval, authorization, order, license, permit, franchise
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or consent of, or registration, qualification or filing with, or notice to,
any judicial or governmental agency or authority, or any other person or
entity, is required in connection with the execution, delivery or
performance by the Company of this Agreement.
2.8 Intellectual Property. The Company owns, or has the
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valid license or other rights to use, all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights and copyrights
used by the Company in its business (the "Intellectual Property Rights"),
and all such Intellectual Property Rights are valid and in good standing and
adequate and sufficient to permit the Company to conduct its business as
conducted by it without conflict with or infringement upon any valid rights
of others, except where such conflict or infringement would not have a
material adverse effect on the Company or the conduct of its business as
presently conducted by it. To the Company's knowledge, all Intellectual
Property Rights owned or used by the Company are free of any adverse claims,
rights or encumbrances as to the Company's rights thereto.
2.9 Environmental Matters. No person or party (including,
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but not limited to, governmental agencies of any kind) has asserted any
claim against the Company, and, to the Company's knowledge, there is no
basis for any such claim, relating to any violation, citation, claim
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or complaint relating to the business of the Company or its property arising
under any law relating to the environment, including, without limitation,
the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response Compensation and Liability Act, the Superfund Amendments and
Reauthorization Act, the Toxic Substances Control Act, the Safe Drinking
Water Act, the Federal Water Pollution Control Act (Clean Water Act), the
Clean Air Act and antipollution, waste control and disposal and
environmental "clean-up" provisions of similar statutes of any federal,
state or local governmental authorities, and all regulations and standards
enacted pursuant thereto and all permits and authorizations issued in
connection therewith, except to the extent any such claim will not have a
material adverse effect on the Company or on the conduct of its business.
2.10 Tax Matters. The Company has prepared and duly filed all tax
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reports and returns required to be filed by it, including all federal,
state, local and foreign tax returns and reports, and the Company has paid
in full all taxes shown to be due on such returns or any assessment,
deficiency notice, 30-day letter or similar notice received by it, except
where such taxes are being protested in good faith by appropriate
proceedings or where such reports and returns do not reflect that any tax is
due and owing by the Company and except where the failure to file such
reports and returns or pay such taxes would not have a material adverse
effect on the Company or the conduct of its business. All taxes which the
Company has been required to collect or withhold have been duly collected or
withheld and, to the extent required, have been paid to the proper taxing
authority. The Company is not a party to any pending action or proceeding by
any governmental authority for the assessment of any Tax, and no claim for
assessment or collection of any Tax has been asserted against the Company
that has not been paid, except to the extent such actions, proceedings or
claims, if adversely determined to the Company, will not have a material
adverse effect on the Company or the conduct of its business. To the best of
the Company's knowledge, there is no valid basis for any assessment,
deficiency notice, 30-day letter or similar intention to assess any tax with
respect to returns filed or required to be filed by the Company.
2.11 Insurance. The Company maintains policies of insurance from
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reputable insurers (including comprehensive general liability, personal and
professional liability, comprehensive general casualty and extended
coverage, products liability, automobile, fire and lightning and worker's
compensation) in amounts and limits deemed appropriate in light of the
Company's business activities, and the Company is not aware of any material
gaps in coverage or any denial of coverage with respect to a material loss
affecting the Company.
2.12 Labor Matters. The Company is in compliance in all material
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respects with federal, state, local and other applicable law respecting
employment and employment practices, terms and conditions of employment and
wages and hours. There is no labor strike, dispute, organizing effort, slow
down, stoppage or other labor difficulty pending, or to Company's knowledge
threatened, against or affecting the Company which could reasonably be
expected to have a material adverse effect on the Company or the conduct of
its business. There are no pending or, to the Company's knowledge,
threatened claims against the Company by any present, former or prospective
employee arising out of the denial or termination of employment or any
matters relating to any workplace environment of the Company or the actions
or omissions of other employees of the Company (other than claims for
worker's compensation benefits as a result of workplace injuries), except
claims
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which, if adversely determined to Company, will not have a material adverse
effect on the Company or the conduct of its business.
2.13 No Broker. Except as set forth on Schedule 2.13, no
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person, firm or corporation has acted in the capacity of broker, advisor,
investment banker or finder on behalf of the Company to bring about the
negotiation or consummation of this Agreement. Any fee payable to a broker,
advisor, investment banker or finder identified on Schedule 2.13 shall be
paid by the Company.
2.14 Contracts. Neither the Company nor any other party to
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any contract or agreement to which the Company or any of its subsidiaries is
a party is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach of default, or permit
termination, modification or acceleration, of the contract or agreement if
consequences of a default or termination is reasonably likely to have a
material adverse effect on the business, financial condition, operations,
results of operations, or future prospects of the Company and its
subsidiaries taken as a whole; the execution, delivery and performance of
this Agreement, the Debentures and the Warrants by the Company do not and
will not, with or without notice or lapse of time, constitute a breach or
default of, or result in any lien under, any material contract, undertaking,
indenture or any other agreement or instrument by which the Company is bound
or to which it is a party.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
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Each Investor represents and warrants to the Company that all
action on the part of such Investor necessary for the authorization,
execution, delivery and performance of all its obligations under this
Agreement has been (or will be) taken prior to the Closing Date. This
Agreement, when executed and delivered by Investor, shall constitute a valid
and legally binding obligation of such Investor enforceable in accordance
with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors.
4. FEDERAL AND OTHER SECURITIES LAWS.
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4.1 Investment Representations.
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(a) This Agreement is made with each Investor in
reliance upon such Investor's representation to the Company, which by its
acceptance hereof Investor hereby confirms, that the Debentures, the
Warrants and the Common Stock issuable upon conversion of the Debentures or
exercise of the Warrants (all such securities are referred to as the
"Securities" for purposes of this Section 4) to be received by it will be
acquired for investment for its own account, not as a nominee or agent, and
not with a view to the sale or distribution of any part thereof, and that it
has no present intention of selling, granting participation in or otherwise
distributing the same. By executing this Agreement, Investor further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to such
person or to any third person with respect to any of the Securities.
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(b) Each Investor understands that the Securities
are not registered under the Securities Act of 1933, as amended (the "1933
Act"), on the ground that the sale provided for in this Agreement and the
issuance of Securities hereunder should be exempt from registration under
the 1933 Act and that the Company's reliance on such exemption is predicated
on such Investor's representations set forth herein. Each Investor realizes
that the basis for the exemption may not be present if, notwithstanding such
representations, such Investor has in mind merely acquiring the Securities
for a fixed or determinable period in the future, or for a market rise or
for sale if the market does not rise. Each Investor confirms it has no such
intention.
(c) Each Investor represents that it is an
"accredited investor" within the meaning of Rule 501 under the 1933 Act and
that such Investor is experienced in evaluating and investing in companies
such as the Company, is able to fend for itself in the transactions
contemplated by this Agreement, has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment and has the ability to bear the economic risks of
its investment. Each Investor further represents that it has had access,
during the course of the transaction and prior to its purchase of the
Securities, to the same kind of information that would be provided in a
registration statement filed by the Company under the 1933 Act and that it
has had, during the course of the transaction and prior to its purchase of
the Securities, the opportunity to ask questions of, and receive answers
from, the Company concerning the terms and conditions of the offering and to
obtain additional information necessary to verify the accuracy of any
information furnished to it or to which it had access.
(d) Each Investor understands that the Securities
may not be sold, transferred or otherwise disposed of without registration
under the 1933 Act or an exemption therefrom, and that in the absence of an
effective registration statement covering the Securities or an available
exemption from registration under the 1933 Act, the Securities must be held
indefinitely. In particular, each Investor is aware that the Securities may
not be sold pursuant to Rule 144 promulgated under the 1933 Act unless all
of the conditions of Rule 144 are met. Each Investor represents that, in the
absence of an effective registration statement covering the Securities, it
will sell, transfer or otherwise dispose of the Securities only in a manner
consistent with its representations set forth herein and then only in
accordance with the provisions of Section 4.1(e) hereof.
(e) Each Investor agrees that in no event will it
make a transfer or disposition of any of the Securities (other than in
accordance with the terms of conversion or exercise thereof or pursuant to
an effective registration statement under the 1933 Act) unless and until (i)
such Investor shall have notified the Company of the proposed disposition
and shall have furnished the Company with a statement of the circumstances
surrounding the disposition and assurance that the proposed disposition is
in compliance with all applicable laws and (ii) if reasonably requested by
the Company, at the expense of such Investor or transferee, it shall have
furnished to the Company an opinion of counsel, reasonably satisfactory to
the Company, to the effect that such transfer may be made without
registration under the 1933 Act.
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4.2 Legends; Stop Transfer.
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(a) All certificates for the Securities may bear
the following or a substantially similar legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION
WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933."
(b) The certificates for the Securities may also
bear any legend required by any applicable state securities or other law or
any of the other agreements executed by the Investor in connection with its
investment in the Company.
(c) In addition, the Company shall make a
notation regarding the restrictions on transfer of the Securities in its
records and the Securities shall be transferred on the books of the Company
only if transferred or sold pursuant to an effective registration statement
under the 1933 Act covering such shares or pursuant to and in compliance
with the provisions of Section 4.1(e) hereof.
5. SUBORDINATION OF DEBENTURES.
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The Company and each Investor, by such Investor's acceptance
hereof, agree that the payment of the principal and interest hereon is
hereby expressly subordinated, as hereinafter provided, to the prior payment
of the principal of, and interest or other charges or fees on, all existing
or future obligations of the Company for money borrowed from any bank, trust
company, insurance company, or other financial institution (each a "Senior
Creditor") engaged in the business of lending money (the foregoing being
referred to, collectively, as the "Senior Indebtedness"). Upon any
receivership, insolvency, assignment for the benefit of creditors,
bankruptcy, reorganization or arrangements with creditors (whether or not
pursuant to bankruptcy or other insolvency laws), sale of all or
substantially all of the assets, dissolution, liquidation, or any other
marshalling of the assets or liabilities of the Company, or in the event of
default in the payment of the principal or interest on the Senior
Indebtedness, or in the event that the Company has received written notice
from any Senior Creditor that such Senior Creditor has declared a default as
a result of the occurrence of any non-payment default by the Company under
any Senior Creditor agreement or loan document, (1) no amount shall be paid
by the Company in respect of the principal of or interest on the Debentures
at the time outstanding, unless and until the principal of and interest on
the Senior Indebtedness then outstanding shall have been paid in full, and
(2) no claim or proof of claim shall be filed with the Company by or
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on behalf of the Investors asserting any right to receive any payments in
respect of the principal of and interest on the Debentures, unless there
shall first have been payment in full of the principal of and interest on
all of the Senior Indebtedness then outstanding.
The Company and each Investor, by such Investor's acceptance
hereof, agree that (i) the Debentures are, and shall remain, unsecured, and
the Investors shall not take or accept any collateral or security for the
repayment of sums due under the Debentures, (ii) the Company shall not,
without the prior written consent of the Senior Creditors, prepay
(voluntarily, involuntarily, by acceleration or otherwise) any principal,
interest or other amounts due on the Debentures, and (iii) this Section 5
shall not be modified or otherwise amended without the prior written consent
of all Senior Creditors.
6. DEBENTURES MAY NOT BE PREPAID.
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Except as otherwise provided in Section 8.3 hereof, the Debentures
may not be prepaid prior to maturity.
7. CONVERSION OF DEBENTURES.
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7.1 Conversion Rights and Manner of Exercise. Subject to and upon
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compliance with the provisions hereof, each holder of a Debenture shall have
the right, at any time and from time to time, after the date hereof, to
convert all, but not less than all, of the principal amount of such
Debenture into as many whole shares of Common Stock of the Company as the
unpaid principal balance to be so converted is a multiple of $3.50, subject
to adjustment as hereinafter provided (the "Conversion Price"). Upon
conversion, in lieu of issuing any fractional shares, the Company shall pay
to the holder exercising conversion rights an amount of cash equal to the
amount of any fractional share which otherwise would be issuable multiplied
by the Conversion Price.
In order to exercise the foregoing conversion privilege, the holder
thereof shall surrender the Debenture to the Company at its principal office
accompanied by a written statement (the "Conversion Notice") indicating that
the Debenture is being surrendered for conversion and stating the name,
address and tax identification number of the person in whose name
certificates evidencing the Common Stock issuable upon conversion are to be
registered.
7.2 Issuance of Stock Certificates. As promptly as practicable (but
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in any event within 10 days) after the receipt of such Conversion Notice and
surrender of the Debenture as aforesaid, the Company shall issue and deliver
to such holder, issued in the name of such holder or such other person or
persons as such holder may request, a certificate or certificates for the
securities issuable upon the conversion of such Debenture. Such conversion
shall be deemed to have been effected as of the close of business on the
date on which such Conversion Notice shall have been received by the Company
and such Debenture shall have been surrendered as aforesaid, and at such
time the rights of the holder of the Debenture as such holder shall cease,
and the person or persons in whose name or names any certificate or
certificates for securities shall be issuable upon such conversion shall be
deemed to have become the holder or holders of record of the securities
represented thereby.
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7.3 Cash Adjustments on Conversion. No payment or adjustment shall
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be made upon any conversion on account of any cash dividends declared for
payment as of a record date prior to the date of conversion on the
securities to be issued on conversion of any of the Debentures, but the
Company shall pay all interest on such Debenture surrendered for conversion
accrued to the date when the above mentioned Conversion Notice shall have
been received by the Company.
7.4 Mergers, Consolidations, Sales. In the case of any
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consolidation or merger of the Company with another entity, or the sale of
all or substantially all of its assets to another entity, or any
reorganization or reclassification of the Common Stock or other equity
securities of the Company, then as a condition of such consolidation,
merger, sale, reorganization or reclassification, lawful and adequate
provision shall be made whereby the holders of the Debentures shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein and in lieu of the securities immediately
theretofore receivable upon conversion of the Debentures, such shares of
stock, securities, assets or cash as may (by virtue of such consolidation,
amalgamation, merger, sale, reorganization or reclassification) be issued or
payable with respect to or in exchange for a type and number of outstanding
securities equal to the type and number of securities immediately
theretofore so receivable hereunder had such consolidation, merger, sale,
reorganization or reclassification not taken place, and in any such case
appropriate provisions shall be made with respect to the rights and
interests of the holders of the Debentures to the end that the provisions of
this Section 7, shall thereafter be applicable as nearly as may be, in
relation to any shares of stock, securities, assets or cash thereafter
deliverable upon conversion of the Debentures. The Company shall not effect
any such consolidation, merger or sale, unless prior to or simultaneously
with the consummation thereof, the successor entity (if other than the
Company) resulting from such consolidation or merger or the entity
purchasing such assets shall assume by written instrument, the obligation to
deliver to such holder such shares of stock, securities, assets or cash as,
in accordance with the foregoing provisions, such holder may be entitled to
receive.
7.5 Dissolution or Liquidation. In the event of any proposed
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distribution of the assets of the Company in dissolution or liquidation
(except under circumstances when the foregoing Section 7.4 shall be
applicable) the Company shall mail notice thereof to the holders of the
Debentures and shall make no distribution to shareholders until the
expiration of 20 days from the date of mailing of the aforesaid notice and,
in any such case, the holders of the Debentures may exercise the conversion
rights, to the extent such rights then are exercisable, with respect to the
Debentures within 20 days from the date of mailing such notice and all
conversion rights herein granted not so exercised within such 20-day period
shall thereafter become null and void.
7.6 Notice of Extraordinary Dividends. If the Board of Directors of
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the Company shall declare any dividend or other distribution on its capital
stock except out of retained earnings or by way of a stock dividend payable
in shares of its Common Stock on its Common Stock, the Company shall mail
notice thereof to the registered holders of the Debentures not less than 20
days prior to the record date fixed for determining shareholders entitled to
participate in such dividend or other distribution and the holders of the
Debentures shall not participate in such dividend or other distribution or
be entitled to any rights on account or as a result thereof unless
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and to the extent that such conversion rights, to the extent such rights
then are exercisable, are exercised prior to such record date. The
provisions of this Section 7.6 shall not apply to distributions made in
connection with transactions covered by Section 7.4.
7.7 Reservation of Stock; Listing. The Company will at all times
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reserve and keep available such number of shares of its authorized Common
Stock, solely for the purpose of issuing upon the conversion of the
Debentures or exercise of the Warrants as herein provided for, as then shall
be issuable upon the conversion of the Debentures or exercise of the
Warrants. Upon any conversion of the Debentures or exercise of the Warrants,
if the Common Stock is then listed on any national securities exchange or
quoted on The Nasdaq Stock Market, then all shares of Common Stock issued
upon such conversion of the Debentures or exercise of the Warrants shall
upon issuance be duly listed or quoted thereon, as the case may be.
7.8 Fully Paid Stock; Taxes. The Company covenants and agrees that
-----------------------
the shares of stock represented by each and every certificate for its
securities to be delivered on the exercise of the conversion rights herein
provided for shall, at the time of such delivery, be validly issued and
outstanding and be fully paid and nonassessable, and the Company will take
all such action as may be necessary to assure that the par value per share
of securities issuable hereunder (if other than without nominal or par
value) is at all times equal to or less than the Conversion Price in effect
from time to time hereunder. The Company further covenants and agrees that
it will pay when due and payable any and all federal and state taxes (other
than income taxes) which may be payable in respect of the Debentures or any
securities or certificates therefor upon the exercise of the conversion
rights herein provided for pursuant to the provisions hereof. The Company
shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the transfer and delivery of stock
certificates in the name other than that of the holder of the Debentures or
convertible securities converted, and any such tax shall be paid by such
holder at the time of presentation.
7.9 Closing of Transfer Books. The right to convert the Debentures
-------------------------
or exercise of the Warrants shall not be suspended during any period while
the stock transfer books of the Company for any of its capital stock may be
closed. The Company shall not be required, however, to deliver certificates
for the securities issuable upon such conversion or exercise while such
books are duly closed for any purpose, but the Company may postpone the
delivery of the certificates for such securities issuable until the opening
of such books, and they shall, in such case, be delivered forthwith upon the
opening thereof, or as soon as practicable thereafter.
7.10 Adjustment of Conversion Price. The Conversion Price and the
------------------------------
number and type of securities issuable upon conversion of the Debentures
shall be subject to adjustment as follows:
(a) In case at any time or from time to time on or after
the date hereof, the holders of any shares of Common Stock or other
securities at the time receivable upon the conversion of the Debentures
shall have received, or on or after the record date fixed for the
determination of eligible shareholders, shall have become entitled to
receive, without payment therefor, other or additional stock of the Company
by way of dividend, then and in each case, the
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holders of the Debentures shall upon the conversion thereof, be entitled to
receive, without payment of any additional consideration therefor, the
amount of such other or additional stock of the Company which such holders
would have held on the date of such conversion had they been the holder of
record of such Common Stock or other securities on the date thereof and had
thereafter during the period from the date thereof to and including the date
of such conversion retained such Common Stock and/or all other additional
stock receivable by them as aforesaid during such period, giving effect to
all adjustments called for during such period by Sections 7.10(b) and (c).
(b) In case of any reclassification or change of the
outstanding securities of the Company or any reorganization of the Company
(or of any other corporation the stock or securities of which are at the
time receivable upon the conversion of the Debentures), on or after the date
thereof, or in case after such date, the Company (or any such other
corporation) shall merge with or into another corporation or convey all or
substantially all of its assets to another corporation, then and in each
such case, the holders of the Debentures, upon the conversion thereof, at
any time after the consummation of such reclassification, change,
reorganization, merger or conveyance, shall be entitled to receive, in lieu
of the stock or other securities and property receivable upon the exercise
hereof prior to such consummation, the stock or other securities of such
party to which such holders would have been entitled upon such consummation
if such holders had converted the Debentures immediately prior thereto, all
subject to further adjustment as provided in Section 10.10(a) and (c); in
each such case the terms of this Section 10.10 shall be applicable to the
shares of stock or other securities properly receivable upon the conversion
of the Debentures after such consummation.
(c) If at any time on or after the date hereof, the
Company shall subdivide its outstanding shares of Common Stock into a
greater number of shares, the Conversion Price in effect immediately prior
to such subdivision shall be proportionately reduced and the number of
shares receivable upon exercise of the Debentures shall be proportionately
increased; and conversely, if at any time on or after the date hereof the
outstanding number of shares of Common Stock shall be combined into a
smaller number of shares, the Conversion Price in effect immediately prior
to such combination shall be proportionately increased and the number of
shares receivable upon conversion of the Debentures shall be proportionately
decreased.
(d) Except as provided in this Section 7.10, no adjustment
of the Conversion Price or shares issuable upon conversion of the Debentures
shall be made on account of dividends or other transactions involving the
Common Stock.
8. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
---------------------------------------
8.1 Nature of Events. An "Event of Default" shall exist if any of
----------------
the following occurs and is continuing:
(a) Principal Payments -- the Company fails to make any
------------------
payment of principal on the Debentures on or before the date such payment is
due, whether by prepayment, at maturity, by acceleration or otherwise; or
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(b) Interest Payments -- the Company fails to make any
-----------------
payment of interest on the Debentures on or before five days after the date
such payment is due; or
(c) Other Defaults -- the Company fails to comply with any
--------------
other provision of this Agreement, and such failure continues for more than
30 days after receipt of written notice from the holders of a majority of
the principal amount of the Debentures; or
(d) Warranties or Representations -- any material
-----------------------------
warranty, representation or other statement by or on behalf of the Company
contained in this Agreement or in any instrument furnished in compliance
with or in reference to this Agreement is false or misleading in any
material respect; or
(e) Default on Other Indebtedness -- any indebtedness of
-----------------------------
the Company or any subsidiary for borrowed money is not paid when due or
within any grace period provided therefor or becomes due and payable prior
to its expressed maturity by reason of any default by the Company or any
subsidiary in the performance or observance of any of the terms, provisions,
obligations or conditions applicable thereto; or
(f) Voluntary Bankruptcy Proceedings; Insolvency -- the
--------------------------------------------
Company shall (1) be generally not paying its debts as they become due or
admits in writing its inability to pay its debts generally as they become
due, (2) file, or consent by answer or otherwise to the filing against it
of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, (3) make an assignment for
the benefit of its creditors, (4) consent to the appointment of a custodian,
receiver, trustee or other officer with similar powers of itself or of any
substantial part of its property, (5) be adjudicated insolvent or be
liquidated, or (6) take corporate action for the purpose of any of the
foregoing; or
(g) Involuntary Bankruptcy Proceedings -- a court or
----------------------------------
governmental authority of competent jurisdiction shall enter an order
appointing, without consent by the Company, a custodian, receiver, trustee
or other officer with similar powers with respect to it or with respect to
any substantial part of its property, or if an order for relief shall be
entered in any case or proceeding for liquidation or reorganization or
otherwise to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation of the
Company or if any petition for any such relief shall be filed against the
Company or a subsidiary and such petition shall not be dismissed within 60
days.
8.2 Notice to Holders. When any Event of Default described in the
-----------------
foregoing Section 8.1 has occurred, or if the holder of any evidence of
indebtedness of the Company other than the Debentures gives any notice or
takes any other action with respect to a claimed default, the Company agrees
to give notice within three business days of such event to the holders of
the Debentures, such notice to be in writing and sent by registered or
certified mail or by telegram.
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8.3 Acceleration of Maturities. When any Event of Default described
--------------------------
in Section 8.1 has occurred and is continuing, the holders of a majority of
the principal amount of the Debentures may, by notice in writing sent by
registered or certified mail to the Company, declare the entire principal
and all interest accrued on all Debentures to be, and such Debentures shall
thereupon become, forthwith due and payable, without any presentment,
demand, protest or other notice of any kind, all of which are hereby
expressly waived and the Company shall, subject to receipt by the Company of
the written consent of the Senior Creditor(s) as is required under Section 5
hereof, forthwith pay to such holder the entire principal of and interest
accrued on the Debentures. No course of dealing on the part of the holders
of the Debentures nor any delay or failure on the part of the holders of the
Debentures to exercise any right shall operate as a waiver of such right or
otherwise prejudice such holder's rights, powers and remedies. The Company
further agrees, to the extent permitted by law, to pay the holders of the
Debentures all reasonable costs and expenses incurred by them in the
collection of the Debentures upon any default hereunder or thereon,
including reasonable compensation to such holder's or holders' attorneys for
all services rendered in connection therewith.
8.4 Rescission of Acceleration. The provisions of Section 8.3 are
--------------------------
subject to the condition that the holders of a majority of the principal
amount the Debentures may, by written instrument filed with the Company,
rescind and annul such declaration and the consequences thereof, provided
that no such rescission and annulment shall extend to or affect any
subsequent default or Event of Default or impair any right consequent
thereto.
9. AMENDMENTS, WAIVERS AND CONSENTS.
--------------------------------
9.1 Consent Required. Any term, covenant, agreement or condition of
----------------
this Agreement may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular
instance and either retroactively or prospectively), if the Company shall
have obtained the consent in writing of the holders of a majority of the
aggregate principal amount of the Debentures then outstanding. Without the
consent of each Investor affected, however, an amendment under this Section
may not: (i) reduce the amount of Debentures whose holders must consent to
an amendment or waiver; (ii) reduce the rate of or change the time for
payment of interest on any Debenture; (iii) reduce the principal of or
change the maturity of any Debenture; (iv) waive an Event of Default in the
payment of the principal of or interest on any Debenture; (v) make any
Debenture payable in money other than that stated in the Debenture; or (vi)
amend or modify the provisions of this Section 9.1. No amendment to Section
5 hereof or of this sentence may be made without the written consent of each
holder of Senior Indebtedness.
9.2 Effect of Amendment or Waiver. Any such amendment or waiver
-----------------------------
shall be binding upon each future holder of the Debentures and upon the
Company, whether or not such Debentures shall have been marked to indicate
such amendment or waiver. No such amendment or waiver shall extend to or
affect any obligation not expressly amended or waived or impair any right
consequent thereon.
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10. CONDITIONS PRECEDENT TO CLOSING.
-------------------------------
The obligations of Investors to purchase the Debentures are subject
to the satisfaction of each of the following conditions on or before the
Closing:
10.1 Representations and Warranties True and Accurate as of
------------------------------------------------------
Closing. The representations and warranties of the Company contained herein
-------
shall be true and accurate in all material respects as of the Closing with
the same force and effect as though made at such time.
10.2 Material Adverse Effects. There shall not have occurred after
------------------------
the date hereof, any events, facts or circumstances which would constitute
or result in a material adverse effect on the Company.
10.3 Legal Proceedings. No preliminary or permanent injunction or
-----------------
other order issued by a governmental body, and no statute, rule, regulation
or executive order promulgated or enacted by a governmental body, shall be
in effect which restrains, enjoins, prohibits or otherwise makes illegal the
sale and purchase of the Debentures. No proceeding shall be pending or, to
the knowledge of the Company or the Investors, threatened before any court
or governmental agency seeking to restrain or prohibit the consummation of
the sale and purchase of the Debentures or seeking to obtain damages or
other relief in connection with this Agreement.
10.4 Warrants. Each Investor shall have received a Warrant
--------
substantially in the form attached hereto as Exhibit D (collectively, the
---------
"Warrants") to purchase a number of shares of Common Stock of the Company in
the ratio of five shares for each $100 principal amount of Debenture (i.e.,
50,000 shares for each $1 million principal amount of Debenture) at an
initial exercise price of $5.00 per share.
10.5 Officer's Certificate. The Company shall have delivered to the
---------------------
Investors a certificate signed by its Chief Executive Officer and Chief
Financial Officer to the effect that each of the conditions specified in
Sections 10.1, 10.2 and 10.3 above have been satisfied in all respects.
10.6 Secretary's Certificate. The Company shall have delivered to
-----------------------
the Investors copies of the Articles of Incorporation and By-Laws of the
Company, each as amended to date and a copy of the resolutions duly adopted
by the Board of Directors of the Company approving the execution and
delivery of this Agreement and performance by the Company of all of the
transactions contemplated hereby including, but not limited to, execution
and delivery of the Debentures and the Warrants, and issuance of shares of
Common Stock of the Company upon conversion of the Debentures or exercise of
the Warrants, all certified by the Secretary of the Company.
10.7 Consent of Lender. Southwest Bank of St. Louis (the "Bank")
-----------------
shall have consented in writing to the execution and delivery by the Company
of this Agreement and the Debentures and the performance by the Company of
the transactions contemplated hereby and thereby.
- 15 -
10.8 Amendment to Credit Agreement. The Company and the Bank shall
-----------------------------
have executed a First Amendment to Credit Agreement containing the terms
substantially as set forth on the term sheet attached hereto and marked
Exhibit E and all contingencies to the Bank's obligations to fund thereunder
---------
shall have been satisfied or waived.
10.9 Opinion of Company Counsel. The Investors shall have received
--------------------------
from counsel to the Company an opinion, dated as of the Closing Date, and
addressed to the Investors, in form and substance reasonably satisfactory to
counsel for the Investors, to the effect that:
(i) The Company is a corporation duly incorporated,
validly existing and in good standing under the laws of the State
of Missouri, with full corporate power and authority to execute,
deliver and perform this Agreement, the Debentures and the
Warrants;
(ii) The execution, delivery and performance by the
Company of this Agreement, the Debentures and the Warrants have
been duly authorized by all necessary corporate action on the part
of the Company;
(iii) This Agreement, the Debentures and the Warrants
constitute the valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective
terms, subject to bankruptcy, insolvency, fraudulent transfer or
conveyance, reorganization, arrangement, moratorium and other
similar laws relating to or affecting creditors' rights generally,
to general equitable principles (whether considered in a proceeding
in equity or at law), laws affecting the enforceability of certain
indemnification obligations under applicable securities laws and to
an implied covenant of reasonableness, good faith and fair dealing;
(iv) The execution, delivery and performance of this
Agreement, the Debentures and the Warrants by the Company do not
and will not result in a violation of the Company's Articles of
Incorporation or By-Laws, or, to our knowledge, any judgment, order
or decree of any court or agency to which the Company is subject;
(v) The execution, delivery and performance of this
Agreement, the Debentures and the Warrants by the Company do not
and will not, with or without notice or lapse of time, constitute a
material breach or default of, or result in any lien under, any
material contract, undertaking, indenture or other agreement or
instrument by which the Company is bound or to which it is a party
and which is either (x) set forth or incorporated by reference as
an exhibit to the Company's Annual Report on Form 10-K for the year
ended September 30, 2002 as set forth on Schedule 2.5 to this
------------
Agreement, or (y) otherwise known to such counsel;
(vi) To counsel's knowledge, there is no suit, action or
legal, administrative, arbitration or other proceeding pending or
threatened against the Company pertaining to this Agreement or any
of the transactions contemplated thereby; and
- 16 -
(vii) The shares of Common Stock of the Company to be
issued upon conversion of the Debentures or exercise of the
Warrants will, when issued upon such conversion or exercise, be
validly issued, fully paid and non-assessable shares of the Common
Stock.
10.10 Unqualified Auditors' Report. The Company's audited
----------------------------
financial statements as of September 30, 2002 and for the three fiscal years
then ended shall be accompanied by an unqualified report of the Company's
independent auditors.
11. MISCELLANEOUS.
-------------
11.1 Registered Debentures. The Company shall cause to be kept at
---------------------
its principal office, a register for the registration and transfer of the
Debentures, and the Company will register or transfer or cause to be
registered or transferred, as hereinafter provided and under such reasonable
regulations as it may prescribe, any Debenture issued pursuant to this
Agreement.
Subject to the provisions of Section 4, at any time and from time
to time the registered holder of a Debenture may transfer such Debenture, or
cause the same to be transferred upon surrender thereof at the principal
office of the Company duly executed or accompanied by a written instrument
of transfer duly executed by the registered holder of such Debenture or his
attorney duly authorized in writing.
The person in whose name a Debenture shall be registered shall be
deemed and treated as the owner and holder thereof for all purposes of this
Agreement. Payment of or on account of the principal and interest on a
Debenture shall be made to or upon the written order of such registered
holder.
11.2 Exchange of the Debentures. Subject to the provisions of
--------------------------
Section 4, at any time, and from time to time, upon not less than ten days'
notice to that effect given by the holder of a Debenture initially delivered
or of a Debenture substituted therefor pursuant to Section 11.1, this
Section 11.2 or Section 11.3, and, upon surrender of such Debenture at its
office, the Company will deliver in exchange therefor, without expense to
the holder, except as set forth below, a Debenture for the same aggregate
principal amount as the then unpaid principal amount of the Debenture so
surrendered, in the denomination of $100,000 or any integral multiple
thereof as such holder shall specify, dated as of the date to which interest
has been paid on the Debenture so surrendered or, if such surrender is prior
to the payment of any interest thereon, then dated as of the date of issue,
registered in the name of such person or persons, as may be designated by
such holder, and otherwise of the same form and tenor as the Debenture so
surrendered for exchange. The Company may require the payment of a sum
sufficient to cover any stamp tax or governmental charge imposed upon such
exchange or transfer.
11.3 Loss, Theft, etc. of a Debenture. Upon receipt of evidence
--------------------------------
satisfactory to the Company of the loss, theft, mutilation or destruction of
a Debenture, and in the case of any such loss, theft or destruction upon
delivery of a bond of indemnity in such form and amount as shall be
reasonably satisfactory to the Company, or in the event of such mutilation
upon surrender and
- 17 -
cancellation of a Debenture, the Company will make and deliver without
expense to the holder thereof, a new Debenture, of like form and tenor, in
lieu of such lost, stolen, destroyed or mutilated Debenture.
11.4 Expenses, Stamp Tax Indemnity. The Company agrees that it will
-----------------------------
pay and save Investor harmless against any and all liability with respect to
stamp and other taxes, if any, which may be payable or which may be
determined to be payable in connection with the execution and delivery of
this Agreement. Each of the parties hereto agrees to protect and indemnify
the other parties against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any person in connection
with the issue and sale of the Common Stock and Warrants by the Company
pursuant to this Agreement which may arise out of the actions of such party.
The Company also agrees to reimburse the Investors on the Closing Date for
the reasonable fees and expenses, not to exceed $20,000, of one counsel for
the Investors in connection with the negotiation and execution of the
Agreement and the transactions contemplated hereby.
11.5 Powers and Rights Not Waived; Remedies Cumulative. No delay or
-------------------------------------------------
failure on the part of a holder of a Debenture in the exercise of any power
or right shall operate as a waiver thereof; nor shall any single or partial
exercise of the same preclude any other or further exercise thereof, or the
exercise of any other power or right, and the rights and remedies of the
holders of the Debentures are cumulative to and are not exclusive of any
rights or remedies any such holder would otherwise have, and no waiver or
consent, given or extended pursuant to Section 9 hereof, shall extend to or
affect any obligation or right not expressly waived or consented to.
11.6 Payments on Saturdays, Sundays and Holidays. Whenever the date
-------------------------------------------
fixed for the payment of principal or interest on the Debentures falls on a
Saturday, Sunday, legal holiday or any day on which banking institutions in
the city of payment are authorized by law to close, then the payment of
principal or interest need not be made on such date, but may be made on the
next succeeding regular business day with the same force and effect as if
made on the date fixed.
11.7 Notices. All communications (other than those sent to
-------
shareholders generally) provided for hereunder shall be in writing and, if
to an Investor, delivered or mailed by registered or certified mail, to the
address set forth in Exhibit A hereto or such other address as such Investor
---------
or the subsequent holder of a Debenture initially issued to Investor, may
designate to the Company in writing, and if to the Company, delivered or
mailed by registered or certified mail to: ▇▇▇▇▇▇ Companies, Inc., ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, marked "Attention: Chief Executive
Officer" or to such other address as the Company may in writing designate to
the Investors or to subsequent holders of the Debentures.
11.8 Successors and Assigns. This Agreement shall be binding upon
----------------------
the Company and its successors and assigns and shall inure to Investor's
benefit and to the benefit of Investor's successors and permitted assigns,
including each successive holder or holders of the Debentures.
- 18 -
11.9 Survival of Covenants and Representations. All covenants,
-----------------------------------------
representations and warranties made by the Company herein and in any
certificates delivered pursuant hereto, whether or not in connection with
the closing of the transactions herein contemplated, shall survive such
closing and the delivery of this Agreement.
11.10 Severability. Should any part of this Agreement for any
------------
reason be declared invalid, such decision shall not affect the validity of
any remaining portion, which remaining portion shall remain in force and
effect as if this Agreement had been executed with the invalid portion
thereof eliminated and it is hereby declared the intention of the parties
hereto that they would have executed the remaining portion of this Agreement
without including therein any such part, parts or portion which may, for any
reason, be hereafter declared invalid.
11.11 Governing Law. This Agreement and securities issued and sold
-------------
hereunder shall be governed by and construed in accordance with Missouri
law, without reference to conflict of laws principles.
11.12 Captions. The descriptive headings of the various Sections or
--------
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
11.13 Number and Gender. Where required by the context, singular
-----------------
words or pronouns shall be construed as plural, plural words and pronouns
shall be construed as singular and the gender of personal pronouns shall be
construed as either masculine, feminine or neuter.
11.14 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall constitute one Agreement binding on all
the parties hereto.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
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SIGNATURE PAGE
TO
SUBORDINATED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
-----------------------------------------------------
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
COMPANY:
▇▇▇▇▇▇ COMPANIES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇
Title: President
- 20 -