EXHIBIT 10.2
SECURITIES PURCHASE AGREEMENT
DATED AS OF
AUGUST 25, 2000
BY AND BETWEEN
BOSTON BIOMEDICA, INC.
AS THE ISSUER,
AND
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ AND
SHORELINE FUND, LTD.
TABLE OF CONTENTS
DEFINITIONS 1
DEFINITIONS 1
ACCOUNTING TERMS AND DETERMINATIONS 9
PURCHASE AND SALE OF SECURITIES 9
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES 9
PURCHASE PRICE 10
CLOSING AND MECHANICS OF PAYMENT 10
PAYMENT TERMS OF CONVERTIBLE DEBENTURES 10
PAYMENT OF PRINCIPAL AND INTEREST; PAYMENT MECHANICS 10
RANKING; PAYMENT OF INTEREST 11
VOLUNTARY PREPAYMENT 11
MANDATORY PREPAYMENTS 11
PREPAYMENT PROCEDURES 12
PAYMENT OF ADDITIONAL AMOUNTS 13
REPRESENTATIONS AND WARRANTIES 15
ORGANIZATION AND QUALIFICATION 15
AUTHORIZATION AND EXECUTION 15
CAPITALIZATION 16
GOVERNMENTAL AUTHORIZATION 16
ISSUANCE OF SHARES 17
NO CONFLICTS 17
FINANCIAL INFORMATION 17
LITIGATION 18
COMPLIANCE WITH ERISA AND OTHER BENEFIT PLANS 18
ENVIRONMENTAL MATTERS 19
TAXES 19
INVESTMENTS, JOINT VENTURES 19
NOT AN INVESTMENT COMPANY 19
FULL DISCLOSURE 19
NO SOLICITATION; NO INTEGRATION WITH OTHER OFFERINGS 19
PERMITS 20
LEASES 20
ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL CALLS 20
PUBLIC UTILITY HOLDING COMPANY 20
INTELLECTUAL PROPERTY RIGHTS 20
INSURANCE 21
TITLE TO PROPERTIES 21
INTERNAL ACCOUNTING CONTROLS 21
FOREIGN PRACTICES 21
REPRESENTATIONS AND WARRANTIES OF PURCHASER 21
PURCHASER 21
CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES 23
CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS TO PURCHASE 23
CONDITIONS TO THE COMPANY'S OBLIGATIONS 25
AFFIRMATIVE COVENANTS 25
INFORMATION 25
PAYMENT OF OBLIGATIONS 26
MAINTENANCE OF PROPERTY; INSURANCE 27
MAINTENANCE OF EXISTENCE 27
COMPLIANCE WITH LAWS 27
INSPECTION OF PROPERTY, BOOKS AND RECORDS 27
INVESTMENT COMPANY ACT 27
USE OF PROCEEDS 27
COMPLIANCE WITH TERMS AND CONDITIONS OF MATERIAL CONTRACTS 28
RESERVED SHARES AND LISTINGS 28
TRANSFER AGENT INSTRUCTIONS 29
MAINTENANCE OF REPORTING STATUS; SUPPLEMENTAL INFORMATION 29
FORM D; BLUE SKY LAWS 29
SALES BY PURCHASER 30
NEGATIVE COVENANTS 30
LIMITATIONS ON DEBT OR OTHER LIABILITIES 30
TRANSACTIONS WITH AFFILIATES 30
MERGER OR CONSOLIDATION 30
LIMITATION ON ASSET SALES 31
RESTRICTIONS ON CERTAIN AMENDMENTS 31
RESTRICTIONS ON ISSUANCES OF SECURITIES. 31
LIMITATION ON STOCK REPURCHASES 33
LIMITATION ON SALES BY OFFICERS AND EMPLOYEE DIRECTORS 33
RESTRICTIVE LEGENDS 33
RESTRICTIONS ON TRANSFER 33
NOTICE OF PROPOSED TRANSFERS 33
ADDITIONAL AGREEMENTS AMONG THE PARTIES 34
LIQUIDATED DAMAGES 34
CONVERSION NOTICE 34
CONVERSION LIMIT 35
REGISTRATION RIGHTS 35
ADJUSTMENT OF FIXED PRICE 37
REORGANIZATION 37
SHARE REORGANIZATION 37
RIGHTS OFFERING 37
SPECIAL DISTRIBUTION 39
CAPITAL REORGANIZATION 39
ADJUSTMENT RULES 40
CERTIFICATE AS TO ADJUSTMENT 40
NOTICE TO HOLDERS 41
EVENTS OF DEFAULT 41
EVENTS OF DEFAULT. 41
POWERS AND REMEDIES CUMULATIVE 44
MISCELLANEOUS 44
NOTICES 44
NO WAIVERS; AMENDMENTS 44
INDEMNIFICATION 45
EXPENSES: DOCUMENTARY TAXES 47
PAYMENT 47
SUCCESSORS AND ASSIGNS 47
BROKERS 48
MASSACHUSETTS LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL; APPOINTMENT OF AGENT 48
ENTIRE AGREEMENT 48
SURVIVAL; SEVERABILITY. 48
TITLE AND SUBTITLES 49
REPORTING ENTITY FOR THE COMMON STOCK. 49
PUBLICITY. 49
ii
LIST OF SCHEDULES
Schedule 4.3 Capitalization
Schedule 4.7 Financial Information
Schedule 4.8 Litigation
Schedule 4.12 Investments, Joint Ventures
Schedule 4.15 Other Offerings
Schedule 4.22 Title to Property
Schedule 7.8 Use of Proceeds
Schedule 8.1 Debt and Other Liability
Schedule 8.2 Transactions with Affiliates
Schedule 8.4 Asset Sales
iii
LIST OF EXHIBITS
Exhibit A Form of Convertible Debentures
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Common Stock Purchase Warrant
Exhibit D Form of Officer's Certificate
iv
SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated as of August 25, 2000, between Boston Biomedica, Inc.
(the "Company") a Massachusetts Corporation, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual
residing in the state of Illinois ("▇▇▇▇▇▇▇") and Shoreline Micro-Cap Fund,
L.P., an Illinois limited partnership ("Shoreline"). Collectively, Shoreline and
▇▇▇▇▇▇▇ are referred to herein as the "Purchaser."
R E C I T A L S:
WHEREAS, the Company desires to sell , and ▇▇▇▇▇▇▇ and Shoreline
desires to purchase from the Company the following: (i) $780,000.00, aggregate
principal amount of the Company's 3% Senior Subordinated Convertible Debentures
due August 25, 2003 to ▇▇▇▇▇▇▇ and (ii) $220,000.00 aggregate principal amount
of the Company's 3% Senior Subordinated Convertible Debentures due August 25,
2003 to Shoreline (collectively, the "Convertible Debentures"), with terms and
conditions as set forth in the form of Senior Subordinated Convertible Debenture
attached hereto as EXHIBIT A;
WHEREAS, the Convertible Debentures will be convertible into shares of
the Company's common stock, $0.01 par value per share (the "Common Stock");
WHEREAS, in order to induce the Purchaser to enter into the
transactions described in this Agreement, the Company desires to issue to the
Purchaser in the amounts specified in the Recitals, warrants to purchase 35,556
shares of Common Stock upon the Closing (as defined herein) on the terms and
conditions described in the form of the common stock purchase warrant attached
hereto as EXHIBIT C (the "Warrants"); and
WHEREAS, Purchaser will have certain registration rights with respect
to such shares of Common Stock issuable as interest under, and upon conversion
of, the Convertible Debentures (the "Debenture Shares") and upon exercise of the
Warrants (the "Warrant Shares," the Debenture Shares and the Warrant Shares
being collectively referred to herein as the "Conversion Shares") as set forth
in the Registration Rights Agreement in the form attached hereto as Exhibit B;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1. DEFINITIONS
ARTICLE 1.1 DEFINITIONS . The following terms, as used herein, have the
following meanings:
"Additional Shares of Common Stock" has the meaning set forth in
Section 11.6.
"Affiliate" means, with respect to any Person (the " Subject Person"),
(i) any other Person (a " Controlling Person") that directly, or indirectly
through one or more intermediaries, Controls the Subject Person or (ii) any
other Person (other than the Subject Person or a Consolidated Subsidiary of the
Subject Person) which is Controlled by or is under common Control with a
Controlling Person.
"Agreement" means this Securities Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Asset Sale" has the meaning set forth in Section 8.4.
"Balance Sheet Date" has the meaning set forth in Section 4.7.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by the Company.
"Benefit Plans" has the meaning set forth in Section 4.9(b).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Capital Reorganization" has the meaning set forth in Section 11.5.
"Change in Control" means (i) after the date of this Agreement, any
person or group of persons (within the meaning of Sections 13 and 14 of the
Exchange Act and the rules and regulations of the Commission relating to such
sections) other than Purchaser shall have acquired beneficial ownership (within
the meaning of Rules 13d-3 and 13d-5 promulgated by the Commission pursuant to
the Exchange Act) of 33 1/3% or more of the outstanding shares of Common Stock
of the Company; (ii) individuals constituting the Board of Directors of the
Company on the date hereof (together with any new Directors whose election by
such Board of Directors or whose nomination for election by the shareholders of
the Company was approved by a vote of at least 50.1% of the Directors still in
office who are either Directors as of the date hereof or whose election or
nomination for election was previously so approved), cease for any reason to
constitute at least two-thirds of the Board of Directors of the Company then in
office.
"Closing Bid Price" shall mean for any security as of any date, the
lowest closing bid price as reported by Bloomberg, L.P. (" Bloomberg") on the
principal securities exchange or
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trading market where such security is listed or traded or, if the foregoing does
not apply, the lowest closing bid price of such security in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no lowest trading price is reported for such security by
Bloomberg, then the average of the bid prices of any market makers for such
securities as reported in the "Pink Sheets" by the National Quotation Bureau,
Inc. If the lowest closing bid price cannot be calculated for such security on
such date on any of the foregoing bases, the lowest closing bid price of such
security on such date shall be the fair market value as mutually determined by
Purchaser and the Company for which the calculation of the closing bid price
requires, and in the absence of such mutual determination, as determined by the
Board of Directors of the Company in good faith.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any entity
succeeding to all of its material functions.
"Common Stock" means the common stock, $0.01 par value per share, of
the Company.
"Company" means Boston Biomedica, Inc., a Massachusetts corporation,
and its successors.
"Company Corporate Documents" means the articles of organization and
bylaws of the Company.
"Consolidated Net Worth" means at any date the total shareholders'
equity which would appear on a consolidated balance sheet of the Company
prepared as of such date.
"Consolidated Subsidiary" means at any date with respect to any Person
or Subsidiary, any Person the accounts of which would be consolidated with those
of such Person or Subsidiary in its consolidated financial statements if such
statements were prepared as of such date.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Conversion Date" shall mean the date of delivery of a Notice of
Conversion for all or a portion of a Convertible Debenture by the holder thereof
to the Company as specified in each Convertible Debenture.
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"Conversion Price" has the meaning set forth in the Convertible
Debentures.
"Conversion Shares" has the meaning set forth in the Recitals.
"Convertible Debentures" means the Company's Senior Subordinated
Convertible Debentures substantially in the form set forth as EXHIBIT A hereto.
"Deadline" has the meaning set forth in Section 10.1.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (y)
are capitalized in accordance with GAAP or (z) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such Person.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivative Securities" has the meaning set forth in Section 8.6.
"Discounted Equity Offerings" has the meaning set forth in Section 8.6.
"Directors" means the individuals then serving on the Board of
Directors or similar such management council of the Company.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the cleanup or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
4
"ERISA Group" means the Company and each Subsidiary and all members of
a Controlled group of corporation and all trades or businesses (whether or not
incorporated) under common Control which, together with the Company or any
Subsidiary, are treated as a single employer under the Code.
"Event of Default" has the meaning set forth in Article 12 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fixed Price" has the meaning set forth in Section 11.1.
"Formula Price" has the meaning set forth in Section 3.4.
"GAAP" has the meaning set forth in Section 1.2.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by virtue
of partnership arrangements, by agreement to purchase assets, goods, securities
or services, to take-or-pay, or to maintain a minimum net worth, financial ratio
or similar requirements, or otherwise) any Debt of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or (ii) entered into for
the purpose of assuring in any other manner the holder of such Debt of the
payment thereof or to protect such holder against loss in respect thereof (in
whole or in part); PROVIDED that the term Guarantee shall not include
endorsements for collection or deposit in the ordinary course of business. The
term Guarantee used as a verb has a corresponding meaning.
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances or petroleum products
(including crude oil or any derivative or fraction thereof), defined or
regulated as such in or under any Environmental Laws.
"Intellectual Property" has the meaning set forth in Section 4.20.
"Investment" means any investment in any Person, whether by means of
share purchase, partnership interest, capital contribution, loan, time deposit
or otherwise.
"Lien" means any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim, title
imperfection, encroachment or other survey defect, pledge, restriction, security
interest or other adverse claim, whether arising by contract or under law or
otherwise (including, without limitation, any financing lease having
substantially the same
5
economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"Listing Applications" has the meaning set forth in Section 4.4.
"Majority Holders" means (Purchaser and its assignee or transferee
thereof who hold more than 50% in aggregate principal amount of the Convertible
Debentures.
"Market Price" shall mean the Closing Bid Price of the Common Stock
preceding the date of determination.
"Material Adverse Effect" has the meaning set forth in Section 4.1.
"Maturity Date" shall mean the date of maturity of the Convertible
Debentures.
"Maximum Number of Shares" shall mean that number of shares of Common
Stock equal to the percentage that the Company may issue without shareholder
approval under the applicable rules of the National Market or the applicable OTC
Bulletin Board or equivalent entity, of the then issued and outstanding shares
of Common Stock of the Company as of the applicable date of determination, or
such greater number of shares as the shareholders of the Company may have
previously approved.
"NASD" has the meaning set forth in Section 7.10.
"Nasdaq Market" means the Nasdaq Stock Market's National Market System.
"National Market" means the Nasdaq Market, the Nasdaq Small Cap Market,
the New York Stock Exchange, Inc. or the American Stock Exchange, Inc.
"Notice of Conversion" means the form to be delivered by a holder of a
Convertible Debenture upon conversion of all or a portion thereof to the Company
substantially in the form of EXHIBIT A to the form of Convertible Debenture.
"Notice of Exercise" means the form to be delivered by a holder of a
Warrant upon exercise of all or a portion thereof to the Company substantially
in the form of EXHIBIT A to the Warrant.
"Officer's Certificate" shall mean a certificate executed by the
president, chief executive officer or chief financial officer of the Company in
the form of EXHIBIT D attached hereto.
6
"OTC Bulletin Board" means the over-the-counter bulletin board operated
by the NASD.
"Other Taxes" has the meaning set forth in Section 3.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means all domestic and foreign licenses, franchises, grants,
authorizations, permits, easements, variances, exemptions, consents,
certificates, orders and approvals necessary to own, lease and operate the
properties of, and to carry on the business of the Company and the Subsidiaries.
"Permitted Financings" has the meaning set forth in Section 8.6.
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under the Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of the Person which
was at such time a member of the ERISA Group.
"Purchase Price" means the purchase price for the Securities set forth
in Section 2.2 hereof.
"Purchaser" means the entity listed on the signature page hereto and
its successors and assigns, including holders from time to time of the
Convertible Debentures.
"Qualified Assignee" has the meaning set forth in Section 3.6(a).
"Recourse Financing" means Debt of the Company or any Subsidiary which,
by its terms, does not bar the lender thereof from action against the Company or
any Subsidiary, as borrower or guarantor, if the security value of the project
or asset pledged in respect thereof falls below the amount required to repay
such Debt.
"Redemption Event" has the meaning set forth in Section 3.4.
"Registrable Securities" has the meaning set forth in Section 10.4(a).
7
"Registration Default" has the meaning set forth in Section 10.4(e).
"Registration Maintenance Period" has the meaning set forth in Section
10.4(c).
"Registration Statement" has the meaning set forth in Section 10.4(b).
"Registration Rights Agreement" means the agreement between the Company
and Purchaser dated the date hereof substantially in the form set forth in
EXHIBIT B attached hereto.
"Required Effectiveness Date" has the meaning set forth in Section
10.4(b).
"Reserved Amount" has the meaning set forth in Section 7.10(a).
"Restricted Payment" means, with respect to any Person, (i) any
dividend or other distribution on any shares of capital stock of such Person
(except dividends payable solely in shares of capital stock of the same or
junior class of such Person and dividends from a wholly-owned direct or indirect
Subsidiary of the Company to its parent corporation), (ii) any payment on
account of the purchase, redemption, retirement or acquisition of (a) any shares
of such Person's capital stock or (b) any option, warrant or other right to
acquire shares of such Person's capital stock or (iii) any loan, or advance or
capital contribution to any Person (a " Shareholder") owning any capital stock
of such Person other than relocation, travel or like advances to officers and
employees in the ordinary course of business, and other than reasonable
compensation as determined by the Board of Directors.
"Rights Offering" has the meaning set forth in Section 11.3.
"Sale Event" has the meaning set forth in Section 3.4.
"SEC Reports" has the meaning set forth in Section 7.1(a).
"Securities" means the Convertible Debentures, the Warrants and, the
Conversion Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Share Reorganization" has the meaning set forth in Section 11.2.
"Special Distribution" has the meaning set forth in Section 11.4.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which (x) a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the
8
time directly or indirectly owned by such Person or (y) the results of
operations, the assets and the liabilities of which are consolidated with such
Person under GAAP.
"Subsidiary Corporate Documents" means the certificates of
incorporation and bylaws of each Subsidiary.
"Taxes" has the meaning set forth in Section 3.6.
"Trading Day" shall mean any Business Day in which the OTC Bulletin
Board, National Market or other automated quotation system or exchange on which
the Common Stock is then traded is open for trading for at least four (4) hours.
"Transaction Agreements" means this Agreement, the Convertible
Debentures, the Warrants, and the Registration Rights Agreement.
"Transfer" means any disposition of Securities whether or not such
disposition would constitute a sale thereof under the Securities Act.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under the Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"Warrants" means the Common Stock Purchase Warrant substantially in the
form set forth in EXHIBIT C hereto.
ARTICLE 1.2 ACCOUNTING TERMS AND DETERMINATIONS . Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared, in accordance with generally accepted
accounting principles as in effect from time to time, applied on a consistent
basis with the Company's prior practice (except for interim financial statements
and for changes concurred in by the Company's independent public accountants) ("
GAAP"). All references to "dollars," "Dollars" or "$" are to United States
dollars unless otherwise indicated.
9
ARTICLE 2. PURCHASE AND SALE OF SECURITIES
ARTICLE 2.1 PURCHASE AND SALE OF CONVERTIBLE DEBENTURES .
(a) Subject to the terms and conditions set forth herein and as
set forth in the Recitals herein, the Company agrees to issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, Convertible
Debentures in the aggregate principal amount of One Million Dollars
($1,000,000.00).
(b) In connection with the Purchaser's agreement to purchase the
Convertible Debentures specified in this Article 2, the Company shall issue and
deliver to: (i) ▇▇▇▇▇▇▇ on the Closing Date a Warrant to purchase an aggregate
of up to 27,734 shares of Common Stock and (ii) Shoreline on the Closing Date a
Warrant to purchase an aggregate of up to 7,822 shares of Common Stock
ARTICLE 2.2 PURCHASE PRICE . The purchase price for the Convertible Debentures
on the Closing Date (as defined herein) shall be 95% of the principal amount
thereof. No part of the purchase price of the Convertible Debentures shall be
allocated to the Warrant. Therefore, the consideration payable by Shoreline to
the Company for the Convertible Debentures and Warrants on the Closing Date
shall be $209,000.00, and the consideration payable by ▇▇▇▇▇▇▇ shall be
$741,000.00. Collectively, the Purchasers shall pay an aggregate consideration
of $950,000.00 ( (the " Purchase Price").
ARTICLE 2.3 CLOSING AND MECHANICS OF PAYMENT .
(a) The Purchase Price shall be paid on the Closing Date by wire
transfer of immediately available funds.
(b) The Convertible Debentures and Warrants issued on the Closing
Date shall be dated the date hereof and interest shall accrue on the Convertible
Debentures as of the Closing Date.
ARTICLE 3. PAYMENT TERMS OF CONVERTIBLE DEBENTURES
ARTICLE 3.1 PAYMENT OF PRINCIPAL AND INTEREST; PAYMENT MECHANICS . The
Company will pay all amounts due on each Convertible Debenture by wire
transfer and at the address specified for such purpose by Purchaser in
writing, without the presentation or surrender of any Convertible Debenture
or the making of any notation thereon, except that upon written request of
the Company made concurrently with or reasonably promptly after payment or
prepayment in full of this Convertible Debenture, the holder shall surrender
the Convertible Debenture for cancellation, reasonably promptly after any
such request, to the Company at its principal executive office. Prior to any
sale or other disposition of any Convertible Debenture, the holder
10
thereof will either submit the Convertible Debenture to the Company for
endorsement thereon of the amount of principal paid thereon and the last date to
which interest has been paid thereon or surrender the Convertible Debenture to
the Company in exchange for a new Convertible Debenture or Convertible
Debentures. The Company will afford the benefits of this Section 3.1 to any
direct or indirect transferee of the Convertible Debenture purchased in
accordance with the terms of this Agreement.
ARTICLE 3.2 RANKING; PAYMENT OF INTEREST . The Convertible Debentures shall be
senior to all indebtedness of the Company except (a) the Company's outstanding
credit facility with Fleet Bank and any successor thereof, including increases
of such credit facility; (b) the Company's mortgage loan with Commerce Bank; and
(c) any future sale and lease back transaction in connection with the Company's
headquarters building in West Bridgewater, MA, to which it shall be junior in
ranking. The Convertible Debenture shall rank on a pari passu basis with the
Company's 3% $2,250,000.00 convertible debenture issued to GCA Strategic
Investment Fund Limited. Interest shall accrue on the outstanding principal
amount of each Convertible Debenture and shall be payable as specified therein.
ARTICLE 3.3 VOLUNTARY PREPAYMENT . For so long as no Event of Default shall have
occurred and is continuing, the Company may, at its option, repay, in whole or
in part, the Convertible Debentures, per the redemption price set forth in
Section 5.1 of the Convertible Debentures, following at least five (5) Business
Days prior written notice to Purchaser (the date of expiration of such five (5)
Business Day period being referred to as the "prepayment date"); PROVIDED,
HOWEVER, that if such date is not a Business Day, the prepayment date shall be
the next Business Day thereafter; and further provided that such repayment is
not otherwise prohibited by Section 5.1 of the Convertible Debenture.
ARTICLE 3.4 MANDATORY PREPAYMENTS .
(a) Upon (i) the occurrence of a Change in Control of the Company,
(ii) a transfer of all or substantially all of the assets of the Company to any
Person in a single transaction or series of related transactions, (iii) a
consolidation or merger of the Company with or into another Person in which the
Company is not the surviving entity (other than a merger which is effected
solely to change the jurisdiction of incorporation of the Company and results in
a reclassification, conversion or exchange of outstanding shares of Common Stock
solely into shares of Common Stock) (each of items (i), (ii) and (iii) being
referred to as a " Sale Event"), or (iv) the occurrence of a Registration
Default which continues uncured for a period of twenty (20) days, then, in each
case, the Company shall, upon request of the Majority Holders, redeem the
Convertible Debentures and Warrants. The redemption price payable upon any such
redemption shall be the redemption price in SECTION 5 of the Convertible
Debentures and SECTION 13 of the Warrants, respectively (referred to herein as
the "Formula Price").
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(b) Upon the issuance of the Maximum Number of Shares, the receipt
by the Company of Notice of Conversion requiring the issuance of shares of
Common Stock in excess of the Maximum Number of Shares, and the failure within
40 days of such issuance to obtain shareholder approval to issue additional
shares of Common Stock required to be issued in connection with such Notices of
Conversion (the " Redemption Event"), the Company shall redeem the outstanding
balance of each Convertible Debenture and Warrant for the Formula Price.
(c) In the event that there is an insufficient number of
authorized, issuable, shares of Common Stock registered under the Registration
Statement filed by the Company to allow Purchaser to fully convert the
Convertible Debentures and exercise all Warrants held by Purchaser and sell such
shares issued thereon, then the Company shall immediately file an amendment to
the then current Registration Statement to register a sufficient number of such
shares to convert said Convertible Debentures and Warrants. Upon the failure
within twenty (20) Trading Days measured from the date of filing the
Registration Statement to register a sufficient number of such shares, the
Company shall redeem the outstanding balance of each Convertible Debenture and
Warrant for the Formula Price. In addition, failure of the Company to register a
sufficient number of such shares to fully convert said Convertible Debentures
and exercise such Warrants shall be a Registration Default under SECTION 10.4(E)
from the date of the Notice of Conversion to the date of the earlier of (i) the
redemption of the outstanding balance of the Convertible Debentures and exercise
of all such Warrants or (ii) full conversion of the Convertible Debentures and
exercise of all such Warrants.
ARTICLE 3.5 PREPAYMENT PROCEDURES .
(a) Any permitted prepayment or redemption of the Convertible
Debentures and Warrants, as applicable pursuant to Sections 3.3 or 3.4 above
shall be deemed to be effective and consummated (for purposes of determining the
Formula Price and the time at which Purchaser shall thereafter not be entitled
to deliver a Notice of Conversion for the Convertible Debentures) as follows:
(i) A prepayment pursuant to Section 3.3, the "prepayment
date" specified therein;
(ii) A redemption pursuant to Section 3.4(a), the later to
occur of (x) one (1) Business Day following the Company's receipt of
notice to redeem from the Majority Holders or (y) the date of
occurrence or consummation, as the case may be, of the applicable Sale
Event or in the case of a Registration Default the date on which such
20-day period expires; and
12
(iii) A redemption pursuant to Section 3.4(c), the date on
which such 40-day period expires.
(b) On or before the Maturity Date and on the effective date of a
repayment or redemption of the Convertible Debentures and Warrants as specified
in Section 3.5(a) above, the Company shall deliver by wire transfer of funds the
repayment/redemption price to Purchaser of the Convertible Debentures and
Warrants subject to repayment/redemption. Should Purchaser not receive payment
of any amounts due on redemption of its Convertible Debentures and Warrants by
reason of the Company's failure to make payment at the times prescribed above
for any reason, the Company shall pay to the applicable holder on demand (x)
interest on the sums not paid when due at an annual rate equal to the lesser of
(i) 18% or (ii) the maximum lawful rate, compounded at the end of each thirty
(30) days, until the applicable holder is paid in full and (y) all costs of
collection, including, but not limited to, reasonable attorneys' fees and costs,
whether or not suit or other formal proceedings are instituted.
(c) The Company shall select the Convertible Debentures and
Warrants to be redeemed in any redemption in which not all of the Convertible
Debentures and Warrants are to be redeemed so that the ratio of the Convertible
Debentures and Warrants of each holder selected for redemption to the total
Convertible Debentures and Warrants owned by that holder shall be the same as
the ratio of all such Convertible Debentures and Warrants selected for
redemption bears to the total of all then outstanding Convertible Debentures and
Warrants. Should any Convertible Debentures and Warrants required to be redeemed
under the terms hereof not be redeemed solely by reason of limitations imposed
by law, the applicable Convertible Debentures and Warrants shall be redeemed on
the earliest possible dates thereafter to the maximum extent permitted by law.
(d) Any Notice of Conversion delivered by Purchaser (including
delivery via telecopy) to the Company prior to the (x) Maturity Date or (y)
effective date of a voluntary prepayment pursuant to Section 3.3 or a mandatory
prepayment pursuant to Section 3.4 as specified in Section 3.5(a) above), shall
be honored by the Company and the conversion of the Convertible Debentures shall
be deemed effected on the Conversion Date, subject to the Company's rights
pursuant to Sections 5.1 and 5.2 of the Convertible Debentures. In addition,
between the effective date of a voluntary prepayment pursuant to Section 3.3 or
a mandatory prepayment pursuant to Section 3.4 as specified in Section 3.5(a)
above and the date the Company is required to deliver the redemption proceeds in
full to Purchaser, Purchaser may deliver a Notice of Conversion to the Company.
Such Notice of Conversion will be (x) of no force or effect if the Company
timely pays the redemption proceeds to Purchaser when due or (y) honored on or
as of the date of the Notice of Conversion if the Company fails to timely pay
the redemption proceeds to Purchaser when due.
13
ARTICLE 3.6 PAYMENT OF ADDITIONAL AMOUNTS .
(a) Any and all payments by the Company hereunder or under the
Convertible Debentures to Purchaser and each "qualified assignee" thereof shall
be made free and clear of and without deduction or withholding for any and all
present or future taxes, levies, imposts, deductions, charges or withholdings,
and all liabilities with respect thereto (all such taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as " Taxes") unless such Taxes are required by law or the administration thereof
to be deducted or withheld. If the Company shall be required by law or the
administration thereof to deduct or withhold any Taxes from or in respect of any
sum payable under the Convertible Debentures (i) the holders of the Convertible
Debentures subject to such Taxes shall have the right, but not the obligation,
for a period of thirty (30) days commencing upon the day it shall have received
written notice from the Company that it is required to withhold Taxes, subject
to the other provisions of this Agreement and the Convertible Debentures
relating to assignment or transfer of the Convertible Debentures, to transfer
all or any portion of the Convertible Debentures to a qualified assignee to the
extent such transfer can be effected in accordance with the other provisions of
this Agreement and applicable law; (ii) the Company shall make such deductions
or withholdings; and (iii) the Company shall forthwith pay the full amount
deducted or withheld to the relevant taxation or other authority in accordance
with applicable. A "qualified assignee" of a Purchaser is a Person that is
organized under the laws of (i) the United States or (ii) any jurisdiction other
than the United States or any political subdivision thereof and that (y)
represents and warrants to the Company that payments of the Company to such
assignee under the laws in existence on the date of this Agreement would not be
subject to any Taxes and (z) from time to time, as and when requested by the
Company, executes and delivers to the Company and the Internal Revenue Service
forms, and provides the Company with any information necessary for the Company
to establish such assignee's exemption or continued exemption from Taxes under
applicable law.
(b) The Company shall forthwith pay any present or future stamp or
documentary taxes or any other similar charges or similar levies which arise
from any payment made under any of the Transaction Agreements or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement other than Taxes relating to income and Taxes payable solely as a
result of the transfer from Purchaser to a Person of any Security (all such
taxes, charges and levies hereinafter referred to as " Other Taxes").
(c) The Company shall indemnify Purchaser, or qualified assignee,
for the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 3.6) required to be
14
paid by the Company under this Section 3.6, but not so paid by the Company and
actually paid by Purchaser, or qualified assignee. Payment under this
indemnification shall be made within 30 days from the date Purchaser or
qualified assignee makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes,
required by the Company to be paid under this Section 3.6, the Company will
furnish to Purchaser the original or a certified copy of a receipt evidencing
payment thereof.
(e) Purchaser and each qualified assignee shall provide to the
Company a form W-8, stating that it is a non-U.S. person, together with any
additional tax forms which may be required under the Code, as amended after the
date hereof, to allow interest payments to be made to it without deduction.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to Purchaser, as of the Closing
Date, the following:
ARTICLE 4.1 ORGANIZATION AND QUALIFICATION . The Company and each Subsidiary is
a corporation (or other legal entity) duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, with full
power and authority to own, lease, use and operate its properties and to carry
on its business as and where now owned, leased, used, operated and conducted.
The Company is qualified to conduct business as a foreign corporation and is in
good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary, except where such failure
would not have a Material Adverse Effect. A " Material Adverse Effect" means any
material adverse effect on the operations, results of operations, properties,
assets or condition (financial or otherwise) of the Company and its
Subsidiaries, taken as a whole, or on the transactions contemplated hereby or by
the agreements or instruments to be entered into in connection herewith.
ARTICLE 4.2 AUTHORIZATION AND EXECUTION .
(a) The Company has all requisite corporate power and authority to
enter into and perform each Transaction Agreement and 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 by the Company of each
Transaction Agreement and the issuance by the Company of the Securities have
been duly and validly authorized by the Board of Directors of the Company and no
further
15
consent or authorization of the Company, its Board of Directors or its
shareholders is required.
(c) This Agreement has been duly executed and delivered by the
Company.
(d) This Agreement constitutes, and upon execution and delivery
thereof by the Company, each of the Transaction Agreements will constitute, a
valid and binding agreement of the Company, in each case enforceable against the
Company in accordance with its respective terms subject to (i) applicable
bankruptcy, insolvency or similar laws affecting the enforceability of creditors
rights generally, and (ii) equitable principals of general applicability.
ARTICLE 4.3 CAPITALIZATION . As of August 25, 2000, the authorized, issued and
outstanding capital stock of the Company is as set forth on SCHEDULE 4.3 hereto
and except as set forth on SCHEDULE 4.3 and excluding any stock options offered
under any Company Benefit Plan (as herein defined) no other shares of capital
stock of the Company will be outstanding other than stock options offered under
any Company Benefit Plan as of the Closing Date. Except as set forth on Schedule
4.3, all of such outstanding shares of capital stock are, or upon issuance will
be, duly authorized, validly issued, fully paid and nonassessable. No shares of
capital stock of the Company are subject to preemptive rights or similar rights
of the shareholders of the Company or any liens or encumbrances imposed through
the actions or failure to act of the Company. Other than as set forth on
SCHEDULE 4.3 hereto, as of the date hereof, (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
or exchangeable for any shares of capital stock of the Company or any of its
Subsidiaries, or arrangements by which the Company or any of its Subsidiaries is
or may become bound to issue additional shares of capital stock of the Company
or any of its Subsidiaries, and (ii) there are no agreements or arrangements
under which the Company or any of its Subsidiaries are obligated to register the
sale of any of its or their securities under the Securities Act (except pursuant
to the Registration Rights Agreement) 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 Convertible Debentures or Conversion Shares. The Company has
furnished to Purchaser true and correct copies of the Company's Corporate
Documents, and the terms of all securities convertible into or exercisable for
Common Stock.
ARTICLE 4.4 GOVERNMENTAL AUTHORIZATION . The execution and delivery by the
Company of the Transaction Agreements does not and will not, the issuance and
sale by the Company of the Securities does not and will not, and the
consummation of the transactions contemplated hereby and by the other
Transaction Agreements will not, require any action by or in respect of, or
filing with, any governmental body, agency or governmental official except (a)
such actions or filings that have been undertaken or made prior to the date
hereof and that will be in full force and effect
16
(or as to which all applicable waiting periods have expired) on and as of the
date hereof or which are not required to be filed on or prior to the Closing
Date, (b) such actions or filings that, if not obtained, would not result in a
Material Adverse Effect, (c) listing applications (" Listing Applications") to
be filed with the OTC Bulletin Board or the National Market relating to the
Conversion Shares, if applicable, and (d) the filing of a "Form D" as described
in Section 7.13 below and the filing of any requisite documents under state
securities ("blue sky") laws.
ARTICLE 4.5 ISSUANCE OF SHARES . Upon conversion in accordance with the terms of
the Convertible Debentures and exercise of the Warrants, the Conversion Shares
shall be duly and validly issued and outstanding, fully paid and nonassessable,
free and clear of any Liens and charges and shall not be subject to preemptive
rights or similar rights of any other shareholders of the Company. Assuming the
representations and warranties of Purchaser herein are true and correct in all
material respects, each of the Securities will have been issued in material
compliance with all applicable U.S. federal and state securities laws. The
Company understands and acknowledges that the issuance of Conversion Shares will
dilute the ownership interests of other shareholders of the Company. The Company
further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Convertible Debentures and exercise of the Warrants is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other shareholders of the Company.
ARTICLE 4.6 NO CONFLICTS . The execution and delivery by the Company of the
Transaction Agreements to which it is a party did not and will not, the issuance
and sale by the Company of the Securities did not and will not and the
consummation of the transactions contemplated hereby and by the other
Transaction Agreements will not, contravene or constitute a default under or
violation of (i) any provision of applicable law or regulation known by the
Company to be applicable to it, (ii) the Company Corporate Documents, (iii) any
material agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or any Subsidiary or any of their respective assets, or
result in the creation or imposition of any material Lien on any asset of the
Company or any Subsidiary. To its knowledge, the Company and each Subsidiary is
in compliance with and conforms to all statutes, laws, ordinances, rules,
regulations, orders, restrictions and all other legal requirements of any
domestic or foreign government or any instrumentality thereof having
jurisdiction over the conduct of its businesses or the ownership of its
properties, except where such failure would not have a Material Adverse Effect.
ARTICLE 4.7 FINANCIAL INFORMATION . Since June 30, 2000 (the " Balance Sheet
Date"), except as disclosed in SCHEDULE 4.7, there has been (x) no material
adverse change in the assets or liabilities, or in the business or condition,
financial or otherwise, or in the results of operations or prospects, of
17
the Company and its Subsidiaries taken as a whole, whether as a result of any
legislative or regulatory change, revocation of any license or rights to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation, act of God, public force or otherwise and (y) no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations or prospects,
of the Company and its Subsidiaries except in the ordinary course of business;
and to the knowledge of the Company no fact or condition exists which might
cause such a change in the future. The audited and unaudited consolidated
balance sheets of the Company and its Subsidiaries for the periods ending
December 31, 1999, and June 30, 2000, respectively, and the related consolidated
statements of income, changes in shareholders' equity and changes in cash flows
for the periods then ended, including the footnotes thereto, except as indicated
therein, (i) complied in all material respects with applicable accounting
requirements and (ii) have been prepared in accordance with GAAP consistently
applied throughout the periods indicated, except that the unaudited financial
statements do not contain notes and may be subject to normal audit adjustments
and normal annual adjustments. Such financial statements fairly present the
financial condition of the Company and its Subsidiaries at the dates indicated
and the consolidated results of their operations and cash flows for the periods
then ended and, except as indicated therein, reflect all claims against and all
Debts and liabilities of the Company and its Subsidiaries, fixed or contingency
required to be reflected therein in accordance with GAAP.
ARTICLE 4.8 LITIGATION . Except as set forth on SCHEDULE 4.8, there is no
action, suit or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary, before any court or arbitrator
or any governmental body, agency or official in which there is a reasonable
possibility of an adverse decision which could be reasonably expected to have a
Material Adverse Effect or which challenges the validity of any Transaction
Agreements.
ARTICLE 4.9 COMPLIANCE WITH ERISA AND OTHER BENEFIT PLANS .
(a) Each member of the ERISA Group has fulfilled its obligations
under the minimum funding standards of ERISA and the Code with respect to each
Plan and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code with respect to each Plan. No member of the
ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Code in respect of any Plan, (ii) failed to make any required
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which as resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Code or (iii) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA.
(b) The benefit plans not covered under clause (a) above
(including profit sharing, deferred compensation, stock option, employee
stock purchase, bonus, retirement, health or insurance plans, collectively
the " Benefit Plans") relating to the employees of the Company are duly
registered where required by, and are in good standing in all material
respects under, all applicable laws. All required employer and employee
contributions and premiums under the Benefit Plans to the date hereof have
been made, the respective fund or funds established under
18
the Benefit Plans are funded in accordance with applicable laws, and no past
service funding liabilities exist thereunder.
(c) No Benefit Plans have any unfunded liabilities, either on a
"going concern" or "winding up" basis and determined in accordance with all
applicable laws and actuarial practices and using actuarial assumptions and
methods that are reasonable in the circumstances. No event has occurred and no
condition exists with respect to any Benefit Plans that has resulted or to the
knowledge of the Company could reasonably be expected to result in any Benefit
Plan having its registration revoked or wound up (in whole or in part) or
refused for the purposes of any applicable laws or being placed under the
administration of any relevant pension benefits regulatory authority or being
required to pay any taxes or penalties (in any material amounts) under any
applicable laws.
ARTICLE 4.10 ENVIRONMENTAL MATTERS . Each of the Company and the Subsidiaries
conducts its businesses in compliance in all material respects with all
applicable Environmental Laws.
ARTICLE 4.11 TAXES . All United States federal, state, county, municipality,
local or foreign income tax returns and all other material tax returns
(including foreign tax returns) which are required to be filed by or on behalf
of the Company and each Subsidiary have been filed and all material taxes due
and payable pursuant to such returns or pursuant to any assessment received by
the Company and each Subsidiary have been paid except those being disputed in
good faith and for which adequate reserves have been established. The charges,
accruals and reserves on the books of the Company and each Subsidiary in respect
of taxes and other governmental charges have been established in accordance with
GAAP.
ARTICLE 4.12 INVESTMENTS, JOINT VENTURES . Other than as set forth in SCHEDULE
4.12, the Company has no Subsidiaries or other direct or indirect Investment in
any Person, and the Company is not a party to any partnership, management,
shareholders' or joint venture or similar agreement.
ARTICLE 4.13 NOT AN INVESTMENT COMPANY . Neither the Company nor any Subsidiary
is an "Investment Company" within the meaning of Investment Company Act of 1940,
as amended.
ARTICLE 4.14 FULL DISCLOSURE . The information heretofore furnished by the
Company to Purchaser for purposes of or in connection with this Agreement or any
transaction contemplated hereby does not contain any untrue statement of a
material fact.
ARTICLE 4.15 NO SOLICITATION; NO INTEGRATION WITH OTHER OFFERINGS . No form of
general solicitation or general advertising was used by the Company or, to its
knowledge, any other Person acting on behalf of the Company, in connection with
the offer and sale of the
19
Securities. Except as set forth in Schedule 4.15, neither the Company, nor, to
its knowledge, any Person acting on behalf of the Company, has, either directly
or indirectly, sold or offered for sale to any Person (other than Purchaser) any
of the Securities or, within the six months prior to the date hereof, any other
similar security of the Company except as contemplated by this Agreement, and
the Company represents that neither itself nor any Person authorized to act on
its behalf (except that the Company makes no representation as to Purchaser and
their Affiliates) will sell or offer for sale any such security to, or solicit
any offers to buy any such security from, or otherwise approach or negotiate in
respect thereof with, any Person or Persons so as thereby to cause the issuance
or sale of any of the Securities to be in violation of any of the provisions of
Section 5 of the Securities Act. The issuance of the Securities to Purchaser
will not be integrated with any other issuance of the Company's securities
(past, current or future).
ARTICLE 4.16 PERMITS . (a) Each of the Company and its Subsidiaries has all
material Permits; (b) to the Company's knowledge all such Permits are in full
force and effect, and each of the Company and its Subsidiaries has fulfilled and
performed all material obligations with respect to such Permits; (c) no event
has occurred which allows, or after notice of lapse of time would allow,
revocation or termination by the issuer thereof or which results in any other
material impairment of the rights of the holder of any such Permit; and (d) the
Company has no reason to believe that any governmental body or agency is
considering limiting, suspending or revoking any such Permit, except in each
case or in the aggregate that could not be reasonably expected to have a
Material Adverse Effect.
ARTICLE 4.17 LEASES . Except as set forth in Schedule 4.17, neither the Company
nor any Subsidiary is a party to any capital lease obligation with a value
greater than $250,000 or to any operating lease with an aggregate annual rental
greater than $250,000 during the life of such lease.
ARTICLE 4.18 ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL CALLS . There are
no liabilities of the Company or any Subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which would
reasonably be expected to result in such a liability, other than (i) those
liabilities provided for in the financial statements delivered pursuant to
Section 4.7 and (ii) other undisclosed liabilities which, individually or in the
aggregate, would not have a Material Adverse Effect.
ARTICLE 4.19 PUBLIC UTILITY HOLDING COMPANY . Neither the Company nor any
Subsidiary is, or will be upon issuance and sale of the Securities and the use
of the proceeds described herein, subject to regulation under the Public Utility
Holding Company Act of 1935, as amended, the Federal Power Act, the Interstate
Commerce Act or to any federal or state statute or regulation limiting its
ability to issue and perform its obligations under any Transaction Agreement.
20
ARTICLE 4.20 INTELLECTUAL PROPERTY RIGHTS . Each of the Company and its
Subsidiaries owns, or is licensed under, and has the rights to use, all material
to the knowledge of the Company, patents, trademarks, trade names, copyrights,
technology, know-how and processes (collectively, " Intellectual Property") used
in, or necessary for the conduct of its business; no claims have been asserted
by any Person to the use of any such Intellectual Property or challenging or
questioning the validity or effectiveness of any license or agreement related
thereto. To the Company's and its Subsidiaries' knowledge, there is no valid
basis for any such claim and the use of such Intellectual Property by the
Company and its Subsidiaries will not infringe upon the rights of any Person.
ARTICLE 4.21 INSURANCE . The Company and its Subsidiaries maintain, with
financially sound and reputable insurance companies, insurance in at least such
amounts as is customary for businesses similar to the Company. All insurance
coverages of the Company and its Subsidiaries are in full force and effect and
there are no past due premiums in respect of any such insurance.
ARTICLE 4.22 TITLE TO PROPERTIES . Except as set forth on Schedule 4.22, the
Company and its Subsidiaries have good and marketable title to all their
respective properties reflected on the financial statements referred to in
Section 4.7, free and clear of all Liens.
ARTICLE 4.23 INTERNAL ACCOUNTING CONTROLS . The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's Board of Directors, to provide reasonable
assurance that (i) transactions are executed in accordance with managements'
general or specific authorizations, (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
ARTICLE 4.24 FOREIGN PRACTICES . Neither the Company nor any of its Subsidiaries
nor, to the Company's knowledge, any employee or agent of the Company or any
Subsidiary has made any payments of funds of the Company or Subsidiary, or
received or retained any funds, in each case in violation of the Foreign Corrupt
Practices Act.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
ARTICLE 5.1 PURCHASER . Purchaser hereby represents and warrants to the Company
that:
(a) Purchaser is an "accredited investor" within the meaning of
Rule 501(a) under the Securities Act and the Securities to be acquired by it
pursuant to this
21
Agreement are being acquired for its own account and, as of the date hereof, not
with a view toward, or for sale in connection with, any distribution thereof
except in compliance with applicable United States federal and state securities
law; provided that, subject to such securities laws, the disposition of
Purchaser's property shall at all times be and remain within its control;
(b) the execution, delivery and performance of this Agreement and
the purchase of the Securities pursuant thereto are within Purchaser's corporate
or partnership powers, as applicable, and have been duly and validly authorized
by all requisite corporate or partnership action;
(c) this Agreement has been duly executed and delivered by
Purchaser;
(d) the execution and delivery by Purchaser of the Transaction
Agreements to which it is a party does not, and the consummation of the
transactions contemplated hereby and thereby will not, contravene or constitute
a default under or violation of (i) any provision of applicable law or
regulation, or (ii) any agreement, judgment, injunction, order, decree or other
instrument binding upon Purchaser;
(e) Purchaser understands that the Securities have not been
registered under the Securities Act and blue sky laws and may not be transferred
or sold except as specified in this Agreement or the remaining Transaction
Agreements;
(f) this Agreement constitutes a valid and binding agreement of
Purchaser enforceable in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency or similar laws affecting the enforceability of creditors
rights generally and (ii) equitable principles of general applicability;
(g) Purchaser has such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Securities and Purchaser is capable of bearing the economic
risks of such investment;
(h) Purchaser is knowledgeable, sophisticated and experienced in
business and financial matters; Purchaser has previously invested in securities
similar to the Securities and fully understands the limitations on transfer
described herein; Purchaser has been afforded access to information about the
Company and the financial condition, results of operations, property, management
and prospects of the Company sufficient to enable it to evaluate its investment
in the Securities; Purchaser has been afforded the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and the risks of investing in the
Securities; and Purchaser has been afforded the opportunity to obtain such
additional information which the Company
22
possesses or can acquire that is necessary to verify the accuracy and
completeness of the information given to Purchaser concerning the Company. The
foregoing does not in any way relieve the Company of its representations and
other undertakings hereunder, and shall not limit Purchaser's ability to rely
thereon;
(i) no part of the source of funds used by Purchaser to acquire
the Securities constitutes assets allocated to any separate account maintained
by Purchaser in which any employee benefit plan (or its related trust) has any
interest;
(j) Shoreline is a organized under the laws of Illinois and its
principal office is located in Illinois. All contacts and communications between
the Purchaser and the Company relating to this Agreement and the transactions
contemplated hereby have taken place at the Company's offices in Massachusetts
and Shoreline's investment advisor's offices in Illinois; and
(i) ▇▇▇▇▇▇▇ is an individual residing in the state of Illinois.
ARTICLE 6. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES
ARTICLE 6.1 CONDITIONS PRECEDENT TO PURCHASER'S OBLIGATIONS TO PURCHASE . The
obligation of Purchaser hereunder to purchase the Convertible Debentures at the
Closing is subject to the satisfaction, on or before the Closing Date, of each
of the following conditions, provided that these conditions are for Purchaser's
sole benefit and may be waived by Purchaser at any time in its sole discretion:
(a) The Company shall have duly executed this Agreement, the
Warrant and the Registration Rights Agreement, and delivered the same to
Purchaser;
(b) The Company shall have delivered to Purchaser duly executed
certificates representing the Convertible Debentures in accordance with Section
2.3 hereof;
(c) The representations and warranties of the Company contained in
each Transaction Agreement shall be true and correct in all material respects as
of the date when made and as of the Closing Date as though made at such time
(except for representations and warranties that speak as of a specified date)
and the Company shall have performed, satisfied and complied with all covenants,
agreements and conditions required by such Transaction Agreements to be
performed, satisfied or complied with by it at or prior to the Closing Date.
Purchaser shall have received an Officer's Certificate executed by the chief
executive officer of the Company, dated as of the Closing Date, to the foregoing
effect and as to such other matters as may be reasonably requested by Purchaser,
including but not limited to certificates with respect to the Company Corporate
23
Documents, resolutions relating to the transactions contemplated hereby and the
incumbencies of certain officers and Directors of the Company. The form of such
certificate is attached hereto as EXHIBIT D;
(d) The Company shall have received all governmental, Board of
Directors, shareholders and third party consents and approvals necessary or
desirable in connection with the issuance and sale of the Securities and the
consummation of the transactions contemplated by the Transaction Agreements;
(e) All applicable waiting periods in respect to the issuance and
sale of the Securities shall have expired without any action having been taken
by any competent authority that could restrain, prevent or impose any materially
adverse conditions thereon or that could seek or threaten any of the foregoing;
(f) No law or regulation shall have been imposed or enacted that,
in the judgment of Purchaser, could adversely affect the transactions set forth
herein or in the other Transaction Agreements, and no law or regulation shall
have been proposed that in the reasonable judgment of Purchaser could reasonably
have any such effect;
(g) All fees and expenses in connection with the transactions
contemplated by the Transaction Agreements due and payable by the Company on or
prior to the Closing Date shall have been paid;
(h) The Company Corporate Documents and the Subsidiary Corporate
Documents, if any, shall be in full force and effect and no term or condition
thereof shall have been amended, waived or otherwise modified without the prior
written consent of Purchaser;
(i) There shall have occurred no material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company or any Subsidiary since June 30, 2000;
(j) There shall exist no action, suit, investigation, litigation
or proceeding pending or threatened in any court or before any arbitrator or
governmental instrumentality that challenges the validity of or purports to
affect this Agreement or any other Transaction Agreement, or other transaction
contemplated hereby or thereby or that could reasonably be expected to have a
Material Adverse Effect, or any material adverse effect on the enforceability of
the Transaction Agreements or the Securities or the rights of the holders of the
Securities or Purchaser hereunder;
24
(k) Purchaser shall have confirmed the receipt of the Convertible
Debentures and the Warrants to be issued, duly executed by the Company and
registered in the name of Purchaser;
(l) There shall not have occurred any disruption or adverse change
in the financial or capital markets generally, or in the market for the Common
Stock (including but not limited to any suspension or delisting), which
Purchaser reasonably deems material in connection with the purchase of the
Securities;
(m) Immediately before and as of the Closing Date, no Default or
Event of Default shall have occurred and be continuing;
ARTICLE 6.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS . The obligations of the
Company to issue and sell the Securities to Purchaser pursuant to this Agreement
are subject to the satisfaction, at or prior to the Closing Date, of the
following conditions:
(a) The representations and warranties of Purchaser contained
herein shall be true and correct in all material respects on the Closing Date
and Purchaser shall have performed and complied in all material respects with
all agreements required by this Agreement to be performed or complied with by
Purchaser at or prior to the Closing Date;
(b) The issue and sale of the Securities by the Company shall not
be prohibited by any applicable law, court order or governmental regulation;
(c) Receipt by the Company of duly executed counterparts of this
Agreement and the Registration Rights Agreement signed by Purchaser;
(d) The Company shall have received payment of the Purchase Price;
(e) There shall exist no action, suit, investigation, litigation
or proceeding pending or threatened in any court or before any arbitrator or
governmental instrumentality that challenges the validity of or purports to
effect this Agreement or any other Transaction Agreement, or other transaction
contemplated hereby or thereby or that could reasonably be expected to have a
Material Adverse Effect, or any material adverse effect on the enforceability of
the Transaction Agreements, or the Securities, or the rights of the holders of
the Securities or Purchaser hereunder.
25
ARTICLE 7. AFFIRMATIVE COVENANTS
The Company and Purchaser hereby agree that, from and after the date
hereof for so long as any Convertible Debentures remain outstanding and for the
benefit of each other:
ARTICLE 7.1 INFORMATION . The Company will deliver to each holder of the
Convertible Debentures:
(a) promptly upon the filing thereof, copies of (i) all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent), and (ii) all
reports on Forms 10-K, 10-Q and 8-K (or other equivalents) which the
Company or any Subsidiary has filed with the Commission after the
Closing Date (collectively, "SEC Reports");
(b) simultaneously with the delivery of each item referred to
in clause (a) above, a certificate from the chief financial officer of
the Company stating that no Default or Event of Default has occurred and
is continuing, or, if as of the date of such delivery a Default shall
have occurred and be continuing, a certificate from the Company setting
forth the details of such Default or Event of Default and the action
which the Company is taking or proposes to take with respect thereto;
(c) within two (2) Business Days after any officer of the
Company obtains knowledge of a Default or Event of Default, or that any
Person has given any notice or taken any action with respect to a
claimed Default hereunder, a certificate of the chief financial officer
of the Company setting forth the details thereof and the action which
the Company is taking or proposed to take with respect thereto;
(d) promptly upon the mailing thereof to the shareholders of
the Company generally, copies of all financial statements, reports and
proxy statements so mailed and any other document generally distributed
to shareholders;
(e) at least two (2) Business Days prior to any event requiring
a repayment of the Convertible Debentures under Section 3.4, notice
thereof together with a summary of all material terms thereof;
(f) notice promptly upon the occurrence of any event by which
the Reserved Amount becomes less than the sum of (i) 1.5 times the
maximum number of Conversion Shares issuable pursuant to the Transaction
Agreements; and
(g) promptly following the commencement thereof, notice and a
description in reasonable detail of any litigation or proceeding to
which the Company or any Subsidiary
26
is a party in which the amount involved is $250,000 or more and not
covered by insurance or in which injunctive or similar relief is sought.
ARTICLE 7.2 PAYMENT OF OBLIGATIONS . The Company will, and will cause each
Subsidiary to, pay and discharge, at or before maturity, all their respective
material obligations, including, without limitation, tax liabilities, except
where the same may be contested in good faith by appropriate proceedings and
will maintain, in accordance with GAAP, appropriate reserves for the accrual of
any of the same.
ARTICLE 7.3 MAINTENANCE OF PROPERTY; INSURANCE . The Company will, and will
cause each Subsidiary to, keep all property necessary in its business in good
working order and condition, ordinary wear and tear excepted. In addition, the
Company and each Subsidiary will maintain insurance in at least such amounts and
against such risks as it has insured against as of the Closing Date.
ARTICLE 7.4 MAINTENANCE OF EXISTENCE . The Company will, and will cause each
Subsidiary to, continue to engage in business of the same general type as now
conducted by the Company and such Subsidiaries, and will preserve, renew and
keep in full force and effect its respective corporate existence and their
respective material rights, privileges and franchises necessary or desirable in
the normal conduct of business.
ARTICLE 7.5 COMPLIANCE WITH LAWS . The Company will, and will cause each
Subsidiary to, comply, in all material respects, with all federal, state,
municipal, local or foreign applicable laws, ordinances, rules, regulations,
municipal by-laws, codes and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules and
regulations thereunder) except (i) where compliance therewith is contested in
good faith by appropriate proceedings or (ii) where non-compliance therewith
could not reasonably be expected, in the aggregate, to have a Material Adverse
Effect on the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Company or such Subsidiary.
ARTICLE 7.6 INSPECTION OF PROPERTY, BOOKS AND RECORDS . The Company will, and
will cause each Subsidiary to, keep proper books of record and account in which
full, true and correct entries shall be made of all dealings and transactions in
relation to their respective businesses and activities; and will permit, during
normal business hours, Purchaser's representative or an affiliate thereof, as
representatives of Purchaser, to visit and inspect any of their respective
properties, upon reasonable prior notice, to examine and make abstracts from any
of their respective books and records and to discuss their respective affairs,
finances and accounts with their respective executive officers and independent
public accountants (and by this provision the Company authorizes its independent
public accountants to disclose and discuss with Purchaser the affairs, finances
and accounts of the Company and its Subsidiaries in the presence of a
27
representative of the Company; provided, however, that such discussions will not
result in any unreasonable expense to the Company, without Company consent), all
at such reasonable times.
ARTICLE 7.7 INVESTMENT COMPANY ACT . The Company will not be or become an
open-end investment trust, unit investment trust or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Company Act of 1940, as amended.
ARTICLE 7.8 USE OF PROCEEDS . The proceeds from the issuance and sale of the
Convertible Debentures by the Company shall be used in accordance with SCHEDULE
7.8 attached hereto. None of the proceeds from the issuance and sale of the
Convertible Debentures by the Company pursuant to this Agreement will be used
directly or indirectly for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any "margin stock" within the meaning of
Regulation G of the Board of Governors of the Federal Reserve System.
ARTICLE 7.9 COMPLIANCE WITH TERMS AND CONDITIONS OF MATERIAL CONTRACTS . The
Company will, and will cause each Subsidiary to, comply, in all material
respects, with all terms and conditions of all material contracts to which it is
subject except in particular circumstances in which the Company determines it to
be in the best interests of the Company not to comply.
ARTICLE 7.10 RESERVED SHARES AND LISTINGS .
(a) The Company shall at all times have authorized, and reserved
for the purpose of issuance, a sufficient number of shares of Common Stock to
provide for the full conversion of the outstanding Convertible Debentures and
exercise of the Warrants and issuance of the Conversion Shares (based on the
conversion price of the Convertible Debentures in effect from time to time and
the exercise price of the Warrants, respectively) (the "Reserved Amount"). The
Company shall not reduce the Reserved Amount without the prior written consent
of Purchaser. With respect to all Securities which contain an indeterminate
number of shares of Common Stock issuable in connection therewith (such as the
Convertible Debentures), the Company shall include in the Reserve Amount, no
less than two (2) times the number of shares that is then actually issuable upon
conversion or exercise of such Securities. If at any time the number of shares
of Common Stock authorized and reserved for issuance is below the number of
Conversion Shares issued or issuable upon conversion of the Convertible
Debentures and exercise of the Warrants, the Company will promptly take all
corporate action necessary to authorize and reserve a sufficient number of
shares, including, without limitation, either (x) calling a special meeting of
shareholders to authorize additional shares, in the case of an insufficient
number of authorized shares or (y) in lieu thereof, consummating the immediate
repurchase of the Convertible Debentures and the Warrants contemplated in
Sections 3.4(c) and 10.3 hereof, respectively.
(b) If required, the Company shall promptly file the Listing
Applications and secure the listing of the Conversion Shares upon each national
securities exchange or automated
28
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance) and shall maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all Conversion
Shares from time to time issuable upon conversion or exercise of the Convertible
Debentures and Warrants, respectively. The Company will maintain the listing and
trading of its Common Stock on the Nasdaq Market. The Company 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. (the
"NASD") and such exchanges, as applicable. The Company shall promptly provide to
Purchaser copies of any notices it receives regarding the continued eligibility
of the Common Stock for listing on the Nasdaq Market.
ARTICLE 7.11 TRANSFER AGENT INSTRUCTIONS . Upon receipt of a Notice of
Conversion or Notice of Exercise, as applicable, the Company shall immediately
direct the Company's transfer agent to issue certificates, registered in the
name of Purchaser or its nominee, for the Conversion Shares, in such amounts as
specified from time to time by Purchaser to the Company upon proper conversion
of the Convertible Debentures or exercise of the Warrants. Upon conversion of
any Convertible Debentures in accordance with their terms and/or exercise of any
Warrants in accordance with their terms, the Company will, and will use its best
lawful efforts to cause its transfer agent to, issue one or more certificates
representing shares of Common Stock in such name or names and in such
denominations specified by a Purchaser in a Notice of Conversion or Notice of
Exercise, as the case may be. As long as the Registration Statement contemplated
by the Registration Rights Agreement shall remain effective, the shares of
Common Stock issuable upon conversion of any Convertible Debentures or exercise
of the Warrants shall be issued to any transferee of such shares from Purchaser
without any restrictive legend upon appropriate evidence of transfer in
compliance with the Securities Act and the rules and regulations of the
Commission; provided that for so long as the Registration Statement is
effective, no opinion of counsel will be required to effect any such transfer.
The Company further warrants and agrees that no instructions other than these
instructions have been or will be given to its transfer agent. Nothing in this
Section 7.11 shall affect in any way a Purchaser's obligation to comply with all
securities laws applicable to Purchaser upon resale of such shares of Common
Stock, including any prospectus delivery requirements.
ARTICLE 7.12 MAINTENANCE OF REPORTING STATUS; SUPPLEMENTAL INFORMATION . So long
as any of the Securities are outstanding, the Company shall timely file all
reports required to be filed with the Commission pursuant to the Exchange Act.
The Company shall 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. If at anytime the Company is not
subject to the requirements of Section 13 or 15(d) of the Exchange Act, the
Company will promptly furnish at its expense, upon request, for the benefit of
the holders from time to time of Securities, and prospective purchasers of
Securities, information satisfying the information requirements of Rule 144
under the Securities Act.
29
ARTICLE 7.13 FORM D; BLUE SKY LAWS . The Company agrees to file a "Form D" with
respect to the Securities as required under Regulation D of the Securities Act
and to provide a copy thereof to Purchaser promptly after such filing. The
Company shall, on or before the Closing Date, take such action as the Company
shall reasonably determine is necessary to qualify the Securities for sale to
Purchaser at the Closing pursuant to 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 shall provide evidence of any such action so taken
to Purchaser on or prior to the Closing Date.
ARTICLE 7.14 SALES BY PURCHASER . Purchaser agrees that it will not effect or
cause any of its affiliates to effect a short sale of Common Stock for so long
as any of the Convertible Debentures remain outstanding or the Purchaser or its
affiliates hold any Securities.
ARTICLE 8. NEGATIVE COVENANTS
The Company hereby agrees that after the date hereof for so long as any
Convertible Debentures remain outstanding and for the benefit of Purchaser:
ARTICLE 8.1 LIMITATIONS ON DEBT OR OTHER LIABILITIES . Neither the Company nor
any Subsidiary will create, incur, assume or suffer to exist (at any time after
the Closing Date, after giving effect to the application of the proceeds of the
issuance of the Securities), except as set forth in Schedule 8.1, (i) any Debt
except (x) Debt incurred in a Permitted Financing, (y) Debt incurred in
connection with equipment leases to which the Company or its Subsidiaries are a
party incurred in the ordinary course of business; or (z) Debt incurred in
connection with trade accounts payable, imbalances and refunds arising in the
ordinary course of business and (ii) any equity securities (including Derivative
Securities) (other than those securities that are issuable (x) under or pursuant
to stock option plans, warrants or other rights programs that exist as of the
date hereof, or (y) in connection with the acquisition (including by merger) of
a business or of assets otherwise permitted under this Agreement).
ARTICLE 8.2 TRANSACTIONS WITH AFFILIATES . The Company and each Subsidiary will
not, directly or indirectly, pay any funds to or for the account of, make any
investment (whether by acquisition or stock or indebtedness, by loan, advance,
transfer of property, guarantee or other agreement to pay, purchase or service,
directly or indirectly, and Debt, or otherwise) in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any transaction in connection with any joint enterprise or other joint
arrangement with, any Affiliate, except, (1) pursuant to those agreements
specifically identified on SCHEDULE 8.2 attached hereto (with a copy of such
agreements annexed to such SCHEDULE 8.2) or (2) on terms to the Company or such
Subsidiary no less favorable than terms that could be obtained by the Company or
such Subsidiary from a Person that is not an Affiliate of the Company upon
negotiation at arms' length, as determined in good faith by the Board of
Directors of the
30
Company; PROVIDED that no determination of the Board of Directors shall be
required with respect to any such transactions entered into in the ordinary
course of business.
ARTICLE 8.3 MERGER OR CONSOLIDATION . The Company will not, in a single
transaction or a series of related transactions (i) consolidate with or merge
with or into any other Person, or (ii) permit any other Person to consolidate
with or merge into it, unless the Company shall be the survivor of such merger
or consolidation and (x) immediately before and immediately after given effect
to such transaction (including any indebtedness incurred or anticipated to be
incurred in connection with the transaction), no Default or Event of Default
shall have occurred and be continuing; and (y) the Company has delivered to
Purchaser an Officer's Certificate stating that such consolidation, merger or
transfer complies with this Agreement, and that all conditions precedent in this
Agreement relating to such transaction have been satisfied.
ARTICLE 8.4 LIMITATION ON ASSET SALES . Except as set forth on SCHEDULE 8.4,
neither the Company nor any Subsidiary will consummate an Asset Sale of material
assets of the Company or any Subsidiary without the prior written consent of
Purchaser, which consent shall not be unreasonably withheld. As used herein,
"Asset Sale" means any sale, lease, transfer or other disposition (or series of
related sales, leases, transfers or dispositions) or sales of capital stock of a
Subsidiary (other than directors' qualifying shares), property or other assets
(each referred to for the purpose of this definition as a "disposition"),
including any disposition by means of a merger, consolidation or similar
transaction other than a disposition of property or assets in arm's length
transactions in the ordinary course of business.
ARTICLE 8.5 RESTRICTIONS ON CERTAIN AMENDMENTS . Neither the Company nor any
Subsidiary will waive any provision of, amend, or suffer to be amended, any
provision of such entity's existing Debt, any material contract or agreement
previously or hereafter filed by the Company with the Commission as part of its
SEC Reports, any Company Corporate Document or Subsidiary Corporate Document if
such amendment, in the Company's reasonable judgment, would materially adversely
affect Purchaser or the holders of the Securities without the prior written
consent of Purchaser.
ARTICLE 8.6 RESTRICTIONS ON ISSUANCES OF SECURITIES.
(a) In addition to and not in lieu of the covenant specified in
Section 8.1 above:
(1) From the Closing Date and continuing until 180 days following the
date on which the Registration Statement becomes effective, the
Company agrees that it will not issue any of its equity securities
(or securities convertible into or exchangeable or exercisable for
equity securities (the "Derivative Securities")) on terms that allow
a holder thereof to acquire such equity securities (or Derivative
Securities) at a discount to the Market Price of the Common Stock
at the time of issuance or, in
31
the case of Derivative Securities, at a conversion price based on
any formula (other than standard anti-dilution provisions) based on
the Market Price on a date later than the date of issuance which is
below the Market Price on the date of issuance (each such event, a
"Discounted Equity Offering") other than (i) borrowings under
conventional credit facilities existing as of the date hereof, (ii)
stock issued or credit facilities to be established in connection
with acquisitions, (iii) equity securities or Derivative Securities
in connection with employee and director stock option and stock
purchase plans, and (iv) securities issued under the Convertible
Debentures or Warrants. In addition, the Company shall not issue any
equity securities in connection with a strategic alliance entered
into by the Company unless such securities are the subject of a one
year statutory or contractual hold period or, if not subject to such
a hold period, unless the Purchaser has fully converted all
outstanding Convertible Debentures and exercised all Warrants. As
used herein, "discount" shall include, but not be limited to,
(i) any warrant, right or other security granted or offered in
connection with such issuance which, on the applicable date of
grant, is offered with an exercise or conversion price, as the case
may be, at less than the then current Market Price of the Common
Stock or, if such security has an exercise or conversion price
based on any formula (other than standard anti-dilution provisions)
based on the Market Price on a date later than the date of issuance,
then at a price below the Market Price on such date of exercise or
conversion, as the case may be, or (ii) any commissions, fees or
other allowances paid in connection with such issuances (other than
customary underwriter or placement agent commissions, fees or
allowances). For the purposes of determining the Market Price at
which Common Stock is acquired under this Section, normal
underwriting commissions and placement fees (including
underwriters' warrants) shall be excluded. Notwithstanding the
foregoing, the Company may enter into the following types of
transactions (collectively referred to as "Permitted Financings"):
(1) "permanent financing" transactions, which would include any form
of debt or equity financing (other than an underwritten offering),
which is followed by a reduction of the said financing commitment
to zero and payment of all related fees and expenses; (2) "project
financing" which provide for the issuance of recourse debt
instruments in connection with the operation of the Company's
business as presently conducted or as proposed to be conducted;
(3) an underwritten offering of Common Stock, provided that such
offering provides for the registration of the Conversion Shares if
the Registration Statement has not been declared effective; and
(4) other financing transactions specifically consented to in
writing by the Purchaser.
(2) The restrictions set forth in paragraph (1) of this Section 8.6(a)
shall terminate in the event the average Closing Bid Price for the
Common Stock is equal to or greater than $10.00 for ten Trading Days
of any twelve consecutive Trading Day
32
period and the Registration Statement is continuously effective
during such period. The 180-day restrictive period set forth in
paragraph (1) of this Section 8.6(a) shall be increased by one day
for each day a Registration Default has occurred and not been cured
by the Company.
(b) Until such time as all of the Convertible Debentures have
been either redeemed or converted into Conversion Shares in full, the
Company agrees it will not issue any of its equity securities (or
Derivative Securities), unless any shares of Common Stock issued or
issuable in connection therewith are "restricted securities." As used
herein "restricted securities" shall mean securities which may not be sold
prior to twelve (12) months following the date of issuance of such
securities by virtue of contractual restrictions imposed by the Company
or otherwise.
(c) Notwithstanding the foregoing, the restrictions contained
in this Section 8.6 shall not apply to the issuance by the Company of
(or the agreement to issue) Common Stock or securities convertible into
Common Stock in connection with (i) the acquisition (including by
merger) of a business or of assets otherwise permitted under this
Agreement, or (ii) Company or Subsidiary stock option or other
compensatory or employee benefit plans.
ARTICLE 8.7 LIMITATION ON STOCK REPURCHASES . Except as otherwise set forth in
the Convertible Debentures and the Warrants, the Company shall not, without the
written consent of the Majority Holders, redeem, repurchase or otherwise acquire
(whether for cash or in exchange for property or other securities or otherwise)
any shares of capital stock of the Company or any warrants, rights or options to
purchase or acquire any such shares.
ARTICLE 8.8 LIMITATION ON SALES BY OFFICERS AND EMPLOYEE DIRECTORS . For a
period of 180 days following the date the Registration Statement is declared
effective by the Commission, no executive officer or a employee director of the
Company shall, individually, sell or otherwise dispose of (other than by reason
of death or disability) to any Person an amount of Common stock greater than
that allowed by Rule 144, promulgated under the Securities Act.
ARTICLE 9. RESTRICTIVE LEGENDS
ARTICLE 9.1 RESTRICTIONS ON TRANSFER . From and after their respective dates of
issuance, none of the Securities shall be transferable except upon the
conditions specified in this Article 9, which conditions are intended to ensure
compliance with the provisions of the Securities Act in respect of the Transfer
of any of such Securities or any interest therein. Purchaser will cause any
proposed transferee of any Securities held by it to agree to take and hold such
Securities subject to the provisions and upon the conditions specified in this
Article 9.
33
ARTICLE 9.2 NOTICE OF PROPOSED TRANSFERS . Prior to any proposed Transfer of the
Securities the holder thereof shall give written notice to the Company of such
holder's intention to effect such Transfer, setting forth the manner and
circumstances of the proposed Transfer, which shall be accompanied by (A) an
opinion of counsel reasonably acceptable to the Company, confirming that such
transfer does not give rise to a violation of the Securities Act, (B)
representation letters in form and substance reasonably satisfactory to the
Company to ensure compliance with the provisions of the Securities Act and (C)
letters in form and substance reasonably satisfactory to the Company from each
such transferee stating such transferee's agreement to be bound by the terms of
this Agreement and the Registration Rights Agreement. Such proposed Transfer may
be effected only if the Company shall have received such notice of transfer,
opinion of counsel, representation letters and other letters referred to in the
immediately preceding sentence, whereupon the holder of such Securities shall be
entitled to Transfer such Securities in accordance with the terms of the notice
delivered by the holder to the Company.
ARTICLE 10. ADDITIONAL AGREEMENTS AMONG THE PARTIES
ARTICLE 10.1 LIQUIDATED DAMAGES .
(a) The Company shall cause its transfer agent to, issue and
deliver shares of Common Stock consistent with Section 7.11 hereof
within three (3) New York Stock Exchange Trading Days of delivery of a
Notice of Conversion or Notice of Exercise, as applicable (the
"Deadline") to Purchaser (or any party receiving Securities by transfer
from Purchaser) at the address of Purchaser set forth in the Notice of
Conversion or Notice of Exercise, as the case may be. The Company
understands that a delay in the issuance of such certificates after the
Deadline could result in economic loss to Purchaser.
(b) Without in any way limiting Purchaser's right to pursue
other remedies, including actual damages and/or equitable relief, the
Company agrees that if delivery of the Conversion Shares is more than
one (1) Business Day after the Deadline (other than a failure due to the
circumstances described in Section 4.3 of the Convertible Debentures,
which failure shall be governed by such Section) the Company shall pay
to Purchaser, as liquidated damages and not as a penalty, $500 in cash
for each $100,000 principal of Convertible Debentures then outstanding
for each of the first ten days that the Company fails to deliver such
Conversion Shares and $1,000 in cash for each $100,000 amount of
Convertible Debentures then outstanding per each day thereafter. Such
cash amount shall be paid in cash to Purchaser upon demand or, at the
option of the Company (by written notice to the Purchaser by the first
day of the week following the week in which it has accrued), shall be
added to the principal amount of the Convertible Debenture (if then
outstanding) payable to Purchaser, in which event interest shall accrue
thereon in accordance with the terms of the Convertible Debentures and
such additional principal
34
amount shall be convertible into Conversion Shares in accordance with the
terms of the Convertible Debentures.
ARTICLE 10.2 CONVERSION NOTICE . The Company agrees that, in addition to any
other remedies which may be available to Purchaser, including, but not limited
to, the remedies available under Section 10.1, in the event the Company fails
for any reason (other than as a result of actions taken by Purchaser in breach
of this Agreement) to effect delivery to Purchaser of certificates with or
without restrictive legends as contemplated by Article 9 representing the shares
of Common Stock on or prior to the Deadline after conversion of any Convertible
Debentures or exercise of the Warrants, Purchaser will be entitled, if prior to
the delivery of such certificates, to revoke the Notice of Conversion or Notice
of Exercise, as applicable, by delivering a notice to such effect to the Company
whereupon the Company and Purchaser shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion or Notice
of Exercise, as the case may be.
ARTICLE 10.3 CONVERSION LIMIT . Notwithstanding the conversion rights under the
Convertible Debentures, unless Purchaser delivers a waiver in accordance with
the immediately following sentence, in no event shall Purchaser be entitled to
convert any portion of the Convertible Debentures, in excess of that portion of
the Convertible Debentures, as applicable, of which the sum of (i) the number of
shares of Common Stock beneficially owned by Purchaser and its Affiliates (other
than shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Convertible Debenture or other
Derivative Securities convertible into or exchangeable for shares of Common
Stock which contain a limitation similar to that set forth in this Section
10.3), and (ii) the number of shares of Common Stock issuable upon the
conversion of the portion of the Convertible Debenture with respect to which
this determination is being made, would result in beneficial ownership by
Purchaser and its Affiliates of more than 4.99% of the outstanding shares of
Common Stock. For purposes of Section 10.3(i) beneficial ownership shall be
determined in accordance with Rule 13d-3 of the Exchange Act and Regulations 13
D-G thereunder, except as otherwise provided in this Section 10.3. The foregoing
limitation shall not apply and shall be of no further force or effect (i)
immediately preceding and upon the occurrence of any voluntary or mandatory
redemption or repayment transaction described herein or in the Convertible
Debentures, (ii) immediately preceding and upon any Sale Event, (iii) on the
Maturity Date or (iv) following the occurrence of any Event of Default which is
not cured for a period of ten (10) calendar days.
ARTICLE 10.4 REGISTRATION RIGHTS .
(a) The Company shall grant Purchaser registration rights
covering the Conversion Shares (the "Registrable Securities") on the
terms set forth in the Registration Rights Agreement and herein.
35
(b) The Company shall prepare and file on or before the 30th
day following the Closing Date (the "Filing Date"), a registration
statement or amendment thereto (the "Registration Statement") covering
the resale of the Registrable Securities with the Commission. In the
event the Company fails to file the Registration Statement by the Filing
Date for any reason other than Purchaser's failure to provide
information requested by the Company for the completion and filing of
the Registration Statement, the Company shall pay to Purchaser as
liquidated damages (and not as a penalty) one percent (1%) of the then
outstanding principal amount of Convertible Debentures per day until the
Registration Statement is filed with the Commission. The Company shall
use its best efforts to cause the Registration Statement to be declared
effective by the Commission or the earlier of (i) 90 days following the
Closing Date, (ii) ten days following the receipt of a "No Review"
Letter from the Commission or (iii) the first Business Day following the
day the Commission determines the Registration Statement eligible to be
declared effective (the "Required Effectiveness Date"). The Company
shall pay all expenses of registration (other than underwriting fees and
discounts, if any, in respect of Registrable Securities offered and sold
under the registration statement by Purchaser). The Company agrees to
file an initial written response to the Commission within ten calender
days of receipt of any comments by the Commission relating to the
Registration Statement.
(c) If the Registration Statement is not declared effective by
the Commission by the Required Effectiveness Date, the Company shall pay
to Purchaser, as liquidated damages (and not as a penalty), an amount
equal to 2% of the outstanding principal amount of the Convertible
Debentures, prorated, for each 30 day period the Registration Statement
is not declared effective by the Commission, which amount will be
increased to 3% of the outstanding principal amount of the Convertible
Debentures in the event that the Registration Statement is not declared
effective by the Commission within 120 days of the Closing Date. In the
event the Company fails to obtain a valid registration statement by the
180th day following the Closing Date, the Company will redeem the
Convertible Debentures and the Warrants as set forth in Section 5 of the
Convertible Debentures and Section 13 of the Warrants, respectively.
Additionally, the Company will grant to Purchaser certain piggyback
registration rights in the event the Company proposes to effect a
registered offering of Common Stock or warrants or both prior to the
filing of the Registration Statement referenced above.
(d) Any such liquidated damages shall be paid in cash by the
Company to Purchaser by wire transfer in immediately available funds on
the last day of each calendar week following the event requiring its
payment.
(e) If, following the declaration of effectiveness of the
Registration Statement, such registration statement (or any prospectus
or supplemental prospectus contained therein) shall cease to be
effective for any reason (including but not limited to the occurrence of
any event that results in any prospectus or supplemental prospectus
36
containing an untrue statement of a material fact or omitting 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), the Company fails to file required amendments to
the Registration Statement in order to allow the Purchaser to resell the
Conversion Shares pursuant to the Registration Statement as
unrestricted, unlegended, freely tradeable shares of Common Stock, or if
for any reason there are insufficient shares of such shares of Common
Stock registered under the then current Registration Statement to effect
full conversion of the Convertible Debentures or exercise of the
Warrants (a "Registration Default"), the Company shall immediately take
all necessary steps to cause the Registration Statement to be amended or
supplemented so as to cure such Registration Default. Failure to cure a
Registration Default within ten (10) Business Days shall result in the
Company paying to Purchaser liquidated damages at the rate of $1,000 per
day from the date of such Registration Default until the Registration
Default is cured.
ARTICLE 11. ADJUSTMENT OF FIXED PRICE
ARTICLE 11.1 REORGANIZATION . The Conversion Price and the exercise price of the
Warrants (collectively, the "Fixed Prices") shall be adjusted, as applicable, as
hereafter provided.
ARTICLE 11.2 SHARE REORGANIZATION . If and whenever the Company shall:
(i) subdivide the outstanding shares of Common Stock into
a greater number of shares;
(ii) consolidate the outstanding shares of Common Stock
into a smaller number of shares;
(iii) issue Common Stock or securities convertible into or
exchangeable for shares of Common Stock as a stock dividend to all or
substantially all the holders of Common Stock; or
(iv) make a distribution on the outstanding Common Stock
to all or substantially all the holders of Common Stock payable in
Common Stock or securities convertible into or exchangeable for Common
Stock;
any of such events being herein called a "Share Reorganization," then in each
such case the applicable Fixed Price shall be adjusted, effective immediately
after the record date at which the holders of Common Stock are determined for
the purposes of the Share Reorganization or, if no record date is fixed, the
effective date of the Share Reorganization, by multiplying the applicable Fixed
Price in effect on such record or effective date, as the case may be, by a
fraction of which:
37
(I) the numerator shall be the number of shares of Common
Stock outstanding on such record or effective date (without giving
effect to the Share Reorganization); and
(II) the denominator shall be the number of shares of Common
Stock outstanding after giving effect to such Share Reorganization,
including, in the case of a distribution of securities convertible into
or exchangeable for shares of Common Stock, the number of shares of
Common Stock that would have been outstanding if such securities had
been converted into or exchanged for Common Stock on such record or
effective date.
ARTICLE 11.3 RIGHTS OFFERING . If and whenever the Company shall issue to all or
substantially all the holders of Common Stock, rights, options or warrants under
which such holders are entitled, during a period expiring not more than 45 days
after the record date of such issue, to subscribe for or purchase Common Stock
(or Derivative Securities), at a price per share (or, in the case of securities
convertible into or exchangeable for Common Stock, at an exchange or conversion
price per share at the date of issue of such securities) of less than 95% of the
Market Price of the Common Stock on such record date (any such event being
herein called a "Rights Offering"), then in each such case the applicable Fixed
Price shall be adjusted, effective immediately after the record date at which
holders of Common Stock are determined for the purposes of the Rights Offering,
by multiplying the applicable Fixed Price in effect on such record date by a
fraction of which:
(i) the numerator shall be the sum of:
(I) the number of shares of Common Stock outstanding on such
record date; and
(II) a number obtained by dividing:
(A) either,
(x) the product of the total number of shares of
Common Stock so offered for subscription or purchase and the price at
which such shares are so offered, or
(y) the product of the maximum number of shares of
Common Stock into or for which the convertible or exchangeable
securities so offered for subscription or purchase may be converted or
exchanged and the conversion or exchange price of such securities, or,
as the case may be, by
(B) the Market Price of the Common Stock on such record date;
and
(ii) the denominator shall be the sum of:
38
(I) the number of shares of Common Stock outstanding on such
record date; and
(II) the number of shares of Common Stock so offered for
subscription or purchase (or, in the case of Derivative Securities, the
maximum number of shares of Common Stock for or into which the
securities so offered for subscription or purchase may be converted or
exchanged).
To the extent that such rights, options or warrants are not exercised prior to
the expiry time thereof, the applicable Fixed Price shall be readjusted
effective immediately after such expiry time to the applicable Fixed Price which
would then have been in effect upon the number of shares of Common Stock (or
Derivative Securities) actually delivered upon the exercise of such rights,
options or warrants.
ARTICLE 11.4 SPECIAL DISTRIBUTION . If and whenever the Company shall issue or
distribute to all or substantially all the holders of Common Stock:
(i) shares of the Company of any class, other than Common
Stock;
(ii) rights, options or warrants; or
(iii) any other assets (excluding cash dividends and
equivalent dividends in shares paid in lieu of cash dividends in the
ordinary course);
and if such issuance or distribution does not constitute a Share Reorganization
or a Rights Offering (any such event being herein called a "Special
Distribution"), then in each such case the applicable Fixed Price shall be
adjusted, effective immediately after the record date at which the holders of
Common Stock are determined for purposes of the Special Distribution, by
multiplying the applicable Fixed Price in effect on such record date by a
fraction of which:
(i) the numerator shall be the difference between:
(A) the product of the number of shares of Common Stock
outstanding on such record date and the Market Price of the Common
Stock on such date; and
(B) the fair market value, as determined by the Directors
(whose determination shall be conclusive), to the holders of Common
Stock of the shares, rights, options, warrants, evidences of
indebtedness or other assets issued or distributed in the Special
Distribution (net of any consideration paid therefor by the holders of
Common Stock), and
39
(ii) the denominator shall be the product of the number of
shares of Common Stock outstanding on such record date and the Market
Price of the Common Stock on such date.
ARTICLE 11.5 CAPITAL REORGANIZATION . If and whenever there shall occur:
(i) a reclassification or redesignation of the shares of
Common Stock or any change of the shares of Common Stock into other
shares, other than in a Share Reorganization;
(ii) a consolidation, merger or amalgamation of the Company
with, or into another body corporate; or
(iii) the transfer of all or substantially all of the assets
of the Company to another body corporate;
(any such event being herein called a "Capital Reorganization"), then in each
such case the holder who exercises the right to convert Convertible Debentures
after the effective date of such Capital Reorganization shall be entitled to
receive and shall accept, upon the exercise of such right, in lieu of the number
of shares of Common Stock to which such holder was theretofore entitled upon the
exercise of the conversion privilege, the aggregate number of shares or other
securities or property of the Company or of the body corporate resulting from
such Capital Reorganization that such holder would have been entitled to receive
as a result of such Capital Reorganization if, on the effective date thereof,
such holders had been the holder of the number of shares of Common Stock to
which such holder was theretofore entitled upon conversion; provided, however,
that no such Capital Reorganization shall be consummated in effect unless all
necessary steps shall have been taken so that such holders shall thereafter be
entitled to receive such number of shares or other securities of the Company or
of the body corporate resulting from such Capital Reorganization, subject to
adjustment thereafter in accordance with provisions the same, as nearly as may
be possible, as those contained above.
ARTICLE 11.6 ADJUSTMENT RULES . The following rules and procedures shall be
applicable to adjustments made in this Article 11:
(a) no adjustment in the applicable Fixed Price shall be
required unless such adjustment would result in a change of at least 1%
in the applicable Fixed Price then in effect, provided, however, that
any adjustments which, but for the provisions of this clause would
otherwise have been required to be made, shall be carried forward and
taken into account in any subsequent adjustment;
(b) if any event occurs of the type contemplated by the
adjustment provisions of this Article 11 but not expressly provided for
by such provisions, the Company will
40
give notice of such event as provided herein, and the Directors will
make an appropriate adjustment in the Fixed Price so that the rights of
the holders of the applicable Security shall not be diminished by such
event; and
(c) if a dispute shall at any time arise with respect to
any adjustment of the applicable Fixed Price, such dispute shall be
conclusively determined by the auditors of the Company or, if they are
unable or unwilling to act, by a firm of independent chartered
accountants selected by the Directors and any such determination shall
be binding upon the Company and Purchaser.
ARTICLE 11.7 CERTIFICATE AS TO ADJUSTMENT . The Company shall from time to time
promptly after the occurrence of any event which requires an adjustment in the
applicable Fixed Price deliver to Purchaser a certificate specifying the nature
of the event requiring the adjustment, the amount of the adjustment necessitated
thereby, the applicable Fixed Price after giving effect to such adjustment and
setting forth, in reasonable detail, the method of calculation and the facts
upon which such calculation is based.
ARTICLE 11.8 NOTICE TO HOLDERS . If the Company shall fix a record date for:
(a) any Share Reorganization (other than the subdivision
of outstanding Common Stock into a greater number of shares or the
consolidation of outstanding Common Stock into a smaller number of
shares),
(b) any Rights Offering,
(c) any Special Distribution,
(d) any Capital Reorganization (other than a
reclassification or redesignation of the Common Stock into other
shares),
(e) Sale Event; or
(f) any cash dividend,
the Company shall, not less than 10 days prior to such record date or, if no
record date is fixed, prior to the effective date of such event, give to
Purchaser notice of the particulars of the proposed event or the extent that
such particulars have been determined at the time of giving the notice.
41
ARTICLE 12. EVENTS OF DEFAULT
ARTICLE 12.1 EVENTS OF DEFAULT. If one or more of the following events (each an
"Event of Default") shall have occurred and be continuing:
(a) failure by the Company to pay or repay when due, all or any
part of the principal on any of the Convertible Debentures (whether by
virtue of the agreements specified in this Agreement or the Convertible
Debentures);
(b) failure by the Company to pay (i) within five (5) Business
Days of the due date thereof any interest on any Convertible Debentures
or (ii) within five (5) Business Days following the delivery of notice
to the Company of any fees or any other amount payable (not otherwise
referred to in (a) above or this clause (b)) by the Company under this
Agreement or any other Transaction Agreement;
(c) failure by the Company to timely comply with the
requirements of Section 7.11 or 10.1 hereof, which failure is not cured
within five (5) Business Days of such failure;
(d) failure on the part of the Company to observe or perform
any covenant contained in Section 7.10 or Article 8 of this Agreement;
(e) failure on the part of the Company to observe or perform
any covenant or agreement contained in any Transaction Agreement (other
than those covered by clauses (a), (b), (c), or (d) above) for 30 days
from the date of such occurrence;
(f) the trading in the Common Stock shall have been suspended
by the Commission or any National Market (except for any suspension of
trading of limited duration solely to permit dissemination of material
information regarding the Company and except if, at the time there is
any suspension on any National Market, the Common Stock is then listed
and approved for trading on another National Market within ten (10)
Trading Days thereof);
(g) failure of the Company to file the Listing Applications
when the Company is eligible within twenty (20) Business Days of the
Closing Date, which failure is not cured within five (5) Business Days
of such failure;
(h) the Company shall have its Common Stock delisted from a
National Market for at least ten (10) consecutive Trading Days and is
unable to obtain a listing on a National Market within such ten (10)
Trading Days;
42
(i) the Registration Statement shall not have been declared
effective by the Commission by the Required Effectiveness Date, or such
effectiveness shall not be maintained for the Registration Maintenance
Period, in each case which results in the Company incurring the
Registration Default fee for a period in excess of 10 days;
(j) the Company or any Subsidiary has commenced a voluntary
case or other proceeding seeking liquidation, winding-up, reorganization
or other relief with respect to itself or its debts under any
bankruptcy, insolvency, moratorium or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, or has consented to any such relief or to the appointment of
or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or has made a general assignment
for the benefit of creditors, or has failed generally to pay its debts
as they become due, or has taken any corporate action to authorize any
of the foregoing;
(k) an involuntary case or other proceeding has been commenced
against the Company or any Subsidiary seeking liquidation, winding-up,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency, moratorium or other similar law now or hereafter
in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 days, or an order for relief
has been entered against the Company or any Subsidiary under the federal
bankruptcy laws as now or hereafter in effect;
(l) except for the Company's current default in its credit
facility as disclosed in footnote 8 to its financial statements for the
quarter ended June 30, 2000, default in any provision (including
payment) or any agreement governing the terms of any Debt of the Company
or any Subsidiary in excess of $500,000, which has not been cured within
any applicable period of grace associated therewith;
(m) judgments or orders for the payment of money which in the
aggregate at any one time exceed $1,000,000 and are not covered by
insurance have been rendered against the Company or any Subsidiary by a
court of competent jurisdiction and such judgments or orders shall
continue unsatisfied and unstayed for a period of 60 days; or
(n) any representation, warranty, certification or statement
made by the Company in any Transaction Agreement or which is contained
in any certificate, document or financial or other statement furnished
at any time under or in connection with any Transaction Agreement shall
prove to have been untrue in any material respect when made.
43
then, and in every such occurrence, Purchaser may, with respect to an Event of
Default specified in paragraphs (a) or (b), and the Majority Holders may, with
respect to any other Event of Default, by notice to the Company, declare the
Convertible Debentures to be, and the Convertible Debentures shall thereon
become immediately due and payable; PROVIDED that in the case of any of the
Events of Default specified in paragraph (j) or (k) above with respect to the
Company or any Subsidiary, then, without any notice to the Company or any other
act by Purchaser, the entire amount of the Convertible Debentures shall become
immediately due and payable, PROVIDED, FURTHER, if any Event of Default has
occurred and is continuing, and irrespective of whether any Convertible
Debenture has been declared immediately due and payable hereunder, any Purchaser
of Convertible Debentures may proceed to protect and enforce the rights of
Purchaser by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein or in any
Convertible Debenture, or for an injunction against a violation of any of the
terms hereof or thereof, or in aid of the exercise of any power granted hereby
or thereby or by law or otherwise, and PROVIDED FURTHER, in the case of any
Event of Default, the amount declared due and payable on the Convertible
Debentures shall be the redemption price set forth therein.
ARTICLE 12.2 POWERS AND REMEDIES CUMULATIVE . No right or remedy herein
conferred upon or reserved to Purchaser is intended to be exclusive of any other
right or remedy, and every right and remedy shall, to the extent permitted by
law, be cumulative and in addition to every other right and remedy given
hereunder or now hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy. Every power and remedy given by the Convertible Debentures or
by law may be exercised from time to time, and as often as shall be deemed
expedient, by Purchaser.
ARTICLE 13. MISCELLANEOUS
ARTICLE 13.1 NOTICES . All notices, demands and other communications to any
party hereunder shall be in writing (including telecopier or similar writing)
and shall be given to such party at its address set forth on the signature pages
hereof, or such other address as such party may hereafter specify for the
purpose to the other parties. Each such notice, demand or other communication
shall be effective (i) if given by telecopy, when such telecopy is transmitted
to the telecopy number specified on the signature page hereof, the sender has
received electronic confirmation of the transmission thereof and the sender has
provided contemporaneous telephonic notice to the recipient of such
transmission, (ii) if given by mail, four days after such communication is
deposited in the United States mail with first class postage prepaid, addressed
as aforesaid or (iii) if given by any other means, when delivered at the address
specified in or pursuant to this Section. For purposes of telephonic notice to
the company in clause (i) above, such telephonic notice shall be to ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ unless the Company notifies the
Purchaser of other individuals to whom telephone notice may be
44
directed.
ARTICLE 13.2 NO WAIVERS; AMENDMENTS .
(a) No failure or delay on the part of any party in exercising
any right, power or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of
any other right, power or remedy.
(b) Any provision of this Agreement may be amended,
supplemented or waived if, but only if, such amendment, supplement or
waiver is in writing and is signed by the Company and the Majority
Holders; PROVIDED, that without the consent of each holder of any
Convertible Debenture affected thereby, an amendment or waiver may not
(a) reduce the aggregate principal amount of Convertible Debentures
whose holders must consent to an amendment or waiver, (b) reduce the
rate or extend the time for payment of interest on any Convertible
Debenture, (c) reduce the principal amount of or extend the stated
maturity of any Convertible Debenture or (d) make any Convertible
Debenture payable in money or property other than as stated in such
Convertible Debenture. In determining whether the holders of the
requisite principal amount of Convertible Debentures have concurred in
any direction, consent, or waiver as provided in any Transaction
Agreement, Convertible Debentures which are owned by the Company or any
other obligor on or guarantor of the convertible Debentures, or by any
Person Controlling, Controlled by, or under common Control with any of
the foregoing, shall be disregarded and deemed not to be outstanding for
the purpose of any such determination; and PROVIDED FURTHER that no such
amendment, supplement or waiver which affects the rights of Purchaser
and their affiliates otherwise than solely in their capacities as
holders of Convertible Debentures shall be effective with respect to
them without their prior written consent.
ARTICLE 13.3 INDEMNIFICATION .
(a) The Company agrees to indemnify and hold harmless
Purchaser, its Affiliates, and each Person, if any, who controls
Purchaser, or any of its Affiliates, within the meaning of the
Securities Act or the Exchange Act (each, a "Controlling Person"), and
the respective partners, agents, employees, officers and Directors of
Purchaser, their Affiliates and any such Controlling Person (each a
"Purchaser Indemnified Party") and collectively, the "Purchaser
Indemnified Parties"), from and against any and all losses, claims,
damages, liabilities and expenses (including, without limitation and as
incurred, reasonable costs of investigating, preparing or defending any
such claim or action, whether or not such Purchaser Indemnified Party is
a party thereto, provided that the Company shall not be obligated to
advance such costs to any Purchaser Indemnified Party other than
Purchaser unless it has received from such Purchaser Indemnified Party an
45
undertaking to repay to the Company the costs so advanced if it should
be determined by final judgment of a court of competent jurisdiction
that such Purchaser Indemnified Party was not entitled to
indemnification hereunder with respect to such costs) which may be
incurred by such Purchaser Indemnified Party in connection with any
investigative, administrative or judicial proceeding brought or
threatened that relates to or arises out of, or is in connection with
any activities contemplated by any Transaction Agreement or any other
services rendered in connection herewith; PROVIDED that the Company will
not be responsible for any claims, liabilities, losses, damages or
expenses that are determined by final judgment of a court of competent
jurisdiction to result from such Purchaser Indemnified Party's gross
negligence, willful misconduct or bad faith.
(b) The Purchaser agrees to indemnify and hold harmless the
Company, its Affiliates, and each Person, if any, who controls the
Company, or any of its Affiliates, within the meaning of the Securities
Act or the Exchange Act (each, a "Controlling Person"), and the
respective employees, officers and Directors of the Company (each a
"Company Indemnified Party") and collectively, the "Company Indemnified
Parties"), from and against any and all losses, claims, damages,
liabilities and expenses (including, without limitation and as incurred,
reasonable costs of investigating, preparing or defending any such claim
or action, whether or not such Company Indemnified Party is a party
thereto, provided that the Purchaser shall not be obligated to advance
such costs to any Company Indemnified Party other than the Company
unless it has received from such Company Indemnified Party an
undertaking to repay to the Purchaser the costs so advanced if it should
be determined by final judgment of a court of competent jurisdiction
that such Company Indemnified Party was not entitled to indemnification
hereunder with respect to such costs) which may be incurred by such
Company Indemnified Party in connection with any investigative,
administrative or judicial proceeding brought or threatened that relates
to or arises out of, or is in connection with any activities
contemplated by any Transaction Agreement or any other services rendered
in connection herewith; PROVIDED that the Purchaser will not be
responsible for any claims, liabilities, losses, damages or expenses
that are determined by final judgment of a court of competent
jurisdiction to result from such Company Indemnified Party's gross
negligence, willful misconduct or bad faith.
(c) if any action shall be brought against a Purchaser
Indemnified Party or a Company Indemnified Party (each an "Indemnified
Party") with respect to which indemnity may be sought against a party
under this Agreement, such Indemnified Party shall promptly notify the
party or parties from whom indemnification is being claimed (the
"Indemnifying Party") in writing and the Indemnifying Party, at its
option, may, assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party and payment of
all reasonable fees and expenses. The failure to so notify the
Indemnifying Party shall not affect any obligations the Indemnifying
Party may have to such Indemnified Party under this Agreement or
otherwise unless the
46
Indemnifying Party is materially adversely affected by such failure.
Such Indemnified Party shall have the right to employ separate counsel
in such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Indemnified
Party, unless (i) the Indemnifying Party has failed to assume the
defense and employ counsel or (ii) the named parties to any such action
(including any impleaded parties) include such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised
by counsel that there may be one or more legal defenses available to it
which conflict with those available to the Indemnifying Party, in which
case, if such Indemnified Party notifies the Indemnifying Party in
writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense of such action or proceeding on behalf of such
Indemnified Party, PROVIDED, HOWEVER, that the Indemnifying Party shall
not, in connection with any one such action or proceeding or separate
but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be responsible hereunder for the reasonable fees and
expenses of more than one such firm of separate counsel, in addition to
any local counsel, which counsel shall be designated by the Indemnified
Party. The Indemnifying Party shall not be liable for any settlement of
any such action effected without the written consent of the Indemnifying
Party (which shall not be unreasonably withheld) and the Indemnifying
Party agrees to indemnify and hold harmless each Indemnified Party from
and against any loss or liability by reason of settlement of any action
effected with the consent of the Indemnifying Party. In addition, the
Indemnifying Party will not, without the prior written consent of the
Indemnified Party, settle or compromise or consent to the entry of any
judgment in or otherwise seek to terminate any pending or threatened
action, claim, suit or proceeding in respect to which indemnification
may be sought hereunder (whether or not any Indemnified Party is a party
thereto) unless such settlement, compromise, consent or termination
includes an express unconditional release of the Indemnified Party and
the other Indemnified Parties, satisfactory in form and substance to the
Indemnified Party, from all liability arising out of such action, claim,
suit or proceeding.
(d) The indemnification and expense reimbursement obligations
set forth in this Section 13.3 shall be in addition to any liability any
Indemnifying Party may have to any Indemnified Party at common law or
otherwise; (ii) shall survive the termination of this Agreement and the
other Transaction Agreements and the payment in full of the Convertible
Debentures and (iii) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of Purchaser or the
Company or any other Indemnified Party.
ARTICLE 13.4 EXPENSES: DOCUMENTARY TAXES . Each of the Company and the Purchaser
agrees to pay to its own fees and expenses in connection with the negotiation
and preparation of the Transaction Agreements, relevant due diligence, and fees
and disbursements of
47
legal counsel. In addition, the Company agrees to pay any and all stamp,
transfer and other similar taxes, assessments or charges payable in connection
with the execution and delivery of any Transaction Agreement or the issuance of
the Securities to Purchaser, excluding their assigns.
ARTICLE 13.5 PAYMENT . The Company agrees that, so long as Purchaser shall own
any Convertible Debentures purchased by it from the Company hereunder, the
Company will make payments to Purchaser of all amounts due thereon by wire
transfer by 4:00 P.M. (E.S.T.).
ARTICLE 13.6 SUCCESSORS AND ASSIGNS . This Agreement shall be binding upon the
Company and upon Purchaser and its respective successors and assigns. So long as
the Convertible Debentures remain outstanding, the Company shall not assign or
otherwise transfer its rights or obligations under this Agreement to any other
Person without the prior written consent of the Majority Holders. All provisions
hereunder purporting to give rights to Purchaser and its affiliates or to
holders of Securities are for the express benefit of such Persons and their
successors and assigns.
ARTICLE 13.7 BROKERS . The Company represents and warrants that it has not
employed any broker, finder, financial advisor or investment banker who would be
entitled to any brokerage, finder's or other fee or commission payable by the
Company or Purchaser in connection with the sale of the Securities. Purchaser
represents and warrants that it has not employed any other broker, finder,
financial advisor or investment banker who would be entitled to any brokerage,
finder's or other fee or commission payable by the Company in connection with
the sale of the Securities.
ARTICLE 13.8 MASSACHUSETTS LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY
TRIAL; APPOINTMENT OF AGENT . THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF MASSACHUSETTS. EACH PARTY HERETO
HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT
FOR THE STATE OF MASSACHUSETTS AND OF ANY FEDERAL DISTRICT COURT SITTING IN
BOSTON, MASSACHUSETTS FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY TO
THIS AGREEMENT IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS IN ANY SUCH
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH HEREIN. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF
48
ANY PARTY TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH PARTY
WAIVES ITS RIGHT TO A TRIAL BY JURY.
ARTICLE 13.9 ENTIRE AGREEMENT . This Agreement, the Exhibits or Schedules
hereto, which include, but are not limited to the Convertible Debenture, the
Warrant and the Registration Rights Agreement, set forth the entire agreement
and understanding of the parties relating to the subject matter hereof and
supercedes all prior and contemporaneous agreements, negotiations and
understandings between the parties, both oral and written relating to the
subject matter hereof. The terms and conditions of all Exhibits and Schedules to
this Agreement are incorporated herein by this reference and shall constitute
part of this Agreement as is fully set forth herein.
ARTICLE 13.10 SURVIVAL; SEVERABILITY. The representations, warranties, covenants
and agreements of the parties hereto shall survive the Closing hereunder. In the
event that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided that
such severability shall be ineffective if it materially changes the economic
benefit of this Agreement to any party.
ARTICLE 13.11 TITLE AND SUBTITLES . The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
ARTICLE 13.12 REPORTING ENTITY FOR THE COMMON STOCK. The reporting entity relied
upon for the determination of the trading price or trading volume of the Common
Stock on any given Trading Day for the purposes of this Agreement and all
Exhibits shall be Bloomberg, L.P. or any successor thereto. The written mutual
consent of the Purchaser and the Company shall be required to employ any other
reporting entity.
ARTICLE 13.13 PUBLICITY. The Company and the Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and no party shall issue any
such press release or otherwise make any such public statement without the prior
written consent of the other parties, which consent shall not be unreasonably
withheld or delayed, except that no prior consent shall be required if such
disclosure is required by law, in which such case the disclosing party shall
provide the other parties with prior notice of such public statement.
Notwithstanding the foregoing, the Company shall not publicly disclose the name
of Purchaser without the prior written consent of Purchaser, except to the
extent required by law, in which case the Company shall provide Purchaser with
prior written notice of such public disclosure.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
BOSTON BIOMEDICA, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Address: Boston Biomedica, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SHORELINE MICRO-CAP FUND, L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Partner
Address: c/o ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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