21ST CENTURY HOLDING COMPANY LAUDERDALE LAKES, FL 33311 UNIT PURCHASE AGREEMENT
Exhibit
4.6
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TO
THE
PURCHASERS LISTED IN
THE
ATTACHED SCHEDULE A:
Ladies
and Gentlemen:
21st
Century Holding Company, a Florida corporation (the "Company"), agrees with
the
Purchasers listed in the attached Schedule A (the "Purchasers") to this Unit
Purchase Agreement (this "Agreement") as follows:
SECTION
1. CERTAIN DEFINITIONS.
As
used
herein, the following terms have the respective meanings set forth below or
set
forth in the Section hereof following such term:
"Affiliate"
means, at any time, and with respect to any Person, (a) any other Person that
at
such time directly or indirectly through one or more intermediaries Controls,
or
is Controlled by, or is under common Control with, such first Person, and (b)
any Person beneficially owning or holding, directly or indirectly, 10% or more
of any class of equity interests of the Company or any Subsidiary or any
corporation of which the Company and its Subsidiaries beneficially own or hold,
in the aggregate, directly or indirectly, 10% or more of any class of equity
interests. As used in this definition, "Control" means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities,
by
contract or otherwise.
"Business
Day" means any day other than a Saturday, a Sunday or a day on which the Nasdaq
National Market ("Nasdaq") is required or authorized to be closed.
"Capital
Lease" means, at any time, a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of
a
liability in accordance with GAAP.
"Capital
Lease Obligation" means, with respect to any Person and a Capital Lease, the
amount of the obligation of such Person as the lessee under such Capital Lease
which would, in accordance with GAAP, appear as a liability on a balance sheet
of such Person.
"Change
of Control" is defined in Section 7.2(h).
"Code"
means the Internal Revenue Code of 1986, as amended from time to time, and
the
rules and regulations promulgated thereunder from time to time.
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"Confidential
Information" is defined in Section 20.
"Default"
means an event or condition the occurrence or existence of which would, with
the
lapse of time or the giving of notice or both, become an Event of
Default.
"Eligible
Subsidiary" means each of the Company's Subsidiaries, except such Subsidiaries
which are regulated by the Florida Department of Financial Service or successor
entity.
"Exchange
Act" means the Securities Exchange Act of 1934, as amended.
"Fair
Market Value" means, at any time and with respect to any property, the sale
value of such property that would be realized in an arm's-length sale at such
time between an informed and willing buyer and an informed and willing seller
(neither being under a compulsion to buy or sell), as reasonably determined
in
the good faith opinion of the Company's board of directors.
"GAAP"
means generally accepted accounting principles as in effect from time to time
in
the United States of America.
"Guarantor"
shall mean those certain Eligible Subsidiaries of the Company which shall be
a
party to a Subsidiary Guarantee.
"Guaranty"
means, with respect to any Person, any obligation (except the endorsement in
the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend
or other obligation of any other Person in any manner, whether directly or
indirectly, including (without limitation) obligations incurred through an
agreement, contingent or otherwise, by such Person: (a) to purchase such
Indebtedness or obligation or any property constituting security therefor
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of any other Person to make payment of the
Indebtedness or obligation; (b) to advance or supply funds (i) for the purchase
or payment of such Indebtedness or obligation, or (ii) to maintain any working
capital or other balance sheet condition or any income statement condition
of
any other Person or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation; (c) to lease properties
or to purchase properties or services primarily for the purpose of assuring
the
owner of such Indebtedness or obligation of the ability of any other Person
to
make payment of the Indebtedness or obligation; or (d) otherwise to assure
the
owner of such Indebtedness or obligation against loss in respect
thereof.
In
any
computation of the Indebtedness or other liabilities of the obligor under any
Guaranty, the Indebtedness or other obligations that are the subject of such
Guaranty shall be assumed to be direct obligations of such obligor, provided
that the amount of such Indebtedness outstanding for purposes of this Agreement
shall not be exceed the maximum amount of Indebtedness that is the subject
of
such Guaranty.
"Holder"
means, with respect to any Note, the Person in whose name such Note is
registered in the register maintained by the Company pursuant to Section
14.1.
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"Indebtedness"
means, with respect to any Person, without duplication, (a) all liabilities
of
such Person for borrowed money (including overdrafts) or for the deferred
purchase price of property or services, excluding any trade payables and other
accrued current liabilities incurred in the ordinary course of business, but
including, without limitation, all obligations, contingent or otherwise, of
such
Person in connection with any letters of credit and acceptances issued under
letter of credit facilities, acceptance facilities or other similar facilities,
(b) all obligations of such Person evidenced by bonds, notes, debentures or
other similar instruments, (c) all indebtedness of such Person created or
arising under any conditional sale or other title retention agreement with
respect to property acquired by such Person (even if the rights and remedies
of
the seller or lender under such agreement in the event of default are limited
to
repossession or sale of such property), but excluding trade payables arising
in
the ordinary course of business, (d) all Capitalized Lease Obligations of such
Person, (e) all Indebtedness referred to in (but not excluded from) the
preceding clauses of other Persons and all dividends of other Persons, the
payment of which is secured by (or for which the holder of such Indebtedness
has
an existing right, contingent or otherwise, to be secured by) any Lien upon
or
with respect to property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness (the amount of such obligation
being
deemed to be the lesser of the Fair Market Value of such property or asset
or
the amount of the obligation so secured), and (f) all guarantees by such Person
of Indebtedness referred to in this definition of any other Person.
"Interest
Shares" is defined in Section 9.
"Investments"
shall mean all investments, in cash or by delivery of property made, directly
or
indirectly in any Person, whether by acquisition of shares of capital stock,
indebtedness or other obligations or securities or by loan, advance, capital
contribution or otherwise.
"Lien"
means, with respect to any Person, any mortgage, lien, pledge, charge, security
interest or other encumbrance, or any interest or title of any vendor, lessor,
lender or other secured party to or of such Person under any conditional sale
or
other title retention agreement or Capital Lease, upon or with respect to any
property or asset of such Person.
"Material"
means material in relation to the business, operations, affairs, financial
condition, assets or properties of the Company and its Subsidiaries taken as
a
whole.
"Material
Adverse Effect" means a material adverse effect on (a) the business, operations,
affairs, financial condition, assets or properties of the Company and its
Subsidiaries taken as a whole, or (b) the ability of the Company to perform
its
obligations under this Agreement, the Notes and the Warrants, or (c) the
validity or enforceability of this Agreement, the Notes or the
Warrants.
"Notes"
is defined in Section 2.
"Offering
Document" is defined in Section 6.3.
"Permitted
Indebtedness" means any of the following:
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(a)
Indebtedness of the Company or its Subsidiary outstanding as of the date
hereof;
(b)
Indebtedness of the Company pursuant to the Notes issued at Closing or of any
Subsidiary pursuant to the Subsidiary Guarantee, and any additional indebtedness
in an aggregate amount (including the issuing of the Notes) which does not
exceed $15 million at any one time outstanding represented by additional senior
subordinated notes issued on a pari passu basis with the Notes and guaranteed
by
guarantees of one or more of the Subsidiaries on a pari passu basis with the
Subsidiary Guarantee.
(c)
Indebtedness of the Company owing to any Subsidiary; provided that any
Indebtedness of the Company owing to any such Subsidiary is unsecured and is
subordinated in right of payment from and after such time as the Notes shall
become due and payable to the payment and performance of the Company's
obligations under the Notes; provided further that any disposition, pledge
or
transfer of any such Indebtedness to a Person (other than a disposition, pledge
or transfer to the Company or another Subsidiary) shall be deemed to be an
incurrence of such Indebtedness by the Company not permitted by this clause
(c);
(d)
Indebtedness of a Subsidiary owing to the Company or to another Subsidiary;
provided that any such Indebtedness of any Subsidiary is subordinated in right
of payment to the Guaranty of such Subsidiary; provided further that any
disposition, pledge or transfer of any such Indebtedness to a Person (other
than
a disposition, pledge or transfer to the Company or a Subsidiary) shall be
deemed to be an incurrence of such Indebtedness by such Subsidiary not permitted
by this clause (d);
(e)
Indebtedness of the Company or any Subsidiary in respect of purchase money
obligations, Capitalized Lease Obligations of the Company or any Subsidiary
and
Subordinated Indebtedness of the Company or any Subsidiary in an aggregate
amount which does not exceed $5 million at any one time
outstanding;
(f)
Indebtedness of the Company or any Subsidiary consisting of guarantees,
indemnities or obligations in respect of purchase price adjustments in
connection with the acquisition or disposition of assets, including, without
limitation, shares of capital stock of Subsidiaries;
(g)
Indebtedness of the Company or any Subsidiary represented by (x) letters of
credit for the account of the Company or any Subsidiary or (y) other obligations
to reimburse third parties pursuant to any surety bond or other similar
arrangements, which letters of credit or other obligations, as the case may
be,
are intended to provide security for workers' compensation claims, payment
obligations in connection with self-insurance or other similar requirements
in
the ordinary course of business;
(h)
Any
renewals, extensions, substitutions, refinancings or replacements (each, for
purposes of this clause, a "refinancing") of any Indebtedness, referred to
herein, including any successive refinancings, so long as (i) any such new
Indebtedness shall be in a principal amount that does not exceed the principal
amount (or, if such Indebtedness being refinanced provides for an amount less
than the principal amount thereof to be due and payable upon a declaration
of
acceleration thereof, such lesser amount as of the date of determination) so
refinanced, plus the lesser of the amount of any premium required to be paid
in
connection with such refinancing pursuant to the terms of the Indebtedness
refinanced or the amount of any premium reasonably determined as necessary
to
accomplish such refinancing, (ii) in the case of any refinancing by the Company
of Subordinated Indebtedness, such new Indebtedness is made pari passu with
or
subordinate to the Notes at least to the same extent as the Indebtedness being
refinanced, and (iii) in the case of any refinancing by any Subsidiary of
Subordinated Indebtedness, such new Indebtedness is made pari passu with or
subordinate to the Guaranty of such Guarantor at least to the same extent as
the
Indebtedness being refinanced; and
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(i)
Indebtedness of the Company not otherwise permitted herein incurred in
connection with a merger, acquisition, sales of assets or similar business
combinations, with the consent of the Holders of 50% of the principal amount
of
Notes then outstanding.
"Person"
means an individual, partnership, corporation, limited liability company,
association, trust, unincorporated organization, or a government or agency
or
political subdivision thereof.
"Prepayment
Shares" is defined in Section 7.2(d)
"Principal
Shares" is defined in Section 7.1.
"Property"
or "properties" means, unless otherwise specifically limited, real or personal
property of any kind, tangible or intangible, ▇▇▇▇▇▇ or inchoate.
"Purchasers"
means the purchasers of the Units named in Schedule A hereto.
"Required
Holders" means, at any time, the holders of at least 51% in principal amount
of
the Notes at the time outstanding (exclusive of Notes then owned by the Company
or any of its Affiliates).
"Responsible
Officer" means any officer of the Company with responsibility for the
administration of the relevant portion of this Agreement.
"Sale
and
Leaseback Transaction" means any transaction or series of related transactions
pursuant to which the Company or a Subsidiary sells or transfers any property
or
asset in connection with the leasing of such property or asset to the seller
or
transferor.
"SEC"
means the Securities and Exchange Commission.
"Securities
Act" means the Securities Act of 1933, as amended from time to
time.
"Senior
Indebtedness" means the principal of, premium, if any, and interest on all
other
Indebtedness of the Company (other than the Notes), whether outstanding on
the
date of Closing or thereafter created, incurred or assumed, unless, in the
case
of any particular Indebtedness, the instrument creating or evidencing the same
or pursuant to which the same is outstanding expressly provides that such
Indebtedness shall not be senior in right of payment to the Notes.
Notwithstanding the foregoing, "Senior Indebtedness" shall not include (i)
Indebtedness evidenced by the Notes, (ii) Indebtedness of the Company that
is
expressly subordinated in right of payment to any Senior Indebtedness of the
Company or the Notes, (iii) Indebtedness of the Company that by operation of
law
is subordinate to any general unsecured obligations of the Company, (iv)
Indebtedness of the Company to the extent incurred in violation of any covenant
of this Agreement, (v) any liability for federal, state or local taxes or other
taxes, owed or owing by the Company, (vi) Indebtedness for goods, materials
or
services purchased in the ordinary course of business or Indebtedness consisting
of trade account payables or other current liabilities (other than the current
portion of long-term Indebtedness which would constitute Senior Indebtedness
but
for the operation of this clause (vi)), (vii) amounts owed by the Company for
compensation to employees or for services rendered to the Company, (viii)
Indebtedness of the Company to any Subsidiary or any other Affiliate of the
Company or any such Affiliate's Subsidiaries, (ix) amounts owing under leases
and (x) Indebtedness which when incurred and without respect to any election
under Section 1111(b) of Title 11 of the United States Code is without recourse
to the Company or any Subsidiary.
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"Subordinated
Indebtedness" means, as of the date of any determination thereof, all unsecured
Indebtedness of the Company which shall contain or have applicable thereto
subordination provisions providing for the subordination thereof to other the
Indebtedness of the Company (including, without limitation, the
Notes).
"Subsidiary"
means, as to any Person, any corporation, association or other business entity
in which such Person or one or more of its Subsidiaries or such Person and
one
or more of its Subsidiaries owns sufficient equity or voting interests to enable
it or them (as a group) ordinarily, in the absence of contingencies, to elect
a
majority of the directors (or Persons performing similar functions) of such
entity, and any partnership or joint venture if more than a 50% interest in
the
profits or capital thereof is owned by such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries (unless such
partnership can and does ordinarily take major business actions without the
prior approval of such Person or one or more of its Subsidiaries). Unless the
context otherwise clearly requires, any reference to a "Subsidiary"
is a reference to a Subsidiary of the Company.
"Subsidiary
Guarantee" is defined in Section 3.2.
"Transaction
Shares" means collectively, the Principal Shares, the Interest Shares, the
Prepayment Shares and the Warrant Shares.
"Warrant
Shares" means the shares of Common Stock issuable upon exercise of the
Warrants.
SECTION
2. AUTHORIZATION
OF UNITS; PRIORITY
2.1
AUTHORIZATION OF UNITS. The Company will authorize the issue and sale of up
to
12,500 units (the "Units") at a price (the "Subscription Price") of $1,000
per
Unit. Each Unit consists of (i) a $1,000 6% Senior Subordinated Note (the
"Note"), and (ii) warrants to purchase shares of the Company's common stock,
par
value $0.01 per share (the "Common Stock") for an exercise price per share
as
set forth therein (the "Warrant"). The Note and Warrant shall be substantially
in the forms set out in Exhibits A and B, respectively.
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2.2
PRIORITY OF NOTES. The Notes shall rank pari passu in terms of payment and
shall
be equal in priority to the 6% Senior Subordinated Notes dated July 31, 2003
in
the original principal amount of $7,500,000.
SECTION
3. SALE
AND
PURCHASE OF UNITS.
3.1
UNITS. Subject to the terms and conditions of this Agreement, the Company will
issue and sell to each Purchaser and each Purchaser will purchase from the
Company, at the Closing provided for in Section 4, such number of Units
specified opposite such Purchaser's name in Schedule A at the aggregate
Subscription Price. The obligations of each Purchaser hereunder are several
and
not joint obligations and each Purchaser shall have no obligation and no
liability to any Person for the performance or nonperformance by any other
Purchaser hereunder.
3.2
SUBSIDIARY GUARANTEE. The payment by the Company of all amounts due with respect
to the Notes and the performance by the Company of its obligations under this
Agreement will be unconditionally guaranteed by all Eligible Subsidiaries of
the
Company (the "Guarantors") under the subsidiary guarantee (the "Subsidiary
Guarantee") which shall be in substantially the form attached hereto as Exhibit
C.
SECTION
4. CLOSING.
The
sale
and purchase of the Units to be purchased by each Purchaser shall occur at
10:00
am Miami time, at a closing (the "Closing") on September 29, 2004 or on such
other Business Day as may be agreed upon by the Company and the Purchasers.
At
the Closing, the Company will deliver to ▇. ▇▇▇▇▇▇▇▇ Securities, LLC, as agent
for each Purchaser, the Units to be purchased by such Purchaser dated the date
of the Closing and registered in such Purchaser's name, against delivery by
such
Purchaser to the Company or its order of immediately available funds in the
amount of the Subscription Price therefor by wire transfer of immediately
available funds for the account of the Company to account number 9660323321,
account name 21st Century Holding Company Operating, at Union Planters Bank,
ABA
Number ▇▇▇▇▇▇▇▇▇. If at the Closing the Company shall fail to tender such Units
to any Purchaser as provided above in this Section 4, such Purchaser shall,
at
such Purchaser's election, be relieved of all further obligations under this
Agreement, without thereby waiving any rights such Purchaser may have by reason
of such failure or such nonfulfillment.
SECTION
5. REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.
The
Company represents and warrants to each Purchaser that:
5.1
ORGANIZATION. The Company is a corporation duly organized, validly existing
and
in good standing under the laws of Florida with full power and authority to
own,
lease, license and use its properties and assets and to carry out the businesses
in which it is engaged in. The Company is duly qualified to transact the
business in which it is engaged and is in good standing as a foreign corporation
in every jurisdiction in which its ownership, leasing, licensing or use of
property or assets or the conduct of its business make such qualification
necessary, except where the failure to be so qualified would not individually
or
in the aggregate have a Material Adverse Effect.
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5.2
POWER
AND AUTHORIZATION. The Company has all requisite power and authority to (i)
execute, deliver and perform its obligations under this Agreement; and (ii)
to
issue and sell the Units. All necessary corporate proceedings of the Company
have been duly taken to authorize the execution, delivery, and performance
of
this Agreement. This Agreement has been duly authorized by the Company and,
when
executed and delivered by the Company, will constitute the legal, valid and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except (i) as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or similar laws
affecting creditors' rights generally; (ii) as enforceability of any
indemnification, contribution or exculpation provision may be limited under
applicable federal and state securities laws; and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may
be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefore may be brought.
5.3
PUBLIC DISCLOSURE. As of their respective filing dates, none of the Company's
filings with the SEC (the "Public Filings") contained any untrue statement
of a
material fact or omitted any material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
in
which they were made, not misleading, except to the extent such filings have
been prior to the date hereof corrected, updated or superseded by a document
subsequently filed with the SEC.
SECTION
6. REPRESENTATIONS
OF THE PURCHASER.
Each
Purchaser hereby represents and warrants to, and agrees with, the Company
as follows:
6.1
It is
an "accredited investor" as that term is defined in Rule 501(a) of Regulation
D
promulgated under the Securities Act.
6.2
If a
natural person, the Purchaser is: a bona fide resident of the state contained
in
the address set forth on Schedule A as the Purchaser's home address; at least
21
years of age; and legally competent to execute this Agreement. If an entity,
the
Purchaser is duly authorized to execute this Agreement and this Agreement
constitutes the legal, valid and binding obligation of the Purchaser enforceable
against the Purchaser in accordance with its terms.
6.3
The
Purchaser is familiar with the Company's business, plans and financial
condition, the terms of the offering of the Units (the "Offering"), and any
other matters relating to the Offering; the Purchaser has received all materials
that have been requested by the Purchaser; the Purchaser has had a reasonable
opportunity to ask questions of the Company and its representatives; and the
Company has answered all inquiries that the Purchaser or the Purchaser's
representatives have put to it. The Purchaser has had access to all additional
non-confidential information necessary to verify the accuracy of the information
set forth in this Agreement and any other materials furnished herewith, and
has
taken all the steps necessary to evaluate the merits and risks of an investment
as proposed hereunder. Without limiting the foregoing, the Purchaser
acknowledges that it has reviewed certain information regarding the Company,
its
business and the terms of this Offering, including but not limited to, the
information contained in the Offering Document dated September , 2004 (the
"Offering Document").
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6.4
The
Purchaser has such knowledge and experience in finance, securities, investments
and other business matters so as to be able to protect the interests of the
Purchaser in connection with this transaction, and the Purchaser's investment
in
the Company hereunder is not material when compared to the Purchaser's total
financial capacity.
6.5
The
Purchaser understands the various risks of an investment in the Company as
proposed herein, including without limitation those set forth in the Offering
Document and in the Public Filings, and can afford to bear such risks,
including, without limitation, the risks of losing the entire
investment.
6.6
The
Purchaser acknowledges that no market for the Units currently exists and none
may develop in the future and that the Purchaser may find it impossible to
liquidate the investment at a time when it may be desirable to do so, or at
any
other time.
6.7
The
Purchaser has been advised by the Company that the Units have not been
registered under the Securities Act, that the Securities will be issued on
the
basis of the statutory exemption provided by Section 4(2) of the Securities
Act
or Regulation D promulgated thereunder, or both, relating to transactions by
an
issuer not involving any public offering and under exemptions under certain
state securities laws, that this transaction has not been reviewed by, passed
on
or submitted to any federal or state agency or self-regulatory organization
where an exemption is being relied upon, and that the Company's reliance thereon
is based in part upon the representations made by the Purchaser in this
Agreement. The Purchaser acknowledges that the Purchaser has been informed
by
the Company of, or is otherwise familiar with, the nature of the limitations
imposed by the Securities Act and the rules and regulations thereunder on the
transfer of the Units. In particular, the Purchaser agrees that the Company
shall not be required to give any effect to sale, assignment or transfer, unless
(i) the sale, assignment or transfer of such Units is registered under the
Securities Act, it being understood that the Units are not currently registered
for sale and that the Company has no obligation or intention to so register
the
Securities except as set forth herein, or (ii) such Units are sold, assigned
or
transferred in accordance with all the requirements and limitations of Rule
144
under the Securities Act, or (iii) such sale, assignment or transfer is
otherwise exempt from registration under the Securities Act. The Purchaser
further understands that an opinion of counsel and other documents may be
required to transfer the Units. The Purchaser acknowledges that the Units shall
be subject to stop transfer orders and the certificate or certificates
evidencing any Units shall bear the following or a substantially similar legend
or such other legend as may appear on the forms of Units and such other legends
as may be required by state blue sky laws:
"THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
FOREIGN SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN
MAY
BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED UNLESS (1) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES
ACT AND ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS, OR (2) THE COMPANY
RECEIVES AN OPINION OF COUNSEL TO THE HOLDER OF SUCH SECURITIES, WHICH COUNSEL
AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES
MAY
BE OFFERED, SOLD, PLEDGED, ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
APPLICABLE STATE OR FOREIGN SECURITIES LAWS."
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6.8
The
Purchaser will acquire the Units for the Purchaser's own account (or for the
joint account of the Purchaser and the Purchaser's spouse either in joint
tenancy, tenancy by the entirety or tenancy in common) for investment and not
with a view to the sale or distribution thereof or the granting of any
participation therein, and has no present intention of distributing or selling
to others any of such interest or granting any participation
therein.
6.9
Neither the Company nor any of the officers, directors, shareholders, partners,
employees or agents of either, or any other Persons, whether expressly or by
implication, have represented, guaranteed or warranted that,
(a)
The
Company or the Purchaser will realize any given percentage of profits and/or
amount or type of consideration, profit or loss as a result of the Company's
activities or the Purchaser's investment in the Company; or
(b)
the
past performance or experience of the management of the Company, or of any
other
person, will in any way indicate the predictable results of the ownership of
the
Units or of the Company's activities.
6.10
No
oral or written representations have been made other than as stated in this
Agreement, the Offering Document dated September , 2004, and the Purchaser
has
not relied on any oral or written representation from the Company other than
as
set forth in this Agreement and the Offering Document in making its investment
decision. The Purchaser hereby acknowledges that the information and
representations set forth in this Agreement and the Offering Document supersede
all prior information and representations provided to the Purchaser in
connection with the Offering.
6.11
The
Purchaser is not purchasing the Units as a result of or subsequent to any
advertisement, press release, public announcement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio, or presented at any seminar or meeting.
6.12
The
Purchaser is not relying on the Company with respect to the tax and other
economic considerations of an investment.
6.13
The
Purchaser understands that the net proceeds from the Offering (after deduction
for expenses of the Offering) will be used in all material respects for the
purposes set forth in the Offering Document.
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6.14
The
Purchaser acknowledges that the representations, warranties and agreements
made
by the Purchaser herein shall survive the execution and delivery of this
Agreement and the purchase of the Units.
6.15
Blue
Sky matters:
THE
UNITS
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF
ANY
STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THE UNITS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION
OR
OTHER REGULATORY AUTHORITY, NOR HAVE ANY OTHER FOREGOING AUTHORITIES PASSED
UPON
OR ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY
IS
UNLAWFUL.
THE
UNITS
ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. SUBSCRIBERS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME.
6.16
The
Purchaser agrees to use its reasonable best efforts to make all warranties
and
representations required by the securities laws of Purchaser's jurisdiction
of
domicile necessary to enable the Company to issue the Transaction Shares in
compliance with such securities laws.
6.17
The
Purchaser acknowledges that as a result of its investment hereunder it may
become subject to the reporting requirements of Sections 13 and 16 of the
Exchange Act. In the event that Purchaser becomes subject to the reporting
requirements of Sections 13 and 16, Purchaser agrees to file a Schedule 13-D
and
a Form 3 no later than 10 days from the Closing and to keep current such filings
in accordance with the requirements of Sections 13 and 16.
6.18
The
Purchaser has consulted his own financial, legal and tax advisors with respect
to the economic, legal and tax consequences of an investment in the Units and
has not relied on the Company, its officers, directors or professional advisors
for advice as to such consequences.
SECTION
7. PAYMENT
OF THE NOTES.
7.1
REQUIRED PAYMENTS.
(a)
PRINCIPAL. The principal amount of the Notes shall be due and payable in equal
quarterly installments commencing on January 31, 2005 with the last installment
due on September 29, 2007 (the date due of each quarterly installment is
referred to herein as a "Quarterly Payment Date" and the last Quarterly Payment
Date on September 29, 2007 is referred to as the "Maturity Date"). Each
principal payment shall be paid in United States dollars or, to the extent
legally permitted, in shares of Common Stock (the "Principal Shares"), at the
Company's option; provided, however, that the Company shall make principal
payments in Principal Shares only to the extent provided in Section 12 hereof.
If such principal payment is paid in Principal Shares, then the number of
Principal Shares to be issued on account of the principal payment shall be
equal
to
(i)
the amount of the principal payment due divided by (ii) 95% of the
weighted-average volume price for the Common Stock on Nasdaq as reported by
Bloomberg Financial Markets ("Bloomberg") for the 20 consecutive trading days
prior to the Quarterly Payment Date (the "Calculation Price"). In the event
the
Company elects to pay the principal amount due in Principal Shares, (a) it
shall
notify the Holder of its election no later than 15 days prior to the
commencement of the 20 consecutive trading day period referenced above, (b)
it
shall issue the applicable Principal Shares on the Quarterly Payment Date,
and
(c) it shall file a registration statement covering resale of the applicable
Principal Shares (the "Registration Statement") no later than two Business
Days
following the Quarterly Payment Date.
11
(b)
COMPENSATORY PAYMENT. If a principal payment is made in Principal Shares and
(i)
the date of effectiveness (the "Effective Date") of the applicable Registration
Statement is more than 10 Business Days after the relevant Quarterly Payment
Date and (ii) the weighted-average volume price for the Common Stock on Nasdaq
as reported by Bloomberg for the three Business Day period ending on (and
including) the Effective Date (the "Post-Issuance Average Price") is less than
the Calculation Price, then the Company shall pay to each holder of the Notes
an
amount equal to (i) the difference between the Calculation
Price and the Post-Issuance Average Price, multiplied by (ii) the number of
Principal Shares issued on the applicable Quarterly Payment Date. Such amount
shall be paid to each holder of the Notes in cash not later than 10 Business
Days following the Effective Date of the applicable Registration
Statement."
7.2
CHANGE IN CONTROL.
(a)
NOTICE OF CHANGE IN CONTROL OR CONTROL EVENT. The Company will, within 15
Business Days after any Responsible Officer has knowledge of the occurrence
of
any Change in Control or Control Event (subject in the case of any Control
Event
to contractual limitations on disclosure and disclosure limitations imposed
by
applicable securities laws), give written notice of such Change in Control
or
Control Event to each holder of Notes unless notice in respect of such Change
in
Control (or the Change in Control contemplated by such Control Event) shall
have
been given pursuant to this Section 7.2. If a Change in Control has occurred,
such notice shall contain and constitute an offer to prepay
Notes as described in of this Section 7.2 and shall be accompanied by the
certificate described in this Section 7.2.
(b)
OFFER
TO PREPAY NOTES. The offer to prepay Notes contemplated by this Section 7.2(b)
shall be an offer to prepay, in accordance with and subject to this Section
7.2,
all, but not less than all, the Notes held by each holder (in this case only,
"holder" in respect of any Note registered in the name of a nominee for a
disclosed beneficial owner shall mean such beneficial owner) on a date specified
in such offer (the "Proposed Prepayment Date"). If such Proposed Prepayment
Date
is in connection with an offer contemplated by this Section 7.2, such date
shall
be not less than 30 days and not more than 60 days after the date of such offer
(if the Proposed Prepayment Date shall not be specified in such offer, the
Proposed Prepayment Date shall be the 30th day after the date of such
offer).
12
(c)
ACCEPTANCE. A holder of Notes may accept the offer to prepay made pursuant
to
this Section 7.2 by causing a notice of such acceptance to be delivered to
the
Company at least 15 days prior to the Proposed Prepayment Date. A failure by
a
holder of Notes to respond to an offer to prepay made pursuant to this Section
7.2 shall be deemed to constitute a rejection of such offer by such
holder.
(d)
PREPAYMENT. Prepayment of the Notes to be prepaid pursuant to this Section
7.2
shall be at 101% of the then-outstanding principal amount of such Notes together
with interest on such Notes accrued to the date of prepayment (the "Change
in
Control Prepayment"). The prepayment shall be made on the Proposed Prepayment
Date except as provided in Section 7.2(e). The Company may pay the Change in
Control Prepayment in United States dollars or in shares of Common Stock (the
"Prepayment Shares"), at the Company's option. In the event the Company pays
the
Change in Control Prepayment in Prepayment Shares, it shall prepare and file
with the Securities and Exchange Commission, a Registration Statement on Form
S-3 covering the resale of the Prepayment Shares within 5 days of the issuance
of the Prepayment Shares. The Company shall pay the Change in Control
Prepayment in Prepayment Shares only to the extent provided in Section 12
hereof. If the Change in Control Prepayment is paid in Prepayment Shares, then
the number of Prepayment Shares to be issued on account of the prepayment shall
be equal to the amount of the Change in Control Prepayment divided by 95% of
the
weighted-average volume price for the Common Stock on Nasdaq as reported by
Bloomberg for the 20 consecutive trading days prior to the date of the Proposed
Prepayment Date. In the event the Company elects to pay the Change in Control
Prepayment in Prepayment Shares, it shall notify the Holder of its election
no
later than 15 days prior to the commencement of the 20 consecutive trading
day
period referenced above.
(e)
DEFERRAL PENDING CHANGE IN CONTROL. The obligation of the Company to prepay
Notes pursuant to the offer required by this Section 7.2 is subject to the
occurrence of the Change in Control in respect of which such offer and
acceptance shall have been made. In the event that such Change in Control does
not occur on the Proposed Prepayment Date in respect thereof, the prepayment
shall be deferred until, and shall be made on the date on which, such Change
in
Control occurs. The Company shall keep each holder of Notes reasonably and
timely informed of (i) any such deferral of the date of prepayment, (ii) the
date on which such Change in Control and the prepayment are expected to occur,
and (iii) any determination by the Company that efforts to effect such Change
in
Control have ceased or been abandoned (in which case the offers and acceptances
made pursuant to this Section 7.2 in respect of such Change in Control shall
be
deemed rescinded).
(f)
CONTENT OF OFFER. Each offer to prepay the Notes pursuant to this Section 7.2
shall, specify:
(i)
the
Proposed Prepayment Date;
(ii)
that
such offer is made pursuant to this Section 7.2;
(iii)
the
principal amount of each Note offered to be prepaid;
13
(iv)
the
interest that would be due on each Note offered to be prepaid, accrued to the
Proposed Prepayment Date;
(v)
that
the conditions of this Section 7.2 have been fulfilled; and
(vi)
in
reasonable detail, the nature and date or proposed date of the Change in
Control.
(g)
"CHANGE IN CONTROL" DEFINED. "Change in Control" means each and every issue,
sale or other disposition of shares of stock of the Company which results in
any
person (as such term is used in Section 13(d) and Section 14(d)(2) of the
Exchange Act) or related persons constituting a group (as such term is used
in
Rule 13d-5 under the Exchange Act) (herein, an "Acquiring Person") becoming
the
"beneficial owners" (as such term is used in Rule 13d-3 under the Exchange
Act
as in effect on the date of the Closing), directly or indirectly, of more than
50% (by total voting power) of the issued and outstanding capital stock of
the
Company which is entitled to vote in the election of the members of the
Company's board of directors.
(h)
"CONTROL EVENT" DEFINED. "Control Event" means:
(i)
the
execution by the Company or any of its Subsidiaries or Affiliates of any
agreement or letter of intent with respect to any proposed transaction or event
or series of transactions or events which, individually or in the aggregate,
may
reasonably be expected to result in a Change in Control, or
(ii)
the
execution of any written agreement which, when fully performed by the parties
thereto, would result in a Change in Control.
SECTION
8. SUBORDINATION
OF NOTES AND GUARANTY.
8.1
NOTES
SUBORDINATE TO SENIOR INDEBTEDNESS. The Company covenants and agrees, and each
Purchaser of a Note, by its acceptance thereof, likewise covenants and agrees,
for the benefit of the holders, from time to time, of Senior Indebtedness that,
to the extent and in the manner hereinafter set forth in this Section, the
Indebtedness represented by the Notes and the payment of the principal of (and
premium, if any) and interest on each and all of the Notes are hereby expressly
made subordinate and subject in right of payment as provided in this Section
to
the prior payment in full in cash or cash equivalents or in any other form
acceptable to each holder of Senior Indebtedness, of all Senior Indebtedness;
provided, however, that the Notes, the Indebtedness represented thereby and
the
payment of the principal of (and premium, if any) and interest on the Notes
in
all respects shall rank equally with, or prior to, all existing and future
senior subordinated indebtedness (including, without limitation, Indebtedness)
of the Company that is subordinated to Senior Indebtedness.
8.2
SUBORDINATION OF GUARANTY. The Guaranty issued by any Guarantor will be
unsecured senior subordinated obligations of such Guarantor, ranking pari passu
with all other existing and future senior subordinated indebtedness of such
Guarantor, if any. The Indebtedness evidenced by such Subsidiary Guarantee
will
be subordinated on the same basis as the guaranty of any Senior Indebtedness
of
such Guarantor as the Notes are subordinated to Senior
Indebtedness.
14
SECTION
9. PAYMENT
OF INTEREST.
9.1
INTEREST. The principal amount of the Notes outstanding shall bear interest
at
the rate of 6% per annum beginning on the date of issuance. Interest shall
be
payable quarterly beginning on January 31, 2005. Each interest payment shall
be
paid in United States dollars or, to the extent legally permitted, in shares
of
Common Stock (the "Interest Shares"), at the Company's option; provided,
however, that the Company shall make interest payments in Interest Shares only
to the extent provided in Section 12 hereof. If such interest payment is paid
in
Interest Shares, then the number of Interest Shares to be issued on account
of
the interest payment shall be equal to (i) the amount of the interest payment
due divided by (ii) the Calculation Price. In the event the Company elects
to
pay the interest amount due in Interest Shares, (a) it shall notify the Holder
of its election no later than 15 days prior to the commencement of the 20
consecutive trading day period referenced in Section 7.1 above, (b) it shall
issue the applicable Interest Shares on the Quarterly Payment Date, and (c)
it
shall file the Registration Statement covering resale of the applicable Interest
Shares no later than two Business Days following the Quarterly Payment
Date.
9.2
COMPENSATORY PAYMENT. If an interest payment is made in Interest Shares and
(i)
the Effective Date of the applicable Registration Statement is more than 10
Business Days after the relevant Quarterly Payment Date and (ii) the
Post-Issuance Average Price of the applicable Interest Shares is less than
the
Calculation Price, then the Company shall pay to each holder of the Notes an
amount equal to (i) the difference between the Calculation Price and the
Post-Issuance Average Price, multiplied by (ii) the number of Interest Shares
issued on the applicable Quarterly Payment Date. Such amount shall be paid
to
each holder of the Notes in cash not later than 10 Business Days following
the
Effective Date of the applicable Registration Statement."
SECTION
10. NEGATIVE
COVENANTS.
The
Company covenants that so long as any of the Notes are outstanding:
10.1
LIMITATION ON LIENS. The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly create, incur, assume or permit to
exist
(upon the happening of a contingency or otherwise), any Lien on or with respect
to any property or asset (including, without limitation, any document or
instrument in respect of goods or accounts receivable) of the Company or any
such Subsidiary, whether now owned or held or hereafter acquired, or any income
or profits therefrom, or assign or otherwise convey any right to receive income
or profits except:
(a)
Liens
for taxes, assessments or other governmental charges which are not yet due
and
payable;
(b)
Liens
incidental to the conduct of business or the ownership of properties and assets
(including landlords', carriers', warehousemen's, mechanics', materialmen's
and
other similar Liens) and Liens to secure the performance of bids, tenders,
leases, or trade contracts, or to secure statutory obligations (including
obligations under workers compensation, unemployment insurance and other social
security legislation), surety or appeal bonds or other Liens incurred in the
ordinary course of business and not in connection with the borrowing of
money;
15
(c)
leases or subleases entered into by the Company or its Subsidiaries as either
lessors or sublessors, easements, rights-of-way, restrictions and other similar
charges or encumbrances (including zoning restrictions), in each case incidental
to the ownership of property or assets or the ordinary conduct of the business
of the Company or any of its Subsidiaries, provided that such Liens do not,
in
the aggregate, detract from the value of such property in any material
way;
(d)
Liens
incidental to minor survey exceptions and similar Liens, provided that such
Liens do not, in the aggregate, materially detract from the value of such
property;
(e)
Liens
on property or assets of Subsidiaries securing Indebtedness owing to the
Company
or to another Subsidiary;
(f)
Liens
existing on the date of Closing which secure outstanding Indebtedness of
the
Company and its Subsidiaries;
(g)
any
Lien existing on property of a Person immediately prior to its being
consolidated with or merged into the Company or a Subsidiary or its becoming
a
Subsidiary, or any Lien existing on any property acquired by the Company
or any
Subsidiary at the time such property is so acquired (whether or not the
Indebtedness secured thereby shall have been assumed; and
(h)
Liens
pursuant to indebtedness created in connection with or incidental to a merger,
acquisition, purchase of assets or other business combinations.
(i)
any
extensions, renewals or replacements of any Lien permitted by the preceding
subparagraphs of this Section 10.1, provided that (i) no additional property
shall be encumbered by such Liens, (ii) the unpaid principal amount of the
Indebtedness secured thereby shall not be increased prior to or on or after
the
date of any extension, renewal or replacement, (iii) the weighted average
life
to maturity of the Indebtedness secured by such Liens shall not be reduced,
and
(iv) at such time and immediately after giving effect thereto, no Default
or
Event of Default would exist.
10.2
MERGER, CONSOLIDATION. The Company will not, and will not permit any
Subsidiary
to, consolidate with or be a party to a merger with any other Person; provided,
however, that:
(a)
any
Subsidiary may merge or consolidate with or into the Company, so long as
in any
merger or consolidation involving the Company, the Company shall be the
surviving entity;
16
(b)
any
Subsidiary may merge or consolidate with or into any other Person if either
(x)
the Subsidiary shall be the surviving entity, or (y) if the Subsidiary is not
the surviving entity, such transaction is permitted by Section 10.3;
and
(c)
the
Company may consolidate or merge with any other Person if (i) either (x) the
Company shall be the surviving entity, or (y) if the surviving entity is other
than the Company, such entity expressly assumes, by written agreement reasonably
satisfactory in scope and form to the Required Holders, all obligations of
the
Company under the Notes, the Warrants and this Agreement, and (ii) at the time
of such consolidation or merger and after giving effect thereto, no Default
or
Event of Default shall have occurred and be continuing.
10.3
SALES OF ASSETS. The Company will not, and will not permit any Subsidiary to,
sell, lease or otherwise dispose of substantially all of the assets of the
Company and its Subsidiaries unless the consideration received by the Company
or
such Subsidiary for such sale is not less than the Fair Market Value of the
assets sold (as determined by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced by a Board
Resolution).
10.4
TRANSACTIONS WITH AFFILIATES. The Company will not, and will not permit any
Subsidiary to enter into, directly or indirectly, any Material transaction
or
Material group of related transactions (including without limitation the
purchase, lease, sale or exchange of properties of any kind or the rendering
of
any service) with any Affiliate (other than the Company or another Subsidiary),
except upon fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable
arm's-length
transaction with a Person not an Affiliate.
10.5
LIMITATION ON INDEBTEDNESS. The Company will not, and will not permit any
Subsidiary to, create, issue, assume, guarantee or in any manner become directly
or indirectly liable for the payment of, or otherwise incur (collectively,
"incur"), any Indebtedness (including any Acquired Indebtedness), other than
Permitted Indebtedness.
10.6
LIMITATION ON RESTRICTED PAYMENTS.
(a)
The
Company will not, and will not permit any Subsidiary to, directly or
indirectly:
(i)
declare or pay any dividend on, or make any distribution to holders of, any
shares of the Common Stock of the Company or any Subsidiary (other than the
declaration or payment of dividends or distributions to the extent declared
or
paid to the Company or any Subsidiary or in accordance with the Company's
dividend payment policy);
(ii)
purchase, redeem or otherwise acquire or retire for value, directly or
indirectly, any shares of Common Stock of the Company or any Affiliate of the
Company (other than as authorized by the Board of Directors or Common Stock
of
any Subsidiary) or any options, warrants or other rights to acquire such shares
of Common Stock; or
(iii)
make any principal payment on, or repurchase, redeem, defease or otherwise
acquire or retire for value, prior to any scheduled principal payment, sinking
fund payment or maturity, any Subordinated Indebtedness of the Company or any
Subsidiary.
17
10.7
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Company shall not, and shall
not permit any Subsidiary to, directly or indirectly, enter into any Sale and
Leaseback Transaction with respect to any property or assets (whether now owned
or hereafter acquired), unless (i) the sale or transfer of such property or
assets to be leased is treated as a sale of assets and the Company complies
with
Section 10.3, and (ii) the Company or such Subsidiary would be permitted to
incur Indebtedness under Section 10.5 in the amount of the Capitalized Lease
Obligations incurred in respect of such Sale and Leaseback
Transaction.
SECTION
11. EVENTS
OF
DEFAULT.
An
"Event
of Default" shall exist if any of the following conditions or events shall
occur
and be continuing:
(a)
the
Company defaults in the payment of any principal on any Note for more than
10
Business Days after the same becomes due and payable, whether at maturity
or at
a date fixed for prepayment or by declaration or otherwise; or
(b)
the
Company defaults in the payment of any interest on any Note for more than
five
Business Days after the same becomes due and payable, whether at a date fixed
for payment or by declaration or otherwise; or
(c)
the
Company defaults in the performance of or compliance with any Material terms
contained herein and such default is not remedied within 30 days after receipt
of written notice from the Required Holders of such default; or
(d)
any
representation or warranty made in writing by or on behalf of the Company
or any
Guarantor or by any officer of the Company or any Guarantor in this Agreement,
any or in any writing furnished in connection with the transactions contemplated
hereby or thereby proves to have been false or incorrect in any Material
respect
on the date as of which made; or
(e)
the
Company defaults in the payment of any principal or interest on any Indebtedness
of the Company, in any case in an amount in excess of $1,000,000, which default
continues for more than the applicable cure period, if any, and/or is not
waived
in writing by the other party thereto;
(f)
the
Company or any Guarantor (i) is generally not paying, or admits in writing
its
inability to pay, its debts as they become due, (ii) files, or consents by
answer or otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an assignment
for the benefit of its creditors, (iv) consents to the appointment of a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, (v) is
adjudicated as insolvent or to be liquidated, or (vi) takes corporate action
for
the purpose of any of the foregoing; or
(g)
a
court or governmental authority of competent jurisdiction enters an order
appointing, without consent by the Company or any of the Guarantors, a
custodian, receiver, trustee or other officer with similar powers with respect
to it or with respect to any substantial part of its property, or constituting
an order for relief or approving a petition for relief or reorganization
or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution,
winding-up or liquidation of the Company or any of the Guarantors, or any
such
petition shall be filed against the Company or any of the Guarantors and
such
petition shall not be dismissed within 60 days.
18
SECTION
12. LIMITATION
ON ISSUANCE OF COMMON STOCK.
Notwithstanding
anything to the contrary contained herein or in the Offering Document, the
Company shall not:
(a)
(i)
Issue any of the Transaction Shares, or (ii) adjust the number of Warrant Shares
in accordance with the terms of the Warrants, if such issuance or adjustment
would, either individually or together with other one or more other issuances
or
adjustments, cause the issuance of shares of Common Stock to exceed the number
of shares that the Company could then issue in compliance with Section 4350(i)
of the rules and regulations of Nasdaq (the "Nasdaq Rules") or any successor
rule or regulation. Under Section 4350(i) of the Nasdaq Rules, a company may
not
issue shares, and may not issue securities convertible into shares, where the
shares issued could in the aggregate equal 20% or more of the voting power
of
the shares outstanding, without obtaining shareholder approval. The foregoing
limitation shall only apply until such time as the Company obtains the requisite
approval of its shareholders for the issuance of the Transaction Shares, as
required by Section 4350(i) of the Nasdaq Rules or any successor rule or
regulation. The Company covenants and agrees that it shall include a proposal
for the approval of the issuance of the Transaction Shares in the Company's
proxy statement for its next annual meeting of shareholders. If, due to the
foregoing limitation, the Company cannot adjust the Warrant Shares as provided
in Section 8.3 of the Warrant, then, subject to NASD approval, the Company
agrees that the exercise price thereof shall be reduced to equal the Issuance
Price(s) of the shares of Common Stock that triggered the
(b)
Issue
any of the Transaction Shares, if such issuance would violate the securities
laws of the jurisdiction in which any Purchaser receiving such shares is
located.
SECTION
13. REMEDIES
ON DEFAULT, ETC.
13.1
ACCELERATION.
(a)
If an
Event of Default with respect to the Company described in Section 11 has
occurred, all the Notes then outstanding may at any time thereafter at the
Holder's option, by notice or notices to the Company, be declared immediately
due and payable.
Upon
any
Note becoming due and payable under this Section 13.1, such Note will forthwith
mature and the entire unpaid principal amount of such Note, plus (i) all accrued
and unpaid interest thereon shall all be immediately due and payable, in each
and every case without presentment, demand, protest or further notice, all
of
which are hereby waived.
13.2
OTHER REMEDIES. If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or have been
declared immediately due and payable under Section 13.1, the Required Holders
at
the time outstanding may proceed to protect and enforce the rights of the
holders 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
Note, 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.
19
13.3
RESCISSION. At any time after any Notes have been declared due and payable
pursuant to Section 13.1, the holders of not less than 50% in principal amount
of the Notes, taken individually, then outstanding, by written notice to the
Company, may rescind and annul any such declaration and its consequences if
(a)
the Company has paid all overdue interest on the Notes and, all principal if
any, on any Notes that are due and payable and are unpaid other than by reason
of such declaration, (b) all Events of Default and Defaults, other than
non-payment of amounts that have become due solely by reason of such
declaration, have been cured or have been waived pursuant to Section 18, and
(c)
no judgment or decree has been entered for the payment of any monies due
pursuant hereto or to any Notes. No rescission and annulment under this Section
13.3 will extend to or affect any subsequent Event of Default or Default or
impair any right consequent thereon.
13.4
NO
WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No course of dealing and no
delay on the part of any holder of any Note in exercising any right, power
or
remedy shall operate as a waiver thereof or otherwise prejudice such holder's
rights, powers or remedies. No right, power or remedy conferred by this
Agreement or by any Note upon any holder thereof shall be exclusive of any
other
right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. The Company will pay
to
the holder of each Note on demand such further amount as shall be sufficient
to
cover all costs and expenses of such holder incurred in any enforcement or
collection under this Section 12, including, without limitation, the reasonable
attorneys' fees, expenses and disbursements for the holders.
SECTION
14. REGISTRATION;
EXCHANGE; SUBSTITUTION OF NOTES.
14.1
REGISTRATION OF NOTES. The Company shall keep at its principal executive office
a register for the registration and registration of transfers of Notes. The
name
and address of each holder of one or more Notes, each transfer thereof and
the
name and address of each transferee of one or more Notes shall be registered
in
such register. Prior to due presentment for registration of transfer, the Person
in whose name any Note shall be registered shall be deemed and treated as the
owner and holder thereof for all purposes hereof, and the Company shall not
be
affected by any notice or knowledge to the contrary.
14.2
TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note at the principal
executive office of the Company for registration of transfer or exchange (and
in
the case of a surrender for registration of transfer, duly endorsed or
accompanied by a written instrument of transfer duly executed by the registered
holder of such Note or its attorney duly authorized in writing and accompanied
by the address for notices of each transferee of such Note or part thereof),
the
Company shall execute and deliver not more than five Business Days following
surrender of such Note, at the Company's expense (except as provided below),
one
or more new Notes (as requested by the holder thereof) in exchange therefor,
in
an aggregate principal amount equal to the unpaid principal amount of the
surrendered Note. Each such new Note shall be payable to such Person as such
holder may request and shall be substantially in the form of the Note originally
issued hereunder. Each such new Note shall be dated and bear interest from
the
date to which interest shall have been paid on the surrendered Note or dated
the
date of the surrendered Note if no interest shall have been paid thereon. The
Company may require payment of a sum sufficient to cover any stamp tax or
governmental charge imposed in respect of any such transfer of Notes. Notes
shall not be transferred in denominations of less than $100,000, provided that
if necessary to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than $100,000.
Any
transferee, by its acceptance of a Note registered in its name (or the name
of
its nominee), shall be deemed to have made the representation set forth in
Section 6.
20
14.3
REPLACEMENT OF NOTES. Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of any Note, and
(a)
in
the case of loss, theft or destruction, of indemnity reasonably satisfactory
to
it (provided that if the holder of such Note is, or is a nominee for, an
original Purchaser or another holder of a Note with a minimum net worth of
at
least $50,000,000, such Person's own unsecured agreement of indemnity shall
be
deemed to be satisfactory), or
(b)
in
the case of mutilation, upon surrender and cancellation thereof, the Company
at
its own expense shall execute and deliver not more than five Business Days
following satisfaction of such conditions, in lieu thereof, a new Note, dated
and bearing interest from the date to which interest shall have been paid on
such lost, stolen, destroyed or mutilated Note or dated the date of such lost,
stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
SECTION
15. PAYMENTS
ON NOTES.
The
Company will pay all sums becoming due on the Notes for principal, and interest
by the method and at the address specified for such purpose for such Purchaser
on Schedule A hereto or by such other method or at such other address as such
Purchaser shall have from time to time specified to the Company in writing
for
such purpose, without the presentation or surrender of such Note 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
any Note, such Purchaser shall surrender such Note for cancellation, reasonably
promptly after any such request, to the Company at its principal executive
office or at the place of payment most recently designated by the Company
pursuant to Section 19. Prior to any sale or other disposition of any Note
held
by any Purchaser, such Person will, at its election, either endorse thereon
the
amount of principal paid thereon and the last date to which interest has been
paid thereon or surrender such Note to the Company in exchange for a new Note
or
Notes pursuant to Section 14.2.
21
SECTION
16. REGISTRATION
RIGHTS.
The
Purchasers have entered into a registration rights agreement (the "Registration
Rights Agreement") pursuant to which the Company has agreed to grant Purchasers
certain registration rights with respect to the resale of the Transaction Shares
and the Warrants.
SECTION
17. SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All
representations and warranties contained herein shall survive the execution
and
delivery of this Agreement and the related Units, the purchase or transfer
by
any Purchaser of any such Units or portion thereof or interest therein and
may
be relied upon by any subsequent holder of any such Units, regardless of any
investigation made at any time by or on behalf of any Purchaser or any other
holder of any such Units. This Agreement, the Subsidiary Guarantee, the Notes,
the Warrants, and the Registration Rights Agreement embody the entire agreement
and understanding between the Purchasers and the Company and supersede all
prior
agreements and understandings relating to the subject matter
hereof.
SECTION
18. AMENDMENT
AND WAIVER.
18.1
REQUIREMENTS.
(a)
This
Agreement and the Notes may be amended, and the observance of any term hereof
including subsection (i) of Section 1 hereof or of the Notes may be waived
(either retroactively or prospectively), with (and only with) the written
consent of the Company and the holders of Notes holding more than 50% in
aggregate principal amount of the Notes at the time outstanding, except that
unless otherwise provided herein (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, or 6 hereof or the corresponding provision
of any Supplement, or any defined term (as it is used in any such Section or
such corresponding provision of any Supplement), will be effective as to any
holder of Notes unless consented to by such holder of Notes in writing, and
(b)
no such amendment or waiver may, without the written consent of all of the
holders of Notes at the time outstanding affected thereby, (i) subject to the
provisions of Section 10 relating to acceleration or rescission, change the
amount or time of any prepayment or payment of principal of, or reduce the
rate
or change the time of payment or method of computation of interest on the Notes,
(ii) change the percentage of the principal amount of the Notes the holders
of
which are required to consent to any such amendment or waiver, or (iii) amend
any of Sections 7, 10, 11.1, 14 or 16.
18.2
SOLICITATION OF HOLDERS OF NOTES.
(a)
SOLICITATION. The Company will provide each holder of the Notes (irrespective
of
the amount of Notes then owned by it) with sufficient information, sufficiently
far in advance of the date a decision is required, to enable such holder to
make
an informed and considered decision with respect to any proposed amendment,
waiver or consent in respect of any of the provisions hereof, or of the Notes.
The Company will deliver executed or true and correct copies of each amendment,
waiver or consent effected pursuant to the provisions of this Section 18 to
each
holder of outstanding Notes promptly following the date on which it is executed
and delivered by, or receives the consent or approval of, the requisite holders
of Notes.
22
(b)
PAYMENT. The Company will not directly or indirectly pay or cause to be paid
any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, or grant any security, to any holder of Notes as consideration for
or
as an inducement to the entering into by any holder of Notes of any waiver
or
amendment of any of the terms and provisions hereof unless such remuneration
is
concurrently paid, or security is concurrently granted, on the same terms,
ratably to each holder of Notes then outstanding even if such holder did not
consent to such waiver or amendment.
18.3
BINDING EFFECT, ETC. Any amendment or waiver consented to as provided in this
Section 18 applies equally to all holders of Notes and is binding upon them
and
upon each future holder of any Note and upon the Company without regard to
whether such Note has been marked to indicate such amendment or waiver. No
such
amendment or waiver will extend to or affect any obligation, covenant,
agreement, Default or Event of Default not expressly amended or waived or impair
any right consequent thereon. No course of dealing between the Company and
the
holder of any Note nor any delay in exercising any rights hereunder or under
any
Note shall operate as a waiver of any rights of any holder of such Note. As
used
herein, the term "this Agreement" and references thereto shall mean this
Agreement
as it may from time to time be amended or supplemented.
18.4
NOTES HELD BY COMPANY, ETC. Solely for the purpose of determining whether the
holders of the requisite percentage of the aggregate principal amount of Notes
then outstanding approved or consented to any amendment, waiver or consent
to be
given under this Agreement or the Notes, or have directed the taking of any
action provided herein or in the Notes to be taken upon the direction of the
holders of a specified percentage of the aggregate principal amount of Notes
then outstanding, Notes directly or indirectly owned by the Company or any
of
its Affiliates shall be deemed not to be outstanding.
SECTION
19. NOTICES.
All
notices and communications provided for hereunder shall be in writing and sent
(a) by telefacsimile if the sender on the same day sends a confirming copy
of
such notice by a recognized overnight delivery service (charges prepaid), or
(b)
by registered or certified mail with return receipt requested (postage prepaid),
or (c) by a recognized overnight delivery service (with charges prepaid). Any
such notice must be sent:
(i)
if to
a Purchaser, to such Purchaser at the address specified for such communications
in Schedule A to this Agreement, or at such other address as such Purchaser
shall have specified to the Company in writing pursuant to this Section 19,
or
(ii)
if
to the Company, to the Company at its address set forth at the beginning hereof
to the attention of Chief Financial Officer, with a copy to the General Counsel,
or at such other address as the Company shall have specified to the holder
of
each Note in writing.
Notices
under this Section 19 will be deemed given only when actually
received.
23
SECTION
20. CONFIDENTIAL
INFORMATION.
For
the
purposes of this Section 20, "Confidential Information" means information
delivered to any Purchaser by or on behalf of the Company or any Subsidiary
in
connection with the transactions contemplated by or otherwise pursuant to this
Agreement that is proprietary in nature and that was clearly marked or labeled
or otherwise adequately identified when received by such Purchaser as being
confidential information of the Company or such Subsidiary, provided that such
term does not include information that (a) was publicly known or otherwise
known
to such Purchaser prior to the time of such disclosure, (b) subsequently becomes
publicly known through no act or omission by such Purchaser or any Person acting
on such Purchaser's behalf, or (c) otherwise becomes known to
such
Purchaser other than through disclosure by the Company or any Subsidiary. Each
Purchaser will maintain the confidentiality of such Confidential Information
in
accordance with procedures adopted by such Purchaser in good faith to protect
confidential information of third parties delivered to such Purchaser, provided
that such Purchaser may deliver or disclose Confidential Information to (w)(i)
such Purchaser's directors, trustees, officers, employees, agents, attorneys
and
affiliates (to the extent such disclosure reasonably relates to the
administration of the investment represented by such Purchaser's Notes), (ii)
such Purchaser's financial advisors and other professional advisors who agree
to
hold confidential the Confidential Information substantially in accordance
with
the terms of this Section 20, or (iii) any other holder of any Note (x) to
effect compliance with any law, Rule, regulation or order applicable to such
Purchaser, (y) in response to any subpoena or other legal process, provided
that, to the extent permitted by law, each holder will use reasonable efforts
to
notify the Company of any request to disclose Confidential Information requested
pursuant to any subpoena or other legal process, provided further that the
failure to notify the Company of any such request shall not result in any
liability to such holder, or (z) if an Event of Default has occurred and is
continuing, to the extent such Purchaser may reasonably determine such delivery
and disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies under such Purchaser's Notes and this
Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed
to
have agreed to be bound by and to be entitled to the benefits of this Section
20
as though it were a party to this Agreement. On reasonable request by the
Company in connection with the delivery to any holder of a Note of information
required to be delivered to such holder under this Agreement or requested by
such holder (other than a holder that is a party to this Agreement or its
nominee), such holder will enter into an agreement with the Company embodying
the provisions of this Section 20.
SECTION
21. MISCELLANEOUS.
21.1
SUCCESSORS AND ASSIGNS. All covenants and other agreements contained in this
Agreement by or on behalf of any of the parties hereto bind and inure to the
benefit of their respective successors and assigns (including, without
limitation, any subsequent holder of a Note) whether so expressed or
not.
21.2
PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes
to
the contrary notwithstanding, any payment of principal of or interest on any
Note that is due on a date other than a Business Day shall be made on the next
succeeding Business Day without including the additional days elapsed in the
computation of the interest payable on such next succeeding Business
Day.
24
21.3
SEVERABILITY. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating
the
remaining provisions hereof, and any such prohibition or unenforceability in
any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
21.4
CONSTRUCTION. Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such
Person.
21.5
COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each
of which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties
hereto.
21.6
GOVERNING LAW. This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the State
of Florida excluding choice-of-law principles of the law of such state that
would require the application of the laws of a jurisdiction other than such
state.
21.7
LEGAL RATE OF INTEREST. Regardless of any provision contained in this Agreement
or in any Guaranty, the rate of interest borne by the Notes shall not exceed
the
maximum amount of nonusurious interest that may be contracted for, taken,
reserved, charged or received under any applicable law; any interest in excess
of that maximum amount shall be credited on the principal of the Notes or,
if
that has been paid, refunded. On any acceleration or required or permitted
prepayment, any such excess shall be canceled automatically as of the
acceleration or prepayment or, if already paid, credited on the principal of
the
Notes or, if the principal of the Notes has been paid, refunded. In determining
whether or not the interest paid or payable, under any specific contingency,
exceeds the maximum amount of nonusurious interest, the Company and holders
of
the Notes shall, to the maximum extent permitted under applicable law, (a)
characterize any nonprincipal payment as an expense, fee or premium rather
than
as interest, (b) exclude voluntary prepayments and the effects thereof, and
(c)
spread the total amount of interest throughout the entire contemplated term
of
the Notes.
21.8
SUBMISSION TO PROCESS. THE COMPANY AND THE PURCHASERS HEREBY AGREE THAT ANY
LEGAL ACTION OR PROCEEDING AGAINST THE COMPANY WITH RESPECT TO THIS AGREEMENT,
OR THE NOTES SHALL BE BROUGHT IN THE COURTS OF THE STATE OF FLORIDA OR (TO
THE
EXTENT THEY HAVE SUBJECT MATTER JURISDICTION) OF THE UNITED STATES OF AMERICA
FOR THE SOUTHERN DISTRICT OF FLORIDA AS THE HOLDERS OF 51% IN PRINCIPAL AMOUNT
OF THE NOTES MAY ELECT, AND, BY EXECUTION AND DELIVERY HEREOF, THE COMPANY
ACCEPTS AND CONSENTS, FOR ITSELF AND IN RESPECT TO ITS PROPERTY, GENERALLY
AND
UNCONDITIONALLY, TO THE JURISDICTION OF THE AFORESAID COURTS AND AGREES THAT
SUCH JURISDICTION SHALL BE EXCLUSIVE, UNLESS WAIVED BY THE COMPANY AND THE
HOLDERS OF 51% IN PRINCIPAL AMOUNT OF THE NOTES IN WRITING. THE COMPANY WAIVES
(TO THE EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT TO STAY OR TO DISMISS
ANY
ACTION OR PROCEEDING BROUGHT BEFORE SAID COURTS ON THE BASIS OF FORUM NON
CONVENIENS.
25
21.9
WAIVERS. THE COMPANY WAIVES (A) THE RIGHT TO TRIAL BY JURY (WHICH EACH HOLDER
OF
NOTES HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM OF
ANY
KIND ARISING OUT OF OR RELATED TO THIS AGREEMENT, ANY SECURITY DOCUMENT OR
THE
NOTES; (B) PRESENTMENT, DEMAND AND PROTEST AND NOTICE OF PRESENTMENT, PROTEST,
DEFAULT, NON-PAYMENT, INTENT TO ACCELERATE, ACCELERATION, MATURITY, RELEASE,
COMPROMISE, SETTLEMENT, EXTENSION OR RENEWAL OF ANY OR ALL DOCUMENTS,
INSTRUMENTS, AND GUARANTIES AT ANY TIME HELD BY THE HOLDERS OF NOTES (OR ANY
AGENT THEREFOR) ON WHICH THE COMPANY MAY IN ANY WAY BE LIABLE AND HEREBY
RATIFIES AND CONFIRMS WHATEVER THE HOLDERS OF NOTES MAY DO IN THIS REGARD;
AND
(C) NOTICE OF ACCEPTANCE HEREOF. THE COMPANY ACKNOWLEDGES THAT THE FOREGOING
WAIVERS ARE A MATERIAL INDUCEMENT TO THE HOLDERS' ENTERING INTO THIS AGREEMENT
AND THAT THE HOLDERS ARE RELYING UPON THE FOREGOING WAIVERS IN THEIR FUTURE
DEALINGS WITH THE COMPANY. THE COMPANY WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS WRITTEN
CONSENT TO A TRIAL BY THE COURT.
21.10
EXCULPATION. Each party to this Agreement acknowledges that ▇▇▇▇▇ Raysman
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP represented ▇. ▇▇▇▇▇▇▇▇ Securities, LLC in
the transactions contemplated by this Agreement and has not represented either
the Company or any Purchaser in connection with such transaction.
The
execution hereof by the Purchasers shall constitute a contract among the Company
and the Purchasers for the uses and purposes hereinabove set forth.
| Very
truly
yours, 21ST CENTURY HOLDING COMPANY |
||
| |
|
|
| By | ||
|
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Chief Executive Officer |
||
26
Accepted
as of the first date written above.
| PURCHASER: | ||
| |
|
|
| By | ||
|
Name: _______________________________________________________ |
||
| Title: _______________________________________________________ | ||
27
EXHIBIT
A
FORM
OF
NOTE
EXHIBIT
B
FORM
OF
WARRANT
EXHIBIT
C
FORM
OF
SUBSIDIARY GUARANTEE
SCHEDULE
A
PURCHASERS