21st CENTURY HOLDING COMPANY 4161 N.W. 5TH STREET PLANTATION, FL 33317 UNIT PURCHASE AGREEMENT
Exhibit
4.1
21st
CENTURY HOLDING COMPANY
▇▇▇▇
▇.▇. ▇▇▇
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
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).
1
“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.
“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.
2
“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.
“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.
3
“Permitted
Indebtedness” means
any
of the following:
(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;
(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; and
(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.
4
“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.
5
“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.
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.
6
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 August 5, 2003 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.
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 therefor may be
brought.
7
5.3 Public
Disclosure.
The Company has filed with the SEC a registration statement on Form S-3
(the “Form S-3”), which is currently being reviewed by the SEC. In
connection with the review of the Form S-3, the SEC is also reviewing the
Company’s Annual Report on Form 10-K for the year ended December 31, 2002 (the
“Form 10-K”) and its Quarterly Report on Form 10-Q for the quarter ended March
31, 2003 (the “Form 10-Q”). As a result, the Company’s Form 10-K and Form
10-Q may be amended subsequent to the date hereof in response to comments
received from the SEC. Notwithstanding the foregoing, 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 limited
to, the information contained in the Offering Document dated July 22, 2003
(the
“Offering Document”). The Purchaser acknowledges it has been advised by
the Company that the SEC is reviewing the Company’s Public Filings, including
the Form 10-K, and as a result the Company’s Public Filings may be
amended.
8
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.”
9
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, and the Executive Summary dated June 2003
(the
“Executive Summary”), 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,
including without limitation those set forth in the Executive
Summary.
6.11 The
Purchaser is not purchasing for the Units as a result of or subsequent to any
advertisement, 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.
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.
10
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.
The principal amount of the Notes shall be due and payable in equal
quarterly installments commencing on October 31, 2003 with the last installment
due on July 31, 2006 (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 may only elect to make principal payments in Principal
Shares if at the time of the payment an effective registration statement
covering the issuance of the Principal Shares shall be available to the Company;
and provided further, 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 the
amount of the principal payment due divided by 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 date of
the principal
payment. In the event the Company elects to pay the principal amount due
in Principal 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.
11
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).
(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; provided, however, that the
Company may only elect to pay the Change in Control Prepayment in Prepayment
Shares if at the time of payment an effective registration statement covering
the issuance of the Prepayment Shares shall be available to the Company; and
provided further, that 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.
12
(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;
(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:
13
(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.
SECTION
9. PAYMENT OF INTEREST.
9.1 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 October 31, 2003. 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 may only elect to make interest payments in Interest
Shares if at the time of payment an effective registration statement covering
the issuance of the Interest Shares shall be available to the Company; and
provided further, 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 the amount of the
interest payment due 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 interest payment. In the event the Company
elects to pay the interest amount due in Interest 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.
14
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;
(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) 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.
15
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;
(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
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:
16
(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 current 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 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.
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;
17
(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.
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 2004 annual meeting of
shareholders, which the Company currently anticipates shall take place in June
2004. 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 adjustment pursuant to Section 8.3 of the
Warrant.
18
(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.
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.
19
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.
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.
20
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.
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
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 (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.
21
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.
(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:
22
(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.
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.
23
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.
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.
24
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.
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.
25
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
A
21ST
CENTURY HOLDING COMPANY
6%
SENIOR
SUBORDINATED NOTE DUE ______________, 2006
No.
[______]
[Date]
$[__________]
FOR
VALUE
RECEIVED, the undersigned, 21ST
CENTURY
HOLDING COMPANY (herein called the “Company”), a corporation organized and
existing under the laws of the State of Florida , hereby promises to pay to
[_____________________] or registered assigns, the principal sum of
[______________] DOLLARS with interest (computed on the basis of a 360-day
year
of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6%
per
annum from the date hereof, payable quarterly beginning on ________________,
2003.
This
Note
is one of a series of Senior Subordinated Notes (herein called the “Notes”)
issued pursuant to the Unit Purchase Agreement, dated as of ________________,
2003 (as from time to time amended, supplemented or modified, the “Unit Purchase
Agreement”), between the Company and the respective Purchasers named therein and
is entitled to the benefits thereof. Each holder of this Note will be
deemed, by its acceptance hereof, (i) to have agreed to the confidentiality
provisions set forth in Section 20 of the Unit Purchase Agreement and (ii)
to
have made the representations set forth in Section 6 of the Unit Purchase
Agreement.
Payments
of principal of and interest on this Note are to be made, at the Company’s
option, in lawful money of the United States of America or, in whole or in
part,
by the issuance to the holder hereof of Interest Shares, as defined in and
in
accordance with the Unit Purchase Agreement.
This
Note
is a registered Note and, as provided in the Unit Purchase Agreement, upon
surrender of this Note for registration of transfer, duly endorsed, or
accompanied by a written instrument of transfer duly executed, by the registered
holder hereof or such holder's attorney duly authorized in writing, a new Note
for a like principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of transfer, the
Company may treat the person in whose name this Note is registered as the owner
hereof for the purpose of receiving payment and for all other purposes, and
the
Company will not be affected by any notice to the contrary.
The
Company will make required prepayments of principal on the dates and in the
amounts specified in the Unit Purchase Agreement. This Note is also
subject to optional prepayment, in whole or from time to time in part, at the
times and on the terms specified in the Unit Purchase Agreement, but not
otherwise.
If
an
Event of Default, as defined in the Unit Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared or otherwise become
due
and payable in the manner, at the price and with the effect provided in the
Unit
Purchase Agreement.
A-1
Pursuant
to the Subsidiary Guarantee dated as of _____________, 2003 (the “Subsidiary
Guarantee”), certain subsidiaries of the Company have absolutely and
unconditionally guaranteed payment in full of the principal of, and interest
on
this Note and the performance by the Company of all of its obligations contained
in the Unit Purchase Agreement all as more fully set forth in said Subsidiary
Guarantee.
This
Note
shall be construed and enforced in accordance with, and the rights of the
Company and the holder hereof shall be governed by, the law of the State of
Florida, excluding the choice-of-law principles of such state that would require
the application of the laws of a jurisdiction other than such
state.
21ST
CENTURY HOLDING COMPANY
By:
_____________________________
Name:
_____________________________
Title:
_____________________________
A-2
EXHIBIT
B
FORM
OF WARRANT
B
EXHIBIT
C
FORM
OF SUBSIDIARY GUARANTEE
C
SCHEDULE
A
PURCHASERS