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EXHIBIT 10.1
PURCHASE AGREEMENT
BY AND AMONG
▇▇▇▇'▇, INC.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
AND
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
MARCH 9, 2001
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TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS ........................................................... -1-
SECTION 1.1 DEFINITIONS ............................................. -1-
SECTION 1.2 REFERENCES AND TITLES ................................... -8-
ARTICLE II.
PURCHASE OF THE NOTES ................................................. -9-
SECTION 2.1 PURCHASE OF THE NOTES ................................... -9-
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY ......................... -9-
SECTION 3.1 ORGANIZATION, STANDING AND CORPORATE POWER .............. -9-
SECTION 3.2 SUBSIDIARIES ............................................ -10-
SECTION 3.3 CAPITAL STRUCTURE ....................................... -10-
SECTION 3.4 AUTHORITY; NO VIOLATIONS; APPROVALS ..................... -11-
SECTION 3.5 SEC DOCUMENTS ........................................... -12-
SECTION 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS .................... -13-
SECTION 3.7 NO DEFAULT .............................................. -13-
SECTION 3.8 COMPLIANCE WITH APPLICABLE LAWS ......................... -13-
SECTION 3.9 LITIGATION .............................................. -14-
SECTION 3.10 STATUS OF NOTES ......................................... -14-
SECTION 3.11 TAX RETURNS AND TAX PAYMENTS ............................ -14-
SECTION 3.12 EMPLOYEE BENEFIT PLANS .................................. -14-
SECTION 3.13 LABOR MATTERS ........................................... -15-
SECTION 3.14 INTANGIBLE PROPERTY ..................................... -16-
SECTION 3.15 INSURANCE ............................................... -16-
SECTION 3.16 NO BROKERS OR FINDERS ................................... -16-
SECTION 3.17 AMENDMENT TO RIGHTS AGREEMENT; BOARD APPROVAL ........... -16-
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASERS .......................... -17-
SECTION 4.1 AUTHORITY; APPROVALS .................................... -17-
SECTION 4.2 EXEMPT OFFERING ......................................... -17-
SECTION 4.3 DISCLOSURE OF INFORMATION ............................... -18-
SECTION 4.4 INVESTMENT INTENT ....................................... -18-
SECTION 4.5 TRANSFER RESTRICTIONS ................................... -18-
SECTION 4.6 PURCHASER STATUS ........................................ -19-
SECTION 4.7 NO BROKERS OR FINDERS ................................... -19-
SECTION 4.8 OWNERSHIP OF SHARES ..................................... -19-
SECTION 4.9 FINANCING ............................................... -19-
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ARTICLE V.
COVENANTS ............................................................. -20-
SECTION 5.1 CORPORATE OPPORTUNITIES ................................. -20-
SECTION 5.2 APPROVALS ............................................... -20-
SECTION 5.3 BOARD OF DIRECTORS ...................................... -20-
SECTION 5.4 STANDSTILL .............................................. -20-
SECTION 5.5 USE OF PROCEEDS ......................................... -20-
ARTICLE VI.
CLOSING ............................................................... -21-
SECTION 6.1 CLOSING ................................................. -21-
SECTION 6.2 ACTIONS TO OCCUR. ....................................... -21-
SECTION 6.3 CONDITION TO CLOSING .................................... -22-
ARTICLE VII.
MISCELLANEOUS ......................................................... -23-
SECTION 7.1 SURVIVAL OF PROVISIONS .................................. -23-
SECTION 7.2 NO WAIVER; MODIFICATION IN WRITING ...................... -23-
SECTION 7.3 SPECIFIC PERFORMANCE .................................... -23-
SECTION 7.4 SEVERABILITY ............................................ -24-
SECTION 7.5 PARTIES IN INTEREST ..................................... -24-
SECTION 7.6 NOTICES ................................................. -24-
SECTION 7.7 COUNTERPARTS ............................................ -25-
SECTION 7.8 ENTIRE AGREEMENT ........................................ -25-
SECTION 7.9 GOVERNING LAW ........................................... -25-
SECTION 7.10 PUBLIC ANNOUNCEMENTS .................................... -25-
SECTION 7.11 HEADINGS ................................................ -25-
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INDEX
13d Group ........................................................ -7-
Administrative Lender ............................................ -1-
Agreement ........................................................ -1-
Approval ......................................................... -1-
Associate ........................................................ -1-
Beneficial Ownership ............................................. -1-
Benefit Plans ................................................ -2-, -14-
blue sky ......................................................... -11-
Board ............................................................ -2-
Business Combination ............................................. -2-
Business Day ..................................................... -2-
Bylaws ........................................................... -2-
Capital Stock .................................................... -2-
Certificate of Incorporation ..................................... -2-
Closing ...................................................... -2-, -20-
Closing Date ................................................. -2-, -20-
Code ............................................................. -2-
Common Stock ..................................................... -2-
Common Stock Equivalents ......................................... -2-
Company ....................................................... -1-, -2-
Company Disclosure Schedule ................................... -3-, -9-
Company Options .............................................. -3-, -10-
Company SEC Documents ........................................ -3-, -12-
Confidential Information ......................................... -3-
Continuing Directors ............................................. -10-
Contracts ........................................................ -3-
control .......................................................... -1-
Credit Agreement ................................................. -3-
Debt ............................................................. -3-
Employment Agreements ............................................ -3-
ERISA ........................................................ -3-, -14-
Exchange Act ..................................................... -▇-
▇▇▇▇ ......................................................... -3-, -12-
Governmental Entity .............................................. -3-
Intangible Property .......................................... -3-, -15-
Knowledge ........................................................ -3-
Law .............................................................. -▇-
▇▇▇▇ ............................................................. -4-
Litigation ................................................... -4-, -13-
Market Price ..................................................... -4-
Material Adverse Change .......................................... -4-
Material Adverse Effect .......................................... -4-
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Material Subsidiary .............................................. -4-
Maximum Percentage Ownership ..................................... -5-
New Securities ................................................... -5-
Notes ............................................................ -5-
Options .......................................................... -5-
Order ............................................................ -5-
Permitted Liens .................................................. -5-
Person ........................................................... -6-
Purchase Price ................................................ -7-, -9-
Purchasers .................................................... -1-, -7-
Registration Rights Agreement .................................... -7-
Representatives .................................................. -7-
Rights Agreement ............................................. -7-, -16-
Rights Agreement Amendment ................................... -7-, -16-
Rule 144 ......................................................... -7-
SEC .............................................................. -7-
SECURITIES ....................................................... -18-
Securities Act ............................................... -7-, -18-
Stock Plans ...................................................... -7-
Subsidiary ....................................................... -7-
Tax .......................................................... -7-, -14-
Tax Return ....................................................... -7-
Tax Returns ...................................................... -13-
Taxes ............................................................ -7-
Transaction Documents ............................................ -7-
Transfer ............................................... -7-, -17-, -18-
Underlying Shares ................................................ -7-
Voting Stock ..................................................... -8-
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PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of March 9, 2001, by and among ▇▇▇▇'▇,
Inc., a Delaware corporation (together with its subsidiaries, the "Company"),
and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, individuals residing in Houston,
Texas (together, the "Purchasers").
In consideration of the mutual covenants and agreements set forth
herein and for good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"ADMINISTRATIVE LENDER" has the meaning ascribed to such term
in the Credit Agreement.
"AFFILIATE" means, with respect to any Person, any other
Person directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such Person.
For purposes of this definition and this Agreement, the term "control"
(and correlative terms "controlling," "controlled by" and "under common
control with") means possession of the power, whether by contract,
equity ownership or otherwise, to direct the policies or management of
a Person.
"AGREEMENT" means this Purchase Agreement, as the same may be
amended, supplemented or modified from time to time in accordance with
the terms hereof.
"APPROVAL" means any approval, authorization, grant of
authority, consent, order, qualification, permit, license, variance,
exemption, franchise, concession, certificate, filing or registration
or any waiver of the foregoing, or any notice, statement or other
communication required to be filed with, delivered to or obtained from
any Governmental Entity or any other Person.
"ASSOCIATE" has the meaning ascribed to such term in Rule
12b-2 under the Exchange Act.
"BENEFICIALLY OWN" or "BENEFICIAL OWNERSHIP" is defined in
Rules 13d-3 and 13d-5 of the Exchange Act, but without taking into
account any contractual restrictions or limitations on voting or other
rights; provided that at all times after the date hereof and prior to
the sale, payment, or conversion of the Notes, Purchasers shall be
deemed to be the beneficial owner of the Underlying Shares related to
the Notes and at all times after the date
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hereof and prior to the exercise or forfeiture of the Options,
Purchasers shall be deemed to be the beneficial owner of the Underlying
Shares related to the Options.
"BENEFIT PLANS" has the meaning set forth in Section 3.12.
"BOARD" means the Board of Directors of the Company.
"BUSINESS COMBINATION" means (i) any consolidation, merger,
share exchange or similar business combination transaction involving
the Company with any Person or (ii) the sale, assignment, conveyance,
transfer, lease or other disposition by the Company of all or
substantially all of its assets.
"BUSINESS DAY" means any day except Saturday, Sunday and any
day which shall be a legal holiday or a day on which banking
institutions in San Antonio, Texas or New York City, New York generally
are authorized or required by law or other government actions to close.
"BYLAWS" mean the Company's bylaws, as amended from time to
time.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation or company, any and all shares, interests, participations
or other equivalents (however designated) of capital or capital stock
of such Person and (ii) with respect to any Person that is not a
corporation or company, any and all partnership or other equity
interests of such Person.
"CERTIFICATE OF INCORPORATION" means the Company's Certificate
of Incorporation, as amended from time to time.
"CLOSING" has the meaning set forth in Section 6.1.
"CLOSING DATE" has the meaning set forth in Section 6.1.
"CODE" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder as in effect on the date
hereof.
"COMMON STOCK" means the Company's common stock, par value
$.32 per share, and any Capital Stock for or into which such Common
Stock hereafter is exchanged, converted, reclassified or recapitalized
by the Company or pursuant to an agreement or Business Combination to
which the Company is a party.
"COMMON STOCK EQUIVALENTS" means (without duplication with any
other Common Stock or common stock, as the case may be, or Common Stock
Equivalents) rights, warrants, options, convertible securities, or
exchangeable securities, exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock or common stock, as the case
may
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be, whether at the time of issuance or upon the passage of time or the
occurrence of some future event, including the Notes and the Options.
"COMPANY" has the meaning set forth in the introductory
paragraph hereof.
"COMPANY DISCLOSURE SCHEDULE" has the meaning set forth in
Article III.
"COMPANY OPTIONS" has the meaning set forth in Section 3.3(b).
"COMPANY SEC DOCUMENTS" has the meaning set forth in Section
3.5.
"CONFIDENTIAL INFORMATION" means all information about the
Company furnished to the Purchasers or any of their Representatives by
the Company or any of its Representatives, but shall exclude
information that (i) is in the possession of the Purchasers or their
Representatives prior to receipt from the Company, (ii) is or becomes
available in the public domain, other than as a result of an
unauthorized disclosure by Purchasers or its Representatives, or (iii)
is not acquired from the Company or any other person known by the
Purchasers or its Representatives to be subject to a confidentiality
agreement with the Company.
"CONTRACTS" means all agreements, contracts, or other binding
commitments, arrangements or plans, written or oral (including any
amendments and other modifications thereto), to which the Company or
any of its Subsidiaries is a party or is otherwise bound.
"CREDIT AGREEMENT" means, that certain Credit Agreement, dated
as of February 7, 1996 among the Company, as borrower, NationsBank of
Texas, N.A., as administrative lender, and the lenders signatory
thereto, as the same has been, or may be, from time to time be amended
or supplemented.
"DEBT" has the meaning set forth in the Credit Agreement.
"EMPLOYMENT AGREEMENTS" means the employment agreements
between the Company and each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ dated the date hereof.
"ERISA" has the meaning set forth in Section 3.12.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC
promulgated thereunder.
"GAAP" has the meaning set forth in Section 3.5(b).
"GOVERNMENTAL ENTITY" means any agency, bureau, commission,
court, authority, department, official, political subdivision, tribunal
or other instrumentality of any
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government, whether (i) regulatory, administrative or otherwise, (ii)
federal, state or local, or (iii) domestic or foreign.
"INTANGIBLE PROPERTY" has the meaning set forth in Section
3.14.
"KNOWLEDGE" of any Person means the actual knowledge of such
Person's executive and financial officers and directors, in each case
after reasonable inquiry of such other officers of such Person with
direct responsibility for the Person's business relating to such
knowledge.
"LAW" means any constitutional provision, statute or other
law, ordinance, rule, regulation or interpretation of any thereof and
any Order of any Governmental Entity (including environmental laws) now
in effect.
"LIEN" means any mortgage, lien, pledge, encumbrance,
easement, charge or security interest of any kind (including any
agreement to give any of the foregoing, any conditional sale or other
title retention agreement or any lease in the nature thereof).
"LITIGATION" has the meaning set forth in Section 3.9.
"MARKET PRICE" means, with respect to a particular security on
any given day, the last reported sale price regular way or, in case no
such reported sale takes place on such day, the average of the last
closing bid and asked prices regular way, in either case on the
principal national securities exchange on which the applicable
securities are listed or admitted to trading, or if not listed or
admitted to trading on any national securities exchange, (i) the
closing sale price for such day reported by the NASDAQ Stock Market, if
such security is traded over-the-counter and quoted on the NASDAQ Stock
Market, or (ii) if such security is so traded, but not so quoted, the
average of the closing reported bid and asked prices of such security
as reported by the NASDAQ Stock Market or any comparable system, or
(iii) if such security is not listed on the NASDAQ Stock Market or any
comparable system, the average of the closing bid and asked prices as
furnished by two members of the National Association of Securities
Dealers, Inc. selected from time to time by the Company for that
purpose. If such security is not listed and traded in a manner that the
quotations referred to above are available for the period required
hereunder, the Market Price per share of such security shall be deemed
to be the fair value per share of such security as reasonably
determined in good faith by the Board of Directors of the Company.
"MATERIAL ADVERSE EFFECT" or "MATERIAL ADVERSE CHANGE" means
any effect, change, event or occurrence that is materially adverse to
the business, operations, properties, condition (financial or
otherwise), results of operations, assets or liabilities of the Company
and its Subsidiaries taken as a whole, but excluding any such effect,
change, event or occurrence resulting from (i) changes in general
economic conditions or (ii) effects, changes, events or occurrences in
the Company's industry generally (including without limitation any
regulatory changes), in each case which do not have a materially
disproportionate effect on
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the business, operations or properties of the Company or its
Subsidiaries as compared to general economic conditions or the
Company's industry as a whole, respectively.
"MATERIAL SUBSIDIARY" means any Subsidiary that, together with
all Subsidiaries of such Subsidiary, (i) for the most recent fiscal
year of the Company accounted for more than 10% of the consolidated
revenues of the Company and its Subsidiaries or (ii) at the end of such
fiscal year, was the owner (beneficial or otherwise) of more than 10%
of the consolidated assets of the Company and its Subsidiaries all as
shown on the consolidating and consolidated financial statements of the
Company and its Subsidiaries.
"MAXIMUM PERCENTAGE OWNERSHIP" means (i) prior to March 15,
2002, 25%, and (ii) on or after March 15, 2002, 28%.
"NEW SECURITIES" means any shares of Capital Stock or other
equity securities (within the meaning of Rule 16a-1(d) promulgated
under the Exchange Act), including debt that is convertible or
exchangeable for Capital Stock and any warrants or other rights to
purchase Capital Stock sold for cash, other than securities marketed to
at least 25 investors, sold in an underwritten private offering and
available for resale pursuant to Rule 144A or Regulation S promulgated
under the Securities Act, and securities sold in an underwritten
offering pursuant to a registration statement effective under the
Securities Act.
"NOTES" means those certain Convertible Subordinated
Promissory Notes in substantially the form of EXHIBIT "A" hereto up to
an aggregate principal amount of $10,000,000, purchased by Purchasers,
issued in accordance with the terms of this Agreement, pursuant to
which the Company is the borrower and the Purchasers are the Holders,
and each, individually, a "Note".
"OPTIONS" means those two (2) certain Stock Options dated
March 9, 2001 issued to the Purchasers, each for the purchase of
1,120,000 shares of Common Stock.
"ORDER" means any decree, injunction, judgment, settlement,
order, ruling, assessment or writ of a court.
"PERMITTED LIENS" means:
(a) Liens upon any property presently owned or
hereafter acquired, created at the time of acquisition to
secure a portion of the purchase price thereof, or existing
thereon at the date of acquisition, whether or not assumed by
the Company or one of its Material Subsidiaries, provided that
every such Lien shall apply only to the property so acquired
and fixed improvements thereon;
(b) any extension, renewal, or refunding of any Lien
permitted by the Credit Agreement, if limited to the same
property subject to, and securing not more than the amount
secured by, the Lien extended, renewed or refunded;
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(c) the pledge of current assets in the ordinary
course of business, to secure current liabilities;
(d) mechanics' or materialmen's liens, good faith
deposits in connection with tenders, leases of real estate,
bids or contracts (other than contracts for the payment of
money) deposits to secure public or statutory obligations,
deposits to secure, or in lieu of, surety, stay or appeal
bonds, and deposits as security for the payment of taxes or
assessments or similar charges, Liens given in connection with
bid or completion bonds; provided that such obligations
secured are not yet due or are being contested in good faith
by appropriate action and against which an adequate reserve
has been established.
(e) any Lien arising by reason of deposits with, or
the giving of any form of security to, any Governmental Entity
created or approved by Law for any purposes at any time as
required by Law as a condition to the transaction of any
business or the exercise of any privilege or license, or to
enable the company or a Subsidiary to maintain self-insurance
or to participate in any funds established to cover any
insurance risks or in connection with workmen's compensation,
unemployment insurance, old age pensions or other social
security, or to share in the privileges or benefits required
for companies participating in such arrangements; provided
that such obligations secured are not yet due or are being
contested in good faith by appropriate action and against
which an adequate reserve has been established;
(f) the pledge or assignment of accounts receivable,
to banks or others made in the ordinary course of business
(including to or by a Subsidiary which is principally engaged
in the business of financing the business of the Company and
its Subsidiaries);
(g) the Liens of taxes or assessments for the then
current year or not at the time due, or the Liens of Taxes
already due but the validity of which is being contested in
good faith by appropriate action and against which an adequate
reserve has been established;
(h) any judgment or Lien against the Company or a
Material Subsidiary, so long as the finality of such judgment
is being contested in good faith by appropriate action and the
execution thereon is stayed;
(i) assessments or similar encumbrances, the
existence of which does not impair the value or the use of the
property subject thereto for the purposes for which it was
acquired;
(j) landlords' liens on fixtures and movable property
located on premises leased by the Company or a Material
Subsidiary in the ordinary course of business so long as the
rent secured thereby is not in default;
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(k) Liens on the assets of any limited liability
company organized under a limited liability company act of any
state in which a limited liability company is treated as a
partnership for federal income tax purposes; provided that
neither the Company nor any Material Subsidiary is liable for
the debt of such limited liability company; and
(l) other Liens on any properties of the Company or
any Subsidiary with an aggregate value not exceeding 1% of the
book value of the total assets of the Company on a
consolidated basis.
"PERSON" means an individual or a corporation, partnership,
trust, incorporated or unincorporated association, limited liability
company, joint venture, joint stock company, government (or an agency
or political subdivision thereof) or other entity of any kind.
"PURCHASE PRICE" has the meaning set forth in Section 2.1(b).
"PURCHASERS" has the meaning set forth in the introductory
paragraph hereto.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement between the Company and Purchasers dated the date hereof.
"REPRESENTATIVES" of any Person means the officers, directors,
employees, agents and other representatives of such Person.
"RIGHTS AGREEMENT" has the meaning set forth in Section 3.17.
"RIGHTS AGREEMENT AMENDMENT" has the meaning set forth in
Section 3.17.
"RULE 144" means Rule 144 under the Securities Act and any
successor rule thereto.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time, and the rules and regulations of the SEC promulgated
thereunder.
"STOCK PLANS" means the Company's stock option, stock
incentive or other similar plans.
"SUBSIDIARY" means (i) a corporation, a majority of whose
stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by the Company,
by a Subsidiary of the Company or by the Company and another
Subsidiary, or (ii) any other Person (other than a corporation) in
which the Company, a Subsidiary or the Company and a Subsidiary,
directly or indirectly, at the date of determination thereof has at
least a majority ownership interest.
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"TAX" or "TAXES" has the meaning set forth in Section 3.11.
"TAX RETURN" has the meaning set forth in Section 3.11.
"13d GROUP" means a group within the meaning of Section
13(d)(3) of the Exchange Act.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes, the
Registration Rights Agreement, and Employment Agreements and the
Options.
"TRANSFER" has the meaning set forth in Section 4.5.
"UNDERLYING SHARES" means the shares of Common Stock (i)
issuable upon conversion of the Notes in accordance with the terms
thereof, (ii) paid as interest on the Notes in accordance with the
terms of the Notes and (iii) issued upon exercise of the Options.
"VOTING STOCK" of a Person means Capital Stock of such Person
of the class or classes pursuant to which the holders thereof have the
general voting power under ordinary circumstances to vote in the
election of the board of directors, managers or trustees of such
Person; provided that if such Person has more than one class or series
of Voting Stock, any calculation as to a percentage of such Voting
Stock shall be made with respect to the percentage of votes entitled to
be cast in respect of such Voting Stock in such circumstances.
SECTION 1.2 REFERENCES AND TITLES. All references in this Agreement to
Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections,
and other subdivisions of this Agreement unless expressly provided otherwise.
Titles appearing at the beginning of any Articles, Sections, subsections, or
other subdivisions of this Agreement are for convenience only, do not constitute
any part of such Articles, Sections, subsections or other subdivisions, and
shall be disregarded in construing the language contained therein. The words
"this Agreement," "herein," "hereby," "hereunder," and "hereof," and words of
similar import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The words "this Section," "this
subsection," and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "including" (in its
various forms) means "including without limitation." Pronouns in masculine,
feminine, or neuter genders shall be construed to state and include any other
gender and words, terms, and titles (including terms defined herein) in the
singular form shall be construed to include the plural and vice versa, unless
the context otherwise requires. Unless the context otherwise requires, all
defined terms contained herein shall include the singular and plural forms of
such defined terms.
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ARTICLE II.
PURCHASE OF THE NOTES
SECTION 2.1 PURCHASE OF THE NOTES.
(a) Subject to the terms and conditions herein set forth, the Company
will sell to Purchasers, and Purchasers will purchase from the Company, the
Notes in the following amounts, and at the following times;
(1) Two (2) Notes, each in the original principal amount of
$1.5 million (one purchased by each Purchaser) within two (2) business
days after receipt by the Company of a written notice signed by the
Administrative Lender to the effect that the lenders signatory to the
Credit Agreement agree to forebear from pursuing any remedy for breach
by the Company of the terms of the Credit Agreement for a period of
eight (8) weeks from the date of such notice; and
(2) Two (2) Notes, each in the original principal amount of
$3.5 million (one purchased by each Purchaser) within two (2) business
days after execution and delivery to the Company of an amendment to the
Credit Agreement which is satisfactory to the Company and the
Purchasers.
(b) The purchase price payable for each Note shall be equal to the sum
of the original principal amount of such Note (the "Purchase Price").
(c) Delivery of the Notes to Purchasers shall be made at each Closing
against payment of the Purchase Price therefor as provided herein.
(d) Payment of the Purchase Price for the Notes to be purchased
hereunder shall be made by or on behalf of Purchasers by wire transfer of
immediately available funds to an account of the Company.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Purchasers as follows (in each
case as qualified by matters reflected on the disclosure schedule dated as of
the date of this Agreement by reference to the Section of this Agreement so
qualified and delivered by the Company to Purchasers prior to the date of this
Agreement (the "Company Disclosure Schedule") and made a part hereof by
reference):
SECTION 3.1 ORGANIZATION, STANDING AND CORPORATE POWER. Each of the
Company and each of its Subsidiaries is a corporation or other entity validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated or organized and has the requisite corporate or other such entity
power and authority to own its properties and carry on its business as now being
conducted. Each of the Company and each of its Subsidiaries is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the
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ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed or to be in good standing, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect. The Company has
delivered to Purchasers prior to the execution of this Agreement complete and
correct copies of its Certificate of Incorporation and Bylaws and, in the case
of the Company's Material Subsidiaries, made available similar organizational
documents in each case, as in effect on the date of this Agreement.
SECTION 3.2 SUBSIDIARIES. Schedule 3.2 of the Company Disclosure
Schedule sets forth a true and complete list, as of the date hereof, of each
Material Subsidiary of the Company, together with the jurisdiction of
incorporation or organization and the percentage of each Material Subsidiary's
outstanding share capital (or other voting or equity securities or interests, as
applicable) owned by the Company or another Subsidiary of the Company. All the
outstanding shares of share capital (or other voting or equity securities or
interests, as applicable) of each Material Subsidiary of the Company have been
validly issued and are fully paid and nonassessable (with respect to corporate
Subsidiaries) and are owned directly or indirectly by the Company, free and
clear of all Liens except for Permitted Liens.
SECTION 3.3 CAPITAL STRUCTURE.
(a) The authorized Capital Stock of the Company consists of 100,000,000
shares of Common Stock, of which, as of the date of this Agreement, (A)
22,422,943 shares of Common Stock are issued and outstanding, (B) 4,980,124
shares of Common Stock are held by the Company in its treasury and (C) no shares
of Common Stock are held by any of the Company's Subsidiaries.
(b) There are no outstanding warrants, stock options or stock
appreciation rights or other rights to receive or purchase any Capital Stock of
the Company or any of its Subsidiaries granted under the Stock Plans or
otherwise except as set forth in Schedule 3.3(b) of the Company Disclosure
Schedule (such warrants, share or stock options, shares or stock appreciation
rights or other rights disclosed thereon, collectively, the "Company Options").
Except as set forth in Schedule 3.3(b) of the Company Disclosure Schedule and
except as provided in the Transaction Documents, there are no outstanding
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company is a party or by
which it is bound obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, any Capital Stock of the Company or of any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Except as set forth in
Schedule 3.3(b) of the Company Disclosure Schedule, there are no outstanding
obligations of the Company or any of its Subsidiaries (contingent or otherwise)
to repurchase, redeem or otherwise acquire any Capital Stock of the Company or
any of its Subsidiaries or any security exchangeable for or convertible into
such Capital Stock. All of the Company's Stock Plans are listed on Schedule
3.3(b).
(c) All outstanding Capital Stock of the Company and its Subsidiaries
are, and all shares which may be issued upon (i) conversion of any of the Notes
issued, (ii) payment of interest on any of the Notes issued, or (iii) exercise
of the Options will be, when issued and upon delivery of the
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exercise price, if any, payable with respect thereto, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive or similar
rights.
(d) Except as contemplated hereby or in the other Transaction Documents
or as set forth in Schedule 3.3(d) of the Company Disclosure Schedule, there are
not any registration rights agreements, shareholder agreements, voting
agreements or trusts, proxies or other agreements or contractual obligations to
which the Company is a party or bound with respect to the registration with any
Government Entity, or the voting or disposition of any Capital Stock of the
Company.
SECTION 3.4 AUTHORITY; NO VIOLATIONS; APPROVALS.
(a) The Board by a vote of not less than a majority of the "Continuing
Directors" (as defined in the Company's Certificate of Incorporation) holding
office as of such date expressly approved, in advance of the acquisition of the
Notes, the Underlying Shares and such other acquisition of the Company's
securities as are contemplated by this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby. The Company has
all requisite corporate power and authority to enter into this Agreement and
each of the other Transaction Documents and to consummate each of the
transactions and perform each of the obligations contemplated hereby and
thereby. The execution and delivery of this Agreement and each of the other
Transaction Documents and the consummation of each of the transactions and the
performance of each of the obligations contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of the Company.
This Agreement and the other Transaction Documents have been duly executed and
delivered by the Company except the Notes, which will be duly executed and
delivered by the Company upon payment of the Purchase Price therefor. Assuming
this Agreement and each of the other Transaction Documents to which Purchasers
are a party constitute the valid and binding obligations of Purchasers, this
Agreement and each of the other Transaction Documents constitutes or in the case
of the Notes, when issued and delivered will constitute, a valid and binding
obligation of the Company enforceable in accordance with its terms, subject, as
to enforceability, to bankruptcy, insolvency, reorganization, moratorium and
other similar laws of general applicability relating to or affecting creditors'
rights and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) Except as set forth in Schedule 3.4(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement and each of the other
Transaction Documents does not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, require the consent of any other Person to or result in any
violation of, or default (with or without notice or lapse of time, or both)
under, or result in the creation of any Lien upon any of the properties or
assets of the Company or any of its Subsidiaries under any provision of (A) the
Certificate of Incorporation or Bylaws or any provision of the comparable
organizational documents of any of the Company's Subsidiaries, (B) any loan or
credit agreement, note, bond, mortgage, indenture or other contract or agreement
arrangement or understanding to which the Company or any of its Subsidiaries is
a party or otherwise is bound or by which any of them or their respective
properties are bound or (C) assuming the Approvals referred to in Section 3.4(c)
are duly and timely obtained or made, any Law or Order applicable to the
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Company or any of its Subsidiaries or any of their respective properties or
assets, other than, in the case of clause (B) or (C), any such violations,
defaults, rights, Liens or detriments, that, individually or in the aggregate,
(x) could not reasonably be expected to have a Material Adverse Effect, (y)
could not reasonably be expected to impair the ability of the Company to perform
its obligations under any of the Transaction Documents in any material respect,
and (z) could not reasonably be expected to delay in any material respect or
prevent the consummation of any of the transactions, or performance of the
obligations, contemplated by any of the Transaction Documents.
(c) No Approval from any Governmental Entity is required by or with
respect to the Company in connection with the execution and delivery of this
Agreement or any other Transaction Document by the Company or the consummation
by the Company of the transactions contemplated hereby or thereby, except for:
(A) such Approvals as may be required by any applicable state securities or
"blue sky" laws; and (B) any such Approvals the failure of which to be made or
obtained (1) could not reasonably be expected to have a Material Adverse Effect,
(2) could not reasonably be expected to impair the ability of the Company to
perform its obligations under any of the Transaction Documents in any material
respect and (3) could not reasonably be expected to delay in any material
respect or prevent the consummation of any of the transactions contemplated by
any of the Transaction Documents.
SECTION 3.5 SEC DOCUMENTS.
(a) The Company has made available to Purchasers a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by the Company with the SEC since December 31, 1999 (the
"Company SEC Documents"), which are all the documents (other than preliminary
materials) that the Company was required to file with the SEC since December 31,
1999. As of their respective dates, the Company SEC Documents complied in all
material respects with the requirements of the Securities Act, or the Exchange
Act, as the case may be, and the rules and regulations of the SEC thereunder
applicable to such Company SEC Documents, and none of the Company SEC Documents
contained as of their respective dates any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) The financial statements of the Company included in the Company SEC
Documents, including the notes and schedules thereto, complied as to form in all
material respects with the rules and regulations of the SEC with respect
thereto, were prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Rule 10-01 of Regulation S-X of the SEC)
and fairly present the consolidated financial position of the Company and its
consolidated Subsidiaries as of their respective dates and the consolidated
results of operations and the consolidated cash flows of the Company and its
consolidated Subsidiaries for the periods presented therein in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to normal, recurring adjustments) applied on a consistent basis
during the periods presented.
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SECTION 3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in Schedule 3.6 of the Company Disclosure Schedule and in correspondence and
discussions among representatives of the Company and the Purchasers, from
November 30, 2000 to the date of this Agreement, there has not been any event,
circumstance or fact that (x) could reasonably be expected to have a Material
Adverse Effect, (y) could reasonably be expected to impair the ability of the
Company to perform its obligations under any of the Transaction Documents in any
material respect, or (z) could reasonably be expected to delay in any material
respect or prevent the consummation of any of the transactions contemplated by
any of the Transaction Documents.
SECTION 3.7 NO DEFAULT. Except as disclosed in Schedule 3.7 of the
Company Disclosure Schedules, neither the Company nor any of its Subsidiaries is
in default or violation (and, to the Knowledge of the Company, no event has
occurred which, with notice or the lapse of time or both, would constitute a
default or violation) of any term, condition or provision of (i) the Certificate
of Incorporation or Bylaws of the Company or the comparable organizational
documents of any of its Subsidiaries, (ii) any loan or credit agreement, note,
bond, mortgage, indenture or any other contract, agreement, arrangement or
understanding to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their respective
properties or assets is bound, or (iii) any Order or Law applicable to the
Company or any of its Subsidiaries, except in the case of clause (ii) and (iii),
for violations or defaults that, individually or in the aggregate, (x) could not
reasonably be expected to have a Material Adverse Effect, (y) could not
reasonably be expected to impair the ability of the Company to perform its
obligations under any of the Transaction Documents in any material respect, and
(z) could not reasonably be expected to delay in any material respect or prevent
the consummation of any of the transactions contemplated by any of the
Transaction Documents.
SECTION 3.8 COMPLIANCE WITH APPLICABLE LAWS.
(a) The Company and each of its Subsidiaries has in effect all
Approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses, and there has occurred no default or violation under any
such Approval, except for failures to obtain, or for defaults or violations
under, Approvals which failures, defaults or violations, individually or in the
aggregate, (i) could not reasonably be expected to have a Material Adverse
Effect, (ii) could not reasonably be expected to impair the ability of the
Company to perform its obligations under any of the Transaction Documents in any
material respect, and (iii) could not reasonably be expected to delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents.
(b) Except as otherwise disclosed in the Company SEC Documents, the
Company and its Subsidiaries are in compliance with all applicable Laws and
Orders, except for possible noncompliance which, individually or in the
aggregate, (i) could not reasonably be expected to have a Material Adverse
Effect, (ii) could not reasonably be expected to impair the ability of the
Company to perform its obligations under any of the Transaction Documents in any
material respect, and (iii) could not reasonably be expected to delay in any
material respect or prevent the consummation of any of the transactions
contemplated by any of the Transaction Documents.
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SECTION 3.9 LITIGATION. Except as disclosed in the Company SEC
Documents or Schedule 3.9 of the Company Disclosure Schedule, to the knowledge
of the Company, there is no suit, action, proceeding or indemnification claim,
at law or in equity, pending before any Governmental Entity or arbitrator, or,
to the Knowledge of the Company, threatened against the Company or any
Subsidiary of the Company ("Litigation") except for litigation that,
individually or in the aggregate, (x) could not reasonably be expected to have a
Material Adverse Effect, (y) could not reasonably be expected to impair the
ability of the Company to perform its obligations under any of the Transaction
Documents in any material respect, and (z) could not reasonably be expected to
delay in any material respect or prevent the consummation of any of the
transactions contemplated by any of the Transaction Documents.
SECTION 3.10 STATUS OF NOTES. The issuance and sale of the Notes and
the reservation and issuance of the Underlying Shares have been duly authorized
by all necessary corporate action on the part of the Company, and the issuance
and sale of the Notes and the issuance of the Underlying Shares are not and will
not be subject to preemptive rights of any Person.
SECTION 3.11 TAX RETURNS AND TAX PAYMENTS. The Company and each of its
Subsidiaries has timely filed all returns, reports or statements required to be
filed with any Governmental Entity with respect to Taxes ("Tax Returns")
required to be filed by it, and all such Tax Returns are true, correct and
complete in all material respects and all Taxes shown thereon to be due have
been paid, except where the failure to so have timely filed, to be true, correct
or complete or to have paid such Taxes has not had and could not reasonably be
expected to have a Material Adverse Effect. No claim for unpaid Taxes has been
asserted in writing by a tax authority or has become a Lien (except for
Permitted Liens) against the property of the Company or any of its Subsidiaries.
No audit of any Tax Return of the Company or any of its Subsidiaries is being
conducted by a tax authority, which audit reasonably could be expected to have a
Material Adverse Effect, and no extension of the statute of limitations on the
assessment of any material Taxes has been granted by the Company or any of its
Subsidiaries and currently is in effect. Neither the Company nor any of its
Subsidiaries is a party to, is bound by, or has any obligation under any tax
sharing or allocation agreement or similar agreement or arrangement, other than
as among the Company and its Subsidiaries. For purposes of this Agreement, "Tax"
means any federal, state, local or foreign income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, premium,
withholding, alternative or added minimum, ad valorem, transfer or excise tax,
or any other tax or other like assessment or charge of any kind whatsoever,
together with any interest or penalty, imposed by any Governmental Entity.
SECTION 3.12 EMPLOYEE BENEFIT PLANS. Except as otherwise disclosed in
the Company SEC Documents or Schedule 3.12 of the Company Disclosure Schedule:
(a) all employee benefit plans and arrangements covering
employees of the Company and its Subsidiaries (collectively, the
"Benefit Plans") are listed in the Company SEC Documents or Schedule
3.12 of the Company Disclosure Schedule and complete copies of all
material Benefit Plans, including all amendments, have been made
available to Purchasers;
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(b) to the extent applicable, the Benefit Plans comply, in all
material respects, with the requirements of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the Code, and
any Benefit Plan intended to be qualified under Section 401(a) of the
Code satisfies the requirements of such Section, has been determined by
the Internal Revenue Service to be so qualified and has not, since such
determination, been amended or, operated in a way which would adversely
affect such qualified status;
(c) each Benefit Plan has been maintained and administered in
all material respects in compliance with its terms and with ERISA and
the Code to the extent applicable thereto; and
(d) all contributions required to be made as of the date
hereof to the Benefit Plans have been made, except in each case as,
individually or in the aggregate, has not had and could not reasonably
be expected to have a Material Adverse Effect.
Except as disclosed in Schedule 3.12 of the Company Disclosure Schedule, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not (i) require the Company to make a
larger contribution to, or pay greater benefits under, any Benefit Plan than it
otherwise would, (ii) create or give rise to additional vested rights or service
credits under any Benefit Plan, or (iii) result in all or any part of any
payments made, or that may become payable as a result of the transactions
contemplated by the Agreement, by the Company not to be deductible by the payor
under sections 280G or 162(m) of the Code;
SECTION 3.13 LABOR MATTERS. Except as set forth in Schedule 3.13 of the
Company Disclosure Schedule or in the Company SEC Documents:
(a) there is no unfair labor practice charge or grievance
arising out of a collective bargaining agreement or other grievance
procedure against the Company or any of its Subsidiaries or any
proceeding or investigation relating to the Company's or any
Subsidiary's compliance with immigration law pending, or, to the
Knowledge of the Company, threatened, that, individually or in the
aggregate, has had or could reasonably be expected to have a Material
Adverse Effect;
(b) there is no strike, dispute, slowdown, work stoppage or
lockout pending, or, to the Knowledge of the Company, threatened,
against or involving the Company or any of its Subsidiaries that,
individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect; or
(c) there is no proceeding, claim, suit, action or
governmental investigation pending or, to the Knowledge of the Company
threatened, in respect to which any current or former director,
officer, employee or agent of the Company or any of its Subsidiaries is
or may be entitled to claim indemnification from the Company or any of
its Subsidiaries pursuant to (a) the Certificate of Incorporation or
Bylaws of the Company, (b) any provision of the comparable charter or
organizational documents of any of its Subsidiaries, (c) any
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indemnification agreement to which the Company or any Subsidiary of the
Company is a party or (d) applicable Law.
SECTION 3.14 INTANGIBLE PROPERTY. The Company and its Subsidiaries
possess or have adequate rights to use all trademarks, trade names, patents,
service marks, brand marks, brand names, computer programs, databases,
industrial designs and copyrights necessary for the operation of the businesses
of each of the Company and its Subsidiaries (collectively, the "Intangible
Property"), except where the failure to possess or have adequate rights to use
such properties, individually or in the aggregate, has not had and could not
reasonably be expected to have a Material Adverse Effect. All of the Intangible
Property is owned or licensed by the Company or its Subsidiaries free and clear
of any and all Liens, except those that, individually or in the aggregate, have
not had and could not reasonably be expected to have a Material Adverse Effect,
and neither the Company nor any such Subsidiary has forfeited or otherwise
relinquished any Intangible Property which forfeiture, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule 3.14, the use of the Intangible Property
by the Company or its Subsidiaries does not conflict with, infringe upon,
violate or interfere with or constitute an appropriation of any right, title,
interest or goodwill, including any trademark, patent, service ▇▇▇▇, copyright
or any pending application therefor of any other person and there have been no
claims made and neither the Company nor any of its Subsidiaries has received any
notice of any claim or otherwise knows that any of the Intangible Property is
invalid or conflicts with the asserted rights of any other person or has not
been used or enforced or has failed to have been used or enforced in a manner
that would result in the abandonment, cancellation or unenforceability of any of
the Intangible Property, except for any such conflict, infringement, violation,
interference, claim, invalidity, abandonment, cancellation or unenforceability
that, individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect.
SECTION 3.15 INSURANCE. The Company maintains insurance in such
amounts, with such deductibles and exclusions, and covering such risks as are in
accordance with industry practice for companies engaged in businesses similar to
those of the Company and each of its Subsidiaries (taking into account the cost
and availability of such insurance).
SECTION 3.16 NO BROKERS OR FINDERS. No agent, broker, finder or
investment or commercial banker, or other Person or firm engaged by or acting on
behalf of the Company in connection with the negotiation, execution or
performance of this Agreement is or will be entitled to any brokerage or
finder's or similar fee or other commission as a result of this Agreement, the
other Transaction Documents or the transactions contemplated hereby or thereby,
other than any such fees or commissions that have been disclosed to Purchasers
in the Company Disclosure Schedule and as to which the Company shall have full
responsibility.
SECTION 3.17 AMENDMENT TO RIGHTS AGREEMENT; BOARD APPROVAL. The Board
has taken all necessary action to amend (such amendment referred to herein as
the "Rights Agreement Amendment") the Rights Agreement dated April 16, 1991
between the Company and AmeriTrust Company, N.A., as Agent (the "Rights
Agreement"), so that none of the execution and delivery of this Agreement and
the other Transaction Documents and the consummation of the transactions
contemplated hereby and thereby (including the conversion of the Notes, the
payment of interest
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thereon in Common Stock, or exercise of the Options) will cause (i) the rights
issued pursuant to the Rights Agreement to become exercisable under the Rights
Agreement or (ii) the distribution of Rights Certificates (as defined in the
Rights Agreement). The Board has, by resolution duly adopted and approved this
Agreement and the other Transaction Documents, and such approval constitutes
approval for purposes of Section 203 of the General Corporation Law of the State
of Delaware, so that consummation of the transactions contemplated hereby and by
the other Transaction Documents does not cause Purchasers to become subject to
the provisions of Section 203 of the General Corporation Law of the State of
Delaware as a result of said transactions. The Board has duly adopted the
resolution set forth on EXHIBIT "B" hereto renouncing any interest or expectancy
in certain specified business opportunities.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
Each Purchaser represents and warrants to the Company as follows:
SECTION 4.1 AUTHORITY; APPROVALS.
(a) (i) Each of the Purchasers has full power and authority to enter
into this Agreement and each of the other Transaction Documents to which he is a
party and to consummate each of the transactions and perform each of the
obligations hereof and thereof applicable to such Purchaser, (ii) this Agreement
and each of the other Transaction Documents to which he is a party have been
duly executed and delivered by him or on his behalf and, assuming the accuracy
of the representations and warranties of the Company in Section 3.4 hereof,
constitutes the valid and legally binding obligations of such Purchaser,
enforceable against him in accordance with their respective terms, subject as to
enforceability, to bankruptcy, insolvency, reorganization, moratorium and other
similar laws of general applicability relating to or affecting creditors' rights
and to general principles of equity (regardless of whether such enforceability
is considered in a proceeding in equity or at law); (iii) execution and delivery
of this Agreement and the other Transaction Documents, including the purchase of
the Notes does not, and the consummation of the transactions contemplated hereby
and thereby and compliance with the terms hereof and thereof will not, require
the consent of any other Person, or conflict with or violate any duties owed by
Purchasers to any other Person or Law applicable to him in a manner that could
reasonably be expected to impair the ability of the Purchaser to perform his
obligations under any of the Transaction Documents in any material respect or
could reasonably be expected to delay in any material respect or prevent the
consummation of any of the transaction, or performances of the obligations,
contemplated by any of the Transaction Documents.
(b) No Approval from any Governmental Entity is required by or with
respect to such Purchaser in connection with the execution and delivery by such
Purchaser of this Agreement or any other Transaction Document to which he is a
party or the consummation by such Purchaser of the transactions contemplated
hereby or thereby.
SECTION 4.2 EXEMPT OFFERING. Each Purchaser acknowledges that the Notes
to be acquired by such Purchaser hereunder have not been registered under the
Securities Act and are
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being offered and sold pursuant to an exemption from registration contained in
the Securities Act based in part upon the representations of the Purchasers
contained herein.
SECTION 4.3 DISCLOSURE OF INFORMATION. Each Purchaser believes that he
has received all the information he considers necessary or appropriate for
deciding whether to purchase the Notes. Each Purchaser has had an opportunity to
ask questions and receive answers from the Company regarding the terms and
conditions of the offering and the Notes and the business, properties, prospects
and financial condition of the Company and to obtain additional information (to
the extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any information furnished to
the Purchaser or to which the Purchaser had access. The foregoing, however, does
not in any way limit or modify the representations and warranties made by the
Company in Article 3.
SECTION 4.4 INVESTMENT INTENT. The Notes to be acquired by each
Purchaser hereunder and any Underlying Shares to be acquired upon the exercise,
conversion or exchange of such Note are being acquired for his own account, not
as a nominee or agent, for investment and with no present intention of
distributing or reselling such Notes or Underlying Shares or any part thereof or
interest therein.
SECTION 4.5 TRANSFER RESTRICTIONS. Subject to any restrictions in the
Notes, if such Purchaser should decide to dispose of any portion of the Notes to
be purchased by him or any Underlying Shares to be issued to him upon the
exercise or exchange of such Note, such Purchaser understands and agrees that he
may do so only pursuant to an effective registration statement under the
Securities Act or pursuant to an exemption from registration under the
Securities Act. In connection with any offer, resale, pledge or other transfer
(individually and collectively, a "Transfer") of any Note(s) or Underlying
Shares other than pursuant to an effective registration statement, the Company
may require that the transferor of such Note(s) or Underlying Shares provide to
the Company an opinion of counsel which opinion shall be reasonably satisfactory
in form and substance to the Company, to the effect that such Transfer is being
made pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act and any applicable state or
foreign securities Laws. Such Purchaser agrees to the imprinting, so long as
appropriate, of substantially the following legend on certificates representing
the Note to be acquired by such Purchaser hereunder and any Underlying Shares:
THE SECURITIES (THE "SECURITIES") EVIDENCED HEREBY HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER AGREES THAT IT WILL NOT OFFER, RESELL, PLEDGE OR OTHERWISE
TRANSFER (INDIVIDUALLY AND COLLECTIVELY, A "TRANSFER") THE SECURITIES
EVIDENCED HEREBY, EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, OR (B) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT. IF THE PROPOSED TRANSFER IS
TO BE MADE OTHER
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THAN PURSUANT TO CLAUSE (A) ABOVE, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT
TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR ANY STATE OR FOREIGN
SECURITIES LAW.
The legends set forth above may be removed if and when the Note(s) or
Underlying Shares, as the case may be, represented by such certificate are
disposed of pursuant to an effective registration statement under the Securities
Act or the opinion of counsel referred to above has been provided to the
Company. Such Purchaser agrees that, in connection with any Transfer of
securities by him pursuant to an effective registration statement under the
Securities Act, he will comply with all prospectus delivery requirements of the
Securities Act. The Company makes no representation, warranty or agreement as to
the availability of any exemption from registration under the Securities Act
with respect to any resale of a Note or Underlying Shares.
SECTION 4.6 PURCHASER STATUS. Each such Purchaser represents and
warrants to, and covenants and agrees with the Company that (i) at the time he
was offered the Note(s) to be acquired by such Purchaser hereunder, he was, and
(ii) at the date hereof, he is, an accredited investor as defined in Rule 501(a)
under the Securities Act, and has such knowledge, sophistication and experience
in business and financial matters so as to be capable of evaluating the merits
and risks of the Company and an investment in such Note, and is able to bear the
economic risk of such investment.
SECTION 4.7 NO BROKERS OR FINDERS. No agent, broker, finder or
investment or commercial banker, or other Person or firm engaged by or acting on
behalf of such Purchaser in connection with the negotiation, execution or
performance of this Agreement is or will be entitled to any brokerage or
finder's or similar fee or other commission as a result of this Agreement, other
than any such fees or commissions that have been disclosed to the Company and as
to which such Purchaser shall have full responsibility.
SECTION 4.8 OWNERSHIP OF SHARES. Except as set forth in the Schedule
13D filed by Purchaser with the SEC, neither Purchaser nor any of their
Affiliates is the beneficial owner of any Capital Stock in the Company.
SECTION 4.9 FINANCING. Upon the terms and subject to the conditions of
this Agreement, the Purchasers have available to them all funds necessary to
satisfy its obligations to purchase the Notes hereunder.
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ARTICLE V.
COVENANTS
SECTION 5.1 CORPORATE OPPORTUNITIES. Until the earlier of (a) March 9,
2006, and (b) such date on which neither ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ is a director, officer, employee or consultant of the Company, the Board
shall not suspend or restrict the resolutions set forth on EXHIBIT "B" hereto
relating to the Company's renouncement of any interest in certain specified
business opportunities.
SECTION 5.2 APPROVALS. The Company and Purchasers each agree to
cooperate and use all commercially reasonable efforts to obtain (and will
promptly prepare all registrations, filings and applications, requests and
notices preliminary to) (a) all Approvals that may be necessary or which may be
reasonably requested by the Company or Purchasers to consummate the transactions
contemplated by this Agreement and the other Transaction Documents, and (b) the
forbearance letter and the amendment to the Credit Agreement contemplated by
Section 2 hereof.
SECTION 5.3 BOARD OF DIRECTORS.
(a) The Company shall take, or cause to be taken, such action as may be
necessary or advisable to ensure that immediately following the Closing the
Board shall consist of eleven directorships and that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ shall each be appointed as a member of the Board of
Directors to fill such newly created vacancy to hold office until the Company's
2002 annual meeting. Upon the occurrence of the first vacancy in the Board of
the Company after the date hereof, Purchasers shall be entitled to name a
nominee to fill such vacancy and subject to the reasonable objection of the
Board of Directors, the nominee of the Purchasers shall be appointed to fill
such vacancy.
(b) At any meeting of the shareholders of the Company held in 2002 for
the purpose of electing directors of the Company, the Purchasers shall be
entitled to nominate for election to the Board, and the Company shall use its
reasonable best efforts to cause to be nominated for election to the Board that
number of individuals such that the aggregate number of directors on the Board
that were nominated by the Purchasers after giving effect to the election of
such nominees shall equal (i) two directors, prior to the time the first vacancy
occurring after the date hereof occurs, and (ii) three directors thereafter.
SECTION 5.4 STANDSTILL. The Purchasers agree that they, together with
their Affiliates and Associates and any 13d Group of which they are a part,
shall not Beneficially Own any Voting Stock or Common Stock of the Company in
excess of the Maximum Percentage Ownership until such time as neither of the
Purchasers is a director, officer, employee or consultant of the Company, at
which time this covenant shall be of no further force or effect whatsoever.
SECTION 5.5 USE OF PROCEEDS. The Company shall use the proceeds from
the sale of the Notes for working capital and for general corporate purposes,
and not for the purpose of purchasing or otherwise acquiring securities.
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ARTICLE VI.
CLOSING
SECTION 6.1 CLOSING. Each purchase and sale of the Notes to be
purchased by Purchasers hereunder (each a "Closing") will take place at the
offices of the Company at ▇▇▇▇ ▇.▇. ▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, at 10:00 a.m.,
local time, on the dates specified in Section 2.1(b) hereof, or on such other
date as mutually agreed to by the parties hereto. The date on which each
purchase and sale of Notes occurs is herein referred to as a "Closing Date."
SECTION 6.2 ACTIONS TO OCCUR.
(a) On March 9, 2001, Purchasers shall deliver to the Company the
following:
(i) Employment Agreements. The Employment Agreement of each
Purchaser, duly executed by such Purchaser.
(ii) Stock Options. The Options to each Purchaser, duly
executed by such Purchaser.
(iii) Registration Rights Agreement. The Registration Rights
Agreement, duly executed by the Purchasers.
(b) On March 9, 2001, the Company shall deliver to Purchasers the
following:
(i) Employment Agreements. The Employment Agreement of each
Purchaser, duly executed by the Company.
(ii) Stock Options. The Options to each Purchaser, duly
executed by the Company.
(iii) Registration Rights Agreement. The Registration Rights
Agreement, duly executed by the Company.
(iv) Rights Agreement Amendment. A true and correct copy of
the Rights Agreement Amendment, duly executed by the Company.
(v) Board Resolutions. Copies of resolutions referred to in
Section 3.17 of this Agreement and adopted by the Board of Directors
relating to Section 203 of the General Corporation Law of the State of
Delaware and renouncing the Company's interest or expectancy in certain
specified business opportunities, in each case certified by the
Company's Secretary.
(vi) Opinion of Company Counsel. An Opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇, outside counsel for the
Company, dated March 9, 2001, to the effect set forth in EXHIBIT "C"
with respect to all matters therein other than the Notes.
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(c) At each Closing, Purchasers shall deliver to the Company an amount
equal to the Purchase Price for the Notes then being purchased in accordance
with Article II, and the Company shall deliver to Purchasers the Notes being
purchased.
SECTION 6.3 CONDITION TO CLOSING.
(a) The obligation of Purchasers under this Agreement to Purchase the
Notes will be subject to the following conditions:
(i) Purchasers shall have received on each Closing Date a
certificate, dated such Closing Date and signed by an executive officer
of the Company, to the effect that the representations and warranties
of the Company contained in this Agreement are true and correct in all
material respects as of such Closing Date and that the Company has
complied in all material respects with all of the agreements and
satisfied all of the conditions on its part to be performed or
satisfied on or before such Closing Date.
(ii) Purchasers shall have received on March 9, 2001 an
opinion of ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇,
outside counsel for the Company, dated March 9, 2001, to the effect set
forth in EXHIBIT "C" hereto with respect to the Notes.
(b) The obligation of the Company under the Agreement to issue the
Notes will be subject to the following condition:
(i) The Company shall have received each Closing Date a
certificate, dated such Closing Date and signed by each Purchaser, to
the effect that the representations and warranties of the Purchasers
contained in this Agreement are true and correct in all material
respects as of the Closing Date and that the Purchasers have complied
in all material respects with all of the agreements and satisfied all
of the conditions on their parts to be performed or satisfied on or
before such Closing Date.
(c) The obligations of Purchasers and the Company to purchase and issue
the Notes, respectively as contemplated hereby are subject to the satisfaction
on or prior to each Closing Date of the following conditions:
(i) No temporary restraining order, preliminary or permanent
injunction, or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the
purchase and sale of the Notes contemplated hereby shall be in effect.
(ii) No action shall have been taken nor any statute, rule, or
regulation shall have been enacted by any governmental entity that
makes the purchase and sale of the Notes contemplated hereby illegal.
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ARTICLE VII.
MISCELLANEOUS
SECTION 7.1 SURVIVAL OF PROVISIONS.
(a) The representations and warranties of the Company and Purchasers
made herein or in any other Transaction Document shall remain operative and in
full force and effect pursuant to their terms, until March 1, 2002; provided
that such representations and warranties shall survive as to any claim or demand
made prior to their termination date until such claim or demand is fully paid or
otherwise resolved by the parties hereto in writing or otherwise.
(b) The covenants and agreements of the Company and Purchasers
contained in this Agreement that, by their terms, are to be performed or
complied with after the Closing Date will survive until the later of (i) March
1, 2002 and (ii) the period specified herein with respect to such covenant or
agreement; and provided, further, that such covenants and agreements shall
survive as to any claim or demand made prior to their termination date until
such claim or demand is fully paid or otherwise resolved by the parties hereto
in writing or otherwise.
SECTION 7.2 NO WAIVER; MODIFICATION IN WRITING. No failure or delay on
the part of the Company or a Purchaser in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. Without
limiting the rights that any party may have for fraud under common law, the
remedies provided for herein are cumulative and are the exclusive remedies
available to the Company or Purchasers at law or in equity. The provisions of
this Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given without the written consent of the Company,
on the one hand, and Purchasers or their permitted assigns, on the other hand,
provided that notice of any such waiver shall be given to each party hereto as
set forth below. Any amendment, supplement or modification of or to any
provision of this Agreement, or any waiver of any provision of this Agreement,
shall be effective only in the specific instance and for the specific purpose
for which made or given. Except where notice is specifically required by this
Agreement, no notice to or demand on any party hereto in any case shall entitle
the other party to any other or further notice or demand in similar or other
circumstances.
SECTION 7.3 SPECIFIC PERFORMANCE. The parties recognize that in the
event the Company or Purchasers should refuse to perform under the provisions of
this Agreement or any other Transaction Document, monetary damages alone will
not be adequate. Purchasers or the Company, as the case may be, shall therefore
be entitled, in addition to any other remedies which may be available, including
money damages, to obtain specific performance of the terms of this Agreement. In
the event of any action to enforce this Agreement or any other Transaction
Document specifically, the Company and Purchasers hereby waive the defense that
there is an adequate remedy at law.
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SECTION 7.4 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal, or incapable of being enforced by any rule of
applicable law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated herein are not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal, or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated herein are consummated as originally contemplated to the fullest
extent possible.
SECTION 7.5 PARTIES IN INTEREST. This Agreement shall be binding upon
and, except as provided below, inure solely to the benefit of each party hereto
and their successors and assigns, and nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
SECTION 7.6 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or mailed
by registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
If to Purchasers:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
and
Fulbright & ▇▇▇▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. Still
If to Luby's:
▇▇▇▇'▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Chairman of the Board
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with a copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ Incorporated
▇▇▇ ▇. ▇▇. ▇▇▇▇'▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Any of the above addresses may be changed at any time by notice given
as provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered, on the date of receipt, if telecopied, three Business Days
after the date of mailing, if mailed by registered or certified mail, return
receipt requested, and one Business Day after the date of sending, if sent by
Federal Express or other recognized overnight courier.
SECTION 7.7 COUNTERPARTS. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, all of which
shall be considered one and the same agreement and shall become effective when
one or more counterparts have been signed by each of the parties and delivered
to the other parties, it being understood that all parties need not sign the
same counterpart.
SECTION 7.8 ENTIRE AGREEMENT. This Agreement (which term shall be
deemed to include the Exhibits and Schedules hereto and the other certificates,
documents and instruments delivered hereunder) and the other Transaction
Documents constitute the entire agreement of the parties hereto and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof. There are no representations
or warranties, agreements, or covenants other than those expressly set forth in
this Agreement and the other Transaction Documents.
SECTION 7.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING
EFFECT TO ANY CONFLICTS OF LAW PROVISIONS.
SECTION 7.10 PUBLIC ANNOUNCEMENTS. The Company, on the one hand, and
Purchasers, on the other, shall consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or the transactions contemplated hereby, except for statements required by Law
or by any listing agreements with or rules of any national securities exchange
or the National Association of Securities Dealers, Inc., or made in disclosures
reasonably determined as required to be filed pursuant to the Securities Act or
the Exchange Act.
SECTION 7.11 HEADINGS. The headings of this Agreement are for
convenience of reference only and are not part of the substance of this
Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officer as of the date first
written above.
▇▇▇▇'▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman of the Board
PURCHASERS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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EXHIBIT A
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATIONS STATEMENT
IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE LAWS OR
SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
APPLICABLE LAWS AND AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
▇▇▇▇'▇ INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE
DUE ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇
March ____, 2001
▇▇▇▇'▇ INC., a Delaware corporation (the "Company"), the principal
office of which is located at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇, for
value received hereby promises to pay to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, or his registered
assigns, the sum of _____ Million Dollars ($__,000,000.00), or such other amount
as shall then equal the outstanding principal amount hereof and any unpaid
accrued interest hereon, as set forth below, and such amounts shall be due and
payable on the earlier to occur of (i) March 1, 2011, or (ii) when declared due
and payable by the Holder upon the occurrence of an Event of Default (as defined
below). Payment for all amounts due hereunder shall be made by mail to the
registered address of the Holder. This Note is issued in connection with the
transactions described in Section 2 of that certain Purchase Agreement between
the Company and the Purchasers described therein, dated as of March _____, 2001
(the "Purchase Agreement"). The holder of this Note is subject to certain
restrictions set forth in the Purchase Agreement and shall be entitled to
certain rights and privileges set forth in the Purchase Agreement. This Note is
one of the Notes referred to as the "Notes" in the Purchase Agreement. Terms
used and not otherwise defined herein have the meaning given such terms in the
Purchase Agreement.
The following is a statement of the rights of the Holder of this Note
and the conditions to which this Note is subject, and to which the Holder
hereof, by the acceptance of this Note, agrees:
1. Definitions. As used in this Note, the following terms, unless the
context otherwise requires, have the following meanings:
(i) "Company" includes any corporation or other entity that,
to the extent permitted by this Note or the Purchase Agreement, shall
succeed to or assume the obligations of the Company under this Note.
33
(ii) "Holder," when the context refers to a holder of this
Note, shall mean any persons who shall at the time be the registered holder of
this Note.
(iii) "Interest Rate" means for the three month period
preceding each Interest Payment Date (each an "Interest Period"), a rate of
interest equal to the lesser of (i) the Maximum Legal Rate divided by 4 and (ii)
LIBOR as reported by the Wall Street Journal two business days before the first
day of such Interest Period plus two percent (2%). During an Event of Default,
the Interest Rate shall equal the greater of (i) LIBOR plus two percent (2%) and
(ii) ten percent (10%), but in no event to exceed the Maximum Legal Rate.
(iv) "Last Sale Price" on any Trading Day shall mean (i) the
closing price regular way (or, if no closing price is reported the average of
the bid and asked prices) as reported on the New York Stock Exchange Composite
Tape, or (ii) if on such Trading Day the Common Stock is not listed or admitted
to trading on such exchange, the closing price regular way (or, if no closing
price is reported the average of the bid and asked prices) on the principal
national securities exchange on which the Common Stock is listed or admitted to
trading, or (iii) if not listed or admitted to trading on any national
securities exchange on such Trading Day, then the average of the closing bid and
asked prices as reported through the National Association of Securities Dealers,
Inc. on its NASDAQ National Market or other NASDAQ market or through a similar
organization if NASDAQ is no longer reporting information, or (iv) if the Common
Stock is not listed or admitted to trading on any national securities exchange
or quoted on such National Market or other NASDAQ market on such Trading Day,
then the average of the closing bid and asked prices in the over-the-counter
market as furnished by any New York Stock Exchange member firm selected from
time to time by the Company for that purpose or (v) if not quoted by any such
organization on such Trading Day, the fair value of such Common Stock on such
Trading Day, as reasonably determined by the Board of Directors in good faith.
(v) "LIBOR" shall mean the interest rate per annum (rounded
upward to the nearest one-sixteenth (1/16th) of one percent) quoted in the Wall
Street Journal for a three month contract in the London interbank market. In the
event that the Wall Street Journal ceases to report the interest rate for a
three month contract in the London interbank market, then LIBOR shall mean the
interest rate per annum (rounded upward to the nearest one-sixteenth (1/16) of
one percent) announced from time to time by CitiBank N.A. of New York for a
three month contract in the London Interbank market two business days before the
first day of such Interest Period.
(vi) "Trading Day" shall mean each Monday, Tuesday, Wednesday,
Thursday, and Friday, other than any day on which securities are not traded on
the New York Stock Exchange.
2. Interest. Commencing on June 1, 2001, and on each of September 1,
December 1, March 1, and June 1 thereafter (each such date being referred to as
an "Interest Payment Date") until all outstanding principal and interest on this
Note shall have been paid in full, the Company shall pay interest at the
Interest Rate on the principal of this Note outstanding during the period
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34
beginning on the date of issuance of this Note and ending on the date that the
principal amount of this Note becomes due and payable. From the original issue
date of this Note through and including the Interest Payment Date occurring
closest to the second anniversary of the original issue date of this Note, the
Company may pay on each Interest Payment Date accrued interest on the Note, at
its election, in cash or shares of Common Stock or both; provided that not more
than 60% of the total interest paid for the period through the first anniversary
of the original issue date and none of the interest paid for the period after
the first anniversary of the original issue date and through the second
anniversary date of the original issue date shall be paid in shares of Common
Stock unless the Holders of 51% of the aggregate principal amount of the
outstanding Notes shall have consented to such payment in shares of Common
Stock. The Company's election will in each case be made on or prior to the
second Trading Day preceding the applicable Interest Payment Date, with prompt
notice (as provided in Section 12 hereof) of such election being given to the
Holder. The Company shall pay all interest that accrues and becomes payable
after March 1, 2003 only in cash. The number of shares of Common Stock to be
issued when interest is to be paid in shares of Common Stock will equal (i) the
cash amount of the interest payable to be paid in shares of Common Stock divided
by (ii) the average of the Last Sale Price of the Common Stock for the twenty
(20) Trading Days immediately preceding the applicable Interest Payment Date,
rounded down to the nearest full share.
3. Events of Default. If any of the events specified in this Section 3
shall occur (herein individually referred to as an "Event of Default") the
Holder may, so long as any such condition exists, declare the entire principal
and unpaid accrued interest hereon immediately due and payable, by notice in
writing to the Company:
(i) Default in the payment of the principal and unpaid accrued
interest of this Note when due and payable not cured by the Company within ten
(10) days;
(ii) Any breach by the Company of any warranty or covenant in
this Note; provided, that, in the event of any such breach, to the extent such
breach is susceptible to cure, such breach shall not have been cured by the
Company within 30 days after written notice to the Company of such breach by the
Holder; or
(iii) Any event or occurrence exists that would constitute an
"Event of Default" of the Company under any Senior Indebtedness (as defined
below) of the Company whether or not such Event of Default has been waived by
the holder of such Senior Indebtedness,
4. Subordination. The indebtedness evidenced by this Note is hereby
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all the Company's Senior
Indebtedness, as hereinafter defined, whether outstanding as of the date hereof
or thereafter created, received, assumed, or guaranteed.
4.1 Senior Indebtedness. As used in this Note, the term "Senior
Indebtedness" shall mean the principal of, and unpaid accrued interest and
premium, if any, on: (i) all indebtedness of the Company for money borrowed by
the Company (whether or not secured), including any
-3-
35
guaranty by the Company of any indebtedness of any subsidiary for money borrowed
by such subsidiary (whether or not secured), and (ii) any such indebtedness or
any debentures, notes, or other evidence of indebtedness issued in exchange for
or to refinance such Senior Indebtedness, or any indebtedness arising from the
satisfaction of such Senior Indebtedness by a guarantor. Notwithstanding the
foregoing, Senior Indebtedness shall not include (i) indebtedness of the Company
owed or owing to any subsidiary of the Company or an officer, director or
employee of the Company or any subsidiary, or (ii) indebtedness to trade
creditors.
4.2 Default on Senior Indebtedness. If the Company shall default in the
payment of any principal of, or premium or interest on, any Senior Indebtedness
when the same becomes due and payable, whether at stated maturity or at a date
fixed for redemption or by declaration of acceleration or otherwise (a "Payment
Default"), then, upon written notice of such default to the Company by the
holders of such Senior Indebtedness or any trustee therefor, unless or until
such default shall have been cured or waived or shall have ceased to exist, no
direct or indirect payment (in cash, property, securities, by set-off, or
otherwise) shall be made or agreed to be made on account of the principal of, or
interest on, the Note, or in respect of any redemption, retirement, repurchase,
or other acquisition of the Note other than those made in capital stock of the
Company (or in cash in lieu of fractional shares thereof) pursuant to any
conversion right of the Note or otherwise made in capital stock of the Company
(or in cash in lieu of fractional shares thereof).
Upon (i) the happening of an Event of Default (other than a Payment
Default) that permits the holders of Senior Indebtedness or any trustee therefor
to accelerate its maturity (a "Nonpayment Default") and (ii) written notice of
such event of default given to the Company by the holders of at least 25% in
aggregate principal amount outstanding of such Senior Indebtedness or any
trustee therefor (a "Payment Notice"), then, unless and until such Event of
Default has been cured or waived or otherwise has ceased to exist, no payment
(in cash, property, securities, by set-off, or otherwise) may be made by or on
behalf of the Company on account of the principal of, or interest on, the Note),
in any such case other than payments made in capital stock of the Company (or in
cash in lieu of fractional shares thereof) pursuant to any conversion right of
the Note or otherwise made in capital stock of the Company (or in cash in lieu
of fractional shares thereof). Notwithstanding the foregoing, unless (i) the
Senior Indebtedness in respect of which such Event of Default exists has been
declared due and payable in its entirety within 179 days after the Payment
Notice is delivered as set forth above (the "Payment Blockage Period"), and (ii)
such declaration has not been rescinded or waived, at the end of the Payment
Blockage Period, the Company shall be required to pay all sums not paid to the
Holders of the Note during the Payment Blockage Period due to the foregoing
prohibitions and to resume all other payments as and when due on the Note. Any
number of Payment Notices may be given; provided, however, that (i) not more
than one Payment Notice shall be given within any period of 360 consecutive
days, and (ii) no default that existed upon the date of such Payment Notice or
the commencement of such Payment Blockage Period (whether or not such Event of
Default is on the same issue of Senior Indebtedness) shall be made the basis for
the commencement of any other Payment Blockage Period.
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36
If (a) without the consent of the Company, a court having jurisdiction
shall enter an order for relief with respect to the Company under the federal
Bankruptcy Code or, without the consent of the Company, a court having
jurisdiction shall enter a judgment, order, or decree adjudging the Company a
bankrupt or insolvent, or enter an order for relief for reorganization,
arrangement, adjustment, or composition of or in respect of the Company under
the federal Bankruptcy Code or applicable state insolvency law, or (b) the
Company shall institute proceedings for entry of an order for relief with
respect to the Company under the federal Bankruptcy Code or for an adjudication
of insolvency, or shall consent to the institution of bankruptcy or insolvency
proceedings against it, or shall file a petition seeking, or seek or consent to
reorganization, arrangement, composition, or relief under the federal Bankruptcy
Code or any applicable state law, or shall consent to the filing of such
petition or to the appointment of a receiver, custodian, liquidator, assignee,
trustee, sequestrator or similar official of the Company or of substantially all
of its property, or the Company shall make a general assignment for the benefit
of creditors as recognized under the federal Bankruptcy Code, then all Senior
Indebtedness (including any interest thereon accruing after the commencement of
any such proceedings) shall first be paid in full before any payment or
distribution, whether in cash, securities, or other property, shall be made to
any Holder of the Note on account thereof. Any payment or distribution, whether
in cash, securities (other than a payment or distribution in capital stock of
the Company), or other property (other than securities of the Company or any
other corporation provided for by a plan of reorganization or readjustment the
payment of which is subordinate, at least to the extent provided in these
subordination provisions with respect to the indebtedness evidenced by the Note,
to the payment of all Senior Indebtedness then outstanding and to any securities
issued in respect thereof under any such plan of reorganization or
readjustment), which would otherwise (but for these subordination provision) be
payable or deliverable in respect of the Note shall be paid or delivered
directly to the holder of Senior Indebtedness in accordance with the priorities
then existing among such holders until all Senior Indebtedness (including any
interest thereon accruing after the commencement of any such proceedings) shall
have been paid in full. In the event of such proceeding, after payment in full
of all sums owing with respect to Senior Indebtedness, the Holders of the Note,
together with the Holders of any other obligations of the Company ranking on a
parity with the Note, shall be entitled to be paid from the remaining assets of
the Company the amounts at the time due and owing on account of unpaid principal
of and interest on the Note and such other obligations before any payment or
other distribution, whether in cash, property, or otherwise, shall be made on
account of any capital stock or any obligations of the Company ranking junior to
the Note and such other obligations.
If, notwithstanding the foregoing, any payment or distribution of any
character, whether in cash, securities, or other property (other than securities
of the Company or any other corporation provided for by a plan of reorganization
or readjustment the payment of which is subordinate, at least to the extent
provided in these subordination provisions with respect to the indebtedness
evidenced by the Note, to the payment of all Senior Indebtedness then
outstanding and to any securities issued in respect thereof under any such plan
of reorganization or readjustment), shall be received by the Holder of the Note
in contravention of any of the terms hereof, such payment or distribution shall
be received in trust for the benefit of, and shall be paid over or delivered and
transferred to, the holders of the Senior Indebtedness then outstanding in
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37
accordance with the priorities then existing among such holders for application
to the payment of all Senior Indebtedness remaining unpaid, to the extent
necessary to pay all such Senior Indebtedness in full. In the event of the
failure of the Holder of the Note to endorse or assign any such payment,
distribution, or security, each holder of Senior Indebtedness is hereby
irrevocably authorized to endorse or assign the same.
4.3 Effect of Subordination. Subject to the rights, if any, of the
holders of Senior Indebtedness under this Section 4 to receive cash, securities,
or other properties otherwise payable or deliverable to the Holder of this Note,
nothing contained in this Section 4 shall impair, as between the Company and the
Holder of this Note, the obligation of the Company, subject to the terms and
conditions hereof, to pay to the Holder of this Note the principal hereof and
interest hereon as and when the same become due and payable, or shall prevent
the Holder of this Note, upon default hereunder, from exercising all rights,
powers, and remedies otherwise provided herein or by applicable law.
4.4 Subrogation. Subject to the payment in full of all Senior
Indebtedness and until this Note shall be paid in full, the Holder of this Note
shall be subrogated to the rights of the holders of Senior Indebtedness (to the
extent of payments or distributions previously made to such holders of Senior
Indebtedness pursuant to the provisions of Subsection 4.2 above) to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness. No such payments or distributions applicable to the Senior
Indebtedness shall, as between the Company and its creditors, other than the
holders of Senior Indebtedness and the Holder of this Note, be deemed to be a
payment by the Company to or on account of this Note; and for the purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness to which the Holder of this Note would be entitled except for the
provisions of this Section 4 shall, as between the Company and its creditors,
other than the holders of Senior Indebtedness and the Holder of this Note, be
deemed to be a payment by the Company to or on account of the Senior
Indebtedness.
4.5 Undertaking. By its acceptance of this Note, the Holder agrees to
execute and deliver such documents as may be reasonably requested from time to
time by the Company or the lender of any Senior Indebtedness in order to
implement the foregoing provisions of this Section 4.
5. Prepayment. Upon 10 days' prior written notice to the Holder, the
Company may at any time prepay in whole or in part the principal sum, plus
accrued interest to date of payment, of this Note.
6. Conversion.
6.1 Voluntary Conversion. Any Holder of this Note has the right, at the
Holder's option, (i) at any time after the 18 month anniversary of the original
issue date of the first Note issued and delivered under the Purchase Agreement
and prior to the close of business on the second business day prior to March 1,
2011 (unless a notice of prepayment pursuant to Section 5
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38
has been given with respect to the Note or some portion thereof), to convert
this Note, in whole or in part, and (ii) at any time after delivery of a notice
of prepayment in accordance with Section 5 of this Note and prior to the close
of business on the second business day prior to the date prepayment is to be
made (unless the Company subsequently fails to make the prepayment on the date
of the proposed prepayment, in which event this clause (ii) of this Section 6.1
shall be of no further force or effect with respect to such proposed
prepayment), to convert the portion of the Note to be prepaid, in whole or in
part, in each case of conversion, into fully paid and nonassessable shares of
Common Stock of the Company in accordance with the provisions of Subsection 6.2
hereof. The number of shares of Common Stock to be issued upon conversion
("Conversion Shares") shall be determined by dividing the aggregate principal
amount to be converted together with all accrued but unpaid interest to the date
of conversion, by the Conversion Price (as defined below) in effect at the time
of such conversion. The initial Conversion Price shall be equal to $5.00 per
share.
6.2 Conversion Procedure. Before the Holder shall be entitled to
convert this Note into shares of Common Stock, it shall surrender this Note duly
endorsed at the principal office of the Company and shall give written notice to
the Company at its principal corporate office, of the election to convert the
same pursuant to this Section 6, and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. The Company shall, as soon as practicable thereafter, issue and deliver
to the Holder of this Note a certificate or certificates (bearing such legends
as are required by the Purchase Agreement and applicable federal and state
securities laws in the opinion of counsel to the Company) for the number of full
shares of Common Stock to which the Holder of this Note shall be entitled as
aforesaid, together with any other securities and property to which the Holder
is entitled upon such conversion under the terms of this Note, including a check
payable to the Holder for any cash amounts payable in lieu of fractional shares.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of this Note, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock as of such date. No fractional shares of Common
Stock shall be issued upon conversion of this Note. In lieu of issuing any
fractional shares to the Holder upon the conversion of this Note, the Company
shall pay in cash to the Holder the amount of outstanding principal that is not
so converted.
7. Conversion Price Adjustments.
7.1 Adjustments for Stock Splits, Subdivisions, and Combinations. In
the event the Company shall (A) pay a dividend or make a distribution in shares
of Common Stock on the Common Stock, (B) subdivide its outstanding shares of
Common Stock into a greater number of shares, (C) combine or reclassify its
outstanding shares of Common Stock into a smaller number of shares, or (D)
issue, by reclassification of its shares of Common Stock, any shares of capital
stock of the Company, the Conversion Price in effect immediately prior to such
action shall be adjusted so that the Holder of the Note thereafter surrendered
for conversion shall be entitled to receive the number of shares of capital
stock of the Company which he would have owned or
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39
been entitled to receive immediately following such action had such Note been
converted immediately prior thereto. An adjustment made pursuant to this
Subsection 7.1 shall become effective immediately after the record date in the
case of a dividend or distribution and shall become effective immediately after
the effective date in the case of a reclassification, subdivision or
combination. If as a result of an adjustment made pursuant to this Subsection
7.1, the Holder of the Note thereafter surrendered for conversion shall become
entitled to receive shares of two or more classes of capital stock (including
shares of Common Stock and other capital stock) of the Company, the Board of
Directors (whose determination, by a duly adopted resolution, shall be
conclusive) shall reasonably determine in good faith the allocation of the
adjusted Conversion Price between or among shares of such classes of capital
stock or shares of Common Stock and other capital stock.
7.2 Adjustments for Certain Rights Issuances. In the event the Company
shall issue rights, options, or warrants to all holders of Common Stock
entitling them (for a period not exceeding 60 days from the date of such
issuance) to subscribe for or purchase shares of Common Stock at a price per
share less than the average market price per share (as determined pursuant to
Subsection 7.6 below) of the Common Stock on the record date mentioned below,
the Conversion Price shall be adjusted to a price, computed to the nearest cent,
so that the same shall equal the price determined by multiplying:
(A) the Conversion Price in effect immediately prior to the date of
issuance of such rights, options, or warrants by a fraction, of which
(B) the numerator shall be (x) the number of shares of Common Stock
outstanding on the date of issuance of such rights, options, or
warrants, immediately prior to such issuance, plus (y) the number of
shares which the aggregate offering price of the total number of shares
so offered for subscription or purchase would purchase at such average
market price, and of which
(C) the denominator shall be (x) the number of shares of Common Stock
outstanding on the date of issuance of such rights, options, or
warrants, immediately prior to such issuance, plus (y) the number of
additional shares of Common stock which are so offered for subscription
or purchase.
Such adjustments shall become effective immediately after the record date for
the determination of holders entitled to receive such rights, options, or
warrants; provided, however, that if any such rights, options, or warrants
issued by the Company as described in this Subsection 7.2 are only exercisable
upon the occurrence of certain triggering events provided for in shareholder
rights plans, then the Conversion Price will not be adjusted as provided in this
Subsection 7.2 until such triggering events occur.
7.3 Adjustments for Other Distributions. In the event the Company shall
distribute to all holders of Common Stock any of its assets, evidences of
indebtedness, cash, or other assets or shares of capital stock, other than
Common Stock (including securities, but other than (A)
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40
dividends or distributions exclusively in cash which exceed $.20 per share of
Common Stock in any calendar year or (B) any dividend or distribution for which
an adjustment is required to be made in accordance with Subsection 7.1 or 7.2
above), then in each such case the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the date of such distribution by a fraction the
numerator of which shall be the average market price per share of the Common
Stock (determined as provided in Subsection 7.6 below) on the record date
mentioned below less the then fair market value (as reasonably determined in
good faith by the Board of Directors) of the portion of the assets or evidence
of indebtedness so distributed applicable to one share of Common Stock, and the
denominator of which shall be such average market price per share of the Common
Stock. Such adjustment shall become effective immediately after the record date
for the determination of stockholders entitled to receive such distribution.
7.4 Notices of Record Date, etc. In the event of:
(A) Any taking by the Company of a record of the holders of Common
Stock of the Company for the purpose of determining the holders thereof who are
entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase, or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right; or
(B) Any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, or any transfer of all or
substantially all of the assets of the Company to any other person or any
consolidation or merger involving the Company; or
(C) Any voluntary or involuntary dissolution, liquidation, or winding
up of the Company, the Company will mail to the Holder of this Note at least ten
(10) days prior to the earliest date specified therein, a notice specifying:
(i) The date on which any such record is to be taken for the purpose of
such dividend, distribution, or right, and the amount and character of such
dividend, distribution, or right; and
(ii) The date on which any such reorganization, reclassification,
transfer, consolidation, merger, dissolution, liquidation, or winding up is
expected to become effective and the record date for determining stockholders
entitled to vote thereon.
7.5 Reservation of Stock Issuable Upon Conversion. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the conversion of the Note
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of the Note; and if at any time the number
of authorized but unissued shares of Common Stock (and/or its treasury stock)
shall not be sufficient to effect the conversion of the entire outstanding
principal amount of the Note, in addition to such other remedies as shall be
available to the holder of the Note, the Company will use its best efforts to
take such corporate action as may, in the opinion of its counsel, be
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41
necessary to increase its authorized but unissued shares of Common Stock (and/or
its treasury stock) to such number of shares as shall be sufficient for such
purposes.
7.6 Market Price. For the purpose of any computation under Subsections
7.2 and 7.3 above, the average market price per share of Common Stock on any
date shall be deemed to be the average of the Last Sale Price of a share of
Common Stock for the five consecutive Trading Days selected by the Company
commencing not more than 20 Trading Days before, and ending not later than, the
earlier of the date in question and the date before the "`ex' date," with
respect to the issuance or distribution requiring such computation. For purposes
of this paragraph, the term "`ex' date," when used with respect to any issuance
or distribution means the first date on which the Common Stock trades regular
way on the New York Stock Exchange (or if not listed or admitted to trading
thereon, then on the principal national securities exchange on which the Common
Stock is listed or admitted to trading) without the right to receive such
issuance or distribution.
7.7 Notice of Adjustment. Whenever the Conversion Price is adjusted as
herein provided, the Company shall promptly mail or cause to be mailed a notice
of such adjustment to the Holder of the Note at the address of the Holder as the
same appears on the registry books of the Company.
8. Assignment. Subject to the restrictions on transfer described in
Section 10 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators, and transferees of the parties.
9. Waiver and Amendment. Any provision of this Note may be amended,
waived, or modified upon the written consent of the Company and holders of at
least two-thirds of the aggregate principal amount of all then outstanding
Notes.
10. Transfer of This Note or Securities Issuable on Conversion Hereof.
This Note shall not be sold, transferred, hypothecated, pledged, or disposed of
prior to the 18 month anniversary of the original issue date of the Note unless
the employment of Holder is terminated prior to such date without "Cause" by the
Company or by the Holder for "good reason," in each case as such terms are
defined in that certain Employment Agreement between the Company and Holder
dated March 9, 2001; provided, however, that the original Holder hereof may
pledge this Note as security to any financial institution for any financing of
such Holder's purchase of this Note. With respect to any offer, sale, or other
disposition of this Note or securities into which such Note may be converted,
the Holder will give written notice to the Company prior thereto, describing
briefly the manner thereof, together with a written opinion of such Holder's
counsel, to the effect that such offer, sale, or other distribution may be
effected without registration or qualification under any federal or state law
then in effect. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, the Company, as promptly as practicable,
shall notify such Holder that such Holder may sell or otherwise dispose of this
Note or such securities, all in accordance with the terms of the notice
delivered to the Company. Each Note thus transferred and each certificate
representing the securities thus transferred shall bear a
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legend as to the applicable restrictions on transferability in order to ensure
compliance with registration or qualification requirements under federal or
state law, unless in the opinion of counsel for the Company such legend is not
required. The Company may issue stop transfer instructions to its transfer agent
in connection with such restrictions.
11. Treatment of Note. To the extent permitted by generally accepted
accounting principles, the Company will treat, account, and report the Note as
debt and not equity for accounting purposes and with respect to any returns
filed with federal, state, or local tax authorities.
12. Notices. Any notice, request, or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if faxed with confirmation of receipt by
telephone or if telegraphed or mailed by registered or certified mail, postage
prepaid, at the respective addresses of the parties as set forth herein. Any
party hereto may by notice so given change its address for future notice
hereunder. Notice shall conclusively be deemed to have been given when
personally delivered, faxed, or on the third Trading Day after being deposited
in the mail or telegraphed in the manner set forth above and shall be deemed to
have been received when delivered.
13. No Stockholder Rights. Nothing contained in this Note shall be
construed as conferring upon the Holder or any other person the right to vote or
to consent or to receive notice as a stockholder in respect of meetings of
stockholders for the election of directors of the Company or any other matters
or any rights whatsoever as a stockholder of the Company; and no dividends or
interest shall be payable or accrued in respect of this Note or the interest
represented hereby or the Underlying Shares obtainable hereunder until, and then
only to the extent that, this Note shall have been converted.
14. Usury Savings Clause.
14.1 If at any time the sum of (i) the amount of interest computed in
accordance with this Note and (ii) all other consideration received by a Holder
that is deemed to constitute interest under applicable law, would exceed the
Maximum Legal Rate, then the interest payable under this Note shall be computed
upon the basis of the Maximum Legal Rate and strictly limited thereto, but any
subsequent increase in the Maximum Legal Rate or subsequent reduction in the
rate of interest payable under this Note shall not reduce such interest
thereafter payable below the amount computed on the basis of the Maximum Legal
Rate until the aggregate amount of such interest accrued and payable equals the
total amount of interest that would have accrued if such interest had been at
all times computed solely on the basis of the interest rate set forth in Section
2 plus the other compensation received by such Holder that is deemed to
constitute interest under applicable law. Furthermore, if at the maturity date,
the total amount of interest paid or accrued under the foregoing provisions is
less than the total amount of interest that would have accrued based upon the
interest rate specified in Section 2, then, to the extent allowed by law, the
Company agrees to pay to the Holder an amount equal to the difference between
(A) the lesser of (x) the amount of interest that would have accrued if the
Maximum Legal Rate had at all
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43
times been in effect and (y) the amount of interest that would have accrued if
the rate specified in Section 2 above had at all times been in effect; and (B)
the amount of interest accrued in accordance with the foregoing provisions.
14.2 No agreements, conditions, provisions, or stipulations contained
in this Note or any other instrument, document, or agreement between a Holder
and the Company, or default of the Company, or exercise by a Holder of the right
to accelerate the payment or the maturity of principal and interest, or to
exercise any option whatsoever contained in this Note or any other agreement
between a Holder and the Company, or arising out of any contingency whatsoever,
shall entitle a Holder to contract for, charge, collect, or receive, in any
event, interest exceeding the Maximum Legal Rate; and in no event shall the
Company be obligated to pay interest exceeding such Maximum Legal Rate; and all
agreements, conditions, or stipulations, if any, that may in any event or
contingency whatsoever operate to bind, obligate, or compel the Company to pay a
rate of interest exceeding the Maximum Legal Rate, shall be without binding
force or effect, at law or in equity, to the extent only of the excess of
interest over such Maximum Legal Rate. In the event any interest is contracted
for, charged, collected, or received in excess of the Maximum Legal Rate
("Excess"), such Excess shall be, first, applied to reduce the principal then
unpaid under this Note; and second, returned to the Company, it being the
intention of the parties hereto not to enter into or cause at any time a
usurious or otherwise illegal relationship. For the purpose of determining
whether or not any Excess has been contracted for, charged, collected, or
received by a Holder, the Company and each Holder shall, to the maximum extent
permitted under applicable law, (A) characterize any nonprincipal payment as an
expense, fee, or premium rather than interest, (B) exclude voluntary prepayments
and the effects thereof, and (C) with respect to all interest at any time
contracted for, charged, collected, or received by the Holders in connection
with this Note, amortize, prorate, allocate, and spread the same in equal parts,
or otherwise as appropriate, to ensure that, to the extent possible, no Excess
exists during the entire term of this Note.
14.3 If, prior to the repayment in full of the obligations under this
Note, the applicable state or federal law is amended in the future to allow a
greater rate of interest to be charged under this Note or any other instrument,
document, or agreement between a Holder and the Company than is currently
allowed by applicable state or federal law, then the limitation of interest
hereunder by the Maximum Legal Rate shall be increased to such greater rate of
interest, which increase shall be effective hereunder on the effective date of
such amendment, and all interest charges owing to each Holder by reason thereof,
if any, shall be payable upon demand concurrently with the next payment of
interest due under the Note; provided, however, if the Note is fully paid and
discharged, no such interest charges shall be owing to a Holder by reason of
such amendment.
14.4 "Maximum Legal Rate" means the maximum non-usurious interest rate,
if any, that any time or from time to time may be contracted for, taken,
reserved, charged, or received with respect to the Note as to which such rate is
to be determined, payable to the Holders pursuant to this Note or any other
agreement, contract, or document by or between the Holders and the Company,
under laws applicable to the Holders which are presently in effect or, to the
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extent allowed by law, under such applicable laws which may hereafter be in
effect and which allow a higher maximum non-usurious interest rate than
applicable laws now allow. The Maximum Legal Rate shall be calculated in a
manner that takes into account any and all fees, payments, and other charges in
respect of this Note or any other agreement, contract, or document by or between
the Holders and the Company that constitute interest under applicable law. Each
change in any interest rate provided for herein based upon the Maximum Legal
Rate resulting from a change in the Maximum Legal Rate shall take effect without
notice to the Company at the time of such change in the Maximum Legal Rate.
15. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO ANY
CONFLICTS OF LAW PROVISIONS.
16. Headings. The headings of this Note are for convenience of
reference only and are not part of the substance of this Note.
17. Waivers. The Company, along with all sureties, endorses and
guarantors (if any) of this Note, waive demand, presentment for payment, notice
of non-payment, protest, notice of protest and all other notice, filing of suit
and diligence in collecting this Note, and consent to any one or more extensions
or postponements of time of payment of this Note on any terms or any other
indulgences with respect thereto, without notice thereof to any of them.
IN WITNESS WHEREOF, the Company has caused this Note to be issued this
_____ day of March, 2001.
▇▇▇▇'▇ INC.
By
-----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Chairman of the Board
Name of Holder: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address: ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
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45
(To be Signed Only Upon Conversion of Note)
▇▇▇▇'▇, INC.
The undersigned, the holder of the foregoing Note, hereby surrenders
such Note for conversion into shares of Common Stock, to the extent of
$_______________ unpaid principal amount of such Note, and request that the
certificates for such shares be issued in the name of, and delivered to,
____________________, whose address is _________________________________.
Dated:
-------------------------------
------------------------------------------
(Signature must conform in all respects to
name of holder as specified on the face of
the Note)
------------------------------------------
(Address)
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46
EXHIBIT B
▇▇▇▇'▇, INC.
RESOLUTIONS OF BOARD OF DIRECTORS
MARCH 7, 2001
----------
DISCUSSION - CORPORATE OPPORTUNITY
WHEREAS, for purposes of facilitating the initiation of new arrangements between
the Company and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and (collectively the
"Executives"), who will become directors and officers of the Company as of the
date of adoption of this resolution, and in accordance with Section 122(17) of
the General Corporation Law of the State of Delaware, the Board of Directors of
the Company does hereby adopt the following preambles and resolutions:
WHEREAS, for purposes hereof the following terms shall have the following
meanings
(1) "Cafeteria-style Restaurant Business" shall mean the traditional
cafeteria type business engaged in by the Company, or in a restaurant
which sells food utilizing cafeteria style serving of entrees, or
selling food on an "all you can eat" basis, or utilizing buffet style
serving of the general type operated by "Luby's", "Morrison's",
"Piccadilly", "▇▇▇▇▇'▇", "Golden Corral" or "▇▇▇▇▇ Steak House".
Notwithstanding the terms of the immediately preceding sentence, for
purposes of this definition the sale of food on an "all you can eat"
basis or utilizing buffet style serving, shall not include
restaurants which serve primarily one type of ethnic or specialty
foods such as Mexican or Chinese food or barbecue or seafood;
(2) The "Areas of Geographic Operation" shall mean the states of Texas,
New Mexico, Arizona, Oklahoma, Kansas, Arkansas, Missouri, Tennessee,
Mississippi and Florida and all states contiguous to such states;
(3) A "▇▇▇▇▇▇ Generated Land or Building Redevelopment Opportunity" shall
mean any opportunity to lease or purchase land in any location or to
lease or purchase a building and land for redevelopment in any
location which arises from or in connection with the ordinary course
of the business of ▇▇▇▇▇▇ Restaurants and is first communicated to
executive, officers or employees of ▇▇▇▇▇▇ Restaurants other then the
Executives; provided that any such opportunity that is first
presented to either of the Executives shall be considered a business
opportunity for the Company.
NOW, THEREFORE, be it resolved that the Company does hereby renounce as a
corporate opportunity, for a period of six (6) years from the date of this
resolution, (i) any business or corporate opportunity (whether operated by an
Executive or not) which shall involve the operation of any restaurant or food
service business other than a Cafeteria-style Restaurant Business in the Areas
of Geographic Operation, and (ii) any ▇▇▇▇▇▇ Generated Land or Building
Redevelopment Opportunity.
47
EXHIBIT C
March 9, 2001
▇▇. ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Gentlemen:
We have been requested by ▇▇▇▇'▇, Inc., a Delaware corporation
("Luby's") to deliver to you the opinions as to the matters set forth herein in
connection with that certain Purchase Agreement dated as of March 9, 2001 (the
"Purchase Agreement"), by and among ▇▇▇▇'▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇ (collectively, "▇▇▇▇▇▇"). This opinion is being rendered pursuant to
Section 6.3(a)(iii) of the Purchase Agreement. Capitalized terms used but not
defined herein have the meanings ascribed to them in the Purchase Agreement.
In connection with this opinion letter, we have examined executed
counterparts of the Purchase Agreement and originals or copies of the following
documents:
(i) certificates of the Secretary of State of the State of
Delaware as to the good standing of Luby's;
(ii) the Certificate of Incorporation of Luby's, certified as of a
recent date by the Secretary of State of the State of
Delaware;
(iii) the Bylaws of Luby's;
(iv) certain resolutions and board actions adopted by the Board of
Directors of Luby's, certified as of a recent date by the
Secretary of Luby's;
We have also examined the originals or copies of such other documents
and records and have made such other investigations as we have deemed relevant
and necessary as a basis for our opinions set forth below. In all such
examinations and for purposes of our opinions set forth below, we have, with
your approval and without independent investigation, assumed the genuineness of
all signatures, the legal capacity of all natural persons, the authenticity and
completeness of all documents submitted to us as originals and the conformity to
the authentic original documents of all documents submitted to us as certified,
photostatic or conformed copies.
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March 9, 2001
Page 2
With your approval and without independent investigation, we have:
A. relied, as to the accuracy of certain factual matters not
independently established by us, upon the certificates
referred to above, the information contained in Luby's
periodic filings made with the Securities and Exchange
Commission and the representations and warranties contained in
the Purchase Agreement;
B. assumed that the Purchase Agreement has been duly executed and
delivered by ▇▇▇▇▇▇ and constitutes the legal, valid and
binding obligation of the parties thereto, enforceable against
the parties thereto in accordance with its terms; and
D. assumed the fairness of the purchase of the Notes contemplated
by the Purchase Agreement, the adequacy of the consideration
paid or to be paid in connection therewith and the compliance
by the Board of Directors of Luby's with their fiduciary
duties.
Based upon the foregoing, and having due regard for such legal
considerations as we deem relevant and subject to the qualifications and
limitation set forth herein, we are of the opinion that:
▇. ▇▇▇▇'▇ has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as
now being conducted, and is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property require such qualification, except to the extent that
the failure to be so qualified or be in good standing would
not have a Material Adverse Effect on Luby's;
B. each of the Transaction Documents has been duly authorized,
executed and delivered by Luby's;
C. the Notes have been duly authorized and, when executed,
delivered and paid for in accordance with the terms of the
Agreement, will be valid and binding obligations of Luby's
enforceable in accordance with their terms, except as (i) the
enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditor's rights
generally and (ii) rights of acceleration, if applicable, and
the availability of equitable remedies may be limited by
equitable principles of general applicability;
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March 9, 2001
Page 3
D. the execution and delivery by Luby's of, and the performance
by Luby's of its obligations under, the Transaction Documents
will not contravene (i) any provisions of applicable law, (ii)
the Certificate of Incorporation or Bylaws of Luby's, (ii) to
such counsel's knowledge, any agreement or other instrument
binding upon Luby's that is material to Luby's or (iv) to such
counsel's knowledge, any Order of any Governmental Entity
having jurisdiction over Luby's, an no Approval of any
Governmental Entity is required for the performance by Luby's
of its obligations under the Transaction Documents, except
such as may be required by the securities or blue sky laws of
the various states;
E. after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which Luby's
is a party or to which any of the properties of Luby's is
subject other than proceedings which have been disclosed in
the Transaction Documents, or such counsel believes are not
likely to have a Material Adverse Effect on Luby's or on the
power or ability of Luby's to perform its obligations under
the Transaction Documents or to consummate the transactions
contemplated by the Agreement.
The foregoing opinions are subject to the following qualifications and
limitations:
A. The opinions expressed herein are limited exclusively to the
General Corporation Law of the State of Delaware (the "DGCL")
and the federal laws of the United States of America insofar
as any of such laws are concerned.
B. We express no opinion herein with respect to (i) antitrust
laws, (ii) the financial terms of the transactions
contemplated by the Purchase Agreement or the fairness or
reasonableness of those terms to any person or entity or (iii)
the satisfaction of any fiduciary duties which may exist.
This opinion is given as of the date hereof, and we assume no
obligation to update or supplement such opinion to reflect any fact or
circumstance that may hereafter come to our attention or any change in law that
may hereafter occur or hereafter become effective. The opinions set forth herein
are limited to matters expressly set forth and no opinion is to be implied or
may be inferred beyond the matters expressly stated.
With respect to any matters indicated herein to be limited to our
knowledge and information (or words to like effect), the opinions set forth
herein with respect to such matters are specifically limited to the actual
knowledge which attorneys who are members of or are employed by this firm have
obtained solely in connection with the representation of Florafax
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March 9, 2001
Page 4
with respect to the transactions contemplated by the Merger Agreement. Nothing
has come to the attention of such attorneys to cause them to believe that the
statements made herein "to our knowledge" are false.
This opinion is delivered to you solely as a party to the Merger
Agreement and may not be quoted, circulated or published in whole or in part or
delivered to any other person without our express written consent.
Yours very truly,
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇ Incorporated
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DRFJr/sh