EXHIBIT I
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▇▇▇▇▇▇ INDUSTRIES, INC.
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SECURITIES PURCHASE AGREEMENT
DATED AS OF OCTOBER 15, 1997
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UNITS
CONSISTING OF
SENIOR NOTES
AND
WARRANTS
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Page 11 of 80 Pages
TABLE OF CONTENTS
PAGE
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ARTICLE I
THE UNITS: PURCHASE AND SALE OF UNITS
1.1 Authorization and Description of the Units............................. 1
1.2 Sale and Purchase of the Units..........................................1
1.3 Closing.................................................................2
1.4 Application of Proceeds.................................................2
1.5 Conditions of Closing...................................................2
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership.........................................................3
2.2 Subsidiaries............................................................4
2.3 Qualification; Enforceability...........................................4
2.4 Business and Property; Financial Statements.............................5
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc ......................................................5
2.6 Consents and Approvals..................................................6
2.7 Litigation..............................................................6
2.8 Private Offering........................................................6
2.9 No Defaults; Debt, etc; Liens...........................................6
2.10 Full Disclosure.........................................................7
2.11 Environmental Matters...................................................7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
3.1 Investment Representation...............................................8
ARTICLE IV
COVENANTS
4.1 Financial Statements; Information......................................11
4.2 Certain Restrictions...................................................12
4.3 Maintenance of Office..................................................13
4.4 Corporate Existence....................................................13
4.5 Compliance with Laws; Government Filings...............................13
i Page 12 of 80 Pages
4.6 Environmental Matters..................................................13
4.7 Certain Contracts......................................................14
4.8 Participation Rights...................................................14
ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default......................................................15
5.2 Appointment of Director................................................16
ARTICLE VI
MISCELLANEOUS
6.1 Expenses...............................................................16
6.2 Reliance on and Survival of Representations............................17
6.3 Amendment and Waiver...................................................17
6.4 Register...............................................................18
6.5 Directly or Indirectly.................................................19
6.6 Successors and Assigns.................................................19
6.7 Notices................................................................19
6.8 LAW GOVERNING..........................................................19
6.9 SUBMISSION TO JURISDICTION;
Service of Process.....................................................19
6.10 Headings, etc .........................................................20
6.11 Entire Agreement.......................................................21
6.12 WAIVER OF TRIAL BY JURY................................................21
6.13 No Waiver..............................................................21
6.14 Applicable Interest Rate...............................................21
6.15 Indemnification........................................................22
6.16 Interpretive Provision.................................................23
6.17 Severability...........................................................23
6.18 Counterparts...........................................................23
6.19 Finder's Fee...........................................................23
Schedules:
Schedule 1.2 Purchasers
Schedule 1.4 Use of Proceeds
Schedule 2.1(b) Capitalization of the Company
Schedule 2.1(c) Capitalization of the Subsidiaries
Schedule 2.5 Noncontravention
Schedule 2.6 Required Consents
Schedule 2.7 Litigation
ii Page 13 of 80 Pages
Schedule 2.9 Debts; Liens
Exhibits:
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Exhibit A Form of Senior Note
Exhibit B Form of Warrant
Exhibit C Form of Opinion of Company Counsel
Exhibit D Form of Registration Rights Agreement
iii Page 14 of 80 Pages
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of October 15, 1997,
between ▇▇▇▇▇▇ INDUSTRIES, INC., a Delaware corporation, and each of the
PURCHASERS who have executed this Agreement.
WHEREAS, the capitalized terms used herein have the meaning given
to such terms in Appendix I; and
WHEREAS, the Company has authorized the issuance of and wishes to
sell to each Purchaser the number of Units set forth opposite such Purchaser's
name in Schedule 1.2; and
WHEREAS, each Purchaser wishes to purchase the number of Units
set forth opposite such Purchaser's name in Schedule 1.2, subject to the terms
and conditions of this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and upon the terms and conditions hereinafter set forth, the Company
and each Purchaser, intending to be mutually bound, agree as follows:
ARTICLE I
THE UNITS: PURCHASE AND SALE OF UNITS
1.1 Authorization and Description of the Units.
The Company has authorized the issuance and sale of 100 Units,
consisting of Senior Notes in the aggregate principal amount of $2,500,000 and
Warrants to purchase an aggregate of 4,000,000 shares of Common Stock. Each
Senior Note shall be in the form of Exhibit A attached hereto and each Warrant
in the form of Exhibit B attached hereto, in each case with such appropriate
insertions therein to reflect the number of Units so purchased and the date of
the purchase.
1.2 Sale and Purchase of the Units.
The Company will sell to each of the Purchasers and each
Purchaser severally will purchase from the Company, subject to the terms and
conditions of this Agreement and in reliance on the representations, warranties
and covenants of the Company contained herein and in the Exhibits hereto, such
number of Units as are set forth in Schedule 1.2, at the purchase price set
forth in Schedule 1.2.
Page 15 of 80 Pages
1.3 Closing.
The initial sale and purchase of Units shall take place on the
date hereof (the "Closing") at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇. At the Closing the Company will
deliver to each Purchaser one or more Senior Notes and one or more Warrants in
the aggregate amount to be purchased by each Purchaser, each dated the date of
the Closing and registered in the name of such Purchaser, against delivery by
each Purchaser of the purchase price therefor by check or wire transfer of such
purchase price to such account as the Company shall designate. The failure of
any Purchaser to deliver such purchase price shall not excuse any other
Purchaser from delivery of his purchase price.
1.4 Application of Proceeds.
The Company shall apply the proceeds from the sale of the Units
as set forth in the Schedule 1.4 attached hereto.
1.5 Conditions of Closing.
Each Purchaser's obligations to purchase and pay for the Units to
be purchased by him is subject to satisfaction, prior to or simultaneously with
the closing, of the following conditions:
(a) The Company shall have delivered a certificate of an officer
of the Company, dated the Closing Date, certifying that the representations and
warranties of the Company contained in this Agreement and any Exhibit to which
the Company is a party are true and correct in all material respects and that
the Company has performed in all material respects all agreements and complied
with all conditions contained in this Agreement and in any Exhibit to which it
is a party that are required to be performed or complied with on or before the
Closing Date.
(b) The Company shall have delivered a certificate of the
Secretary of the Company, dated the Closing Date, certifying as to (A) the
certificate of incorporation of the Company and any amendments thereto, (B) the
by-laws of the Company, and (C) resolutions of the Board of Directors of the
Company authorizing the execution and delivery of the Senior Notes, the
Warrants, this Agreement and all Exhibits to which the Company is a party and
reserving for issuance such number of shares of Common Stock as is required to
deliver shares of Common Stock upon exercise of rights therefor as provided in
the Senior Notes and the Warrants.
(c) The Company shall have executed and delivered to the
Purchasers the Registration Rights Agreement.
(d) Each of the other Exhibits hereto shall have been executed
and delivered to the Purchasers by the parties thereto.
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(e) Fulbright & ▇▇▇▇▇▇▇▇ L.L.P., counsel for the Company, shall
have delivered to the Purchasers the Opinion of Company Counsel.
(f) All proceedings taken in connection with the authorization,
issuance and sale of the Units and the consummation of the transactions
contemplated hereby to occur on or prior to the Closing and all documents and
papers relating thereto shall be satisfactory in form, scope and substance to
the Purchasers and their counsel, and each Purchaser and their counsel shall
have received copies (executed or certified as may be appropriate) of such
documents and papers as each may reasonably request in connection therewith.
(g) The Company shall have paid the reasonable legal fees and
other expenses of the Purchasers' counsel and all other expenses for which the
Company is obligated to pay pursuant to Section 6.1 and for which the Company
shall have received invoices on or prior to the closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as follows:
2.1 Organization, Authority and Capitalization of the Company;
Stock Ownership
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to own or hold under lease the property
it purports to own or hold under lease, to carry on its business as now
conducted, to enter into this Agreement and the other Exhibits to which it is or
is to be a party, to issue and sell the Units (including the Senior Notes and
the Warrants), to perform its obligations under this Agreement, the Units
(including the Senior Notes and the Warrants), and the other Exhibits to which
it is or is to be a party and to consummate the transactions contemplated hereby
and thereby. The Company has, by all necessary corporate action (no action of
stockholders of the Company being required by law, by its charter or by-laws, or
otherwise in connection therewith), duly authorized the execution and delivery
of this Agreement, the Units (including the Senior Notes and the Warrants), and
the other Exhibits to which it is or is to be a party, the performance of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby.
(b) Schedule 2.1(b) sets forth the authorized capital stock of
the Company. All such authorized capital stock has been duly and validly
authorized, and either are, or will be when issued, duly and validly issued and
outstanding and are, or will be, fully paid and nonassessable. Such capital
stock is not subject to any rights (either preemptive or otherwise) or warrants
to subscribe for or to purchase, nor any options for the purchase of, nor any
agreements providing for the issue (contingent or otherwise) of, nor any calls,
commitments or claims of any
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character relating thereto or any stock or securities convertible into or
exchangeable for any capital stock, other than as set forth in Schedule 2.1(b).
All securities of the Company have been issued in compliance with the Securities
Act and applicable state securities laws. The shares of Common Stock that will
be issuable pursuant to the Senior Notes and the Warrants in the manner referred
to in the Senior Notes and the Warrants have been duly authorized and reserved
for issuance, are not subject to any preemptive or similar rights on the part of
the holders of any shares of capital stock or other securities of the Company,
and when issued in the manner referred to in the Senior Notes and the Warrants
will be validly issued, fully paid and nonassessable.
(c) Schedule 2.1(c) sets forth the authorized, issued and
outstanding capital stock of each Subsidiary, including the record ownership
thereof, and the ownership interests of the Company (direct and indirect), in
any other Person. There are no liens on any capital stock of any Subsidiary or
on the Company's ownership interests in any other Person, except as set forth in
Schedule 2.1(c). There are no outstanding rights, options, warrants, conversion
rights or agreements for the purchase or acquisition from the Company or any
Subsidiary of any shares of capital stock of any Subsidiary or any other
securities convertible into or exchangeable for any shares of capital stock of
any Subsidiary, except as set forth in Schedule 2.1(c).
2.2 Subsidiaries.
Each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to own or hold
under lease the property it purports to own or hold under lease, and to carry on
its business as conducted by it.
2.3 Qualification; Enforceability.
(a) Each of the Company and each Subsidiary is duly qualified or
licensed and in good standing as a foreign corporation duly authorized to do
business in each jurisdiction in which the nature of the activities or the
character of the properties owned or leased makes such qualification or
licensing necessary, except for jurisdictions in which the failure to be so
qualified would not have a Material Adverse Effect.
(b) This Agreement, the Senior Notes, the Warrants and the other
Exhibits hereto have been (or at the Closing will be, as the case may be) duly
executed and delivered by the Company, and, assuming due execution and delivery
by the Purchasers of this Agreement and the Exhibits that require execution by
the Purchasers, constitute (or upon execution and delivery at the Closing, will
constitute) the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws from time to time in effect relating
to or affecting the enforcement of creditors' rights generally or by the
application of equitable principles (whether such application is considered in
equity or in law).
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2.4 Business and Property; Financial Statements.
The Company has furnished to each Purchaser a true and complete
copy of the Unit Offering Disclosure Documents. The Unit Offering Disclosure
Documents correctly describe in all material respects the business and material
properties of the Company and its Subsidiaries and the nature of their
operations as of the date thereof. The Financial Statements included in the Unit
Offering Disclosure Documents, were prepared in accordance with GAAP, applied on
a consistent basis throughout the periods specified, and present fairly in all
material respects the financial position of the Company and its Subsidiaries for
the respective periods specified. Except as specifically described in the
Financial Statements contained in the Unit Offering Disclosure Documents,
neither the Company nor any Subsidiary has as of the date thereof any material
liabilities, contingent or otherwise, which under GAAP are required to be
disclosed therein.
2.5 Compliance with Laws, Other Instruments;
No Conflicts, etc .
(a) Except as set forth in Schedule 2.5, neither the Company nor
any Subsidiary is (i) in violation of any term or provision of its corporate
charter or by-laws or (ii) in violation of or default under (A) any term or
provision of any agreement, indenture, mortgage, instrument, permit or license
to which it is a party or by which it or any of its properties may be bound or
affected or (B) to the Company's knowledge, any existing statute, law,
governmental rule, regulation or ordinance, or any order of any court,
arbitrator or Governmental Body applicable to it or its properties (including,
without limitation, any statute, law, rule, regulation, ordinance or order
relating to occupational health and safety standards, or equal employment
practice requirements), the consequences of which violation or default, either
in any one case or taken together with all other such violations or defaults,
(x) could have a Material Adverse Effect or (y) could materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, the Senior Notes, the Warrants or any other Exhibit to which the
Company is a party.
(b) Except as set forth in Schedule 2.5, neither the execution,
delivery or performance by the Company of this Agreement, the Senior Notes or
the Warrants (including, without limitation, the issuance of Common Stock
pursuant to the Senior Notes or the Warrants), or any other Exhibit to which it
is a party, nor compliance by the Company with the respective terms hereof and
thereof will result in (i) any violation of or be in conflict with or constitute
a default under (A) any term or provision of the corporate charter or by-laws of
the Company or any Subsidiary, (B) any term or provision of any agreement,
indenture, mortgage, instrument, permit or license to which it is a party or by
which it or any of its properties may be bound or affected, or (C) to the
Company's knowledge, any existing statute, law, governmental rule, regulation or
ordinance, or any order of any court, arbitrator or Governmental Body applicable
to it or its properties, or (ii) the creation of (or impose any obligation on
the Company or any Subsidiary to create) any lien upon any of the properties or
assets of the Company or any Subsidiary.
-5- Page 19 of 80 Pages
2.6 Consents and Approvals.
Except for the Required Consents set forth in Schedule 2.6, no
consent, approval or authorization of, or filing or registration with, or the
taking of any other action in respect of, any Governmental Body or any other
Person (including any trustee or holder of any indebtedness, securities or other
obligations of the Company or any Subsidiary) is required (i) for or in
connection with the valid execution and delivery by the Company of, or the
performance by the Company of any obligation under, this Agreement or any
Exhibit to which it is a party or the consummation by the Company of the
transactions contemplated hereby and thereby, including, without limitation, the
offer, issue, sale and delivery of the Senior Notes or the Warrants (including
without limitation, the issuance of stock pursuant to the Senior Notes or the
Warrants) or (ii) as a condition to the legality, validity or enforceability as
against the Company of this Agreement or any Exhibit to which it is a party. The
Company shall use all reasonable efforts to obtain the Required Consents on or
before the Closing. In the event of the failure of the Company to receive the
Required Consents within ten Business Days of the date hereof, this Agreement
shall terminate, except for the obligations of the Company pursuant to Section
6.1.
2.7 Litigation.
Except as set forth on Schedule 2.7, there are no actions, suits
or proceedings pending (or, to the knowledge of the Company, threatened) against
the Company or any Subsidiary or affecting any of their respective properties in
any court or before any arbitrator of any kind or before or by any Governmental
Body, which (i) question the validity or legality of this Agreement, the Senior
Notes or the Warrants or any other Exhibit or any action taken or to be taken
pursuant hereto or thereto or (ii) might result, either in any one case or in
the aggregate, in (A) a material impairment of the ability of the Company to
perform its obligations under this Agreement or any other Exhibit to which it is
a party, or (B) a Material Adverse Effect.
2.8 Private Offering.
Neither the Company nor any other person acting on behalf of the
Company has taken, or will take, any action which would subject the issuance or
sale of the Units, Senior Notes or Warrants to Section 5 of the Securities Act
or to the registration or qualification requirements of any securities law of
the State of New York or the State of Texas.
2.9 No Defaults; Debt, etc; Liens.
(a) Schedule 2.9 correctly lists (i) all secured and unsecured
funded debt of the Company and any Subsidiary and (ii) any liens (other than
Permitted Liens) on any assets of the Company or any Subsidiary, in each case,
as of the date hereof. Upon receipt of any Required Consent, no default or event
of default, after giving effect to the issuance and sale of the Units and the
consummation of the other transactions contemplated by this Agreement and the
Exhibits, will exist (or, but for the waiver thereof, would exist) under any
instrument or agreement evidencing, providing for the issuance or securing of,
or otherwise relating to, any such debt or liens.
-6- Page 20 of 80 Pages
(b) There is no pending foreclosure with respect to any assets or
properties of the Company or any Subsidiary, and as of the Closing there will
not be any pending foreclosure with respect thereto.
2.10 Full Disclosure.
None of this Agreement, any Exhibit, the Unit Offering Disclosure
Documents or any document, certificate or instrument delivered to the Purchasers
by or on behalf of the Company in connection with the transactions contemplated
by this Agreement as of their respective dates contains any untrue statement of
a material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which the same were made, not misleading.
2.11 Environmental Matters.
(a) To the Company's knowledge, the Company and the Subsidiaries
hold all Environmental Permits required under all Environmental Laws except to
the extent failure to have any such Environmental Permit has not had and will
not have a Material Adverse Effect.
(b) To the Company's knowledge, the Company and the Subsidiaries
currently are, and at all times heretofore have been, in compliance with all
terms and conditions of all such Environmental Permits and all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in all applicable Environmental
Laws except to the extent failure to comply therewith, in any one case or in the
aggregate, has not had and will not have a Material Adverse Effect.
(c) Neither any of the Company nor any Subsidiary has ever
received, and, to the Company's knowledge, no predecessor in interest of any the
Company and the Subsidiaries has ever received in respect of any of the Company
Premises, from any Governmental Body or other Person any written notice of, and
the Company has no knowledge of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans that could
reasonably be expected to interfere with or prevent compliance or continued
compliance in all material respects with the Environmental Permits referred to
in Section 2.11(a) or any scheduled renewals thereof or any Environmental Laws,
or that could reasonably be expected to give rise to any liability on the part
of any the Company and the Subsidiaries or otherwise form the basis of any
claim, action, demand, request, notice, suit, proceeding, hearing, study or
investigation (collectively, "Environmental Claims") involving any of the
Company and the Subsidiaries based on or related to (i) a violation of any
Environmental Law or (ii) the manufacture, refining, generation, processing,
distribution, use, sale, treatment, receipt, storage, disposal, transport,
arranging for transport or handling, or the emission, discharge, release or
threatened release into the environment, of any Hazardous Substance, other than
liabilities or Environmental Claims referred to in this Section 2.11(c) that
have not had and will not have, either in any one case or in the aggregate, a
Material Adverse Effect.
-7- Page 21 of 80 Pages
(d) To the Company's knowledge, there has not been any civil,
criminal or administrative action, suit, demand, summons, citation, claim,
hearing, notice or demand letter, information request, notice of violation,
judgment, order, lien, investigation, study or proceeding pending or threatened
against any of the Company or the Subsidiaries, or against any predecessor in
interest thereof, in its capacity as such, relating to any such Environmental
Permits or any scheduled renewals thereof or any Environmental Laws that has had
or will have, either in any one case or in the aggregate, a Material Adverse
Effect.
(e) To the Company's knowledge, (i) no part of the Company
Premises or, so far as is known to the Company, the area surrounding the Company
Premises is being used, or has been used at any time in the past, to
manufacture, generate, refine, process, distribute, use, sell, treat, receive,
store, dispose of, transport, arrange for transport of, handle, or conduct any
other activity involving any Hazardous Substance except in a manner that has
been in compliance in all material respects with all applicable Environmental
Laws and Environmental Permits and to an extent that has not had and will not
have a Material Adverse Effect; and (ii) neither the Company nor any Subsidiary
is conducting or has ever conducted any such activities anywhere else except in
a manner that has been in compliance in all material respects with all
applicable Environmental Laws and Environmental Permits and to an extent that
has not had and will not have a Material Adverse Effect.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally as to himself, represents and warrants
as follows:
3.1 Investment Representation . (a) The Purchaser of the Senior
Notes and of the Warrants hereby acknowledges that the Senior Notes and the
Warrants are not being registered (i) under the Securities Act of 1933, as
amended (the "Act") or (ii) under any applicable state securities law; and that
the Company's reliance on the Section 4(2) exemption of the Act and under
applicable state securities laws is predicated in part on the representations
hereby made to the Company in the Agreement.
(b) The Purchaser of the Senior Notes will not sell or transfer
all or any part of the Senior Notes unless and until he shall first have given
notice to the Company describing such sale or transfer and, if requested by the
Company, furnished to the Company either (a) an opinion, reasonably satisfactory
to counsel for the Company, of counsel skilled in securities matters (selected
by the Purchaser and reasonably satisfactory to the Company) to the effect that
the proposed sale or transfer may be made without registration under the Act and
without registration or qualification under applicable state law, or (b) an
interpretive letter from the Securities and Exchange Commission to the effect
that no enforcement action will be recommended if the proposed sale or transfer
is made without registration under the Act. The Purchaser acknowledges that the
Senior Notes and the Warrants (and upon any exercise thereof,
-8- Page 22 of 80 Pages
the certificates representing the Common Stock) subscribed for hereby will bear
a legend restricting transfer thereof as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAVE
BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM THE
REGISTRATION OR QUALIFICATION PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS BASED, IN PART, ON AN INVESTMENT REPRESENTATION
ON THE PART OF THE PURCHASER THEREOF. THESE SECURITIES MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED
WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM."
(c) The Company may refuse to recognize a transfer of the Senior
Notes or the Warrants on its books should a Purchaser attempt to transfer the
Senior Notes or the Warrants otherwise than in compliance with this Section 3.1.
(d) The Purchaser has adequate means of providing for his current
needs and possible personal contingencies, he anticipates no need now or in the
foreseeable future to sell the Senior Notes or the Warrants (or upon any
exercise thereof, the Common Stock) which he is purchasing and he can afford the
loss of his entire investment in the Company.
(e) The Purchaser is an "accredited investor," as defined in Rule
501 of Regulation D, promulgated under the Act.
(f) The Purchaser has such knowledge and experience in financial
and business matters that he is capable of evaluating the merits and risks of
investment in the Company and of making an informed investment decision.
(g) Each Purchaser will be the only owner, beneficial or
otherwise, of the Senior Notes and the Warrants (and upon any exercise thereof,
the Common Stock) being purchased by the Purchaser hereunder.
(h) The Purchaser has received and read and is familiar with the
Unit Offering Disclosure Documents and confirms that all documents, records and
books pertaining to his proposed investment in the Company have been made
available to him. The Purchaser is aware that no federal or state agency has
passed upon the Senior Notes, the Warrants or the Common Stock or made any
finding or determination concerning the fairness of the investment represented
thereby.
(i) The Purchaser had an opportunity to ask questions of and
receive answers from representatives of the Company concerning the terms and
conditions of this investment, and
-9- Page 23 of 80 Pages
all such questions have been answered to the full satisfaction of the Purchaser.
The Purchaser understands that no person other than the Company has been
authorized to make any representation or warranty other than as contained herein
(inclusive of the Exhibits hereto) or in the Unit Offering Disclosure Documents
and, if made, such representation may not be relied on unless it is made in
writing and signed by the Company. The Company has not rendered any investment
or tax advice to the Purchaser with respect to the suitability of an investment
in the Senior Notes and the Warrants (and upon any exercise thereof, the Common
Stock) or the tax consequences thereof. The Company has urged each Purchaser to
consult his own tax adviser concerning any tax matters relating to this
investment.
(j) The Senior Notes and the Warrants (and upon any exercise
thereof, the Common Stock) which Purchaser is acquiring will be acquired for his
own account for investment. The Purchaser intends to hold the Senior Notes and
the Warrants (and upon any exercise thereof, the Common Stock) indefinitely and
he is not purchasing such securities with a view toward distribution in a manner
which would require registration under the Securities Act, and he does not
presently have any reasons to anticipate any change in his circumstances or
other particular occasion or event which would cause him to sell, the Senior
Notes and the Warrants (or upon any conversion or exercise thereof, the Common
Stock) which he is purchasing hereunder, subject, nevertheless, to any
requirement of law that the disposition of his property shall at all times be
within his control.
(k) The Purchaser acknowledges that it has been called to his
attention both in the Unit Offering Disclosure Documents and by those
individuals with whom he has dealt in connection with his investment in the
Company that his investment in the Company involves a high degree of risk.
(1) The Purchaser has received no representations or warranties
from the Company other than those contained herein (inclusive of the Exhibits
hereto) or in the Unit Offering Disclosure Documents or otherwise furnished in
writing and signed by the Company.
(m) The Purchaser, if a corporation, partnership, trust or other
form of business entity: is authorized and otherwise duly qualified to purchase
and hold the Senior Notes and the Warrants (and upon any exercise thereof, the
Common Stock) and to enter into this Agreement and the Exhibits hereto to which
it is a signatory; represents that the purchase of the Senior Notes and the
Warrants (and upon any conversion or exercise thereof, the Common Stock) will
not result in a breach of or violation of the terms or provisions of, or
constitute a default under, the certificate of incorporation, by-laws, or other
charter document of such entity or any indenture or other agreement or
instrument by which the entity or its property is bound, or violate any
applicable law, administrative regulation, or court decree; and represents that
such entity has its principal place of business as set forth on its signature
page and that such entity has not been formed for the specific purpose of
acquiring the Senior Notes and the Warrants (or upon any exercise thereof, the
Common Stock). If the Purchaser is one of the aforementioned entities, it shall
supply any additional written information that may be required by the Company.
-10- Page 24 of 80 Pages
(n) All of the information that the Purchaser has heretofore
furnished or which is set forth in this Agreement and the Schedules and Exhibits
hereto with respect to his financial position and business status is correct and
complete as of the date of this Agreement and, if there should be any material
change in such information prior to the Closing, the Purchaser will immediately
furnish the revised or corrected information to the Company.
ARTICLE IV
COVENANTS
The Company, so long as any Senior Note shall be outstanding,
agrees to perform and comply with each of the following covenants.
4.1 Financial Statements; Information.
The Company shall furnish to each Holder of the Senior Notes the
following:
(a) Financial Information. The Company shall send, or cause to be
sent, to each Holder (i) its consolidated audited annual financial statements,
fairly and accurately presenting in all material respects the financial
condition and the results of operations and cash flows of the Company and its
Subsidiaries, prepared in accordance with GAAP, as soon as is practicable after
the same have been issued but in any case within ninety days of the end of its
fiscal year, together with the report thereon by independent public auditors,
(ii) its unaudited quarterly consolidated financial statements, of each of the
first three fiscal quarters of its fiscal year, fairly and accurately presenting
in all material respects the financial condition and the results of operations
and cash flows of the Company and its Subsidiaries, prepared in accordance with
GAAP, as soon as is practicable after the end of each fiscal quarter but in any
case within forty-five days of the end of its fiscal quarters, certified by its
duly authorized chief financial officer, together with a certificate signed by
its duly authorized chief executive officer or treasurer to the effect that,
based upon due inquiry and investigation, during such fiscal quarter no Event of
Default, or event which with the passing of time or giving of notice would
constitute an Event of Default, occurred, (iii) a copy of any monthly financial
report or statement of the Company and/or any of its Subsidiaries as may be
prepared by or for the directors of such company or for any other Person, as
soon as same is available, and (iv) such financial or other information relating
to the Company and its Subsidiaries or any of the transactions contemplated by
this Agreement or any Exhibit to which the Company is a party, as may be
reasonably requested by a Majority-in-Interest of the Holders.
(b) Information Delivered to Creditors. Concurrently with the
furnishing thereof, copies of any statements, reports or documents relating to
the business or condition generally of the Company or any Subsidiary which are
furnished by the Company or any Subsidiary to any other holder of funded debt of
the Company or Subsidiary, or any notices which are so furnished, in each case
pursuant to the terms of any indenture, loan, credit or similar
-11- Page 25 of 80 Pages
agreement and not otherwise required to be furnished pursuant to any other
clause of this Section 4.1
(c) Commission and Other Reports. Promptly upon their becoming
available (and in any event within five Business Days thereafter), copies of (i)
all financial statements, reports, notices, proxy statements and other
information sent or made available generally by the Company to any class of its
security holders (in their capacity as such) or by any Subsidiary to any class
of its security holders other than the Company or another Subsidiary, (ii) all
regular and periodic reports and all registration statements, forms and
prospectuses filed by the Company or any of its Subsidiaries with any securities
exchange or with the Commission, and (iii) all press releases and other
statements made available generally by the Company or any of its Subsidiaries to
the public concerning material developments in the business of the Company or
any of its Subsidiaries.
(d) Defaults, etc. Promptly upon and in any event within five
Business Days after any officer of the Company obtaining knowledge of any
condition or event which constitutes a Default or an Event of Default or
becoming aware that the Holder of any Senior Note has given any notice or taken
any other action with respect to a claimed Default or Event of Default or that
any person has given any notice to the Company or any of its Subsidiaries or
taken any other action with respect to a claimed default under or in respect of
any debt for borrowed money in excess of $100,000 or with respect to the
occurrence or existence of any event or condition of such type, written notice
in reasonable detail specifying the facts and circumstances of such condition,
event or action.
(e) Litigation, etc. Promptly and in any event within five
Business Days after any officer of the Company obtains knowledge of any
litigation, administrative proceeding or judgment (i) affecting the Company or
any of its Subsidiaries which involves claims against the Company or its
Subsidiaries aggregating, when taken together with all other such litigation,
proceedings and judgments, $100,000 which are not considered by the Company, in
its reasonable judgment, to be covered by insurance, or (ii) relating in any
material way to this Agreement, the Senior Notes, or any other Exhibit, notice
thereof specifying in each case in reasonable detail the facts and circumstances
surrounding such litigation, proceeding or judgment.
4.2 Certain Restrictions.
(a) The Company shall not pay any dividend or distribution in
respect of any class of its capital stock or make any payment on account of the
purchase, redemption or other retirement of any of its shares of capital stock
without the prior written consent of the Majority-in-Interest of the Holders of
the Senior Notes.
(b) Without the prior written consent of the Majority-in-Interest
of the Holders of the Senior Notes, for so long as the Senior Notes are
outstanding, the Company shall not, and shall not permit any Subsidiary to,
mortgage, pledge, create a lien or security interest in or otherwise encumber
any assets or property of the Company or any Subsidiary, except as
-12- Page 26 of 80 Pages
contemplated by any loan or security document specifically referenced in any of
the Schedules to this Agreement and except for Permitted Liens.
(c) Without the prior written consent of the Majority-in-Interest
of the Holders of the Senior Notes, the Company shall not, and shall not permit
any Subsidiary to, voluntarily liquidate or dissolve, or consolidate or merge
with or into any other Person (except where the Company or Subsidiary is the
surviving entity and the net worth of such surviving entity is at least equal to
the net worth of the Company or Subsidiary, as the case may be, immediately
prior thereto), or sell, lease, transfer, contribute or otherwise dispose of all
or substantially all of its assets to any other Person (other than sales of
inventory and worn out and obsolete assets in the ordinary course of business).
4.3 Maintenance of Office.
Until the principal of and interest on the Senior Notes has been
paid in full to the Holders, (i) the Company shall maintain its principal office
at a location in the United States of America where notices, presentations and
demands in respect of this Agreement and the Senior Notes may be made upon it,
and (ii) shall notify each Holder of a Senior Note in writing of any change of
location of such office at least 20 days prior to such change of location. Such
principal office shall first be maintained at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇.
4.4 Corporate Existence.
The Company will, and will cause each of its Subsidiaries to, do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence.
4.5 Compliance with Laws; Government Filings.
The Company shall, and shall cause each of its Subsidiaries to,
comply in all material respects with all laws, statutes, rules, regulations and
ordinances and all orders of, and restrictions imposed by, any court, arbitrator
or Governmental Body in respect of the conduct of the business of the Company or
Subsidiary and the ownership of the properties of the Company or Subsidiary
(including, without limitation, applicable laws, statutes, rules, regulations,
ordinances and orders relating to occupational health and safety standards,
consumer protection and equal employment opportunities), except to the extent
that the applicability or validity of any such law, statute, rule, regulation,
ordinance or order is being contested in good faith by appropriate and timely
actions or proceedings diligently pursued, and for which such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been
made.
4.6 Environmental Matters.
(a) The Company shall, and shall cause each of its Subsidiaries
to, (i) obtain and maintain in full force and affect all Environmental Permits
that may be required from time to time in order for the Company and such
Subsidiary to comply in all material respects with all Environmental Laws
applicable to the Company or such Subsidiaries and (ii) be and remain in
-13- Page 27 of 80 Pages
compliance in all material respects with all terms and conditions of all such
Environmental Permits and with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in all applicable Environmental Laws.
(b) The Company shall not, and shall not permit any of its
Subsidiaries to, (i) cause or allow (A) any Hazardous Substance to be present at
any time on, in, under or above the Company Premises or any part thereof or (B)
the Company Premises or any part thereof to be used at any time to manufacture,
generate, refine, process, distribute, use, sell, treat, receive, store, dispose
of, transport, arrange for transport of, handle, or be involved in any other
activity involving, any Hazardous Substance, or (ii) conduct any such activities
described in the foregoing clause (i) on the Company Premises or anywhere else,
except, in each case referred to in the foregoing clauses (i) and (ii), in a
manner that is in compliance in all material respects with all applicable
Environmental Laws and Environmental Permits or to an extent that will not have
a Material Adverse Effect.
4.7 Certain Contracts.
The Company shall notify the Holders of the Senior Notes promptly
following receipt of notice of any default or assertion of any material breach
under any existing Material Contract, and shall notify the Holders of the Senior
Notes promptly following the entering into of any new Material Contract.
4.8 Participation Rights.
The Holders of the Senior Notes, acting by a
Majority-in-Interest, shall have a preferred right to participate in any future
debt or equity financing of the Company effected prior to January 1, 1999, on
the following basis. The Company agrees to negotiate in good faith with the
Holders of the Senior Notes for the provision of any such debt or equity
financing before negotiating with any other potential provider of any such
financing. If the Company and such Holders cannot agree upon the terms of such
debt or equity financing, the Company may negotiate with third parties for the
provision of such debt or equity financing, and may obtain debt financing
without being required to offer to allow the Holders to provide such debt
financing on the same terms. If the Company and any such third party reach an
agreement upon the terms of any equity financing, the Company shall give notice
to the Holders specifying such terms and the Holders shall have the option,
exercisable within 30 days of receipt of such notice, to provide such equity
financing on the same terms. If the Holders waive such option, or do not
exercise such option within such 30-day period, the Company may, for a period of
60 days from the date of such waiver or the expiration of such period, obtain
such equity financing from such third party on the terms specified in the notice
or on terms no less favorable to the Company.
-14- Page 28 of 80 Pages
ARTICLE V
EVENTS OF DEFAULT
5.1 Events of Default. In the event that:
(i) the Company defaults for more than five days after written
notice from any Holder hereof in making any payment required to be made on the
Senior Notes; or
(ii) any other obligation of the Company or any Subsidiary for
the payment of borrowed money in excess of $100,000 becomes or is declared to be
due and payable prior to its expressed maturity, unless the validity of any such
indebtedness or obligation is being contested in good faith by appropriate
proceedings; or
(iii) the Company defaults in the observance or performance in
any material respect of any of the covenants and agreements (other than
covenants and agreements with respect to the payment of principal or interest on
the Senior Notes) contained in this Agreement or in any Exhibit hereto and if
the same is capable of being cured the continuance of the same for 30 days after
written notice of such default from any Holder; or
(iv) any warrant of attachment, execution or other writ is levied
upon any property or assets of the Company or any Subsidiary in excess of
$100,000 and is not discharged or stayed (including stays resulting from the
filing of an appeal) within 30 days; or all or any substantial part of the
assets or properties of the Company or any Subsidiary are condemned, seized or
appropriated by any government or governmental authority; or any order is
entered in any proceeding directing winding up, dissolution or split-up of the
Company or any Subsidiary; or
(v) any representation or warranty of the Company made in this
Agreement or any Exhibit hereto or in connection herewith or therewith shall
prove to have been false or incorrect or breached in any material respect on the
date on which made, and if the same is capable of being cured the continuance of
same for 20 days after receiving notice of such default from any Holder; or
(vi) the Company or any Subsidiary hereafter makes an assignment
for the benefit of creditors, or files a petition in bankruptcy as to itself, is
adjudicated insolvent or bankrupt, petitions a receiver of or any trustee for
the Company or any Subsidiary or any substantial part of the property of the
Company or any Subsidiary under any bankruptcy, reorganization, arrangement,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or if there is hereafter
commenced against the Company or any Subsidiary any such proceeding and an order
approving the petition is entered or such proceeding remains undismissed for a
period of 60 days, or the Company or any Subsidiary by any act or omission to
act indicates its consent to or approval of or acquiescence in any such
proceeding or the appointment of any receiver of, or trustee for, the Company or
any
-15- Page 29 of 80 Pages
Subsidiary or any substantial part of its properties, or suffers any such
receivership or trusteeship to continue undischarged for a period of 60 days;
then, and in any such event, and at any time thereafter, if such event shall
then be continuing, any Holder as to Section 5.1(i) and a Majority-in-Interest
of all Holders as to any other Event of Default may, by written notice to the
Company, declare the Senior Notes due and payable, whereupon the same shall be
due and payable without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived.
5.2 Appointment of Director.
Until such time as the entire principal and interest on the
Senior Notes shall have been paid in full, the Majority-in-Interest may, but
need not, designate up to two persons to serve as directors of the Company.
ARTICLE VI
MISCELLANEOUS
6.1 Expenses.
Whether or not the transactions contemplated by Article I hereof
are consummated (unless the failure to consummate such transactions is due to a
breach by the Purchasers of their obligations hereunder), the Company shall: (a)
directly pay the reasonable fees and expenses of special counsel to the
Purchasers incurred in connection with such transactions (up to $35,000), in
connection with compliance by the Purchasers with any obligations imposed by or
under the Securities Exchange Act as a consequence of the issuance of the Senior
Notes and Warrants or the conversion or exercise thereof (including, without
limitation, pursuant to Sections 13(d) and 16 of that Act) (up to $10,000 for
the initial filings under Sections 13(d) and 16 of that Act and up to $2,500 per
year thereafter so long as the Purchasers are subject to such Sections), or in
connection with any actual or proposed amendment, waiver or consent pursuant to
the provisions hereof, and all other expenses in connection with the foregoing
(including, without limitation, document production and reproduction expenses);
(b) reimburse each Purchaser for his reasonable out-of-pocket expenses in
connection with each such actual or proposed amendment, waiver or consent
pursuant to the provisions of this Agreement, and any items of the character
referred to in clause (a) which shall have been paid by any Purchaser; and (d)
pay all documentary, stamp or similar taxes (including interest and penalties)
which may be payable in respect of the execution and delivery or issuance (but
not the transfer) of any of the Senior Notes or of any amendment of, or waiver
or consent under or with respect to, this Agreement, any of the Senior Notes or
any other Exhibit and save each Purchaser of the Senior Notes harmless against
each Purchaser any loss or liability resulting from nonpayment or delay in
payment of any such tax. The obligations of the Company under this Section shall
survive payment and transfer of any Senior Notes.
-16- Page 30 of 80 Pages
6.2 Reliance on and Survival of Representations.
All agreements, covenants, representations and warranties of the
Company herein or in any Exhibit or of (or on behalf of) the Company in any
certificate or other instrument delivered pursuant hereto or thereto shall: (a)
be deemed to be material and to have been relied upon by each Purchaser,
notwithstanding any investigation heretofore or hereafter made by each Purchaser
or on his behalf, and (b) survive the execution and delivery of this Agreement
and the execution and delivery of the Senior Notes to each Purchaser and any
investigation made at any time by him or on his behalf or any disposition of any
of the Senior Notes, and all representations and warranties contained in Article
II hereof and in any Exhibit hereto and in any Financing Document shall expire
and terminate upon payment in full of the Senior Notes including all accrued
interest thereon.
6.3 Amendment and Waiver.
(a) Any term, provision, covenant, agreement or condition of this
Agreement, the Senior Notes or the Warrants or any other Exhibit hereto may,
with the written consent of the Company, be amended or modified, or compliance
therewith may be waived (either generally or in a particular instance and either
retroactively or prospectively), by one or more substantially concurrent written
instruments signed by the Holder or Holders of not less than 66 2/3% in
aggregate unpaid principal amount of all Senior Notes and 66 2/3% in number of
the Warrants at the time outstanding (except that amendments or waivers to the
Senior Notes shall not require the consent of Holders of Warrants and amendments
or waivers to the Warrants shall not require the consent of Holders of Senior
Notes); provided, that
(i) with respect to the Senior Notes no such amendment,
modification or waiver shall (A) change the principal of, or change the
rate of interest or change the time of payment of principal, or premium,
if any, or interest on any of the Senior Notes, (B) change the
percentage of Holders of Senior Notes required to accelerate or rescind
any acceleration of the Senior Notes, or (C) modify any provision of
this Section, without the consent of the Holders of all Senior Notes
then outstanding,
(ii) with respect to the Warrants no such amendment, modification
or waiver shall change the Warrant Price, as provided in the Warrant,
without the consent of the Holders of all Warrants then outstanding, and
(iii) no such amendment, modification or waiver shall extend to
or affect any obligation not expressly waived or impair any right
consequent thereon.
(b) Any amendment, modification or waiver pursuant to this
Section 6.3 shall apply equally to all the Holders of the Senior Notes or the
Warrants, as the case may be, and shall be binding upon them, upon each future
holder of any Senior Note or Warrants, as the case may be, and upon the Company,
in each case, whether or not a notation thereof shall have been placed on any
Senior Note. Promptly after any amendment, modification or waiver pursuant to
-17- Page 31 of 80 Pages
this Section 6.3 has become effective, the Company shall deliver to each Holder
of a Senior Note or Warrant, as the case may be, a true and complete copy of the
written instruments pursuant to which such amendment, modification or waiver was
effected, signed by the Holder or Holders of the requisite percentage and
setting forth any such amendment or modification or the terms of any such
waiver.
(c) Each Holder shall continue to make its own analysis and
decisions in taking or not taking action under this Agreement. In no event shall
the Majority-in-Interest be deemed to be an agent or fiduciary for the
Purchasers, and shall not be required to keep informed as to the performance or
observance by the Company of this Agreement or any other document referred to or
provided for herein or therein or to inspect the properties or books of the
Company. No Holder shall have any duty or responsibility to provide any other
Holder with any credit or other information concerning the affairs, financial
condition or business of the Company that may come into the possession of such
Holder.
6.4 Register.
(a) The Senior Notes and the Warrants shall be issued in
registered form only. The Company shall keep a register (the "Senior Note
Register") in which provision shall be made for the registration of the Senior
Notes and the registration of transfers of the Senior Notes and a register (the
"Warrant Register") in which provisions shall be made for the registration of
the Warrants and the registration of transfers thereof. Such Registers shall be
kept at the principal office of the Company and the Company is hereby appointed
"Senior Note Registrar" and the "Warrant Registrar" for the purpose of
registering the Senior Notes and the Warrants, respectively, and transfers of
the Senior Notes. Subject to compliance with the provisions of Article III
hereof by a transferee, upon surrender for registration of transfer of any
Senior Note or Warrant at the principal office of the Company and compliance
with the provisions of Section 3.1, if applicable, the Company shall execute and
deliver, in the name of the designated transferee, a new Senior Note or Warrant,
as the case may be, of a like amount. The Company shall make or cause to be made
a notation on each new Senior Note of the amount of all payments of principal
previously made on the surrendered Senior Note and the date to which interest
accrued on the surrendered Senior Note has been paid. The Company shall treat
the individual or entity in whose name each Senior Note is registered on the
Senior Note Register or Warrant on the Warrant Register, as the case may be, as
the sole and absolute owner thereof, notwithstanding any contrary notice.
(b) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any Senior Note or
Warrant and of a letter of indemnity reasonably satisfactory to the Company, and
upon reimbursement to the Company of all reasonable expenses incident thereto,
and upon surrender or cancellation of a Senior Note or Warrant, if mutilated,
the Company will make and deliver a new Senior Note or Warrant of like tenor in
lieu of such lost, stolen, destroyed or mutilated Senior Note or Warrant.
-18- Page 32 of 80 Pages
6.5 Directly or Indirectly.
Where any provision of this Agreement refers to actions to be
taken by any person, or which such person is prohibited from taking, such
provision shall be applicable whether the action in question is taken directly
or indirectly by such person.
6.6 Successors and Assigns.
All covenants and agreements in this Agreement by or on behalf of
the respective parties hereto shall bind and inure to the benefit of their
respective successors and, in the case of any Holder of a Senior Note or
Warrant, registered assigns. The provisions of this Agreement are intended to be
for the benefit of all Holders from time to time of the Senior Notes, and shall
be enforceable by any such Holder, whether or not an express assignment to such
Holder of rights under this Agreement has been made by the Purchaser or his
successors or assigns.
6.7 Notices.
Unless otherwise expressly provided in this Agreement, all
notices, opinions and other communications provided for in this Agreement shall
be in writing and delivered by hand or mailed, first class postage prepaid,
return receipt requested or sent by overnight courier, or by confirmed telefax
transmission (confirmed by hand-delivered, mailed or overnight courier copy)
addressed (a) if to the Company, to the Company at ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ (with a copy sent by telefax transmission to it at (713)
850-7730), marked to the attention of the President, with a copy to Fulbright &
Joworski L.L.P., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
telecopy number (▇▇▇) ▇▇▇-▇▇▇▇, to the attention of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq., or at
such other address as the Company may hereafter designate by notice to each
Holder of Senior Notes or Warrants at the time outstanding, or (b) if to the
Purchasers, at the address of each Purchaser as set forth in Schedule 1.2 or at
such other address as such Purchaser may hereafter designate by notice to the
Company, or (c) if to any other Holder of any Senior Note or Warrant, at the
address of such Holder as it appears on the Senior Note Register or the Warrant
Register, as the case may be.
6.8 LAW GOVERNING.
THIS AGREEMENT AND THE SENIOR NOTES AND ALL AMENDMENTS,
SUPPLEMENTS, MODIFICATIONS, WAIVERS AND CONSENTS RELATING HERETO OR THERETO
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE
STATE OF NEW YORK.
6.9 SUBMISSION TO JURISDICTION;
Service of Process .
(a) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE
OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK,
-19- Page 33 of 80 Pages
STATE OF NEW YORK, AND IRREVOCABLY AGREES THAT ALL ACTIONS OR PROCEEDINGS
RELATING TO THIS AGREEMENT, THE SENIOR NOTES OR WARRANTS OR ANY OTHER EXHIBIT
MAY BE LITIGATED IN SUCH COURTS, AND THE COMPANY WAIVES ANY OBJECTION WHICH IT
MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF
ANY PROCEEDING IN ANY SUCH COURT.
(b) In relation to any dispute arising out of or in connection
with this Agreement or any Exhibit, and for the exclusive benefit of the
Holders, the Company irrevocably and unconditionally submits to the
non-exclusive jurisdiction of the United States District Court for the Southern
District of New York, and to the non-exclusive jurisdiction of any court of the
State of New York located in the City and County of New York, for the purposes
of any suit, action or other proceeding arising out of, or relating to, this
Agreement or any Exhibit or any of the transactions contemplated hereby or
thereby, and hereby waives, and agrees not to assert, by way of motion, as a
defense, or otherwise, that it is not personally subject to the jurisdiction of
the above named courts for any reason whatsoever, that such suit, action or
proceeding is brought in an inconvenient forum, or that the venue of such suit,
action or proceeding is improper, or that this Agreement or any Exhibit or the
subject matter hereof may not be enforced in or by such courts. The Company
hereby agrees that process against it may be served by mail or delivery of
service of process in any of the aforementioned action, suits or proceedings to
C T Corporation System, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (such agent
being hereinafter called the "Process Agent"), which the Company hereby
irrevocably designates and appoints as its attorney-in-fact to receive service
of process in any action, suit or proceeding with respect to any matter as to
which it submits to jurisdiction as set forth above, it being agreed that
service to such office or upon such agent shall constitute valid service upon
the Company. The Company hereby directs the Process Agent to receive and accept
all process on its behalf. The Company shall promptly notify the Purchasers of
any change in the address of the Process Agent and may, with prior notice given
to Holders, appoint a successor Process Agent; provided, however, that if the
Process Agent shall at any time cease to exist or its agency shall for any
reason cease, the Company shall designate forthwith a successor Process Agent in
the County and State of New York and shall give prompt notice of such
designation to the Holders, together with evidence of the acceptance of any such
appointment. The Company agrees irrevocably to the service of process of any of
the aforementioned courts in any suit, action or proceeding described above by
mailing of copies of such process to the Company at its address specified in
Section 6.7 hereof. Nothing herein shall preclude service of process in any
other manner permitted by applicable law or prohibit any Holder from commencing
legal proceedings against the Company or any of its properties in any other
jurisdiction.
6.10 Headings, etc.
The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning or construction of any
of the terms hereof. Unless otherwise specified, any reference in this Agreement
to a particular section, clause or other subdivision, or a particular schedule
or exhibit, shall be considered a reference to that section, clause or other
subdivision of, or to that schedule or exhibit to, this Agreement.
-20- Page 34 of 80 Pages
6.11 Entire Agreement.
This Agreement (inclusive of the Exhibits hereto) embodies the
entire agreement and understanding among the Company and the Purchasers and
supersedes all prior agreements and understandings among such parties relating
to the subject matter hereof.
6.12 WAIVER OF TRIAL BY JURY.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH OF THE
PARTIES HERETO IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY EXHIBIT HERETO OR
THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF THE PURCHASERS
IN THE NEGOTIATION OR ENFORCEMENT HEREOF OR THEREOF.
6.13 No Waiver.
No failure on the part of any Holders of the Senior Notes to
exercise any right or remedy hereunder with respect to the Company, whether
before or after the happening of an Event of Default, shall constitute waiver of
any such subsequent Event of Default or of any other Event of Default. No
failure to accelerate the debt of the Company evidenced hereby by reason of an
Event of Default or indulgence granted from time to time shall be construed to
be a waiver of the right to insist upon prompt payment thereafter; or shall be
deemed to be a novation of the Senior Notes or a reinstatement of such debt
evidenced hereby or a waiver of such right of acceleration or any other right,
or be construed so as to preclude the exercise of any right any Holders of the
Senior Notes may have, whether by the laws of the state governing the Senior
Notes, by agreement or otherwise; and the Company hereby expressly waives the
benefit of any statute or rule of law or equity that would produce a result
contrary to or in conflict with the foregoing.
6.14 Applicable Interest Rate.
The Holders of the Senior Notes, on the one hand, and the
Company, on the other hand, intend that the obligations evidenced by the Senior
Notes conform strictly to the applicable usury laws from time to time in force.
All agreements between the Company and any Holder of the Senior Notes, whether
now existing or hereafter arising and whether oral or written, hereby are
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity hereof or otherwise, shall the amount paid or agreed to
be paid to such Holder, or collected by such Holder, by or on behalf of the
Company for the use, forbearance or detention of the money to be loaned to the
Company hereunder or otherwise, or for the payment or performance of any
covenant or obligation contained herein of the Company to such Holder, or in any
other document evidencing, securing or pertaining to such indebtedness evidenced
hereby, exceed the maximum amount permissible under applicable usury law. If
under any circumstances whatsoever fulfillment of any provision thereof or any
other document, at the time
-21- Page 35 of 80 Pages
performance of such provisions shall be due, shall involve transcending the
limit of validity prescribed by law, then, ipso facto, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if under any
circumstances any Holder of Senior Notes ever shall receive from or on behalf of
the Company an amount deemed interest, by applicable law, which would exceed the
highest lawful rate, such amount that would be excessive interest under
applicable usury laws shall be applied to the reduction of the principal amount
owing hereunder and under the Senior Notes and not to the payment of interest,
or if such excessive interest exceeds the unpaid balance of principal and such
other indebtedness, the excess shall be deemed to have been a payment made by
mistake and shall be refunded to the Company or to any other person making such
payment on the Company's behalf.
6.15 Indemnification.
In consideration of the execution and delivery of this Agreement
by each Purchaser, the Company hereby agrees to indemnify, defend and hold each
Purchaser and each Holder from time to time of any Senior Notes, and such
Purchaser's and their respective officers and directors, general and limited
partners (and directors and officers thereof), employees and agents (herein
called the "Indemnitees") free and harmless from and against any and all claims,
actions, causes of action, suits or other proceedings (whether or not any such
Indemnitee is a party thereto), losses, liabilities and damages, and expenses in
connection therewith, including, without limitation, reasonable fees and
disbursements of counsel, consultants and experts and claims relating to
personal injury or property damage (herein called the "Indemnified Liabilities",
which term shall not include, however, in respect of any particular Indemnitee,
liabilities incurred by reason of the gross negligence or willful misconduct of
such Indemnitee) incurred by the Indemnitees or any of them as a result of, or
arising out of, or relating to (a) any transaction financed or to be financed in
whole or in part directly or indirectly with proceeds from the sale of any
Senior Note, or (b) any failure of any representation or warranty set forth in
Section 2.11 to be true and correct when made or any failure by the Company to
comply with any of its covenants or agreements set forth in Section 4.6. If and
to the extent that the foregoing undertaking may be unenforceable for any
reason, the Company hereby agrees to make the maximum contribution to the
payment of each of the Indemnified Liabilities which is permissible under
applicable law. The provisions of, and obligations of the Company under, this
Section 6.15 shall survive the execution and delivery of this Agreement, the
delivery, payment or transfer of any Senior Note, the enforcement of any
provision hereof or thereof, the consummation of the transactions to occur on
the Closing Date, and any amendments or waivers, and shall be enforceable by
each Indemnitee separately or together without necessity of accelerating the
maturity of any Senior Notes; and any such Indemnitee seeking to enforce the
indemnification provided for hereunder may initially proceed directly against
the Company without first resorting to any other rights of indemnification or
otherwise that it may have.
-22- Page 36 of 80 Pages
6.16 Interpretive Provision.
Wherever any representation, warranty or other statement made by
the Company in this Agreement is limited to the Company's knowledge, such
limitation shall mean the actual knowledge or awareness of any person who, on
the date hereof, is an executive officer or director of the Company after due
inquiry of the circumstances thereof.
6.17 Severability.
Any provision of this Agreement which shall be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or enforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
6.18 Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
6.19 Finder's Fee.
(a) The Company represents and warrants that it has not incurred
any obligation or liability to any broker or finder for any fee or payment with
respect to the offering or sale of the Units and agrees to indemnify and hold
the Purchasers harmless against any claims or liabilities asserted against them
by any person acting or claiming to act as a broker or finder on behalf of the
Company or any Subsidiary.
(b) Each Purchaser represents and warrants that it has not
incurred any obligation or liability to any broker or finder for any fee or
payment with respect to the offering or sale of the Units and agrees to
indemnify and hold the Company harmless against any claims or liabilities
asserted against them by any person acting or claiming to act as a broker or
finder on behalf of such Purchaser.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement effective as of the day and year first before written.
COMPANY:
▇▇▇▇▇▇ INDUSTRIES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
-23- Page 37 of 80 Pages
PURCHASERS:
WHITE OWL CAPITAL PARTNERS
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, General Partner
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ANTONY ▇. ▇. ▇▇▇▇▇
----------------------------------------
Antony ▇. ▇. ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇
-24- Page 38 of 80 Pages
APPENDIX I
DEFINITIONS
As used in this Agreement the following terms shall have the
meanings ascribed thereto:
"Agreement" means this agreement, as it may be amended from time
to time, including all schedules and exhibits thereto.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which commercial banks are required or authorized by law or
regulation to be closed in New York, New York.
"Closing" has the meaning set forth in Section 1.3.
"Commission" means the Securities and Exchange Commission or any
other United States agency at the time administering the Securities Act.
"Common Stock" means common stock of the Company having a par
value of $.01 per share.
"Company" means ▇▇▇▇▇▇ Industries, Inc., a Delaware corporation.
"Company Premises" means real property in which (a) the Company,
(b) any Subsidiary of any person referred to in clause (a) of this definition or
(c) any person which has at any time been a Subsidiary of any person referred to
in clause (a) of this definition at any time has or ever had any direct or
indirect interest, including, without limitation, ownership thereof, or any
arrangement for the lease, rental or other use thereof, or the retention or
claim of any mortgage or security interest therein or thereon.
"Environmental Claims" has the meaning set forth in Section
2.11(c).
"Environmental Law" any past, present or future Federal, state,
local or foreign statutory or common law, or any regulation, ordinance, code,
plan, Order, permit, grant, franchise, concession, restriction or agreement
issued, entered, promulgated or approved thereunder, relating to (a) the
environment, human health or safety, including, without limitation, emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including, without limitation, air, surface water, groundwater or
land), or (b) the manufacture, generation, refining, processing, distribution,
use, sale, treatment, receipt, storage, disposal, transport, arranging for
transport, or handling of Hazardous Substances,
"Environmental Permit" means any and all permits, consents,
licenses, approvals and registrations of any nature at any time required
pursuant to or in order to comply with any Environmental Law.
-25- Page 39 of 80 Pages
"Event of Default" has the meaning set forth in Section 5.1.
"Exhibit" means any of the exhibits to this Agreement, including
such exhibits as executed and delivered pursuant to the terms of this Agreement.
"Financial Statements" means (i) the consolidated balance sheet
of the Company and the Subsidiaries as of August 31, 1996, and the consolidated
statement of operations and cash flows for the year ended August 31, 1996, and
(ii) the consolidated balance sheets of the Company and the Subsidiaries as of,
and the consolidated statements of operations and cash flows for the fiscal
quarters ended November 30, 1996, February 28, 1997, and May 31, 1997, in each
case, together with the notes thereto.
"GAAP" means generally accepted accounting principles as from
time to time set forth in the opinions of the Accounting Principles Board of the
American Institute of Certified Public Accountants and in statements by the
Financial Accounting Standards Board or in such opinions and statements of such
other entities as shall be approved by a significant segment of the accounting
profession in the United States of America.
"Governmental Body" means any Federal, state, municipal, local or
other governmental department, commission, board, bureau, agency,
instrumentality, political subdivision or taxing authority of any country.
"Hazardous Substances" collectively, contaminants; pollutants;
toxic or hazardous chemicals, substances, materials, wastes and constituents;
petroleum products; polychlorinated biphenyls; medical wastes; infectious
wastes; asbestos; paint containing lead; and urea formaldehyde.
"Holder" means initially a Purchaser and thereafter such person
who from time to time is the registered Holder of a Senior Note or a Warrant, as
the case may be, or a Holder of either.
"Indemnified Liabilities" has the meaning set forth in Section
6.15.
"Indemnitees" has the meaning set forth in Section 6.15.
"Majority-in-Interest" means the Holders of at least two-thirds
of the outstanding principal amount of the Senior Notes and two-thirds of the
outstanding Warrants, provided, however, that if fewer than one-half of the
principal amount of Senior Notes or Warrants originally issued pursuant to this
Agreement are outstanding then Majority-in-Interest means 50.1% of such
outstanding principal amount of Senior Notes and Warrants.
"Material Adverse Effect" means any circumstance or event which
is material and adverse to the financial condition or business operations or
prospects of the Company and its Subsidiaries, taken as a whole, or which may
reasonably be expected to result in or cause an Event of Default.
-26- Page 40 of 80 Pages
"Material Contract" means any contract of the Company or any
Subsidiary with any Person that is presently in effect and (i) that either (A)
accounted for 10 percent or more of the annual revenues of the Company or any
Subsidiary during any of the past three fiscal years or (B) is expected to
account for 10 percent or more of the annual revenues of the Company or any
Subsidiary during the present fiscal year or (ii) the expiration or termination
of which would have a Material Adverse Effect.
"Opinion of Company Counsel" means the legal opinion of Fulbright
& ▇▇▇▇▇▇▇▇ L.L.P., counsel for the Company, in favor of the Purchasers, in the
form of Exhibit C hereto
"Permitted Liens" means (i) liens of carriers, warehousemen,
mechanics and materialmen incurred in the ordinary course of business securing
sums not overdue; (ii) liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms of
government insurance or benefits, relating to employees, securing sums (a) not
overdue or (b) being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of the Company in
conformity with GAAP, (iii) liens for taxes (a) not yet due or (b) being
diligently contested in good faith, provided that adequate reserves with respect
thereto are maintained on the books of the Company in conformity with GAAP.
"Person" means a corporation, a partnership, an organization or
business, an individual, a government or political subdivision thereof or
governmental agency.
"Purchaser" means a person set forth on Schedule 1.2 with respect
to that number of Units set forth opposite his name, and Purchasers means two or
more Purchasers.
"Registration Rights Agreement" means that certain registration
rights agreement to be entered into between the Company and the Purchasers in
the form of Exhibit D hereto.
"Required Consents" means the approvals, consents and
agreements set forth on Schedule 2.6.
"Securities Act" means the Securities Act of 1933, or any similar
United States statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Senior Note" means a Senior Convertible Promissory Note of the
Company in the form of Exhibit A.
"Senior Note Register" has the meaning set forth in Section 6.4.
"Subsidiary" means any corporation or other legal entity 50% or
more of the voting stock of which is owned by the Company or another Subsidiary
of the Company. For these purposes voting stock means the capital stock or other
form of ownership which ordinarily,
-27- Page 41 of 80 Pages
in the absence of contingencies, entitles the holder to elect corporate
directors or persons performing similar functions.
"Unit" means a unit of securities consisting of a $25,000
principal amount Senior Note and a detachable Warrant, issued by the Company.
"Unit Offering Disclosure Documents" means the Annual Report on
Form 10-K of the Company for the fiscal year ended August 31, 1996, and the
Forms 10-Q of the Company for the fiscal quarters ended November 30, 1996,
February 28, 1997, and May 31, 1997, as filed with the Commission, together with
the Financial Statements.
"Warrant" means a warrant of the Company to purchase 1.6 shares
of Common Stock for each $1 principal amount of Senior Note, in the form of
Exhibit B.
"Warrant Register" has the meaning set forth in Section 6.4.
-28- Page 42 of 80 Pages
SCHEDULE 1.2
PURCHASERS
Name, Address, Telefax No.
and Tax Identification No. No. Units
of Purchaser Subscribed For Subscription Price
-------------------------------------- -------------- ------------------
White Owl Capital Partners 76 $1,900,000
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
TIN:
▇▇▇▇▇▇ ▇▇▇▇▇▇ 10 $250,000
c/▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SSN:
Antony ▇. ▇. ▇▇▇▇▇ 10 $250,000
c/▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
Securities Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SSN:
▇▇▇▇ ▇▇▇▇▇▇▇ 4 $100,000
c/o Wellington Management Co., LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SSN:
Total: 100 $2,500,000
Page 43 of 80 Pages