Exhibit 6
NOTE REFORMATION AGREEMENT
DATED AS OF
JULY 14, 2000
BY AND AMONG
COVENTRY INDUSTRIES CORP. N/K/A
AMERICAN RISK MANAGEMENT GROUP, INC.
AS THE ISSUER,
PROFUTURES SPECIAL EQUITIES, L.P.
AS THE NOTEHOLDER
1
NOTE REFORMATION AGREEMENT
AGREEMENT, dated as of July 14, 2000, among PROFUTURES SPECIAL EQUITIES
FUND, L.P. INC., a Delaware limited partnership (the "Noteholder") and COVENTRY
INDUSTRIES CORP. N/K/A AMERICAN RISK MANAGEMENT GROUP, INC. ("Company").
R E C I T A L S:
WHEREAS, on March 3, 1999, the Company has issued to the Noteholder,
three of the Company's 8% Convertible Promissory Notes each having a principal
face value of $273,000 and an aggregate principal value of $819,000 ("Coventry
Note(s)") and the Company's 8% Promissory Note having a principal face value of
$81,000 ("Company Promissory Note"), attached hereto as EXHIBIT A ; and
WHEREAS, the Coventry Notes and securities exchanged for the Coventry
Notes have been held for a period exceeding 2 years by the Noteholder and are
convertible into shares of the Company's common stock, par value $.001 per share
which shares shall be tradeable without restrictive legend and without any
restrictions on sale under Rule 144; and
WHEREAS, accrued and unpaid interest on the Coventry Notes aggregates
$111,000 and the total of principal and interest due under the Coventry Notes to
the date of this Agreement is $930,000; and
WHEREAS, the amounts due under the Coventry Notes and Company
Promissory Note have not been paid by the Company in accordance with their terms
and conditions and the Noteholder is willing to waive the Company's default
under the Coventry Notes and any and all other claims which the Noteholder has
against the Company provided that the Company reforms, restates and amends the
Coventry Notes and cancels the Company Promissory Note in accordance with the
terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
DEFINITIONS
SECTION 1.1. DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Affiliate" means, with respect to any Person (the "Subject Person"),
(i) any other Person (a "Controlling Person") that directly, or indirectly
through one or more intermediaries, Controls the Subject
2
Person or (ii) any other Person (other than the Subject Person) which is
Controlled by or is under common Control with a Controlling Person.
"Agreement" means this Note Reformation Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with its
terms.
"Balance Sheet Date" has the meaning set forth in Section 4.7.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan
and which is maintained or otherwise contributed to by the Company.
"Benefit Plans" has the meaning set forth in Section 4.9(b).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
to close.
"Capital Reorganization" has the meaning set forth in Section 7.9.
"Closing Bid Price" shall mean for any security as of any date, the
lowest closing bid price as reported by Bloomberg, L.P. ("Bloomberg") on the
principal securities exchange or trading market where such security is listed or
traded or, if the foregoing does not apply, the lowest closing bid price of such
security in the over-the-counter market on the electronic bulletin board, or, if
no lowest trading price is reported for such security by the electronic bulletin
board, then the average of the bid prices of any market makers for such security
as reported in the "pink sheets" by the National Quotation System, Inc.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any entity
succeeding to all of its material functions.
"Common Stock" means the common stock, $.001 par value per share, of
the Company symbol "ARMC".
"Company" means Coventry Industries Corp. n/k/a American Risk
Management Group, Inc., a Florida corporation, and its successors.
"Company Corporate Documents" means the articles of incorporation and
by-laws of the Company.
3
"Company Promissory Note" means the Company's 8% Promissory Note issued
, 1999 having a principal face value of $81,000 and issued to the Noteholder.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of that
Person, whether through the ownership of voting securities, by contract or
otherwise .
"Conversion Date" shall mean the date of delivery (including delivery
via telecopy) of a Notice of Conversion for all or a portion of a Convertible
Note by the holder thereof to the Company as specified in each Convertible Note.
"Conversion Price" has the meaning set forth in the Convertible Notes.
"Conversion Shares" has the meaning set forth in the Recitals.
"Convertible Notes" means the Company's 8% Amended and Restated
Convertible Notes due July 20, 2003 in the form attached hereto as EXHIBIT B
hereto.
"Coventry Notes" means the three Company 8% Convertible Promissory
Notes dated March 3, 1999 having an aggregate principal face value of $819,000
and issued to the Noteholder.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which (x)
are capitalized in accordance with GAAP or (y) arise pursuant to sale-leaseback
transactions, (iv) all reimbursement obligations of such Person in respect of
letters of credit or other similar instruments, (v) all Debt of others secured
by a Lien on any asset of such Person, whether or not such Debt is otherwise an
obligation of such Person and (vi) all Debt of others Guaranteed by such Person.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Conversion Price" has the meaning set forth in the Convertible
Notes.
"Directors" means the individuals then serving on the Board of
Directors or similar such management council of the Company.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment, including, without limitation, ambient air, surface water,
ground
4
water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the cleanup or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Company, are treated as a single
employer under the Code.
"Event of Default" has the meaning set forth in Article X hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" has the meaning set forth in Section 1.2.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by virtue
of partnership arrangements, by agreement to keep well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain a minimum net
worth, financial ratio or similar requirements, or otherwise) any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or (ii) entered into for the purpose of assuring in any other manner the
holder of such Debt of the payment thereof or to protect such holder against
loss in respect thereof (in whole or in part); PROVIDED that the term Guarantee
shall not include endorsements for collection or deposit in the ordinary course
of business. The term Guarantee used as a verb has a corresponding meaning.
"Hazardous Materials" means any hazardous materials, hazardous wastes,
hazardous constituents, hazardous or toxic substances or petroleum products
(including crude oil or any derivative or fraction thereof), defined or
regulated as such in or under any Environmental Laws.
"Holder" or "Holders" means any Person which purchases, takes or comes
into possession of the Convertible Notes by assignment, Transfer or otherwise,
or is the nominee, trustee or receiver of any Person who is the registered
holder of any of the Convertible Notes.
"Intellectual Property" has the meaning set forth in Section 4.18.
"Investment" means any investment in any Person, whether by means of
share purchase, partnership interest, capital contribution, loan, time deposit
or otherwise.
"Lien" means, any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim,
5
title imperfection, encroachment or other survey defect, pledge, restriction,
security interest or other adverse claim, whether arising by contract or under
law or otherwise (including, without limitation, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of any financing statement under the Uniform Commercial Code or comparable law
of any jurisdiction in respect of any of the foregoing).
"Majority Holders" means (i) as of the Closing Date, the Noteholder and
(ii) at any time thereafter, the Holder or Holders of more than 50% in aggregate
principal amount of the Convertible Notes outstanding at such time.
"Market Price" shall mean the Closing Bid Price of the Common Stock
preceding the date of determination.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $500,000.
"Maturity Date" shall mean the date of maturity of the Convertible
Notes; specifically, June 30, 2003.
"Notice of Conversion" means the form to be delivered by a holder of a
Convertible Note upon conversion of all or a portion thereof to the Company in
the form of EXHIBIT I to the form of Convertible Note.
"Other Taxes" has the meaning set forth in Section 3.6(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means all domestic and foreign licenses, franchises, grants,
authorizations, permits, easements, variances, exemptions, consents,
certificates, orders and approvals necessary to own, lease and operate the
properties of, and to carry on the business of the Company.
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock company,
government (or any agency or political subdivision thereof) or other entity of
any kind.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
the Code and either (i) is maintained, or contributed to, by any member of the
ERISA group for employees of any member of the ERISA group or (ii) has at any
time within the preceding five years been maintained, or contributed to, by any
Person which was at such time a member of the ERISA Group for employees of any
Person which was at such time a member of the ERISA group.
6
"SEC Reports" shall have the meaning set forth in Section 4.7.
"Securities" means the Convertible Notes and, as applicable, the
Conversion Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which (x) a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person or (y) the results of operations,
the assets and the liabilities of which are consolidated with such Person under
GAAP.
"Taxes" has the meaning set forth in Section 3.6.
"Trading Day" shall mean any Business Day on which the automated
quotation system or exchange on which the Common Stock is then traded is open
for trading for at least four (4) hours.
"Transaction Agreements" means this Agreement and the Convertible
Notes.
"Transfer" means any disposition of Securities that would constitute a
sale thereof under the Securities Act.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under such Plan
exceeds (ii) the fair market value of all Plan assets allocable to such benefits
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
SECTION 1.2. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared, in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a consistent basis (except for changes concurred in by the Company's
independent public accountants) ("GAAP"). All references to "dollars," "Dollars"
or "$" are to United States dollars unless otherwise indicated.
ARTICLE II
REFORMATION OF CONVERTIBLE NOTES
SECTION 2.1. AUTHORIZATION OF REFORMATION. The Company has duly
authorized the reformation, amendment and restatement to the Noteholder of the
Coventry Notes. In substitution of and in exchange for the Coventry Notes, the
Company will issue the Convertible Notes in the aggregate
7
principal amount of $930,000 which includes the principal face amount of the
Coventry Notes and accrued but unpaid interest to date, the form of which is
annexed hereto as EXHIBIT B, which Convertible Notes shall be saleable,
transferable and assignable in accordance with the terms and conditions of this
Agreement to any Person or Persons in varying denominations. The Convertible
Notes are given in exchange for the Coventry Notes, and do not constitute
repayment of the Coventry Notes, nor a novation thereof.
SECTION 2.2. CLOSING. The closing for the reformation, amendment and
restatement restatement of the Convertible Notes shall be held on such date
("Closing Date") not later than July 14, 2000.
SECTION 2.3. DELIVERIES. On the Closing Date, subject to the
satisfaction of all terms and conditions set forth herein, the following
deliveries shall take place:
(a) The Company shall deliver to the Noteholder the Convertible
Notes duly executed on behalf of the Company registered in the
name of and payable to the order of such Noteholder.
(b) The Noteholder shall cancel and deliver to the Company the
Company Promissory Note.
(c) The Company shall deliver an opinion of counsel as to certain
matters substantially in the form annexed hereto as EXHIBIT C
which may be relied upon by the Noteholder and any subsequent
Holder.
(d) The Company shall deliver a resolution of its Board of
Directors authorizing the execution and delivery of this
Agreement and the reformation, amendment and restatement of
the Convertible Notes.
8
ARTICLE III
PAYMENT TERMS OF CONVERTIBLE NOTES
SECTION 3.1. PAYMENT OF PRINCIPAL AND INTEREST. The Company will pay
all amounts due on each Convertible Note by the method and at the address
specified for such purpose by the Noteholder or any Holder registered with the
Company in writing, without the presentation or surrender of any Convertible
Note or the making of any notation thereon, except that upon written request of
the Company made concurrently with or reasonably promptly after payment or
prepayment in full of any Convertible Note, the Noteholder or any Holder shall
surrender such Convertible Note for cancellation, reasonably promptly after any
such request, to the Company at its principal executive office. Prior to any
sale or other disposition of any Convertible Note, the holder thereof will, at
its election, either endorse thereon the amount of principal paid thereon and
the last date to which interest has been paid thereon or surrender the
Convertible Note to the Company in exchange for a new Convertible Note or
Convertible Notes. The Convertible Notes may be freely transferable and
assignable to any Holder which agrees in writing to comply with the terms and
conditions of this Agreement and the Convertible Notes provided that such Holder
is an "accredited investor." The Company will afford the benefits of this
Section 3.1 to any direct or indirect transferee of the Convertible Notes
purchased under this Agreement and that has made the same agreement relating to
this Convertible Note as the Noteholder or any Holder has in this Section 3.1;
provided that such transferee is an "accredited investor" under Rule 501 of
Regulation D promulgated under the Securities Act.
SECTION 3.2 PAYMENT OF INTEREST. Interest shall accrue on the
outstanding principal amount of each Convertible Note and shall be payable
quarterly on the last day of each calendar month of each quarter, commencing
September 30, 2000 in the manner set forth in the Convertible Notes.
SECTION 3.3. VOLUNTARY PREPAYMENT. For so long as no Event of Default
shall have occurred and is continuing and not cured by the Company within the
applicable time to cure as provided under this Agreement, the Company may, at
its option, prepay each Convertible Note at 130% of the principal amount
thereof, plus accrued but unpaid interest through the date of prepayment
following at least ten (10) Business Days prior written notice to the Noteholder
or Holder (the expiration of such ten (10) Business Day period being referred to
as the "prepayment date"); PROVIDED, HOWEVER, that if such date is not a
Business Day, the prepayment date shall be the next Business Day thereafter. No
partial prepayment of a Convertible Note shall be permitted and the Company must
prepay all outstanding Convertible Notes simultaneously. If the Company gives a
notice of prepayment of the Convertible Notes, the Noteholder or any Holder may
convert the unpaid principal amount of such Convertible Note or Convertible
Notes to be prepaid (together with the amount of accrued and unpaid interest)
into shares of Common Stock.
9
SECTION 3.4. MANDATORY PREPAYMENTS.
Upon (i) a transfer of all or substantially all of the assets
of the Company to any Person in a single transaction or series of related
transactions, or (ii) a consolidation, merger or amalgamation of the Company
with or into another Person in which the Company is not the surviving entity
(other than a merger which is effected solely to change the jurisdiction of
incorporation of the Company and results in a reclassification, conversion or
exchange of outstanding shares of Common Stock solely into shares of Common
Stock) (each of items (i) and (ii) being referred to as a "Sale Event"), then,
in each case, the Company shall, upon request of any Holder, redeem the
Convertible Notes registered in the name of such Holder in cash for 130% of the
principal amount, plus accrued but unpaid interest through the date of
redemption, or at the election of the Holder, such Holder may convert the unpaid
principal amount of such Convertible Notes (together with the amount of accrued
and unpaid interest) into shares of Common Stock at the Conversion Rate.
SECTION 3.5. PREPAYMENT PROCEDURES.
(A) Any permitted prepayment or redemption of the Convertible
Notes pursuant to Sections 3.3 or 3.4 above shall be deemed to be
effective and consummated (for purposes of determining the time at
which the Noteholder or any Holder shall thereafter not be entitled to
deliver a Notice of Conversion for the Convertible Notes) as follows:
(i) A prepayment pursuant to Section 3.3, the
"prepayment date" specified therein;
(ii) A redemption pursuant to Section 3.4(a), the
date of consummation of the applicable Sale Event;
(B) On the Maturity Date and on the effective date of a
repayment or redemption of the Convertible Notes as specified in
Section 3.5(a) above, the Company shall deliver by wire transfer of
funds or certified check the repayment/redemption price to the
Noteholder or any Holder of the Convertible Notes subject to prepayment
or redemption. Should the Noteholder or any Holder not receive payment
of any amounts due on prepayment or redemption of its Convertible Notes
by reason of the Company's failure to make payment at the times
prescribed above for any reason, the Company shall pay to the
Noteholder or any Holder on demand (x) interest on the sums not paid
when due at an annual rate equal to the lesser of (i) the maximum
lawful rate and (ii) 2% per annum, compounded at the end of each thirty
(30) days, until the Noteholder or any Holder is paid in full and (y)
all costs of collection, including, but not limited to, attorneys' fees
and costs, whether or not suit or other formal proceedings are
instituted.
(C) Any Notice of Conversion delivered by the Noteholder or
any Holder (including delivery via telecopy) to the Company prior to
the (x) Maturity Date or (y) effective date of a voluntary prepayment
pursuant to Section 3.3 or a mandatory prepayment pursuant to Section
3.4 as specified in Section 3.5(a) above), shall be honored by the
Company and the conversion of the
10
Convertible Notes shall be deemed effected on the Conversion Date. In
addition, between the effective date of a voluntary prepayment pursuant
to Section 3.3 or a mandatory prepayment pursuant to Section 3.4 as
specified in Section 3.5(a) above and the date the Company is required
to deliver the redemption proceeds in full to the Noteholder or any
Holder, the Noteholder or any Holder may deliver a Notice of Conversion
to the Company.
SECTION 3.6 PAYMENT OF ADDITIONAL AMOUNTS.
(A) Any and all payments by the Company hereunder or under the
Convertible Notes to the Noteholder and each "qualified assignee"
thereof shall be made free and clear of and without deduction or
withholding for any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect
thereto (all such taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes")
unless such Taxes are required by law or the administration thereof to
be deducted or withheld. If the Company shall be required by law or the
administration thereof to deduct or withhold any Taxes from or in
respect of any sum payable under the Convertible Notes to the
Noteholder or Holders of Convertible Notes subject to such Taxes shall
have the right, but not the obligation, for a period of thirty (30)
days commencing upon the day it shall have received written notice form
the Company that it is required to withhold Taxes to transfer all or
any portion of the Convertible Notes to a qualified assignee to the
extent such transfer can be effected in accordance with the other
provisions of this Agreement and applicable law; (ii) the Company shall
make such deductions or withholdings; and (iii) the Company shall
forthwith pay the full amount deducted or withheld to the relevant
taxation or other authority in accordance with applicable law. A
"qualified assignee" of a Noteholder is a Person that is (x) organized
under the laws of (i) the United States or (ii) any jurisdiction other
than the United States or any political subdivision thereof and that
(y) represents and warrants to the Company that payments of the Company
to such assignee under the laws in existence on the date of this
Agreement would not be subject to any Taxes and (z) from time to time,
as and when requested by the Company, executes and delivers to the
Company and the Internal Revenue Service forms, and provides the
Company with any information necessary to establish such assignee's
continued exemption from Taxes under applicable law.
(B) The Company shall forthwith pay any present or future
stamp or documentary taxes or any other excise or property taxes,
charges or similar levies (all such taxes, charges and levies
hereinafter referred to as "Other Taxes") which arise from any payment
made under any of the Transaction Agreements or from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement other than Taxes payable solely as a result of the transfer
from the Noteholder to a Person of any Security.
(C) Within 30 days after the date of any payment of Taxes, the
Company will furnish to the Noteholder the original or a certified copy
of a receipt evidencing payment thereof.
11
(D) The Noteholder shall provide to the Company a Form W-8,
stating that it is a non-U.S. person, together with any additional tax
forms which may be required under the Code, as amended after the date
hereof, to allow interest payments to be made to it without deduction.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Noteholder and any future
Holder and each of them, as of the Closing Date the following:
SECTION 4.1. ORGANIZATION AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation, with full power and authority to own,
lease, use and operate its properties and to carry on its business as and where
now owned, leased, used, operated and conducted. The Company has no
Subsidiaries. The Company is duly qualified to conduct business as a foreign
corporation and is in good standing in every jurisdiction in which the nature of
the business conducted by it makes such qualification necessary, except where
such failure would not have a Material Adverse Effect. A "MATERIAL ADVERSE
EFFECT" means any material adverse effect on the operations, results of
operations, properties, assets or condition (financial or otherwise) of the
Company, or on the transactions contemplated hereby or by the agreements or
instruments to be entered into in connection herewith.
SECTION 4.2. AUTHORIZATION AND EXECUTION.
(A) The Company has all requisite corporate power and
authority to enter into and perform each Transaction Agreement and to
consummate the transactions contemplated hereby and thereby and to
issue the Securities in accordance with the terms hereof and thereof.
(B) The execution, delivery and performance by the Company of
each Transaction Agreement and the issuance by the Company of the
Securities have been duly and validly authorized and no further consent
or authorization of the Company, its Board of Directors or its
shareholders is required.
(C) This Agreement has been duly executed and delivered by the
Company.
(D) This Agreement constitutes, and upon execution and
delivery thereof by the Company, each of the other Transaction
Agreements will constitute, a valid and binding agreement of the
Company, in each case enforceable against the Company in accordance
with its respective terms.
SECTION 4.3. CAPITALIZATION. Except as provided on Schedule 4.3, the
authorized, issued and outstanding capital stock of the Company is as set forth
in its Form 10-QSB for the quarter
12
ended March 31, 2000 and no other shares of capital stock of the Company will be
outstanding as of the Closing Date. All of such outstanding shares of capital
stock are, or upon issuance will be, duly authorized, validly issued, fully paid
and non-assessable. No shares of capital stock of the Company are subject to
preemptive rights or similar rights of the stockholders of the Company or any
liens or encumbrances imposed through the actions or failure to act of the
Company. Other than as set forth on Schedule 4.3 hereto, as of the date hereof,
(i) there are no outstanding options, warrants, scrip, rights to subscribe for,
puts, calls, rights of first refusal, agreements, understandings, claims or
other commitments or rights of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for any shares of capital
stock of the Company, or arrangements by which the Company is or may become
bound to issue additional shares of capital stock of the Company, and (ii) there
are no agreements or arrangements under which the Company is obligated to
register the sale of any of its securities under the Securities Act and (iii)
there are no anti-dilution or price adjustment provisions contained in any
security issued by the Company (or in any agreement providing rights to security
holders) that will be triggered by the issuance of the Convertible Notes or
Conversion Shares. The Company has furnished to Noteholder true and correct
copies of the Company's Corporate Documents, and the terms of all securities
convertible into or exercisable for Common Stock and the material rights of the
holders thereof in respect thereto.
SECTION 4.4. GOVERNMENTAL AUTHORIZATION. The execution and delivery by
the Company of the Transaction Agreements does not and will not, the issuance
and sale by the Company of the Securities does not and will not, and the
consummation of the transactions contemplated hereby and by the other
Transaction Agreements will not, require any action by or in respect of, or
filing with, any governmental body, agency or governmental official except (a)
such actions or filings that have been undertaken or made prior to the date
hereof and that will be in full force and effect (or as to which all applicable
waiting periods have expired) on and as of the date hereof or which are not
required to be filed on or prior to the Closing Date, and (b) such actions or
filings that, if not obtained, would not result in a Material Adverse Effect.
SECTION 4.5. ISSUANCE OF SHARES. Upon conversion in accordance with the
terms of the Convertible Notes, the Conversion Shares shall be duly and validly
issued and outstanding, fully paid and nonassessable, free and clear of any
Taxes, Liens and charges with respect to issuance and shall not be subject to
preemptive rights or similar rights of any other stockholders of the Company.
Assuming the representations and warranties of the Noteholder herein are true
and correct in all material respects, each of the Securities will have been
issued in material compliance with all applicable U.S. federal and state
securities laws. The Company understands and acknowledges that, in certain
circumstances, the issuance of Conversion Shares could dilute the ownership
interests of other stockholders of the Company. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the
Convertible Notes, is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
stockholders of the Company.
SECTION 4.6. NO CONFLICTS. The execution and delivery by the Company of
the Transaction Agreements did not and will not, the issuance and reformation,
amendment and restatement by the Company of the Convertible Notes did not and
will not and the consummation of the transactions contemplated hereby will not,
contravene or constitute a default under or violation of (i) any provision of
13
applicable law or regulation, (ii) the Company Corporate Documents, (iii) any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Company or any its assets, or result in the creation or imposition of any
Lien on any asset of the Company except where such default or violation would
not have a Material Adverse Effect. The Company is in compliance with and
conforms to all statutes, laws, ordinances, rules, regulations, orders,
restrictions and all other legal requirements of any domestic or foreign
government or any instrumentality thereof having jurisdiction over the conduct
of its businesses or the ownership of its properties, except where such failure
would not have a Material Adverse Effect.
SECTION 4.7. FINANCIAL INFORMATION AND SEC REPORTS. Since June 30,
1998, the Company has filed all forms, reports and documents with the Commission
required to be filed by it under the Exchange Act through the date hereof (all
of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being referred to herein
collectively as the "SEC Reports"). Such SEC Reports, at the time filed,
complied in all material respects with the requirements of the Exchange Act and
the rules and regulations of the Commission thereunder applicable to such SEC
Reports. None of the SEC Reports, including without limitation, any financial
statements or schedules included therein, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. There have been no material adverse changes in the Company's
business, properties, results of operations, condition (financial or otherwise)
or prospects since the date of the Company's Report on Form 10-K for the year
ended June 30, 1999 which have not been disclosed in the Company's SEC Reports
or to the Noteholder in writing. The audited and unaudited balance sheets of the
Company contained in the SEC Reports, and the related statements of operations,
changes in stockholders' equity and changes in cash flows for the periods then
ended, including the footnotes thereto, except as indicated therein, (i)
complied in all material respects with applicable accounting requirements and
the published rules and regulations of the Commission with respect thereto and
(ii) have been prepared in accordance with GAAP consistently applied throughout
the periods indicated, except that the unaudited financial statements do not
contain notes and may be subject to normal audit adjustments and normal annual
adjustments. Such financial statements fairly present the financial condition of
the Company at the dates indicated and its results of their operations and cash
flows for the periods then ended and, except as indicated therein, reflect all
claims against and all Debts and liabilities of the Company, fixed or
contingent. Since June 30, 1999 (the "Balance Sheet Date"), except as disclosed
in the SEC Reports, there has been (x) no material adverse change in the assets
or liabilities, or in the business or condition, financial or otherwise, or in
the results of operations or prospects, of the Company, whether as a result of
any legislative or regulatory change, revocation of any license or rights to do
business, fire, explosion, accident, casualty, labor trouble, flood, drought,
riot, storm, condemnation, act of God, public force or otherwise and (y) no
material adverse change in the assets or liabilities, or in the business or
condition, financial or otherwise, or in the results of operations or prospects,
of the Company, except in the ordinary course of business; and no fact or
condition exists or is contemplated or threatened which might cause such a
change in the future.
SECTION 4.8. LITIGATION. There is no claim, action, suit or proceeding
pending or, to the knowledge of the Company, threatened against the Company,
before any court or arbitrator or any
14
governmental body, agency or official in which there is a reasonable possibility
of an adverse decision which could materially adversely affect the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Company or which challenges the validity of any Transaction
Agreements.
SECTION 4.9. COMPLIANCE WITH ERISA AND OTHER BENEFIT PLANS.
(A) Each member of the ERISA Group has fulfilled its obligations under
the minimum funding standards of ERISA and the Code with respect to each Plan
and is in compliance in all material respects with the presently applicable
provisions of ERISA and the Code with respect to each Plan. No member of the
ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Code in respect of any Plan, (ii) failed to make any required
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Code or (iii) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA.
(B) The benefit plans not covered under clause (a) above (including
profit sharing, deferred compensation, stock option, employee stock purchase,
bonus, retirement, health or insurance plans, collectively the "Benefit Plans")
relating to the employees of the Company are duly registered where required by,
and are in good standing in all material respects under, all applicable laws.
All required employer and employee contributions and premiums under the Benefit
Plans to the date hereof have been made, the respective fund or funds
established under the Benefit Plans are funded in accordance with applicable
laws, and no past service funding liabilities exist thereunder.
SECTION 4.10. ENVIRONMENTAL MATTERS. The costs and liabilities
associated with Environmental Laws (including the cost of compliance therewith)
are unlikely to have a material adverse effect on the business, condition
(financial or otherwise), operations, performance, properties or prospects of
the Company. The Company conducts its businesses in compliance in all material
respects with all applicable Environmental Laws.
SECTION 4.11. TAXES. All United States federal, state, county,
municipality local or foreign income tax returns and all other material tax
returns (including foreign tax returns) which are required to be filed by or on
behalf of the Company have been filed and all material taxes due pursuant to
such returns or pursuant to any assessment received by the Company have been
paid, except those being disputed in good faith and for which adequate reserves
have been established. The charges, accruals and reserves on the books of the
Company in respect of taxes or other governmental charges have been established
in accordance with GAAP.
SECTION 4.12. INVESTMENTS, JOINT VENTURES. Except as set forth in
SCHEDULE 4.12 the Company does not have a direct or indirect Investment in any
Person, and the Company is not a party to any partnership, management,
shareholders' or joint venture or similar agreement.
15
SECTION 4.13. NOT AN INVESTMENT COMPANY. The Company is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
SECTION 4.14. FULL DISCLOSURE. The information heretofore furnished by
the Company to the Noteholder for purposes of or in connection with this
Agreement or any transaction contemplated hereby does not, and all such
information hereafter furnished by the Company to the Noteholder will not (in
each case taken together and on the date as of which such information is
furnished), contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they are made, not misleading.
SECTION 4.15. INTENTIONALLY LEFT BLANK.
SECTION 4.16. PERMITS. (a) The Company has all material Permits; (b)
all such Permits are in full force and effect, and the Company has fulfilled and
performed all material obligations with respect to such Permits; (c) no event
has occurred which allows, or after notice or lapse of time would allow,
revocation or termination by the issuer thereof or which results in any other
material impairment of the rights of the holder of any such Permit; and (d) the
Company has no reason to believe that any governmental body or agency is
considering limiting, suspending or revoking any such Permit.
SECTION 4.17. ABSENCE OF ANY UNDISCLOSED LIABILITIES OR CAPITAL CALLS.
There are no liabilities of the Company of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability, other than (i) those liabilities
provided for in the financial statements delivered pursuant to Section 4.7
hereof and (ii) other undisclosed liabilities which, individually or in the
aggregate, would not have a Material Adverse Effect.
SECTION 4.18. INTELLECTUAL PROPERTY RIGHTS. The Company owns, or is
licensed under, and has the rights to use, all material patents, trademarks,
trade names, copyrights, technology, know-how and processes (collectively,
"Intellectual Property") used in, or necessary for the conduct of its business;
no claims have been asserted by any Person to the use of any such Intellectual
Property or challenging or questioning the validity or effectiveness of any
license or agreement related thereto. To the best of the Company's knowledge,
there is no valid basis for any such claim and the use of such Intellectual
Property by the Company will not infringe upon the rights of any Person.
SECTION 4.19. INSURANCE. The Company maintains, with financially sound
and reputable insurance companies, insurance in at least such amounts and
against such risks such that any uninsured loss would not have a Material
Adverse Effect. All insurance coverages of the Company are in full force and
effect and there are no past due premiums in respect of any such insurance.
SECTION 4.20. TITLE TO PROPERTIES. The Company has good and marketable
title to all its properties reflected on the financial statements referred to in
Section 4.7, free and clear of all Liens, other than Liens set forth on SCHEDULE
4.20.
16
SECTION 4.21. INTERNAL ACCOUNTING CONTROLS. The Company maintains a
system of internal accounting controls sufficient, in the judgment of the
Company's Board of Directors, to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability, (iii) access to assets is permitted only in accordance
with management's general or specific authorization and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
SECTION 4.22. FOREIGN PRACTICES. Neither the Company nor, to the
Company's knowledge, any employee or agent of the Company has made any payments
of funds of the Company, or received or retained any funds, in each case (x) in
violation of any law, rule or regulation or (y) of a character required to be
disclosed by the Company in any of the SEC Reports.
SECTION 4.23. NO RESTRICTIONS ON TRANSFER. The Coventry Notes were
originally issued to the Noteholder in exchange for 1,250 shares of the
Company's 5% Convertible Preferred Stock ("Preferred Shares") sold to the
Noteholder by the Company on January 20, 1998. The conversion of the Preferred
Shares the Coventry Notes occurred on March 3, 1999 all pursuant to any duly
authorized and required action by the Company's Board of Directors and
shareholders and all in compliance with law, and the rules and regulations of
the Commission and the National Association of Securities Dealers. The
Convertible Notes are entitled to tack on the holding period of the Noteholder
from the time of issuance of the Preferred Shares, which holding period is not
affected either by the conversion of the Preferred Shares into the Coventry
Notes, nor the amendment and restatement of the Coventry Notes into the
Convertible Notes. The holding period to date for the Convertible Notes is two
years and five months ("Holding Period"). The Holding Period exceeds the period
of restriction required by Rule 144 of Regulation D promulgated under the
Securities Act, are unaffected by the conversion of the Preferred Shares into
the Coventry Notes, and the amendment and restatement of the Coventry Notes into
the Convertible Notes, and the Convertible Notes and Conversion Shares issuable
upon conversion of the Convertible Notes may be transferred and sold freely,
without restriction or restrictive legend of any nature. There is no requirement
that the Noteholder, any Holder or any seller of the Convertible Notes or
Conversion Shares file any registration statement with the Commission or with
any state securities commission including but not limited to the State of
Florida or to any sale or transfer of the Convertible Notes or the Conversion
Shares. The conversion feature contained in the Convertible Notes is not subject
to any "lock up" provisions or any other contractual or binding agreement or
obligation which would restrict or prohibit the assignment, Transfer, sale or
conversion of the Convertible Notes into Conversion Shares, or the assignment,
Transfer or sale of the Conversion Shares
SECTION 4.24. NOT A "CONTROL SHARE ACQUISITION" The reformation,
amendment and restatement of the Convertible Notes, or the further assignment,
Transfer or sale of the Convertible Notes, or conversion of the Convertible
Notes into Conversion Shares is not and will not be a "control share
acquisition" as defined in Section 607.0902, Title XXXVI of the Florida Business
Corporations Act ("FBCA"), and none of the provisions of Chapter 607 of the Act
apply to the transactions contemplated herein.
17
SECTION 4.25 NO SHAREHOLDER APPROVAL REQUIRED. The reformation,
amendment and restatement of the Convertible Notes, or the further assignment,
Transfer or sale of the Convertible Notes, or conversion of the Convertible
Notes into Conversion Shares does not require the approval of the shareholders
of the Company under the FBCA, the Company's articles of incorporation or
bylaws, or any other requirement of law or, if shareholder approval is required
it has or will, prior to the Closing, be properly obtained in accordance with
the requirements of the Company's articles of incorporation and by-laws and the
FBCA.
SECTION 4.26 NO DISSENTER'S RIGHTS. The reformation, amendment and
restatement of the Convertible Notes, or the further assignment, Transfer or
sale of the Convertible Notes, or conversion of the Convertible Notes into
Conversion Shares will not will not give rise to any dissenting shareholders'
rights under Sections 607.0902 or 607.1302 of the FBCA, the Company's articles
of incorporation or bylaws, or otherwise.
SECTION 4.27. NOT AN AFFILIATE. The Noteholder is not, and has not, at
any time in the past, been an Affiliate of the Company, and the execution and
delivery of this Reformation Agreement, and the issuance of the Convertible
Notes to Noteholder does not render the Noteholder an Affiliate of the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE NOTEHOLDER
The Noteholder represents and warrants to the Company the following:
SECTION 5.1. ORGANIZATION AND QUALIFICATION. The Noteholder is a
limited partnership duly organized, validly existing and in good standing under
the laws of its jurisdiction of formation, with full power and authority to own,
lease, use and operate its properties and to carry on its business as and where
now owned, leased, used, operated and conducted.
SECTION 5.2. AUTHORIZATION AND EXECUTION.
(A) The Noteholder has all requisite partnership power and
authority to enter into and perform this Agreement and to consummate
the transactions contemplated hereby.
(B) The execution, delivery and performance by the Noteholder
of this Agreement has been duly and validly authorized and no further
consent or authorization of the Noteholder, its general partner or its
limited partners is required.
(C) This Agreement has been duly executed and delivered by the
Noteholder.
18
(D) This Agreement constitutes, and upon execution and
delivery thereof by the Noteholder, a valid and binding agreement of
the Noteholder in accordance with its terms subject to (i) applicable
bankruptcy, insolvency or similar laws affecting the enforceability of
creditors rights generally and (ii) equitable principles of general
applicability.
SECTION 5.3. NO CONFLICTS. The execution and delivery by the Noteholder
of this Agreement did not and will not, and the consummation of the transactions
contemplated hereby will not, contravene or constitute a material default under
or a material violation of (i) the Noteholder's formation documents, or (ii) any
agreement, judgment, injunction, order, decree or other instrument binding upon
the Noteholder or any its assets, or result in the creation or imposition of any
Lien on any asset of the Noteholder.
SECTION 5.4. LITIGATION. There is no claim, action, suit or proceeding
pending or, to the knowledge of the Noteholder, threatened against the
Noteholder, before any court or arbitrator or any governmental body, agency or
official in which there is a reasonable possibility of an adverse decision which
challenges the validity of this Agreement.
SECTION 5.5. NOT AN AFFILIATE. The Noteholder is not, and has not,
since September 30, 1998, been an Affiliate of the Company, and the execution
and delivery of this Reformation Agreement, and the issuance of the Convertible
Notes to Noteholder does not render the Noteholder an Affiliate of the Company.
ARTICLE VI
CONDITIONS PRECEDENT TO REFORMATION OF
CONVERTIBLE NOTES
SECTION 6.1. CONDITIONS PRECEDENT TO THE NOTEHOLDER'S OBLIGATIONS. The
obligations of the Noteholder hereunder is subject to the satisfaction, on or
before the Closing Date each of the following conditions, provided that these
conditions are for such Noteholder's sole benefit and may be waived by such
Noteholder at any time in its sole discretion:
(A) The Company shall have executed this Agreement and
delivered the same to the Noteholder;
(B) The Company shall have delivered to the Noteholder duly
executed Convertible Notes in accordance with Section 2.3;
(C) The representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though
made at such time (except for representations and warranties that speak
as of a
19
specified date) and the Company shall have performed, satisfied and
complied with all covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by it at or prior
to the Closing Date.
(D) The Company shall have received all governmental,
regulatory, exchange, Board of Directors, shareholders and third party
consents and approvals necessary or desirable in connection with the
reformation, amendment and restatement of the Convertible Notes;
(E) All applicable waiting periods in respect to the
reformation, amendment and restatement of the Convertible Notes shall
have expired without any action having been taken by any competent
authority that could restrain, prevent or impose any materially adverse
conditions thereon or that could seek or threaten any of the foregoing;
(F) No law or regulation shall have been imposed or enacted
that, in the judgment of the Noteholder, could adversely affect the
transactions set forth herein and no law or regulation shall have been
proposed that in the reasonable judgment of Noteholder could reasonably
have any such effect;
(G) The Company Corporate Documents shall be in full force and
effect and no term or condition thereof shall have been amended, waived
or otherwise modified without the prior written consent of the
Noteholder;
(H) There shall exist no action, suit, investigation,
litigation or proceeding pending or threatened in any court or before
any arbitrator or governmental instrumentality that challenges the
validity of or purports to affect this Agreement, or other transaction
contemplated hereby or thereby or that could reasonably be expected to
have a Material Adverse Effect, or any material adverse effect on the
enforceability of this Agreement or the Convertible Notes or the rights
of the Noteholder or any Holder of the Convertible Notes;
(I) The Noteholder shall have confirmed receipt of the
Convertible Notes, duly executed by the Company;
(J) There shall not have occurred any disruption or adverse
change in the financial or capital markets generally, or in the market
for the Common Stock (including but not limited to any suspension or
delisting), which the Noteholder reasonably deems material;
(K) The Noteholder shall have received the Company's opinion
of counsel as required by Section 2.3, and all other certificates,
instruments, agreements or other documents as they shall reasonably
request.
(L) The Noteholder is satisfied that all terms and conditions
of a certain Securities Purchase Agreement, to be executed among
Noteholder and various purchasers, have been satisfied and that the
closing of the transaction contemplated therein will take place.
20
SECTION 6.2. CONDITIONS TO THE COMPANY'S OBLIGATIONS. The obligations
of the Company to reform, amend and restate the Convertible Notes pursuant to
this Agreement are subject to the satisfaction, at or prior to any Closing Date,
of the following conditions:
(A) The representations and warranties of the Noteholder
contained herein shall be true and correct in all material respects on
the Closing Date and the Noteholder shall have performed and complied
in all material respects with all agreements required by this Agreement
to be performed or complied with by the Noteholder at or prior to the
Closing Date;
(B) The reformation, amendment and restatement of the
Convertible Notes shall not be prohibited by any applicable law, court
order or governmental regulation;
(C) Receipt by the Company of duly executed counterparts of
this Agreement signed by the Noteholder; and
(D) The Noteholder shall have released an liens on the
Company's assets or on any shares of the shareholders of the Company and
returned any pledged shares to such shareholders.
ARTICLE VII
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby agrees that, from and after the date hereof for so
long as any Convertible Notes remain outstanding and for the benefit of the
Noteholder or any Holder:
SECTION 7.1. INFORMATION. The Company will deliver to the Noteholder
and any Holder of the Convertible Notes:
(A) promptly upon the filing thereof, copies of (i) all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent), and (ii) all
reports on Forms 10-K, 10-Q and 8-K (or their equivalents) which the
Company has filed with the Commission; and
(B) promptly upon the mailing thereof to the shareholders of
the Company generally, copies of all financial statements, reports and
proxy statements so mailed and any other document generally distributed
to shareholders.
SECTION 7.2. PAYMENT OF OBLIGATIONS. The Company will, pay and
discharge, at or before maturity, all its liabilities, except where the same may
be contested in good faith by appropriate proceedings and will maintain, in
accordance with GAAP, appropriate reserves for the accrual of any of the same.
21
SECTION 7.3. MAINTENANCE OF PROPERTY; INSURANCE. The Company will keep
all property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted. In addition, the Company will
maintain insurance in at least such amounts and against such risks as it has
insured against as of the Closing Date.
SECTION 7.4. COMPLIANCE WITH LAWS. The Company will comply, in all
material respects, with all federal, state, municipal, local or foreign
applicable laws, ordinances, rules, regulations, municipal by-laws, codes and
requirements of governmental authorities (including, without limitation,
Environmental Laws and ERISA and the rules and regulations thereunder) except
(i) where compliance therewith is contested in good faith by appropriate
proceedings or (ii) where non-compliance therewith could not reasonably be
expected, in the aggregate, to have a material adverse effect on the business,
condition (financial or otherwise), operations, properties or prospects of the
Company.
SECTION 7.5. INTENTIONALLY OMITTED.
SECTION 7.6. RESERVED SHARES. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the full conversion of the outstanding
Convertible Notes and issuance of the Conversion Shares.
SECTION 7.7. IRREVOCABLE INSTRUCTIONS. Upon receipt of a Notice of
Conversion the Company shall immediately issue irrevocable instructions to its
transfer agent to issue certificates, registered in the name of each Noteholder
or any Holder or their respective nominees, transferees and assignees, for the
Conversion Shares, in such amounts as specified from time to time by each
Noteholder or Holder to the Company upon proper conversion of the Convertible
Notes. Upon conversion of any Convertible Notes in accordance with their terms,
the Company will, and will cause its transfer agent to, issue one or more
certificates representing shares of Common Stock in such name or names and in
such denominations specified by a Noteholder or Holder in a Notice of
Conversion. The shares of Common Stock issuable upon conversion of any
Convertible Notes shall be issued to the Noteholder, any Holder, any nominee,
assignee, transferee of such shares from a Noteholder or Holder without any
restriction or restrictive legend or any nature whatsoever. The Company further
warrants and agrees that no instructions other than these instructions have been
or will be given to its transfer agent. Nothing in this Section 8.9 shall affect
in any way the Noteholder's or any Holder's obligation to comply with all
securities laws applicable to the Noteholder or Holder upon resale of such
shares of Common Stock.
SECTION 7.8. MAINTENANCE OF REPORTING STATUS; SUPPLEMENTAL INFORMATION.
So long as any of the Securities are outstanding, the Company shall timely file
all reports required to be filed with the Commission pursuant to the Exchange
Act. The Company shall not terminate its status as an issuer required to file
reports under the Exchange Act, even if the Exchange Act or the rules and
regulations thereunder would permit such termination. If at anytime the Company
is not subject to the requirements of Section 13 or 15(d) of the Exchange Act,
the Company will promptly furnish at its expense, upon request, for the benefit
of the holders from time to time of Securities, and prospective purchasers of
Securities, information satisfying the information requirements of Rule 144
under the Securities Act.
22
SECTION 7.9. CAPITAL REORGANIZATION. If and whenever there shall occur:
(i) a reclassification or redesignation of the shares of
Common Stock or any change of the shares of Common Stock into other
shares, or,
(ii) a Sale Event.
(any such event being herein called a "Capital Reorganization"), then in each
such case the Noteholder or any Holder who exercises the right to convert
Convertible Notes after the effective date of such Capital Reorganization shall
be entitled to receive and shall accept, upon the exercise of such right, in
lieu of the number of shares of Common Stock to which the Noteholder or such
Holder was theretofore entitled upon the exercise of the conversion privilege,
the aggregate number of shares or other securities or property of the Company or
of the body corporate resulting from such Capital Reorganization that such
holder would have been entitled to receive as a result of such Capital
Reorganization if, on the effective date thereof, the Noteholder or such Holders
had been the holder of the number of shares of Common Stock to which the
Noteholder or such Holder was theretofore entitled upon conversion; provided,
however, that no such Capital Reorganization shall be consummated in effect
unless all necessary steps shall have been taken so that the Noteholder or such
Holders shall thereafter be entitled to receive such number of shares or other
securities of the Company or of the body corporate resulting from such Capital
Reorganization, subject to adjustment thereafter in accordance with provisions
the same, as nearly as may be possible, as those contained above.
SECTION 7.10. NOTICE TO NOTEHOLDERS.
The Company shall give the Noteholder or registered Holders of the
Convertible Notes written notice of any record, not less than 10 Business Days
prior to such record date or, if no record date is fixed, not less than 10
Business Days prior to the effective date of such event, which notice shall set
forth the particulars of the proposed event or the extent that such particulars
have been determined at the time of giving the notice.
ARTICLE VIII
WAIVER AND RELEASE BY THE NOTEHOLDER
Provided the transactions contemplated by this Agreement are
consummated and the Coventry Notes are reformed, amended and restated and the
Convertible Notes are delivered to the Noteholder, as required by this
Agreement, the Noteholder waives and forgives any and all defaults and events of
defaults under the Coventry Notes. Noteholder, for itself and each of its
respective general partners, limited partners, investors, representatives,
executors, administrators, affiliated entities, successors and assigns ("OBLIGOR
PARTIES") hereby remises, releases and forever discharges the Company, its
officers, directors, affiliates, and/or subsidiaries, its and their
predecessors, successors and assigns, (collectively "RELEASED PARTIES") from any
and all debts, demands, actions, causes of actions, claims, specialties,
covenants, contracts, controversies, agreements, promises, doings, omissions,
variances, damages, executions, rights, liabilities, suits, sums and sums of
money, accounts, reckonings, presentments, attorneys' liens rights to attorneys'
fees whatsoever, in law or in equity, whether known or unknown, which any or all
23
of the Obligor Parties now has or ever had against the Released Parties from the
beginning of the world to and including the date of this Agreement, including
without limitation any and all claims arising with respect to, and /or in
connections with the Coventry Notes but specifically does not release and
discharge any obligations and liabilities of the Company in connection with the
Convertible Notes. The release provided herein by the Noteholder shall not apply
to any debts, demands, actions, causes of action, claims or agreements which the
Noteholder has or may have against any and all third parties which are not made
Released Parties as specifically set forth above.
ARTICLE IX
ADDITIONAL AGREEMENTS AMONG THE PARTIES
SECTION 9.1. CONVERSION LIMIT. Notwithstanding the conversion rights
under the Convertible Notes, in no event shall such Noteholder or any Holder be
entitled to convert any portion of the Convertible Notes in excess of that
portion of the Convertible Notes upon conversion, of which the sum of (i) the
number of shares of Common Stock beneficially owned by such Noteholder or any
Holder (other than shares of Common Stock which may be deemed beneficially owned
through the ownership of the unconverted portion of the Convertible Note
convertible into or exchangeable for shares of Common Stock), and (ii) the
number of shares of Common Stock issuable upon the conversion of the portion of
the Convertible Note with respect to which this determination is being made,
would result in beneficial ownership by the Noteholder or any Holder of more
than 4.99% of the outstanding shares of Common Stock. In the event that the
Noteholder or any Holder attempts to convert any portion of the Convertible
Notes in derogation of this Section 9.1, the Company shall refuse to honor such
conversion and may issue instructions to the Company's transfer agent
restricting the conversion of the Convertible Notes held by the Noteholder or
any such Holder, until the Company has been provided with evidence, sufficient
in the opinion of the Company's counsel, that the proposed conversion will not
exceed the lmitations set forth in this Section 9.1. For purposes of this
Section 10.1(a), beneficial ownership shall be determined in accordance with
Rule 13d-3 of the Exchange Act and Regulations 13 D-G thereunder, except as
otherwise provided in this Section 9.1. The Company and the Noteholder or any
Holder hereby irrevocably acknowledge and agree that at no time shall the
Noteholder or any Holder have the right or privilege under this Agreement or any
other agreement or contract with the Company to beneficial ownership of Common
Stock in excess of the limitations provided in this Section 9.1 The foregoing
limitation shall not apply and shall be of no further force or effect (i)
immediately preceding and upon the occurrence of any voluntary or mandatory
redemption or repayment transaction described herein or in the Convertible
Notes, (ii) on the Maturity Date or (iii) following the occurrence of any Event
of Default which is not cured within the greater of the applicable time period
specified in either (A) such written notice of Noteholder or any Holder or (B)
Section 10.1 hereof.
24
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.1. EVENTS OF DEFAULT. If one or more of the following events
(each an "Event of Default") shall have occurred and be continuing:
(A) failure by the Company to pay or prepay when due, all or
any part of the principal on any of the Convertible Notes (whether by
virtue of the agreements specified in this Agreement or the Convertible
Notes);
(B) failure on the part of the Company to observe or perform
in any material respect any covenant contained in this Agreement;
(C) trading in the Common Stock shall have been suspended by
the Commission or by the OTC Bulletin Board (except for any suspension
of trading of limited duration solely to permit dissemination of
material information regarding the Company and except if, at the time
there is any suspension on the OTC Bulletin Board, the Common Stock is
then listed and approved for trading on either the Nasdaq Stock
Market's SmallCap Market or the Nasdaq Stock Market's National Market
or a stock exchange within ten (10) Trading Days thereof, and except if
any such de-listing is caused by actions of the Noteholder or any
Holder);
(D) the Company shall have its Common Stock delisted from the
OTC Bulletin Board for at least ten (10) consecutive Trading Days and
is unable to obtain a listing on either the Nasdaq Stock Market's
SmallCap Market or the Nasdaq Stock Market's National Market or a stock
exchange within such ten (10) Trading Days thereof unless any such de-
listing is caused by actions of the Noteholder or any Holder;
(E) the Company has commenced a voluntary case or other
proceeding seeking liquidation, winding-up, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency, moratorium or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or has consented to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or has made a general assignment
for the benefit of creditors, or has failed generally to pay its debts
as they become due, or has taken any corporate action to authorize any
of the foregoing;
(F) an involuntary case or other proceeding has been commenced
against the Company seeking liquidation, winding-up, reorganization or
other relief with respect to it or its debts under any bankruptcy,
insolvency, moratorium or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall
remain
25
undismissed and unstayed for a period of 90 days, or an order for
relief has been entered against the Company under the federal
bankruptcy laws as now or hereafter in effect;
(G) default in any provision (including payment) of any
agreement governing the terms of any Debt of the Company in excess of
$400,000, which has not been cured within any applicable period of
grace associated therewith;
(H) judgments or orders for the payment of money which in the
aggregate at any one time exceed $400,000 and are not covered by
insurance have been rendered against the Company by a court of
competent jurisdiction and such judgments or orders shall continue
unsatisfied and unstayed for a period of 90 days.
then, and in every such occurrence, the Noteholder or any Holder may with
respect to any other Event of Default, by notice to the Company, declare the
Convertible Notes then purchased to be, and the Convertible Notes shall thereon
become immediately due and payable; PROVIDED that in the case of any of the
Events of Default specified in paragraph (e) or (f) above with respect to the
Company, then, without any notice to the Company or any other act by the
Noteholder or any Holder, the entire amount of the Convertible Notes shall
become immediately due and payable, PROVIDED FURTHER, if any Event of Default
has occurred and is continuing, and irrespective of whether any Convertible Note
has been declared immediately due and payable hereunder, the Noteholder or any
Holder of Convertible Notes may proceed to protect and enforce the rights of the
Noteholder or such Holder by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in any Convertible Note, or for an injunction against a
violation of any of the terms hereof or thereof, or in aid of the exercise of
any power granted hereby or thereby or by law or otherwise, and PROVIDED
FURTHER, in the case of any Event of Default other than those specified in
paragraphs (e) and (f), the amount declared due and payable on the Convertible
Notes shall be 130% of the principal amount thereof, including accrued but
unpaid interest through the date of payment, except that the Noteholder or any
Holder may convert the unpaid principal amount of any Convertible Note
(including the amount of accrued but unpaid interest) into shares of Common
Stock at the Default Conversion Price.
SECTION 10.2. POWERS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to the Noteholder or any Holder is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy. Every power and remedy given by the Convertible
Notes or by law may be exercised from time to time, and as often as shall be
deemed expedient, by the Noteholder or any Holder.
26
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. NOTICES. All notices, demands and other communications to
any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereafter
specify for the purpose to the other parties. Each such notice, demand or other
communication shall be effective (i) if given by telecopy, when such telecopy is
transmitted to the telecopy number specified on the signature page hereof, (ii)
if given by mail, four days after such communication is deposited in the mail
with first class postage prepaid, addressed as aforesaid or (iii) if given by
any other means, when delivered at the address specified in or pursuant to this
Section.
SECTION 11.2. NO WAIVERS; AMENDMENTS.
(A) No failure or delay on the part of any party in exercising
any right, power or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.
(B) Any provision of this Agreement may be amended,
supplemented or waived if, but only if, such amendment, supplement or
waiver is in writing and is signed by the Company and the Noteholder or
the Holders; PROVIDED, that without the consent of each holder of any
Convertible Note affected thereby, an amendment or waiver may not (a)
reduce the aggregate principal amount of Convertible Notes whose
holders must consent to an amendment or waiver, (b) reduce the rate or
extend the time for payment of interest on any Convertible Note, (c)
reduce the principal amount of or extend the stated maturity of any
Convertible Note or (d) make any Convertible Note payable in money or
property other than as stated in such Convertible Note. In determining
whether the Holders of the requisite principal amount of Convertible
Notes have concurred in any direction, consent, or waiver as provided
in this Agreement, Convertible Notes which are owned by the Company or
any other obligor on or guarantor of the Convertible Notes, or by any
Person Controlling, Controlled by, or under common Control with any of
the foregoing, shall be disregarded and deemed not to be outstanding
for the purpose of any such determination; and PROVIDED FURTHER that no
such amendment, supplement or waiver which affects the rights of the
Noteholder and any Holder and their affiliates otherwise than solely in
their capacities as holders of Convertible Notes shall be effective
with respect to them without their prior written consent.
SECTION 11.3. INDEMNIFICATION.
(A) The Company agrees to indemnify and hold harmless the
Noteholder, any Holder and their Affiliates, and each Person, if any,
who controls such Noteholder or the Holders, or any of its Affiliates,
within the meaning of the Securities Act or the Exchange Act (each, a
"Controlling Person"), and the respective partners, agents, employees,
officers, directors and attorneys of the Noteholder and each Holder,
their Affiliates and any such Controlling Person (each an "Indemnified
Party" and collectively, the "Indemnified Parties"), from and against
any and all losses, claims,
damages, liabilities and expenses (including, without limitation and as
incurred, reasonable costs of investigating, preparing or defending any
such claim or action, whether or not such Indemnified Party is a party
thereto, provided that the Company shall not be obligated to advance
such costs to any Indemnified Party other than the Noteholder and any
Holder unless it has received from such Indemnified Party an
undertaking to repay to the Company the costs so advanced if it should
be determined by final judgment of a court of competent jurisdiction
that such Indemnified Party was not entitled to indemnification
hereunder with respect to such costs) which may be incurred by such
Indemnified Party in connection with any investigative, administrative
or judicial proceeding brought or threatened that relates to or arises
out of, or is in connection with any activities contemplated by any
Transaction Agreement or any other services rendered in connection
herewith; PROVIDED that the Company will not be responsible for any
claims, liabilities losses, damages or expenses that are determined by
final judgment of a court of competent jurisdiction to result from such
Indemnified Party's gross negligence, willful misconduct or bad faith.
(B) If any action shall be brought against an Indemnified
Party with respect to which indemnity may be sought against the Company
under this Agreement, such Indemnified Party shall promptly notify the
Company in writing and the Company, at its option, may, assume the
defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Party and payment of all attorneys'
and experts' fees and expenses. The failure to so notify the Company
shall not affect any obligations the Company may have to such
Indemnified Party under this Agreement or otherwise unless the Company
is materially adversely affected by such failure. Such Indemnified
Party shall have the right to employ separate counsel in such action
and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party, unless:
(i) the Company has failed to assume the defense and employ counsel or
(ii) the named parties to any such action (including any impleaded
parties) include such Indemnified Party and the the Company, and such
Indemnified Party shall have been advised by counsel that there may be
one or more legal defenses available to it which are different from or
additional to those available to the Company, in which case, if such
Indemnified Party notifies the Company in writing that it elects to
employ separate counsel at the expense of the Company, the Company
shall not have the right to assume the defense of such action or
proceeding on behalf of such Indemnified Party, PROVIDED, HOWEVER, that
the Company shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be responsible hereunder for the
reasonable fees and expenses of more than one such firm of separate
counsel, in addition to any local counsel, which counsel shall be
designated by the Noteholder or any Holder. The Company shall not be
liable for any settlement of any such action effected without the
written consent of the Company (which shall not be unreasonably
withheld) and the Company agrees to indemnify and hold harmless each
Indemnified Party from and against any loss or liability by reason of
settlement of any action effected with the consent of the Company. In
addition, the Company will not, without the prior written consent of
the Noteholder or any Holder, settle or compromise or consent to the
entry of any judgment in or otherwise seek to terminate any pending or
threatened action, claim, suit or proceeding in respect to which
indemnification or contribution may be sought hereunder (whether or not
any Indemnified Party is a party thereto) unless such settlement,
compromise, consent or termination includes an express unconditional
release of the
28
Noteholder, any Holder and the other Indemnified Parties, satisfactory
in form and substance to the Noteholder and any Holder, from all
liability arising out of such action, claim, suit or proceeding.
(C) If for any reason the foregoing indemnity is unavailable
(otherwise than pursuant to the express terms of such indemnity) to an
Indemnified Party or insufficient to hold an Indemnified Party
harmless, then in lieu of indemnifying such Indemnified Party, the
Company shall contribute to the amount paid or payable by such
Indemnified Party as a result of such claims, liabilities, losses,
damages, or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand
and by the Indemnified Party on the other from the transactions
contemplated by this Agreement or (ii) if the allocation provided by
clause (i) is not permitted under applicable law, in such proportion as
is appropriate to reflect not only the relative benefits received by
the Company on the one hand and the Indemnified Party on the other, but
also the relative fault of the Company and the Indemnified Party as
well as any other relevant equitable considerations. Notwithstanding
the provisions of this Section 11.3, the aggregate contribution of all
Indemnified Parties shall not exceed the amount of interest actually
received by the Noteholder or Holders pursuant to this Agreement. It is
hereby further agreed that the relative benefits to the Company on the
one hand and the Noteholder or Holders on the other with respect to the
transactions contemplated hereby shall be determined by reference to,
among other things, whether any untrue or alleged untrue statement of
material fact or the omission or alleged omission to state a material
fact related to information supplied by the Company or by the
Indemnified Party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation
(D) The indemnification, contribution and expense
reimbursement obligations set forth in this Section 11.3 (i) shall be
in addition to any liability the Company may have to any Indemnified
Party at common law or otherwise, (ii) shall survive the termination of
this Agreement and the payment in full of the Convertible Notes and
(iii) shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of the Noteholder, any Holder or
any other Indemnified Party.
SECTION 11.4. SUCCESSORS AND ASSIGNS. The Noteholder and any Holder may
assign its rights under this Agreement and may assign, Transfer or sell, all or
any portion of the Convertible Notes held by the Noteholder or any Holder in
denominations of no less than $10,000, to any other Person who is an "accredited
investor". This Agreement shall be binding upon the Company and upon the
Noteholder and any Holder and their respective successors and assigns; PROVIDED
that the the Company shall not assign or otherwise transfer its rights or
obligations under this Agreement to any other Person without the prior written
consent of a Majority of the Holders. All provisions hereunder purporting to
give rights to the Noteholder, any Holder and their affiliates are for the
express benefit of such Persons and their successors and assigns.
29
SECTION 11.5. LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
APPOINTMENT OF AGENT. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF FLORIDA. EACH PARTY HERETO HEREBY SUBMITS
TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT IN MIAMI,
FLORIDA FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH PARTY HERETO HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THE FOREGOING, AT THE ELECTION OF
THE NOTEHOLDER OR A HOLDER, ANY DISPUTE BETWEEN THE NOTEHOLDER AND ANY HOLDER
AND THE COMPANY MAY BE ARBITRATED, RATHER THAN LITIGATED IN THE COURTS, BEFORE
AND IN ACCORDANCE WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION IN
MIAMI. THE COMPANY AGREES TO SUBMIT TO AND PARTICIPATE IN ANY SUCH ARBITRATION.
SECTION 11.6. SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect and shall in no way be affected, impaired or invalidated unless a failure
of consideration would result thereby.
SECTION 11.7. SURVIVAL. All provisions contained in this Agreement
(unless specifically noted to the contrary) shall survive the payment in full of
the Convertible Notes and shall remain operative and in full force and effect.
SECTION 11.8. COUNTERPARTS. This Agreement may be executed by telecopy
signature and in any number of counterparts each of which shall be an original
with the same effect as if the signatures there to and hereto were upon the same
instrument.
30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
COMPANY: COVENTRY INDUSTRIES CORP. N/K/A
AMERICAN RISK MANAGEMENT GROUP, INC.
By:
-----------------------------------------
NOTEHOLDER: PROFUTURES SPECIAL EQUITIES FUND, L.P.
BY: PROFUTURES FUND MANAGEMENT, INC., ITS
AUTHORIZED AGENT
By:
------------------------------------------
Gary D. Halbert, President
31
EXHIBITS
Exhibit A - Coventry Notes
Exhibit B - Form of Convertible Note
Exhibit C - Opinion of Counsel
Exhibit I - Notice of Conversion
32
SCHEDULE 4.3
(CAPITALIZATION, WARRANTS AND OTHER SECTION 4.3 MATTERS)
1. D.L. Cromwell (Ira Goldberg) warrants issued pursuant to $1,000,000
private placement of units consisting of stock and warrants.
1
SCHEDULE 4.12
(COMPANY JOINT VENTURES AND INVESTMENTS)
1. PeopleFirst LLC, an Ohio limited liability company, wholly
owned by the Company.
2
SCHEDULE 4.20
(LIENS)
1. None.
3
EXHBIT I
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Convertible
Notes)
The undersigned hereby irrevocably elects to convert
$___________ of the above Convertible Note _______ into shares of Common Stock
of American Risk Management Group, Inc. according to the conditions set forth in
such Convertible Notes, as of the date written below.
If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer and other taxes and
charges payable with respect thereto.
Date of Conversion________________________________________________
Applicable Conversion Price________________________________________
Number of Conversion Shares
Signature__________________________________________________________
[Print Name of Holder and Title of Signer]
SSN or EIN: Shares to be registered in the following name:
Name: ___________________________________________________________
Address:_________________________________________________________
4
Tel:_______________________________
Fax:
SSN or EIN: __________________________________________________________________
Shares are to be sent or delivered to the following account:
Account Name: ___________________________________________________________
Address: ___________________________________________________________
Tel:_____________________________
Fax:_________________________
SSN or EIN: _____________________
5