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SCHEDULE 14A
(RULE 14a-101)
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
BIO-PLEXUS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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BIO-PLEXUS, INC.
129 RESERVOIR ROAD
VERNON, CONNECTICUT 06066
March __, 2000
Dear Bio-Plexus Stockholder:
I am writing on behalf of Bio-Plexus Inc.'s (the "Company") Board of
Directors to invite you to attend a special meeting of stockholders of the
Company the (the "Special Meeting"). The meeting has been rescheduled from
February 28, 2000 and will be held at 9:30 a.m. local time on Friday, April 28,
2000, at Rensselaer at Hartford, 275 Windsor Street, Hartford, Connecticut.
Directions to the Special Meeting are enclosed.
On or about January 31, 2000, the Company distributed proxy materials
to the holders of the Company's Common Stock as of the close of business on
January 28, 2000, which included a Notice of Special Meeting of Stockholders
that was to occur on February 28, 2000 (the "Original Meeting"), a Proxy
Statement describing the matters to be voted upon at the Original Meeting (the
"Initial Proxy Statement") and a white Proxy Card for stockholders to record
their votes. In a letter to the stockholders dated February 23, 2000 and a press
release dated February 24, 2000, the Company notified the public and its
stockholders of the adjournment of the Original Meeting.
The Original Meeting was adjourned in order to allow the Company and
Appaloosa Management L.P. of Chatham, New Jersey ("Appaloosa") additional time
to align the financing terms of a contemplated $17.5 million financing
commitment (the "Investment") to better reflect Appaloosa's risk during the
initial stages of the Company's business plan. The Investment, along with the
other items set forth below, was to be voted upon by the stockholders at the
Original Meeting. The original terms and conditions of the Investment are
described in the Initial Proxy Statement and the revised terms and conditions of
the Investment are described in the Supplemental Proxy Statement, copies of each
of which are attached hereto. The Special Meeting has been scheduled because the
Company and Appaloosa have completed negotiations with respect to the
Investment.
At the Special Meeting you will be asked to vote on the Investment. In
addition, you will also be asked to vote on an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock (the "Charter Amendment"), which is necessary to effect the
Investment. You will further be asked to vote on an amendment to the Bio-Plexus
1991 Long-Term Incentive Plan to increase the number of shares of Common Stock
subject to it from 1 million to 2.5 million shares (the "Incentive Plan
Amendment"), which is being requested in connection with the implementation of
the Company's longer-term business plan after the closing of the Investment.
All of these actions were contemplated by the Original Meeting.
I have enclosed the following materials for your review:
- Notice of Special Meeting of Stockholders
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- Initial Proxy Statement
- Supplemental Proxy Statement
- Blue Proxy Card
- Directions to the Special Meeting
The Company is distributing the Supplemental Proxy Statement to you in
order to ensure that you are given the opportunity to review the changes from
the information set forth in the Initial Proxy Statement. I ENCOURAGE YOU TO
READ BOTH THE INITIAL PROXY STATEMENT AND THE SUPPLEMENTAL PROXY STATEMENT IN
ORDER TO GAIN A COMPLETE UNDERSTANDING OF THE TERMS OF, AND OTHER IMPORTANT
INFORMATION, REGARDING THE INVESTMENT.
Due to the adjournment of the Original Meeting, the record date set
forth in the Initial Proxy Statement is no longer valid. The Board of Directors
has fixed the close of business on March 24, 2000, as the record date for the
determination of stockholders entitled to notice of and to vote at the Special
Meeting.
Approval of each of the Investment, the Charter Amendment, and the
Incentive Plan Amendment requires the affirmative vote of the holders of a
majority of the shares of Common Stock present in person or represented by proxy
and voting on such proposal at the Special Meeting. All of the Company's
directors holding shares of Common Stock as of the record date have stated their
present intentions to vote all of such shares in favor of approval and adoption
of the Investment, the Charter Amendment, and the Incentive Plan Amendment.
These directors, in the aggregate, own as of the record date approximately 26%
of the outstanding shares of Common Stock.
THE BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE
REVISED TERMS AND CONDITIONS OF THE INVESTMENT, THE CHARTER AMENDMENT, AND THE
INCENTIVE PLAN AMENDMENT. BOTH THE BOARD AND I RECOMMEND THAT YOU VOTE "FOR"
EACH OF THE PROPOSALS.
THE WHITE PROXY CARD PREVIOUSLY DISTRIBUTED TO YOU IS NO LONGER VALID,
EVEN IF YOU HAVE PREVIOUSLY EXECUTED THE WHITE PROXY CARD AND RETURNED IT TO THE
COMPANY. IN ORDER FOR YOUR VOTE ON THE INVESTMENT, THE CHARTER AMENDMENT, AND
THE INCENTIVE PLAN AMENDMENT TO BE EFFECTIVE, YOU MUST COMPLETE, SIGN AND DATE
THE ENCLOSED BLUE PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED SO
THAT IT WILL BE RECEIVED PRIOR TO THE SPECIAL MEETING. YOUR VOTE IS IMPORTANT
REGARDLESS OF HOW MANY SHARES YOU OWN AND WHETHER OR NOT YOU PLAN TO ATTEND THE
SPECIAL MEETING. YOU MAY ATTEND THE SPECIAL MEETING AND VOTE IN PERSON EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR BLUE PROXY CARD.
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I look forward to seeing you at the Special Meeting. In the meantime, thank
you for your continued support of Bio-Plexus.
Sincerely,
CARL R. SAHI
President & Chief Executive Officer
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BIO-PLEXUS, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 2000
TO THE STOCKHOLDERS OF BIO-PLEXUS, INC.:
NOTICE IS HEREBY GIVEN that a special meeting (the "Special Meeting")
of the stockholders of Bio-Plexus, Inc., a Connecticut corporation (the
"Company"), has been scheduled and will be held at 9:30 a.m. local time on
Friday, April 28, 2000, at Rensselaer at Hartford, 275 Windsor Street, Hartford,
Connecticut.
The Special Meeting is called for the purpose of considering and voting
upon the following proposals:
1. The Investment Proposal: To approve the issuance and sale of
zero-coupon, secured convertible notes of the Company due 2005 with an original
issue price of $16.75 million (the "Notes") and an initial conversion price of
$3.00 per share, 250,000 shares of the Company's common stock, without par value
(the "Common Stock"), at a price of $3.00 per share, and 9-year warrants to
purchase 1.5 million shares of Common Stock (the "Warrants") at an initial
exercise price of $7.00 per share, including the reservation and subsequent
issuance of the shares of Common Stock issuable upon conversion of the Notes and
exercise of the Warrants (the foregoing issuance and sale, the "Investment"), to
one or more entities affiliated with Appaloosa Management L.P. (collectively,
the "Purchasers"), and to approve and adopt the Convertible Note Purchase
Agreement (the "Purchase Agreement")(as revised from the version described in
and attached to the Proxy Statement previously distributed to stockholders by
the Company on or about January 31, 2000 (the "Initial Proxy Statement")),
Warrants, Registration Rights Agreement, and Security Agreement (collectively,
the "Transaction Documents") and the transactions contemplated by the
Transaction Documents. The copy of the Purchase Agreement attached to the
Initial Proxy Statement as an Exhibit should be disregarded. A copy of the
revised Purchase Agreement is included as an Exhibit to the Supplemental Proxy
Statement accompanying this Notice. Copies of the Warrants, Registration Rights
Agreement and Security Agreement (the terms of which have not been revised) are
attached as Exhibits to the Initial Proxy Statement. Approval of the Investment
will be deemed to constitute approval of the Transaction Documents and the
transactions contemplated by the Investment. A detailed discussion of "Proposal
No. 1: The Investment Proposal", as modified as provided in the Supplemental
Proxy Statement, is contained in the Initial Proxy Statement beginning at page
3;
2. The Charter Amendment Proposal: To amend the Company's
Certificate of Incorporation to increase from 25 million (25,000,000) to 40
million (40,000,000) the number of shares of Common Stock that the Company is
authorized to issue, which proposal is being proposed, in part, to ensure that
there are sufficient shares of Common Stock reserved for the subsequent issuance
of shares of Common Stock upon conversion of the Notes and exercise of the
Warrants and as awards in connection with the Company's 1991 Long Term Incentive
Plan (the "Charter Amendment"). A detailed discussion of "Proposal No. 2:
Approval of the Charter Amendment" is contained in the Initial Proxy Statement
beginning at page 22;
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3. The Incentive Plan Proposal: To amend the Company's 1991
Long-Term Incentive Plan (as amended, the "Incentive Plan") to increase from one
million (1,000,000) to 2.5 million (2,500,000) the number of shares of Common
Stock subject to the Incentive Plan, which proposal is being made to ensure that
there are sufficient shares of Common Stock reserved for the subsequent issuance
of awards to employees and consultants under the Incentive Plan because the
number of employees of the Company is expected to increase in connection with
the implementation of the Company's longer-term business plan after the closing
of the Investment (the "Incentive Plan Amendment"). A detailed discussion of
"Proposal No. 3: Approval of the Incentive Plan Amendment" is contained in the
Initial Proxy Statement beginning at page 24; and
4. To transact such other business as may properly come before
the Special Meeting. The Company may be required to adjourn or postpone the
Special Meeting from time to time until all conditions to closing the Investment
are satisfied or waived, such that the vote on the Investment will take place on
the same day as the closing of the Investment.
The Supplemental Proxy Statement accompanying this Notice describes
changes to the terms and conditions of the Investment from the terms set forth
in the Initial Proxy Statement. The Supplemental Proxy Statement forms a part of
this Notice and is incorporated herein by reference. Except as described in the
Supplemental Proxy Statement, the background and terms and conditions of the
Investment remain the same and are more fully described in the Initial Proxy
Statement, which forms a part of this Notice and is incorporated herein by
reference.
The Board of Directors knows of no matters to be brought before the
Special Meeting other than those referred to herein and in the Initial Proxy
Statement. If any other business should properly come before the Special
Meeting, the persons named in the Blue Proxy Card will vote in accordance with
their best judgment.
The Board of Directors has fixed the close of business on March 24,
2000 as the record date for the determination of stockholders entitled to notice
of and to vote at the Special Meeting and any adjournments or postponements
thereof. Only holders of record of Common Stock on the record date are entitled
to vote at the Special Meeting. Due to the adjournment of the Special Meeting of
the Company's stockholders originally scheduled for February 28, 2000, the
record date set forth in the Initial Proxy Statement is no longer valid.
In order to vote your shares at the Special Meeting, if your shares are
held by a broker, bank, or other nominee, you must obtain from such person a
Blue Proxy Card in your name. You can ensure that your shares are voted at the
Special Meeting by promptly completing, signing, and dating the enclosed Blue
Proxy Card and returning it in the envelope provided, which requires no postage
if mailed in the United States. Sending in a signed Blue Proxy Card will not
affect your right to attend the Special Meeting and vote in person. You may
revoke your Blue Proxy Card at any time before it is voted by delivering to the
Secretary of the Company before the Special Meeting a written revocation or a
subsequently executed Blue Proxy Card, or by attending the Special Meeting and
voting in person.
THE WHITE PROXY CARD PREVIOUSLY DISTRIBUTED TO YOU IS NO LONGER VALID,
EVEN IF YOU HAVE PREVIOUSLY EXECUTED THE WHITE PROXY CARD AND RETURNED IT TO THE
COMPANY. IN ORDER FOR YOUR VOTE ON THE REVISED TERMS AND CONDITIONS OF THE
INVESTMENT, THE
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CHARTER AMENDMENT AND THE INCENTIVE PLAN AMENDMENT TO BE EFFECTIVE, YOU MUST
COMPLETE, SIGN AND DATE THE ENCLOSED BLUE PROXY CARD AND RETURN IT PROMPTLY IN
THE ENVELOPE PROVIDED SO THAT IT WILL BE RECEIVED PRIOR TO THE SPECIAL MEETING.
YOUR VOTE IS IMPORTANT REGARDLESS OF HOW MANY SHARES YOU OWN AND WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING. WE URGE YOU TO COMPLETE, SIGN, AND DATE
THE ENCLOSED BLUE PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED.
YOU MAY ATTEND THE SPECIAL MEETING AND VOTE IN PERSON EVEN IF YOU HAVE
PREVIOUSLY RETURNED YOUR BLUE PROXY CARD.
THE ENCLOSED BLUE PROXY CARD IS SOLICITED BY THE BOARD OF DIRECTORS,
WHICH HAS CAREFULLY REVIEWED AND CONSIDERED THE REVISED TERMS AND CONDITIONS OF
THE INVESTMENT, THE CHARTER AMENDMENT, AND THE INCENTIVE PLAN AMENDMENT AND
DETERMINED THAT THEY ARE IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS, AND RECOMMENDS THAT YOU VOTE "FOR" THE INVESTMENT, THE CHARTER
AMENDMENT, AND THE INCENTIVE PLAN AMENDMENT.
TO CONSTITUTE A QUORUM FOR THE TRANSACTION OF BUSINESS AT THE SPECIAL
MEETING, THERE MUST BE PRESENT, IN PERSON OR BY PROXY, THE HOLDERS OF A MAJORITY
OF THE VOTING POWER OF THE ISSUED AND OUTSTANDING SHARES OF VOTING STOCK OF THE
COMPANY.
The Company's Initial Proxy Statement, Supplemental Proxy Statement and
Blue Proxy Card are submitted herewith.
By Order of the Board of Directors,
NANCY S. LAUTENBACH
Secretary
Vernon, Connecticut
March __, 2000
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BIO-PLEXUS, INC.
129 RESERVOIR ROAD, VERNON, CONNECTICUT 06066
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SUPPLEMENTAL PROXY STATEMENT
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FOR A SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 2000
GENERAL
The enclosed Blue Proxy Card is solicited by and on behalf of the Board
of Directors of Bio-Plexus, Inc., a Connecticut corporation having its principal
offices at 129 Reservoir Road, Vernon, Connecticut 06066 (the "Company"), for
use at a special meeting of stockholders (the "Special Meeting") to be held on
Friday, April 28, 2000, at 9:30 a.m. local time at Rensselaer at Hartford, 275
Windsor Street, Hartford, Connecticut and at any adjournments or postponements
thereof, for the purposes set forth in the accompanying Notice of Special
Meeting. This Supplemental Proxy Statement and the accompanying Blue Proxy Card
(the "Supplemental Proxy Materials") are first being mailed to stockholders on
or about March 28, 2000. THE SUPPLEMENTAL PROXY MATERIALS AMEND AND MODIFY, AND
SHOULD BE READ IN CONJUNCTION WITH, THE COMPANY'S PROXY STATEMENT DATED JANUARY
28, 2000 (the "INITIAL PROXY STATEMENT") THAT WAS MAILED TO THE COMPANY'S
STOCKHOLDER'S ON OR ABOUT JANUARY 31, 2000, A COPY OF WHICH IS ENCLOSED FOR
REVIEW BY THE COMPANY'S STOCKHOLDERS.
BACKGROUND
On January 28, 2000, the Company's Board of Directors (the "Board of
Directors") called a special meeting of the Company's stockholders for February
28, 2000 (the "Original Meeting"). By way of a letter to stockholders dated
February 23, 2000 and a press release dated February 24, 2000, the Company
adjourned the Original Meeting so that the Company and Appaloosa Management L.P.
("Appaloosa") could have additional time to align the financing terms of
Appaloosa's proposed $17.5 million financing commitment (the "Investment") to
better reflect Appaloosa's risk during the initial stages of the Company's
business plan. The Investment, along with the other items set forth below, was
to be voted upon at the Original Meeting. In its notice of adjournment and press
release, the Company indicated that the Original Meeting would be rescheduled to
a future date. The Company and Appaloosa, after extensive negotiations, have
agreed upon revised terms for the Investment and have scheduled a new special
stockholders meeting in order to permit holders of the Company's common stock as
of March 24, 2000 to vote on the matters set forth in the attached Notice of
Stockholder's Meeting and described in the Initial Proxy Statement and this
Supplemental Proxy Statement.
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PURPOSE OF THE SPECIAL MEETING
The Special Meeting is called for the purpose of considering and voting
upon the following proposals:
1. The Investment Proposal: To approve the issuance and sale of
zero-coupon, secured convertible notes of the Company due 2005 with an original
issue price of $16.75 million (the "Notes") and an initial conversion price of
$3.00 per share, 250,000 shares of the Company's common stock, without par value
(the "Common Stock"), at a price of $3.00 per share, and 9-year warrants to
purchase 1.5 million shares of Common Stock (the "Warrants") at an initial
exercise price of $7.00 per share, including the reservation and subsequent
issuance of the shares of Common Stock issuable upon conversion of the Notes and
exercise of the Warrants, to one or more entities affiliated with Appaloosa
(collectively, the "Purchasers"), and to approve and adopt the Convertible Note
Purchase Agreement (the "Purchase Agreement") (as revised from the version
described in and attached to the Initial Proxy Statement), Warrants,
Registration Rights Agreement, and Security Agreement, (collectively, the
"Transaction Documents") and the transactions contemplated by the Transaction
Documents. The copy of the Purchase Agreement attached to the Initial Proxy
Statement as an Exhibit should be disregarded. A copy of the revised Purchase
Agreement is included as an Exhibit to the Supplemental Proxy Statement. Copies
of the Warrants, Registration Rights Agreement and Security Agreement (the terms
of which have not been revised) are attached as Exhibits to the Initial Proxy
Statement. Approval of the Investment will be deemed to constitute approval of
the Transaction Documents and the transactions contemplated by the Investment. A
detailed discussion of "Proposal No. 1: The Investment Proposal", as modified as
provided in the Supplemental Proxy Statement, is contained in the Initial Proxy
Statement beginning at page 3;
2. The Charter Amendment Proposal: To amend the Company's
Certificate of Incorporation to increase from 25 million (25,000,000) to 40
million (40,000,000) the number of shares of Common Stock that the Company is
authorized to issue, which proposal is being proposed, in part, to ensure that
there are sufficient shares of Common Stock reserved for the subsequent issuance
of shares of Common Stock upon conversion of the Notes and exercise of the
Warrants and as awards in connection with the Company's 1991 Long Term Incentive
Plan (the "Charter Amendment"). A detailed discussion of "Proposal No. 2:
Approval of the Charter Amendment" is contained in the Initial Proxy Statement
beginning at page 22;
3. The Incentive Plan Proposal: To amend the Company's 1991
Long-Term Incentive Plan (as amended, the "Incentive Plan") to increase from one
million (1,000,000) to 2.5 million (2,500,000) the number of shares of Common
Stock subject to the Incentive Plan, which proposal is being made to ensure that
there are sufficient shares of Common Stock reserved for the subsequent issuance
of awards to employees and consultants under the Incentive Plan because the
number of employees of the Company is expected to increase in connection with
the implementation of the Company's longer-term business plan after the closing
of the Investment (the "Incentive Plan Amendment"). A detailed discussion of
"Proposal No. 3: Approval of the Incentive Plan Amendment" is contained in the
Initial Proxy Statement beginning at page 24; and
4. To transact such other business as may properly come before
the Special Meeting. The Company may be required to adjourn or postpone the
Special Meeting from time to
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time until all conditions to closing the Investment are satisfied or waived,
such that the vote on the Investment will take place on the same day as the
closing of the Investment.
SOLICITATION
The Company will bear the entire cost of solicitation, including
preparation, assembly, printing, and mailing of this Supplemental Proxy
Statement, the Initial Proxy Statement, the Blue Proxy Card, and any additional
materials furnished to the stockholders. Copies of the solicitation materials
will also be furnished to brokerage houses, fiduciaries, and custodians holding
in their names shares which are beneficially owned by others to be forwarded to
such beneficial owners. The Company may reimburse such persons for their cost of
forwarding the solicitation materials to such beneficial owners. Original
solicitations of proxies by mail may be supplemented by telephone, telegram,
facsimile, or personal solicitation by directors, officers, or employees of the
Company. No additional compensation will be paid for such services. Except as
described above, the Company does not intend to solicit proxies other than by
mail.
REVOCABILITY OF PROXY
Any person submitting a Blue Proxy Card in the form accompanying this
Supplemental Proxy Statement has the power to revoke such proxy at any time
before it is exercised. Proxies may be revoked by either (i) sending to the
Secretary of the Company, Nancy S. Lautenbach, a duly executed written
instrument of revocation or a duly executed Blue Proxy Card bearing a date later
than that on the Blue Proxy Card being revoked, or (ii) attending the Special
Meeting and voting in person. Attendance at the Special Meeting will not in and
of itself constitute revocation of a proxy.
RECORD DATE; VOTING AT THE SPECIAL MEETING
On March 24, 2000, the record date for the determination of
stockholders entitled to notice of and to vote at the Special Meeting (the
"Record Date"), there were [14,150,259] shares of Common Stock outstanding and
entitled to vote. Stockholders of record on the Record Date are entitled to one
vote per share, in person or by properly executed Blue Proxy Card, upon each
matter properly submitted for the vote of stockholders at the Special Meeting.
If not revoked, properly executed Blue Proxy Cards will be voted in accordance
with the instructions contained thereon. Unless a contrary specification is made
thereon, it is the intention of the persons named on the accompanying Blue Proxy
Card to vote "FOR" each of the proposals on the accompanying Notice of Special
Meeting.
DUE TO THE ADJOURNMENT OF THE SPECIAL MEETING OF THE COMPANY'S
STOCKHOLDERS ORIGINALLY SCHEDULED FOR FEBRUARY 28, 2000, THE RECORD DATE SET
FORTH IN THE INITIAL PROXY STATEMENT IS NO LONGER VALID. IN ADDITION, THE WHITE
PROXY CARD DISTRIBUTED WITH THE INITIAL PROXY STATEMENT IS NO LONGER VALID, EVEN
IF THE WHITE PROXY CARD HAS BEEN EXECUTED AND RETURNED TO THE COMPANY. IN ORDER
FOR A STOCKHOLDER'S VOTE ON THE REVISED TERMS AND CONDITIONS OF THE INVESTMENT,
THE CHARTER AMENDMENT AND THE INCENTIVE PLAN AMENDMENT TO BE EFFECTIVE, THE
ENCLOSED BLUE PROXY CARD MUST BE COMPLETED, SIGNED, DATED AND RETURNED TO THE
COMPANY IN THE ENVELOPE PROVIDED PRIOR TO THE SPECIAL MEETING.
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VOTE REQUIRED
The rules of The Nasdaq Stock Market ("Nasdaq") require that Proposal
No. 1: The Investment Proposal be approved by the holders of a majority of the
Common Stock present in person or represented by proxy and voting on such
proposal at the Special Meeting. The Connecticut Business Corporation Act (the
"CBCA") requires Proposal No. 2: the Charter Amendment Proposal and Proposal No.
3: the Incentive Plan Amendment Proposal (collectively, Proposals No. 1, 2 and 3
are the "Proposals") be approved by the same vote. It is also a condition to the
Company's obligations under the terms and conditions of the Investment that the
Investment Proposal and the Charter Amendment Proposal be similarly approved.
All directors of the Company holding shares of Common Stock as of the
Record Date, namely Messrs. Richard Ribakove, Carl Sahi, David Himick, Richard
Higgins and Herman Gross, have stated their present intentions to vote all of
such shares in favor of approval and adoption of the Investment Proposal, the
Charter Amendment Proposal, and the Incentive Plan Amendment Proposal. These
directors as of the Record Date own, in the aggregate, approximately 26% of the
outstanding shares of Common Stock.
VOTING PROCEDURES; QUORUM; ABSTENTIONS AND BROKER NON-VOTES
All votes will be tabulated by the inspector of election appointed for
the Special Meeting, who will separately tabulate affirmative and negative
votes, abstentions, and broker "non-votes" (proxies that are returned by the
record holder, typically a brokerage house, but not voted on a particular matter
because no instructions were received from the beneficial owner). Pursuant to
the CBCA and the Company's By-laws, to constitute a quorum for the transaction
of business at any meeting of stockholders, there must be present, in person or
by proxy, the holders of a majority of the voting power of the issued and
outstanding shares of voting stock of the Company. Once a share is represented
for any purpose at the meeting, it is deemed present for quorum purposes for the
remainder of the meeting. In certain circumstances, a stockholder will be
considered to be present at the Special Meeting for quorum purposes, but will
not be deemed to have voted on the matters presented for approval at the
meeting. Such circumstances will exist where a stockholder is present but
specifically abstains from voting, or where shares are represented at a meeting
by a proxy conferring authority to vote on certain matters but not on other
matters (i.e., broker non-votes). Under the CBCA, such abstentions and non-votes
have a neutral effect on the approval or disapproval of the matters presented
for stockholder action. As of the Record Date, Common Stock was the only
outstanding voting security of the Company.
NO APPRAISAL OR DISSENTERS' RIGHTS; NO PREEMPTIVE RIGHTS
Under the CBCA, stockholders are not entitled to any statutory
dissenters' rights or appraisal of their shares of Common Stock in connection
with the Investment Proposal, the Charter Amendment Proposal, or the Incentive
Plan Amendment Proposal. Stockholders have no preemptive rights in respect of
any of the securities to be issued in connection with the Investment or any
other securities issuances by the Company.
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CHANGES TO PROPOSAL NO. 1: THE INVESTMENT PROPOSAL
Set forth below is a summary of certain changes which have been made to
the terms of the Investment, which is described in detail commencing on page 3
of the Initial Proxy Statement. Except as described in this Supplemental Proxy
Statement, the background and terms and conditions of the Investment, as
described in the Initial Proxy Statement, remain unchanged. Therefore, the
following discussion is qualified in its entirely by reference to the Initial
Proxy Statement and to the complete text of the revised Purchase Agreement which
is attached hereto as Exhibit A. Capitalized terms used herein which are not
defined herein shall have the meanings ascribed to such terms in the Initial
Proxy Statement. The copy of the Purchase Agreement attached to the Initial
Proxy Statement as an Exhibit has been revised as disclosed herein and should be
disregarded.
THE BRIDGE TRANSACTIONS
A. Second Letter Agreement
The Company and Appaloosa entered into a letter agreement on March ___,
2000 (the "Second Letter Agreement") pursuant to which, among other things, the
parties agreed to certain amendments to the Bridge Notes.
In connection with the transactions contemplated by the Second Letter
Agreement, the Bridge Notes were amended to extend the maturity date of each
Bridge Note to April 30, 2000. In addition, each of the Bridge Notes was amended
to extend the date on which stockholder approval of the Investment must be
obtained from February 28, 2000 to April 30, 2000. Prior to the amendments to
the Bridge Notes discussed above, the maturity date of the Bridge Notes and the
latest date upon which stockholder approval of the Investment could occur was
February 28, 2000.
The Second Letter Agreement also provides that if on the closing date
of the Investment the Company has hired a new Chief Executive Officer who is
approved by the Purchaser, at the election of the Purchasers, the $3 Warrants
which are currently outstanding will be cancelled and the Company will issue the
Purchasers the Replacement Warrants, which will have an initial exercise price
of $4 per share. If on the closing of the Investment the Company has not yet
hired a new Chief Executive Officer (or the Company has hired a new Chief
Executive Officer approved by the Purchasers but the Purchasers elect not to
exchange the $3 Warrants for the Replacement Warrants at such time), the $3
Warrants will be canceled and the Replacement Warrants will be issued six months
and one day after the closing of the Investment. The Purchasers have agreed that
they will not exercise any of the $3 Warrants during such time period. The
Second Letter Agreement further provides that if the Investment does not close
for any reason, the $3 Warrants will remain in full force and effect and the
terms and conditions thereof will remain unchanged. Under the terms of the $3
Warrants, the exercise price of such warrants will increase from $3 per share to
$5 per share on October 21, 2000, the first anniversary of the issuance of the
$3 Warrants.
The foregoing changes to the Bridge Notes and the agreements with
respect to the issuance of the Replacement Warrants were agreed to by the Board
of Directors after deliberation. Stockholder approval of the foregoing changes
were not required and the
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stockholders are not now being asked to approve these transactions with the
proxies being solicited hereby.
B. Third Bridge Transaction
At the time of the execution of the Second Letter Agreement, the
Company issued and sold to Appaloosa Investment Limited Partnership I a 15%
secured note in the aggregate principal amount of $2.2 million (the "Third
Bridge Note"). The Third Bridge Note matures on the earlier of April 30, 2000 or
the closing of the Investment. Other than as set forth above, the Third Bridge
Note contains terms substantially identical to the First Bridge Note and the
Second Bridge Note, each as amended.
In connection with the sale and issuance of the Third Bridge Note, the
Company did not sell to the Purchasers any additional warrants to purchase
shares of Common Stock.
Pali was not engaged to assess the terms of the Third Bridge Note and,
therefore, did not review the Third Bridge transaction documents.
Stockholder approval of the sale and issuance of the Third Bridge Note
was not required and the stockholders are not now being asked to approve such
sale and issuance with the proxies being solicited hereby. Immediately following
the closing of the Third Bridge, the Purchasers beneficially owned 16% of the
Common Stock outstanding as of February 29, 2000.
C. Summary of the Bridge Transactions
The following summary of the Bridge Transactions reflects the revised
terms described in this Supplemental Proxy Statement.
As of the date hereof, the Bridge Transactions have been consummated
and, as a result thereof, the Purchasers have been (and in the case of the
Second Bridge Warrants, will be) issued, in the aggregate, the following
securities of the Company:
- a 12% secured note in the aggregate principal amount of $3,000,000;
- a 15% secured note in the aggregate principal amount of $1,650,000;
- a 15% secured note in the aggregate principal amount of $2,200,000; and
- warrants to purchase 2,700,000 shares of Common Stock.
The Bridge Notes (including the Third Bridge Note) are not convertible
into Common Stock. The Bridge Warrants are exercisable into shares of Common
Stock and, if exercised, would represent approximately 16% of the outstanding
shares of Common Stock as of February 29, 2000, or 14% on a fully diluted basis.
"Fully diluted basis" assumes, in addition to the foregoing, the conversion of
all Convertible Debentures and the exercise of all warrants and options to
purchase Common Stock outstanding as of the February 29, 2000.
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The Investment Transaction
A. The Purchase Agreement
Set forth below is a summary of the changes to the terms of the
Investment which have been agreed upon since the Initial Proxy Statement was
delivered to the Company's stockholders. The following discussion is qualified
in its entirety by reference to the complete text of the revised Purchase
Agreement. The copy of the Purchase Agreement attached to the Initial Proxy
Statement as an Exhibit has been revised as disclosed herein and should be
disregarded. The terms of all of the other Transaction Documents have not been
revised.
The changes to the terms of the Investment were the result of extensive
negotiations between the Company and Appaloosa and were agreed upon in order to
better reflect Appaloosa's risk during the initial stages of the Company's
business plan and were approved by the Board of Directors after deliberation.
i. The Notes, Interest Rate. The Notes, which are zero coupon notes,
and have an original issue price of $16.75 million will initially accrue
interest at a semi-annual compound rate of 15% (increased from 7.5% as described
in the Initial Proxy Statement), payable at maturity, with such rate being
subject to reduction upon the occurrence of the following events:
a. Upon the appointment of a new Chief Executive Officer
by the Board of Directors and the achievement of
certain operational milestones (the "First
Milestone"), the interest rate of the Notes will
decrease from 15% to 12%;
b. Assuming the conditions set forth in paragraph (a)
have occurred, upon the Company achieving Product
Sales Revenues equal to or exceeding $15 million for
the trailing 12-month period (the "Second
Milestone"), the interest rate of the Notes will
decrease from 12% to 10%; and
c. Assuming the conditions set forth in paragraphs (a)
and (b) have occurred, upon the Company achieving
Product Sales Revenues equal to or exceeding $25
million for the trailing 12-month period (the "Third
Milestone"), the interest rate of the Notes will
decrease from 10% to 7.5%.
The Notes will mature five years from the date of the closing of the
Investment and will accrete from $16.75 million to an aggregate of approximately
$26.0 million at maturity. In determining the accreted value of the Notes at
maturity, the Company assumed that the First Milestone would be satisfied on
June 30, 2000, and that on such date the interest rate of the Notes would
decrease from 15% per annum compounded semi-annually to 12% per annum compounded
semi-annually. The Company further assumed that the Second Milestone would be
satisfied on August 31, 2001, and that on such date the interest rate of the
Notes would decrease from 12% per annum compounded semi-annually to 10% per
annum compounded semi-annually. Finally, the Company assumed that the Third
Milestone would be satisfied on January 31, 2002, and that on such date the
interest rate of the Notes would decrease from 10% per annum
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compounded semi-annually to 7.5% per annum compounded semi-annually and that
such interest rate would remain in effect through the scheduled maturity of the
Notes. The foregoing calculations reflect only the Company's assumptions as to
when the various milestones may be satisfied. No inference should be drawn from
such assumptions that the Company will achieve such milestones on or before the
milestone dates set forth above.
The Notes are initially convertible into an aggregate of approximately
5.6 million shares of Common Stock at a conversion price of $3.00 per share.
Upon maturity, assuming that the Notes have not been repaid or redeemed (and
using the same set of assumptions described in the immediately preceding
paragraph), the Notes will be convertible into approximately 8.7 million shares
of Common Stock. The Notes are secured by substantially all the assets of the
Company.
ii. Overdue Amounts. All overdue amounts payable by the Company under
the Purchase Agreement will bear interest at 15% (increased from 12% as
described in the Initial Proxy Statement) per annum compounded semi-annually
until such overdue amount is paid in full.
iii. Financial Covenants. The Company will not be required to exceed or
match specified levels of minimum Operating Profit or maximum Operating Loss and
Product Sales Revenue during calendar year 2000. Commencing in calendar year
2001, the Company will be required to exceed/not to exceed certain specified
levels of minimum Operating Profit or maximum Operating Loss for three-month
periods and Product Sales Revenues for three- and twelve-month periods and
certain specified levels of consolidated Capital Expenditures for six-month
periods. Once the Board of Directors has appointed a new Chief Executive
Officer, the Purchasers and the Company have agreed to negotiate in good faith
to establish new financial performance covenants for the Company, which
covenants will be tied to the Company's business plan. New financial performance
covenants will not be established until the new Chief Executive Officer is
appointed so that the new Chief Executive Officer can be involved in the
development and implementation of the Company's business plan.
iv. Executive Officers. The Company must hire a new Chief Executive
Officer by June 30, 2000. The Board of Directors and the Purchasers must approve
the appointment of the new Chief Executive Officer. The Company has retained an
executive recruiter to assist in identifying potential candidates for the Chief
Executive Officer position.
The Board of Directors, including Carl R. Sahi, the Company's current
Chief Executive Officer, supports the Company's plan to identify and appoint a
new Chief Executive Officer. The Board of Directors has been contemplating the
appointment of a new Chief Executive since prior to the commencement of
negotiations with Appaloosa with respect to the Investment.
v. Right to Designate Board of Directors. Immediately after the
appointment of a new Chief Executive Officer, the size of the Board of Directors
will be expanded from five to seven members and the Purchasers will have the
right to designate two of the seven members. The Purchasers will, upon the
consummation of the Investment, have the right to designate a non-voting
Observer (the "Non-Voting Observer") to attend and participate at meetings of
the Company's Board of Directors as disclosed in the Initial Proxy Statement.
Until the appointment of a new Chief Executive Officer, the Board of Directors
will have the right to exclude the Non-
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Voting Observer from meetings of the Board of Directors relating to the
Company's relationship with the Purchasers and/or Appaloosa.
vi. Restricted Use of Proceeds. In addition to the restrictions on the
use of proceeds discussed in the Initial Proxy Statement, the Company will be
obligated to maintain a minimum of $6 million in a restricted account until such
time as the Company appoints a new Chief Executive Officer.
vii. Operational Covenants. The Company is required to undertake
certain operational covenants.
viii. Events of Default. Upon the occurrence and during the continuance
of any Event of Default (as defined in the Purchase Agreement), all Notes then
outstanding will bear interest at a rate of 15% compounded semi-annually.
B. Possible Disadvantages of Approving the Investment Proposal
The following is an additional item to consider in making your decision
as to whether or not to vote to approve the Investment.
Potential for Default Upon Failure to Appoint a New Chief Executive
Officer.
As noted, the Company is required to appoint a new Chief Executive
Officer by June 30, 2000. Although the Board of Directors believes that it will
be able to appoint a new Chief Executive Officer by such date, there can be no
assurances that the Company will be able to identify qualified candidates for
such position by June 30, 2000. The failure to appoint a new Chief Executive
Officer will constitute an event of default under the Purchase Agreement
pursuant to which the holders of the Notes may accelerate the maturity of the
Notes and declare them immediately due and payable and, if the Company fails to
repay the Notes, foreclose against the Company's assets pledged as collateral,
which could result in a loss of the Company's patents and other assets.
C. Summary of the Investment Transaction
The following summary of the Investment Transaction reflects the
revised terms described in this Supplemental Proxy Statement.
At the Closing of the Investment, the Company will receive an aggregate
payment of $17.5 million in cash. As a result thereof and as a result of the
Bridge Transactions (assuming the immediate repayment of the Bridge Notes), the
Purchasers will hold, in the aggregate, the following securities of the Company:
- Zero Coupon Secured Convertible Notes in the aggregate principal amount
of $16,750,000;
- 250,000 Shares; and
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- warrants to purchase 4,200,000 shares of Common Stock.
Following the closing of the Investment, the Purchasers will initially
own 250,000 shares of Common Stock, which represents approximately 2% of the
outstanding Common Stock as of February 29, 2000 or 1% on a fully diluted basis.
Assuming the immediate conversion of the Notes and the exercise of the Warrants
and the Bridge Warrants, the Purchasers will own 10,033,333 shares of Common
Stock, or approximately 42% of the outstanding Common Stock as of February 29,
2000, or 38% on a fully diluted basis. Similarly, assuming conversion of the
Notes at maturity, and assuming further that the Notes have not been repaid or
redeemed and that there has been no change to the Company's capital structure
between February 29, 2000 and such time, the Purchasers will own approximately
13,137,377 shares of Common Stock, or approximately 48% of the aggregate
outstanding Common Stock as of February 29, 2000, or 44% on a fully diluted
basis. Each of the foregoing calculations do not contemplate the application of
anti-dilution adjustments.
With respect to the Warrants, the Bridge Warrants, and other
outstanding warrants, the above calculations do not consider the effect of
out-of-the-money exercise prices (i.e., warrants which have an exercise price
above the then-current market price of the Common Stock) which would inhibit
exercise of such warrants, or, in the event such warrants are in-the-money
(i.e., warrants which have an exercise price below the then-current market price
of the Common Stock), the application of the respective net exercise provisions
which could reduce the number of underlying shares of Common Stock ultimately
issued upon exercise. By way of example, on March 9, 2000, the closing price of
the Common Stock was $4 per share. Upon the Closing of the Investment, the
Purchasers will hold warrants to purchase 4.2 million shares of Common Stock as
follows:
- 1,000,000 warrants with an exercise price of $4 per share (assuming the
Company has appointed a new Chief Executive Officer by the Closing of
the Investment and the Purchasers have elected to exchange the $3
Warrants for the Replacement Warrants) (the Replacement Warrants);
- 3,000,000 warrants with an exercise price of $7 per share (the Warrants
and $5 Warrants);
- 200,000 warrants with an exercise price of $3 per share (the Second
Bridge Warrants)
Assuming the then-current market price of the Common Stock at the Closing of the
Investment is $4 per share, only the 200,000 Second Bridge Warrants exerciseable
at $3 per share would be in-the-money. If the net exercise provision were
invoked by the Purchasers, the cashless exercise would result in an aggregate of
50,000 shares of Common Stock being issued to the Purchasers.
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D. Capitalization
Following the Closing of the Investment, and assuming the immediate
conversion of the Notes and the exercise of the Warrants and Bridge Warrants,
the Purchasers would own approximately 42% of the aggregate outstanding Common
Stock on February 29, 2000, or 38% on a fully diluted basis.
Assuming that there has been no change to the Company's capital
structure between February 29, 2000 and the Closing, and assuming further that
the Bridge Transactions closed as of February 29, 2000, the following table
illustrates the dilutive effects of the Investment and Charter Amendment
Proposals:
Capitalization as of Capitalization as of Capitalization
February 29, 2000 without February 29, 2000 with Immediately after the
the Bridge Transactions the Bridge Transactions Investment
Common Stock Authorized 25,000,000 25,000,000 40,000,000
Common Stock Outstanding 14,150,259 14,150,259 14,400,259
Employee Stock Options 557,150 557,150 557,150
Non-Employee Directors Stock
Options 35,000 35,000 35,000
Warrants* 1,417,235 3,958,244 5,747,078
Convertible Debt - Ramius 290,601 290,601 290,601
Convertible Debt - the 5,583,333
Purchasers
TOTAL SHARES 16,450,245 18,991,254 26,613,421
Percent of Purchasers Equity
Interest (fully diluted) 0% 13% 38%
* For purposes of this table only, the 200,000 Second Bridge Warrants are
depicted as part of the Investment because they are not being issued until
the Closing.
E. Use of Proceeds
As a result of the changes in the terms of the Bridge Transactions and
the Investment described in this Supplemental Proxy Statement, the Company
estimates that the net proceeds of the Investment from the issuance and sale of
the Notes, the Shares, and the Warrants will be approximately $16,700,000, after
deducting the estimated financing fees and expenses payable by the Company of
approximately $800,000. This amount does not include the proceeds from the
Bridge Transactions; however, as noted below, the Bridge Notes will be
immediately repaid from the net proceeds at the Closing of the Investment.
The Company intends to use the net proceeds of the Investment primarily
for working capital to support the growth of its business, including expanding
the Company's sales force, increasing its marketing efforts, expanding its
production capacity, introducing additional safety needle products and
accessories to supplement its existing blood collection needle line, and
repaying outstanding debt.
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The following table sets forth the Company's estimated allocation of
the net proceeds:
Redemption of Convertible Debentures (amount outstanding as
of February 29, 2000) $ 1,171,000
Repayment of Bridge Notes (including interest) $ 7,140,000
Working Capital $ 8,389,000
Total Net Proceeds $16,700,000
The Company will use the net proceeds of the Investment for the
purposes set forth above. The net proceeds allocated to working capital will be
deposited in a restricted account and disbursed in amounts equal to quarterly
operating budgets prepared by the Company and approved by the Board of Directors
(including the affirmative vote of the Purchaser Designees); provided, however,
that until the Board of Directors appoints a new Chief Executive Officer, the
restricted account must always contain at least $6 million. The Company must
remain in compliance with the terms of the Purchase Agreement in order for the
remaining net proceeds to be disbursed. Pending the disbursement of funds, the
remaining net proceeds from the Investment will be held in local bank in a
short-term investment account backed by either U.S. treasury bonds or federal
agency obligations.
The Company will similarly use any proceeds of the Warrants and the
Bridge Warrants for the purposes set forth above. Assuming the Warrants and the
Bridge Warrants are exercised, the Company could receive up to $25.6 million in
additional funding. However, there are two factors which may reduce this amount:
First, the only warrants that do not contain a net exercise provision are the $4
Replacement Warrants for 1 million shares of Common Stock. Even assuming
exercise of the Warrants and the Bridge Warrants, if each of the net exercise
provisions are invoked as may be expected, the capital received by the Company
would be limited to $4 million. Second, a vast majority of the warrants are
out-of-the-money. If the price of the Common Stock does not increase
substantially, this again could reduce any proceeds ultimately received by the
Company.
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F. Selected Financial Data
As a result of the issuance of the Third Bridge Note, the pro-forma financial
information set forth in the Initial Proxy Statement has changed as set forth
below. Other than with respect to the pro forma information, the Selected
Financial Data set forth in the Initial Proxy Statement has not changed.
September 30, 1999
(Unaudited)
PRO FORMA
AS PRO FORMA
ADJUSTED AS ADJUSTED
FOR BRIDGE FOR
Balance Sheet Data: ACTUAL (1) LOANS (2) INVESTMENT(3) 1998 1997 1996 1995 1994
- ------------------- ---------- --------- ------------- ---- ---- ---- ---- ----
Cash and cash $195 $6,695 $16,554 $535 $1,502 $1,322 $11,842 $4,187
equivalents
Working capital 1,284 4,081 17,643 (754) (33) (1,413) 12,017 6,152
(deficiency)
Total assets 8,718 15,518 25,877 9,152 11,688 12,820 23,389 14,739
Long-term debt and 2,496 2,496 15,430 2,403 3,204 7,407 9,099 6,715
capital lease
obligations
Total shareholder's 4,023 7,120 8,248 2,477 4,158 (713) 10,751 4,690
equity (deficit)
- ---------
(1) Actual as of September 30, 1999.
(2) September 30, 1999 pro forma as adjusted to give effect to the Bridge
Transactions: (i) issuance of $3 million, $1.65 million and $2.2
million of Bridge Notes (net of $350,000 in financing costs); and (ii)
issuance of 2.7 million warrants in connection with the Bridge Notes
resulting in $3,147,000 of debt discount to be recorded.
(3) September 30, 1999 pro forma as adjusted to give effect to the
Investment transactions: (i) issuance of $16.75 million Convertible
Secured Notes (net of $800,000 in financing costs); (ii) issuance of
250,000 shares of common stock at $3.00 per share; (iii) issuance of
1.5 million warrants issued in connection with the Convertible Secured
Notes resulting in $3,816,000 of debt discount to be recorded; and (iv)
recording of interest expense of $291,000 on the Bridge Notes due and
payable at the consummation of the Investment transactions.
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Beneficial Conversion Feature of the Notes and Shares
In connection with the initial funding of the Investment, and the
ongoing accretion of interest on the Notes, the Company will be obligated to
record interest expense for the beneficial conversion feature of the Notes. The
charge for the beneficial conversion feature is recorded as the difference
between the fair market value of the Common Stock at the date of issuance of the
Notes and the initial conversion price of $3.00. Upon the issuance of the Notes
and the Shares, assuming and utilizing the fair market value of the Common Stock
of $3.875 at February 29, 2000, the Company would record approximately
$5,104,000 as a charge to interest expense in connection with the beneficial
conversion feature. In addition, as the Notes accrete interest, the Company will
continue to record the effect of the beneficial conversion feature in connection
with such accrued interest utilizing the fair market value of the Common Stock
at the date of issuance. Assuming the Notes are held to maturity and relying on
the assumptions set forth in this Supplemental Proxy Statement and utilizing the
fair market value of the Common Stock of $3.875 on February 29, 2000, the
Company would record approximately $2,716,00 of additional interest expense over
the life of the Notes.
Debt Discount Associated with the Bridge Warrants and Warrants
In connection with the issuance of the Bridge Warrants, the Company
will record approximately $3,147,000 of debt discount associated with the 1
million $3 Warrants, the 200,000 Second Bridge Warrants, and the 1.5 million
$4.00 Warrants (assuming the Company has appointed a new Chief Executive Officer
by the Closing of the Investment and the Purchasers have elected to exchange the
$3 Warrants for the Replacement Warrants). Such discount will be fully amortized
as a charge to interest expense on the earlier of April 30, 2000 and the closing
of the Investment. In addition, upon the closing of the Investment, the Company
will obtain an independent valuation of the 1.5 million $7.00 million Warrants,
and record the associated debt discount at the time of issuance of the warrants.
Such discount will be amortized as interest expense over the term of the Notes
until maturity or conversion of the Notes. Utilizing an independent valuation
performed as of March 8, 2000 for pro forma purposes, the Company would record
approximately $3,816,000 of debt discount.
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CHANGES TO PROPOSAL NO. 2: APPROVAL OF THE CHARTER AMENDMENT
Current Capitalization
The capitalization table set forth in the section of the Initial Proxy
Statement titled "Proposal No. 2: Approval of the Charter Amendment" as revised
in its entirety as set herein. The capitalization figures set forth below are as
of February 29, 2000.
COMMON STOCK
------------
Shares issued and outstanding 14,150,259
Shares reserved for issuance upon the exercise of outstanding warrants (includes the
Bridge Warrants) 3,958,244
Shares reserved for issuance under the Incentive Plan and Directors' Plan, which are
either subject to outstanding options or reserved for future grants 809,750
Shares reserved for issuance upon the conversion of the Convertible Debenture (which will
be redeemed at the request of the Purchasers following the Closing of the Investment) 1,963,860
TOTAL 20,882,113
The Company is currently authorized to issue 3 million shares of Preferred
Stock, of which, as of February 29, 2000, no shares were issued and outstanding
or reserved for issuance.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files periodic reports, proxy statements, and other
information with the Commission. The reports, proxy statements, and other
information filed by the Company with the Commission may be inspected and copied
at the public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and also are available for
inspection at the Commission's Regional Offices at Seven World Trade Center,
Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also may be obtained, at
prescribed rates, from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, the Company is required
to file electronic versions of certain materials with the Commission through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
The Commission maintains a site on the Internet's World Wide Web at
http://www.sec.gov that contains reports, proxy statements, and other
information regarding registrants that file electronically with the Commission.
NO PERSON IS AUTHORIZED TO PROVIDE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS SUPPLEMENTAL PROXY
STATEMENT AND THE INITIAL PROXY STATEMENT OTHER THAN THOSE CONTAINED HEREIN AND
THEREIN OR IN THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN AND THEREIN. ANY
INFORMATION OR REPRESENTATIONS WITH RESPECT TO SUCH MATTERS NOT CONTAINED HEREIN
OR THEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
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STOCKHOLDER INFORMATION
ANY PERSON FROM WHOM BLUE PROXIES FOR THE MEETING ARE SOLICITED MAY
OBTAIN, IF NOT ALREADY RECEIVED, FROM THE COMPANY, WITHOUT CHARGE, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
1998, BY WRITTEN REQUEST ADDRESSED TO BIO-PLEXUS, INC., 129 RESERVOIR ROAD,
VERNON, CONNECTICUT 06066, ATTENTION: INVESTOR RELATIONS DEPARTMENT.
FORWARD-LOOKING STATEMENTS
Certain information contained or incorporated by reference in this
Supplemental Proxy and in the Initial Proxy Statement, including statements as
to the future financial or operating performance of the Company, may constitute
"forward-looking statements," which can be identified by the use of such
forward-looking terminology as "believes," "expects," "may," "will," "should,"
or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or discussions of strategies, plans, or proposals that
involve risks and uncertainties. The Private Securities Litigation Reform Act of
1995 provides certain "safe harbor" protections for forward-looking statements
in order to encourage companies to provide prospective information about their
businesses. Forward-looking statements include statements concerning plans,
objectives, goals, strategies, future events or performance, and underlying
assumptions and other statements which are other than statements of historical
facts.
The forward-looking statements set forth or incorporated by reference
in this Supplemental Proxy Statement and in the Initial Proxy Statement are
based upon various assumptions, many of which are based, in turn, upon further
assumptions, including, without limitation, management's examination of
historical operating trends, data contained in the Company's records, and other
data available from third parties. Although the Company believes that such
assumptions were reasonable when made, because such assumptions are inherently
subject to significant uncertainties and contingencies which are difficult or
impossible to predict and are beyond the Company's control, there can be no
assurance, and no representation or warranty is made, that management's
expectations, beliefs, or projections will result or be achieved or
accomplished. In addition to the other factors and matters discussed elsewhere
herein and in the documents incorporated by reference herein, factors that, in
the view of the Company, could cause actual results to differ materially from
those discussed in the forward-looking statements include: (i) changes in
economic conditions; (ii) wars; (iii) changes in management or control of the
Company; (iv) the inability to obtain new customers or retain existing
customers; (v) significant changes in competitive factors affecting the Company;
(vi) governmental/regulatory actions and initiatives, including those affecting
investments and environmental/safety requirements; (vii) significant changes
from expectations in actual revenues, capital expenditures, and operating
expenses and unanticipated project delays, including, without limitation, the
ability to meet required levels of Operating Profit (Loss), Product Sales
Revenues, and Capital Expenditures; (viii) occurrences affecting the Company's
ability to obtain funds from operations, debt or equity to finance needed
capital expenditures, and other investments; (ix) changes in foreign trade and
monetary policies, laws and regulations related to foreign operations, political
governmental changes, inflation and exchange rates, taxes, and operating
conditions; (x) significant changes in tax rates or policies or in rates of
inflation or interest; (xi) significant changes in the Company's relationship
with its employees and the potential adverse effects if
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labor disputes or grievances were to occur; (xii) changes in accounting
principles and/or the application of such principles by the Company; (xiii) the
difficulties of predicting synergies from the integration of businesses
following a change of control; and (xiv) natural disasters and other occurrences
beyond the control of the Company.
Neither the Company nor any of its agents, employees, or advisors
intends or has any duty or obligation to supplement, amend, update, or revise
any of the forward-looking statements contained or incorporated by reference in
this Supplemental Proxy Statement or in the Initial Proxy Statement. The
Company's independent auditors have not examined or compiled such statements or
applied any procedures with respect to such statements. Accordingly, such
auditors have not expressed any opinion or other form of assurance with respect
to such statements.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company (File No.
000-1412) with the Commission under the Exchange Act, are incorporated herein by
reference and delivered with this Supplemental Proxy Statement:
(i) The Company's Definitive Proxy Statement on Schedule 14A filed with the
Commission on January 31, 2000, as supplemented by the Company's Definitive
Additional Proxy Statement on Schedule 14A filed with the Commission on February
24, 2000.
(ii) The Company's Current Report on Form 8-K filed with the Commission on
February 24, 2000.
(iii) The Company's Annual Report on Form 10-K for the year ended December 31,
1998 filed with the Commission on March 31, 1999, as amended by the Company's
Annual Report on Form 10-K/A for the year ended December 31, 1998 filed with the
Commission on August 24, 1999.
(iv) The Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1999 filed with the Commission on May 13, 1999, as amended by the Company's
Quarterly Report on Form 10-Q/A for the quarter ended March 31, 1999 filed with
the Commission on August 24, 1999.
(v) The Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1999 filed with the Commission on August 16, 1999.
(vi) The Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1999 filed with the Commission on November 15, 1999.
(vii) The Company's Current Report of Form 8-K filed with the Commission on
April 30, 1999.
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OTHER MATTERS
Management knows of no matters to be brought before the Special Meeting
other than those referred to herein. If any other business should properly come
before the Special Meeting, the persons named in the Blue Proxy Card will vote
in accordance with their best judgment.
Nancy S. Lautenbach
Secretary
March __, 2000
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EXHIBIT A
CONVERTIBLE NOTE PURCHASE AGREEMENT
AMONG
BIO-PLEXUS, INC.,
THE PURCHASERS
LISTED ON EXHIBIT A HERETO
AND
APPALOOSA MANAGEMENT L.P.,
as Collateral Agent
Dated as of _________, 2000
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1. Issuance and Sale of Notes, Common Stock and $7 Warrants......................................................1
1.1 Definitions..............................................................................1
1.2 Issuance, Purchase and Sale..............................................................1
1.3 Closing..................................................................................1
1.4 Deliveries by the Company................................................................2
1.5 Deliveries by the Purchasers.............................................................3
2. Representations and Warranties of the Company.................................................................3
2.1 Organization; Subsidiaries...............................................................3
2.2 Due Authorization........................................................................3
2.3 Capitalization...........................................................................4
2.4 SEC Reports Correspondence...............................................................5
2.5 Financial Statements.....................................................................5
2.6 Litigation...............................................................................5
2.7 Title to Properties; Insurance...........................................................5
2.8 Consents, etc............................................................................6
2.9 No Material Adverse Change...............................................................6
2.10 Taxes....................................................................................6
2.11 Compliance with ERISA....................................................................7
2.12 Labor Relations..........................................................................7
2.13 Intellectual Property Rights.............................................................7
2.14 Possession of Franchises, Licenses, Etc..................................................8
2.15 Compliance with Laws.....................................................................8
2.16 Conflicting Agreements and Certificate of Incorporation Provisions.......................8
2.17 Suppliers................................................................................9
2.18 Products.................................................................................9
2.19 Offering of the Securities...............................................................9
2.20 Existing Indebtedness; Future Liens......................................................9
2.21 Environmental Matters...................................................................10
2.22 Solvency................................................................................10
2.23 Security Documents......................................................................10
2.24 Brokers or Finders......................................................................10
2.25 Holding Company Act and Investment Company Act..........................................10
2.26 Related Party Transactions..............................................................10
2.27 Year 2000...............................................................................10
2.28 Disclosure..............................................................................11
3. Representations and Warranties of the Purchasers.............................................................11
3.1 Organization and Qualification..........................................................11
3.2 Due Authorization.......................................................................11
3.3 Acquisition for Investment..............................................................11
3.4 Offering of Securities..................................................................12
3.5 Accredited Investor.....................................................................12
4. Registration, Exchange and Transfer of Notes.................................................................12
4.1 The Note Register; Persons Deemed Owners................................................12
4.2 Issuance of New Notes Upon Exchange or Transfer.........................................12
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5. Payment of Notes..............................................................................12
5.1 Home Office Payment.....................................................................12
5.2 Limitation on Interest..................................................................12
5.3 Payment of Principal & Interest.........................................................13
6. Covenants of the Company......................................................................13
6.1 Maintenance of Office or Agency.........................................................13
6.2 Money for Security Payments to be Held in Trust.........................................14
6.3 Existence...............................................................................14
6.4 Maintenance of Properties...............................................................14
6.5 Payment of Taxes and Other Claims.......................................................14
6.6 Limitation on Indebtedness..............................................................14
6.7 Limitation on Encumbrances..............................................................14
6.8 Limitation on Related Party Transactions................................................15
6.9 Limitation on Dividends; Stock Issuances................................................15
6.10 Subsidiary Guarantees...................................................................15
6.11 Additional Offerings of Securities......................................................15
6.12 Pledges of Intercompany Notes...........................................................16
6.13 No Speculative Transactions.............................................................16
6.14 Restricted Investments..................................................................16
6.15 Financial Covenants.....................................................................16
6.16 Sale-and-Leaseback Transactions.........................................................16
6.17 Line of Business........................................................................16
6.18 Sale of Assets..........................................................................16
6.19 Indenture Relating to the Notes.........................................................17
6.20 Financial Statements and Information....................................................18
6.21 Inspection..............................................................................19
6.22 Compliance with Laws....................................................................19
6.23 Supplemental Disclosure.................................................................19
6.24 Proceeds................................................................................19
6.25 Insurance; Damage to or Destruction of Collateral.......................................19
6.26 Rights of Required Holders to Designate Directors; Board Composition....................20
6.27 Executive Officers......................................................................21
6.28 Board and Committee Notice Requirement..................................................21
6.29 Reimbursement of Certain Expenses.......................................................21
6.30 Limitation of Agreements................................................................21
6.31 Redemption of Convertible Debentures....................................................21
6.32 Preparation of Quarterly Budgets........................................................21
6.33. Operations in Accordance with the Business Plan.........................................22
6.34. Operational Covenants...................................................................22
7. Events of Default and Remedies............................................................... 22
7.1. Events of Default and Remedies..........................................................22
7.2. Default Rate............................................................................24
7.3. Acceleration of Maturity................................................................24
7.4. Other Remedies..........................................................................25
7.5. Conduct No Waiver; Collection Expenses..................................................25
7.6. Annulment of Acceleration...............................................................25
7.7. Remedies Cumulative.....................................................................25
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8. Redemption..............................................................................................25
8.1. Optional Redemption.....................................................................25
8.2. Partial Redemption......................................................................25
8.3. Change of Control.......................................................................25
8.4. Redemption Procedures...................................................................25
9. Conversion..............................................................................................26
9.1. Holder's Option to Convert into Common Stock............................................26
9.2. Exercise of Conversion Privilege........................................................26
9.3. Fractions of Shares; Interest...........................................................27
9.4. Reservation of Stock; Listing...........................................................27
9.5. Rights..................................................................................27
9.6. Adjustment of Conversion Ratio..........................................................27
9.7. Merger or Consolidation.................................................................30
9.8. Notice of Certain Corporate Actions.....................................................30
9.9. Reports as to Adjustments...............................................................31
10. The Collateral Agent....................................................................................31
10.1. Appointment.............................................................................31
10.2. Delegation of Duties....................................................................31
10.3. Exculpatory Provisions..................................................................31
10.4. Reliance by the Collateral Agent........................................................31
10.5. Notice of Default.......................................................................32
10.6. Non-Reliance on Collateral Agent and Other Purchasers...................................32
10.7. Indemnification.........................................................................33
10.8. Collateral Agent in its Individual Capacity.............................................33
10.9. Successor Collateral Agent..............................................................33
11. Interpretation..........................................................................................33
11.1. Definitions.............................................................................33
11.2. Accounting Principles...................................................................45
12. Miscellaneous...........................................................................................45
12.1. Payments; Indemnity.....................................................................45
12.2. Severability............................................................................46
12.3. Specific Enforcement....................................................................47
12.4. Entire Agreement........................................................................47
12.5. Counterparts............................................................................47
12.6. Notices and other Communications........................................................47
12.7. Amendments..............................................................................48
12.8. Successors and Assigns..................................................................48
12.9. Expenses................................................................................48
12.10. Survival................................................................................48
12.11. Transfer of Notes and Common Stock......................................................48
12.12. GOVERNING LAW...........................................................................49
12.13. Submission to Jurisdiction..............................................................49
12.14. Service of Process......................................................................49
12.15. WAIVER OF JURY TRIAL....................................................................49
12.16. Public Announcements....................................................................49
12.17. Further Assurances......................................................................50
12.18. Substitution of Purchaser...............................................................50
12.19. Signatures..............................................................................50
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THIS CONVERTIBLE NOTE PURCHASE AGREEMENT, dated as of
_________, 2000 (this "Agreement"), is made among BIO-PLEXUS, INC., a
Connecticut corporation (the "Company"), the purchasers listed on Exhibit A
(each such party, a "Purchaser" and, collectively, the "Purchasers"), and
APPALOOSA MANAGEMENT L.P., as Collateral Agent (the "Collateral Agent").
WHEREAS, the Company has previously issued to Appaloosa
Investment Limited Partnership I 7.5% Secured Note, 15% Secured Note and Second
15% Secured Note (collectively, the "Bridge Notes");
WHEREAS, the Bridge Notes provide that, subject to the terms
and conditions specified therein, the parties thereto will enter into this
Agreement;
WHEREAS, upon the terms and subject to the conditions set
forth in this Agreement, the Purchasers wish to purchase from the Company, and
the Company wishes to issue and sell to the Purchasers, (i) Zero Coupon Secured
Convertible Notes due ______, 2005 (the "Notes") in the form attached hereto as
Exhibit 1.4i with an original issue price of $[ ], (the "Issue Price") (ii) an
aggregate of 250,000 shares (the "Shares") of Common Stock, no par value, of the
Company (the "Common Stock") and (iii) warrants to purchase 1,500,000 shares of
Common Stock with an exercise price of $7 per share in the form attached as
Exhibit 1.4ii (the "$7 Warrants");
WHEREAS, the Notes shall be convertible (under the
circumstances described herein) into shares of Common Stock; and
WHEREAS, the Purchasers and the Company desire to provide for
such purchase and sale and to establish various rights and obligations in
connection therewith.
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties and agreements herein set forth, the parties
hereto agree as follows:
1. Issuance and Sale of Notes, Common Stock and $7 Warrants.
1.1. Definitions. Certain capitalized terms used in the
Agreement are defined in Section 11.1 hereof; references to a "Schedule" or an
"Exhibit" are, unless otherwise specified, to a Schedule or an Exhibit attached
to this Agreement.
1.2. Issuance, Purchase and Sale. (a) Upon the terms and
subject to the conditions set forth herein, the Company is issuing and selling
to the Purchasers, and the Purchasers are purchasing from the Company, the
Notes, the Shares and the $7 Warrants for an aggregate cash purchase price of
[$________] (the "Purchase Price"). The Notes shall be in the form of Exhibit
1.2.
(b) The parties agree that the fair market value of the Notes
is $_____, the fair market value of the Shares is $______ and the fair market
value of the $7 Warrants is $_______ . Each party agrees to file all Tax Returns
consistent with such allocation and to take no position inconsistent with such
allocation, unless required by Law.
1.3. Closing. The closing of the transactions contemplated
hereby (the "Closing") will take place simultaneously with the execution hereof
at the offices of Fried, Frank, Harris, Shriver & Jacobson, New York, New York.
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1.4. Deliveries by the Company. At the Closing, the Company is
delivering to each Purchaser (and to such other parties as otherwise set forth
below) the following:
(i) duly executed Notes in the principal amount set
forth opposite such Purchaser's name on Exhibit 1.4i;
(ii) duly executed $7 Warrants in the number set
forth opposite such Purchaser's name on Exhibit 1.4ii;
(iii) duly executed $3 Warrants in the number set
forth opposite such Purchaser's name on Exhibit 1.4iii;
(iv) an opinion of the Company's counsel, dated as
of the date hereof, addressed to such Purchaser in the form of
Exhibit 1.4iv;
(v) an Officers' Certificate, dated as of the date
hereof, certifying that (A) the representations and warranties
contained in Section 2 hereof are true and correct and (B) the
transactions contemplated hereby and in the Transaction
Documents have been approved and adopted by the requisite vote
of the stockholders of the Company in accordance with
applicable Law, the applicable rules of NASDAQ and the
Company's Certificate of Incorporation and By-Laws at a
properly called special meeting of the stockholders of the
Company;
(vi) a good standing certificate for the Company,
dated no earlier than seven days prior to the date hereof,
from the Secretary of State of the State of Connecticut;
(vii) a copy of the resolutions of the Board of
Directors adopting the execution of each of the Transaction
Documents and the performance of the transactions contemplated
by the Transaction Documents, which resolutions shall be
certified as true, correct and effective as of the date hereof
by an officer of the Company;
(viii) duly executed copies of the Security Agreement
[and the Intercreditor Agreement] in the forms attached hereto
as Exhibits 1.4viiiA and 1.4viiiB, and copies of any other
Collateral Documentation including Financing Statements
required to perfect the Holders' security interest in the
Collateral;
(ix) a duly executed copy of the Registration Rights
Agreement attached as Exhibit 1.4viii;
(x) an opinion from an independent valuation
consultant or appraiser reasonably satisfactory to the
Purchasers in form and substance reasonably satisfactory to
the Purchasers supporting the conclusions that, after giving
effect to the transactions contemplated by the Transaction
Documents, the Company will not be insolvent by the incurrence
of Indebtedness incurred in connection therewith, or be left
with unreasonably small capital with which to engage in its
business, or have incurred debts beyond its ability to pay
such debts as they mature;
(xi) a copy of the Company's employment agreement
with Carl Sahi, which employment agreement shall be in form
and substance reasonably satisfactory to the Purchasers and
which shall be certified as true, correct and effective as of
the date hereof by an officer of the Company;
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(xii) copies of all of the Company's directors and
officers liability insurance policies, which insurance
policies shall be in form and substance reasonably
satisfactory to the Purchasers and which shall be certified as
true, correct and effective as of the date hereof by an
officer of the Company;
(xiii) reimbursement of the Purchasers' costs and
expenses (including the reasonable fees and expenses of their
counsel, Fried, Frank, Harris, Shriver & Jacobson) incurred in
connection with the transactions contemplated by the
Transaction Documents to be paid as set forth in Section 1.5;
and
(xiv) evidence of repayment in full of the principal
amount of each of the Bridge Notes, plus accrued and unpaid
interest due and payable thereon; and
(xv) such other instruments and documents as
reasonably requested by each Purchaser.
1.5. Deliveries by the Purchasers. At the Closing, each
Purchaser is delivering to the Restricted Account or to such other parties as
otherwise set forth below the amount set forth opposite such Purchaser's name in
Exhibit 1.5, such amount being equal to the pro-rata portion of the Purchase
Price allocable to such Purchaser for the Notes, the Shares and the $7 Warrants
being purchased by such Purchaser as set forth opposite such Purchaser's name in
Exhibit 1.5, less its costs and expenses (including the fees and expenses of its
counsel, Fried, Frank, Harris, Shriver & Jacobson, which amounts shall be wire
transferred by the Collateral Agent, on behalf of the Company, in immediately
available funds to one or more accounts designated by such parties on or prior
to the date hereof).
2. Representations and Warranties of the Company.
The Company represents and warrants to each Holder as follows:
2.1. Organization; Subsidiaries. (a) The Company is a
corporation duly organized and existing in good standing under the laws of the
State of Connecticut and has the corporate power to own its property and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted or property owned by it makes such
qualification necessary and where the failure to so qualify could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(b) The Company does not have any Subsidiaries. Except as set
forth on Schedule 2.1(b), the Company does not own, directly or indirectly, or
have the right or obligation to acquire, any interest in any business
association or other Person.
2.2. Due Authorization. (a) The Company has all right, power
and authority to enter into, deliver and perform the Transaction Documents and
to consummate the transactions contemplated thereby. The execution and delivery
of each Transaction Document by the Company and the performance by it of the
transactions contemplated thereby (including, without limitation, the issuance
and sale of the Notes, the Shares, the $7 Warrants, the $3 Warrants and issuance
of shares of Common Stock upon conversion of the Notes and the exercise of the
$7 Warrants and the $3 Warrants) and compliance by the Company with all the
provisions of each Transaction Document (as applicable) have been duly
authorized by all requisite corporate proceedings on the part of the Company
(including, without limitation, approval by the requisite vote of holders of the
outstanding Common Stock). Each of the Transaction Documents has been duly
executed and delivered on behalf of the Company, and each such Transaction
Document constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in
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accordance with its respective terms, except to the extent that such
enforceability (i) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally or (ii)
is subject to general principles of equity. The Shares and shares of Common
Stock issuable upon conversion of the Notes and exercise of the $7 Warrants and
the $3 Warrants have been validly reserved for issuance and, upon issuance, will
be validly issued and outstanding, fully paid and nonassessable.
(b) The Board of Directors has taken all necessary action so
that no "fair price," "moratorium," "control share acquisition," "interested
holder" or other similar anti-takeover statute or regulation (including, without
limitation, Sections 33-840 through 33-845 of the Connecticut Business
Corporation Act) or any applicable anti-takeover provision in the Company's
Certificate of Incorporation or By-Laws prohibits the transactions contemplated
by this Agreement. To the knowledge of the Company, no other state takeover
statute is applicable to the transactions contemplated by this Agreement.
2.3. Capitalization. The authorized capital stock of the
Company consists of (i) 25,000,000 shares of Common Stock, of which, as of the
date hereof, shares were issued and outstanding, shares were reserved for
issuance upon the exercise of outstanding stock options pursuant to the
Company's option plans, shares were reserved for issuance upon the exercise of
the outstanding warrants, and shares were reserved for issuance upon the
conversion of the Company's 6% Convertible Debentures due 2004 (the "Convertible
Debentures") and (ii) 3,000,000 shares of Preferred Stock, no par value (the
"Preferred Stock"), of which, as of the date hereof, no shares were issued and
outstanding. All of the outstanding shares of Common Stock are validly issued
and are fully paid and nonassessable. No class of Capital Stock of the Company
is entitled to preemptive rights. Except as set forth on Schedule 2.3, there are
no outstanding options, warrants, subscription rights, calls or commitments of
any character whatsoever relating to, or securities or rights convertible into,
shares of any class of Capital Stock of the Company, or Contracts, by which the
Company is or may become bound to issue additional shares of its Capital Stock
or options, warrants or other rights to purchase or acquire any shares of its
Capital Stock. Except as set forth on Schedule 2.3, no warrants, bonds,
debentures, notes or other Indebtedness or other security having the right to
vote (or convertible into or exercisable for securities having the right to
vote) on any matters on which stockholders of the Company may vote were issued
or outstanding. Except as set forth on Schedule 2.3 or as contemplated by the
Transaction Documents, the Company is not a party to, and, to the Company's best
knowledge, there is, and immediately after the Closing, there will be, no
agreement, restriction or encumbrance (such as a preemptive or similar right of
first refusal, right of first offer, proxy, voting agreement, voting trust,
registration rights agreement, shareholders' agreement, etc., whether or not the
Company is a party thereto) with respect to the purchase, sale or voting of any
shares of Capital Stock of the Company (whether outstanding or issuable upon
conversion, exchange or exercise of outstanding securities) or other securities
of the Company pursuant to any provision of Law, the Certificate of
Incorporation or By-Laws, any agreement or otherwise. Except as set forth on
Schedule 2.3 or as contemplated by the Transaction Documents, no Person has the
right to nominate or elect one or more directors of the Company. Immediately
following the transactions contemplated hereby, the Company's capitalization
will be as set forth in Schedule 2.3. The Company has not declared or paid any
dividend or made any other distribution of cash, stock or other property to its
stockholders since January 1, 1996.
2.4. SEC Reports Correspondence. The Company has filed all
proxy statements, reports and other documents required to be filed by it under
the Exchange Act from and after January 1, 1995, and the Company has furnished
each Purchaser true and complete copies of all annual reports, quarterly
reports, proxy statements and other reports under the Exchange Act filed by the
Company from
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and after such date, each as filed with the SEC (collectively, the "SEC
Reports"). Each SEC Report was in compliance in all material respects with the
requirements of its respective report form and did not on the date of filing
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
as of the date hereof there is no fact or facts not disclosed in the SEC Reports
that relate specifically to the Company and that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. The Company
has made available for inspection by each Purchaser copies of all correspondence
between the Company and the SEC from and after January 1, 1995.
2.5. Financial Statements. The financial statements (including
any related schedules and/or notes) included in the SEC Reports have been
prepared in accordance with GAAP consistently followed (except as indicated in
the notes thereto) throughout the periods involved and fairly present the
consolidated financial condition, results of operations, cash flows and changes
in stockholders' equity of the Company as of the respective dates thereof and
for the respective periods then ended (in each case subject, as to interim
statements, to changes resulting from year-end adjustments, none of which was
material in amount or effect). Except as set forth on Schedule 2.5, the Company
is not subject to any Liabilities, except (i) Liabilities in the respective
amounts reflected or reserved against in the Company's balance sheet as of
December 31, 1998 included in the SEC Reports or (ii) Liabilities incurred in
the ordinary course of business since December 31, 1998 which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
2.6. Litigation. (a) Except as set forth on Schedule 2.6,
there is no Litigation pending or, to the knowledge of the Company, threatened
against the Company or any of its properties or assets by or before any court,
arbitrator or other Governmental Entity.
(b) The Company is not in default under or in breach of any
Order of any court, arbitrator or other Governmental Entity, and the Company is
not subject to or a party to any Order of any court, arbitrator or other
Governmental Entity arising out of any claim, demand, notice, action, suit or
proceeding under any Law.
2.7. Title to Properties; Insurance. (a) Except as set forth
on Schedule 2.7(a), the Company has good and valid title to, or, in the case of
property leased by it as lessee, a valid and subsisting leasehold interest in,
its properties and assets, free of all Liens.
(b) Schedule 2.7(b) sets forth a complete and correct list of
all insurance coverage carried by the Company, the carrier and the terms and
amount of coverage. All of the material assets of the Company and all aspects of
the Company's business that are of insurable character are covered by insurance
with insurers against risks of liability, casualty and fire and other losses and
liabilities customarily obtained to cover comparable businesses and assets in
amounts, scope and coverage that are consistent with prudent industry practice.
The Company is not in default with respect to its obligations under any such
insurance policy maintained by it. All such policies and other instruments are
in full force and effect and no premiums with respect thereto are past due and
owed. The Company has not failed to give any notice or present any material
claim under any such insurance policy in due and timely fashion or as required
by any of such insurance policies. The Company has not otherwise, through any
act, omission or non-disclosure, jeopardized or impaired full recovery of any
claim under such policies, and there are no claims by the Company under any of
such policies to which any insurance company is denying liability or defending
under a reservation of rights or similar clause. The Company has not
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received notice of any pending or threatened termination of any of such policies
or any premium increases for the current policy period with respect to any of
such policies and the consummation of the transactions contemplated by the
Transaction Documents will not result in any such termination or premium
increase.
2.8. Consents, etc. Except as set forth on Schedule 2.8, the
Company is not required to obtain any consent, approval or authorization of, or
to make any registration declaration or filing with, any Governmental Entity or
third party as a condition to or in connection with the valid execution and
delivery of any of the Transaction Documents (including, without limitation, the
issuance and sale of the Notes, the Shares and the $7 Warrants and the $3
Warrants), or the performance by the Company of its obligations in respect of
any thereof, except for (i) filings required pursuant to state and federal
securities laws to effect any registration of Securities pursuant to this
Agreement and the Registration Rights Agreement, (ii) the filing of the
Financing Statements [and Mortgages], (iii) filings to be made with the U.S.
Patent and Trademark Office or the U.S. Copyright Office to perfect the Holders'
first priority security interest in the Intellectual Property constituting
Collateral under the Collateral Documentation, (iv) the filing on Form 8-K under
the Exchange Act to report the consummation of the transactions contemplated
hereby and (v) the approval of the stockholders of the Company, which approval
has been previously obtained.
2.9. No Material Adverse Change. Since December 31, 1998, no
event has occurred or failed to occur that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
2.10. Taxes. Except as set for on Schedule 2.10:
(a) The Company (i) has timely filed all Tax Returns
(including, but not limited to, those filed on a consolidated, combined or
unitary basis) required to have been filed by the Company, all of which Tax
Returns are true, correct and complete in all material respects, (ii) has within
the time and manner prescribed by Law paid all Taxes required to be paid in
respect of the periods covered by such Tax Returns or otherwise due to any
Governmental Entity, (iii) has established and maintained on its books and
records, accruals and reserves that are adequate for the payment of all Taxes
not yet due and payable and attributable to any period preceding the date
hereof, and (iv) has not received notice of any deficiencies for any Tax from
any Governmental Entity against the Company, which deficiency has not been
satisfied. The Company is not the subject of any currently ongoing audit or
judicial or administrative proceeding relating to Taxes, nor is any such audit
pending or, to the Company's knowledge, threatened. With respect to any taxable
period ended prior to December 31, 1994, all Tax Returns of the Company have
been audited by the Internal Revenue Service or are closed by the applicable
statute of limitations. The accruals and reserves for Taxes on the Company's
balance sheet as of December 31, 1998 included in the SEC Reports are complete
and adequate in all respects to cover any and all Liabilities of the Company for
Taxes through such date. There are no Liens with respect to Taxes upon any of
the properties or assets, real or personal, tangible or intangible, of the
Company (other than Liens for Taxes not yet due). No claim has been made or
threatened by any Governmental Entity in a jurisdiction where the Company does
not file Tax Returns that the Company is or may be subject to taxation by such
jurisdiction. The Company has not filed an election under Section 341(f) of the
Code to be treated as a consenting corporation. The Company is not or has not
been a party to any Tax sharing agreement.
(b) The Company has duly withheld or collected all Taxes
required by Law to have been withheld or collected (including Taxes required by
Law to be withheld or collected in
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connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party) and any such amounts required to be
remitted to a Governmental Entity have been timely remitted.
2.11. Compliance with ERISA. Schedule 2.11 sets forth a
complete and correct list of all (i) Benefit Plans, (ii) Employee Agreements,
including (in the case of each of (i) and (ii)) all amendments thereto, and
trust or funding agreements with respect thereto (excluding any grantor trusts
established to hold assets subject to the claims of the Company's creditors) and
(iii) summary plan descriptions and communications of any material modifications
to any employee or employees relating to any Benefit Plan or Employee Agreement.
Each Benefit Plan has been established and operated in accordance with terms
thereof and all other applicable Laws, including but not limited to the Code and
ERISA, and the Company and each ERISA Affiliate are in compliance with the terms
of each Employee Agreement. Neither the Company nor any ERISA Affiliate
presently sponsors, maintains, contributes to, or is required to contribute to,
nor has the Company nor any ERISA Affiliate ever sponsored, maintained,
contributed to, or been required to contribute to, an "employee pension benefit
plan" (within the meaning of Section 3(2) of ERISA) which is subject to Title IV
of ERISA or Section 412 of the Code or a "multiemployer plan" (within the
meaning of Section 4001(a)(3) of ERISA). Neither the Company nor any ERISA
Affiliate has ever maintained or contributed to or been required to maintain or
contribute to any employee welfare benefit plan (within the meaning of Section
3(1) of ERISA) which provides for post-retirement medical, life insurance or
other welfare-type benefits, and neither the Company nor any ERISA Affiliate has
any Liability for any such post-retirement benefits to any present or former
employee.
2.12. Labor Relations. Except as set forth in Schedule 2.12,
no unfair labor practice complaint or any complaint alleging sexual harassment
or sex, age, race or other employment discrimination has been brought during the
last three years against the Company before the National Labor Relations Board,
the Equal Employment Opportunity Commission or any other Governmental Entity,
nor is there any charge, investigation (formal or informal) or complaint
pending, or to the knowledge of the Company, threatened, against the Company
regarding any labor or employment matter. There have been no governmental audits
of the equal employment opportunity practices of the Company and, to the
knowledge of the Company, no reasonable basis for any such audit exists. The
Company (i) is in compliance with all applicable Laws respecting employment,
employment practices, labor, terms and conditions of employment, collective
bargaining and wages and hours, and (ii) has withheld all amounts required by
Law or by agreement to be withheld from the wages, salaries and other payments
to its employees.
2.13. Intellectual Property Rights. Schedule 2.13(a) sets
forth a complete and correct list of all Intellectual Property of the Company
(the "Company Intellectual Property"). Except as set forth on Schedule 2.13(b),
the Company owns and possesses all right, title and interest in, or possesses
adequate licenses to (without the making of any payment to others or the
obligation to grant rights to others in exchange) all the Company Intellectual
Property, free and clear of any Liens, licenses or other restrictions. The
Company has the right to require the applicant of any Company Intellectual
Property which is an application, including but not limited to patent
applications, trademark applications, service mark applications, copyright
applications, and mask work applications, to transfer ownership to the Company
of the application and of the registration once it issues. All registered
patents, trademarks, service marks and copyrights listed on Schedule 2.13(a) are
valid and subsisting and in full force and effect. The Company Intellectual
Property is all the Intellectual Property that is necessary for the ownership,
maintenance and operation of the Company's properties and assets, the Company
has the
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right to use all of the Company Intellectual Property in all jurisdictions in
which the Company conducts or proposes to conduct its business, and the
consummation of the transactions contemplated hereby will not alter or impair
any such rights. The Company has no agreements to indemnify any Person for or
against any interference, infringement, misappropriation or other conflict with
respect to any Company Intellectual Property. Except as set forth in Schedule
2.13(b), no third party has interfered with, infringed upon, misappropriated or
otherwise come into conflict with any Company Intellectual Property. The Company
has taken all reasonably necessary and desirable action to maintain and protect
each item of Company Intellectual Property. The validity, ownership,
enforceability, use or legality of the Company Intellectual Property is not
being questioned or opposed in any Litigation or Order to which the Company, or
any Person who has granted a license of Intellectual Property to the Company, is
a party or subject, nor, to the knowledge of the Company, is any such Litigation
or Order threatened. The conduct of the Company as currently conducted and as
currently proposed to be conducted does not and will not infringe, interfere
with, misappropriate or otherwise come into conflict with any Intellectual
Property of any other Person, and the Company has not received any charge,
complaint, claim, demand or notice alleging any such infringement, interference,
misappropriation or conflict (including any claim that the Company must license
or refrain from using any Intellectual Property of any other Person). Except as
set forth in Schedule 2.13(b), the Company has not granted any licenses of
Intellectual Property to any Person.
2.14. Possession of Franchises, Licenses, Etc. The Company
possesses all franchises, certificates, licenses, permits and other
authorizations from Governmental Entities and other rights, free from burdensome
restrictions, that are necessary for the ownership, maintenance and operation of
its properties and assets, except for those the absence of which could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, and the Company is not in violation of any such franchise,
certificates, licenses, permits, authorizations and rights.
2.15. Compliance with Laws. The Company is in compliance with
all applicable Laws including, without limitation, all rules, regulations and
other Laws of the Food and Drug Administration (the "FDA") relating to the
design, development, manufacturing, sales and distribution of safety medical
products and accessories, except where the failure to comply could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. No Order has been issued nor any Law enacted which prevents, nor
does any Law prohibit the consummation of the transactions contemplated by any
of the Transaction Documents.
2.16. Conflicting Agreements and Certificate of Incorporation
Provisions. The Company has not entered into any Contract and the Company is not
subject to any Certificate of Incorporation or By-Law provision or any Order
that in any case could, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. None of the execution and delivery of any of
the Transaction Documents, the issuance, sale and delivery of the Notes, the
Shares, the $7 Warrants or the $3 Warrants, and the fulfillment of or compliance
with the terms and provisions hereof or thereof will conflict with or result in
a breach of the terms, conditions, or provisions of, or give rise to a right of
termination under, or constitute a default under, or result in the creation of
any Lien, or result in any violation of, the Certificate of Incorporation or
By-Laws or other organizational documents of the Company or any Contract of the
Company. The Company has not defaulted under any outstanding indenture or other
debt instrument or with respect to the payment of the principal of or interest
on any outstanding obligations for borrowed money, and the Company is not in
default under any of its Contracts except where such default could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
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2.17. Suppliers. Except as set forth on Schedule 2.17, no
Major Supplier has during the last twelve months materially increased or, to the
knowledge of the Company, threatened to materially increase its prices or
materially decreased or limited or, to the knowledge of the Company, threatened
to materially decrease or limit its provision of services or supplies to the
Company. During the last twelve months, there has been no termination,
cancellation or limitation of, or any material change in, the business
relationships of the Company with any Major Supplier. To the knowledge of the
Company, there will not be any such change in relations with any Major Supplier
or the triggering of any right of termination, cancellation or penalty or other
payment by or to any Major Supplier in connection with or as a result of the
transactions contemplated by the Transaction Documents that could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.
2.18. Products. Except as set forth on Schedule 2.18, there
are no statements, citations or decisions by the FDA or any other Governmental
Entity stating that any product manufactured, sold, rented, leased, designed,
distributed or marketed at any time by the Company ("Products") is defective or
unsafe or fails to meet any standards promulgated by the FDA or such
Governmental Entity. Except as set forth on Schedule 2.18, there is no (i) fact
relating to any Product that, to the knowledge of the Company, may impose upon
the Company a duty to recall or retrofit such Product or a duty to warn
customers of a defect in such Product, (ii) latent or overt design,
manufacturing or other defect in any Product that could, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect or (iii)
Liability for warranty claims or returns with respect to any Product that could,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
2.19. Offering of the Securities. In connection with this
offering, neither the Company nor any Person acting on its behalf has offered
the Securities or any similar securities of the Company for sale to, solicited
any offers to buy the Securities or any similar securities of the Company from
or otherwise approached or negotiated with respect to the Company with any
Person other than the Purchasers and other "accredited investors" (as defined in
Rule 501(a) under the Securities Act). Neither the Company nor any Person acting
on its behalf has taken, or, except as contemplated hereby, will take, any
action (including, without limitation, any offering of any securities of the
Company under circumstances that would require the integration of such offering
with the offering of the Securities under the Securities Act) that could
reasonably be expected to subject the offering, issuance or sale of the
Securities to the registration requirements of Section 5 of the Securities Act
or violate the provisions of any securities, "blue sky", or similar law of any
applicable jurisdiction.
2.20. Existing Indebtedness; Future Liens. (a) Schedule 2.20
sets forth a complete and correct list of all outstanding Indebtedness of the
Company as of the date hereof. The Company has not defaulted, and no waiver of
default is currently in effect, in the payment of any principal or interest on
any such Indebtedness and no event or condition exists with respect to any such
Indebtedness that would permit (or that with notice or the lapse of time, or
both, would permit) one or more Persons to cause such Indebtedness to become due
and payable before its stated maturity or before its regularly scheduled dates
of payment. The Company has not received any notice from any Person declaring or
threatening to declare any Indebtedness owed by the Company to such Person due
and payable prior to the stated maturity of such Indebtedness or before its
regularly scheduled dates of payment.
(b) The Company has not agreed or consented to cause or permit
in the future (upon the happening of a contingency or otherwise) any of its
property, whether now owned or hereafter acquired, to be subject to any Lien
(other than Permitted Liens).
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2.21. Environmental Matters. The Company has no knowledge of
any claim and has not received any notice of any claim, and no proceeding has
been instituted raising any claim against the Company or any of its real
properties now or formerly owned, leased or operated by it or other assets,
alleging any damage to the environment or violation of any Environmental Laws.
Except as set forth on Schedule 2.21, (i) the Company has no knowledge of any
facts that would give rise to any claim, public or private, of violation of
Environmental Laws or damage to the environment emanating from, occurring on or
affecting real properties now or formerly owned, leased or operated by the
Company or to other assets or their use, (ii) the Company has not stored any
Hazardous Materials on real properties now or formerly owned, leased or operated
by it and has not disposed of any Hazardous Materials in a manner contrary to
any Environmental Laws, and (iii) all buildings on all real properties now
owned, leased or operated by the Company are in compliance with applicable
Environmental Laws.
2.22. Solvency. The Company is not, and, after giving effect
to the issuance of the Notes and the sale of the Shares, the $7 Warrants and the
$3 Warrants and the application of the proceeds therefrom, will not be,
insolvent within the meaning of Title 11 of the United States Code or any
comparable state law provision.
2.23. Security Documents. Upon proper filing of the Financing
Statements (or assignments thereof) in the offices of the Secretary of State of
the State of Connecticut with respect to the Company (or assignments thereof)
and in the locations identified in the Security Agreement, the Liens granted
under the Transaction Documents shall constitute a fully perfected security
interest in all right, title and interest of the Company in and to the personal
property or interests therein secured thereby prior to any other security
interests against such property or interests therein.
2.24. Brokers or Finders. Except for the fees payable to Pali
Capital LLC, no agent, broker, investment banker or other Person is or will be
entitled to any broker's fee or any other commission or similar fee from the
Company in connection with any of the transactions contemplated by this
Agreement.
2.25. Holding Company Act and Investment Company Act. The
Company is not: (i) a "public utility company" or a "holding company", or an
"affiliate" or a "subsidiary company" of a "holding company", or an "affiliate"
of such a "subsidiary company", as such terms are defined in the Public Utility
Holding Company Act of 1935, as amended, or (ii) a "public utility", as defined
in the Federal Power Act, as amended, or (iii) an "investment company" or an
"affiliated person" thereof or an "affiliated person" of any such "affiliated
person", as such terms are defined in the Investment Company Act of 1940, as
amended.
2.26. Related Party Transactions. (a) Except as set forth on
Schedule 2.26, the Company has not entered into or been a party to any
transaction with any Related Party thereof except in the ordinary course of, and
pursuant to the reasonable requirements of, such Related Party's business and
upon fair and reasonable terms that are at least equivalent to an arm's-length
transaction with a Person not a Related Party.
(b) Except as set forth on Schedule 2.26, the Company has not
entered into any lending or borrowing transaction with any director, officer or
employee of the Company.
2.27. Year 2000. Except as could not reasonably be expected to
result in a Material Adverse Effect, the software, computers and other hardware
and systems used by the Company continue to (i) accurately process date
information after January 1, 2000, including, but not
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limited to, accepting date input, providing date output and performing
calculations on dates or portions of dates, (ii) function accurately and without
interruption after January 1, 2000 without any change in operations associated
with the advent of the new century, (iii) respond to two digit year date input
in a way that resolves the ambiguity as to century in a disclosed, defined and
predetermined manner, and (iv) store and provide output of date information in
ways that are unambiguous as to century. The Company has contacted its principal
vendors and Major Suppliers and other Persons with whom the Company has material
business relationships, and each of such vendors, Major Suppliers and other
Persons has notified the Company that its software, computers and other hardware
and systems are Year 2000 compliant in all material respects to the extent
affecting the Company. The ability of such vendors, Major Suppliers and other
Persons to identify and resolve their own Year 2000 issues could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
2.28. Disclosure. None of the Transaction Documents and
schedules thereto and certificates furnished to any Purchaser by or on behalf of
the Company in connection with the transactions contemplated thereby contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained therein not misleading.
There is no fact or information relating to the Company that could reasonably be
expected to be material to the Company that has not been disclosed to the
Purchasers.
3. Representations and Warranties of the Purchasers. Each Purchaser,
severally and not jointly, represents and warrants to the Company with respect
to such Purchaser as follows:
3.1. Organization and Qualification. Such Purchaser is duly
organized and existing in good standing under the laws of the state of its
formation and has the power to own its respective property and to carry on its
respective business as now being conducted. Such Purchaser is duly qualified to
do business and in good standing in every jurisdiction in which the nature of
the respective business conducted or property owned by it makes such
qualification necessary, except where the failure to so qualify would not
prevent consummation of the transactions contemplated hereby or reasonably be
expected to have a material adverse effect on such Purchaser's ability to
perform its obligations hereunder.
3.2. Due Authorization. Such Purchaser has all right, power
and authority to enter into, deliver and perform the Transaction Documents to
which it is a party and to consummate the transactions contemplated thereby.
Such Purchaser's execution and delivery of each Transaction Document to which it
is a party and the performance by such Purchaser of the transactions
contemplated thereby and compliance by such Purchaser with all the provisions of
each Transaction Document to which it is a party (as applicable) have been duly
authorized by all requisite proceedings on the part of such Purchaser. Each of
the Transaction Documents to which it is a party has been duly executed and
delivered on behalf of such Purchaser, and each such Transaction Document
constitutes the legal, valid and binding obligation of such Purchaser,
enforceable against such Purchaser in accordance with its respective terms,
except to the extent that such enforceability (i) may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to
creditors' rights generally or (ii) is subject to general principles of equity.
3.3. Acquisition for Investment. Such Purchaser is acquiring
the Notes, the Shares, the $7 Warrants and the $3 Warrants being purchased by it
for its own account for the purpose of investment and not with
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a view to or for sale in connection with any distribution thereof except in
compliance with all applicable securities Laws.
3.4. Offering of Securities. Such Purchaser has not been
offered the Securities for sale by any means of general solicitation or general
advertising including, but not limited to, any advertisements, articles, notices
or other communications published in any newspaper, magazine or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
were invited by any general solicitation or general advertising.
3.5. Accredited Investor. Such Purchaser is an "accredited
investor" within the meaning of Rule 501 promulgated under the Securities Act.
4. Registration, Exchange and Transfer of Notes.
4.1. The Note Register; Persons Deemed Owners. The Company
shall maintain, at its office designated for notices in accordance with Section
12.6, a register for the Notes (the "Note Register"), in which the Company shall
record the name and address of the Person in whose name each Note has been
issued and the name and address of each transferee and prior owner of each Note.
The Company shall deem and treat the Person in whose name a Note is so
registered as the Holder and owner thereof for all purposes and shall not be
affected by any notice to the contrary, until due presentment of such Note for
registration of transfer as provided in this Section 4.
4.2. Issuance of New Notes Upon Exchange or Transfer. Upon
surrender for exchange or registration of transfer of any Note at the office of
the Company designated for notices in accordance with Section 12.6, the Company
shall execute and deliver, at its expense, one or more new Notes as requested by
the Holder of the surrendered Note, each dated the date so surrendered, but in
the same Accreted Value as such surrendered Note, and registered in the name of
such Person or Persons as shall be designated in writing by such Holder. Every
Note surrendered for registration of transfer shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the Holder of
such Note or by his attorney duly authorized in writing. The Company may also
condition the issuance of any new Note or Notes to a Person other than the
Holder thereof on the payment of a sum sufficient to cover any stamp Tax or
other governmental charge imposed in respect of such transfer.
5. Payment of Notes.
5.1. Home Office Payment. The Company will pay to each Holder
or any transferee thereof all sums becoming due on the Notes (including all sums
that become due on the Notes at the maturity thereof) (a) prior to the date of
execution of an indenture, if any (the "Indenture Date"), at the account/address
to be specified by such Holder or transferee for such purpose by notice to the
Company, by wire transfer of immediately available funds, or at such other
address or by such other method as such Holder or transferee shall have
designated by notice to the Company and (b) at any time after the Indenture
Date, by wire transfer to the Trustee, as specified in the Indenture. Before
selling or otherwise transferring any Note, such Holder or transferee will make
a notation thereon of the aggregate amount of all payments, if any, of the Face
Amount thereof, theretofore made.
5.2. Limitation on Interest. No provision of this Agreement or
of the Notes shall require the payment or permit the collection of interest in
excess of the maximum rate which is permitted by Law. If any such excess
interest is provided for herein or in the Notes, or shall be adjudicated to be
so provided for, then the Company shall not be obligated to pay such interest in
excess of the maximum rate
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permitted by Law, and the right to demand payment of any such excess interest is
hereby waived, any other provisions in this Agreement or in the Notes to the
contrary notwithstanding.
5.3. Payment of Principal & Interest. (a) In lieu of paying
interest on the Notes on a current basis, the Accreted Value of the Notes shall
be due and payable on the Stated Maturity; provided, however, that if any amount
payable hereunder is not paid when due (including, without limitation, payment
of the Accreted Value under Section 7.2), then in each such case the overdue
amount shall bear interest at a rate of 15% per annum, compounded semi-annually,
which interest shall accrue from the date such overdue amount was due to the
date payment of such amount, including interest thereon, has been made or duly
provided for (including any interest accruing during the pendency of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowed as a claim in any such bankruptcy or proceeding). All such
interest shall be payable on demand. The accrual of such interest on overdue
amounts shall, in the case of any late payment of the Accreted Value or Change
of Control Redemption Price, be in lieu of, and not in addition to, the
continued accrual of the Accreted Value.
(b) The "Accreted Value" of the Notes shall mean, as at any
date, an amount equal to the sum of (i) the Issue Price and (ii) the Accreted
Amount. The "Accreted Amount" of the Notes as at any date shall mean the amount
accrued on the Issue Price of the Notes based upon the accretion rate, in effect
from time to time as provided below (the "Accretion Rate"). For purposes of the
foregoing, the Accretion Rate, in effect as at any date, shall be determined as
follows:
(i) from the date hereof up to and including the First
Adjustment Date, an amount equal to 15% per annum, compounded
semi-annually, computed on the basis of a 360-day year consisting of twelve
30-days months;
(ii) from the day following the First Adjustment Date up
to and including the Second Adjustment Date, an amount equal to 12% per
annum, compounded semi-annually, computed on the basis of a 360-day year
consisting of twelve 30-days months;
(iii) from the day following the Second Adjustment Date
up to and including the Third Adjustment Date, an amount equal to 10% per
annum, compounded semi-annually, computed on the basis of a 360-day year
consisting of twelve 30-days months; and
(iv) from the day following the Third Adjustment Date up
to and including the Stated Maturity, an amount equal to 7.5% per annum,
compounded semi-annually, computed on the basis of a 360-day year
consisting of twelve 30-days months.
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6. Covenants of the Company. The Company covenants that at all times
from and after the date hereof:
6.1. Maintenance of Office or Agency. The Company shall
maintain in Vernon, Connecticut an office or agency where Notes may be presented
or surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Notes may be served. The Company shall give prompt written notice
to the Holders of the location, and any change in the location, of such office
or agency. The Company may also from time to time designate one or more other
offices or agencies (in or outside Connecticut) where the Notes may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in Vernon, Connecticut for such purposes. The Company shall give
prompt written notice to the Holders of any such designation or rescission and
of any change in the location of any such other office or agency.
6.2. Money for Security Payments to be Held in Trust. On or
before each date on which payments are due on the Notes, the Company shall
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to make such payments when such payments are due, until such sums
shall be paid to such Persons or otherwise disposed of as herein provided.
6.3. Existence. The Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
Material rights (charter and statutory) and franchises and the existence,
Material rights and franchises of all of its Subsidiaries. Neither the Company
nor any of its Subsidiaries shall enter into any transaction of acquisition of,
or merger or consolidation or amalgamation with, any other Person (including any
Subsidiary or Affiliate of the Company or any of its Subsidiaries), or sell,
transfer or otherwise dispose of ("Transfer") all or substantially all of its
assets to any Person, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or make any Material change in the present method
of conducting business or engage in any type of business other than of same
general type now conducted by it. The Company shall not, and shall not permit
any of its Subsidiaries to, amend or otherwise modify (i) the Company's
Certificate of Incorporation, (ii) the By-Laws or (iii) the charter, by-laws or
other organizational documents of any of the Company's Subsidiaries.
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6.4. Maintenance of Properties. The Company shall cause all
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained and kept in good condition, repair and working order
and supplied with all necessary equipment and shall cause to be made all
necessary repairs, renewals, replacements, betterments and improvements thereof,
all as in the judgment of the Company may be necessary so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times; provided, however, that nothing in this Section 6.4 shall prevent
the Company from discontinuing the operation or maintenance of any of such
property if such discontinuance is, in the reasonable, good faith judgment of
the Company, desirable in the conduct of its business or the business of any
Subsidiary and not disadvantageous in any Material respect to the Holders.
6.5. Payment of Taxes and Other Claims. The Company shall pay
or discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all Taxes levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (ii) all lawful claims for labor, materials and supplies
that, if unpaid, might by Law become a Lien upon the property of the Company or
any of its Subsidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such Tax
amount, applicability or validity of which is being contested in good faith by
appropriate proceedings.
6.6. Limitation on Indebtedness. Except as forth on Schedule
6.6, the Company shall not, and shall not permit any of its Subsidiaries to,
create, incur, assume or directly or indirectly guarantee or in any other manner
become directly or indirectly liable for the payment of any Indebtedness
(excluding Permitted Indebtedness and Indebtedness that is a Guaranty of an
Indebtedness of the Company or any of its Subsidiaries that is otherwise
Permitted Indebtedness).
6.7. Limitation on Encumbrances. The Company shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, create,
incur, assume or otherwise suffer to exist or cause or otherwise suffer to
become effective any Lien in or on any right, title or interest to any property
(real or personal) that constitutes all or any portion of the Collateral (a
"Restricted Encumbrance", which term excludes the Lien created in favor of the
Holders) unless such Restricted Encumbrance is a Permitted Lien.
6.8. Limitation on Related Party Transactions. (a) The Company
shall not, and shall not permit any of its Subsidiaries to, enter into or be a
party to any transaction with any Related Parties (other than any of the Holders
or their Affiliates) except in the ordinary course of, and pursuant to the
reasonable requirements of, such Related Party's business and upon fair and
reasonable terms that are at least equivalent to an arm's-length transaction
with a Person that is not a Related Party. In addition, if any such transaction
or series of related transactions involves payments in excess of $25,000 in the
aggregate, the terms of such transactions must be disclosed in advance to each
Holder. All such transactions existing as of the date hereof are set forth on
Schedule 6.8.
(b) The Company shall not, and shall not permit any of
its Subsidiaries to, enter into any lending or borrowing transaction with any
director, officer or employee of the Company or any of its Subsidiaries.
(c) The Company shall not, and shall not permit any of
its Subsidiaries to, (i) enter into or adopt or amend any existing agreement or
arrangement relating to severance, (ii) enter into or adopt or amend any
existing severance plan, (iii) enter into or adopt or amend any Benefit Plan or
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Employee Agreement or (iv) grant any bonus, salary increase, severance or
termination pay to, any employee, officer, director or consultant other than in
the ordinary course of business consistent with past practice.
6.9. Limitation on Dividends; Stock Issuances. The Company
shall not offer or issue any shares of Preferred Stock or Common Stock for any
purpose whatsoever, except for shares of Common Stock issuable upon (i) exercise
of warrants issued to the Purchasers and its affiliates, (ii) the conversion of
the Notes and (iii) pursuant to Schedule 6.9. The Company shall not declare any
dividends on any shares of its Capital Stock, or make any payment on account of,
or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, retirement, exchange or other acquisition of any shares of its
Capital Stock, whether now or hereafter outstanding, or make any other
distribution in respect thereof, either directly or indirectly, whether in cash,
securities, property or in obligations of the Company or any of its
Subsidiaries.
6.10. Subsidiary Guarantees. The Company shall cause its
future direct and indirect Subsidiaries organized under the laws of any state of
the United States (or the District of Columbia) to jointly and severally
guarantee the obligations of the Company under the Notes and this Agreement
pursuant to the form of Guarantee and Security Agreement attached as Exhibit
6.10. The Company shall cause its Subsidiaries organized under the laws of any
jurisdiction other than any state of the United States or the District of
Columbia to jointly and severally guarantee the obligations of the Company under
the Notes and this Agreement pursuant to a guarantee agreement.
6.11. Additional Offerings of Securities. Prior to seeking
financing from any third party consisting of an issuance of Equity Securities
(the "Proposed Securities") by the Company on or after the date hereof, the
Company shall notify the Holders of a description in reasonable detail of the
Proposed Securities, the amount proposed to be issued and the consideration the
Company desires to receive therefor (the "Notice"), which Notice shall
constitute an offer to the Holders with respect to the Proposed Securities on
the terms set forth therein. The Holders and the Company shall, for not less
than 20 days after receipt of the Notice (unless the Holders earlier indicate
that they have no interest in purchasing the Proposed Securities), discuss the
possibility of any of the Holders acquiring the Proposed Securities, after which
(if any of the Holders has not agreed to purchase the Proposed Securities on the
terms set forth in the Notice or such other terms as are mutually acceptable to
the Company and such Holder) the Company shall be permitted to seek and obtain
third-party investors to acquire the Proposed Securities, provided that the
closing of such acquisition by such third-party investor occurs within 90 days
from the date of the Notice and provided, further, that the acquisition of the
Proposed Securities by such third-party investor is on terms no more favorable
to such third-party investor than those terms set forth in the Notice. No Equity
Securities shall be issued by the Company to any Person unless the Company has
first offered such Equity Securities to the Holders in accordance with this
Section 6.11. This Section 6.11 shall not apply to the following issuances of
securities: (i) pursuant to an approved employee stock option plan, stock
purchase plan, or similar employee benefit program or agreement, where the
primary purpose is not to raise equity capital for the Company and (ii) the
issuance of Equity Securities as consideration in a business combination
approved by each member of the Board of Directors.
6.12. Pledges of Intercompany Notes. The Company shall, and
shall cause each of its Subsidiaries to, promptly pledge all Intercompany Notes
(and all security agreements and documents relating thereto) created after the
date hereof to the Collateral Agent as Collateral under the Collateral
Documentation. To the extent that, on or after the date hereof, the Company
makes any cash investment
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in any of its Subsidiaries (in accordance with Section 6.14) that are organized
under the Laws of and doing business in the United States, such investment shall
be required to be made in the form of a loan, which shall be evidenced by an
Intercompany Note and all such Intercompany Notes shall be pledged by the
Company to the Collateral Agent as Collateral under the Collateral
Documentation.
6.13. No Speculative Transactions. The Company shall not, and
shall not permit any of its Subsidiaries to, engage in any transaction involving
commodity options, futures contracts or similar transactions.
6.14. Restricted Investments. The Company shall not, or permit
any of its Subsidiaries to, directly or indirectly, make or cause or permit, (i)
any direct or indirect advance to, (ii) any loan or other extension of credit
to, (iii) any Guarantee of any Indebtedness of, (iv) any capital contribution
to, (v) any purchase or other acquisition of any Equity Interests in, (vi) any
purchase or other acquisition of assets (other than in the ordinary course of
business) from or (vii) any merger with, any Person, including, without
limitation, any of the Company's Subsidiaries in each case other than Permitted
Investments.
6.15. Financial Covenants. Until the Designation Event and the
new Chief Executive Officer and the Collateral Agent agree to a new set of
financial covenants, the Company shall maintain the financial covenants
specified in Schedule 6.15. From and after the occurrence of the Designation
Event, the Company and the Collateral Agent agree to negotiate in good faith to
establish a new set of financial covenants.
6.16. Sale-and-Leaseback Transactions. The Company shall not,
and shall not permit any of its Subsidiaries to, enter into any
Sale-and-Leaseback Transaction.
6.17. Line of Business. The Company shall not, and shall not
permit any of its Subsidiaries to, engage in any business if, as a result, the
general nature of the business in which the Company and its Subsidiaries, taken
as a whole, would then be engaged would be substantially changed from the
general nature of the business in which the Company is engaged on the date of
this Agreement.
6.18. Sale of Assets. The Company shall not, and shall not
permit any of its Subsidiaries to, Transfer any property or assets, unless the
property or asset that is the subject of such Transfer constitutes (i) inventory
held for sale, (ii) marketable securities available for sale, or (iii) real
estate, equipment, fixtures, supplies or materials no longer required in the
operation of the business of the Company or such Subsidiary or that is obsolete,
and, in the case of any Transfer described in clause (i) or (iii), such Transfer
is in the ordinary course of business.
6.19. Indenture Relating to the Notes. Upon the written
request of the Required Holders, the Company, at its expense, shall cause to be
prepared, executed and delivered within 30 days after such request an indenture
(including a new form of note, any necessary related documentation and, from
time to time thereafter, any necessary supplements thereto) (the "Indenture")
with respect to the Notes, which Indenture shall contain terms and provisions
substantially the same as those set forth in Sections 6, 8, 9 and 13 hereof and
such other terms and provisions as are required under the Trust Indenture Act of
1939 and such other items and provisions as are customary in indentures relating
to publicly traded senior secured debt securities having a rating comparable to
the rating that the Notes would receive if rated by a nationally recognized
rating agency. In such event, the Company shall also appoint as trustee under
the Indenture a national banking association reasonably acceptable to the
Required Holders having its principal offices in New York, New York, and having
capital, surplus, and undivided profits of at least $50,000,000. In connection
with the execution of the Indenture, the Holders shall exchange all outstanding
Notes for new notes in the form contemplated by the Indenture, and upon such
exchange such new notes shall be deemed to be "Notes" for purposes hereof.
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6.20. Financial Statements and Information. The Company shall
furnish to each Holder: (a) as soon as practicable and in any event within 45
days after the end of each of the four quarters of each fiscal year and within
90 days of the end of each fiscal year, (i) copies of the quarterly and annual
reports and of the other information, documents, and other reports that the
Company files or is required to file with the SEC pursuant to the Exchange Act
and of any other reports or information that the Company delivers or makes
available to any of its security holders, at the time of filing such reports
with the SEC or of delivery to the Company's security holders, as the case may
be (but in no event later than the time such filing or delivery is required
pursuant to the Exchange Act) or (ii) as soon as practicable and in any event
within 45 days after the end of each of the four quarters of each fiscal year
and within 90 days of the end of each fiscal year, quarterly reports for the
four quarters of each fiscal year of the Company and annual reports which the
Company would have been required to file under any provision of the Exchange Act
if it had a class of securities listed on a national securities exchange or was
otherwise required to file such reports under the Exchange Act, within 15
Business Days of when such report would have been filed under Section 13 of the
Exchange Act, together with copies of a consolidating balance sheet of the
Company and its Subsidiaries as of the end of each such accounting period and of
the related consolidating statements of income and cash flow for the portion of
the fiscal year then ended, all in reasonable detail and all certified by the
principal financial officer of the Company to present fairly the information
contained therein in accordance with GAAP (and in the case of annual reports,
including financial statements, audited and certified by the Company's
independent public accountants as required under the Exchange Act); (b) within
90 days after the end of each fiscal year, a written statement by the Company's
independent certified public accountants stating as to the Company and its
Subsidiaries whether in connection with their audit examination, any Default or
Event of Default has come to their attention; (c)(i) within 45 days after the
end of the four quarters of the Company's fiscal year and within 90 days after
the end of the Company's fiscal year, an Officers' Certificate setting forth
computations in reasonable detail showing, as at the end of such quarter or
fiscal year, as the case may be, the Company's compliance with Sections 6.6,
6.7, 6.13, 6.14 and 6.15, and (ii) within 30 days after the end of each fiscal
quarter, an Officers' Certificate stating that as of the date of such
certificate, based upon such examination or investigation and review of this
Agreement, as in the opinion of such signer is necessary to enable the signer to
express an informed opinion with respect thereto, to the best knowledge of such
signer, the Company has kept, observed, performed and fulfilled each and every
covenant contained in this Agreement, and is not in default in the performance
or observance of any of the terms, provisions and conditions hereof, and, to the
best of such signer's knowledge, no Default or Event of Default exists or has
existed during such period or, if a Default or Event of Default shall exist or
have existed, specifying all such defaults, and the nature and period of
existence thereof, and what action the Company has taken, is taking or proposes
to take with respect thereto; (d) promptly after becoming aware of (i) the
existence of a Default or Event of Default or any default under any of the
Collateral Documentation, (ii) any default or event of default under any
Indebtedness of the Company or any of its Subsidiaries, (iii) any Litigation or
proceeding affecting the Company or any of its Subsidiaries in which the amount
claimed is in excess of $[50,000] or in which injunctive relief is sought which
if obtained could, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect or (iv) any change that has or could reasonably
be expected to have a Material Adverse Effect, an Officers' Certificate
specifying the nature and period of existence thereof and what action the
Company is taking or proposes to take with respect thereto; and (e) such other
information, including financial statements and computations, relating to the
performance of the provisions of this Agreement and the affairs of the Company
and any of its Subsidiaries as each Holder may from time to time reasonably
request. The Company shall keep at its principal executive office a true copy of
this Agreement (as at the time in effect), and cause the same to be available
for inspection at said office, during normal business hours and after reasonable
notice to the Company by any Holder.
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6.21. Inspection. (a) Any Holder shall have the right to visit
and inspect any of the properties of the Company or any of its Subsidiaries, to
examine the books of account and records of the Company or any of its
Subsidiaries, to be provided with copies and extracts therefrom, to discuss the
affairs, finances and accounts of the Company or any of its Subsidiaries with,
and to be advised as to the same by, its and their officers and employees, and
its and their independent public accountants (and the Company authorizes such
independent public accountants to discuss the Company's or any of its
Subsidiaries' financial matters with such Holder and its representatives,
regardless of whether any representative of the Company is present, but provided
that an officer of the Company will be afforded a reasonable opportunity to be
present at any such discussion), all at such reasonable times and intervals
during normal business hours, and upon reasonable prior notice to the Company as
such Holder and the Company shall agree and at the expense of the Company
(including the costs incurred by such Holder in hiring accountants to conduct an
audit). The Company will likewise afford each Holder the opportunity to obtain
any information necessary to verify the accuracy of any of the representations
and warranties made by the Company hereunder or in any other Transaction
Document or compliance by the Company and its Subsidiaries with a covenant made
herein or in any other Transaction Document.
(b) By receipt of information under this Section 6.21, such
Holder agrees that all information (other than such information that is publicly
available or any other information that is in such Holder's possession prior to
any disclosure under this Section 6.21) provided to it pursuant to this Section
6.21 shall be used by such Holder solely in connection with its investment in
the Company and for no other purpose, and such Holder shall treat such
information as confidential in accordance with such reasonable internal
procedures as it applies generally to information of this kind and shall not
disclose such information to any Person, except (i) to any Governmental Entity
having jurisdiction over such Holder in the law or ordinary course of business,
(ii) to any other Person pursuant to subpoena or other process, whether legal,
administrative or other (and such Holder hereby agrees to provide the Company
with prompt notice of any such subpoena or other process), (iii) to such
Holder's officers, directors, trustees, employees, partners, legal counsel,
financial advisors or auditors or accountants who need access to such
information in connection with their duties, (iv) to any transferee or
prospective purchaser of a Note or interest therein who agrees to be bound by
this paragraph, or (v) to the extent necessary in the enforcement of each
Holder's rights hereunder and under the Notes during the continuance of a
Default or Event of Default.
6.22. Compliance with Laws. The Company shall, and shall cause
each of its Subsidiaries to, comply with all Laws, ordinances or governmental
rules or regulations to which each of them is subject, and shall obtain and
maintain in effect all licenses, certificates, permits, franchises and other
governmental authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses. The Company shall
timely file all proxy statements, reports and other documents required to be
filed by it under the Exchange Act and such statements, reports and other
documents shall be in compliance in all Material respects with the requirements
of its respective report form and shall not on the date of filing contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
6.23. Supplemental Disclosure. From time to time as may be
requested by the Required Holders, the Company shall supplement each Schedule
hereto, or any representation herein or in any other Transaction Document, with
respect to any matter hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth or described in
such Schedule or as an exception to such representation or which is necessary to
correct any information in
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such Schedule or representation which has been rendered inaccurate thereby (and,
in the case of any supplements to any Schedule, such Schedule shall be
appropriately marked to show changes made therein); provided that no such
supplement to any such Schedule or representation shall be or be deemed a waiver
of any Default or Event of Default resulting from the matters disclosed therein;
provided, further, that if such supplement discloses any Default or Event of
Default, the Company shall have 15 days to cure such Default or Event of Default
so long as such Default or Event of Default (i) is not caused by the failure to
pay amounts due under this Agreement and (ii) the Collateral Manager believes
that such Default or Event of Default can be cured within such 15-day period.
6.24 Proceeds. The proceeds of the sale of the Notes, the
Shares and the $7 Warrants shall be placed in a restricted account (the
"Restricted Account"), and the disbursements of proceeds from the Restricted
Account shall be made in accordance with the procedures set forth on Schedule
6.24. No part of the proceeds from the sale of the Notes, the Shares and the $7
Warrants hereunder shall be used, directly or indirectly, for the purpose of
"purchasing" or "carrying" any "margin stock" within the respective meanings of
Regulation U of the Board of Governors of the Federal Reserve System or for any
purpose which violates or would be inconsistent with the provisions of
Regulation T, U or X of such Board.
6.25. Insurance; Damage to or Destruction of Collateral. The
Company shall, and shall cause each of its Subsidiaries to, at its sole cost and
expense, maintain the policies of insurance described on Schedule 2.7(b) in form
and with insurers reasonably acceptable to the Required Holders. If the Company
or any of its Subsidiaries at any time or times hereafter shall fail to obtain
or maintain any of the policies of insurance required above or to pay all
premiums relating thereto, the Collateral Agent may (at the direction of the
Required Holders) at any time or times after ten days' written notice to the
Company obtain and maintain such policies of insurance and pay such premiums and
take any other action with respect thereto that the Required Holders deem
advisable. By doing so, the Collateral Agent and the Holders shall not be deemed
to have waived any Default or Event of Default arising from the Company's or any
of its Subsidiaries' failure to maintain such insurance or pay any premiums
therefor. Neither the Collateral Agent nor the Required Holders shall have any
obligation to obtain insurance for the Company or any of its Subsidiaries or to
pay any premiums therefor. All sums so disbursed, including reasonable
attorneys' fees, court costs and other charges related thereto, shall be payable
on demand by the Company to the Collateral Agent and shall be secured by the
Collateral.
6.26. Rights of Required Holders to Designate Directors; Board
Composition. (a) Immediately after the Designation Event, the Company shall
expand the size of its Board of Directors from five to seven members and shall
at all times thereafter cause two individuals designated by the Holders (any
such individual so designated pursuant to this Section 6.26 from time to time,
a "Purchaser Designee" and, together, the "Purchaser Designees") to be
appointed to the Board of Directors to fill the vacancies created by such
expansion, and the Company will take all necessary action to cause a Purchaser
Designee to be appointed to (i) each existing and future committee to the Board
of Directors (ii) the board of directors or governing body of any future
Subsidiary of the Company (a "Subsidiary Board") and (iii) each Committee of
such Subsidiary Board. Thereafter, in connection with any annual meeting of
stockholders at which the term of a Purchaser Designee is to expire, the
Company will take all necessary action to cause such Purchaser Designee to be
elected to the Board of Directors. In the event of any vacancy arising by
reason of the resignation, death, removal or inability to serve of any Purchaser
Designee, the Holders shall be entitled to designate a successor to fill such
vacancy for the unexpired term (and, thereafter, such successor shall be deemed
a Purchaser Designee for all purposes of this Section 6.26). Beginning on the
date hereof, the Company further agrees that the Holders shall be entitled to
designate a non-voting observer to attend and participate in (but not to vote
at) all meetings of the Board of Directors, each committee of the Board of
Directors, each Subsidiary Board and each committee of such Subsidiary Board
(the "Non-Voting Observer"); provided, however, that until the Designation
Event, the Board of Directors shall have the discretion to exclude the
Non-Voting Observer from any of the meetings of the Board of Directors relating
to the Company's relationship with any of the Holders or the Collateral Agent.
The Non-Voting Observer, if appointed, shall have the same access to
information concerning the business and operations of the Company and its
Subsidiaries and at the same time as directors of the Company and its
Subsidiaries and shall be entitled to participate in discussions and to consult
with the Board of Directors and each Subsidiary Board without voting, and the
Board of Directors and each Subsidiary Board shall give due consideration to
the advice and recommendations of such Non-Voting Observer.
(b) Without the prior written consent of the Holders, (i) the
Board of Directors shall not consist of more than seven members and (ii) the
Executive Committee of the Board of Directors shall not consist of more than
four members.
(c) Notwithstanding anything to the contrary contained
herein, after the Designation Event, so long as (i)(Y) the Holders in the
aggregate own at least 5% of the Common Stock (on a fully diluted basis) or (Z)
hold at least $10 million in the Issue Price of the Notes, (ii) there has not
been any change, event or development or series of changes, events or
developments that could or could reasonably be expected to have a Material
Adverse Effect, (iii) at least [three] individuals who are members of the Board
of Directors as of the date hereof remain members of the Board of Directors,
(iv) there is no material Litigation pending or threatened against the Company
and/or any Subsidiary, (v) the Board of Directors or any Subsidiary Board has
not failed to address in a timely fashion any concerns raised by the Purchaser
Designee(s) regarding the conduct of, or breach of duty by, any officer or
director of the Company or any Subsidiary and (vi) the Company maintains
officers and directors insurance policies satisfactory to the Collateral Agent
in its reasonable discretion, the Holders agree that they shall use their
reasonable efforts to appoint and cause one Purchaser Designee to serve on the
Board of Directors.
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6.27. Executive Officers. (a) The Company shall promptly, but
in no event later than June 30, 2000, hire a new Chief Executive Officer to
replace the existing Chief Executive Officer, whose appointment shall be
approved by the Board of Directors and the Holders.
(b) Without the approval of the Board of Directors, which
approval shall include the affirmative vote of each of the Purchaser Designees,
the Company shall not make any change in, or appointment of, key executive
officers of the Company, including, without limitation, the Chief Executive
Officer, the Chief Financial Officer, Executive Vice President, Chief Operating
Officer, General Counsel or similar positions; provided, that if there are no
Purchaser Designees at the time of such event, the approval of the Holders will
be required.
(b) Without the approval of the Board of Directors, which
approval shall include the affirmative vote of each of the Purchaser Designees,
the Company shall not make any change in, or appointment of, key executive
officers of the Company, including, without limitation, the Chief Executive
Officer, the Chief Financial Officer, Executive Vice President, Chief Operating
Officer, General Counsel or similar positions.
6.28. Board and Committee Notice Requirement. In addition to
any requirements specified in the By-Laws of the Company, the Company shall
notify each Purchaser Designee and the Non-Voting Observer, by telecopy, of (a)
every meeting (or action by written consent) of the Board of Directors and (b)
every meeting (or action by written consent) of any Subsidiary Board and of any
committee of the Board of Directors or Subsidiary Board, at least three days in
advance of such meeting (or distribution of written consents), or, if such
notice under the circumstances is not practicable, as soon before the meeting
(or distribution) as is practicable.
6.29. Reimbursement of Certain Expenses. The Company shall,
upon request therefor, promptly reimburse each Purchaser Designee and the
Non-Voting Observer for all reasonable expenses incurred by them in connection
with their attendance at meetings of the Board of Directors, any Subsidiary
Board or of committees of any of the foregoing and any other activities
undertaken by them
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51
in their capacity as directors of the Company or any Subsidiary or observer, as
applicable. The foregoing shall be in addition to, and not in lieu of (or in
duplication of), any indemnification or reimbursement obligations of the Company
under the Certificate of Incorporation of the Company or the By-Laws or by Law.
The Non-Voting Observer shall be entitled to indemnification from the Company
and its Subsidiaries to the maximum extent permitted by Law as though he or she
were a director of the Company or the Subsidiary.
6.30. Limitation of Agreements. The Company shall not, and
shall not permit any Subsidiaries to, enter into any Contract, or any amendment,
modification, extension or supplement to any of its existing Contract or the
By-Laws or Certificate of Incorporation of the Company, that prohibits the
Company from honoring and observing its obligations under the Transaction
Documents.
6.31. Redemption of Convertible Debentures. At the request of
the Collateral Agent the Company shall cause all of its outstanding Convertible
Debentures to be redeemed in accordance with the terms and conditions thereof.
6.32. Preparation of Quarterly Budgets. The Company shall
furnish to the Collateral Agent as soon as practicable, but in any event no
later than 10 days before the end of each of the quarterly periods of each
fiscal year of the Company, an operating budget (each, a "Quarterly Budget")
approved and adopted by a majority of the Board of Directors (which majority
shall include the Purchaser Designees, if any) for the Company and its
Subsidiaries, taken as a whole, for the next quarterly period (provided that the
Company need not furnish the Collateral Agent with a Quarterly Budget for the
quarterly period commencing on April 1, 2000). Each Quarterly Budget shall
specify, among other things, the amount of funds needed by the Company and its
Subsidiaries in the next quarter to operate the business of the Company and its
Subsidiaries (the amount of such funds, the "Quarterly Amount").
6.33. Operations in Accordance with the Business Plan. The
business and operations of the Company and its Subsidiaries shall be conducted
in accordance with the Quarterly Budget and a business plan of the Company
approved by the Collateral Agent.
6.34. Operational Covenants. The Company shall maintain the
covenants specified in Schedule 6.34.
7. Events of Default and Remedies.
7.1. Events of Default and Remedies. "Event of Default",
wherever used herein, means any one of the following events (whatever the reason
for such Event of Default and whether it shall be voluntary or involuntary or be
effected by operation of law or pursuant to any Order of any court or any Order,
rule or regulation of any Governmental Entity) (or, if the giving of notice or
lapse of time or both is required, then, prior to such notice or lapse of time,
a "Default"):
(a) default in the payment of the Accreted Value of
or premium, if any, and interest in respect of any Note when it becomes
due and payable; or
(b) default in the performance of any agreement or
covenant in, or provision of, this Agreement, the Notes, or the other
documents executed and delivered in connection with this Agreement
(including any Transaction Document) and to which the Company or any of
its Subsidiaries is a party (other than a covenant or a default in
whose performance is elsewhere in this Section specifically dealt
with), or any representation or warranty made in any document executed
and delivered in connection with this Agreement (including any
Transaction Document) was false in any material respect on the date as
of which made or deemed made; or
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(c) the Company or any of its Subsidiaries shall: (A)
default in any payment of principal of or interest on any Indebtedness
(other than the Notes and any intercompany debt) or in the payment of
any Guarantee, beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness or Guarantee was
created; or (B) default in the observance or performance of any other
agreement or condition relating to any such Indebtedness or Guarantee
or contained in any instrument or agreement evidencing, securing or
relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or
to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Guarantee (or a trustee or agent on behalf of
such holder or holders or beneficiary or beneficiaries) to cause, with
the giving of notice if required, such Indebtedness to become due prior
to its stated maturity, any applicable grace period having expired, or
such Guarantee to become payable, any applicable grace period having
expired, provided that the aggregate principal amount of all such
Indebtedness and Guarantee which would then become due or payable as
described in this Section 7.1(c) would equal or exceed $500,000; or
(d) a final judgment or judgments for the payment of
money are entered by a court or courts of competent jurisdiction
against any Company or any of its Subsidiaries and such judgment or
judgments remain undischarged for a period (during which execution
shall not effectively be stayed) of 60 days, provided that the
aggregate of all such judgments that are not covered by insurance under
which the Company or a Subsidiary is a beneficiary exceeds $500,000, or
the Required Holders shall determine that any Governmental Entity
having jurisdiction over the Company or any of its Subsidiaries
including, without limitation, the SEC, shall have taken or proposed to
take any action that the Required Holders believe could, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect or that adversely affects the Holders' security interest in the
Collateral; or
(e) the Company or any of its Subsidiaries (i) is
generally not paying, or admits in writing its inability to pay, its
debts as they become due, (ii) files, or consents by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any jurisdiction,
(iii) makes an assignment for the benefit of its creditors, (iv)
consents to the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as insolvent or to
be liquidated, or (vi) takes corporate action for the purpose of any of
the foregoing; or
(f) a court or other Governmental Entity of competent
jurisdiction enters an Order appointing, without consent by the Company
or any of its Subsidiaries, a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, or constituting an order for relief
or approving a petition for relief or reorganization or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy or insolvency law of any jurisdiction, or ordering the
dissolution, winding-up or liquidation of the Company or any of its
Subsidiaries, or any such petition shall be filed against the Company
or any of its Subsidiaries and such petition shall not be dismissed
within 60 days; or
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(g) a court or other Governmental Entity of competent
jurisdiction enters a final judgment holding any of the documents
delivered in connection with this Agreement (including any Transaction
Document) to be invalid or unenforceable and such judgment remains
unstayed and in effect for a period of 20 consecutive days; or the
Company or any of its Subsidiaries shall assert, in any pleading filed
in such a court, that any of the documents delivered in connection with
this Agreement are invalid or unenforceable; or
(h) any provision of any Transaction Document shall
for any reason cease to be valid, binding and enforceable in accordance
with its terms (or the Company or any of its Subsidiaries [(or the
trustee in the case of the Intercreditor Agreement)] shall challenge
the enforceability of any Transaction Document or shall assert in
writing, or engage in any action or inaction based on any such
assertion, that any provision of any of the Transaction Documents has
ceased to be or otherwise is not valid, binding and enforceable in
accordance with its terms), or any security interest created under any
Transaction Document shall cease to be a valid and perfected security
interest, or Lien in any of the Collateral purported to be covered
thereby; or
(i) the Company or any of its Subsidiaries shall
default in the payment of any amounts due pursuant to the terms of any
document executed and delivered by the Company or such Subsidiary in
connection with this Agreement (other than payments elsewhere in this
Section specifically dealt with); or
(j) there shall exist with respect to any Benefit
Plan any "prohibited transaction" (as defined in Section 406 of ERISA
or Section 4975 of the Code); (ii) there shall exist with respect to
any Benefit Plan that is a "defined benefit plan" (within the meaning
of Section 3(35) of ERISA) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA or Section 412 of the Code, whether or
not waived); (iii) a "reportable event" (within the meaning of Section
4043 of ERISA, but excluding any reportable event with respect to which
the 30-day notice requirement of Section 4043 has been waived) shall
occur, or judicial or administrative proceedings shall have commenced,
with respect to any Benefit Plan that is a "defined benefit plan"
(within the meaning of Section 3(35) of ERISA), which reportable event
or proceedings is, in the reasonable opinion of the Holders, likely to
result in the termination of such Benefit Plan; (iv) there shall exist
with respect to any Benefit Plan that is a "multiemployer plan" (within
the meaning of Section 4001(a)(3) of ERISA) any "withdrawal liability"
(within the meaning of Section 4201 of ERISA); or (v) any Benefit Plan
that is a "defined benefit plan" (within the meaning of Section 3(35)
of ERISA) shall terminate; and in the case of each of clauses (i)
through (v) above, such event or condition could individually or in the
aggregate with all other such events or conditions have a Material
Adverse Effect.
7.3. Acceleration of Maturity. If any Event of Default (other
than an Event of Default specified in clause (e), (f), (g) or (h) of Section
7.1) shall have occurred and be continuing, the Required Holders may, by notice
to the Company, declare the entire unpaid Accreted Value of, and interest, if
any, in respect of the Notes (to the full extent permitted by applicable law) to
be immediately due and payable (and such Accreted Value shall be based on the
Accreted Value of the Notes to the day prior to such payment date), and upon
such declaration all of such amount shall be immediately due and payable, in
each and every case without presentment, demand, protest or further notice, all
of which are hereby waived, anything in the Notes or in this Agreement to the
contrary notwithstanding; provided that if an Event of Default under clause (e),
(f), (g) or (h) of Section 7.1 shall have occurred, the entire unpaid Accreted
Value of each Note (to the full extent permitted by applicable law), shall
immediately become
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due and payable, without any declaration and without presentment, demand,
protest or further notice, all of which are hereby waived, anything in the Notes
or this Agreement to the contrary notwithstanding.
7.4. Other Remedies. If any Event of Default shall have
occurred and be continuing, from and including the date of such Event of Default
to but not including the date such Event of Default is cured or waived, each
Holder may enforce its rights by suit in equity, by action at law, or by any
other appropriate proceedings, whether for the specific performance (to the
extent permitted by Law) of any covenant or agreement contained in this
Agreement or the Notes or in aid of the exercise of any power granted in this
Agreement or the Notes, and each Holder may enforce the payment of any Note held
by such Holder and any of its other legal or equitable rights.
7.5. Conduct No Waiver; Collection Expenses. No course of
dealing on the part of any Holder, nor any delay or failure on the part of any
Holder to exercise any of its rights, shall operate as a waiver of such right or
otherwise prejudice any Holder's rights, powers and remedies. If the Company
fails to pay, when due, any payment in respect of any Note, the Company will pay
the Holder of such Note, to the extent permitted by Law, on demand, all costs
and expenses incurred by such Holder in the collection of any amount due in
respect of any Note hereunder, including reasonable legal fees incurred by such
Holder in enforcing its rights hereunder.
7.6. Annulment of Acceleration. If a declaration is made in
accordance with Section 7.2, then and in every such case, the Required Holders
may, by an instrument delivered to the Company, annul such declaration and the
consequences thereof.
7.7. Remedies Cumulative. No right or remedy conferred upon or
reserved to each Purchaser or the Collateral Agent or the Holders under this
Agreement is intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative and in addition to every other right and
remedy given hereunder or now and hereafter existing under applicable law. Every
right and remedy given by this Agreement or by applicable Law to each Holder or
the Collateral Agent or the Holders may be exercised from time to time and as
often as may be deemed expedient by such Holder or the Collateral Agent or the
Holders.
8. Redemption
8.1. Optional Redemption. Subject to each Holder's right of
conversion set forth in Section 9, the Company shall have the right, at its sole
option and election made in accordance with Section 8.4 and subject to Section
8.4, to redeem the Notes after __________, 2002, in whole or in part, at a
redemption price of 145% of the Accreted Value of the Notes to the day prior to
the redemption date (the "Optional Redemption Price"); provided, however, that
if such redemption date occurs after ___________, 2003, the Optional Redemption
Price shall decrease to 110% of the Accreted Value of the Notes on the day prior
to the redemption date.
8.2. Partial Redemption. If less than all of the Notes at the
time outstanding are to be redeemed, the aggregate Accreted Value of the Notes
to be redeemed shall be prorated among the outstanding Notes; provided, however,
that in the event that the aggregate Accreted Value of the Notes then
outstanding is $1,000,000 or less, the Company shall be required to redeem all
of such outstanding Notes if it elects to redeem any such Notes.
8.3. Change of Control. The Company shall make an offer, in
accordance with the procedures set forth in Section 8.4(b), to acquire the Notes
for cash at a redemption price of 110% of the
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Accreted Value of the Notes on the day prior to the redemption date (the "Change
of Control Redemption Price"), in the event of (i) a Change of Control, a
merger, consolidation or other combination involving the Company, or (ii) a
Change of Control of a Subsidiary of the Company or a group of Subsidiaries of
the Company occurs and such Subsidiary or group of Subsidiaries, individually or
in the aggregate, together with their consolidated Subsidiaries and all other
Subsidiaries previously subject to a Change of Control, if any, represent more
than 50% of the revenues or net assets of the Company and its Subsidiaries on a
consolidated basis as of the last date of the immediately preceding fiscal
quarter of the Company or for the twelve month period then ended.
8.4. Redemption Procedures. (a) Notice of any redemption of
Notes pursuant to Section 8.1 shall be mailed at least 30 but not more than 60
days prior to the date fixed for redemption to each Holder of a Note to be
redeemed, at such Holder's address as it appears in the Note Register. In order
to facilitate the redemption of Notes, the Board of Directors may fix a record
date for the determination of Notes to be redeemed which shall be a date at
least 20 days following the date of the notice.
(b) Promptly following a Change of Control (but in no event
more than five Business Days thereafter), the Company shall mail to each Holder,
at such Holder's address as it appears in the Note Register, notice of such
Change of Control, which notice shall set forth such Holder's right to require
the Company to redeem any or all Notes held by it. The Company shall thereafter,
during a period of 90 days from the date of such notice, redeem any Note, in
whole or in part, at the option of the Holder thereof, upon at least five days'
written notice to the Company by such Holder specifying (i) the Accreted Value
of Notes to be redeemed and (ii) the redemption date.
(c) On the date of any redemption being made pursuant to
Section 8.1, 8.2 or 8.3 that is specified in a notice given pursuant to this
Section 8.4, the Company shall wire transfer to such Holder the Optional
Redemption Price or the Change of Control Redemption Price, as the case may be,
for the Accreted Value of such Holder's Notes and premium, if any, so redeemed.
9. Conversion.
9.1. Holder's Option to Convert into Common Stock. Subject to
the provisions for adjustment hereinafter set forth, any Note or any portion of
the outstanding Accreted Value of such Note shall be convertible at the option
of the Holder thereof at any time after the Closing into fully paid and
nonassessable shares of Common Stock at a conversion price, determined as
hereinafter provided, in effect at the time of conversion.
The number of shares of Common Stock issuable upon conversion
of a Note shall be determined by dividing the Accreted Value of such Note or
portion thereof surrendered for conversion on the day prior to the conversion
date by the Conversion Price. The "Conversion Price" shall initially be $3.00
per share, subject to adjustment as provided in this Section 9.
9.2. Exercise of Conversion Privilege. (a) Conversion of the
Notes may be effected by any Holder thereof upon the surrender to the Company at
the office of the Company designated for notices in accordance with Section 14.6
or at the office of any agent or agents of the Company, as may be designated by
the Board of Directors (the "Transfer Agent"), of the Notes to be converted,
accompanied by a written notice stating that such Holder elects to convert all
or a specified portion of the Accreted Value of such Notes in accordance with
the provisions of this Section 9 and specifying the name or names in which such
Holder wishes the certificate or certificates for shares of Common Stock to
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be issued. In case any Holder's notice shall specify a name or names other than
that of such Holder, such notice shall be accompanied by payment of all transfer
Taxes payable upon the issuance of shares of Common Stock in such name or names.
Other than such Taxes, the Company will pay any and all issue and other Taxes
(other than Taxes based on income) that may be payable in respect of any issue
or delivery of shares of Common Stock on conversion of Notes pursuant hereto. As
promptly as practicable, and in any event within five Business Days after the
surrender of such Notes and the receipt of such notice relating thereto and, if
applicable, payment of all transfer Taxes (or the demonstration to the
satisfaction of the Company that such Taxes have been paid), the Company shall
deliver or cause to be delivered (i) a certificate or certificates representing
the number of validly issued, fully paid and nonassessable full shares of Common
Stock to which the Holder of the Notes being converted shall be entitled and
(ii) if less than the entire Accreted Value of any Note surrendered is being
converted, a new Note in the Accreted Value that remains outstanding upon such
partial conversion. Such conversion shall be deemed to have been made at the
close of business on the date of giving such notice so that the rights of any
Holder thereof as to the Note or Notes (or portion thereof) being converted
shall cease except for the right to receive shares of Common Stock in accordance
herewith, and the Person entitled to receive the shares of Common Stock shall be
treated for all purposes as having become the record holder of such shares of
Common Stock at such time, so long as such Holder's Notes are delivered to the
Company within two Business Days after the date of the giving of notice.
(b) For the avoidance of doubt, both the Holders and the
Company acknowledge that the Holders' right to convert the Notes into Common
Stock remains in effect until any redemption and will not be suspended by any
notice of redemption.
9.3. Fractions of Shares; Interest. In connection with the
conversion of any Note into Common Stock, no fractional shares shall be issued,
but in lieu thereof the Company shall pay a cash adjustment in respect of each
fractional interest in an amount equal to such fractional interest multiplied by
the Current Market Price per share of Common Stock on the Trading Day on which
any Note is deemed to have been converted. If more than one Note shall be
surrendered for conversion by the same Holder at the same time, the number of
full shares of Common Stock issuable on conversion thereof shall be computed on
the basis of the aggregate Accreted Value of Notes so surrendered, together with
cash in lieu of any fractional share of Common Stock.
9.4. Reservation of Stock; Listing. (a) The Company shall at
all times reserve and keep available for issuance upon the conversion of the
Notes, free from any preemptive rights, such number of its authorized but
unissued shares of Common Stock as will from time to time be sufficient to
permit the conversion of the aggregate Face Amount of the Notes into Common
Stock, and shall take all action required to increase the authorized number of
shares of Common Stock, if necessary, to permit the conversion of the then
Accreted Value of the Notes.
(b) If at the time of conversion, the Common Stock is listed
on a national securities exchange, or is designated as a "national market system
security" on the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ"), the Company shall take all action necessary to
cause the shares of Common Stock issuable upon conversion of the Notes to be
listed on such exchange, subject to official notice of issuance.
9.5. Rights. If the Company shall issue shares of Common Stock
upon conversion of any Notes as contemplated by this Section 9, the Company
shall issue together with each such share of Common Stock any rights issued to
holders of Common Stock, irrespective of whether such rights shall
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be exercisable at such time, but only if such rights are issued and outstanding
and held by other holders of Common Stock at such time and have not expired.
9.6. Adjustment of Conversion Ratio. The Conversion Price will
be subject to adjustment from time to time as follows:
(a) In case the Company shall at any time or from
time to time after the date hereof (A) pay a dividend, or make a distribution,
on the outstanding shares of Common Stock in shares of Common Stock, (B)
subdivide the outstanding shares of Common Stock; (C) combine the outstanding
shares of Common Stock into a smaller number of shares; or (D) issue by
reclassification of the shares of Common Stock any shares of capital stock of
the Company, then, and in each such case, the Conversion Price in effect
immediately prior to such event or the record date therefor, whichever is
earlier, shall be adjusted so that the Holder of any Note thereafter surrendered
for conversion into Common Stock shall be entitled to receive the number of
shares of Common Stock of the Company that such Holder would have owned or would
have been entitled to receive after the happening of any of the events described
above, had such Notes been surrendered for conversion immediately prior to the
happening of such event or the record date therefor, whichever is earlier. An
adjustment made pursuant to this clause (a) shall become effective (x) in the
case of any such dividend or distribution, immediately after the close of
business on the record date for the determination of holders of shares of Common
Stock entitled to receive such dividend or distribution, or (y) in the case of
such subdivision, reclassification or combination, at the close of business on
the day upon which such corporate action becomes effective. No adjustment shall
be made pursuant to this clause (a) in connection with any transaction to which
Section 9.7 applies.
(b) If at any time the Company shall issue shares of
Common Stock (or rights, warrants or other securities convertible into or
exchangeable for shares of Common Stock (collectively "Convertible Securities"))
at a price per share (or having a conversion price per share) less than the
Conversion Price per share of Common Stock as of the date of issuance of such
shares (or, in the case of Convertible Securities, less than the Conversion
Price as of the date of issuance of the Convertible Securities in respect of
which shares of Common Stock were issued), then the Conversion Price shall be
adjusted by multiplying (A) the Conversion Price in effect on the day
immediately prior to such date by (B) a fraction, the numerator of which shall
be the sum of (1) the number of shares of Common Stock outstanding on such date
and (2) the number of shares of Common Stock purchasable with the aggregate
consideration receivable by the Company for the total number of shares of Common
Stock so issued (or into which the rights, warrants or other convertible
securities may convert), and the denominator of which shall be the sum of (x)
the number of shares of Common Stock outstanding on such date and (y) the number
of additional shares of Common Stock issued (or into which the Convertible
Securities may convert).
An adjustment made pursuant to this Section 9.6(b)
shall be made on the next Business Day following the date on which any such
issuance is made and shall be effective retroactively to the close of business
on the date of such issuance. For purposes of this Section 9.6(b), the aggregate
consideration receivable by the Company in connection with the issuance of
shares of Common Stock or of Convertible Securities shall be deemed to be equal
to the sum of the aggregate offering price (before deduction of underwriting
discounts or commissions and expenses payable to third parties) of all such
Common Stock and Convertible Securities plus the minimum aggregate amount, if
any, payable upon exercise or conversion of any such Convertible Securities. The
issuance or reissuance of any shares of Common Stock (whether treasury shares or
newly issued shares) pursuant to (i) a dividend or distribution
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on, or subdivision, combination or reclassification of, the outstanding shares
of Common Stock requiring an adjustment in the Conversion Price pursuant to
Section 9.6(a) or (ii) any stock option plan or program of the Company currently
in effect involving the grant of options to employees of the Company at the
Current Market Price shall not be deemed to constitute an issuance of Common
Stock or Convertible Securities by the Company to which this Section 9.6(b)
applies. No adjustment shall be made pursuant to this Section 9.6(b) in
connection with any transaction to which Section 9.7 applies.
(c) In case the Company shall at any time or from
time to time after the date hereof declare, order, pay or make a dividend or
other distribution (including, without limitation, any distribution of stock or
other securities or property or Convertible Securities of the Company or any of
its Subsidiaries by way of dividend or spinoff), on its Common Stock, then, and
in each such case, the Conversion Price shall be adjusted by multiplying (1) the
applicable Conversion Price on the day immediately prior to the record date
fixed for the determination of stockholders entitled to receive such dividend or
distribution by (2) a fraction, the numerator of which shall be the average
Current Market Price of the Common Stock for the period of 20 Trading Days
preceding such record date, and the denominator of which shall be such average
Current Market Price of the Common Stock less the Fair Market Value per share of
Common Stock (as determined in good faith by the board of directors of the
Company, a certified resolution with respect to which shall be mailed to each
Holder) of such dividend or distribution. No adjustment shall be made pursuant
to this Section 9.6(c) in connection with any transaction to which Section 9.7
applies.
(d) In case a tender or exchange offer made by the
Company or any Affiliate of the Company for all or any portion of the Common
Stock shall expire and such tender or exchange offer shall involve the payment
by the Company or such Affiliate of consideration per share of Common Stock
having a Fair Market Value at the last time (the "Expiration Time") tenders or
exchanges may be made pursuant to such tender or exchange offer (as it shall
have been amended) that exceeds the Current Market Price per share of Common
Stock on the Trading Day next succeeding the Expiration Time, the Conversion
Price shall be reduced so that the same shall equal the price determined by
multiplying the Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this subsection
(d) by a fraction (which shall not be greater than one) of which the numerator
shall be the number of shares of Capital Stock outstanding (including any
tendered or exchanged shares) at the Expiration Time multiplied by the Current
Market Price per share of Common Stock on the Trading Day next succeeding the
Expiration Time and of which the denominator shall be the sum of (i) the Fair
Market Value of the aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the tender or exchange
offer) of all shares validly tendered or exchanged and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (ii) the product of the number of
shares of Capital Stock outstanding (less any Purchased Shares) at the
Expiration Time and the Current Market Price per share of Common Stock on the
Trading Day next succeeding the Expiration Time, such reduction to become
retroactively effective immediately prior to the opening of business on the day
following the Expiration Time.
(e) For purposes of this Section 9.6, the number of
shares of Common Stock at any time outstanding shall not include any shares of
Common Stock then owned or held by or for the account of the Company.
(f) The term "dividend," as used in this Section 9.6,
shall mean a dividend or other distribution upon Capital Stock of the Company.
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(g) Anything in this Section 9.6 to the contrary
notwithstanding, the Company shall not be required to give effect to any
adjustment in the Conversion Price unless and until the net effect of one or
more adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the Conversion Price by at least
one one-hundredth of one share of Common Stock, and when the cumulative net
effect of more than one adjustment so determined shall be to change the
Conversion Price by at least one one-hundredth of one share of Common Stock,
such change in Conversion Price shall thereupon be given effect.
(h) The certificate of any firm of independent public
accountants of recognized national standing selected by the Board of Directors
(which may be the firm of independent public accountants regularly employed by
the Company) shall be presumptively correct for any computation made under this
Section 9.6.
(i) If the Company shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this Section
9.6 or in the Conversion Price then in effect shall be required by reason of the
taking of such record.
9.7. Merger or Consolidation. In the case of any
recapitalization, reorganization, reclassification, consolidation, merger, sale
of all or a substantial portion of the Company's assets to another Person or
other transaction which is effected in such a manner that holders of Common
Stock are entitled to receive (either directly or upon subsequent liquidation)
stock, securities or assets with respect to or in exchange for Common Stock
(each of the foregoing being referred to as a "Transaction"), each Note then
outstanding shall thereafter be convertible into, in lieu of the Common Stock
issuable upon such conversion prior to consummation of such Transaction, the
kind and amount of shares of stock and other securities and property receivable
(including cash) upon the consummation of such Transaction by a holder of that
number of shares of Common Stock into which the Accreted Value of such Note was
convertible immediately prior to such Transaction. In each such case, the
Company shall also make appropriate provisions (in form and substance
satisfactory to the Required Holders) to insure that the provisions of this
Section 9.6 shall thereafter be applicable to the Notes (including, in the case
of any such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Conversion Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate adjustment in
the number of shares of Common Stock acquirable and receivable upon conversion
of the Notes, in each case if the value so reflected is less than the Conversion
Price in effect immediately prior to such consolidation, merger or sale). The
Company shall not effect any such consolidation, merger or sale, unless prior to
the consummation thereof, the successor corporation (if other than the Company)
resulting from consolidation or merger or the corporation purchasing such assets
assumes by written instrument (in form reasonably satisfactory to the Required
Holders), the obligation to deliver to each such Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, such
Holder may be entitled to acquire. In case securities or property other than
Common Stock shall be issuable or deliverable upon conversion as aforesaid, then
all references in this Section 9 shall be deemed to apply, so far as appropriate
and nearly as may be, to such other securities or property.
9.8. Notice of Certain Corporate Actions. In case at any time
or from time to time the Company shall pay any stock dividend or make any other
non-cash distribution to the holders of its
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Common Stock, or shall offer for subscription pro rata to the holders of its
Common Stock any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
Stock or consolidation or merger of the Company with or into another
corporation, or any sale or conveyance to another corporation of the property of
the Company as an entirety or substantially as an entirety, or there shall be a
voluntary or involuntary dissolution, liquidation or winding up of the Company,
then, in any one or more of such cases, the Company shall give at least 20 days'
prior written notice (the time of mailing of such notice shall be deemed to be
the time of giving thereof) to the Holders of the Notes at their addresses as
shown in the Note Register as of the date on which (i) a record shall be taken
for such stock dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, sale or conveyance,
dissolution, liquidation or winding up shall take place, as the case may be,
provided that in the case of any Transaction to which Section 9.7 applies the
Company shall give at least 30 days' prior written notice as aforesaid. Such
notice shall also specify the date as of which the holders of the Common Stock
of record shall participate in such dividend, distribution or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance or participate in such dissolution,
liquidation or winding up, as the case may be. Failure to give such notice shall
not invalidate any action so taken.
9.9. Reports as to Adjustments. Upon any adjustment of the
Conversion Price then in effect and any increase or decrease in the number of
shares of Common Stock issuable upon the operation of the conversion provisions
set forth in this Section 9, then, and in each such case, the Company shall
promptly deliver to each Holder and the Transfer Agent of the Notes and Common
Stock, a certificate signed by the President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary
of the Company setting forth in reasonable detail the event requiring the
adjustment and the method by which such adjustment was calculated and specifying
the Conversion Price then in effect following such adjustment, and shall set
forth in reasonable detail the method of calculation of each and a brief
statement of the facts requiring such adjustment. Where appropriate, such notice
to any Holder may be given in advance and included as part of the notice
required under the provisions of Section 9.8.
10. The Collateral Agent.
10.1. Appointment. Each Purchaser for itself and for future
Holders hereby irrevocably designates and appoints Appaloosa Management L.P. as
the Collateral Agent under this Agreement, and irrevocably authorizes the
Collateral Agent to take such action on such Purchaser's behalf and any future
Holder's behalf and to exercise such powers and perform such duties as are
expressly delegated to the Collateral Agent by the terms of the Transaction
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Collateral Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Purchaser or
future Holder, and no implied covenants, functions, responsibilities, duties,
obligations or Liabilities shall be read into this Agreement or any of the
Transaction Documents or otherwise exist against the Collateral Agent.
10.2. Delegation of Duties. The Collateral Agent may execute
any of its duties under the Transaction Documents by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Collateral Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys-in-fact selected by
it with reasonable care, except as otherwise provided in Section 10.3.
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10.3. Exculpatory Provisions. Neither the Collateral Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact, Affiliates
or Subsidiaries shall be (i) liable for any action taken or omitted to be taken
by any of them under or in connection with the Transaction Documents, or (ii)
responsible in any manner to any of the Purchasers or future Holders for any
recitals, statements, representations or warranties made by the Company or any
of its Subsidiaries or any officer thereof contained in the Transaction
Documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Collateral Agent under or in connection
with, the Transaction Documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Transaction Documents or for
any failure of the Company or any of its Subsidiaries to perform its obligation
thereunder. The Collateral Agent shall not be under any obligation to any
Purchaser or future Holder to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, any
Transaction Document, or to inspect the properties, books or records of the
Company or any of its Subsidiaries.
10.4. Reliance by the Collateral Agent. The Collateral Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to the
Company), independent accountants and other experts selected by the Collateral
Agent. The Collateral Agent may deem and treat the payee of any Note as the
owner thereof for all purposes unless a written notice of assignment,
negotiation or transfer thereof shall have been filed with the Collateral Agent.
The Collateral Agent shall be fully justified in failing or refusing to take any
action under any Transaction Document unless it shall first receive such advice
or concurrence of the Required Holders (or, where unanimous consent of the
Holders is expressly required hereunder or thereunder, such Holders) as it deems
appropriate or it shall first be indemnified to its satisfaction by the Holders
against any and all Liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Collateral Agent shall in
all cases be fully protected in acting, or in refraining from acting, under any
Transaction Document in accordance with a request of the Required Holders, and
such request and any action taken or failure to act pursuant thereto shall be
binding upon all Purchasers and all future Holders of the Notes.
10.5. Notice of Default. The Collateral Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Collateral Agent has received written notice from a
Holder or the Company referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Collateral Agent receives such a notice, the Collateral Agent
shall promptly give notice thereof to all Holders. The Collateral Agent shall
take such action with respect to such Default or Event of Default as shall be
directed by the Required Holders, provided that (i) the Collateral Agent shall
not be required to take any action that exposes the Collateral Agent to any
Liability or that is contrary to this Agreement or applicable Law and (ii)
unless and until the Collateral Agent shall have received such directions, the
Collateral Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such default or Event or
Default as it shall deem advisable in the best interests of the Holders.
10.6. Non-Reliance on Collateral Agent and Other Purchasers.
Each Purchaser for itself and all future Holders of the Notes acquired by such
Purchaser expressly acknowledges that neither the Collateral Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact, Subsidiaries
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or Affiliates has made any representation or warranties to it and that no act by
the Collateral Agent hereafter taken, including any review of the affairs of the
Company and its Subsidiaries, shall be deemed to constitute any representation
or warranty by the Collateral Agent to any such Purchaser or Holder. Each
Purchaser for itself and all future Holders of the Notes acquired by such
Purchaser represents to the Collateral Agent that it has, independently and
without reliance upon the Collateral Agent or any other Holder, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operation, property, financial
and other condition and creditworthiness of the Company and its Subsidiaries,
and made its own decision to make its investment hereunder and to enter into
this Agreement. Each Purchaser also represents for itself and all future Holders
of the Notes acquired by such Purchaser that it will, independently and without
reliance upon the Collateral Agent or any other Holder, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under the Transaction Documents, and to make such investigation as it
deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of the Company and its
Subsidiaries. Except for notices, reports and other documents expressly required
to be furnished to the Holders by the Collateral Agent hereunder, the Collateral
Agent shall not have any duty or responsibility to provide any Holder with any
credit or other information concerning the business, financial condition,
assets, liabilities, net assets, properties, results of operations, value,
prospects and other condition or creditworthiness of the Company and its
Subsidiaries which may come into the possession of the Collateral Agent or any
of its officers, directors, employees, agents, attorneys-in-fact, Affiliates or
any of its Subsidiaries.
10.7. Indemnification. The Purchasers and the future Holders
jointly and severally agree to indemnify the Collateral Agent in its capacity as
such (to the extent not reimbursed by the Company and its Subsidiaries and
without limiting the obligation of the Company and its Subsidiaries to do so),
from and against any and all Liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind whatsoever that may at any time be imposed on, incurred by or asserted
against the Collateral Agent in any way relating to or arising out of the
Transaction Documents or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted by the
Collateral Agent under or in connection with any of the foregoing, provided that
no Purchaser or future Holder shall be liable for the payment of any portion of
such Liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the Collateral
Agent's gross negligence or willful misconduct. The agreements contained in this
Section 10.7 shall survive the payment of the Notes and all other amounts
payable hereunder.
10.8. Collateral Agent in its Individual Capacity. The
Collateral Agent and its Affiliates and Subsidiaries may make loans to, accept
deposits from and generally engage in any kind of business with the Company and
its Subsidiaries as though the Collateral Agent were not the Collateral Agent
hereunder. With respect to its loans made or renewed by it or any Note issued to
it, the Collateral Agent shall have the same rights and powers, duties and
Liabilities under the Transaction Documents as any Holder and may exercise the
same as though it were not the Collateral Agent and the terms "Purchaser",
"Purchasers", "Holder" and "Holders" shall include the Collateral Agent in its
individual capacity.
10.9. Successor Collateral Agent. The Collateral Agent may
resign as Collateral Agent upon 30 days' notice to the Company (and the Company
shall promptly notify the Holders thereof). If the Collateral Agent shall resign
as Collateral Agent under the Transaction Documents, then
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the Required Holders shall appoint a successor agent for the Holders whereupon
such successor agent shall succeed to the rights, powers and duties of the
Collateral Agent and the term "Collateral Agent" shall mean such successor agent
effective upon its appointment, and the former Collateral Agent's rights, powers
and duties as Collateral Agent shall be terminated, without any other or further
act or deed on the part of such former Collateral Agent or any of the parties to
this Agreement or any Holders of the Notes. After any retiring Collateral
Agent's resignation hereunder as Collateral Agent, the provisions of this
Section 10 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Collateral Agent under the Transaction Documents.
11. Interpretation.
11.1. Definitions.
"$3 Warrants" means warrants to purchase 200,000 shares of
Common Stock with an exercise price of $3 per share in the form attached hereto
as Exhibit 1.4iii.
"$7 Warrants" shall have the meaning ascribed thereto in the
Recitals.
"7.5% Secured Note" shall mean the 7.5% Secured Note in the
initial aggregate principal amount of $3,000,000 issued by the Company to the
Holder on October 21, 1999, as such 7.5% Secured note may be amended from time
to time.
"15% Secured Note" shall mean the 15% Secured Note in the
initial aggregate principal amount of $1,650,000 issued by the Company to the
Holder on January 5, 2000, as such 15% Secured Note may be amended from time to
time.
"Accreted Amount" shall have the meaning ascribed thereto in
Section 5.3.
"Accretion Rate" shall have the meaning ascribed thereto in
Section 5.3.
"Accreted Value" shall have the meaning ascribed thereto in
Section 5.3.
"Action" shall mean see Section 12.1(b)(i).
"Agreement" shall have the meaning ascribed thereto in the
Preamble.
"Affiliate" shall have the respective meanings ascribed to
such term in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act. "Affiliate" shall also include partners of a Person. Notwithstanding the
foregoing, "Affiliate" shall not include the limited partners of any Purchaser
or Holder or any limited partners of a limited partner of any Purchaser or
Holder.
"Beneficially Own" with respect to any securities shall mean
having "beneficial ownership" of such securities (as determined pursuant to Rule
13d-3 under the Exchange Act), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. "Beneficial Owners" and
Beneficially Owned shall have correlative meanings.
"Benefit Plan" shall mean each plan, program, policy, payroll
practice, commitment or other arrangement providing for compensation, severance,
termination pay, bonuses, performance awards, stock or stock-related awards,
fringe benefits or other employee benefits of any kind, whether formal or
informal, funded or unfunded, written or oral and whether or not legally
binding, including, without limitation, each "employee benefit plan" (within the
meaning of Section 3(3) of ERISA), in the case of each of the foregoing,
maintained, sponsored or contributed to by the Company or any ERISA Affiliate or
pursuant to which the Company or any ERISA Affiliate has or may have any
Liability, but excluding individual Employee Agreements.
"Board of Directors" shall mean the Board of
Directors of the Company.
"Bridge Notes" shall have the meaning ascribed thereto in the
Recitals.
"Business Day" shall mean any day other than a Saturday,
Sunday, or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"By-Laws" shall mean the By-Laws of the Company as currently
in effect.
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"Capital Expenditures" shall mean expenditures made or
liabilities incurred for the acquisition of any fixed assets or improvements,
replacements, substitutions or additions thereto which have a useful life of
more than one year, including the total principal portion of Capitalized Lease
Obligations.
"Capital Stock" shall mean, in the case of the Company, any
and all shares (however designated) of the capital stock of the Company now or
hereafter outstanding.
"Capitalized Lease" shall mean, with respect to any Person,
any lease or any other agreement for the use of property which, in accordance
with GAAP, should be capitalized on the lessee's or user's balance sheet.
"Capitalized Lease Obligation" of any Person shall mean and
include, as of any date as of which the amount thereof is to be determined, the
amount of the liability capitalized or disclosed (or which should be disclosed)
in a balance sheet of such Person in respect of a Capitalized Lease of such
Person.
"Certificate of Incorporation" shall mean the
Certificate of Incorporation of the Company as currently in effect.
"Change of Control" shall mean:
(a) the acquisition by any individual,
entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 35% or more of the combined voting power of the then
outstanding Voting Securities of the Company, but excluding,
for this purpose, any such acquisition by (i) the Company or
any of its Subsidiaries, (ii) any Benefit Plan (or related
trust) of the Company or any of its Subsidiaries, or (iii) any
corporation with respect to which, following such acquisition,
50% or more of the combined voting power of the then
outstanding Voting Securities of such corporation is then
Beneficially Owned, directly or indirectly, by individuals and
entities who were the Beneficial Owners of Voting Securities
of the Company immediately prior to such acquisition in
substantially the same proportion as their ownership,
immediately prior to such acquisition, of the combined voting
power of the then outstanding Voting Securities of the
Company; or
(b) a reorganization, merger or
consolidation, in each case, with respect to which all or
substantially all the Persons who were the Beneficial Owners
of the Voting Securities of the Company immediately prior to
such reorganization, merger or consolidation do not, following
such reorganization, merger or consolidation Beneficially Own,
directly or indirectly, more than 35% of the combined voting
power of the then outstanding Voting Securities of the
corporation resulting from such reorganization, merger or
consolidation; or
(c) the Incumbent Board shall cease for any
reason to constitute at least 50% of the members of the Board
of Directors; or
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(d) the sale, lease or other disposition of
all or a substantial part of the Company's assets in one
transaction or a series of related transactions.
"Change of Control Redemption Price" shall have the meaning
ascribed thereto in Section 8.3.
"Closing" shall have the meaning ascribed thereto
in Section 1.3.
"Code" shall mean the Internal Revenue Code of
1986, as amended.
"Collateral" shall mean all real and personal property and
interests in real and personal property including, without limitation,
Intellectual Property, rights under leases and royalty rights and agreements,
now owned or hereafter acquired by the Company or its Subsidiaries in or upon
which a Lien is granted or made under the Collateral Documentation.
"Collateral Agent" shall have the meaning ascribed
thereto in the Preamble.
"Collateral Documentation" shall mean the Guarantee and
Security Agreement, the Security Agreement, the Financing Statements, the
Intercompany Notes and the endorsements thereof to the Collateral Agent (for the
benefit of the Holders) or to the Holders, and all other deeds of trust,
assignments, endorsements, pledged stock, collateral assignments and other
instruments, documents, agreements or conveyances at any time creating or
evidencing Liens or assigning Liens to the Collateral Agent (for the benefit of
the Holders) or to the Holders, to secure the obligations of the Company or any
of its Subsidiaries under the Notes, [the Intercreditor Agreement] and the
Registration Rights Agreement.
"Commencement Date" shall have the meaning ascribed thereto in
Schedule 6.34.
"Common Stock" shall have the meaning ascribed thereto in the
Recitals.
"Company" shall have the meaning ascribed thereto in the
Preamble.
"Company Intellectual Property" shall have the meaning
ascribed thereto in Section 2.13.
"Consolidated" or "consolidated", when used with reference to
any financial term in this Agreement (but not when used with respect to any Tax
Return or Tax Liability), shall mean the aggregate for two or more Persons of
the amounts signified by such term for all such Persons, with inter-company
items eliminated and, with respect to earnings, after eliminating the portion of
earnings properly attributable to minority interests, if any, in the capital
stock of any such Person or attributable to shares of preferred stock of any
such Person not owned by any other such Person.
"Contracts" shall mean all agreements, contracts, leases,
purchase orders, arrangements, commitments and licenses to which the Company or
any of its Subsidiaries is a party or by which the Company or any of its
Subsidiaries is bound.
"Conversion Price" shall have the meaning ascribed thereto in
Section 9.1.
"Convertible Debentures" shall have the meaning ascribed
thereto in Section 2.3.
"Convertible Securities" shall have the meaning ascribed
thereto in Section 9.6(b).
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"Current Market Price", when used with reference to shares of
Common Stock or other securities on any date, shall mean the closing price per
share of Common Stock or such other securities on such date and, when used with
reference to shares of Common Stock or other securities for any period shall
mean the average of the daily closing prices per share of Common Stock or such
other securities for such period. If the Common Stock or such other securities
are listed or admitted to trading on a national securities exchange, the closing
price shall be the last sale price, regular way, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, regular way,
in either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or, if the Common Stock or such other securities are not listed
or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Common Stock
or such other securities are listed or admitted to trading or, if the Common
Stock or such other securities are not so listed on any national securities
exchange, as reported in the transaction reporting system applicable to
securities designated as a "national market system security" or NASDAQ. If the
Common Stock or such other securities are not publicly held or so listed or
designated, "Current Market Price" shall mean the fair market value per share of
Common Stock or of such other securities as determined in good faith by the
Board of Directors based on an opinion of an independent investment banking firm
with an established national reputation with respect to the valuation of
securities.
"Default" shall have the meaning ascribed thereto in Section
7.1.
"Default Rate" shall have the meaning ascribed thereto in
Section 7.2
"Designation Event" shall mean the appointment of a Chief
Executive Officer of the Company, acceptable to the Holders, by the Board of
Directors, in accordance with Section 6.27 thereof.
"Employee Agreement" shall mean each management, employment,
severance, consulting, non-compete, confidentiality, or similar agreement or
Contract between the Company or any ERISA Affiliate and any employee pursuant to
which the Company or any ERISA Affiliate has or may have any Liability.
"Environmental Laws" shall mean any and all Laws, permits,
concessions, grants, franchises, licenses, agreements or governmental
restrictions relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not limited to
those related to hazardous substances or wastes, air emissions and discharges to
waste or public systems.
"Equity Interests" shall mean any capital stock, partnership
interest, joint venture interest or other equity interest or warrants, options
or other rights to acquire any capital stock, partnership interest, joint
venture interest or other equity interest.
"Equity Securities" shall mean, with respect to any Person,
shares of capital stock or other equity interest of such Person, and any rights,
options or warrants to purchase stock or other securities exchangeable for or
convertible into capital stock of or other equity interest in such Person.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean each business or entity which is
a member of a "controlled group of corporations," under "common control" or an
"affiliated service group" with the Company within the meaning of Sections
414(b), (c) or (m) of the Code, or required to be aggregated with the Company
under Section 414(o) of the Code, or is under "common control" with the Company,
within the meaning of Section 4001(a)(14) of ERISA.
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"Event of Default" shall have the meaning ascribed thereto in
Section 7.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time. Reference to
a particular section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of any such successor
federal statute.
"Expiration Time" shall have the meaning ascribed thereto in
Section 9.6(d).
"Fair Market Value" shall mean, as to shares of Common Stock
or any other securities of the Company or any other issuer that are publicly
traded, the average of the Current Market Prices of such shares or securities
during the period of five consecutive Trading Days preceding the date as of that
the Fair Market Value of such shares or securities is to be determined. The
"Fair Market Value" of any security which is not publicly traded or of any other
property shall mean the fair value thereof as determined in good faith by the
Board of Directors based on an opinion of an independent investment banking firm
with an established national reputation with respect to the valuation of
securities.
"First Adjustment Date" shall mean the first date on which
both the Designation Event and the Commencement Date have occurred.
"FDA" shall have the meaning ascribed thereto in Section 2.15.
"Financing Statements" means Form UCC-1 financing statements
to be filed in all jurisdictions necessary or desirable in order to perfect the
Holders' security interest in the Collateral and shall include any Form UCC-1
financing statements assigned to the Holders and filings to be made in the U.S.
Patent and Trademark Office and the U.S. Copyright Office.
"GAAP" shall mean U.S. generally accepted accounting
principles, consistently applied.
"Governmental Entity" shall mean any supernational, national,
foreign, federal, state or local judicial, legislative, executive,
administrative or regulatory body or authority.
"Guarantee and Security Agreement" shall mean the agreement,
in the form of Exhibit 6.10, to be entered into between the Collateral Agent and
the Company's future domestic Subsidiaries, providing for a security interest in
such domestic Subsidiaries' Collateral and Guarantees from such Subsidiaries.
"Guaranty" or "Guarantee" by any Person shall mean all
obligations (other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) of any Person guaranteeing, or
in effect guaranteeing, any Indebtedness, dividend or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, all obligations incurred through an
agreement, contingent or otherwise, by such Person: (i) to purchase such
Indebtedness or obligation or any property or assets constituting security
therefor, (ii) to advance or supply funds (x) for the purchase or payment of
such Indebtedness or obligation, (y) to maintain working capital or other
balance sheet condition or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation, (iii) to lease property
or to purchase securities or other property or services primarily for the
purpose of assuring the owner of such Indebtedness or obligation of the ability
of the primary obligor to make payment of such Indebtedness or obligation, or
(iv) otherwise to assure the owner of the Indebtedness or obligation of the
primary obligor
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against loss in respect thereof. For the purposes of any computations made under
this Agreement, a Guarantee in respect of any Indebtedness for borrowed money
shall be deemed to be Indebtedness equal to the outstanding amount of the
Indebtedness for borrowed money that has been guaranteed, and a Guarantee in
respect of any other Liability or any dividend shall be deemed to be
Indebtedness equal to the maximum aggregate amount of such Liability or
dividend.
"Hazardous Material" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard to health or
safety, the removal of which may be required or the generation, manufacture,
refining, production, processing, treatment, storage, handling, transportation,
transfer, use, disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law
(including, without limitation, asbestos, urea formaldehyde foam insulation and
polychlorinated biphenyls).
"Holder" shall mean, at any time of reference, a Person in
whose name a Note is registered in the Note Register at such time.
"Incumbent Board" shall mean the individuals who, immediately
after the Closing, constitute the Board of Directors; provided, however, that
any individual becoming a director subsequent to the Closing whose election, or
nomination for election by the Company's stockholders was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be deemed to be a member of the Incumbent Board.
"Indebtedness" shall mean, with respect to any Person, (i) all
obligations of such Person for borrowed money, or with respect to deposits or
advances of any kind, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of such Person
under conditional sale or other title retention agreements relating to property
purchased by such Person, (iv) all obligations of such Person issued or assumed
as the deferred purchase price of property or services (other than accounts
payable to suppliers and similar accrued liabilities incurred in the ordinary
course of business and paid in a manner consistent with industry practice), (v)
all Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien or security interest on property owned or acquired by such Person
whether or not the obligations secured thereby have been assumed, (vi) all
Capitalized Lease Obligations of such Person, (vii) all Guarantees of such
Person, (viii) all obligations (including, but not limited to, reimbursement
obligations) relating to the issuance of letters of credit for the account of
such Person, (ix) all obligations arising out of foreign exchange contracts, and
(x) all obligations arising out of interest rate and currency swap agreements,
cap, floor and collar agreements, interest rate insurance, currency spot and
forward contracts and other agreements or arrangements designed to provide
protection against fluctuations in interest or currency exchange rates.
"Indemnified Person" shall have the meaning ascribed thereto
in Section 12.1(b).
"Indenture" shall have the meaning ascribed thereto in Section
6.19.
"Indenture Date" shall have the meaning ascribed thereto in
Section 5.1.
"Intellectual Property" shall mean (a) Patents, (b) all
trademarks, service marks, trade dress, logos, trade names, domain names and
corporate names, together with all translations, adaptations, derivations and
combinations thereof and including all goodwill associated therewith, and all
applications, registrations and renewals in connection therewith, (c) all
copyrightable works, all
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copyrights and all applications, registrations and renewals in connection
therewith, (d) all mask works and all applications, registrations and renewals
in connection therewith, (e) all trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, (h) all copies and tangible embodiments of the foregoing (in
whatever form or medium), (i) all licenses, sublicenses, permissions or
agreements in connection with the foregoing and (j) all rights, now existing or
hereafter coming into existence, (I) to all income, royalties, damages and other
payments (including in respect of all past, present and future infringements)
now or hereafter due or payable under or with respect to any of the foregoing,
(II) to sue for all past, present and future infringements with respect to any
of the foregoing and (III) otherwise accruing under or pertaining to any of the
foregoing throughout the world.
"Intercompany Notes" shall mean any notes from the
Subsidiaries or Affiliates of the Company in favor of the Company, as the same
may be amended, modified or supplemented from time to time in accordance with
their terms, and all other promissory notes or other instruments evidencing
Indebtedness of Affiliates or Subsidiaries of the Company to the Company between
the Company and its Affiliates.
"Intercreditor Agreement" shall mean the agreement, dated as
of the date hereof, between the Collateral Agent and .
"Issue Price" shall have the meaning ascribed thereto in the
Preamble.
"Law" shall include any foreign, federal, state, or local law,
statute, rule, regulation, Order or other restriction of any court or other
Governmental Entity.
"Liability" shall mean any debt, liability or obligation,
whether known or unknown, asserted or unasserted, accrued, absolute, contingent
or otherwise, whether due or to become due.
"Lien" shall mean, with respect to any Person, any mortgage,
lien, pledge, charge, security interest or other encumbrance, or any interest or
title of any vendor, lessor, lender or other secured party to or of such Person
under any conditional sale or other title retention agreement or Capital Lease,
upon or with respect to any property or asset of such Person (including in the
case of stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Litigation" shall mean any claim, demand, notice, action,
suit, proceeding, arbitration, investigation, civil, criminal or administrative
action, audit, inquiry or hearing by or before any Governmental Entity or
private arbitration tribunal.
"Major Supplier" shall mean a supplier of $20,000 or more in
materials or services to the Company during the last twelve months.
"Material" shall mean material in relation to the properties,
business, prospects, operations, earnings, assets, Liabilities, condition
(financial or otherwise) or prospects of the Company and its Subsidiaries taken
as a whole, whether or not in the ordinary course of business.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the properties, business, prospects, operations, earnings, assets,
Liabilities or the condition (financial or otherwise) of the Company and its
Subsidiaries taken as a whole, whether or not in the ordinary course of
business, (b)
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the ability of the Company or any of its Subsidiaries to perform its obligations
under any of the Transaction Documents to which it is a party, (c) the validity
or enforceability of any of the Transaction Documents, (d) the rights, remedies,
powers and privileges of the Holders under any of the Transaction Documents or
(e) the timely payment or performance of the Secured Obligations.
"NASDAQ" shall have the meaning ascribed thereto in Section
9.4(b).
"Net Income" shall mean, with respect to any period, the net
income or net loss of the Company and its Subsidiaries in accordance with GAAP
on a consolidated basis as reflected in the financial statements furnished to
the Holders in accordance with Section 6.20.
"Non-Voting Observer" shall have the meaning ascribed thereto
in Section 6.26.
"Note Register" shall have the meaning ascribed thereto in
Section 4.1.
"Notes" shall have the meaning ascribed thereto in the
Recitals.
"Notice" shall have the meaning ascribed thereto in Section
6.11.
"Officers' Certificate" shall mean a certificate signed by any
two officers of the Company, one of whom must be the Chairman of the Board of
Directors, the President, the Chief Executive Officer, the Treasurer or a Vice
President of the Company.
"Optional Redemption Price" shall have the meaning ascribed
thereto in Section 8.1.
"Order" shall mean any judgment, order, injunction, ruling,
decree, stipulation or award of any Governmental Entity or private arbitration
tribunal.
"Original Issue Price" of a Note shall mean $ per $1,000
face value thereof.
"Outstanding" or "outstanding" shall mean, when used with
reference to the Notes at a particular time, all Notes theretofore issued as
provided in this Agreement, except (i) Notes theretofore reported as lost,
stolen, damaged or destroyed, or surrendered for transfer, exchange or
replacement, in respect to which replacement Notes have been issued, (ii) Notes
theretofore paid in full, and (iii) Notes therefore canceled by the Company,
except that, for the purpose of determining whether Holders of the requisite
aggregate Accreted Value of Notes have made or concurred in any waiver, consent,
approval, notice or other communication under this Agreement, Notes registered
in the name of, or Beneficially Owned by, the Company or any Subsidiary of any
thereof, shall not be deemed to be outstanding.
"Patents" shall mean, collectively, (a) all inventions
(whether patentable or unpatentable and whether or not reduced to practice) and
all improvements thereon, (b) all patents, patent applications and patent
disclosures, (c) all reissues, divisions, continuations, revisions
reexaminations, renewals, extensions and continuations-in-part thereof) and (d)
all rights, now existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of all past,
present and future infringements) now or hereafter due or payable under or with
respect to any of the foregoing, (ii) to sue for all past, present and future
infringements with respect to any of the foregoing
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and (iii) otherwise accruing under or pertaining to any of the foregoing
throughout the world, including all inventions and improvements described or
discussed in all such patents and patent applications.
"Permitted Indebtedness" means, without duplication, any of
the following Indebtedness of the Company or any of its Subsidiaries, as the
case may be: (i) Indebtedness and obligations under the Notes; (ii) any
Indebtedness and obligations outstanding on the date hereof, as set forth on
Schedule 6.6; (iii) Indebtedness of a domestic Subsidiary of the Company to the
Company as long as such Subsidiary has executed the Guarantee and Security
Agreement and such Indebtedness is evidenced by Intercompany Notes and the
Intercompany Notes are pledged to the Collateral Agent as Collateral; or (iv)
Indebtedness incurred in the ordinary course of business and consistent with
past practice not to exceed $1,000 individually or in the aggregate.
"Permitted Investments" shall mean (a) direct obligations of
the United States of America, or of any of its agencies, or obligations
guaranteed as to principal and interest by the United States of America, or of
any of its agencies, in either case maturing not more than 90 days from the date
of acquisition of such obligation; (b) deposit accounts in, and certificates of
deposit, repurchase agreements or bankers acceptances of any bank or trust
company organized under the laws of the United States of America or any state or
licensed to conduct a banking or trust business in the United States of America
or any state and having capital, surplus and undivided profits of at least
$35,000,000, maturing not more than 90 days from the date of acquisition; (c)
commercial paper rated A-1 or better or P-1 by Standard & Poor's Ratings
Service, a division of The McGraw-Hill Companies or Moody's Investors Services,
Inc., respectively, maturing not more than 90 days from the date of acquisition;
(d) money market funds sponsored by commercial or investment banks unaffiliated
with the Company or any of its Subsidiaries; and (e) loans or advances of money
by the Company to its wholly owned domestic Subsidiaries that have executed the
Guarantee and Security Agreement as long as such loans or advances are evidenced
by Intercompany Notes and the Intercompany Notes are pledged to the Collateral
Agent as Collateral.
"Permitted Liens" means (i) Liens existing on the date hereof
and set forth on Schedule, all of which are subordinate to the Lien of the
Collateral Documentation (other than as set forth in Schedule ___); (ii) Liens
(other than any Lien imposed under ERISA or any Environmental Laws) for Taxes,
assessments or charges of any Governmental Entity for claims not yet due or that
are being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted, and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with the provisions of
GAAP and enforcement thereof is stayed; (iii) Liens of landlords, carriers,
warehousemen, mechanics, materialmen and other Liens (other than any Lien
imposed under ERISA) not voluntarily granted for amounts not yet due or which
are being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted, and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with the provisions of
GAAP, and enforcement thereof is stayed; (iv) Liens (other than any Lien imposed
under ERISA), incurred or deposited made in the ordinary course of business
including, without limitation, surety bonds and appeal bonds, in connection with
workers' compensation, unemployment insurance and other types of social security
benefits or to secure the performance of tenders, bids, leases, contracts (other
than for the repayment of Indebtedness), statutory obligations and other similar
obligations or arising as a result of progress payments under government
contracts; (v) easements (including without limitation reciprocal easement
agreements and utility agreements), rights-of-way, covenants, consents,
reservations, encroachments, variations and other similar restrictions, charges
or encumbrances (whether or not recorded) and other Liens incurred in the
ordinary course of business, that do not secure Indebtedness or
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the deferred purchase price of any asset and that do not interfere materially
with the ordinary conduct of the business of the Company or any Subsidiary of
the Company and that do not materially detract from the value of the property to
which they attach or materially impair the use thereof to the Company or any
Subsidiary of the Company; and (vi) building restrictions, zoning laws and other
statutes, laws, rules, regulations, ordinances and restrictions, and any
amendments thereto, now or at any time hereafter adopted by any governmental
authority having jurisdiction.
"Person" shall mean any individual, firm, corporation, limited
liability company, partnership, company or other entity, and shall include any
successor (by merger or otherwise) of such entity.
"Preferred Stock" shall have the meaning ascribed thereto in
Section 2.3.
"Product Sales Revenues" shall mean sale of medical products
manufactured by the Company calculated in accordance with GAAP.
"Products" shall have the meaning ascribed thereto in Section
2.18.
"Proposed Securities" shall have the meaning ascribed thereto
in Section 6.11.
"Purchase Price" shall have the meaning ascribed thereto in
Section 1.2(a).
"Purchased Shares" shall have the meaning ascribed thereto in
Section 9.6(d).
"Purchaser" and "Purchasers" shall have the meaning ascribed
thereto in the Preamble.
"Purchaser Designee" and "Purchaser Designees" shall have the
meanings ascribed thereto in Section 6.26.
"Quarterly Amount" shall have the meaning ascribed thereto in
Section 6.32.
"Quarterly Budget" shall have the meaning ascribed thereto in
Section 6.32.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated the date hereof between the Purchasers and the Company
with respect to the Notes.
"Related Parties" shall mean Affiliates of the Company or any
of its Subsidiaries and directors or officers of the Company or any of its
Subsidiaries (including any family members of such directors and officers).
"Required Holders" shall mean, at any time, the Holders of at
least 51% of the aggregate Accreted Value of the Notes at the time outstanding
(exclusive of Notes then owned by the Company or any of its Affiliates).
"Restricted Account" shall have the meaning ascribed thereto
in Section 6.24.
"Restricted Encumbrance" shall have the meaning ascribed
thereto in Section 6.7.
"Sale-and-Leaseback Transaction" shall mean a transaction or
series of transactions pursuant to which the Company or any Subsidiary shall
Transfer to any Person (other than the Company
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or a Subsidiary) any property, whether now owned or hereafter acquired, and, as
part of the same transaction or series of transactions, the Company or any
Subsidiary shall rent or lease as lessee (other than pursuant to a Capitalized
Lease), or similarly acquire the right to possession or use of, such property or
one or more properties which it intends to use for the same purpose or purposes
as such property.
"SEC" shall mean the United States Securities and Exchange
Commission.
"SEC Reports" shall have the meaning ascribed thereto in
Section 2.4.
"Second Adjustment Date" shall mean the date on which the
Company achieves Product Sales Revenues equal to or exceeding $15 million for
the trailing 12 month period.
"Second 15% Secured Note" shall mean the 15% Secured Note in
the initial aggregate principal amount of $2,200,000 issued by the Company to
the Holder on March , 2000, as such 15% Secured Note may be amended from time
to time.
"Secured Obligations" shall mean any and all obligations of
the Company or any of its Subsidiaries at any time and from time to time for the
performance of its agreements, covenants and undertakings under or in respect of
the Transaction Documents to which the Company or such Subsidiary is a party.
"Securities" shall mean the Notes, the Shares, the Warrants
and the shares of Common Stock issuable upon the conversion of the Notes and
exercise of the Warrants.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Act shall include reference to the
comparable section, if any, of such successor federal statute.
"Security Agreement" shall mean the agreement, dated as of the
date hereof, between the Collateral Agent and the Company, providing for a
security interest in the Collateral.
"Semi-Annual Accrual Date" shall have the meaning ascribed
thereto in Section 5.3(a).
"Shares" shall have the meaning ascribed thereto in the
Recitals.
"Stated Maturity", when used with respect to any Security or
any installment of interest thereon, shall mean the date specified in such
Security as the fixed date on which the principal of such Security or such
installment of interest is due and payable.
"Subsidiary" means, with respect to any Person, (i) a
corporation a majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by one or more Subsidiaries of such Person or by such Person and
one or more Subsidiaries thereof, (ii) any other Person (other than a
corporation), including, without limitation, a joint venture, in which such
Person, one or more Subsidiaries thereof or such Person and one or more
Subsidiaries thereof, directly or indirectly, at the date of determination
thereof, has at least majority ownership interest entitled to vote in the
election of directors, managers or trustees thereof (or other Persons performing
similar functions), (iii) the management of which is otherwise controlled,
directly or indirectly, by such Person or (iv) any other Person required to be
consolidated with such Person in accordance with generally accepted accounting
principles. For purposes of this definition (and for the determination of
whether or not a Subsidiary is a wholly owned Subsidiary of a Person), any
directors' qualifying shares or investment by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a
Subsidiary.
"Subsidiary Board" shall have the meaning ascribed thereto in
Section 6.26(a).
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"Tax" and "Taxes" shall mean any federal, state, local or
foreign income, gross receipts, property, sales, use, value added, license,
excise, franchise, capital, net worth, estimated, withholding, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
inventory, asset, gains, transfer or excise tax, or any other tax, levy, custom,
duty, impost, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest, penalty or additions to tax, imposed by
any Governmental Entity and, including, without limitation, any Taxes of another
Person owing under a contract, as transferee or successor, under Treas. Reg.
Section 1.1502-6 or analogous state, local or foreign law, or otherwise.
"Tax Return" shall mean any return, report or similar
statement required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax.
"Third Adjustment Date" shall mean the date on which the
Company achieves Product Sales Revenue equal to or exceeding $25 million for
the trailing 12 month period.
"Total Revenue" shall mean, with respect to any period, the
total revenues of the Company and its Subsidiaries in accordance with GAAP on a
consolidated basis as reflected in the financial statements furnished to the
Holders in accordance with Section 6.20.
"Trading Day" shall mean a Business Day or, if the Common
Stock is listed or admitted to trading on any national securities exchange, a
day on which such exchange is open for the transaction of business.
"Transaction" shall have the meaning ascribed thereto in
Section 9.7.
"Transaction Documents" shall mean this Agreement, the Notes,
the $7 Warrants, the $3 Warrants, the Registration Rights Agreement, the
Security Agreement, the Guarantee and Security Agreement and [the Intercreditor
Agreement].
"Transfer" shall have the meaning ascribed thereto
in Section 6.3.
"Transfer Agent" shall have the meaning ascribed thereto in
Section 9.2.
"Voting Securities" shall mean at any time shares of any class
of Capital Stock of the Company (or other corporation) which are then entitled
to vote generally in the election of directors of the Company (or such other
corporation).
11.2. Accounting Principles. The character or amount of any
asset, liability, capital account or reserve and of any item of income or
expense required to be determined pursuant to this Agreement, and any
consolidation or other accounting computation required to be made pursuant to
this Agreement, and the construction of any definition in this Agreement
containing a financial term shall be determined or made, as the case may be, in
accordance with GAAP, to the extent applicable, unless such principles are
inconsistent with the express requirements of this Agreement.
12. Miscellaneous.
12.1. Payments; Indemnity. (a) The Company agrees that, so
long as any Holder shall hold any Notes, it will make all payments hereunder and
under the Notes in immediately available funds by wire transfer on the date due
in such manner as each Holder may reasonably request in writing. Anything in
this Agreement or the Notes to the contrary notwithstanding, any payment of any
Note that is due on a date other than a Business Day shall be made on the next
succeeding Business Day. If the
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date for payment is extended to the next succeeding Business Day by reason of
the preceding sentence, the period of such extension will be included in the
computation of the interest payable on such next succeeding Business Day.
(b) (i) The Company and its Subsidiaries shall jointly and
severally indemnify and hold harmless each Purchaser, each Holder and each of
their respective Affiliates, and each such Person's respective officers,
directors, partners, members, employees, attorneys, agents and representatives
(each, an "Indemnified Person") from and against any and all suits, actions,
proceedings, claims (collectively, "Actions"), damages, losses, Liabilities and
out-of-pocket expenses (including reasonable attorneys' fees and disbursements
and other costs of investigation or defense, including those incurred upon any
appeal) which may be instituted or asserted against or incurred by any such
Indemnified Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Transaction Documents and the
administration of such credit, and in connection with or arising out of the
transactions contemplated hereunder and thereunder and any actions or failures
to act in connection therewith.
(ii) Upon receipt by any Indemnified Person of any Action
against such Indemnified Person with respect to which indemnity may be sought
under this Agreement or any other Transaction Document, such Indemnified Person
shall promptly notify the Company in writing, provided that failure so to notify
the Company shall not relieve the Company from any Liability that the Company
may have on account of this indemnity or otherwise, except to the extent the
Company shall have been materially prejudiced by such failure. The Company
shall, at its option, assume the defense of any Action including the employment
of counsel reasonably satisfactory to such Indemnified Person. Any Indemnified
Person shall have the right to employ separate counsel in any such Action and
participate in the defense thereof but the fees and expenses of such counsel
shall be at the expense of such Indemnified Person, unless: (i) the Company has
failed promptly to assume the defense and employ counsel or (ii) the named
parties to such Action (including any impleaded parties) include such
Indemnified Person and the Company, and such Indemnified Person and the Company
shall have been advised by counsel that there may be one or more legal defenses
available to such Indemnified Person that are different from or in addition to
those available to the Company or there is or may be a conflict between the
Company and any Indemnified Person (in which case the Company may not assume the
defense). In the event that any Indemnified Person shall become entitled to
separate counsel under this Agreement or any other Transaction Document, the
Company shall not in such event be responsible hereunder for the fees and
expenses of more than one firm of separate counsel in connection with any Action
in the same jurisdiction, in addition to any local counsel. In addition, the
Company will not, without prior written consent of such Indemnified Person,
settle, compromise or consent to the entry of any judgment in or otherwise seek
to terminate any pending or threatened Action in which indemnification may be
sought hereunder (whether or not any Indemnified Person is a party thereto)
unless such settlement, compromise, consent or termination includes an
unconditional release of such Indemnified Person from all liabilities and
expenses arising out of such Action.
(c) The Company shall bear all sales, documentary, transfer,
stamp or other similar Taxes and all filing fees and expenses incurred in
connection with the transactions contemplated by this Agreement and shall
indemnify and hold harmless each Indemnified Purchaser from and against any such
Taxes.
12.2. Severability. If any term, provision, covenant or
restriction of this Agreement or any Exhibit or Schedule hereto is held by a
court of competent jurisdiction to be invalid, void or
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unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement and such Exhibits and Schedules shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants and
restrictions without including any of such which may be hereafter declared
invalid, void or unenforceable.
12.3. Specific Enforcement. The Holders, on the one hand, and
the Company, on the other, acknowledge and agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Holders shall be entitled to an injunction to
prevent breaches of the provisions of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
thereof having jurisdiction, this being in addition to any other remedy to which
they may be entitled at Law or equity.
12.4. Entire Agreement. The Transaction Documents (including
the Schedules and Exhibits hereto and thereto) contain the entire understanding
of the parties with respect to the transactions contemplated hereby and thereby.
12.5. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been signed
by each party and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
12.6. Notices and other Communications. All notices, consents,
requests, instructions, approvals, financial statements, proxy statements,
reports and other communications provided for herein shall be deemed given, if
in writing and delivered personally, by telecopy or sent by registered mail,
postage prepaid, if to:
The Company, to:
129 Reservoir Road
Vernon, CT 06066
Attention: Mr. Carl Sahi
Fax: (860) 870-6118
With a copy to:
Paul, Hastings, Janofsky & Walker LLP
1055 Washington Boulevard
Stamford, Connecticut 06901
Attention: Esteban A. Ferrer, Esq.
Fax: (203) 359-3031
The Purchasers, to each Purchaser's address
as set forth in the Note Register
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The Collateral Agent, to:
Appaloosa Management, L.P.
26 Main Street, 1st Floor
Chatham, New Jersey 07928
Attention: Mr. James E. Bolin
Fax: (973) 701-7309
With a copy to:
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attention: Robert C. Schwenkel, Esq.
Fax: (212) 859-4000
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.
12.7. Amendments. This Agreement may be amended as to the
Purchasers, any Holder and their respective successors and assigns, and the
Company may take any action herein prohibited, or omit to perform any act
required to be performed by it, if the Company shall obtain the written consent
of the Required Holders. This Agreement may not be waived, changed, modified, or
discharged orally, but only by an agreement in writing signed by the party or
parties against whom enforcement of any waiver, change, modification or
discharge is sought or by parties with the right to consent to such waiver,
change, modification or discharge on behalf of such party.
12.8. Successors and Assigns. All covenants and agreements
contained herein shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns (including, without limitation, any
subsequent Holder of a Note).
12.9. Expenses. The Company agrees to pay to each Holder all
reasonable costs and expenses incurred by such Holder relating to any future
amendment or supplement to any of the Transaction Documents or any of the Notes
(or any proposal by the Company for such amendment or supplement) whether or not
consummated or any waiver or consent with respect thereto (or any proposal for
such waiver or consent) whether or not consummated, and all costs and expenses
of such Holder relating to the enforcement of any of the Transaction Documents.
12.10. Survival. All covenants, agreements, representations
and warranties contained herein and in any certificates delivered pursuant
hereto in connection with the transactions contemplated hereby shall survive the
Closing and the delivery of the Transaction Documents, regardless of any
investigation made by or on behalf of any party; provided that, all covenants,
agreements, representations and warranties contained herein shall terminate when
all the Notes and amounts due hereunder have been paid in full; provided,
however, that notwithstanding anything to the contrary contained herein,
Sections 12.1(b), 12.6, 12.12, 12.13, 12.14 and 12.15 shall survive forever.
12.11. Transfer of Notes and Common Stock. Each Holder
understands and agrees that the Notes and the Shares have not been registered
under the Securities Act or the securities laws of any state and that they may
be sold or otherwise disposed of only in one or more transactions registered
under the Securities Act and, where applicable, such laws or transactions as to
which an exemption from the registration requirements of the Securities Act and,
where applicable, such laws are available. Each
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Holder acknowledges that, except as provided in the Registration Rights
Agreement, such Holder has no right to require the Company to register the
Notes. Each Holder understands and agrees that each Note or certificate
representing the Notes shall bear the following legends:
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT. FOR
INFORMATION REGARDING THE AMOUNT OF ORIGINAL ISSUE DISCOUNT,
THE PURCHASE PRICE, DATE OF ISSUANCE OF YIELD TO MATURITY OF
THE NOTE, CONTACT [name or title of contact] AT [address].
THE TRANSFER OF [THE SECURITIES REPRESENTED BY THIS
CERTIFICATE] [THIS NOTE] IS RESTRICTED BY AND PURSUANT TO THE
CONVERTIBLE NOTE PURCHASE AGREEMENT DATED AS OF ______, 2000,
A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE COMPANY.
[THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE] [THIS
NOTE HAS] NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT OR SUCH LAWS.
12.12. GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL
BE GOVERNED BY, THE LAW OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW
PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF A JURISDICTION OTHER THAN SUCH STATE.
12.13. Submission to Jurisdiction. If any Litigation shall be
brought by any Holder in order to enforce any right or remedy under this
Agreement or any of the Notes, the Company hereby consents and will submit, and
will cause each of its Subsidiaries to submit, to the jurisdiction of any state
or federal court of competent jurisdiction sitting within the area comprising
the Southern District of New York on the date of this Agreement. The Company
hereby irrevocably waives any objection, including, but not limited to, any
objection to the laying of venue or based on the grounds of forum non
conveniens, which it may now or hereafter have to the bringing of any such
Litigation in such jurisdiction.
12.14. Service of Process. Nothing herein shall affect the
right of any Holder to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Company in any other
jurisdiction.
12.15. WAIVER OF JURY TRIAL. The company hereby waives any
right it may have to a trial by jury in respect of any action, proceeding or
litigation directly or indirectly arising out of, under or in connection with,
this agreement and the notes.
12.16. Public Announcements. Neither the Company nor any
Purchaser shall make any public statements, including, without limitation, any
press releases, with respect to this Agreement and the transactions contemplated
hereby without the prior written consent of the other party (which consent shall
not be unreasonably withheld) except as may be required by Law. If a public
statement is
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required to be made by Law, the parties shall consult with each other in advance
as to the contents and timing thereof.
12.17. Further Assurances. Each of the Company and its
Subsidiaries agrees that it shall and shall cause each other to, at the
Company's expense and upon the reasonable request of the Collateral Agent, duly
execute and deliver, or cause to be duly executed and delivered, to the
Collateral Agent such further instruments, agreements and documents (including,
without limitation, financing statements under the Code, security agreements in
respect of Intellectual Property, stock powers executed in blank and other items
necessary or desirable in connection with the perfection of Liens in the
Collateral) and do and cause to be done such further acts as may be necessary or
proper in the reasonable opinion of the Collateral Agent to carry out more
effectively the provisions and purposes of the Transaction Documents.
12.18. Substitution of Purchaser. Each Purchaser shall have
the right to substitute one of its Affiliates as the purchaser of the Notes, by
written notice to the Company, which notice shall be signed by both such
Purchaser and such Affiliate, shall contain such Affiliate's agreement to be
bound by this Agreement and shall contain a confirmation by such Affiliate of
the accuracy with respect to it of the representations set forth in Section 3.
Upon receipt of such notice, wherever the word "Purchaser" is used in this
Agreement (other than in this Section 14.17), such word shall be deemed to refer
to such Affiliate in lieu of the Purchaser. In the event that such Affiliate is
so substituted as a purchaser hereunder and such Affiliate thereafter transfers
to any Purchaser all of the Notes then held by such Affiliate, upon receipt by
the Company of notice of such transfer, wherever the word "Purchaser" is used in
this Agreement (other than in this Section 14.17), such word shall no longer be
deemed to refer to such Affiliate, but shall refer to such Purchaser, and such
Purchaser shall have all the rights of an original Holder of the Notes under
this Agreement.
12.19. Signatures. This Agreement shall be effective upon
delivery of original signature pages or facsimile copies thereof executed by
each of the parties hereto.
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IN WITNESS WHEREOF, the Company, the Purchasers and the
Collateral Agent have caused this Agreement to be executed and delivered by
their respective officers or partners thereunto duly authorized.
BIO-PLEXUS,INC.
By:
----------------------------
Name:
Title:
APPALOOSA
MANAGEMENT L.P.,
as Collateral Agent
By:Appaloosa Partners Inc., its
General Partner
By:
----------------------------
Name:
Title:
APPALOOSA
INVESTMENT LIMITED
PARTNERSHIP I
By: Appaloosa Management L.P., its
General Partner
By: Appaloosa Partners Inc., its General
Partner
By:
----------------------------
Name:
Title:
PALOMINO
FUND LTD.
By: Appaloosa Management L.P., its
Investment Adviser
By: Appaloosa Partners Inc., its General
Partner
By:
----------------------------
Name:
Title:
TERSK LLC
By: Appaloosa Management L.P., its
Managing Member
By: Appaloosa Partners Inc., its General
Partner
By:
----------------------------
Name:
Title:
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81
PROXY
BIO-PLEXUS, INC.
SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby severally appoints Carl R. Sahi and Kimberley A.
Cady, the true and lawful proxies and attorneys in fact of the undersigned, each
with the power of substitution and resubstitution, and hereby authorizes each of
them to vote all shares of Common Stock of the undersigned at the Special
Meeting of Stockholders of the Company to be held on Friday, April 28, 2000 at
Rensselaer at Hartford, 275 Windsor Street, Hartford, Connecticut at 9:30 a.m.,
local time, and at any adjournments or postponements thereof.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL
BE VOTED "FOR" THE PROPOSALS SET FORTH ON THE REVERSE SIDE, AND UPON ALL OTHER
MATTERS THE PROXIES SHALL VOTE IN ACCORDANCE WITH THEIR BEST JUDGMENT.
SEE REVERSE SIDE SEE REVERSE SIDE
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
DETACH HERE
[X] Please mark
votes as in this
example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3.
1. Approval of the issuance and sale of zero-coupon, secured convertible
notes, shares of Common Stock, and warrants to purchase shares of
Common Stock to affiliates of Appaloosa Management L.P., and, in
connection therewith, approval and adoption of the requisite
transaction documents and the transactions contemplated thereby.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Approval of the amendment to the Company's Certificate of Incorporation
to increase the number of shares of Common Stock that the Company is
authorized to issue.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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82
3. Approval of the amendment to the Company's 1991 Long-Term Incentive
Plan to increase the number of shares of Common Stock that the Company
is authorized to issue.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Special Meeting or any
adjournments or postponements thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
Signature: Date:
--------------------------------------------------------------
Title/Capacity:
--------------------------------------------------------------
Signature: Date:
--------------------------------------------------------------
Title/Capacity:
--------------------------------------------------------------
THE BOARD OF DIRECTORS URGES THAT YOU COMPLETE, SIGN, AND DATE THIS PROXY CARD
AND RETURN IT PROMPTLY BY MAIL IN THE ENCLOSED ENVELOPE.
27