[EXECUTION FORM]
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of February
12, 2004, by and between OMNI ENERGY SERVICES CORP., a Louisiana corporation
(the "Company"), and each of the entities whose names appear on the signature
pages hereof. Such entities are each referred to herein as an "Investor" and,
collectively, as the "Investors".
The Company wishes to issue and sell to each Investor, and each
Investor wishes to purchase, on the terms and subject to the conditions set
forth in this Agreement, (i) a 6.5% Convertible Debenture, in the form attached
hereto as Exhibit A (a "Debenture" and, collectively, the "Debentures"), (ii) a
Warrant in the form attached hereto as Exhibit B-1 (a "Series A Warrant" and,
collectively, the "Series A Warrants"), and (iii) a Warrant in the form attached
hereto as Exhibit B-2 (a "Series B Warrant" and, collectively, the "Series B
Warrants"). The Series A Warrants and the Series B Warrants are collectively
referred to herein as the "Warrants." The Series A Warrants will entitle the
Investors to purchase an aggregate of 700,000 shares of Common Stock and will
have an exercise price equal to $7.15 per share (subject to adjustment as
provided therein). The Series B Warrants will entitle the Investors to purchase
an aggregate of 390,000 shares of Common Stock and will have an exercise price
equal to $8.50 per share (subject to adjustment as provided therein). The
Warrants will be allocated to the Investors pro rata in proportion to the
principal amount of the Debentures purchased by each such Investor.
The shares of Common Stock into which the Debentures are convertible
are referred to herein as the "Conversion Shares" and the shares of Common Stock
into which the Warrants are exercisable are referred to herein as the "Warrant
Shares". The Debentures, the Conversion Shares, the Warrants and the Warrant
Shares are collectively referred to herein as the "Securities".
The Company has agreed to use its best efforts to effect the
registration of the Conversion Shares and the Warrant Shares under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Rights Agreement in the form attached hereto as Exhibit C (the
"Registration Rights Agreement"). The sale of the Debentures and the Warrants by
the Company to the Investors will be effected in reliance upon the exemption
from securities registration afforded by the provisions of Regulation D
("Regulation D"), as promulgated by the Securities and Exchange Commission (the
"Commission") under the Securities Act.
In consideration of the mutual promises made herein, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and each Investor hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
1.1 Purchase of Debentures and Warrants. Upon the terms and subject to
the satisfaction or waiver of the conditions set forth herein, the Company
agrees to sell and each Investor agrees to purchase (i) the principal amount of
the Debentures set forth below such Investor's name on the signature pages
hereof, and (ii) a Series A Warrant and a Series B Warrant. The purchase price
for the Debentures and Warrants being purchased by an Investor (the "Purchase
Price") shall be equal to the principal amount set forth below its signature to
this Agreement, and the Purchase Price shall be allocated between such
Debentures and Warrants as may be agreed between the Company and such Investor.
The date on which the closing of the purchase and sale of the Debentures and
Warrants occurs (the "Closing") is hereinafter referred to as the "Closing
Date". Subject to the satisfaction or waiver of the conditions set forth herein,
the Closing will be deemed to occur when (A) this Agreement and the other
Transaction Documents (as defined below) have been executed and delivered by the
Company, and (B) full payment of each Investor's Purchase Price has been made by
all such Investors to the Company by wire transfer of immediately available
funds against physical delivery by the Company of duly executed originals of the
Debentures and Warrants purchased by such Investor at the Closing.
1.2 Certain Definitions. When used herein, the following terms shall
have the respective meanings indicated:
"Affiliate" means, as to any Person (the "subject Person"),
any other Person (a) that directly or indirectly through one or more
intermediaries controls or is controlled by, or is under direct or indirect
common control with, the subject Person, (b) that directly or indirectly
beneficially owns or holds ten percent (10%) or more of any class of voting
equity of the subject Person, or (c) ten percent (10%) or more of the voting
equity of which is directly or indirectly beneficially owned or held by the
subject Person. For the purposes of this definition, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, through representation on such Person's Board of Directors or other
management committee or group, by contract or otherwise.
"Business Day" means any day other than a Saturday, a Sunday
or a day on which the New York Stock Exchange or commercial banks located in New
York City are authorized or permitted by law to close.
"Cap Amount" means 19.99% of the Common Stock outstanding on
the Closing Date (subject to adjustment upon a stock split, stock dividend or
similar event).
"Common Stock" means the common stock, par value $0.01 per
share, of the Company.
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"Conversion Price" has the meaning specified in the
Debentures.
"Debt" means, as to any Person at any time: (a) all
indebtedness, liabilities and obligations of such Person for borrowed money; (b)
all indebtedness, liabilities and obligations of such Person to pay the deferred
purchase price of Property or services, except trade accounts payable of such
Person arising in the ordinary course of business that are not past due by more
than 90 days; (c) all capital lease obligations of such Person; (d) all Debt of
others guaranteed by such Person; (e) all indebtedness, liabilities and
obligations secured by a Lien existing on Property owned by such Person, whether
or not the indebtedness, liabilities or obligations secured thereby have been
assumed by such Person or are non-recourse to such Person; (f) all reimbursement
obligations of such Person (whether contingent or otherwise) in respect of
letters of credit, bankers' acceptances, surety or other bonds and similar
instruments; and (g) all indebtedness, liabilities and obligations of such
Person to redeem or retire shares of capital stock of such Person.
"Debenture Shares" means the Conversion Shares, the Interest
Payment Shares (as defined in the Debenture) and the Put Payment Shares (as
defined in the Debenture).
"Effective Date" has the meaning set forth in the Registration
Rights Agreement.
"Environmental Law" means any federal, state, provincial,
local or foreign law, statute, code or ordinance, principle of common law, rule
or regulation, as well as any Permit, order, decree, judgment or injunction
issued, promulgated, approved or entered thereunder, relating to pollution or
the protection, cleanup or restoration of the environment or natural resources,
or to the public health or safety, or otherwise governing the generation, use,
handling, collection, treatment, storage, transportation, recovery, recycling,
discharge or disposal of hazardous materials.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations and published interpretations thereunder.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended (or any successor act), and the rules and regulations thereunder (or
respective successors thereto).
"Exercise Price" shall have the meaning specified in the
Warrants.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis, as set forth in (i) opinions of the Accounting Principles
Board of the American Institute of Certified Public Accountants, (ii) statements
of the Financial Accounting Standards Board (iii) interpretations of the
Commission and the Staff of the Commission and each of their
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respective successors and which are applicable in the circumstances as of the
date in question. Accounting principles are applied on a "consistent basis" when
the accounting principles applied in a current period are comparable in all
material respects to those accounting principles applied in a preceding period.
"Governmental Authority" means any nation or government, any
state, provincial or political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, including without limitation any stock exchange,
securities market or self-regulatory organization.
"Governmental Requirement" means any law, statute, code,
ordinance, order, rule, regulation, judgment, decree, injunction, franchise,
license or other directive or requirement of any federal, state, county,
municipal, parish, provincial or other Governmental Authority or any department,
commission, board, court, agency or any other instrumentality of any of them.
"Intellectual Property" means any U.S. or foreign patents,
patent rights, patent applications, trademarks, trade names, service marks,
brand names, logos and other trade designations (including unregistered names
and marks), trademark and service mark registrations and applications,
copyrights and copyright registrations and applications, inventions, invention
disclosures, protected formulae, formulations, processes, methods, trade
secrets, computer software, computer programs and source codes, manufacturing
research and similar technical information, engineering know-how, customer and
supplier information, assembly and test data drawings or royalty rights.
"Lien" means, with respect to any Property, any mortgage or
mortgage, pledge, hypothecation, assignment, deposit arrangement, security
interest, tax lien, financing statement, pledge, charge, or other lien, charge,
easement, encumbrance, preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever on or with respect to
such Property (including, without limitation, any conditional sale or other
title retention agreement having substantially the same economic effect as any
of the foregoing).
"Material Adverse Effect" means an effect that has a material
and adverse effect on (i) the consolidated business, operations, properties,
financial condition, prospects or results of operations of the Company and its
Subsidiaries taken as a whole or (ii) the ability of the Company to perform its
obligations under this Agreement or the other Transaction Documents (as defined
below).
"Material Contracts" means, as to the Company, any agreement
required pursuant to Item 601 of Regulation S-K promulgated under the Securities
Act to be filed as an exhibit to any report, schedule, registration statement or
definitive proxy statement filed or required to
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be filed by the Company with the Commission under the Exchange Act or any rule
or regulation promulgated thereunder, and any and all amendments, modifications,
supplements, renewals or restatements thereof.
"NASD" means the National Association of Securities Dealers,
Inc.
"Pension Plan" means an employee benefit plan (as defined in
ERISA) maintained by the Company for employees of the Company or any of its
Affiliates.
"Permitted Liens" means the following:
(a) encumbrances consisting of easements, rights-of-way,
zoning restrictions or other restrictions on the use of real Property
or imperfections to title that do not (individually or in the
aggregate) materially impair the ability of the Company or any of its
Subsidiaries to use such Property in its businesses, and none of which
is violated in any material respect by existing or proposed structures
or land use;
(b) Liens for taxes, assessments or other governmental charges
that are not delinquent or which are being contested in good faith by
appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the Property subject to such
Liens, and for which adequate reserves (as determined in accordance
with GAAP) have been established; and
(c) Liens of mechanics, materialmen, warehousemen, carriers,
landlords or other similar statutory Liens securing obligations that
are not yet due and are incurred in the ordinary course of business or
which are being contested in good faith by appropriate proceedings.
"Person" means any individual, corporation, trust,
association, company, partnership, joint venture, limited liability company,
joint stock company, Governmental Authority or other entity.
"Property" means property and/or assets of all kinds, whether
real, personal or mixed, tangible or intangible (including, without limitation,
all rights relating thereto).
"Principal Market" means the principal exchange or market on
which the Common Stock is listed or traded.
"Registrable Securities" has the meaning set forth in the
Registration Rights Agreement.
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"SEC Documents" has the meaning specified in Section 3.4
hereof.
"Senior Lender" means Webster Business Credit Corporation
(f/k/a Whitehall Business Credit Corporation), its successors and assigns.
"Senior Loan Agreement" means that certain Credit and Security
Agreement, dated as of December 23, 2003, by and among the Company, American
Helicopters Inc. and OMNI Energy Services Corp.-Mexico, as borrowers, and Senior
Lender, as such agreement may be amended, modified and supplemented from time to
time.
"Subordination Agreement" means the Subordination Agreement to
be entered into by and between the Investors and the Senior Lender at Closing
pursuant to which certain rights of the Investors under the Debentures will be
subordinated to the rights of the Senior Lender under the Senior Loan Agreement.
"Subsidiary" means, with respect to any Person, any
corporation or other entity of which at least a majority of the outstanding
shares of stock or other ownership interests having by the terms thereof
ordinary voting power to elect a majority of the board of directors (or Persons
performing similar functions) of such corporation or entity (irrespective of
whether or not at the time, in the case of a corporation, stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more of its Subsidiaries
or by such Person and one or more of its Subsidiaries.
"Trading Day" means any day on which the Common Stock is
purchased and sold on the Principal Market.
"Transaction Documents" means (i) this Agreement, (ii) the
Warrants, (iii) the Registration Rights Agreement, (iv) the Debentures and (v)
all other agreements, documents and other instruments executed and delivered by
or on behalf of the Company or any of its officers at the Closing.
1.3 Other Definitional Provisions. All definitions contained in this
Agreement are equally applicable to the singular and plural forms of the terms
defined. The words "hereof", "herein" and "hereunder" and words of similar
import referring to this Agreement refer to this Agreement as a whole and not to
any particular provision of this Agreement.
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2. REPRESENTATIONS AND WARRANTIES OF EACH INVESTOR.
Each Investor hereby makes the following representations and warranties
to the Company and agrees with the Company that, as of the date of this
Agreement and as of the Closing Date:
2.1 Authorization; Enforceability. Such Investor is duly and validly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization as set forth below such
Investor's name on the signature page hereof and is duly qualified to transact
business and is in good standing in each jurisdiction in which it conducts
business except where the failure so to qualify has not had or would not
reasonably be expected to have a material adverse effect on such Investor. Each
Investor has the requisite corporate power and authority to purchase the
Debentures and Warrants and to execute and deliver the Transaction Documents to
which such Investor is a party and to perform the provisions hereof and thereof.
This Agreement constitutes, and upon execution and delivery thereof, each other
Transaction Document to which such Investor is a party will constitute, such
Investor's valid and legally binding obligation, enforceable in accordance with
its terms, subject to (i) applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) general principles of equity.
2.2 No Conflict with Other Instruments. The (i) execution, delivery and
performance of this Agreement by each Investor and the other Transaction
Documents to which such Investor is a party, and (ii) consummation of the
transactions contemplated hereby and thereby by such Investor has not and will
not result in any violation of any provisions of such Investor's organizational
documents or in default (and no event has occurred which, with notice or lapse
of time or both, would constitute a default) under any provision of any
instrument or contract to which such Investor is a party or by which such
Investor or any of its property is bound, or in violation of any provision of
any Governmental Requirement applicable to such Investor, except for violations
or defaults that has not had or would not reasonably be expected to have a
material adverse effect on such Investor.
2.3 Consent. No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
Governmental Authority is required on the part of such Investor in connection
with the execution and delivery by such Investor of the Transaction Documents to
which such Investor is a party, except such filings as shall have been made
prior to and shall be effective on and as of the Closing and such filings
required to be made after the Closing under applicable federal and state
securities laws.
2.4 Accredited Investor. Such Investor is an accredited investor as
that term is defined in Rule 501 of Regulation D, and is acquiring the
Debentures and Warrants solely for its own account as a principal and not with a
present view to the public resale or distribution of all or any part thereof,
except pursuant to sales that are exempt from the registration requirements of
the Securities Act and/or
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sales registered under the Securities Act; provided, however that in making such
representation, such Investor does not agree to hold the Securities for any
minimum or specific term and reserves the right to sell, transfer or otherwise
dispose of the Securities at any time in accordance with the provisions of the
Transaction Documents and with Federal and state securities laws applicable to
such sale, transfer or disposition. Such Investor has the knowledge and
experience in business and financial matters so as to enable it to understand
the risks of and form an investment decision with respect to its investment in
the Securities.
2.5 Information. The Company has provided such Investor and its
advisors and representatives, if any, with information regarding the business,
operations and financial condition of the Company, and has granted to such
Investor the opportunity to ask questions of and receive answers from
representatives of the Company, its officers, directors, employees and agents
concerning the Company and materials relating to the terms and conditions of the
purchase and sale of the Debentures and Warrants hereunder. The Company answered
all of the questions asked by such Investor, its advisors or representatives.
Neither such information nor any other investigation conducted by such Investor
or any of its representatives shall modify, amend or otherwise affect such
Investor's right to rely on the Company's representations and warranties
contained in this Agreement.
2.6 No Governmental Review. Such Investor understands that no United
States federal or state agency or any other government or governmental agency
has passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
2.7 Limitations on Disposition. Such Investor acknowledges that, except
as provided in the Registration Rights Agreement, the Securities have not been
and are not being registered under the Securities Act and may not be transferred
or resold without registration under the Securities Act or unless pursuant to an
exemption therefrom.
2.8 Legend. Such Investor understands that the certificates
representing the Securities, except as set forth below, shall bear at issuance a
restrictive legend in substantially the following form:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or the securities laws of any state, and may not be
offered for sale, sold, transferred or assigned unless a registration
statement under the Securities Act and applicable state securities laws
shall have become effective with regard thereto, or an exemption from
registration under the Securities Act and applicable state securities
laws is available in connection with such offer or sale."
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Notwithstanding the foregoing, it is agreed that, as long as
(A) the resale or transfer (including without limitation a pledge) of any of the
Securities is registered pursuant to an effective registration statement, (B)
such Securities have been sold pursuant to Rule 144 under the Securities Act or
any successor provision ("Rule 144"), subject to receipt by the Company of
customary documentation in connection therewith, or (C) such Securities are
eligible for resale under Rule 144(k) or any successor provision, such
Securities shall be issued without any legend or other restrictive language and,
with respect to Securities upon which such legend is stamped, the Company shall
issue new certificates without such legend to the holder upon request.
2.9 Reliance on Exemptions. Such Investor understands that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of the
representations and warranties of such Investor set forth in this Section 2 in
order to determine the availability of such exemptions and the eligibility of
such Investor to acquire the Securities.
2.10 Non-Affiliate Status; Common Stock Ownership. Such Investor is not
an Affiliate of the Company or of any other Investor and is not acting in
association or concert with any other Investor in regard to its purchase of the
Debentures and Warrants or otherwise in regard to the Company. Such Investor's
investment in the Debentures and Warrants is not for the purpose of acquiring,
directly or indirectly, control of, and it has no intent to acquire or exercise
control of, the Company or to influence the decisions or policies of the
Company's Board of Directors.
2.11 No Net Short Position in Company Securities. Neither such Investor
nor any person trading on its behalf or at its direction has established a net
short position on the Common Stock or any other securities of the Company as of
the Trading Day immediately preceding the Closing Date.
2.12 Fees. Such Investor is not obligated to pay any compensation or
other fee, cost or related expenditure to any underwriter, broker, agent or
other representative in connection with the transactions contemplated hereby.
Such Investor will indemnify and hold harmless the Company from and against any
cost or expense incurred by the Company as a result of the inaccuracy of the
foregoing representation.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby makes the
following representations and warranties to each Investor and agrees with each
Investor that, as of the date of this Agreement and as of the Closing Date:
3.1 Organization, Good Standing and Qualification. Each of the Company
and its active Subsidiaries (all of which are listed on Schedule 3.1) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization and has all requisite
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power and authority to carry on its business as now conducted. Each of the
Company and its active Subsidiaries (all of which are listed on Schedule 3.1) is
duly qualified to transact business and is in good standing in each jurisdiction
in which it conducts business except where the failure so to qualify has not had
or would not reasonably be expected to have a Material Adverse Effect. For
purposes hereof, a Subsidiary is an "active" Subsidiary if it holds or leases
any assets or other property or if any business or operations are conducted by
or through it.
3.2 Authorization; Consents. The Company has the requisite corporate
power and authority to enter into and perform its obligations under the
Transaction Documents, to issue and sell the Debentures and the Warrants to the
Investors in accordance with the terms hereof and thereof, to issue the
Debenture Shares issuable upon conversion of or otherwise under the Debentures
and to issue the Warrant Shares upon exercise of the Warrants. All corporate
action on the part of the Company by its officers, directors and stockholders
necessary for the authorization, execution and delivery of, and the performance
by the Company of its obligations under, the Debentures and the Transaction
Documents has been taken, and no further consent or authorization of the
Company, its Board of Directors, stockholders, any Governmental Authority or
organization (other than such approval as may be required under the Securities
Act and applicable state securities laws in respect of the Registration Rights
Agreement), or any other person or entity is required (pursuant to any rule of
the National Association of Securities Dealers ("NASD") or otherwise). The
Company's Board of Directors has determined, at a duly convened meeting or by
unanimous written consent, that the issuance and sale of the Securities, and the
consummation of the transactions contemplated hereby and the other Transaction
Documents (including without limitation the issuance of Debenture Shares and
Warrant Shares) are in the best interests of the Company.
3.3 Enforcement. Each of the Transaction Documents constitutes the
valid and legally binding obligation of the Company, enforceable against it in
accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization or other similar laws of general
application relating to or affecting the enforcement of creditors' rights
generally and (ii) general principles of equity.
3.4 Disclosure Documents; Agreements; Financial Statements; Other
Information. The Company is subject to the reporting requirements of the
Exchange Act and has filed with the Commission all reports, schedules,
registration statements and definitive proxy statements that the Company was
required to file with the Commission on or after December 31, 2002
(collectively, the "SEC Documents"). The Company is not aware of any event
occurring or expected to occur on or prior to the Closing Date (other than the
transactions effected hereby) that would require the filing of, or with respect
to which the Company intends to file, a Form 8-K after the Closing. Each SEC
Document, as of the date of the filing thereof with the Commission, complied in
all material respects with the requirements of the Securities Act or Exchange
Act, as applicable, and the rules and regulations promulgated thereunder and, as
of the date of such filing (or if amended or superseded by a
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filing prior to the date of this Agreement, then on the date of such filing),
such SEC Document (including all exhibits and schedules thereto and documents
incorporated by reference therein) did not contain an untrue statement of
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. All documents required to be filed as
exhibits to the SEC Documents have been filed as required. Except as set forth
in the SEC Documents filed at least one Business Day prior to the date of this
Agreement (the "Disclosure Documents"), the Company has no liabilities,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business which, under GAAP, are not required to be reflected in the financial
statements included in the Disclosure Documents and which, individually or in
the aggregate, are not material to the consolidated business or financial
condition of the Company and its Subsidiaries taken as a whole. As of their
respective dates, the financial statements of the Company included in the SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Commission with respect thereto. Such financial statements have been prepared in
accordance with GAAP consistently applied at the times and during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto, or (ii) in the case of unaudited interim statements, to
the extent they may exclude footnotes or may be condensed or summary statements)
and fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end adjustments).
3.5 Capitalization; Debt Schedule. The capitalization of the Company as
of the date hereof, including its authorized capital stock, the number of shares
issued and outstanding, the number of shares issuable and reserved for issuance
pursuant to the Company's stock option plans, the number of shares issuable and
reserved for issuance pursuant to securities (other than the Debentures and
Warrants) exercisable for, or convertible into or exchangeable for any shares of
Common Stock and the number of shares initially to be reserved for issuance upon
conversion of the Debentures and exercise of the Warrants is set forth on
Schedule 3.5 hereto. All of such outstanding shares of capital stock have been,
or upon issuance will be, validly issued, fully paid and non-assessable. Except
as disclosed on Schedule 3.5 hereto, the Company owns all of the capital stock
of each Subsidiary, which capital stock is validly issued, fully paid and
non-assessable, and no shares of the capital stock of the Company or any of its
Subsidiaries are subject to preemptive rights or any other similar rights of the
stockholders of the Company or any such Subsidiary or any Liens created by or
through the Company or any such Subsidiary. Except as disclosed on Schedule 3.5,
or as contemplated herein, as of the date of this Agreement and as of the
Closing Date, there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into or exercisable or exchangeable for, any
shares of capital stock of the Company or any of its Subsidiaries, or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to issue additional shares of capital stock of the Company or any of its
Subsidiaries (whether pursuant to anti-dilution, "reset" or other similar
provisions). Schedule 3.5 identifies all Debt of the Company outstanding as of
the date hereof exceeding $250,000.
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3.6 Due Authorization; Valid Issuance. The Debentures and Warrants are
each duly authorized and, when issued, sold and delivered in accordance with the
terms hereof, (i) will be duly and validly issued, free and clear of any Liens
imposed by or through the Company and (ii) assuming the accuracy of each
Investor's representations in this Agreement, will be issued, sold and delivered
in compliance with all applicable Federal and state securities laws. The
Debenture Shares are duly authorized and reserved for issuance and, when issued
in accordance with the terms of the Debentures, will be duly and validly issued,
fully paid and nonassessable, free and clear of any Liens imposed by or through
the Company. The Warrant Shares are duly authorized and reserved for issuance
and, when issued in accordance with the terms of the Warrants, will be duly and
validly issued, fully paid and nonassessable, free and clear of any Liens
imposed by or through the Company.
3.7 No Conflict with Other Instruments. Except as disclosed on Schedule
3.7 hereto, neither the Company nor any of its Subsidiaries is in violation of
any provisions of its Articles of Incorporation, Bylaws or any other governing
document or in default (and no event has occurred which, with notice or lapse of
time or both, would constitute a default) under any provision of any instrument
or contract to which it is a party or by which it or any of its Property is
bound, or in violation of any provision of any Governmental Requirement
applicable to it, except for violations of any provision of a Governmental
Requirement that has not had or would not reasonably be expected to have a
Material Adverse Effect. Except as disclosed on Schedule 3.7 hereto, neither the
(i) execution, delivery and performance of this Agreement and the other
Transaction Documents, and (ii) consummation of the transactions contemplated
hereby and thereby (including without limitation, the issuance of the Debentures
and the Warrants and the reservation for issuance and issuance of the Debenture
Shares and the Warrant Shares) has not and will not result in any violation
referred to in the previous sentence or be in conflict with or constitute, with
or without the passage of time and giving of notice, either a default under any
such provision, instrument or contract or an event which results in the creation
of any Lien upon any assets of the Company or of any of its Subsidiaries or the
triggering of any preemptive or anti-dilution rights (including without
limitation pursuant to any "reset" or similar provisions) or rights of first
refusal or first offer, or any other rights that would allow or permit the
holders of the Company's securities to purchase shares of Common Stock or other
securities of the Company (whether pursuant to a shareholder rights plan
provision or otherwise), on the part of holders of the Company's securities,
other than such rights as are disclosed on Schedule 3.7 hereto.
3.8 Financial Condition; Taxes; Litigation.
3.8.1 Except as disclosed on Schedule 3.8 hereto, the
Company's financial condition is, in all material respects, as described in the
Disclosure Documents, except for changes in the ordinary course of business and
normal year-end adjustments that are not, in the aggregate, materially adverse
to the consolidated business or financial condition of the Company and its
Subsidiaries taken as a whole.
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Except as otherwise described in the Disclosure Documents, there has been no (i)
material adverse change to the Company's business, operations, properties,
financial condition, prospects or results of operations since the date of the
Company's most recent audited financial statements contained in the Disclosure
Documents or (ii) change by the Company in its accounting principles, policies
and methods except as required by changes in GAAP.
3.8.2 The Company and each of its Subsidiaries has prepared in
good faith and duly and timely filed all tax returns required to be filed by it
and such returns are complete and accurate in all material respects and the
Company and each of its Subsidiaries has paid all taxes required to have been
paid by it, except for taxes which it reasonably disputes in good faith or the
failure of which to pay has not had or would not reasonably be expected to have
a Material Adverse Effect. Neither the Company nor any of its Subsidiaries has
any material liability with respect to taxes that accrued on or before September
30, 2003 in excess of the amounts accrued with respect thereto that are
reflected in the financial statements included in the Disclosure Documents filed
prior to the date hereof.
3.8.3 Neither the Company nor any of its Subsidiaries is the
subject of any pending or, to the Company's knowledge, threatened inquiry,
investigation or administrative or legal proceeding by the Internal Revenue
Service, the taxing authorities of any state or local jurisdiction, the
Commission, the NASD, any state securities commission or other Governmental
Authority.
3.8.4 Except as described in the Disclosure Documents and as
disclosed on Schedule 3.8 hereto, there is no material claim, litigation or
administrative proceeding pending, or, to the Company's knowledge, threatened or
contemplated, against the Company or any of its Subsidiaries, or against any
officer, director or employee of the Company or any such Subsidiary in
connection with such person's employment therewith. Neither the Company nor any
of its Subsidiaries is a party to or subject to the provisions of, any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality that has had or would reasonably be expected to have a Material
Adverse Effect.
3.9 Reporting Company; Form S-3. The Company is subject to the
reporting requirements of the Exchange Act, has a class of securities registered
under Section 12 of the Exchange Act, and has filed all reports required
thereby. The Company is eligible to register the Debenture Shares and Warrant
Shares for resale in a secondary offering by each Investor on a registration
statement on Form S-3 pursuant to Rule 415 under the Securities Act. To the
Company's knowledge, there exist no facts or circumstances (including without
limitation any required approvals or waivers of any circumstances that may delay
or prevent the obtaining of accountant's consents) that could reasonably be
expected to prohibit or delay the preparation, filing or effectiveness of any
such registration statement.
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3.10 Acknowledgement of Dilution. The Company acknowledges that the
issuance of the Debenture Shares upon conversion of or otherwise under the
Debentures and the issuance of the Warrant Shares upon exercise of the Warrants
may result in dilution of the outstanding shares of Common Stock, which dilution
may be substantial under certain market conditions. The Company further
acknowledges its obligation to issue Debenture Shares upon conversion of or
otherwise under the Debentures in accordance with the terms of the Debentures,
and to issue Warrant Shares upon exercise of the Warrants in accordance with the
terms of the Warrants, regardless of the effect of any such dilution.
3.11 Intellectual Property. The Company and its Subsidiaries each owns
or possesses adequate rights or licenses to use all Intellectual Property that
is necessary for the operation of its businesses as presently conducted and as
proposed to be conducted, except where the failure to own or possess such rights
would not result, either individually or in the aggregate, in a Material Adverse
Effect. The consummation of the transactions contemplated by this Agreement, the
other Transaction Documents and the Debentures will not materially alter or
impair, individually or in the aggregate, any of such rights of the Company. To
the Company's knowledge, except as described in the Disclosure Documents, none
of its planned or current products or services infringes upon any Intellectual
Property of any other Person, and no claim or litigation is pending or, to the
knowledge of the Company, threatened against the Company contesting its right to
sell or otherwise use any product or material or service which has had or would
reasonably be expected to have a Material Adverse Effect. Except as described in
the Disclosure Documents, there is no violation by the Company with respect to
any Intellectual Property owned or used by the Company that would reasonably be
expected to have a Material Adverse Effect on the Company. Except as described
in the Disclosure Documents, the Company's rights to such Intellectual Property
are valid and enforceable and no registration relating thereto has lapsed,
expired or terminated or, to the Company's knowledge, is the subject of any
claim or proceeding that could result in any such lapse, expiration or
termination. The Company and its Subsidiaries each has complied in all material
respects with its obligations pursuant to any agreement relating to the
Intellectual Property Rights that are the subject of licenses granted by third
parties.
3.12 Registration Rights. Except as described on Schedule 3.12 hereto,
the Company has not granted or agreed to grant to any person or entity any
rights (including "piggy-back" registration rights) to have any securities of
the Company registered with the Commission or any other governmental authority
which has not been satisfied in full prior to the date hereof.
3.13 Solicitation; Other Issuances of Securities. Neither the Company
nor any of its Subsidiaries or Affiliates, nor any person acting on its or their
behalf, (i) has engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the offer or
sale of the Securities, (ii) has, directly or indirectly, made any offers or
sales of any security or solicited any offers to buy any security, under any
circumstances that would require registration of the Securities under the
Securities Act or (iii) has issued any shares of Common Stock or shares of any
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series of preferred stock or other securities or instruments convertible into,
exchangeable for or otherwise entitling the holder thereof to acquire shares of
Common Stock which would be integrated with the sale of the Securities to such
Investor or the issuance of the Debenture Shares for purposes of the Securities
Act or of any applicable stockholder approval provisions, including, without
limitation, under the rules and regulations of the NASD, nor will the Company or
any of its Subsidiaries or Affiliates take any action or steps that would
require registration of any of the Securities under the Securities Act or cause
the offering of the Securities to be so integrated with other offerings.
3.14 Fees. Except as described on Schedule 3.14 hereto, the Company is
not obligated to pay any compensation or other fee, cost or related expenditure
to any underwriter, broker, agent or other representative in connection with the
transactions contemplated hereby. The Company will indemnify and hold harmless
such Investor from and against any claim by any person or entity alleging that
such Investor is obligated to pay any such compensation, fee, cost or related
expenditure in connection with the transactions contemplated hereby.
3.15 Foreign Corrupt Practices. To the knowledge of the Company,
neither the Company, nor any of its Subsidiaries nor any director, officer,
agent, employee or other person acting on behalf of the Company or any
Subsidiary, has (i) used any corporate funds for any unlawful contribution,
gift, entertainment or other unlawful expenses relating to political activity,
(ii) made any direct or indirect unlawful payment to any foreign or domestic
government official or employee, or (iii) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
3.16 Employees. Each executive officer (as defined in Rule 501(f) of
the Securities Act) of the Company (each, a "Key Employee") is currently serving
in the capacity indicated in the most recently filed Disclosure Documents. The
Company has no knowledge of any fact or circumstance (including without
limitation (i) the terms of any agreement to which such person is a party or any
litigation in which such person is or may become involved and (ii) any illness
or medical condition that could reasonably be expected to result in the
disability or incapacity of such person) that would limit or prevent any such
person from serving in such capacity on a full-time basis in the foreseeable
future, or of any intention on the part of any such person to limit or terminate
his or her employment with the Company. No Key Employee has borrowed money
pursuant to a currently outstanding loan that is secured by Common Stock or any
right or option to receive Common Stock. There is no strike, labor dispute or
union organization activities pending or, to the knowledge of the Company,
threatened between it and its employees. None of the Company's employees belong
to any union or collective bargaining unit. The Company has complied in all
material respects with all applicable federal and state equal opportunity and
other laws related to employment.
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3.17 Environment. Except as disclosed in the Disclosure Documents (i)
the Company and its Subsidiaries have no liabilities under any Environmental
Law, nor, to the Company's knowledge, do any factors exist that are reasonably
likely to give rise to any such liability, affecting any of the properties of
the Company or any of its Subsidiaries that, individually or in the aggregate,
has had or would reasonably be expected to have a Material Adverse Effect and
(ii) neither the Company nor any of the Subsidiaries has violated any
Environmental Law applicable to it now or previously in effect, other than such
violations or infringements that, individually or in the aggregate, have not had
and would not reasonably be expected to have a Material Adverse Effect.
3.18 ERISA. Except as described on Schedule 3.18, the Company does not
maintain or contribute to, or have any obligation under, any Pension Plan. The
Company is in compliance in all material respects with the presently applicable
provisions of ERISA and the United States Internal Revenue Code of 1986, as
amended, with respect to each Pension Plan except in any such case for any such
matters that, individually or in the aggregate, have not had, and would not
reasonably be expected to have, a Material Adverse Effect.
3.19 Disclosure. No written statement, information, report,
representation or warranty made by the Company in any Transaction Document
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements herein or therein, in light of the
circumstances in which made, not misleading. There is no fact known to the
Company, which has had a Material Adverse Effect, and there is no fact known to
the Company that could reasonably be expected to have a Material Adverse Effect
except as may have been disclosed in writing to such Investor. The Company has
not disclosed to such Investor any event, circumstance or fact that would
constitute material non-public information as of the date of this Agreement or
the Closing Date. The Company acknowledges and agrees that following the
issuance of the press release in accordance with Section 4.1 hereof, such
Investor will not possess any material non-public information concerning the
Company or any Subsidiary, and that such Investor is relying on the
representations, acknowledgements and agreements made by the Company in this
Section 3.19 in making trading and other decisions concerning the Company's
securities.
3.20 Insurance. The Company maintains insurance for itself and its
Subsidiaries in such amounts and covering such losses and risks as is reasonably
prudent and customary in the businesses in which the Company and its
Subsidiaries are engaged. No notice of cancellation has been received for any of
such policies and the Company is in compliance with all of the terms and
conditions thereof. The Company has no reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business without a significant increase in cost. Without limiting
the generality of the foregoing, the Company maintains Director's and Officer's
insurance in an amount not less than $20 million for each covered occurrence.
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3.21 Property. The Company and its Subsidiaries have good and
marketable title in fee simple to all of its real property and good and
marketable title to all personal Property owned by them which is material to the
business of the Company and its Subsidiaries, in each case free and clear of all
Liens, except for Permitted Liens. Any Property held under lease by the Company
and its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made or proposed to be made of such Property by the Company and its
Subsidiaries. Schedule 3.21 sets forth all of the Real Property owned by the
Company or any of its Subsidiaries.
3.22 Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses, and neither the Company nor any such Subsidiary has received any
notice of proceedings relating to the revocation or modification of any such
certificate, authorization or permit.
3.23 Listing. The Company's Common Stock is listed on The Nasdaq
National Market (the "Nasdaq Stock Market"). The Company currently meets the
continuing eligibility requirements for listing on the Nasdaq Stock Market and
has not received any notice from the Nasdaq Stock Market that it may not
currently satisfy such requirements or that such continued listing is in any way
threatened. The Company has taken no action designed to, or which, to the
knowledge of the Company, is likely to have the effect of, terminating the
registration of the Common Stock under the Exchange Act or delisting the Common
Stock from the Nasdaq Stock Market.
3.24 Investment Company Status. The Company is not, and immediately
after receipt of payment for the Debentures and the Warrants issued under this
Agreement will not be, an "investment company" or an entity "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended (the "Investment Company Act"), and shall conduct its business in a
manner so that it will not become subject to the Investment Company Act.
3.25 Transfer Taxes. No stock transfer or other taxes (other than
income taxes) are required to be paid in connection with the issuance and sale
of any of the Securities, other than such taxes for which the Company has
established appropriate reserves and intends to pay in full on or before the
Closing.
3.26 Internal Controls and Procedures. The Company maintains internal
accounting controls, policies and procedures, and such books and records as are
reasonably designed to provide reasonable assurance that (i) all transactions to
which the Company or any Subsidiary is a party or by which its properties are
bound are effected by a duly authorized employee or agent of the Company,
supervised by and acting within the scope of the authority granted by the
Company's senior management; (ii) the recorded accounting of the Company's
consolidated assets is compared
17
with existing assets at regular intervals; and (iii) all transactions to which
the Company or any Subsidiary is a party, or by which its properties are bound,
are recorded (and such records maintained) in accordance with all Government
Requirements and as may be necessary or appropriate to ensure that the financial
statements of the Company are prepared in accordance with GAAP.
3.27 Embargoed Person. At all times while any Debentures remain
outstanding: to the Company's knowledge (a) none of the funds or other assets of
the Company shall constitute property of, or shall be beneficially owned,
directly or indirectly, by any person subject to trade restrictions under United
States law, including, but not limited to, the International Emergency Economic
Powers Act, 50 U.S.C. Section 1701 et seq., The Trading with the Enemy Act, 50
U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated under
any such United States laws (each, an "Embargoed Person"), with the result that
the investments evidenced by the Securities are or would be in violation of law;
(b) no Embargoed Person shall have any interest of any nature whatsoever in the
Company with the result that the investments evidenced by the Securities are or
would be in violation of law; and (c) none of the funds of the Company shall be
derived from any unlawful activity with the result that the investments
evidenced by the Securities are or would be in violation of law.
3.28 No Other Agreements. The Company has not, directly or indirectly,
entered into any agreement with or granted any right to any Investor relating to
the terms or conditions of the transactions contemplated by the Transaction
Documents, except as expressly set forth in the Transaction Documents.
4. COVENANTS OF THE COMPANY AND EACH INVESTOR.
4.1 The Company agrees with each Investor that it will, following the
Closing:
(a) file a Form D with respect to the Securities issued at the
Closing as required under Regulation D and to provide a copy thereof to such
Investor promptly after such filing;
(b) take such action as the Company reasonably determines upon
the advice of counsel is necessary to qualify the Debentures and Warrants issued
at the Closing for sale under applicable state or "blue-sky" laws or obtain an
exemption therefrom, and shall provide evidence of any such action to such
Investor at such Investor's request; and
(c) (i) on or before 5:00 pm eastern time on the date on which
this Agreement is executed and delivered by the Company and each Investor, issue
a press release disclosing the material terms of this Agreement and the
transactions contemplated by this Agreement substantially in the form attached
hereto as Exhibit D and (ii) prior to 5:00 p.m. on the
18
second (2nd) Business Day following Closing, file with the Commission a Current
Report on Form 8-K disclosing the material terms of this Agreement and the
transactions contemplated hereby and including as exhibits this Agreement, the
other Transaction Documents and the Debentures; provided, however, that each
Investor shall have a reasonable opportunity to review and comment on any such
press release or Form 8-K prior to the issuance or filing thereof. Thereafter,
the Company shall timely file any filings and notices required by the Commission
or applicable law with respect to the transactions contemplated hereby.
4.2 The Company agrees that it will, as long as any Debentures
purchased at Closing remain outstanding or ten percent (10%) or more of the
Warrants purchased at Closing remain outstanding:
(a) maintain its corporate existence in good standing;
(b) maintain, keep and preserve all of its Properties
necessary in the proper conduct of its businesses in good repair, working order
and condition (ordinary wear and tear excepted) and make all necessary repairs,
renewals and replacements and improvements thereto, except where the failure to
do so would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;
(c) pay or discharge before becoming delinquent (a) all taxes,
levies, assessments and governmental charges imposed on it or its income or
profits or any of its Property and (b) all lawful claims for labor, material and
supplies, which, if unpaid, might become a Lien upon any of its Property, except
where the failure to do so would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; provided, however,
that the Company shall not be required to pay or discharge any tax, levy,
assessment or governmental charge, or claim for labor, material or supplies,
whose amount, applicability or validity is being contested in good faith by
appropriate proceedings being diligently pursued and for which adequate reserves
have been established under GAAP;
(d) comply with all Governmental Requirements applicable to
the operation of its business, except for instances of noncompliance that would
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;
(e) comply with all agreements, documents and instruments
binding on it or affecting its Properties or business, including, without
limitation, all Material Contracts, except for instances of noncompliance that
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect;
(f) provide such Investor with copies of all materials sent to
its stockholders, in each such case promptly after the filing thereof with the
Commission; and
19
(g) timely file with the Commission all reports required to be
filed pursuant to the Exchange Act and refrain from terminating its status as an
issuer required by the Exchange Act to file reports thereunder even if the
Exchange Act or the rules or regulations thereunder would permit such
termination.
4.3 Reservation of Common Stock. The Company shall, on the Closing
Date, have authorized and reserved for issuance, free from any preemptive
rights, a number of shares of Common Stock (the "Reserved Amount") equal to at
least one hundred and fifty percent (150%) of the maximum number of shares of
Common Stock issuable upon (A) conversion of the outstanding Debentures in full
at the Conversion Price then in effect and (B) exercise of the outstanding
Warrants in full at the Exercise Price then in effect, in each such case without
regard to any limitation or restriction on such conversion or exercise that may
be set forth in the Transaction Documents. In the event that the Reserved Amount
is less than one hundred and twenty-five percent (125%) of the number of
Debenture Shares then issuable upon conversion of or otherwise under all of the
Debentures and the number of Warrant Shares then issuable upon exercise of all
of the Warrants then outstanding (without regard to any limitation or
restriction on such conversion or exercise that may be set forth in the
Transaction Documents), the Company shall take action (including without
limitation seeking stockholder approval for the authorization or reservation of
additional shares of Common Stock) as soon as practicable (but in no event later
than the tenth (10th) business day or, in the event that stockholder approval is
required, the sixtieth (60th) day following such date) to increase the Reserved
Amount to no less than one hundred and fifty percent (150%) of the number of
Debenture Shares then issuable upon conversion of or otherwise under such
outstanding Debentures and the number of Warrant Shares then issuable upon
exercise of such outstanding Warrants are exercisable. The Company shall not
reduce the number of shares reserved for issuance hereunder without the written
consent of the holders of seventy-five percent (75%) of the Registrable
Securities into which all of the Debentures and Warrants then outstanding are
convertible or exercisable (without regard to any limitation on such conversion
or exercise that may be set forth in the Transaction Documents). The initial
Reserved Amount shall be allocated pro rata among the Investors based on the
principal amount of the Debentures issued to each Investor at the Closing. Each
increase in the Reserved Amount shall be allocated pro rata among the Holders
based on the amount of Registrable Securities into which all of the Debentures
and Warrants held by such Holder at the time of such increase are convertible or
exercisable (without regard to any limitation on such conversion or exercise
that may be set forth in the Transaction Documents). In the event that a Holder
shall sell or otherwise transfer any of such Holder's Debentures, each
transferee shall be allocated a pro rata portion of such transferor's Reserved
Amount. Any portion of the Reserved Amount which remains allocated to any person
or entity which does not hold any Debentures shall be reallocated to the
remaining Holders pro rata based on the amount of Registrable Securities into
which all of the outstanding Debentures and Warrants at the time of such
increase are convertible or exercisable (without regard to any limitation on
such conversion or exercise that may be set forth in the Transaction Documents).
20
4.4 Use of Proceeds. The Company shall use the proceeds from the sale
of the Debentures and Warrants for general corporate purposes only, in the
ordinary course of its business and consistent with past practice, and, at the
Company's election, to redeem all of the outstanding shares of its Series A 8%
Convertible Preferred Stock and its Series B 8% Convertible Preferred Stock;
provided, however, that the Company may not use such proceeds to repurchase or
redeem any securities issued by the Company or any Subsidiary (other than the
Series A or Series B Preferred Stock) or to repay any loan made to or incurred
by any Affiliate of the Company without the prior written consent of the holders
of a majority of the Registrable Securities into which all of the Debentures and
Warrants then outstanding are convertible or exercisable (without regard to any
limitation on such conversion or exercise that may be set forth in the
Transaction Documents).
4.5 Quotation on Nasdaq. The Company shall (i) promptly following the
Closing, take such action as may be necessary to include all of the Debenture
Shares and Warrant Shares that may be issued by the Company (or such surviving
entity) under the Debentures and Warrants on the Nasdaq Stock Market, and (ii)
use its commercially reasonable efforts to maintain the designation and
quotation, or listing, of the Common Stock on the Nasdaq Stock Market or the New
York Stock Exchange for a minimum of five (5) years following the Closing Date.
4.6 Use of Investor Name. Except as may be required by applicable law,
the Company shall not use, directly or indirectly, any Investor's name or the
name of any of its affiliates in any advertisement, announcement, press release
or other similar communication unless it has received the prior written consent
of any Investor for the specific use contemplated or as otherwise required by
applicable law or regulation.
4.7 Company's Instructions to Transfer Agent. On or prior to the
Closing Date, the Company shall execute and deliver irrevocable written
instructions to the transfer agent for its Common Stock (the "Transfer Agent"),
and provide each Investor with a copy thereof, directing the Transfer Agent (i)
to issue certificates representing Debenture Shares upon conversion of or other
issuance under the Debentures and receipt of a valid Conversion Notice (as
defined in the Debentures) from an Investor, in the amount specified in such
Conversion Notice, in the name of such Investor or its nominee, (ii) to issue
certificates representing Warrant Shares upon exercise of the Warrants and (iii)
to deliver such certificates to such Investor no later than the close of
business on the third (3rd) Business Day following the related Conversion Date
(as defined in the Debentures) or Exercise Date (as defined in the Warrants), as
the case may be. Such certificates may bear legends pursuant to applicable
provisions of this Agreement or applicable law. As long as the Company shall
instruct the transfer agent that, in lieu of delivering physical certificates
representing shares of Common Stock to an Investor upon conversion of the
Debentures, or exercise of the Warrants, and as long as the Transfer Agent is a
participant in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer
21
program, and such Investor has not informed the Company that it wishes to
receive physical certificates therefor, and no legend is required to appear on
any physical certificate if issued, the transfer agent may effect delivery of
Debenture Shares or Warrant Shares, as the case may be, by crediting the account
of such Investor or its nominee at DTC for the number of shares for which
delivery is required hereunder within the time frame specified above for
delivery of certificates. The Company represents to and agrees with each
Investor that it will not give any instruction to the Transfer Agent that will
conflict with the foregoing instruction or otherwise restrict such Investor's
right to convert the Debentures or to receive Debenture Shares in accordance
with the terms of the Debentures or to exercise the Warrant or to receive
Warrant Shares upon exercise of the Warrants. In the event that the Company's
relationship with the Transfer Agent should be terminated for any reason, the
Company shall use its commercially reasonable efforts to cause the Transfer
Agent to continue acting as transfer agent pursuant to the terms hereof until
such time that a successor transfer agent is appointed by the Company and
receives the instructions described above.
4.8 No Adverse Action. The Company and its Subsidiaries shall refrain,
while any Debentures are outstanding, from taking any action or entering into
any arrangement that in any way materially and adversely affects (i) the rights,
privileges or benefits available to a holder of Debentures or (ii) the rights,
privileges or benefits available to a holder of a Warrant.
4.9 Limitations on Disposition. Each Investor shall not sell, transfer,
assign or dispose of any Securities, unless:
(a) there is then in effect an effective registration
statement under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such registration statement; or
(b) such Investor has notified the Company in writing of any
such disposition and furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration of such Securities under the Securities Act; provided, however,
that no such opinion of counsel will be required (A) if the sale, transfer or
assignment is made to an Affiliate of such Investor, (B) if the sale, transfer
or assignment is made pursuant to Rule 144 and such Investor provides the
Company with evidence reasonably satisfactory to the Company and its legal
counsel that the proposed transaction satisfies the requirements of Rule 144 or
(C) in connection with a bona fide pledge or hypothecation of any Securities
under a margin arrangement with a broker-dealer or other financial institution.
4.10 Limitations on Conversion. Until Shareholder Approval (as defined
below) is obtained, or an Investor obtains an opinion of counsel reasonably
satisfactory to the Company and its counsel that such approval is not required,
no Investor shall be issued Debenture Shares pursuant to a conversion of such
Holder's Debenture or exercise of its Put Option (as defined in the
22
Debentures) in an amount greater than the product of (A) the Cap Amount
multiplied by (B) a fraction, the numerator of which is the principal amount of
the Debenture purchased by such Holder and the denominator of which is the
aggregate principal amount of all Debentures purchased by all Investors under
this Agreement (the "Allocation Amount"). In the event that any Investor shall
sell or otherwise transfer any of such Investor's Debentures, the remaining
Debenture Shares constituting such transferring Investor's Allocation Amount
shall be allocated between the transferring Investor and transferee pro rata in
proportion to the number of Registrable Shares issuable under the Debentures
transferred to such transferee and the number of Registrable Shares issuable
under the Debentures retained by such transferring Investor. In the event that
any Investor shall put or convert all of such Investor's Debentures into a
number of Debenture Shares which, in the aggregate, is less than such Investor's
Allocation Amount, then the difference between such Investor's Allocation Amount
and the number of Debenture Shares actually issued to such Investor shall be
allocated to the respective Allocation Amounts of the remaining Investors on a
pro rata basis in proportion to the number of Registrable Shares then issuable
under the Debentures held by each such Investor.
4.11 Shareholder Approval. From and after the Closing Date, the Company
shall use its best efforts to seek the approval of its shareholders of the
transactions described herein and the other Transaction Documents ("Shareholder
Approval") and, in furtherance thereof, the Company shall, at the first meeting
of its shareholders held after the Closing Date, recommend to its shareholders
that such approval be given. In furtherance of the foregoing, the Company shall
hold its next annual meeting of shareholders on a date that is no later than
June 30, 2004. In the event that Shareholder Approval is not obtained at the
next meeting of the Company's shareholders, the Company shall continue to use
its best efforts to seek Shareholder Approval as soon as practicable after such
meeting but no less frequently than quarterly thereafter.
4.12 Restrictions on Issuances of Convertible Securities having
Fluctuating Conversion Price. While any Debentures or Warrants are outstanding,
the Company shall not issue any securities or other instruments which are
convertible into or exercisable or exchangeable for Common Stock at a
fluctuating conversion price or exchange ratio.
4.13 Leverage Ratio Restrictions. While any Debentures or Warrants are
outstanding, the Company shall not fail to maintain the leverage ratio set forth
in Section 8.4 of the Senior Loan Agreement.
4.14 Disclosure of Information. The Company agrees that it will not at
any time disclose material non-public information to any Investor without first
receiving such Investor's written consent to such disclosure.
4.15 Senior Debt. The Company shall not refinance its Debt under the
Senior Loan
23
Agreement, and will not incur any additional Debt senior to the Debentures,
without the prior written consent of the holders of two-thirds of the aggregate
principal amount of the Debentures then outstanding.
5. CONDITIONS TO CLOSING.
5.1 Conditions to Investors' Obligations at the Closing. Each
Investor's obligations to effect the Closing, including without limitation its
obligation to purchase the Debentures and Warrants at the Closing, are
conditioned upon the fulfillment or waiver by such Investor of each of the
following events as of the Closing Date:
5.1.1 the representations and warranties of the Company set forth in
this Agreement shall be true and correct in all respects as of
such date as if made on such date (except that to the extent
that any such representation or warranty relates to a
particular date, such representation or warranty shall be true
and correct in all respects as of that particular date);
5.1.2 the Company shall have complied with or performed in all
material respects all of the agreements, obligations and
conditions set forth in this Agreement that are required to be
complied with or performed by the Company on or before the
closing;
5.1.3 the Closing Date shall occur on a date that is not later than
February 12, 2004;
5.1.4 the Company shall have delivered to such Investor a
certificate, signed by the Chief Executive Officer and Chief
Financial Officer of the Company, certifying that the
conditions specified in this paragraph 5.1 have been fulfilled
as of the Closing, it being understood that such Investor may
rely on such certificate as though it were a representation
and warranty of the Company made herein;
5.1.5 the Company shall have delivered to such Investor an opinion
of counsel for the Company, dated as of such date, in
substantially the form set forth on Exhibit 5.1.5 hereto;
5.1.6 the Company shall have delivered duly executed certificates
representing the Debentures and the Warrants being purchased
by such Investor;
24
5.1.7 the Company shall have executed and delivered the Registration
Rights Agreement;
5.1.8 the Common Stock shall be quoted and actively traded on the
Nasdaq Stock Market;
5.1.9 there shall have been no material adverse change in the
Company's consolidated business or condition (financial or
otherwise) since the date of the Company's most recent audited
financial statements contained in the Disclosure Documents;
5.1.10 the Company shall have authorized and reserved for issuance at
least one hundred and fifty percent (150%) of the aggregate
number of shares of Common Stock issuable upon conversion of
all of the Debentures and exercise of all of the Warrants to
be issued at the Closing (such number to be determined using
the Conversion Price and Exercise Price in effect on the
Closing Date and without regard to any restriction on the
ability of an Investor to convert Debentures or exercise the
Warrants as of such date);
5.1.11 there shall be no injunction, restraining order or decree of
any nature of any court or Government Authority of competent
jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated hereby, by the
other Transaction Documents or by the Debentures;
5.1.12 the aggregate Purchase Price to be paid by the Investors for
all of the Debentures and Warrants to be issued hereunder
shall be at least $10,000,000;
5.1.13 the Company shall have obtained a consent from Senior Lender
in form and substance reasonably satisfactory to such Investor
consenting to the execution, delivery and performance by the
Company of all of the transactions contemplated by the
Transaction Documents (the "Senior Lender Consent"); and
5.1.14 the form and substance of the Subordination Agreement shall be
reasonably satisfactory to such Investor.
5.2 Conditions to Company's Obligations at the Closing. The Company's
obligations to
25
effect the Closing are conditioned upon the fulfillment or waiver by the Company
of each of the following events as of the date of the closing:
5.2.1 the representations and warranties of each Investor shall be
true and correct in all respects as of such date as if made on
such date (except that to the extent that any such
representation or warranty relates to a particular date, such
representation or warranty shall be true and correct in all
respects as of that particular date);
5.2.2 each Investor shall have complied with or performed all of the
agreements, obligations and conditions set forth in this
Agreement that are required to be complied with or performed
by such Investor on or before the Closing;
5.2.3 there shall be no injunction, restraining order or decree of
any nature of any court or Government Authority of competent
jurisdiction that is in effect that restrains or prohibits the
consummation of the transactions contemplated hereby, by the
other Transaction Documents or by the Debentures; and
5.2.4 the Company shall have obtained the Senior Lender Consent.
6. MISCELLANEOUS.
6.1 Survival; Severability. The representations, warranties,
covenants and indemnities made by the parties herein and the other Transaction
Documents shall survive the Closing notwithstanding any due diligence
investigation made by or on behalf of the party seeking to rely thereon. In the
event that any provision of this Agreement becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable or void, this Agreement
shall continue in full force and effect without said provision; provided that in
such case the parties shall negotiate in good faith to replace such provision
with a new provision which is not illegal, unenforceable or void, as long as
such new provision does not materially change the economic benefits of this
Agreement to the parties.
6.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and permitted assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and permitted assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement. No Investor may assign its
rights and obligations hereunder without the prior written consent of the
26
Company, which consent shall not be unreasonably withheld; provided, however,
that no such consent shall be required for an assignment to an Affiliate of an
Investor. If the Company consents to such transfer (or such transfer is to an
Affiliate of an Investor), the transferee shall execute an acknowledgment
agreeing to be bound by the applicable provisions of this Agreement, in which
case the term "Investor" shall be deemed to refer to such transferee as though
such transferee were an original signatory hereto. The Company may not assign it
rights or obligations under this Agreement without the prior written consent of
the holders of two-thirds of the aggregate principal amount of the Debentures
then outstanding .
6.3 No Reliance. Each party acknowledges that (i) it has such
knowledge in business and financial matters as to be fully capable of evaluating
this Agreement and the other Transaction Documents, and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice or
representation of any other party in connection with entering into this
Agreement, the other Transaction Documents, or such transactions (other than the
representations made in this Agreement or the other Transaction Documents),
(iii) it has not received from such party any assurance or guarantee as to the
merits (whether legal, regulatory, tax, financial or otherwise) of entering into
this Agreement or the other Transaction Documents or the performance of its
obligations hereunder and thereunder, and (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting advisors
to the extent that it has deemed necessary, and has entered into this Agreement
and the other Transaction Documents based on its own independent judgment and on
the advice of its advisors as it has deemed necessary, and not on any view
(whether written or oral) expressed by such other party.
6.4 Independent Nature of Investors' Obligations and Rights.
The obligations of each Investor hereunder are several and not joint with the
obligations of the other Investors hereunder, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor hereunder. Nothing contained herein or in any other agreement or
document delivered at the Closing, and no action taken by any Investor pursuant
hereto or thereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each
Investor shall be entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement or the other Transaction
Documents, and it shall not be necessary for any other Investor to be joined as
an additional party in any proceeding for such purpose.
6.5 Injunctive Relief. The Company acknowledges and agrees
that a breach by it of its obligations hereunder will cause irreparable harm to
each Investor and that the remedy or remedies at law for any such breach will be
inadequate and agrees, in the event of any such breach, in addition to all other
available remedies, such Investor shall be entitled to an injunction restraining
any breach and requiring immediate and specific performance of such obligations
without the necessity of showing economic loss.
27
6.6 Governing Law; Jurisdiction. This Agreement shall be
governed by and construed under the laws of the State of New York applicable to
contracts made and to be performed entirely within the State of New York. Each
party hereby irrevocably submits to the non-exclusive jurisdiction of the state
and federal courts sitting in the City of New York, borough of Manhattan, for
the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper. Each party hereby
irrevocably waives personal service of process and consents to process being
served in any such suit, action or proceeding by mailing a copy thereof to such
party at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in any way any
right to serve process in any manner permitted by law.
6.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
6.8 Headings. The headings used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
6.9 Notices. Any notice, demand or request required or
permitted to be given by the Company or an Investor pursuant to the terms of
this Agreement shall be in writing and shall be deemed delivered (i) when
delivered personally or by verifiable facsimile transmission, unless such
delivery is made on a day that is not a Business Day, in which case such
delivery will be deemed to be made on the next succeeding Business Day, (ii) on
the next Business Day after timely delivery to an overnight courier and (iii) on
the Business Day actually received if deposited in the U.S. mail (certified or
registered mail, return receipt requested, postage prepaid), addressed as
follows:
If to the Company:
OMNI Energy Services Corp.
4500 NE Evangeline Thruway
Carencro, LA 70520
Attn: James C. Eckert
Tel: (337) 896-6664
Fax: (337) 896-6655
28
with a copy to:
Locke Liddell & Sapp LLP
600 Travis Street, Suite 3400
Houston, TX 77002
Attn: David F. Taylor
Tel: (713) 226-1496
Fax: (713) 223-3717
and if to any Investor, to such address for such Investor as shall appear on the
signature page hereof executed by such Investor, or as shall be designated by
such Investor in writing to the Company in accordance with this Section 6.9.
6.10 Expenses. The Company and each Investor shall pay all
costs and expenses that it incurs in connection with the negotiation, execution,
delivery and performance of this Agreement, provided, however, that that the
Company shall pay up to $50,000 in immediately available funds, at the Closing
and promptly upon receipt of any further invoices relating to same, for all
reasonable out-of-pocket expenses (including without limitation legal fees and
expenses) incurred by Gemini Investment Strategies, LLC ("Gemini") in connection
its due diligence investigation of the Company and the negotiation, preparation,
execution, delivery and performance of this Agreement and the other Transaction
Documents (regardless of whether the Closing occurs). At the Closing, the
Company shall pay the amount due for such reasonable fees and expenses (which
may include fees and expenses estimated to be incurred for completion of the
transaction including post-closing matters) and Gemini may net such amount from
its Purchase Price. In the event the amount so paid by the Company is less than
the actual reasonable fees and expenses, the Company shall promptly pay such
deficiency within thirty (30) days following receipt of an invoice regarding
same. In no event shall the Company be required to pay Gemini under this Section
6.10 an amount exceeding $50,000.
6.11 Entire Agreement; Amendments. This Agreement and the
other Transaction Documents constitute the entire agreement between the parties
with regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed by
the Company and the Investors holding at least two-thirds (2/3) of the aggregate
principal amount of the Debentures then outstanding, and no provision hereof may
be waived other than by a written instrument signed by the party against whom
enforcement of any such waiver is sought.
[Signature Pages to Follow]
29
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
OMNI ENERGY SERVICES CORP.
By: /s/ G. Darcy Klug
-------------------------------------
Name: G. Darcy Klug
Title: Chief Financial Officer
PROVIDENT PREMIER MASTER FUND LTD.
By: /s/ Steven Winters
-------------------------------------
Name: Steven Winters
Title: Attorney-in-fact
ADDRESS:
c/o Gemini Investment Strategies, LLC
35 Waterview Boulevard
Parsippany, NJ 07054
Attn: Steven Winters
Tel: (973) 404-1350
Fax: (973) 404 1360
Principal Amount of Debenture to be Purchased: $2,500,000
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
OMNI ENERGY SERVICES CORP.
By: /s/ G. Darcy Klug
-------------------------------------
Name: G. Darcy Klug
Title: Chief Financial Officer
PORTSIDE GROWTH AND OPPORTUNITY FUND
By: /s/ Jeff Smith
-------------------------------------
Name: Jeff Smith
Title: Authorized Signatory
ADDRESS:
c/o Ramius Capital Group, LLC
666 Third Avenue, 26th floor
New York, New York 10017
Attention: Jeffrey Smith
Roger Anscher
Tel: (212) 845-7900
Fax: (212) 845-7999
Principal Amount of Debenture to be Purchased: $2,500,000
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first-above written.
OMNI ENERGY SERVICES CORP.
By: /s/ G. Darcy Klug
-------------------------------------
Name: G. Darcy Klug
Title: Chief Financial Officer
MANCHESTER SECURITIES CORP.
By: /s/ Paul Singer
-------------------------------------
Paul Singer
President
ADDRESS:
c/o Elliott Management Corporation
712 Fifth Avenue
New York, New York 10019
Attn: Brett Cohen
Tel: (212) 974-6000
Fax: (212) 974-2092
Principal Amount of Debenture to be Purchased: $5,000,000