Exhibit 4.8
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BOLLE INC.
WITH
THE PURCHASERS LISTED
ON
EXHIBIT "A" HERETO
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CONVERTIBLE SUBORDINATED NOTE PURCHASE AGREEMENT
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DATED AS OF MAY 29, 1998
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BOLLE INC.
As of May 29, 1998
To the Purchasers listed
on Exhibit "A" to this Agreement
Dear Sirs:
BOLLE Inc., a Delaware corporation (the "Company"), agrees with each
Purchaser as follows:
I.A.1. AUTHORIZATION OF CONVERTIBLE NOTES.
The Company has authorized the issuance and sale of an aggregate of
$7,000,000 principal amount of its 0% Convertible Subordinated Notes due May
29, 2002 (the "Convertible Notes"). The Convertible Notes are convertible into
shares of the Company's common stock ("Common Stock"), par value $.01 per share
(such shares to be issued upon conversion of the Convertible Notes being
hereinafter referred to herein as the "Shares"), at the Conversion Price
defined in Article 24 of this Agreement. The Convertible Notes do not bear
interest. The Convertible Notes are to be sold pursuant to this Agreement to
the purchasers listed on Exhibit "A" to this Agreement (the "Purchasers"). The
Form of Convertible Note is attached hereto as Exhibit "B".
I.A.2. SALE AND PURCHASE OF CONVERTIBLE NOTES.
Subject to the terms and conditions hereof, the Company will sell to
each Purchaser, and each Purchaser will purchase from the Company, on the
Closing Date specified in Article 3, a Convertible Note or Convertible Notes in
the aggregate principal amount set forth opposite such Purchaser's name on
Exhibit "A" hereto, at a purchase price of 100% of such principal amount.
I.A.3. CLOSING.
The closing (the "Closing") of the purchase and sale of the
Convertible Notes will take place at the offices of Kane Kessler, P.C., 1350
Avenue of the Americas, New York, New York 10019, at 10:00 a.m., New York City
time, on May 29, 1998 or such other time and date as shall be mutually agreed
upon by the Purchasers and the Company. Such time and date is herein called the
"Closing Date."
On the Closing Date, the Company shall deliver to each Purchaser a
Convertible Note, dated the Closing Date, in the aggregate principal amount set
forth opposite such Purchaser's name on Exhibit "A" hereto, each such
Convertible Note to be registered in the name of the Purchaser or its nominee,
against delivery by the Purchaser to the Company of a certified or official
bank check(s) or wire transfer(s) in an aggregate amount equal to the aggregate
purchase
price for such Convertible Notes, payable to the order of the Company
in immediately available funds.
I.A.4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company represents and warrants that:
I.A.4.1. Corporate Existence and Power. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers required to carry on its
business as now conducted. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for those jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on the Company and its Subsidiaries taken as a whole.
For purposes of this Agreement, the term "Material Adverse Effect" means, with
respect to any person or entity, a material adverse effect on the condition
(financial or otherwise), business, properties, assets, liabilities (including
contingent liabilities), results of operations of the Company or its
Subsidiaries (as defined below). For purposes of this Agreement, the term
"Subsidiary" means, with respect to any entity, any corporation or other
organization of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions are directly or indirectly owned by such entity or
of which such entity is a partner or is, directly or indirectly, the beneficial
owner of 50% or more of any class of equity securities or equivalent profit
participation interests.
I.A.4.2. Corporate Authorization. The execution, delivery and
performance by the Company of this Agreement, and the consummation of the
transactions contemplated hereby (including, but not limited to, the sale,
issuance and delivery of the Convertible Notes, the subsequent issuance of the
Shares upon conversion of the Convertible Notes and the Additional Shares) have
been duly authorized by all required corporate action and no additional
corporate action is required for the approval of this Agreement. This Agreement
constitutes the legal, valid and binding agreement of the Company enforceable
against it in accordance with its terms, except as may be limited by
bankruptcy, reorganization, insolvency, moratorium and similar laws of general
application relating to or affecting the enforcement of rights of creditors and
except that enforceability of its obligations hereunder are subject to general
principles of equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
I.A.4.3. Disclosure. The Company's filings and submissions with the
Commission (the "SEC Reports") comply in all material respects with all
applicable securities laws and no statement, report, or certificate filed with
the Commission 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. Since December 31, 1997, the Company has conducted its
business in the ordinary and usual course consistent with past practices and
there has not occurred any Material Adverse Effect.
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A.I.4.4. Capitalization. Except as disclosed below, the authorized
capital of the Company is as set out in its most recently filed Annual Report
on Form 10-K for the year ended December 31, 1997 (the "1997 Form 10-K"), which
discloses all outstanding options or warrants for the purchase of, or other
rights to purchase or subscribe for, or securities convertible into or
exchangeable for, Common Stock or other capital stock of the Company, or any
contracts or commitments to issue or sell Common Stock or other capital stock
of the Company or any such options, warrants, rights or other securities; and
from such date to the date hereof there has been no material change in the
amount or terms of any of the foregoing except for the grant of shares of
Common Stock pursuant to the Company's stock option plan. In connection with
the closing of the Bolle Australia Acquisition, the Company has issued 248,388
shares of Common Stock. In addition, in connection with the Bolle UK
Acquisition, the Company has agreed to issue shares of Common Stock having a
value of approximately $375,000. The outstanding Shares of Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable
and all of such options, warrants and other rights have been duly authorized by
the Company. None of the outstanding Shares of Common Stock and options,
warrants and other rights to acquire Common Stock has been issued in violation
of the preemptive rights of any securityholder of the Company. The offers and
sales of the outstanding Shares of Common Stock and options, warrants and other
rights to acquire Common Stock were at all relevant times either registered
under the Securities Act and applicable state securities laws or exempt from
such requirements.
I.A.4.5. Concerning the Shares and the Common Stock. The Shares and
the Additional Shares have been duly authorized and, when the Shares are issued
upon conversion of the Convertible Note, or the Additional Shares are issued in
accordance with the terms of this Agreement, as the case may be, such shares
will be duly and validly issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such
holder. The holders of outstanding shares of capital stock of the Company are
not entitled to preemptive or other rights to subscribe for the Shares or the
Convertible Note. The Shares have been duly reserved by the Company for
issuance upon conversion of the Convertible Note, and shall remain so reserved
as long as the Convertible Note may be converted. The Additional Shares have
been duly reserved by the Company for issuance pursuant to the terms of this
Agreement, and shall remain so reserved as long as such Additional Shares may
be required to be issued in connection with this Agreement. The Common Stock is
listed for trading on the NASDAQ National Market System and (1) the Company and
the Common Stock meet the criteria for continued listing and trading on NASDAQ;
(2) the Company has not been notified by the National Association of Securities
Dealers, Inc. (the "NASD") of any failure or potential failure to meet the
criteria for continued listing and trading on NASDAQ National Market and (3) no
suspension of trading in the Common Stock is in effect.
I.A.4.6. Non-contravention. The execution and delivery of this
Agreement, and the consummation by the Company of the issuance of the Shares
and the Additional Shares, do not and will not, with or without the giving of
notice or the lapse of time, or both, (i) result in any violation of any term
of the certificate of incorporation or by-laws of the Company, (ii) conflict
with or result in a breach by the Company of any of the
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terms or provisions of, or constitute a default under, or result in the
modification of, or result in the creation or imposition of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company pursuant to, any indenture, mortgage, deed of trust or other agreement
or instrument to which the Company is a party or by which the Company or any of
its properties or assets are bound or affected, (except as to any such
agreement for which the Company has obtained a written waiver in form, scope
and substance reasonably acceptable to the Purchaser), or (iii) violate or
contravene any applicable law, rule or regulation or any applicable decree,
judgment or order of any court, United States federal or state regulatory body,
administrative agency or other governmental body having jurisdiction over the
Company or any of its properties or assets, except as disclosed in Section 4.7
below, or (iv) have any Material Adverse Effect on any permit, certification,
registration, approval, consent, license or franchise necessary for the Company
to own or lease and operate its properties and to conduct any its business or
the ability of the Company to make use thereof.
I.A.4.7. Approvals. No authorization, approval or consent of, or
filing with, any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the stockholders of the Company is
required to be obtained or made by the Company in connection with the
execution, delivery and performance of this Agreement or the issuance of the
Shares or the Additional Shares as contemplated by this Agreement and the terms
of the Convertible Note, other than (1) listing of the Shares and the
Additional Shares on NASDAQ, (2) registration of the Shares and the Additional
Shares under the Securities Act as contemplated by Section 13, and (3) as may
be required under applicable state securities or "blue sky" laws.
I.A.4.8. SEC Reports. The Company has filed in a timely manner all
reports required to be filed under the Exchange Act and any other material
reports or documents required to be filed with the Commission and to the extent
that the Company used Rule 12b-25(b) under the Exchange Act with respect to a
report, that report has actually been filed within the time prescribed by such
Rule. All of such reports and documents complied, when filed, in all material
respects, with all applicable requirements of the Securities Act and the
Exchange Act.
I.A.4.9. Private Offering. Neither the Company nor any Person acting
on its behalf has taken or will take any action which might subject the
offering, issuance or sale of the Convertible Notes, the Shares and the
Additional Shares hereunder to the registration requirements of the Securities
Act; provided, that the representations hereunder made by each of the
Purchasers is true, correct and complete.
I.A.4.10. Registration Rights; Rights of Participation. Except as
described on Schedule 4.10 hereto, (A) the Company has not granted or agreed to
grant to any Person 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 and (B) no Person,
including, but not limited to, current or former shareholders of the Company,
underwriters, brokers or agents, has any right of first refusal, preemptive
right, right of
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participation, or any similar right to participate in the transactions
contemplated by this Agreement, which has not been waived.
I.A.4.11. No Brokers. The Company has not employed any financial
advisor, broker or finder and has not incurred (and will not incur) any
broker's, finder's, investment banking or similar fees, commissions or expenses
in connection with the transactions contemplated by this Agreement.
I.A.4.12. Absence of Litigation. Except as described in the SEC
Reports, there is no action, suit, proceeding, inquiry or investigation before
or by any court, public board or body pending or, to the knowledge of the
Company, threatened against or affecting the Company wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
business, properties, operations, condition (financial or other), results of
operations of the Company or the transactions contemplated by this Agreement,
or which would materially adversely effect the validity or enforceability of,
or the authority or ability of the Company to perform its obligations under
this Agreement.
I.A.4.13. No Default or Violation. The Company (i) is not in default
under or in violation of any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound, (ii) in violation of any order of any court, arbitrator or
governmental body applicable to its property or assets, or (iii) in violation
of any statute, rule or regulation of any governmental authority to which it is
subject, except those that would result in a Material Adverse Effect.
I.A.5. SUBORDINATION.
I.A.5.1. Agreement to Be Bound. The Company covenants and agrees, and
each holder of Convertible Notes by his (its) acceptance thereof, likewise
covenants and agrees, that the Convertible Notes shall be issued subject to the
provisions contained in this Article 5; and each person holding any Convertible
Notes, whether upon original issue or upon transfer or assignment thereof,
accepts and agrees to be bound by such provisions. All Convertible Notes shall,
to the extent and in the manner hereinafter set forth, be subordinated and
subject in right of payment to the prior payment in full of all Senior
Indebtedness (as defined herein). Notwithstanding any other provisions of this
Article 5, conversions of the Convertible Notes and the issuance of Additional
Shares shall not be considered redemptions, acquisitions or retirements thereof
for purposes of this Article 5.
I.A.5.2. Priority of Senior Indebtedness. (a) No payment on account of
principal or interest on the Convertible Notes or any amount due or payable
pursuant to this Agreement shall be made, nor shall any assets be applied to
the purchase or other acquisition or retirement of the Convertible Notes or any
amount due or payable pursuant to this Agreement, nor shall the Purchaser
enforce any judgment or otherwise attach or seek remedy directly against any
property of the Company (whether before or after judgment), if, at the time of
such payment or application or immediately after giving effect thereto, there
shall exist a default (other than a default in the payment of any amount due)
in the payment of any amount due on any Senior Indebtedness or if there shall
have occurred an event of default with respect to any Senior Indebtedness, or
in the
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instrument under which the same has been issued, permitting the holders
thereof, after notice or lapse of time, or both, to accelerate the maturity
thereof, until the earliest to occur of (i) the date on which the Senior
Indebtedness to which such event of default related is discharged in accordance
with its terms, or (ii) the date such event of default is waived by the holders
of such Senior Indebtedness or otherwise cured; provided, that the Convertible
Notes shall not be considered "equity securities" for the purposes of
determining whether a default has occurred, or would occur, under Company
covenants pertaining to Senior Indebtedness which prohibit the redemption of
equity securities or require the maintenance of minimum equity ratios, until
such time as and to the extent that the Convertible Notes are actually
converted to Common Stock; and provided, further, that notwithstanding the
partial restriction of a redemption or other payment hereunder, payment shall
be made, if required by the terms hereof, to the extent possible without
causing an event of default under Senior Indebtedness, and the balance thereof
shall be paid as soon as such event of default is no longer continuing. Within
ten (10) Business Days after knowledge of any such default referred to in this
Section 5.2(a), the Company shall furnish a copy thereof to each holder of the
Convertible Notes, in the manner and at the address specified pursuant to
Article 17 hereof.
(b) Upon the occurrence and during the continuance of any Event of
Default under this Agreement or the Convertible Notes, or upon the occurrence
of an event requiring any amount to be due and payable pursuant to this
Agreement and notwithstanding any other provision contained herein or in the
Convertible Notes to the contrary, each Purchaser hereby agrees, for the
benefit of the holders of Senior Indebtedness, not to take or receive any
amount owing under the Convertible Notes or any amount due or payable pursuant
to this Agreement with respect thereto, or enforce any judgment or otherwise
attach or seek remedy directly against any property of the Company (whether
before or after judgment), until the earliest of, (i) if applicable, the date
on which the Senior Indebtedness to which such event of default related is
discharged in accordance with its terms or after the date that such event of
default is waived by the holders of such Senior Indebtedness or otherwise cured
or (ii) any voluntary or involuntary petition in bankruptcy filed by or against
the Company. Within ten (10) Business Days after knowledge of any Event of
Default under this Agreement or the Convertible Notes, the Company shall
furnish a copy thereof to the holders of Senior Indebtedness in the manner and
at the addresses specified in the documents and/or agreements evidencing the
applicable Senior Indebtedness.
I.A.5.3. Acceleration of Convertible Notes; Insolvency. Upon (i) any
acceleration of the principal amount due on the Convertible Notes or Senior
Indebtedness or (ii) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or
to become due upon all Senior Indebtedness shall first be paid in full, or
payment thereof duly provided for, to the full satisfaction of the holders of
Senior Indebtedness before the holders of the Convertible Notes shall be
entitled to receive or retain any assets so paid or distributed in respect
thereof; and upon any such dissolution or winding up or liquidation or
reorganization, any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to which the
holders of the Convertible Notes would be entitled, except for these
provisions, shall be paid by the Company or by any receiver, trustee in
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bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the holders of the Convertible Notes if received by them or
it, as the case may be, directly to the holders of Senior Indebtedness, to the
extent necessary to pay all such Senior Indebtedness in full, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness before any payment or distribution is made to the holders
of the Convertible Notes.
I.A.5.4. Subrogation, Etc. Upon payment in full of all Senior
Indebtedness, the holders of Convertible Notes shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company pro rata in proportion to the respective
amounts then owing to the holders of Convertible Notes; and for purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the holders of
Convertible Notes would be entitled except for the provisions of this Section
5, and no payment pursuant to such provisions to the holders of Senior
Indebtedness, shall, as between the Company and its creditors (other than the
holders of Convertible Notes and the holders of the Senior Indebtedness), be
deemed to be a payment by the Company to or on account of Senior Indebtedness,
it being understood that the provisions of this Section 5 are and are intended
solely for the purpose of defining the relative rights of the holders of
Convertible Notes on the one hand and the holders of Senior Indebtedness on the
other hand. The holders of Senior Indebtedness may amend, modify and otherwise
deal with Senior Indebtedness without any notice to or approval of any holder
of Indebtedness ranking junior to Senior Indebtedness.
I.A.5.5. Enforcement. The foregoing subordination provisions shall be
for the benefit of the holders of Senior Indebtedness and may be enforced
directly by such holders against the holders of the Convertible Notes. Each
holder of Convertible Notes by his (or its) acceptance thereof shall be deemed
to acknowledge and agree that the subordination provisions of this Article 5
are, and are intended to be, an inducement and a consideration to each holder
of any Senior Indebtedness, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Convertible Notes, to acquire and
continue to hold, or to continue to hold, such Senior Indebtedness and each
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
Upon any payment or distribution of assets of the Company, the holders
of the Convertible Notes shall be entitled to rely upon a certificate of the
receiver, trustee in bankruptcy, liquidation trustee, Company, agent or other
person making such payment or distribution, delivered to the holders of the
Convertible Notes, for the purpose of ascertaining the persons entitled to
participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertaining
thereto or to the provisions of this Article 5.
I.A.5.6. Obligations Unimpaired. Nothing contained in this Article 5,
or elsewhere in this Agreement, or in the Convertible Notes, is intended to or
shall impair as between the Company, its creditors other than the holders of
Senior Indebtedness, and the holders of the
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Convertible Notes, the obligation of the Company, which shall be absolute and
unconditional, to pay the holders of the Convertible Notes the principal of and
interest on the Convertible Notes as and when the same shall become due and
payable in accordance with the terms thereof, or affect the relative rights of
the holders of the Convertible Notes and other creditors of the Company other
than the holders of Senior Indebtedness, nor shall anything herein or therein
prevent the holder of any Convertible Notes from exercising all remedies
otherwise permitted by applicable law upon default under this Agreement,
subject to the rights, if any, under this Article 5 of the holders of Senior
Indebtedness in respect to cash, property or securities of the Company received
upon the exercise of any such remedy. Nothing contained in this Article 5,
shall prevent the Company from making payment of the principal of or interest,
if applicable, on the Convertible Notes at any time except under the conditions
described in Section 5.2 or 5.3 or during the pendency of any dissolution,
winding up, liquidation or reorganization of the Company.
I.A.5.7. Definition of Senior Indebtedness. The term "Senior
Indebtedness" shall mean the principal, interest and other amounts due under
the terms of the instruments creating or evidencing all Consolidated Funded
Indebtedness of the Company permitted by Section 9.1 hereof from time to time,
including that owing to banks or other financial institutions (including, but
not limited to, under the terms of the Second Amended and Restated Credit
Agreement among the Company, the lenders executing a signature thereto and
NationsBank, National Association, as Agent, dated as of March 11, 1998, as may
be amended from time to time (the "Credit Facility")), an agency or agencies of
the federal government or other institutions engaged in the business of lending
money, unless expressly stated not to be superior in right of payment to the
Convertible Notes; provided that "Senior Indebtedness" shall in any case
include all amounts owing under or pursuant to the Credit Facility to the
extent of the current available credit facilities in the maximum principal
amount at anytime outstanding of $28,000,000.00 which shall include a Term Loan
Facility (as defined in the Credit Facility) and a Revolving Credit Facility
(as defined in the Credit Facility), including a letter of credit subfacility
of up to $5,000,000 together with all interest and other amounts due or payable
thereunder, notwithstanding the Company's compliance or non-compliance with
Section 9.1; and provided, further, that "Senior Indebtedness" shall in any
case not include any amounts owing to Lumen Technologies, Inc. or to a
Subsidiary or an Affiliate of the Company or Lumen Technologies, Inc. (other
than holders of the Convertible Notes), notwithstanding the Company's
compliance or non-compliance with Section 9.1 hereof.
I.A.6. REPRESENTATIONS OF THE PURCHASERS.
I.A.6.1. Binding Agreement. Each Purchaser has full power, authority
and legal capacity to (i) execute, deliver and perform this Agreement and (ii)
consummate the transactions contemplated hereby. This Agreement has been duly
authorized, approved, executed and delivered by each Purchaser. This Agreement
constitutes the legal, valid and binding obligation of each Purchaser
enforceable against it in accordance with its terms.
I.A.6.2. Acquisition of Shares for Own Account; Restrictions on
Transfer. Each Purchaser is acquiring the Convertible Notes, and to the extent
acquired, the Shares and the Additional Shares, for investment and not with a
view to the sale or distribution thereof, and is acquiring such Convertible
Notes for its own account and not on behalf of others and has not
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granted any other person any right or option or any participation or beneficial
interest in any of the Convertible Notes and the Shares and the Additional
Shares. Each Purchaser acknowledges its understanding that the Convertible
Notes, the Shares and the Additional Shares constitute restricted securities
within the meaning of Rule 144 of the Commission under the Securities Act of
1933, as amended (the "Securities Act"), and that none of such Convertible
Notes, the Shares and the Additional Shares may be sold except pursuant to an
effective registration statement under the Securities Act or in a transaction
exempt from registration under the Securities Act, and acknowledges that it
understands the meaning and effect of such restriction. Each Purchaser has
sufficient knowledge and experience in financial and business matters so that
it is capable of evaluating the risks and merits of the acquisition of the
Convertible Notes. Each Purchaser is aware of and has investigated the
Company's business, management and financial condition, has had a satisfactory
opportunity to ask questions of, and receive answers from, agents and employees
of the Company concerning the business of the Company and the terms and
conditions of this transaction and has had access to such other information
about the Company as each Purchaser deemed necessary or desirable to reach an
informed and knowledgeable decision to purchase the Convertible Notes, the
Shares and the Additional Shares.
I.A.6.3. Accreditation. Each Purchaser is an "accredited investor"
within the meaning of Rule 501 of the rules and regulations of the Commission
promulgated under the Securities Act, and has the financial ability to bear the
economic risk of its acquisition of the Convertible Notes, the Shares and the
Additional Shares. The principal place of business of each of the Purchasers is
New York. Each Purchaser hereby agrees to provide the Company and its counsel
with such information as is reasonably necessary to enable the Company to file
a Form D with the Commission with respect to the transactions contemplated
hereby. In furtherance of the foregoing, each Purchaser acknowledges that a
purchase of the Convertible Notes is only available to a Purchaser who is an
"accredited investor."
I.A.6.4. No Brokers. The Purchaser has not employed any financial
advisor, broker or finder and has not incurred (and will not incur) any
broker's, finder's, investment banking or similar fees, commissions or expenses
in connection with the transactions contemplated by this Agreement.
I.A.6.5. Compliance with Securities Laws. Each of the Purchasers shall
comply in all material respects with all applicable requirements of federal and
state securities laws.
I.A.7. CONDITIONS TO OBLIGATIONS.
I.A.7.1. The Purchasers' obligation to purchase the Convertible Notes
hereunder is subject to satisfaction of the following conditions at the
Closing:
(a) Accuracy of Representations and Warranties. The representations
and warranties of the Company herein or in any certificate or document
delivered pursuant hereto shall be true and correct on and as of the Closing
Date with the same effect as though made on and as of the Closing Date.
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(b) Performance; No Default. The Company shall have performed and
complied, in each case in all material respects, with all material agreements
and conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and at the time of the Closing, no Event
of Default shall have occurred and be continuing.
(c) Compliance with Securities Laws. The offering and sale of the
Convertible Notes at or prior to the Closing under this Agreement shall have
complied in all material respects with all applicable requirements of federal
and state securities laws.
(d) Consents. The Company shall receive the consent of the lenders
under the Credit Facility.
(e) Legal Opinion. Each Purchaser shall have received from counsel for
the Company an opinion with respect to the matters set forth in Exhibit D,
which opinion shall be addressed to the Purchasers, dated the date of the
Closing, and in form and substance reasonably satisfactory to the Purchasers.
(f) Officer's Certificate. The Purchasers shall have received a
certificate of an officer of the Company, dated the date of the Closing,
stating that the conditions specified in this Section 7.1 have been fully
satisfied.
(g) Expenses. At the Closing, the Company shall have paid, or
reimbursed the Purchasers for, the Purchasers' fees and expenses to the extent
provided in Section 25 hereof.
(h) Convertible Notes. The Company shall have delivered to each
Purchaser a Convertible Note in the aggregate principal amount set forth
opposite such Purchaser's name on Exhibit A hereto.
(i) Secretary's Certificate. Each of the Purchasers shall have
received a certificate of the Secretary of the Company (in form and substance
satisfactory to the Purchasers) certifying (i) that attached thereto are true
and complete copies of the certificate of incorporation and by-laws of the
Company, (ii) that attached thereto are true and complete copies of the
resolutions of the Board of Directors of the Company authorizing the execution,
delivery and performance of this Agreement and any other documents, instruments
and certificates required to be executed by it in connection herewith and
approving the consummation of the transactions in the manner contemplated
hereby including, but not limited to, the authorization and issuance of the
Convertible Notes and the Common Stock issuable on conversion thereof and the
reservation thereof, (iii) the names and true signatures of the officers of the
Company signing this Agreement and all other documents to be delivered in
connection with this Agreement, and (iv) such other matters as the Purchasers
may reasonably request.
(j) Other Documents. The Purchasers shall have received such other
documents as the Purchaser may reasonably require.
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Any condition specified in this Section 7.1 may be waived if consented
to by each Purchaser.
I.A.7.2. The Company's obligation to issue the Convertible Notes
hereunder is subject to satisfaction of the following conditions at the
Closing:
(a) Accuracy of Representations and Warranties. The representations
and warranties of each of the Purchasers herein or in any certificate or
document delivered pursuant hereto shall be true and correct on and as of the
Closing Date with the same effect as though made on and as of the Closing Date.
(b) Performance; No Default. Each Purchaser shall have performed and
complied, in each case in all material respects, with all material agreements
and conditions contained in this Agreement required to be performed or complied
with by it prior to or at the Closing and at the time of the Closing, no Event
of Default shall have occurred and be continuing.
(c) Consents. The Company shall have received the consent of the
lenders under the Credit Facility.
(d) Loan Proceeds. At the Closing, the Purchasers shall have delivered
to the Company a certified or official bank check(s) or wire transfer(s) in an
aggregate amount of $7,000,000 payable to the order of the Company in
immediately available funds.
(e) Other Documents. The Company shall have received such other
documents as the Company may reasonably require.
Any condition specified in this Section 7.2 may be waived if consented
to by the Company.
I.A.8.2 AFFIRMATIVE COVENANTS.
I.A.8.1. Office for Payment, Exchange and Registration. So long as any
of the Convertible Notes are outstanding, the Company will maintain an office
or agency in the United States where the Convertible Notes may be presented for
payment, conversion, exchange or registration of transfer as provided in this
Agreement. Such office or agency initially shall be the office of the Company
set forth in Article 17 hereof, which place may thereafter from time to time be
changed by notice to the holders of all Convertible Notes then outstanding.
I.A.8.2. Notices. The Company will give notice to all holders of
Convertible Notes within 10 Business Days after it learns of the existence of
any Event of Default or any event which, with the giving of notice or the lapse
of time or both, would become an Event of Default, describing the same and the
period of existence thereof, and what action the Company has taken, is taking
or proposes to take with respect thereto.
11
I.A.8.3. Corporate Existence, Etc. The Company will at all times
preserve and keep in full force and effect its corporate existence, and rights
and franchises deemed material to its business, and those of each of its
material Subsidiaries.
I.A.8.4. Payment of Taxes. The Company will, and will cause each of
its Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or profits before any penalty or interest accrues
thereon, provided that no such tax, assessment, charge or claim need be paid if
being contested in good faith by appropriate proceedings promptly initiated and
diligently conducted and if such reserve or other appropriate provision, if
any, as shall be required by generally accepted accounting principles shall
have been made therefor.
I.A.8.5. Maintenance of Properties; Insurance. The Company will
maintain or cause to be maintained in reasonably good repair, working order and
condition, normal wear and tear excepted, all material properties used in the
business of the Company and its Subsidiaries. The Company will maintain or
cause to be maintained, with financially sound and reputable insurers,
insurance with respect to its properties and business and the properties and
business of its Subsidiaries against loss or damage of the kinds customarily
insured against by corporations of established reputation engaged in the same
or similar business and similarly situated, of such types and in such amounts
as are customarily carried under similar circumstances by such other
corporations.
I.A.8.6. Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
except where (i) noncompliance could not reasonably be expected to have a
material adverse effect on the business, operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or (ii) the
necessity of compliance therewith is contested in good faith by appropriate
proceedings.
I.A.8.7. Listing and Reservation of Shares. The Company shall (i) with
reasonable promptness following the Closing Date prepare and file with the
NASDAQ National Market (as well as any other national securities exchange or
market on which the Common Stock is then listed) an additional shares listing
application or a letter acceptable to the NASDAQ Market System covering and
listing all Shares and the Additional Shares, (ii) take all reasonable steps
necessary to cause the Shares and the Additional Shares to be approved for
listing in the NASDAQ Market System (as well as on any other national
securities exchange or market on which the Common Stock is then listed) as soon
as possible thereafter, and (iii) provide to the Purchasers evidence of such
listing, and the Company shall take all steps reasonably necessary to maintain
the listing of its Common Stock on such market or exchange.
I.A.8.8. Conversion Procedures. Exhibit C attached hereto sets forth
the procedures with respect to the conversion of the Convertible Notes,
including the form of conversion notice to be provided upon conversion and
instructions as to the procedures for conversion.
12
I.A.8.9. No Violation of Applicable Law. Notwithstanding any provision
of this Agreement to the contrary, if the redemption of Convertible Notes or
Shares otherwise required under this Agreement would be prohibited by law or
contractual restrictions, such redemption shall be effected as soon as it is
permitted under such law or such contractual restriction; provided, that
interest payable by the Company with respect to any such redemption shall
continue to accrue in accordance with Section 12, to the extent applicable.
I.A.8.10. Press Releases. The press release or other public
announcement concerning this Agreement or the transactions contemplated hereby
will be mutually satisfactory to the Company and the Purchaser, except that the
Company may issue such press release or make public statements as they
reasonably believe to be required by law.
I.A.9. NEGATIVE COVENANTS.
The Company covenants and agrees that it shall not without the written
consent of 50% in principal amount of the Convertible Notes, take any of the
following actions:
I.A.9.1. The Company shall not create, incur or assume any
Consolidated Funded Indebtedness, unless following the creation, incurrence or
assumption of such Consolidated Funded Indebtedness, the Company's Consolidated
Leverage Ratio (as defined in Section 24 hereof) is less than or equal to 3.50
to 1.00.
I.A.9.2. The Company shall not: (a) declare any dividends (other than
dividends payable in capital stock of the Company) on any shares of its capital
stock (other than the Company's Series A Preferred Stock and Series B Preferred
Stock); (b) except in connection with the Company's Series A Preferred Stock
and Series B Preferred Stock, apply its property or assets to the purchase,
redemption or other retirement of, or set apart any sum for the payment of any
dividends on, or for the purchase, redemption or other retirement of, or make
any other distribution by reduction of capital or otherwise in respect of, any
shares of any class of capital stock of the Company.
I.A.9.3. The Company shall not consummate a Merger (as defined in
Section 24 hereof) with and into any other Person or permit any other Person to
effect a Merger into it; provided, that the Company may effect any such Merger
if in connection therewith the holders of the Convertible Notes are given the
option, exercisable within twenty days after written notice of such proposed
Merger, to have their Convertible Notes redeemed in full in connection with and
upon consummation of such Merger or (B) to have their Convertible Notes assumed
by the successor entity in connection with and upon consummation of such
Merger.
I.A.9.4. The Company shall not, and shall use its best efforts to
ensure that any Affiliate of the Company shall not, sell, offer for sale or
solicit offers to buy any security (as defined in Section 2 of the Securities
Act) that is integrated with the offer or sale of the Convertible Notes or the
Shares in a manner that would require registration under the Securities Act of
the sale of the Convertible Notes.
13
I.A.9.5. The Company shall not (i) register any shares of Common
Stock, except as described in Schedule 4.10, or (ii) issue securities in
reliance upon an exemption from registration under Regulation S of the
Securities Act, in each case for the earlier of (x) 75 days following the date
that the Registration Statement has been declared effective by the Commission
or (y) 225 days from the Closing Date.
I.A.10. DEFAULTS.
I.A.10.1. If any of the following events (herein called a "default" or
"defaults") shall occur and be continuing:
(a) The Company fails (i) to pay the principal amount of the
Convertible Notes when due, whether at maturity, upon redemption, upon
acceleration or otherwise, as applicable, or (ii) to pay any
installment of interest hereon or Conversion Penalty, if any, when due
and, in the case of this clause (ii) of this paragraph only, such
failure continues for a period of ten (10) days after the due date
therefor;
(b) The Company fails to issue shares of Common Stock to a
Purchaser upon exercise by such Purchaser of the conversion rights of
the Purchaser in accordance with the terms of this Agreement and after
the Deadline Day;
(c) The Company fails to comply with the provisions of Section 9
of this Agreement in any material respect;
(d) Any material representation or warranty of the Company made
herein or in any agreement, statement or certificate given in writing
pursuant hereto shall be false or misleading in any material respect
when made; provided that any purported failure of the Company to
comply with the 20% Rule shall not be deemed to breach any such
representation, warranty, statement or certificate of the Company, so
long as Section 11.12 hereof is complied with by the Company;
(e) The Company or any Subsidiary shall commence a voluntary case
or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking
the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, or
shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment
for the benefit of creditors, or shall fail generally to pay its debts
as they become due or shall admit in writing its inability generally
to pay its debts as the become due;
(f) An involuntary case or other proceeding shall be commenced
against the Company or any Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency or other similar law
14
now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of sixty
(60) consecutive days;
then, or at any time thereafter, and as long as such default is continuing for
fourteen (14) days after written notice of such default has been delivered to
the Company by the majority in interest of the Purchasers, (except for the
events described in Section 10(e) and (f) for which no notice shall be given
and no grace period shall be provided) or unless such default shall have been
waived in writing by the majority in interest of the Purchasers (which waiver
shall not be deemed to be a waiver of any subsequent default) the majority in
interest of the Purchasers may declare an event of default (an "Event of
Default") and the Company shall pay (subject to the provisions of Article 5
hereof) to the Purchasers (A) an amount equal to the sum of (1) the principal
amount of the Convertible Notes then outstanding and (2) all other amounts
payable hereunder, together with (B) the Additional Shares (as defined in
Section 24 hereof) applicable to such principal amount (except with respect to
any principal amount to which the Redemption Price is applicable), all of which
shall immediately become due and payable, without demand, presentment or
notice, all of which hereby are expressly waived, together with all costs,
including, without limitation, reasonable legal fees and expenses of
collection, and the Purchasers shall be entited to exercise all other rights
and remedies available at law or in equity, subject, however, to the provisions
of Article 5 hereof.
I.A.11. CONVERSION.
I.A.11.1. Conversion. On or after the date hereof, and prior to the
maturity of the Convertible Notes or, if sooner, the Redemption Date (as
hereinafter defined), the holder of a Convertible Note shall have the right, at
the option of such holder (whether or not payment upon the Convertible Notes is
prohibited by the subordination provisions of Article 5) to convert, subject to
the terms and provisions of this Article 11, all or, subject to the provision
contained in this Section 11.1, any portion of the Convertible Notes held by
such holder into the number of fully paid and nonassessable Shares as shall be
equal to the aggregate principal amount of Convertible Notes then being
converted divided by the Conversion Price then in effect, by delivery of the
Convertible Notes to the Company at the office of the Company provided for in
Section 8.2 herein; provided, however, that no holder of a Convertible Note
shall be permitted to exercise its rights with respect to partial conversions
as herein described unless each such holder of a Convertible Note elects to
convert a minimum of at least $100,000 principal amount of its Convertible Note
or any additional amounts in multiples thereof; provided, further, that the
Company shall not be required to issue any fractional shares in connection with
any conversion pursuant to this Article 11. Each such conversion shall be made
as specified hereunder and in accordance with the procedures and form of
conversion notice ("Conversion Notice") set out in Exhibit C.
I.A.11.2. Delivery of Stock Certificates; Time Conversion Effective;
No Adjustment for Interest or Dividends. As promptly as practicable after the
receipt of a Conversion Notice from a holder of Convertible Notes (and in any
case within three Trading Days after the Conversion Date (as defined below)),
the Company shall deliver or cause to be delivered to or upon
15
the written order of the holder of the Convertible Note so surrendered,
certificates representing the number of fully paid and nonassessable Shares
into which the Convertible Note is being converted. Subject to the following
provisions of this Section 11.2, such conversion shall be deemed to have been
made at the close of business on the date of the Company's receipt of a
properly completed and duly executed Conversion Notice (the "Conversion Date"),
so that the rights of the holder of such Convertible Note as a holder thereof,
shall cease at such time and the person or persons entitled to receive any of
the Shares upon conversion of the Convertible Notes shall be treated for all
purposes as having become the record holder or holders of such Shares at such
time; provided, however, that no such surrender on any date when the stock
transfer books of the Company shall be closed, shall be effective to constitute
the person or persons entitled to receive Shares upon such conversion as the
record holder or holders of such Shares on such date, but such surrender shall
be effective to constitute the person or persons entitled to receive such
Shares as the record holder or holders thereof for all purposes at the close of
business on the next succeeding day on which such stock transfer books are open
or the Company is required to convert Convertible Notes. If such certificate or
certificates are not delivered to or as directed by the applicable holder or
before the fourth (4th) Trading Day after the Conversion Date, the Company
shall pay to such holder, in cash, as liquidated damages and not as a penalty,
$1,500 for each Trading Day after such fourth Trading Day until the eleventh
(11th) Trading Day (which day is referred to herein as the "Deadline Day")
after the Conversion Date (being a maximum of 8 Trading Days). If the Company
fails to deliver to the holder such certificate or certificates pursuant to
this Section on or prior to the Deadline Day, the Company shall pay to such
holder the Conversion Penalty within Seven (7) Business Days of the Company's
receipt of documents, invoices or other reasonable evidence prepared by such
holder supporting the calculation of the Conversion Penalty.
If the day for the exercise of the conversion right shall not be a
Trading Day, then such conversion right will automatically be deemed to be
exercised on the next succeeding day which is a Trading Day.
I.A.11.3. [INTENTIONALLY OMITTED].
I.A.11.4. Adjustment of Conversion Price. The Conversion Price shall
be subject to adjustment as of the Closing Date as follows:
(a) In case the Company shall, after the date hereof, (i) pay a
stock dividend or make a distribution in shares of its capital stock
(whether shares of its Common Stock or of capital stock of any other
class), (ii) subdivide its outstanding shares of Common Stock, (iii)
combine its outstanding shares of Common Stock into a smaller number
of shares, or (iv) issue by reclassification of its shares of Common
Stock any shares of capital stock of the Company, the Conversion Price
in effect immediately prior to such action shall be adjusted so that
the holder of a Convertible Note thereafter surrendered for conversion
shall be entitled to receive an equivalent number of shares of capital
stock of the Company which he would have owned immediately following
such action had such Convertible Note been converted immediately prior
thereto. Any adjustment made pursuant to this subsection (a) shall
become effective immediately after the record date in the case of a
dividend or
16
distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification.
(b) In any case in which this Section 11.4 shall require that an
adjustment be made immediately following a record date or an effective
date, the Company may elect to defer (but only until five Business
Days following the mailing by the Company to the holders of
Convertible Notes of the certificate required by subsection (h) of
this Section 11.4) issuing to the holder of any Convertible Note
converted after such record date or effective date the shares of
Common Stock issuable upon such conversion over and above the shares
of Common Stock issuable upon such conversion on the basis of the
Conversion Price prior to adjustment, and paying to such holder any
amount of cash in lieu of a fractional share.
(c) No adjustment in the Conversion Price shall be required to be
made unless such adjustment would require an increase or decrease of
at least one percent (1%) in such price; provided, however, that any
adjustments which by reason of this subsection (g) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Section 11.4 shall
be made to the nearest cent.
(d) Whenever the Conversion Price is adjusted as provided in
Section 11.4(a) herein, the Company will promptly mail to the holders
of the Convertible Notes, a certificate of the Company's Treasurer or
Chief Financial Officer setting forth the Conversion Price as so
adjusted and a brief statement of facts accounting for such
adjustment.
(e) Irrespective of any adjustment or change in the Conversion
Price and the number of Shares actually purchasable under the
Convertible Notes, the Convertible Notes theretofore and thereafter
issued may continue to express the Conversion Price per Share and the
number of Shares purchasable thereunder as the Conversion Price per
Share and the number of Shares purchasable as expressed upon the
Convertible Notes when initially issued.
I.A.11.5. Company's Consolidation or Merger. If the Company shall at
any time consolidate or merge with and into another corporation, (a) the
Company shall give at least twenty (20) days prior written notice to the
holders of the Convertible Notes of such consolidation or merger and the terms
thereof, and (b) the holder of a Convertible Note shall thereafter be entitled
to receive, upon the conversion thereof, the securities or property to which a
holder of the number of Shares then deliverable upon the conversion thereof
would have been entitled upon such consolidation or merger, and the Company
shall take such steps in connection with such consolidation or merger as may be
necessary to assure such holder that the provisions of this Agreement shall
thereafter be applicable, as nearly as reasonably may be in relation to any
securities or property thereafter deliverable upon the conversion of the
Convertible Note including, but not limited to, obtaining a written
acknowledgement from the continuing corporation or other appropriate
corporation of its obligation to supply such securities or property upon such
conversion and to honor the obligations under this Agreement
17
and the Convertible Notes. A sale of all or substantially all the assets of the
Company shall be deemed a consolidation or merger for the foregoing purposes as
well as Section 9.3 hereof.
I.A.11.6. Reserve of Sufficient Shares. The Company will reserve and
keep available a sufficient number of shares of its Common Stock to satisfy the
conversion requirements of all outstanding Convertible Notes and the Additional
Shares. The Company will take all such action as may be necessary to insure
that all Shares issued upon conversion of the Convertible Notes and the
Additional Shares will be duly and validly authorized and issued and fully paid
and nonassessable.
I.A.11.7. Taxes on Conversion. The issuance of certificates for Shares
upon the conversion of Convertible Notes shall be made without charge to the
holders of Convertible Notes converting such Convertible Notes for any issue or
stamp tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such names as
may be directed by, the holders of the Convertible Notes converted; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
such certificate in a name other than that of the holder of the Convertible
Note converted, and the Company shall not be required to issue or deliver such
certificates unless or until the person or persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid.
I.A.11.8. Cancellation of Converted Convertible Notes. All Convertible
Notes which have been converted in full shall be cancelled by the Company and
no Convertible Notes shall be issued in lieu thereof.
I.A.11.9. Notice to Holders of Convertible Notes. In case at any time:
(a) the Company shall take any action which would require an
adjustment in the Conversion Price pursuant to Section 11.4(a); or
(b) there shall be any capital reorganization or reclassification
of the Common Stock (other than a change in par value or from par
value to no par value or from no par value to par value of the Common
Stock), whether or not such reorganization or reclassification results
in an adjustment in the Conversion Price, or any consolidation or
merger to which the Company is a party and for which approval of any
stockholders of the Company is required, or any sale or transfer of
all or substantially all of the assets of the Company; or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice
to the holders of the Convertible Notes, not less than twenty (20) days before
any record date or other date set for definitive action, of the date on which
such adjustment, distribution, reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up shall take place,
18
as the case may be. Such notice shall also set forth such facts as shall
indicate the effect of such action (to the extent such effect may be known at
the date of such notice) on the current Conversion Price and the kind and
amount of the Shares and other securities and property deliverable upon
conversion of the Convertible Notes. Such notice shall also specify the date as
of which the holders of the Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such adjustment, distribution, reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be (on which date, in the event of voluntary or involuntary dissolution,
liquidation or winding up of the Company, the right to convert the Convertible
Notes into Shares shall terminate).
Without limiting the obligation of the Company to provide notice to
the holders of Convertible Notes or Shares of corporate action hereunder, it is
agreed that failure of the Company to give such notice shall not invalidate
such corporate action of the Company.
I.A.11.10. Certain Transactions. Notwithstanding anything to the
contrary contained in this Agreement or in the Convertible Notes, in the event
that a Purchaser of Convertible Notes or any of such Purchaser's Associates or
Affiliates have initiated, engaged in, or completed any Arbitrage Transaction,
then the Purchaser shall promptly give notice to the Company ("Arbitrage
Notice") to convert that principal amount of Convertible Notes which when
converted into Shares of Common Stock shall equal the same number of Shares of
Common Stock that is subject to the Arbitrage Transaction. In the event that a
Purchaser does not provide the Company with the Arbitrage Notice within 90 days
of an Arbitrage Transaction such holder shall be deemed to automatically and
immediately have elected on the date of such Arbitration Transaction to convert
that principal amount of Convertible Notes which when converted into Shares of
Common Stock shall equal the same number of Shares of Common Stock that is
subject to such Arbitrage Transaction.
I.A.11.11. Optional Company Conversion.
(a) In the event that at any time following the sixtieth (60th) day
after the effectiveness of the Registration Statement, the Closing Price of the
Common Stock, as reported on NASDAQ, or if not listed on NASDAQ, on any
securities exchange on which Common Stock is then listed, for 20 consecutive
Trading Days (at any time after the effectiveness of the Registration
Statement) is in excess of $7.0875 per share, following notice pursuant to
Section 11.11(b) given at any time thereafter to all holders of Convertible
Notes, as provided below, the Company may at its option, require the holders of
the Convertible Notes to convert in whole or in part the Convertible Notes into
Shares of Common Stock, as herein described; provided, that in the event of a
conversion pursuant to the provisions of this Section 11.11, the holders of the
Convertible Notes shall be entitled to receive registered Shares of the Common
Stock. The holder of any Convertible Notes shall be required to convert such
Convertible Notes held by such holder into the number of fully paid and
nonassessable Shares as shall be equal to the aggregate principal amount of
Convertible Notes then being converted divided by the Conversion Price then in
effect, by delivery of the Convertible Notes to the Company at the office of
the Company provided for in Section 8.1 herein. The Company shall not be
required to issue any fractional shares in connection with
19
any conversion pursuant to this Article 11. In the event that any Purchaser
shall be required to convert the Convertible Notes held by it in an amount less
than the entire aggregate principal amount outstanding of such Convertible
Notes held by such Purchaser, the Company shall, or shall direct its transfer
agent to, issue to such Purchaser certificates for the Shares of Common Stock
for which such Convertible Note is being converted in such denominations as are
required for delivery to such Purchaser, and the Company shall, or shall direct
its transfer agent to, thereupon deliver such certificates to or in accordance
with the instructions of such Purchaser, and the Company shall issue to such
Purchaser a new Convertible Note, duly executed by the Company, in form and
substance identical to the Convertible Note surrendered by such Purchaser, for
the balance of the aggregate principal amount of Convertible Notes that have
not been so converted.
(b) Company Conversion Procedures. At least 10 days prior to the date
fixed for any conversion of Convertible Notes pursuant to Section 11.11 above
(the "Company Conversion Date"), written notice shall be sent to each holder of
Convertible Notes, notifying such holder of the conversion to be effected,
specifying the Company Conversion Date, and calling upon such holder to
surrender to the Company, in the manner and at the place designated, his
Convertible Notes to be converted (the "Company Conversion Notice"). On or
after the Company Conversion Date, each holder of Convertible Notes to be
converted shall surrender to the Company the Convertible Notes, in the manner
and at the place designated in the Company Conversion Notice, and thereupon the
Shares of Common Stock shall be delivered to the person whose name appears on
such Convertible Notes as the owner thereof and each surrendered Convertible
Notes shall be cancelled.
I.A.11.12. Shares Issuance Limitation. If, on any date of requested
conversion, redemption or repayment, as the case may be, (A) the Common Stock
is then listed for trading on the NASDAQ National Market, NASDAQ Small Cap
Market, the American Stock Exchange, or the New York Stock Exchange, or if
rules similar to Rule 4460(i) of the NASDAQ Stock Market, Inc. (or any
successor or replacement provision thereof, the "20% Rule") are applicable to
the over-the-counter market or an exchange or market to which the Common Stock
is then trading and the Company's Common Stock is listed for trading on such
market or exchange, (B) the 20% Rule is applicable on that date, (C) the
Conversion Price then in effect is such that the aggregate number of shares of
Common Stock that would then be issuable upon conversion of all outstanding
Convertible Notes or through the issuance of Additional Shares, together with
any shares of Common Stock previously issued upon conversion of the Convertible
Notes or through the issuance of Additional Shares, would equal or exceed 20%
of the number of shares of Common Stock outstanding on the Closing Date (the
"Issuable Maximum"), and (D) the Company has not previously obtained
Shareholder Approval (as defined below), then the Company shall issue to any
holder so requesting conversion of Convertible Notes its pro rata portion of
the Issuable Maximum in the same ratio that the principal amount of Convertible
Notes held by any such holder bears to the aggregate outstanding principal
amount of all of the Convertible Notes then outstanding and, with respect to
any shares of Common Stock that otherwise would have been issuable to such
holder in respect of the conversion notice at issue hereunder in excess of such
holder's pro rata portion of the Issuable Maximum (the "Surplus Amount"), the
Company shall
20
have the option to either (1) as promptly as possible, but in no event later
than 90 days after such requested Conversion Date, convene a meeting of the
holders of the Common Stock and use its reasonable efforts (which may include,
among other things, hiring a proxy solicitor) to obtain the Shareholder
Approval and the approval of the Company's Board of Directors or (2) in lieu of
issuing such Surplus Amount, redeem in cash that outstanding principal amount
of the Convertible Notes, which relates to such Surplus Amount, at a redemption
price equal 108% of the principal amount then being repaid or redeemed;
provided, that if the Company has elected to obtain Shareholder Approval under
clause (1) above, the holders of a majority of the outstanding principal amount
of Convertible Notes may request, in lieu of such meeting, that the Company
redeem each holder's Surplus Amount as set forth herein and provided, further
that if the Company fails for any reason to obtain such Shareholder Approval
within the time period set forth in (1) above, the Company shall be obligated
to redeem the principal amount of Convertible Notes not converted as a result
of the provisions of this Section in accordance with the provisions of clause
(2) above. "Shareholder Approval" means the approval by a majority of the total
votes cast on the proposal, in person or by proxy, at a meeting of the
shareholders of the Company held in accordance with the Company's Certificate
of Incorporation and by-laws, of the issuance by the Company of shares of
Common Stock exceeding the Issuable Maximum as a consequence of the conversion
of Convertible Notes into Common Stock at a price less than the greater of the
book or market value on the Closing Date as and to the extent required pursuant
to Rule 4460(i) of the NASDAQ Stock Market or Rule 713 of the American Stock
Exchange (or any successor or replacement provision thereof), as applicable.
Notwithstanding anything to the contrary contained herein, in the event that
the Company redeems any such holder's Surplus Amount of the Convertible Notes
pursuant to this Section 11.2, no Additional Shares will be issued by the
Company in respect of such amount being redeemed or repaid.
I.A.12. MANDATORY REDEMPTION OF CONVERTIBLE NOTES BY THE COMPANY.
The Company shall not directly or indirectly, call, prepay, redeem, or
repurchase, any Convertible Notes or any portion thereof except as set forth in
this Article 12 or in Article 11 or in Section 9.3.
I.A.12.1. Mandatory Redemption by the Company. (a) The Company shall
redeem, subject to the provisions contained in Article 5 hereof, the
Convertible Notes (if not previously converted) at the Redemption Price
therefor pursuant to the terms of this Section 12 on the one hundred ninetieth
(190th) day following the date of issuance of the Convertible Notes in the
event that the Registration Statement has not been declared effective by the
SEC within one hundred and eighty (180) days after the Closing Date in
accordance with the provisions of Article 13 hereof.
(b) The Company shall redeem, subject to the provisions contained in
Article 5 hereof, the Convertible Notes (if not previously converted) pursuant
to the terms of this Section 12 within twenty days after the date that the
Company's Common Stock shall
21
cease to be listed on the NASDAQ National Market, the NASDAQ
Small Cap Market, the NYSE or the AMEX.
I.A.12.2. Notice of Redemption. The Company shall redeem any
Convertible Notes pursuant to Section 12.1 by giving notice of such redemption
(the "Redemption Notice"), by personal delivery, overnight courier, certified
mail or by facsimile, signed by an authorized officer, to the holders of
Convertible Notes, not less than three (3) days prior to the date upon which
the redemption is to be made (the "Redemption Date"). The Redemption Notice
shall specify (i) the aggregate principal amount of the Convertible Notes to be
redeemed, (ii) the date of such redemption, and (iii) the Redemption Price, if
applicable.
I.A.12.3. Partial Redemption. In the event of a partial redemption by
the Company pursuant to this Article 12, the aggregate principal amount of each
redemption of Convertible Notes pursuant to Section 12.1 hereof, shall be
allocated among the Convertible Notes at the time outstanding, in proportion,
as nearly as practicable, to the respective unpaid principal amounts of such
Convertible Notes. Any redemption required to be made hereunder which cannot be
made in full, or which can be made only in part, shall be made on such date to
the extent possible, and the balance thereof shall be made as soon as permitted
thereafter.
I.A.12.4. Surrender of Convertible Notes Upon Redemption. In the event
that any Convertible Notes shall be surrendered to the Company as provided in
this Article 12, interest shall cease to accrue upon such Convertible Notes so
surrendered.
I.A.13. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
I.A.13.1. Transferability. The holders of the Convertible Notes are
only entitled to transfer the Convertible Notes, subject to strict compliance
with all applicable laws, with the prior written consent of the Company, which
consent shall not be unreasonably withheld.
I.A.13.2. Legend. The Company may endorse on all Convertible Notes and
on all certificates evidencing Shares (issued upon conversion of the
Convertible Notes) and the Additional Shares an appropriate legend restricting
their transfer, which in the case of the Convertible Notes shall be in the
terms set out in Exhibit "B" hereto and in the case of the Shares and the
Additional Shares shall read as follows "THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE ACT OR AN
OPINION, IF REQUESTED, OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION
IS NOT REQUIRED UNDER THE ACT"; provided, that, no such legend shall be
endorsed on any Convertible Note, Shares or Additional Shares certificates
which, when issued, are no longer subject to the restrictions of this Article
13, and provided, further, that if an opinion of satisfactory counsel (in-house
counsel of a Purchaser shall be deemed satisfactory counsel) which opinion
shall be reasonably satisfactory to counsel for the
22
Company concludes that the legend is no longer necessary, the Company will
deliver upon transfer or exchange Convertible Notes or otherwise in connection
with this Agreement, stock certificates without such legends.
I.A.13.3. Covenant to Register. The Company shall use its best efforts
to promptly file a registration statement ("Registration Statement") within
sixty (60) days of the Closing Date, with the Commission to register the
Registrable Securities (as defined in Section 24 hereof) for an offering to be
made on a continuous or delayed basis pursuant to Rule 415 under the Securities
Act, if available to the Company, covering all of the Registrable Securities.
Such registration statement shall be on Form S-1 or Form S-3 under the
Securities Act, if such Forms are then available for use by the Company, or
another appropriate form that is available to the Company permitting
registration of such Registrable Securities for resale by the holders of
Convertible Notes, Shares or Additional Shares ("Holders") in the manner or
manners reasonably designated by them (including, without limitation, one or
more underwritten offerings). The Registration Statement shall state, to the
extent permitted by Rule 416 under the Securities Act, that it also covers such
indeterminate number of shares of Common Stock as may be required to effect
conversion of the Convertible Note to prevent dilution resulting from stock
splits, stock dividends or similar events. Except for the parties described on
Schedule 4.10 hereto, the Company shall not permit any securities other than
the Registrable Securities issuable in connection with the transactions
contemplated by this Agreement to be included in the Registration Statement.
The Company shall use its best efforts to cause the Registration Statement to
be declared effective by the Commission as soon as practicable after the filing
of the Registration Statement relating to such Shares. The Holder shall
cooperate with the Company to provide all such necessary information as shall
be required by the Company to file the Registration Statement. The Company
shall maintain the prospectus relating to the Registrable Securities effective
for so long as the Holder desires to dispose of the Shares, not to exceed a
period of four years from the date hereof. In the event that the Registration
Statement is not declared effective by the Commission within one hundred and
eighty (180) days after the Closing Date, then the Convertible Notes shall be
redeemed by the Company in accordance with the terms and conditions set forth
in Article Twelve.
I.A.13.4. Terms and Conditions of Registration. Except as otherwise
provided herein, in connection with any Registration Statement filed pursuant
to Sections 13.3 herein, the following provisions shall apply:
(i) All expenses in connection with the preparation and filing of a
Registration Statement filed pursuant to Sections 13.3 shall be borne solely by
the Company, except for any transfer taxes payable with respect to the
disposition of such Registrable Securities.
(ii) The Company shall use its reasonable efforts to cause all of the
Registrable Securities covered by such Registration Statement to be listed on
NASDAQ or on such other securities exchange as such shares may then be listed,
on which similar shares are listed for trading, if the listing of such
registered shares is permitted by such exchange.
23
(iii) Following the effective date of such Registration Statement, the
Company shall, upon the request of the Holders, forthwith supply such number of
prospectuses (including exhibits thereto and preliminary prospectuses and
amendments and supplements thereto) meeting the requirements of the Securities
Act and such other documents as are referred to in the prospectus as shall be
reasonably requested by the Holders to permit the Holders to make a public
distribution of their Shares.
(iv) The Company shall use its reasonable efforts to register the
Registrable Securities covered by any such registration statements filed
pursuant to Section 13.3 under such securities or Blue Sky laws in addition to
those in which the Company would otherwise sell shares, as the Holders shall
request, except that neither the Company nor the Holders shall for any such
purpose be required to execute a general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction where it is
not so qualified. The fees and expenses incurred in connection with such
registration shall be borne by the Company.
(v) The Holders shall cooperate fully with the Company and provide the
Company with all information reasonably requested by the Company for inclusion
in the registration statement or as necessary to comply with the Securities
Act.
(vi) The Company shall notify the Holders, at any time after
effectiveness when a prospectus relating thereto is required to be delivered
under the Securities Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of circumstances then existing (and upon receipt of such
notice and until a supplemented or amended prospectus as set forth below is
available, the Holders shall not offer or sell any securities covered by such
registration statement and shall return all copies of such prospectus to the
Company if requested to do so by it), and at the request of the Holders prepare
and furnish the Holders as promptly as practicable, a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such shares,
such prospectus shall not include an 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 not misleading in light of the circumstances then
existing.
13.5.Indemnification.
(i) In the event of the registration of any Registrable Securities of
the Company under the Securities Act pursuant to the provisions of Sections
13.3, the Company agrees to indemnify and hold harmless the Holders, each
underwriter, broker or dealer, if any, and their respective directors, officers
and employees, of such Shares, and each other person, if any, who controls the
holders of the Convertible Notes, the Shares or the Additional Shares (or a
permitted assignee thereof), such underwriter, broker or dealer within the
meaning of the Securities Act, from and against any and all losses, claims,
damages or liabilities (or actions in respect thereof), joint or several, to
which the Holders (and as applicable) its directors, officers or employees, or
such underwriter, broker or dealer or controlling person may become subject
under
24
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus relating to such Registrable Securities, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation under the Securities Act applicable to
the Company or relating to any action or inaction required by the Company in
connection with any such registration and will reimburse the Holders, each such
underwriter, broker or dealer and controlling person, and their respective
directors, officers or employees, for any legal or other expenses reasonably
incurred by the Holders or such underwriter, broker or dealer or controlling
person in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
such preliminary prospectus, such final prospectus or such amendment or
supplement thereto in reliance upon and in conformity with written information
furnished to the Company by the Holders and as applicable, such Holders'
directors, officers or employees, or such underwriter, broker, dealer or
controlling person for use in the preparation thereof. Such indemnity shall
remain in full effect irrespective of any investigation by any person
indemnified above.
(ii) In the event of the registration of any Registrable Securities of
the Holders under the Securities Act for sale pursuant to the provisions of
this Agreement, the Holders, jointly and severally, agree to indemnify and hold
harmless the Company, its directors, officers and employees, from and against
any losses, claims, damages or liabilities, joint or several, to which the
Company, its directors, officers or employees, may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities were
registered under the Securities Act, any preliminary prospectus or final
prospectus relating to such Registrable Securities, or any amendment or
supplement thereto, or arise out of or are based upon omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which untrue statement
or alleged untrue statement or omission or alleged omission was made therein in
reliance upon and in conformity with written information furnished to the
Company by the Holders for use in the preparation thereof. Such indemnity shall
remain in full effect irrespective of any investigation by any person
indemnified above.
(iii) Promptly after receipt by a person entitled to indemnification
under this Section 13.5 (for purposes of this Section 13.5, an "Indemnified
Party") of notice of the commencement of any action or claim relating to any
registration statement filed under Sections 13.3 or as to which indemnity may
be sought hereunder, such Indemnified Party will, if a claim for
indemnification hereunder in respect thereof is to be made against any other
party hereto (for purposes of this Section 13.5, an "Indemnifying Party"), give
written notice to
25
such Indemnifying Party of the commencement of such action or claim, but the
failure to so notify the Indemnifying Party will not relieve it from any
liability which it may have to any Indemnifying Party otherwise than pursuant
to the provisions of this Section 13.5 and shall also not relieve the
Indemnifying Party of its obligations under this Section 13.5, except to the
extent that the Indemnifying Party is damaged solely as a result of the failure
to give timely notice. In case any such action is brought against an
Indemnified Party, and it notifies an Indemnifying Party of the commencement
thereof, the Indemnifying Party will be entitled (at its own expense) to
participate in and, to the extent that it may wish, jointly with any other
Indemnifying Party similarly notified, to assume the defense with counsel
satisfactory to such Indemnified Party, of such action and/or to settle such
action and, after notice from the Indemnifying Party to such Indemnified Party
of its election so to assume the defense thereof, the Indemnifying Party will
not be liable to such Indemnified Party for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof, other than the reasonable cost of investigation; provided, however,
that no Indemnifying Party and no Indemnified Party shall enter into any
settlement agreement which would impose any liability on such other party or
parties without the prior written consent of such other party or parties.
(iv) Contribution. To the extent any indemnification by an
Indemnifying Party as set forth in this Section is applicable by its terms but
is prohibited or limited by law, the Indemnifying Party agrees to make the
maximum contribution with respect to any amounts for which it would otherwise
be liable under this Section to the fullest extent permitted by law. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the relative fault of each party, the
parties' relative knowledge of and access to information concerning the matter
with respect to which the claim was asserted, the opportunity to correct and
prevent any statement or omission and any other equitable considerations
appropriate under the circumstances; provided, that (a) no contribution shall
be made under circumstances where the maker would not have been liable for
indemnification under the fault standards set forth in this Section 13.5, (b)
no person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any other
person who was not guilty of such fraudulent misrepresentation and (c)
contribution by any seller of securities under the Registration Statement shall
be limited in amount to the proceeds received by such seller from the sale of
such securities.
I.A.13.6. Reports Under Exchange Act. With a view to making available
to the Purchasers the benefits of Rule 144, the Company agrees to:
(a) furnish to each Purchaser so long as such Purchaser owns
Registrable Securities, promptly upon request, (i) a copy of the most recent
annual or quarterly report of the Company and such other reports and documents
so filed by the Company and (ii) such other information as may be necessary to
permit the Purchasers to sell such securities pursuant to Rule 144 without
registration; and
(b) if at any time the Company is not required to file such reports
with the SEC, use its best efforts to, upon the request of a Purchaser, make
publicly available other information so long as is necessary to permit
publication by brokers and dealers of quotations for
26
the Common Stock and sales of the Registrable Securities in accordance with
Rule 15c2-11 under the Exchange Act.
I.A.13.7. Survival. The indemnity and contribution agreements
contained in this Article 13 shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement or any underwriting
agreement, (ii) any investigation made by or on behalf of any Indemnified Party
or by or on behalf of the Company and (iii) the consummation of the sale or
successive resales of the Shares.
I.A.14. REPLACEMENT OF CONVERTIBLE NOTES.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Convertible Note and, in the case of
any such loss, theft, or destruction, upon delivery of a bond of indemnity
satisfactory to the Company (provided that, in the case of any Purchaser, the
written Affidavit of Loss and undertaking of such Purchaser to indemnify the
Company shall be satisfactory to the Company) or in the case of any such
mutilation, upon surrender and cancellation of such Convertible Note, the
Company will issue a new Convertible Note of like tenor as if the lost, stolen,
destroyed or mutilated Convertible Note were then surrendered for exchange in
lieu of such lost, stolen, destroyed or mutilated Convertible Note.
I.A.15. AMENDMENT AND WAIVER.
Except as set forth in Article 5, this Agreement and the Convertible
Notes may be amended (or any provision thereof waived) with the consent of the
Company and the Purchasers holding in excess of fifty percent (50%) in
aggregate principal amount of the Convertible Notes then outstanding. The
Company and each holder of a Convertible Note then or thereafter outstanding
shall be bound by any amendment or waiver effected in accordance with the
provisions of this Article, whether or not (y) any such holder consented to
such amendment or waiver or (z) such Convertible Note shall have been marked to
indicate such modification, but any Convertible Note issued thereafter shall
bear a notation as to any such modification. Promptly after obtaining the
written consent of the holders herein provided, the Company shall transmit a
copy of such modification to all of the holders of the Convertible Notes then
outstanding.
I.A.16. HOME OFFICE PAYMENT.
The Company will make payments of principal and any other cash
payments required pursuant to the terms of this Agreement by check payable to
the order of the holder of any such Convertible Notes duly mailed or delivered
to such holder at the address of such holder specified in Exhibit "A", or at
such other address as such holder may designate in writing, or , if requested
by any holder of the Convertible Notes, by wire transfer to its (or its
nominee's) account at any bank or trust company in the United States of
America, notwithstanding any contrary provisions herein or in any Convertible
Note with respect to the place of payment. All such payments shall be made in
immediately available funds. The Purchasers agree that, before any such
Convertible Note is assigned or transferred, the Purchasers will make or cause
to be made a notation thereon of principal payments previously made thereon and
of the date to which interest
27
thereon has been paid and will notify the Company of the name and address of
the transferee of such Convertible Note if such name and address are known to
such Purchaser.
I.A.17. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered by
courier or mailed express mail or transmitted by telex, facsimile, or other
means of electronic transmission:
(a) if to a Purchaser or its nominee, at such Purchaser's address as
set forth in Exhibit "A" hereto, or at such other address as may have been
furnished to the Company by a Purchaser in writing; or
(b) if to any other holder of a Convertible Note, at such address as
the payee thereof shall have designated to the Company by a written notice
stating that such holder has acquired such Convertible Note and designating
such an address, or at such other address as may have been furnished to the
Company by such holder in writing; or
(c) if to the Company, at 555 Theodore Fremd Avenue, Suite B-302, Rye,
New York 10580 (fax number (914) 967-9400; Attention: President), or at
such other address as may have been furnished to the Purchasers or other
holders of Convertible Notes in writing by the Company, with a copy to
Robert L. Lawrence, Esq., Kane Kessler, P.C., 1350 Avenue of the Americas,
New York, New York 10019 (fax number (212) 245-3009).
I.A.18. ENTIRE AGREEMENT.
This Agreement and the Convertible Notes embody the entire agreement
and understanding between the Purchasers and the Company and supersede all
prior agreements and understandings relating to the subject matter hereof.
I.A.19. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement contained by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not.
I.A.20. HEADINGS.
The headings of the articles and sections of this Agreement have been
inserted for convenience of reference only and shall in no way restrict or
otherwise modify any of the terms or provisions hereof.
28
I.A.21. GOVERNING LAW, JURY TRIAL.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of New York, without giving effect to its
conflict of laws rules. 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, or that 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
receiving a copy thereof sent 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. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE
RELATING HERETO IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT.
I.A.22. COUNTERPARTS.
This Agreement may be signed in any number of counterparts with the
same effect as if the signatures thereto and hereto were upon the same
instrument. Facsimile signatures shall be deemed acceptable and binding.
I.A.23. SEVERABILITY.
Any provision hereof or of the Convertible Notes which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or thereof, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
I.A.24. DEFINITIONS.
The following terms, when used in this Agreement, shall have the
meanings described below. A copy of the definitions section to the Credit
Facility is attached hereto as Exhibit "E".
"Additional Shares" shall mean that number of registered shares of
Common stock that is derived at by multiplying (i) 360,000 by (ii) the
principal amount of the Convertible Note then being repaid or redeemed, as the
case may be, divided by the Original Principal Amount.
"Affiliate" shall mean any person that controls, is controlled by or
is under common control with the person in question. For purposes hereof,
"control" and the
29
correlative definitions "controlled by" and "under common control with" shall
mean the power and ability to direct the management and affairs of the person
in question, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" has the meaning set forth in Article 1.
"Arbitrage Transaction" shall mean any puts, calls, future contracts,
short sales, hedging and other related arbitrage transactions with respect to
the Company's equity securities.
"Associate" shall include:
(a) any corporation or organization (other than the Company or any of
its majority-owned subsidiaries) of which the Purchaser is an executive officer
or partner, or of which the Purchaser is, directly or indirectly, the
beneficial owner of 10% or more of any class of equity securities;
(b) any trust or other estate in which the Purchaser has a substantial
beneficial interest or as to which the Purchaser serves serve as trustee or in
a similar fiduciary capacity;
(c) any relative or spouse of the Purchaser, or any relative of such
spouse, who has the same home as the Purchaser or who is a director or officer
of the Company or any of its subsidiaries; and
(d) any of the Purchaser's agents or representatives.
"beneficial owner" has the meaning set forth in Rule 13d-3 promulgated
by the Commission under the Exchange Act.
"Board" or "Board of Directors" means, with respect to any person
which is a corporation, a joint stock company or a business trust, the board of
directors or other group, however designated, which is charged with legal
responsibility for the management of such person, or any committee of such
board of directors or group, however designated, which is authorized to
exercise the power of such board or group in respect of the matter in question.
"Bolle Australia Acquisition" shall have the meaning ascribed to such
term in the Credit Facility.
"Bolle UK Acquisition" shall have the meaning ascribed to such term in
the Credit Facility.
"Business Day" means any day other than a Saturday, Sunday or other
day on which banks in the State of New York are legally authorized to close.
"Capital Lease" shall mean a lease of property which is capitalized on
the financial statements of the lessee in accordance with generally accepted
accounting principles, as well as, conditional sales or similar retention
agreements.
30
"Closing" has the meaning set forth in Article 3.
"Closing Date" has the meaning set forth in Article 3.
"Closing Price" means (i) the last reported sale price as reported on
the NASDAQ National Market System or the successor principal National
securities exchange on which the Common Stock is listed or admitted to trading,
or (ii) if the Common Stock is not listed or admitted to trading on any
national securities exchange or on the NASDAQ National Market System, the
average of the highest reported bid and lowest reported asked price as
furnished by NASDAQ, the National Quotation Bureau, Inc., or comparable system
or organization, or (iii) in the absence of any of the foregoing, the fair
market value as determined in good faith by the Board of Directors of the
Company (which determination shall be conclusive).
"Commission" means the Securities and Exchange Commission and any
other similar or successor agency of the federal government administering the
Securities Act or the Exchange Act.
"Company" means Bolle Inc., a Delaware corporation, and its successors
and assigns.
"Consolidated EBITDA" shall have the meaning ascribed to such term in
the Credit Facility.
"Consolidated Funded Indebtedness" shall have the meaning ascribed to
such term in the Credit Facility.
"Consolidated Leverage Ratio" shall have the meaning ascribed to such
term in the Credit Facility.
"Conversion Date" has the meaning set forth in Section 11.2.
"Conversion Penalty" shall mean the amount of actual damages caused
directly by the Company's failure to deliver certificates representing Shares
on or prior to the Deadline Day.
"Conversion Price" means $5.25 per share, as the same may be adjusted
from time to time in accordance with the terms of this Agreement.
"Convertible Notes" has the meaning set forth in Article 1.
"Credit Facility" has the meaning set forth in Section 5.7.
"Deadline Day" has the meaning set forth in Section 11.2.
"EBITDA" shall have the meaning ascribed to such term in the Credit
Facility.
31
"Event of Default" has the meaning set forth in Article 10.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"generally accepted accounting principles" or "GAAP" means, unless
otherwise stated, generally accepted accounting principles in effect from time
to time.
"Holders" has the meaning set forth in Section 13.3.
"Indebtedness" of any person means and includes, without duplication,
as of any date as of which the amount thereof is to be determined, (i) all
obligations of such person to repay money borrowed (including, without
limitation, all debentures payable and drafts accepted representing extensions
of credit, all obligations evidenced by bonds, debentures or other similar
instruments and all obligations upon which interest charges are customarily
paid), (ii) all Capital Leases and other leases of the Company and its
Subsidiaries in respect of which such person is liable as lessee or as the
guarantor of the lessee, (iii) the principal amount of all monetary obligations
which are secured by any lien or security interest existing on property owned
by such person whether or not the obligations secured thereby shall have been
assumed by such person, (iv) all guaranties of the Indebtedness of any other
person, (v) all amounts from time to time owing to trade creditors whether
arising in the ordinary course of such person's business, or otherwise, (vi)
obligations of the Company for the reimbursement of any obligor on any Letter
of Credit, banker's acceptance or similar credit transaction, and (vii) any
deferrals, renewals and extensions of any indebtedness described in clauses (i)
through (vi) above.
"Indebtedness for Money Borrowed" shall have the meaning ascribed to
such term in the Credit Facility.
"Maturity Date" shall mean May 29, 2002
"Merger" shall mean a merger or consolidation of the Company with or
into another corporation or a sale of all or substantially all of the assets of
the Company, but shall not be deemed to include such a transaction involving a
Subsidiary of the Company.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Original Principal Amount" shall mean the aggregate principal amount
of the Convertible Notes issued by the Company on the Closing Date.
"Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, an
unincorporated association, a joint venture, a trust or other entity or a
governmental authority.
"Purchaser" has the meaning set forth in Article 1.
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"Redemption Price" means 108% of the principal amount of the
Convertible Notes then being redeemed or repaid.
"Registrable Securities" shall mean the Shares and the Additional
Shares.
"Registration Statement" has the meaning set forth in Article 13.
"SEC Reports" shall have the meaning set forth in Section 4.3.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" has the meaning set forth in Section 5.7.
"Share" or "Shares" has the meaning set forth in Article 1.
"Trading Day" means (a) a day on which the Common Stock is traded on
the NASDAQ National Market or other stock exchange or market on which the
Common Stock is then listed, or (b) if the Common Stock is not listed on the
NASDAQ National Market or any stock exchange or market, a day on which the
Common Stock is traded in the over-the-counter market, as reported by the OTC
Bulletin Board, or (c) if the Common Stock is not quoted on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter
market as reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding its functions of reporting prices);
provided, that in the event that the Common Stock is not listed or quoted as
set forth in (a), (b) and (c) hereof, then Trading Day shall mean any day
except Saturday, Sunday and any day which shall be a legal holiday or a day on
which banking institutions in the State of New York are authorized or required
by law or other government action to close.
I.A.25. EXPENSES.
Each party to this Agreement shall bear all of its own expenses in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby, including without limitation all fees and
expenses of its agents, representatives, counsel and accountants; provided,
however, that the Company shall be responsible the reasonable fees and expenses
of Gregory F.W. Todd, counsel to the Purchasers in an amount up to $20,000.
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If the foregoing correctly sets forth our understanding, please sign
below on the enclosed counterpart of this Agreement and return the same to the
undersigned.
Very truly yours,
BOLLE INC.
By: /s/ Ian G. H. Ashken
------------------------------------
Name: Ian G. H. Ashken
Title: Executive Vice President and
Chief Financial Officer
The foregoing Agreement is hereby
accepted and agreed to as of the
date first above written:
PURCHASER:
By: /s/ Daniel S. Och
------------------------------------
Name: Daniel S. Och
Title: Managing Member
OZ Management, L.L.C.
as Investment Manager of
OZ Master Fund, Ltd.
34
EXHIBIT "A"
PURCHASERS
PRINCIPAL
AMOUNT TO BE PERCENTAGE
NAME AND ADDRESS OF PURCHASER PURCHASED OF OFFERING
- ----------------------------- --------- -----------
(a) Name: $7,000,000 100%
OZ Master Fund, Ltd.
(b) Address for communications:
c/o OZ Management, L.L.C.
153 East 53rd Street, 43rd Floor
New York, New York 10022
Attn: Joel Frank, CFO
Facsimile: 212-292-5950
(c) Address for payment of principal and
interest by wire transfer of immediately
available funds: