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Exhibit 10.43
SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement dated April 13, 1998 by and among with the Company
and certain other parties thereto.
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SENETEK PLC
SECURITIES PURCHASE AGREEMENT
APRIL 14, 1999
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SCHEDULES
Schedule 1 - Purchaser Information
Schedule 8.8 - Sale and Leaseback
Schedule 10.1 - Qualification
Schedule 10.3 - Capital Stock
Schedule 10.5 - Subsidiaries
Schedule 10.7 - Litigation
Schedule 10.10 - ERISA
Schedule 10.12 - Indebtedness
Schedule 10.14 - Conflicting Agreements
Schedule 10.15 - Environmental Matters
Schedule 10.17 - Permits
Schedule 10.19 - Compliance
Schedule 10.20 - Intellectual Property
Schedule 10.21(a) - Owned Real Property
Schedule 10.21(b) - Leased Real Property
Schedule 10.22 - Employees
Schedule 10.23 - Insurance
Schedule 10.25 - Pending Drug Applications
EXHIBITS
Exhibit A - Form of Senior Secured Note
Exhibit B - Form of Series A Warrant Certificate
Exhibit C - Form of Legal Opinion of Company Counsel
Exhibit D - Registration Rights Agreement
Exhibit E - Security Agreement
Exhibit F - Pledge Agreement
Exhibit G - Guaranty
Exhibit H - Patent and Trademark Security Agreement
Exhibit I - U.K. Security Agreement
Exhibit J - Form of Series B Warrant Certificate
Exhibit K - Form of Series C Warrant Certificate
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SECURITIES PURCHASE AGREEMENT, dated as of April 14, 1999, by and
between Senetek PLC, a corporation organized under the laws of England (the
"Company"), and the Purchasers set forth on Schedule 1 hereto (the "Purchasers")
WHEREAS, the Company and Windsor Capital Management, Ltd. ("Windsor")
are parties to a Credit Agreement dated as of April 28, 1998, as the same may
have been amended (the "Credit Agreement"), pursuant to which Windsor has
extended to Senetek a line of credit in the amount of $10,000,000;
WHEREAS, prior to the date of this Agreement, the Company borrowed an
aggregate amount of $6,600,000 under the Credit Agreement, of which $2,388,750
remained outstanding and unpaid immediately prior to the execution of this
Agreement (the "Borrowing");
WHEREAS, the Company, the Purchasers, Windsor and certain other parties
have entered into an agreement dated as of April 13, 1999 (the "Settlement
Agreement") pursuant to which, among other things, Windsor has assigned to the
Purchasers all of its rights under the Credit Agreement, including its right to
receive payment from the Company of the Borrowing (collectively, the "Credit
Agreement Rights"), as well as all right, title and interest in and to 2,105,715
of the Company's Ordinary Shares, 5 pence par value ("Ordinary Shares")
previously issued by the Company upon the exercise of certain warrants (the
"Previously Issued Shares");
WHEREAS, upon the return to the Company by or on behalf of Windsor of
certificates representing the Previously Issued Shares, the Company will cancel
the certificates and reissue certificates representing the Previously Issued
Shares in the names of the Purchasers in the respective amounts set forth
opposite each Purchaser's name on Schedule 1 hereto;
WHEREAS, the Company desires, upon the terms and conditions hereinafter
provided to issue the Notes and the Warrants, each as hereinafter defined, to
the Purchasers;
WHEREAS, the Purchasers desire, upon the terms and conditions
hereinafter provided, to acquire from the Company the Notes and Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions contained herein, the parties hereto hereby agree as
follows:
1. DEFINITIONS.
For the purpose of this Agreement the following terms shall have the
meanings specified with respect thereto below:
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"Accounts Receivable" shall mean, with respect to the Company,
all present and future accounts, receivables, all rights to payment for goods
sold or leased or for services rendered or work performed that are not evidenced
by an instrument or chattel paper (whether or not earned by performance),
chattel paper, notes, drafts and other forms of obligations and other
instruments and documents, whether now or hereafter owed to or owned or acquired
by the Company or in which the Company has or may hereafter have any interest or
right, all sums of money or other proceeds due or to become due thereon, all
guaranties and security therefor, and all goods and rights represented thereby
or arising therefrom, including but not limited to, the right of stoppage in
transit, replevin and reclamation.
"Affiliate" shall mean, with respect to any Person, any other
Person (i) which directly or indirectly controls, is controlled by, or is under
direct or indirect common control with, such Person, (ii) which directly or
indirectly, of record or beneficially, owns or holds ten percent (10%) or more
of the shares of any class of capital stock of such Person, or (iii) ten percent
(10%) or more of the shares of such stock of which are owned or held, directly
or indirectly, of record or beneficially, by such Person. A Person shall be
deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise. All officers and directors of a Person
shall be deemed to be an Affiliate of that Person.
"Authorized Representative" means any of the President or any
Vice President of the Company or, with respect to financial matters, the chief
financial officer of the Company, or any other Person expressly designated by
the Board of Directors of the Company (or the appropriate committee thereof) as
an Authorized Representative of the Company.
"Bankruptcy Law" shall have the meaning specified in clause
(vii) of Section 9.1.
"Business Day" shall mean any day other than a Saturday, a
Sunday or a day on which commercial banks in New York City are required or
authorized to be closed.
"Capital Leases" means all leases which have been or should be
capitalized in accordance with GAAP as in effect from time to time including
Statement No. 13 of the Financial Accounting Standards Board and any successor
thereof.
"Capital Stock" shall mean any and all shares, interests, rights
to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) corporate stock.
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"Change of Control" shall mean any transaction or series of
related transactions whereby any one Person or "group" within the meaning of
Rule 13d-5(b)(1) under the Securities Exchange Act of 1934, as amended, who as
of the date of this Agreement beneficially own, directly or indirectly, in the
aggregate, less than 30% of the Ordinary Shares on a fully diluted basis,
outstanding as of the date hereof, after giving effect to such transaction(s),
beneficially own, directly or indirectly, in the aggregate, 30% or more of the
Ordinary Shares on a fully diluted basis on any date.
"Closing Date" shall mean the date and time of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder.
"Commission" shall mean the United States Securities and
Exchange Commission or any governmental body or agency succeeding to the
functions thereof.
"Company" shall have the meaning specified in the Preamble.
"Contract" shall mean any mortgage, indenture, contract or
agreement to which the Company or any Subsidiary is a party.
"CSA" shall mean the United States Comprehensive Drug Abuse
Prevention and Control Act of 1970, as may be amended from time to time.
"Default" shall have the meaning specified in this paragraph 11
under the definition of "Event of Default".
"Dollars" and the symbol "$" means dollars constituting legal
tender for the payment of public and private debts in the United States of
America.
"Employee Benefit Plan" shall have the meaning specified in
Section 10.10.
"Environmental Claim" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other communication from any
Governmental Authority, or any third party involving violations of Environmental
Laws or Releases.
"Environmental Laws" shall mean any and all laws, statutes,
ordinances, rules, regulations, orders, or determinations of any governmental
authority pertaining to health
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or the environment in effect in any and all jurisdictions in which the Company
is conducting or at the time has conducted business, including, without
limitation, the Clean Air Act, as amended, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Federal Water
Pollution Control Act, as amended, the Resource Conservation and Recovery Act of
1976, as amended the Occupational Safety and Health Act of 1970, as amended, the
Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as
amended, the Superfund Amendments and Reauthorization Act of 1986, as amended,
and other environmental, conservation or protection laws.
"Environmental Liabilities" means any monetary obligations,
losses, damages, punitive damages, consequential damages, treble damages, costs
and expenses (including all reasonable out-of-pocket fees, disbursements and
expenses of counsel, out-of-pocket expert and consulting fees and out-of-pocket
costs for environmental site assessments, remedial investigation and feasibility
studies), fines, penalties, sanctions and interest incurred as a result of any
Environmental Claim filed by any Governmental Authority or any third party which
relate to any environmental condition, remedial action, Release or threatened
Release from or onto (i) any facility presently or formerly owned by the company
or a predecessor in interest, or (ii) any facility which received Hazardous
Materials generated by the Company or a predecessor in interest, or (ii) any
facility which received Hazardous Materials generated by the Company or a
predecessor in interest.
"Environmental Permit" means any permit, license, notice, order,
approval or other authorization under any applicable law, rule, regulation or
other requirement of the United States or of any state, municipality or other
subdivision thereof required by any Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"ERISA Affiliate" shall mean each trade or business (whether or
not incorporated) which together with the Company as of any relevant measuring
date under ERISA or the Code, is treated as a "single employer" under section
414 of the Code and the regulations promulgated thereunder; provided that in no
event shall any Purchaser or any Affiliate of any Purchaser be deemed to be an
ERISA Affiliate for purposes of this Agreement.
"Event of Default" shall mean any of the events specified in
Section 9.1, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "Default" shall mean
any of such events, whether or not any such requirement has been satisfied.
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"FDCA" shall mean the United States Federal Food, Drug and
Cosmetic Act, as may be amended from time to time.
"GAAP" or "Generally Accepted Accounting Principles" means
generally accepted accounting principles, being those principles of accounting
set forth in pronouncements of the Financial Accounting Standards Board, the
American Institute of Certified Public Accountants or which have other
substantial authoritative support and are applicable in the circumstances as of
the date of a report.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranty" shall have the meaning set forth in Section 5.14
hereof.
"Hazardous Materials" means (a) any element, compound, or
chemical that is defined, listed or otherwise classified by a Governmental
Authority as a contaminant, pollutant, toxic pollutant, toxic or hazardous
substances, extremely hazardous substance or chemical, hazardous waste, medical
waste, biohazardous or infectious waste, special waste, or solid waste under
Environmental Laws; (b) petroleum and its refined products; (c) polychlorinated
biphenyls; (d) any substance exhibiting a hazardous waste characteristic as
defined in 40 C.F.R. 261.21-.24; and (e) any raw materials, building components,
including but not limited to asbestos-containing materials and manufactured
products, containing Hazardous Materials.
"Holder of a Note or Warrant" shall mean the person in whose
name the Note or Warrant is registered on the books and records of the Company.
"Indebtedness" shall mean, with respect to the Company and any
Subsidiary the principal of (and premium, if any, on) and unpaid interest on the
following:
(i) indebtedness for money borrowed from another person
whether secured or unsecured;
(ii) indebtedness guaranteed, directly or indirectly, in
any manner by the Company and any Subsidiary, or in effect guaranteed,
directly or indirectly, by the Company and any Subsidiary, through an
agreement, contingent or otherwise, to supply funds to or in any manner
invest in the debtor or to purchase indebtedness, or to purchase
property or services primarily for the purpose of enabling the debtor to
make payment of the indebtedness or of assuring
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the owner of the indebtedness against loss (whether by direct guaranty,
suretyship, discount, endorsement, take-or-pay agreement, agreement to
purchase or advance or keep in funds or other agreement having the
effect of a guarantee);
(iii) all indebtedness secured by any mortgage, lien,
pledge, charge or other encumbrance upon property or assets owned by the
Company and any Subsidiary, even if the Company and any Subsidiary, has
not in any manner become liable for the payment of such indebtedness;
(iv) all indebtedness of the Company and any Subsidiary,
created or arising under any conditional sale, capital lease or other
title retention agreement with respect to property or assets acquired by
the Company and any Subsidiary, even though the rights and remedies of
the seller, lessor or lender under any such agreement or capital lease
in the event of default are limited to repossession or sale of such
property or assets; and
(v) renewals, extensions and refundings of any or all of
such indebtedness.
"Indebtedness for Money Borrowed" means with respect to any
Person, without duplication, all indebtedness in respect of money borrowed,
including without limitation all Capital Leases and the deferred purchase price
of any property or asset, evidenced by a promissory note, bond, debenture or
similar written obligation for the payment of money (including conditional sales
or similar title retention agreements), other than trade payables incurred in
the ordinary course of business.
"Intellectual Property Rights" means, as to any Person, that
Person's Patents and Patent Applications, Trademarks, licenses and trade/brand
names, and including without limitation all logos and designs, trade secrets,
technical information, proprietary rights, engineering procedures, designs,
know-how and processes, software, copyrights and other intellectual property.
"Inventory Financing" shall mean Indebtedness arising from an
agreement for the financing of inventory entered into in the ordinary course of
business between the Company or any of its Subsidiaries and a bank or financial
institution experienced in providing financing of inventory.
"Investment" in any Person shall mean all investments by stock
purchase, capital contribution, loan, advance, guarantee of any indebtedness or
creation or assumption of any other liability in respect of any indebtedness of
such Person.
"Investment Notes" shall have the meaning set forth in Section 2
hereof.
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"IRS" shall mean the Internal Revenue Service of the United
States.
"Knowledge," "best knowledge" and similar phrases, when used
with respect to the Company or any of its Subsidiaries, shall mean the actual
knowledge after due inquiry of the Company's Chief Executive Officer, President,
Chief Financial Officer or Executive Vice President of Operations.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing, any conditional sale or other title retention agreement, any
lease in the nature thereof and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction).
"Material Adverse Effect" shall mean a material adverse effect
on the business, condition (financial or otherwise), assets, properties or
operations of the Company and its Subsidiaries, taken as a whole.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is maintained for any employees or
former employees of the Company or any ERISA Affiliates.
"Notes" shall mean the Senior Secured Notes due 2002 (together
with any such notes which may be issued hereunder in substitution or exchange
thereof) of the Company to bear interest on the unpaid balance thereof from the
date of issue until the principal thereof shall become due and payable at the
rate of 8.0% per annum (accruing daily and payable quarterly in arrears) and on
overdue principal, premium and interest at the rate specified therein, and be
stated to mature on April 13, 2002, issued pursuant to Section 2 hereof.
"Obligations" shall mean the obligations, liabilities and
Indebtedness of the Company with respect to (i) the principal, interest and all
other amounts owed pursuant to the terms of the Notes and (ii) the payment and
performance of all other obligations, liabilities and Indebtedness of the
Company to the Purchaser, under any one or more of the Transaction Documents
other than the Warrants.
"Officers' Certificate" shall mean a certificate signed in the
name of the Company by its Chief Executive Officer, President or one of its Vice
Presidents and by its Chief Financial Officer, Treasurer or Controller.
"Ordinary Shares" shall mean the Company's ordinary shares, (5p)
par value per share.
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"Patent and Patent Applications" shall mean, as to any Person,
all of such Person's right, title and interest in and to all of its now owned or
existing and filed and hereinafter acquired or arising and filed patents and
patent applications, inventions and improvements thereto, and (a) the reissues,
divisions, continuations, renewals, extensions, and continuations, in-part
thereof, (b) all income, royalties, damages and payments now or hereafter due
and/or payable under or with respect thereto, including without limitation
damages and payments for past or future infringements thereof, (c) the right to
sue for past, present and future infringements thereof, (d) all rights
corresponding thereto throughout the world, and (e) all right as licensor or
licensee with respect to any of the foregoing.
"Patent and Trademark Security Agreement" shall have the meaning
set forth in Section 5.12 hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or
any corporation or governmental body or agency succeeding to the functions
thereof.
"Pension Plan" shall mean an employee pension benefit plan
within the meaning of section 3(2) of ERISA, maintained or contributed to by the
Company or an ERISA Affiliate, and which is subject to Section 412 of the Code.
"Permitted Acquisition" means an acquisition by the Company or
its Subsidiaries of assets or capital stock or other ownership interest in a
Person provided that (a) the Person to be (or whose assets are to be) acquired
does not oppose such acquisition and the line or lines of business of the Person
to be acquired are substantially the same as one or more line or lines of
business conducted by the Company and its Subsidiaries; (b) the Person acquired
shall be a wholly-owned Subsidiary, or be merged into the Company or a
wholly-owned Subsidiary, immediately upon consummation of the acquisition (or if
assets are being acquired, the acquiror shall be the Company or a wholly-owned
Subsidiary); (c) if the cost of Acquisition shall be financed with cash
consideration in excess of $1,000,000, the Purchaser shall consent to such
Acquisition in their discretion; provided, that the aggregate purchase price for
such acquisitions consummated during any twelve month period for less than
$1,000,000 shall not exceed $3,000,000; and (d) no Default or Event of Default
shall have occurred and be continuing either immediately prior to or immediately
after giving effect to such acquisition.
"Permitted Indebtedness" shall mean
(i) purchase money Indebtedness and Indebtedness arising
from Receivables Financing, Inventory
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Financing and Indebtedness under capital leases entered into in the
ordinary course of business;
(ii) the Indebtedness represented by the Notes;
(iii) Indebtedness used to finance the cost of Permitted
Acquisitions;
(iv) Indebtedness with terms substantially similar to
that represented by the Notes not to exceed $15,000,000 in the
aggregate, provided such Indebtedness is issued on a pari passu basis
with the Notes;
(v) Any extension, renewal, refunding or refinancing of
Indebtedness permitted in (i), (ii), (iii) or (iv) above without any
increase in the principal or commitment amount thereof and on terms, in
the aggregate, no less favorable to the Company, as the case may be,
than the terms of such debt prior to such extension, renewal, refunding
or refinancing;
(vi) Indebtedness between wholly-owned Subsidiaries and
the Company;
(vii) Unsecured Indebtedness which is expressly
subordinated to the Notes in payment of principal and interest and in
all other respects; and
(viii) Indebtedness secured by Permitted Liens.
"Permitted Liens" shall mean, as to the property, personal,
real, tangible and intangible, of any Person:
(i) Other Liens in existence on the Closing Date listed
on Schedule 8.1 hereto;
(ii) Purchase money Liens upon or in any plant,
machinery or equipment acquired after the Closing Date by the Company to
secure a portion of the purchase price of such plant, machinery or
equipment or to secure Indebtedness incurred solely for the purpose of
financing the acquisition of such plant, machinery or equipment and
Liens incurred in connection with Inventory Financing and Receivables
Financing;
(iii) Liens existing on any plant, machinery or
equipment at the time of its acquisition whether by merger,
consolidation, purchase of assets, or otherwise;
(iv) Liens incurred to refinance existing secured
obligations permitted by clauses (i) through (iii) above;
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(v) Liens incurred or pledges and deposits in connection
with workers' compensation, unemployment insurance and other social
security benefits, or securing the performance of bids, tenders, leases,
contracts (other than for the repayment of borrowed money), statutory
obligations, progress payments, surety and appeal bonds and other
obligations of like nature, incurred in the ordinary course of business;
(vi) Liens imposed by law, such as mechanics' carriers'
warehousemen's, materialmen's, supplier's and vendors' in good faith by
appropriate proceedings which have the effect of staying any action to
foreclose or to obtain a judgment to enforce such Liens;
(vii) zoning restrictions, easements, licenses,
covenants, reservations restrictions on the use of real property or
minor irregularities of title incident thereto which do not in the
aggregate materially impair the use of such property in the operation of
the businesses of such Person;
(viii) Liens for taxes or assessments not yet due or
which are being contested in good faith for which adequate reserves have
been established in accordance with GAAP.
"Person" shall mean and include an individual, a partnership, a
joint venture, a corporation, a trust, an unincorporated organization and a
government or any department or agency thereof.
"Pledge Agreement" shall have the meaning set forth in Section
5.12 hereof.
"Prohibited Transaction" shall mean any "prohibited transaction"
(within the meaning of Section 406 of ERISA or 4975 of the IRC) with respect to
any Employee Benefit Plan for which transaction no statutory or administrative
exemption is available.
"Receivables Financing" shall mean Indebtedness arising from an
agreement for the financing of account receivables entered into in the ordinary
course of business between the Company or any of its Subsidiaries and a bank or
financial institution experienced in providing financing of receivables.
"Registration Rights Agreement" shall have the meaning set forth
in Section 5.12 hereof.
"Release" means any spilling, leaking, pumping, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of
Hazardous Materials (including the
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abandonment or discarding of barrels, containers or other closed receptacles
containing Hazardous Materials) into the environment.
"Requirements of Environmental Law" means any and all
regulations imposed by and provisions of any law, rule, regulation, order,
decision or decree of any federal, state or local executive, legislative,
judicial, regulatory or administrative agency, board or authority which relate
to (i) pollution, contamination, protection, cleanup, restoration, destruction,
loss or injury to or of the air, surface water, groundwater, land (including,
without limitation, surface and subsurface strata) or other natural resources;
(ii) solid, gaseous or liquid waste generation, handling, transportation,
treatment, processing, cleanup, storage, disposal, recycling, or reclamation;
(iii) exposure to pollutants, contaminants, Hazardous Materials, hazardous
substances, toxic materials or substances, or wastes; (iv) the safety or health
of employees (other than social security laws); (v) the manufacture, generation,
processing, distribution, use, treatment, storage, disposal, transport,
recycling, reclamation or handling of chemical substances, pollutants,
contaminants, Hazardous Materials, hazardous substances, toxic materials or
substances, or wastes; or (vi) noise.
"Restricted Investment" means an Investment in any Person other
than (i) an Investment by the Company or any Wholly- Owned Subsidiary of the
Company in a Wholly-Owned Subsidiary of the Company, subject, in the case of any
such Investments that constitute debt, to the provisions of Section 8.2; (ii)
loans or advances made in the ordinary course of business to employees of the
Company and its Subsidiaries for travel and like expenses; (iii) Investments in
direct obligations of the United States of America or obligations of any
instrumentality or agency thereof, the payment of which is unconditionally
guaranteed by the United States of America; (iv) negotiable certificates of
deposit issued by any commercial bank or trust company organized under the laws
of the United States of America or any state thereof having capital and surplus
of not less than $100,000,000; (v) readily marketable commercial paper rated A-1
by Standard & Poor's Corporation or Prime-1 by NCO/Moody's Commercial Paper
Division of Moody's Investor Services, Inc. (all of which Investments shall be
payable in U.S. dollars in the United States of America and shall have
maturities not in excess of twelve months); and (vi) Permitted Acquisitions.
"Restricted Payment" shall mean (i) any dividend on, or any
distribution of property or cash in respect of, any shares of Capital Stock of
the Company or any Subsidiary or the incurrence of any liability in respect
thereof, and (ii) any payment or distribution of property or cash on account of
the redemption, purchase, retirement or other acquisition of any shares of
Capital Stock of
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the Company or any Subsidiary or any warrant, option or other right to purchase
or acquire any shares of Capital Stock of the Company or any Subsidiary, other
than the exercise of the Warrants.
"Securities" shall have the meaning specified in Section 2.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security Agreement" shall have the meaning set forth in Section
5.12 hereof.
"Series A Warrants" shall mean warrants to purchase an aggregate
of 3,000,000 Ordinary Shares, subject to adjustment, at an exercise price of
$1.50 per Ordinary Share, subject to adjustment.
"Series B Warrants" shall mean warrants to purchase an aggregate
of 3,333,333 Ordinary Shares, subject to adjustment, at an exercise price of
$1.50 per Ordinary Share, subject to adjustment.
"Series C Warrants" shall mean warrants to purchase an aggregate
of 1,194,285 Ordinary Shares, subject to adjustment, at an exercise price of
$2.00 per Ordinary Share, subject to adjustment.
"Settlement Notes" shall have the meaning set forth in Section 2
hereof.
"Significant Holder" shall mean as long as the Notes are
outstanding any holder holding at least 25% of the principal amount of the Notes
outstanding from time to time (it being agreed that two or more investment funds
which have the same investment manager shall be treated as one holder for this
purpose).
"Substantial Part" shall mean, as of any date, assets (i) having
a net book value equal to or in excess of 10% of the assets of the Company and
its Subsidiaries, taken as a whole (determined in accordance with United States
GAAP) or (ii) which have provided 10% or more of consolidated net revenue
(defined in accordance with GAAP) of the Company and its Subsidiaries in the
most recent fiscal year of the Company.
"Subsidiary" shall mean, with respect to the Company, any
corporation or similar entity, a majority of the Capital Stock or other equity
of which shall, at the time as of which any determination is being made, be
owned by the Company either directly or through Subsidiaries.
"Termination Event" shall mean (i) a "Reportable Event"
described in 4043 of ERISA and the regulations issued thereunder,
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but not including any such event for which the 30 day notice requirement has
been waived by applicable PBGC regulation; or (ii) the withdrawal of the Company
or any ERISA Affiliate from a Pension Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2)of ERISA; or (iii) the
filing of a notice of intent to terminate a Pension Plan or the treatment of a
Pension Plan amendment as a termination under Section 4041 of ERISA; or (iv) the
institution of proceedings to terminate a Pension Plan by the PBGC; or (v) the
complete or partial withdrawal of the Company or an ERISA Affiliate from a
Multiemployer Plan; or (vi) an event occurs which requires the Company or an
ERISA Affiliate to provide security to a Pension Plan within the meaning of
Section 401(a)(29) of the Code; or (vii) the imposition of a lien pursuant to
Section 412 of the Code or Section 302 of ERISA; or (viii) any event or
condition which results in the reorganization or insolvency of a Multiemployer
Plan under Section 4241 or Section 4245 of ERISA; or (ix) any other event or
condition which might reasonably be expected to constitute grounds under ERISA
for the termination by the PBGC of, or the appointment of a trustee to
administer any Pension Plan.
"Trademarks" means, as to any Person, all of such Person's
right, title and interest in and to all of its now owned or existing and filed,
and hereafter acquired or arising and filed, trademarks, service marks,
trademark or service mark registration, trade names, trademark rights, trade
name rights and trademark or service mark applications, and (a) the reissues,
divisions, continuations, renewals, extensions and continuations-in-part
thereof, (b) all income, royalties, damages and payments now or hereafter due
and/or payable with respect thereto, including, without limitation, damages and
payment for past or future infringements thereof, (c) the right to sue for past,
present and future infringements thereof, (d) all rights corresponding thereto
throughout the world, (e) all rights as licensor or licensee with respect to any
of the foregoing, and (f) together with each case with the goodwill of such
Person's business connected with the use of, and symbolized by any of the
foregoing.
"Transaction Documents" shall mean, collectively, this
Agreement, the Notes, the Warrants, the Registration Rights Agreement, the
Security Agreement, the U.K. Security Agreement, the Pledge Agreement, the
Guaranty and the Patent and Trademark Security Agreement , the Copyright
Security Agreement and all exhibits and schedules thereto and hereto.
"U.K. Security Agreement" shall have the meaning set forth in
Section 5.12 hereof.
"Warrants" shall have the meaning specified in Section 2.
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"Warrant Shares" shall mean the shares of Ordinary Shares
issuable upon the exercise of the Warrants.
"Wholly-Owned Subsidiary" as applied to any Subsidiary, shall
mean a Subsidiary all of the outstanding shares of every class of Capital Stock
of which are at the time owned by or for the benefit of the Company or by one or
more Wholly-Owned Subsidiaries or by the Company and one or more Wholly-Owned
Subsidiaries.
2. AUTHORIZATION OF FINANCING; SETTLEMENT. (a) In order to provide funds
for working capital for the Company and its Subsidiaries, the Company has
authorized the issue, sale and delivery of (i) Notes in the aggregate principal
amount of $5,000,000, substantially in the form of Exhibit A attached hereto
(the "Investment Notes") to the Purchasers in accordance with Schedule 1; (ii)
500,000 Series A Warrants; and (iii) 3,333,333 Series B Warrants.
(b) In addition, the Company will issue on the Closing Date to
the Purchasers in accordance with Schedule 1, (i) Notes in the aggregate
principal amount of $2,388,570, which shall be substantially in the form of
Exhibit A attached hereto (the "Settlement Notes"); (ii) 238,857 Series A
Warrants; (iii) 2,261,143 Series A Warrants and (iv) 1,194,285 Series C
Warrants.
(c) The Series A Warrants, Series B Warrants and Series C
Warrants shall be evidenced by warrant certificates substantially in the forms
of Exhibit B, Exhibit I and Exhibit J, respectively, attached hereto (the
"Warrant Certificates") and are collectively referred to herein as the
"Warrants".
(d) As used herein, the term "Securities" means the Investment
Notes, the Settlement Notes and the Warrants issued pursuant to this Section 2.
3. PURCHASE AND SALE OF SECURITIES; SETTLEMENT NOTE; CERTAIN
REPRESENTATIONS, WARRANTIES AND AGREEMENT. Subject to the terms and conditions
herein set forth, the Company hereby agrees to sell to the Purchasers and the
Purchasers agree to purchase from the Company $5,000,000 in aggregate principal
amount of the Investment Notes, together with 500,000 Series A Warrants and
3,333,333 Series B Warrants in the respective amounts set forth opposite their
names on Schedule 1 hereto, represented by one or more Notes or Warrant
Certificates in the appropriate form attached hereto as an Exhibit, registered
in the Purchaser's name or that of the Purchasers' nominee, as the Purchaser
shall request, and, in the case of the Investment Notes, in such denominations
as the Purchasers shall request. In addition, in connection with the
transactions provided for in the Settlement Agreement, the Company hereby agrees
to issue the Settlement Notes and the Series A and Series C Warrants described
in Section 2(b)
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hereof to the Purchasers in the respective amounts set forth opposite their
names on Schedule 1 hereto, represented by one or more Notes or Warrant
Certificates in the appropriate form attached hereto as an Exhibit. Each
Purchaser hereby agrees that the issuance of the Settlement Notes and the Series
A and Series C Warrants to the Purchasers pursuant hereto shall satisfy in full
all of the obligations of the Company under the Credit Agreement, including,
without limitation, the obligation of the Company to repay the Borrowing, and
(ii) upon issuance of the Settlement Notes and Series A and Series C Warrants to
the Purchasers pursuant hereto, the Credit Agreement shall be deemed to be
terminated and of no further force or effect.
4. CLOSING OF SALE OF SECURITIES. The purchase and delivery of the
Securities shall take place at the offices of Pryor Cashman Sherman & Flynn LLP,
410 Park Avenue, New York, New York 10022 (the "Closing") to be held on April
14, 1999, or at such other place or on such other date as the Purchasers and
Company may agree upon. At the Closing, the Company will deliver (i) the
Investment Notes, 500,000 Series A Warrants and 3,333,333 Series B Warrants to
the Purchasers, against payment of the purchase price therefor by transfer of
immediately available funds in the amount of $5,000,000 to such bank or other
financial institution as the Company shall direct in writing for credit to the
Company's account, and (ii) the Settlement Notes, 238,857 Series A Warrants,
2,261,143 Series A Warrants and 1,194,285 Series C Warrants to the Purchasers in
full satisfaction of all obligations of the Company under the Credit Agreement.
If at the Closing the Company shall fail to tender to the Purchaser any of the
Securities or any of the conditions specified in Section 5 shall not have been
satisfied or waived by the Purchasers, the Purchasers shall, at the Purchasers'
election, be relieved of all further obligations under this Agreement, without
thereby waiving any other rights the Purchaser may have by reason of such
failure or such non-fulfillment.
5. CONDITIONS OF CLOSING. The Purchasers' obligation to purchase and pay
for the Securities is subject to the satisfaction prior to or at the Closing of
the following conditions:
5.1 OPINIONS OF COUNSEL. The Purchasers shall have received from
Latham & Watkins, United States counsel for the Company and Trowers and Hamlins,
English counsel to the Company, opinions covering the matters contained in the
opinion form set forth in Exhibit C attached hereto, addressed to the Purchaser
dated the date of the Closing and otherwise satisfactory in substance and form
to the Purchaser.
5.2 REPRESENTATIONS AND WARRANTIES; NO DEFAULT. The
representations and warranties of the Company contained in this Agreement and
the Transaction Documents, shall be true and correct when made and at the time
of the Closing as though made at such
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time, and the Company shall have performed or complied with the covenants,
conditions and agreements contained in this Agreement and the Transaction
Documents required to be performed and complied with by the Company at or prior
to the Closing; and there shall exist at the time of the Closing and after
giving effect to such transactions no Event of Default or Default.
5.3 PURCHASE AND LOAN PERMITTED BY APPLICABLE LAWS. The purchase
of and payment for the Securities shall not violate any applicable law or
governmental regulation (including, without limitation, Section 5 of the
Securities Act) and shall not subject the Purchaser to any tax, penalty,
liability or other onerous condition under or pursuant to any applicable law or
governmental regulation or order.
5.4 NO ADVERSE ACTION OR DECISION. There shall be no action,
suit, investigation, or proceeding pending, or to the Company's knowledge,
threatened, before any court, arbitrator or administrative or governmental body
which (i) seeks to restrain, enjoin, prevent the consummation of the
transactions contemplated by this Agreement or (ii) questions the validity or
legality of any such transactions or seeks to recover damages or to obtain other
relief in connection with any such transactions.
5.5 APPROVALS AND CONSENTS. The Company shall have duly received
all authorizations, waivers, consents, approvals, licenses, franchises, permits
and certificates (collectively, "Consents") by or of all United States federal,
state and local governmental authorities and all United Kingdom and other
foreign governmental authorities and all Consents by or of all other Persons
necessary for the issuance of the Securities and all such Consents shall be in
full force and effect at the time of Closing and copies thereof shall be
delivered to the Purchaser at the Closing.
5.6 PROCEEDINGS. All proceedings taken or to be taken in
connection with the transactions contemplated hereby, and all documents incident
thereto shall be reasonably satisfactory in form and substance to the Purchaser
and its special counsel, and the Purchaser and its special counsel shall have
received all such counterpart originals or certified or other copies of such
documents as the Purchaser or its special counsel may reasonably request.
5.7 TRANSACTION FEE; LEGAL FEES. (a) Scorpion Holdings LLC shall
have received payment in full of USD $75,000 representing the transaction fee
referred to in Section 12.2 hereof.
(b) Pryor Cashman Sherman & Flynn LLP, special counsel
to the Purchaser, shall have received payment of its fees and expenses referred
to in Section 12.2 hereof.
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5.8 COMPLIANCE CERTIFICATE. The Purchaser shall have received an
Officers' Certificate, dated the Closing Date, certifying that the conditions
specified in this Article 5 required to be fulfilled on the Closing Date have
been fulfilled.
5.9 NOTE AND WARRANT CERTIFICATES. The Company shall have
delivered to the Purchasers the Investment Notes, Series A Warrants, Series B
Warrants, the Settlement Notes and the Series C Warrants, as required by Section
2 hereof.
5.10 SECRETARY'S CERTIFICATE; GOOD STANDING. The Company and
each Subsidiary shall have delivered to the Purchaser (i) a certificate of its
corporate secretary or assistant secretary as to (A) resolutions of its Board of
Directors approving and authorizing the execution, delivery and performance of
each of the Transaction Documents to which it is a party and, in the case of the
Company, authorizing the issuance and delivery of the Notes and Warrants, as
being in full force and effect without modification or amendment and (B) its
Certificate of Incorporation (or equivalent organizational document) and By-Laws
and all amendments thereto to the Closing Date as being in full force and
effect; with true, correct and complete copies of such resolutions, Certificates
of Incorporation (or equivalent organizational document)and By-laws (or
equivalent document) attached thereto, and (ii) an incumbency certificate of its
officers executing this Agreement and any other Transaction Documents to which
it is a party, (iii) a certificate of subsistence and/or good standing of the
Company and each Subsidiary, dated as of the Closing Date, issued by the
Companies House of the United Kingdom and the Secretary of State of California,
and of each other jurisdiction in which the Company and any Subsidiary is
qualified to do business.
5.11 CERTIFICATES. The Company shall have delivered a
certificate of its Chief Financial Officer certifying that the Company is in
compliance with all covenants under all existing credit facilities of the
Company.
5.12 OTHER DOCUMENTS AND OPINIONS. The Purchaser shall have
received each of the following documents, duly executed by the Company and, if
applicable, each Subsidiary: (i) the Registration Rights Agreement,
substantially in the form of Exhibit D hereto (the "Registration Rights
Agreement"), (ii) the Security Agreement, substantially in the form of Exhibit E
hereto (the "Security Agreement"), (iii) the Pledge Agreement, substantially in
the form of Exhibit F hereto (the "Pledge Agreement"), (iv) a Guaranty,
substantially in the form of Exhibit G hereto from each Subsidiary ("Guaranty"),
(v) the Patent and Trademark Security Agreement, substantially in the form of
Exhibit H hereto ("Patent and Trademark Security Agreement") and
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(vi) the Fixed and Floating Security Document, substantially in the form of
Exhibit I hereto (the "U.K. Security Agreement").
6. PREPAYMENT OF THE NOTES. The Notes shall be subject to prepayment as
provided below.
6.1 MANDATORY PREPAYMENT. Upon the occurrence of (a) any
registered underwritten public offering of any class or classes of Capital Stock
of the Company, (b) the sale of all or substantially all of the assets of the
Company (c) a merger or consolidation involving the Company in which the Company
is not the surviving entity or (d) a Change of Control, then all of the
principal amount of Notes then outstanding shall be immediately and indefeasibly
prepaid in full, together with all accrued and unpaid interest thereon and any
other amounts owing in connection therewith;
6.2 OPTIONAL PREPAYMENT. Subject to Section 6.3 and 6.4, the
Notes shall, in accordance with their terms, be subject to prepayment, without
penalty, in full or in part at any time at the option of the Company, together
with all accrued and unpaid interest thereon and any other amounts owing in
connection therewith.
6.3 NOTICE OF PREPAYMENT. The Company shall give the holder of
each Note written notice of its intent to prepay such Note pursuant to Section
6.1 or 6.2 hereof not less than 15 Business Days prior to the prepayment date as
specified in the notice ("Prepayment Notice"). Notice of prepayment having been
given as aforesaid, the principal amount of the Notes to be prepaid, together
with all accrued and unpaid interest thereon to the prepayment date, shall
become due and payable on such prepayment date. All payments received by the
holders of the Note, shall be applied in the following manner: first, in payment
of any amounts owing under the Notes other than principal and interest, second,
in respect of any accrued and unpaid interest on the Notes to the repayment
date, and third, in payment of principal under the Notes.
7. AFFIRMATIVE COVENANTS. The Company covenants that from and after the
date of this Agreement and thereafter so long as any Notes remain outstanding,
as follows:
7.1 FINANCIAL STATEMENTS AND OTHER REPORTS. The Company
covenants that it will deliver, or cause to be delivered, to each holder of the
Notes:
(i) promptly upon transmission thereof, (a) copies of all such
financial statements, proxy statements, quarterly reports, annual
reports, notices and all other reports as the Company or any Subsidiary
shall send to its security holders or directors, (b) copies of all
reports (and all registration
22
statements) which the Company or any Subsidiary, files with the
Commission or the NASDAQ Stock Market or any securities exchange or
automated quotation system on which any securities of the Company may be
listed or quoted, (c) copies of all press releases and other statements
made generally available by the Company or any Subsidiary to the public
concerning material developments in the business of the Company or any
Subsidiary, and (d) to the Significant Holders, copies of all notices of
default, term sheets that have been agreed to by the Company or any
Subsidiary and commitment letters received from any lender to the
Company or any Subsidiary, and copies of all minutes of meetings of the
Company's or any Subsidiary's Board of Directors or any Committee
thereof, in each case as the Significant Holders may reasonably request;
(ii) within 45 days after the end of each fiscal quarter and
within 90 days after the end of each fiscal year, a certificate of the
Chief Financial Officer of the Company stating that the signer has
reviewed the terms of this Agreement and the Securities and has made, or
caused to be made under his supervision, a review in reasonable detail
of the transactions and condition of the Company and its Subsidiaries
during the fiscal period covered by such financial statements and that
such review has not disclosed the existence during or at the end of such
fiscal period, and that the signer does not have knowledge of the
existence, as at the date of the certificate of the Chief Financial
Officer, of any condition or event which constitutes a Default or Event
of Default or, if any such condition or event existed or exists,
specifying the nature and period of existence thereof and what action,
if any, the Company has taken or is taking or proposes to take with
respect thereto.
(iii) with reasonable promptness upon the Company or any
Subsidiary obtaining knowledge (a) of any condition or event which
constitutes a Default or Event of Default, (b) that the holder of any
Note has given any notice or taken any other action with respect to a
claimed Default or Event of Default under this Agreement, (c) of any
condition or event which, in the opinion of management of the Company,
would have a Material Adverse Effect, (d) that any Person has given any
notice to the Company or any Subsidiary or taken any other action with
respect to a claimed default or event or condition of the type referred
to in Section 9.1(ii) or (e) of the institution of any litigation
involving claims against the Company or any of its Subsidiaries equal to
or greater than $200,000 with respect to any single cause of action or
of any adverse determination in any litigation involving a potential
liability to the Company or any of its Subsidiaries equal to or greater
than $200,000 with respect to any single cause of action, an officers'
certificate specifying the
23
nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such holder or Person and
the nature of such claimed Default, Event of Default, event or
condition, and what action, if any, the Company has taken, is taking or
proposes to take with respect thereto; and
(iv) copies of all relevant documentation as soon as reasonably
practicable after the Company or any ERISA Affiliate first becomes aware
of the occurrence of (a) the establishment of a new Employee Benefit
Plan, the commencement of contributions to any Employee Benefit Plan to
which the Company or any ERISA Affiliate was not previously
contributing, any Employee Benefit Plan amendment providing for a
material increase in the aggregate benefits provided under any existing
Employee Benefit Plans, each funding waiver request filed with respect
to any Employee Benefit Plan and all communications received or sent by
the Company or any ERISA Affiliate with respect to such request and the
failure of the Company or any ERISA Affiliate to make a required
installment or payment under Section 302 of ERISA or Section 412 of the
Code by the due date; (b) any Termination Event, any Prohibited
Transaction, along with a notice specifying the nature thereof, what
action the Company or any ERISA Affiliate has taken, is taking or
proposes to take with respect thereto and when known, any action taken
or threatened by the IRS, the Department of Labor or the PBGC with
respect thereto; or (c) any unfavorable determination letter from the
IRS regarding the qualification of an Employee Benefit Plan under
Section 401(a) of the Code, the institution of proceedings or the taking
or expected taking of action by the PBGC or the Company or any ERISA
Affiliate to terminate any Pension Plan (including the filing or intent
to file a notice to terminate any Pension Plan under a distress
termination within the meaning of Section 4041(c) of ERISA) or have a
trustee appointed to administer any Pension Plan or withdraw or
partially withdraw from any Multiemployer Plan; each Schedule B
(actuarial report) to the annual report (Form 5500 Series) filed by the
Company or any ERISA Affiliate with the IRS with respect to each Pension
Plan; all notices received by the Company or any ERISA Affiliate from a
Multiemployer Plan sponsor concerning the imposition or amount of
withdrawal liability pursuant to Section 4002 of ERISA.
7.2 INSPECTION OF PROPERTY. The Company and each Subsidiary will
permit any Person or Persons designated by the Purchasers in writing, subject to
the execution by that Person or Persons of a confidentiality agreement
reasonably satisfactory to the Company, to visit and inspect any of the
properties of the Company or any Subsidiary, to examine the books and financial
records of the Company or any Subsidiary and all scientific
24
information and data, and make copies thereof or extracts therefrom and to
discuss its affairs, finances and accounts with its officers and its independent
public accountants, all at such reasonable times and as often as the Purchaser
may reasonably request. The Company shall pay the reasonable, out-of-pocket
expenses incurred by the Purchasers for one such visit by one Person per
calendar year; provided, however, that if an Event of Default (as defined
herein) has occurred and is continuing, the Company shall reimburse the
Purchasers for all such expenses for an unlimited number of such visits.
7.3 MAINTENANCE OF PROPERTIES; INSURANCE. The Company and each
Subsidiary will maintain or cause to be maintained in good repair, working order
and condition all properties used or useful in the business of the Company or
any Subsidiary and which are material to the conduct of the business of the
Company and the Subsidiaries, taken as a whole, and from time to time will make
or cause to be made all appropriate repairs, renewals and replacements thereof
and additions and improvements thereto; and the Company and each Subsidiary at
all times will comply with each provision of all leases to which it is a party
or pursuant to which it occupies property and which are material to the conduct
of the business of the Company and the Subsidiaries, taken as a whole. The
Company and each Subsidiary will maintain or cause to be maintained, with
financially sound and reputable insurers, which shall have the same or higher
rating by A.M. Best Co. (or another nationally recognized insurance rating
agency of similar standing if A.M. Best Co. is not then in the business of
rating insurers) as the insurers insuring the Company's assets on the date
hereof, (or, as to workers' compensation or similar insurance, in an insurance
fund or by self-insurance authorized by the laws of the jurisdiction in
question), insurance with respect to their respective properties and businesses
which are material to the conduct of the business of the Company and the
Subsidiaries, taken as a whole, against loss or damage from fire, explosion or
other risks customarily insured against by corporations of established
reputation engaged in the same or similar businesses and similarly situated, of
such type and in such amounts as are customarily carried under similar
circumstances by such other corporations and as are sufficient to prevent the
Company from becoming a co-insurer within the terms of the policies in question.
The Company shall provide 30 days prior written notice to the holders of the
Notes prior to the termination of any such insurance policy by the Company or of
which the Company has received notice from the insurer. The Company, in its
discretion, will use the proceeds of all such casualty insurance policies to (i)
repay the debt evidenced by the Notes on a pro rata basis, or (ii) repair or
replace the damaged property. The Company agrees to pay in a timely manner any
and all premiums required to maintain such policies in full force and effect.
25
7.4 CORPORATE EXISTENCE; LIENS. (a) Except as set forth on
Schedule 7.4 hereto, the Company will, and will cause each Subsidiary to, at all
times preserve and keep in full force and effect its corporate existence, and
rights, licenses, franchises, trademarks, tradenames, patents and other
proprietary information material to the business of the Company and the
Subsidiaries taken as a whole, and will qualify and cause each Subsidiary to
qualify to do business in any jurisdiction where the ownership of property or
the operation of its business makes such qualification necessary, except where
the failure to so qualify would not have a Material Adverse Effect.
(b) As soon as practicable but no later than ninety (90) days of
the Closing, the Company will deliver to each of the Purchasers a certificate of
good standing of the Company from the Secretary of State of the States of
California and Missouri.
(c) As soon as practicable but no later than ninety (90) days of
the Closing, the Company will provide the Significant Holders with evidence that
the Liens previously held by Bank of New York and Michigan National Bank against
a Subsidiary of the Company have been discharged.
(d) As soon as practicable but no later than thirty (30) days of
the Closing, the Company will provide the Significant Holders with the results
of lien searches performed in the following jurisdictions: Buffalo County,
Nebraska, and Macomb County, Michigan. As soon as practicable but no later than
ninety (90) days of the delivery to the Significant Holders of the
above-mentioned lien searches for each of the above jurisdictions, the Company
will provide the Significant Holders with evidence that any Liens other than
Permitted Liens found on such lien searches have been discharged.
7.5 PAYMENT OF TAXES AND CLAIMS. Except as set forth on Schedule
7.5 hereto, the Company will, and will cause each Subsidiary to, promptly pay
and discharge, when due and payable, all material taxes, assessments and other
governmental charges imposed upon them or any of their respective properties or
assets or in respect of any of their respective franchises, business income or
properties before any penalty or interest accrues thereon, and all material
claims (including, without limitation, claims for labor, services, materials and
supplies) for sums which have become due and payable and which by law have or
may become a Lien upon any of their properties or assets; provided, that no such
charge or claim need be paid if being contested in good faith by appropriate
proceedings promptly instituted and diligently conducted and if such accrual or
other appropriate provision, if any, as shall be required by GAAP shall have
been made therefor.
7.6 COMPLIANCE WITH LAWS. The Company will, and will cause its
Subsidiaries to, comply in all respects with the
26
requirements of all applicable laws, rules, regulations and orders of any court
or other governmental authority except where a failure to do so would not have a
Material Adverse Effect. The Company, at its expense, will promptly upon request
make all state securities or "blue sky" filings as may be necessary or
appropriate in connection with the issuance of Ordinary Shares hereunder or upon
exercise of the Warrants.
7.7 ATTENDANCE AT BOARD MEETINGS. For so long as any of the
Notes are outstanding, the Company shall and will cause each Subsidiary to (i)
give the Purchasers written or other notice of any meeting of the Company's or
each Subsidiary's Board of Directors and any committees thereof at the time and
in the manner that such notice thereof is given to members of its Board of
Directors or such committee, and shall permit Kevin McCarthy, as representative
of the Purchasers (or any other person designated by the Purchasers as their
representative and approved by the Company, which approval shall not be
unreasonably withheld), to attend as an observer and in person (at the Company's
expense) or, in the case of meetings held by telephonic conference call, by
telephone, each meeting of the Company's or a Subsidiary's Board of Directors
and committees thereof, and (ii) deliver to the Purchaser, concurrently with the
delivery thereof to Board members, any written communication including, without
limitation, financial information, directed to members of the Company's or its
Subsidiary's Board of Directors.
7.8 USE OF PROCEEDS. The Company shall use all of the proceeds
received from the sale of the Securities pursuant to this Agreement as follows
(i) the payment of closing costs associated with the closing under this
Agreement and (ii) all remaining amounts for general corporate purposes of the
Company.
7.9 INDEPENDENT ACCOUNTANTS. The Company's financial statements
for the year ended December 31, 1998 have been or are being audited by BDO
Seidman. In the event the services of BDO Seidman or any firm of independent
public accountants hereafter employed by the Company are terminated, the Company
will promptly thereafter notify the Significant Holders and will request the
firm of independent public accountants whose services are terminated to deliver
to the Significant Holders a letter of such firm setting forth the reasons for
the termination of their services. In its notice, the Company shall state
whether the change of accountants was recommended or approved by the Board of
Directors or any committee thereof. In the event of any such termination, the
Company will promptly thereafter engage another nationally recognized firm of
independent public accountants or, if the Company is unable through commercially
reasonable efforts to retain a nationally recognized firm of independent public
accountants, another firm of independent public accountants reasonably
acceptable to the Significant Holders.
27
7.10 REGULATORY COMPLIANCE. The Company and each Subsidiary will
timely make all filings required to be made by it by all relevant federal, state
or local regulatory bodies except where failure to do so would not have a
Material Adverse Effect.
7.11 RESERVATION OF SHARES. The Company shall at all times keep
reserved and available for issuance the number of Ordinary Shares necessary for
issuance upon exercise of all of the Warrants (as such number may be adjusted or
changed pursuant to the terms of the Warrants).
7.12 ACCOUNTS AND RECORDS. The Company and each Subsidiary will
keep true records and books of account in which full, true and correct entries
will be made of all dealings or transactions in relation to its business and
affairs.
7.13 KEY MAN LIFE INSURANCE. The Company shall have obtained as
of the Closing Date from a financially sound and reputable insurer, a "key man"
life insurance policy with respect to Frank J. Massino in an amount equal to at
least $1,000,000, and any proceeds (after payment of applicable taxes) received
by the Company thereunder shall be applied to repay the debt evidenced by the
Notes on a pro rata basis.
7.14 EXECUTIVE OFFICERS. The Company covenants that Frank J.
Massino will continue as an executive officer of the Company; provided, however,
that the failure of such person to continue as an executive officer of the
Company shall not be deemed a breach of this covenant if, within six (6) months
of such individual's ceasing to serve as an executive officer, such individual's
position is filled or responsibilities are assumed by an individual reasonably
acceptable to the Significant Holders.
7.15 EMPLOYEE BENEFIT PLANS. The Company will and will continue
to cause each of its ERISA Affiliates to (a) comply in all material respects
with all requirements imposed by ERISA, the Code and all other laws and the
regulations thereof, applicable from time to time to any of its Employee Benefit
Plans, (b) make full payment when due of all amounts which, under the provisions
of such Employee Benefit Plans or under applicable law, are required to be paid
as contributions thereto, including any payments or contributions to
Multiemployer Plans required to be made under any agreement relating to such
Multiemployer Plans, or under any law pertaining thereto, (c) not permit to
exist, with respect to any Pension Plan, any material accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Code),
whether or not waived, (d) not permit the actuarial present value of all benefit
liabilities under any Pension Plan to be less than the current value of the
assets of such Pension Plans allocable to such benefit liabilities, (e) not
permit the occurrence of a Termination Event which would result in a liability
on the part of the Company or any ERISA Affiliate to the
28
PBGC, (f) not engage in any Prohibited Transaction, (g) not establish, or amend
or otherwise alter any Employee Benefit Plan if such establishment or amendment
could result in a material liability to the Company or any ERISA Affiliate or
increase the material obligation of the Company or any ERISA Affiliate to a
Multiemployer Plan or permit the establishment of any Employee Benefit Plan
providing post-retirement welfare benefits or (h) take no action which would
reasonably be expected to cause any of the Employee Benefit Plans to fail to
meet any applicable qualification requirement imposed by the Code.
7.16 FURTHER ASSURANCES. From time to time the Company will
execute and deliver such other instruments, certificates, agreements and
documents and will take such other action and do all other things as may be
reasonably requested by the Significant Holders in order to implement or
effectuate the terms and provisions of this Agreement.
7.17 Delivery of Certificates. As soon as practicable after the
return to the Company by or on behalf of Windsor of certificates representing
the 1,885,715 Ordinary Shares, the Company will cancel the certificates and
reissue certificates representing the Previously Issued Shares in the names of
the Purchasers in the respective amounts set forth opposite each Purchaser's
name on Schedule 1 hereto.
8. NEGATIVE COVENANTS. The Company covenants and agrees that from and
after the date of this Agreement through the Closing and thereafter so long as
any Notes remain outstanding, as follows:
8.1 LIMITATION ON LIENS. The Company will not, and will not
permit any Subsidiary to, create, assume or suffer to exist any Lien upon any of
its properties or assets, whether now owned or hereafter acquired, except
Permitted Liens.
8.2 LIMITATION ON INDEBTEDNESS. The Company will not and will
not permit any Subsidiary to, create, incur, assume, suffer to exist or
otherwise become or be liable with respect to any Indebtedness, except Permitted
Indebtedness.
8.3 LIMITATION ON RESTRICTED PAYMENTS. The Company will not, and
will not permit any Subsidiary to, directly or indirectly, pay or declare or set
apart for payment any Restricted Payment.
8.4 LIMITATION ON INVESTMENTS. The Company will not, and will
not permit any Subsidiary to, make or obligate itself to make, directly or
indirectly, any Restricted Investment.
29
8.5 TRANSACTIONS WITH AFFILIATES AND DIRECTORS. The Company will
not, and will not permit any Subsidiary to, directly or indirectly, enter into
any transaction with any Affiliate of the Company (other than the granting of
stock options, or the exercise thereof, pursuant to the Company's existing share
option scheme or pursuant to any other incentive plan approved by a majority of
members of the Board of Directors of the Company) if such transaction involves
in excess of $100,000, unless such transaction is approved by a majority of the
non-employee directors of the Company. Transactions with Affiliates involving
less than $100,000 may be entered into, provided (i) such transaction is on an
arm's length basis on terms which are no less favorable to the Company or any
Subsidiary than would by the case with a similar transaction with an
unaffiliated Person or (ii) such transaction is approved by a majority of the
non-employee directors of the Company.
8.6 MERGER, CONSOLIDATION, SALE OR TRANSFER OF ASSETS. The
Company will not, and will not permit any Subsidiary to, be a party to any
merger or consolidate with any Person, acquire any other company or invest in,
or purchase, any stock, security or evidence of indebtedness of any other
enterprise or individual, or sell, lease or transfer or otherwise dispose of all
or substantially all of its assets to any Person, provided, however, that the
Company may engage in any of the following transactions provided that that
immediately after giving effect to any such transaction or transactions, no
condition or event shall exist which constitutes a Default or an Event of
Default: (i) the merger of any Wholly-Owned Subsidiary of the Company into the
Company or a Wholly-Owned Subsidiary of the Company if the Company or such
Wholly-Owned Subsidiary, as the case may be, shall be the surviving corporation,
(ii) the sale, lease, transfer or other disposition of any of the assets of any
Wholly-Owned Subsidiary of the Company to the Company or to any other
Wholly-Owned Subsidiary of the Company, whether by dissolution, liquidation or
otherwise, (iii) Permitted Acquisitions, (iv) the sale of the Allercreme(R)
product line, (v) the sale of the Silver Fox(R) product line, (vi) the sale of
the Mill Creek(R) product line, and (vii) the sale, lease, transfer or other
disposition of any assets of any Wholly-Owned Subsidiary of the Company to the
Company or to any other Wholly-Owned Subsidiary of the Company.
8.7 SALES OF ASSETS. The Company will not, and will not permit
any Subsidiary of the Company to, sell, lease, transfer or otherwise dispose of,
in a single transaction or a series of related transactions, any assets,
directly or through the sale of Capital Stock or other equity of a Subsidiary of
the Company, other than (i) sales of inventory in the ordinary course of
business, (ii) sales of obsolete capital equipment in arms-length transactions
in the ordinary course of business, where the proceeds of such capital equipment
sales are immediately reinvested in the Company, (iii) sales during any fiscal
year of
30
assets of the Company having a value (as determined in good faith by the Board
of Directors) of less than $150,000.00, (iv) the sale of the Allercreme(R)
product line, (v) the sale of the Silver Fox(R) product line, (vi) the sale of
the Mill Creek(R) product line, and (vii) the sale, lease, transfer or other
disposition of any assets of any Wholly-Owned Subsidiary of the Company to the
Company or to any other Wholly-Owned Subsidiary of the Company
8.8 SALE AND LEASEBACK. Except as set forth on Schedule 8.8, the
Company will not, and will not permit any Subsidiary to, enter into any
arrangement with any lender or investor or to which such lender or investor is a
party providing for the leasing by the Company or a Subsidiary of any real or
personal property (i) which has been or is to be sold or transferred by the
Company or any Subsidiary to such lender or investor or to any Person to whom
funds have been or are to be advanced by such lender or investor on the security
of such property or rental obligations of the Company or any Subsidiary or (ii)
which has been or is to be acquired from another Person by such lender or
investor, or on which one or more buildings have been or are to be constructed
by such lender or investor, for the purpose of leasing such property to the
Company or such Subsidiary.
8.9 AMENDMENT OF BY-LAWS AND CHARTER. Neither the Company nor
any Subsidiary shall amend its By-Laws or its Certificate of Incorporation (or
equivalent organizational document) in any manner that would have an adverse
effect on the interests the holders of the Notes and/or Warrants.
8.10 LOANS BY THE COMPANY. Neither the Company nor any
Subsidiary shall make any loans or advances to, or enter into any arrangement
for the purpose of providing funds or credit to, any officer, director, employee
or other person, other than reasonable advances to directors, officers and/or
employees for reasonable travel and other normal business expenses relating to
the business of the Company or such Subsidiary.
8.11 CERTAIN CONTRACTS. The Company will not, and will not
permit any Subsidiary to, enter into or be a party to any contract or agreement
which would constitute a breach of the covenants of the Company set forth in
this Agreement or the Transaction Documents.
8.12 NO SUBSIDIARIES. Neither the Company nor any Subsidiary
will create any new Subsidiaries.
8.13 CHANGE IN BUSINESS. Neither the Company nor any Subsidiary
will enter into or engage in any business other than the business currently
engaged in by the Company and any such Subsidiary as of the date hereof.
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8.14 WITHHOLDING TAXES. (a) Unless otherwise required by law,
the Company will not withhold United States withholding taxes from payments to
be made to holders of Notes if such holders (i) are corporations organized under
the laws of a jurisdiction outside the United States or are otherwise persons
not resident in the United States for U.S. federal income tax purposes, and (ii)
provide the Company, upon the Company's reasonable request, with one or more of
Internal Revenue Service Form W-8, Form 4224 or other applicable form,
certificate or document prescribed by the Internal Revenue Service certifying as
to such holders' entitlement to an exemption from any such withholding
requirements.
(b) Unless otherwise required by law, the Company will
not withhold United States withholding taxes from payments to be made to holders
of Notes in excess of an applicable treaty rate if such holders (i) are
corporations organized under the laws of a jurisdiction outside the United
States or are otherwise persons not resident in the United States for U.S.
federal income tax purposes, and (ii) provide the Company upon the Company's
reasonable request, with one or more of certification of their residence
address, Internal Revenue Service Form 1001 or other applicable form,
certificates or documents certifying as to such holders' entitlement to a
reduced rate of withholding under any such withholding requirements.
(c) Neither Section 8.14(a) nor Section 8.14(b) hereof
shall require the Company to apply an exemption or reduced rate of withholding
during any period when it shall have received notice or has knowledge that (i)
the residence or other information previously provided on any applicable form,
certificate or document is incorrect and no corrected form, certificate or
document as applicable has been provided to the Company, or (ii) of any other
information which would render such exemption or reduced rate inapplicable.
8.15 NO PLEDGE OF SUBSIDIARIES' SHARES. The Company will not
mortgage, pledge, hypothecate or create or permit to exist any security interest
in, or lien on, any shares of the Capital Stock of any Subsidiary, except
pursuant to the Transaction Documents.
8.16 CHANGE IN ACCOUNTING POLICIES. Except as set forth in
Schedule 8.16 hereto, neither the Company nor any of its Subsidiaries shall
change its accounting policies, except in accordance with changes mandated by
GAAP.
8.17 DIVIDENDS AND REDEMPTIONS. Neither the Company nor any of
its Subsidiaries shall (a) declare, pay or make any dividend or other
distribution of assets, properties, cash, rights, obligations or Capital Stock
on account of, or redeem, retire, purchase or otherwise acquire, directly or
indirectly, any
32
shares of its Capital Stock, or (b) make any payments (including, without
limitation, prepayments) of principal of, or retire, redeem, purchase or
otherwise acquire any Indebtedness, other than with respect to the Notes or any
scheduled payments of Permitted Indebtedness.
9. EVENTS OF DEFAULT.
9.1 DEFAULT; ACCELERATION. If any of the following events shall
occur and be continuing for any reason whatsoever (and whether such occurrence
shall be voluntary or involuntary or come about or be effected by operation of
law or otherwise):
(i) the Company defaults in the payment of any principal of or
interest on any Note when the same shall become due, either by the terms
thereof or otherwise as herein provided, and such default continues for
ten (10) days; or
(ii) the Company or any Subsidiary (a) breaches any of the terms
of or defaults under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any Subsidiary or (b)
fails to perform or observe any other agreement, term or condition
contained in any agreement under which any Indebtedness is created and
the effect of such failure or other event is to cause, or to permit the
holder or holders of such Indebtedness to cause such debt in a principal
amount in excess of $100,000 to become due prior to any stated maturity
date; or
(iii) any representation or warranty made in writing by or on
behalf of the Company or any Subsidiary in this Agreement or any of the
Transaction Documents, shall be false or misleading in any respect on
the date as of which made; or
(iv) the Company or any Subsidiary fails perform or observe any
agreement contained in clause (iii) of Section 7.1 or Section 8; or
(v) the Company or any material Subsidiary fails to perform or
observe any other agreement, term or condition contained in this
Agreement or any of the Transaction Documents, and such failure shall
not have been remedied within 30 days after such failure shall first
have become known to the Chief Executive Officer, President, Chief
Financial Officer or Executive Vice President of Operations of the
Company or such Subsidiary or written notice shall have been received by
the Company (regardless of the source of such notice); or
33
(vi) the Company or any material Subsidiary makes an assignment
for the benefit of creditors or is generally unable to pay its debts as
such debts become due; or
(vii) any order or decree for relief in respect of the Company
or any material Subsidiary is entered under any bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law, whether now or
hereafter in effect (herein called the "Bankruptcy Law"), of any
jurisdiction; or
(viii) the Company or any material Subsidiary petitions or
applies to any tribunal for, or consents to, the appointment of, or
taking possession by, a trustee, receiver, custodian, liquidator or
similar official of the Company or any material Subsidiary, or of any
Substantial Part of the assets of the Company or any material
Subsidiary, or commences a voluntary case under the Bankruptcy Law of
the United States or any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Subsidiary) relating to the
Company or any material Subsidiary under the Bankruptcy Law of any other
jurisdiction; or
(ix) any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary and
such petition, application or proceeding is unstayed or undismissed
within 60 days, or any such petition or application is filed, or any
such proceedings are commenced against the Company or any material
Subsidiary and the Company or such Subsidiary by any act indicates its
approval thereof, consent thereto or acquiescence therein, or an order,
judgment or decree is entered appointing any such trustee, receiver,
custodian, liquidator or similar official, or approving the petition in
any such proceedings, and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
(x) any order, judgment or decree is entered in any proceedings
against the Company or any material Subsidiary decreeing the dissolution
of the Company or such Subsidiary and such order, judgment or decree
remains unstayed and in effect for more than 60 days; or
(xi) any order, judgment or decree is entered in any proceedings
against the Company or any Subsidiary decreeing a split-up of the
Company or such Subsidiary which requires the divestiture of a
Substantial Part, or the divestiture of the stock of a Subsidiary, the
assets of which constitute a Substantial Part, of the assets of the
Company and its Subsidiaries, taken as a whole, and such order, judgment
or decree remains unstayed and in effect for more than 60 days; or
34
(xii) a final judgment, the payment of which is not covered by
existing insurance policies, in an amount in excess of $200,000 is
rendered against the Company or any Subsidiary and, within 60 days after
entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within 60 days after the expiration of any
such stay, such judgment is not discharged;
(xiii) the Company defaults under any of the material terms of
the Transaction Documents;
(xiv) there shall occur a cessation of a Substantial Part of the
business of the Company and/or any of its Subsidiaries for a period
which significantly affects the Company's and/or any of its
Subsidiaries' capacity to continue their businesses, or the Company or
any Subsidiary shall suffer the loss or revocation of any material
certificate, license or permit, now held or hereafter acquired by the
Company or any Subsidiary, which is necessary to the continued or lawful
operation of a Substantial Part of their businesses; or the Company or
any Subsidiary shall be enjoined, restrained or in any way prevented by
court, governmental or administrative order from conducting all or any
Substantial Part of their business affairs for a period of 30 days; or
any lease or agreement pursuant to which the Company or any Subsidiary
leases, uses or occupies any of its respective real or personal property
shall be canceled or terminated by the other party to such lease or
agreement prior to the expiration of its stated term which individually
or in the aggregate which would have a Material Adverse Effect; or
(xv) any Termination Event shall occur and as of the date hereof
or any subsequent date, the sum of the various liabilities of the
Company and its ERISA Affiliates (such liabilities to include, without
limitation, any liability to the PBGC (or any successor thereto) or to
any other party under Section 4062, 4063, or 4064 of ERISA or any other
provision of law resulting from or otherwise associated with such event)
exceeds $200,000 or the Company or any of its ERISA Affiliates as an
employer under any Multiemployer Plan shall have made a complete or
partial withdrawal from such Multiemployer Plan and the plan sponsors of
such Multiemployer Plan shall have notified such withdrawing employer
that such employer has incurred a withdrawal liability requiring a
payment in an amount exceeding $200,000.
then (a) if such event is an Event of Default specified in clause (viii), (ix)
or (x) of this Section 9.1, all of the Notes at the time outstanding shall
automatically become due and payable at
35
par, together with interest accrued thereon, (b) if such event is an Event of
Default specified in Section 9.1(i), any holder may, at such holder's option, by
notice in writing to the Company, declare the Notes held by such holder to be,
and all of such holder's Notes shall thereupon be and become, immediately due
and payable at par together with interest accrued thereon, and (c) if such event
is any Event of Default other than under (i), (viii), (ix) or (x) of this
Section 9.1, the Purchaser may, at its option, by notice in writing to the
Company, declare all of the Notes to be, and all of the Notes shall thereupon be
and become, immediately due and payable at par, together with interest accrued
thereon. Each amount that becomes payable pursuant to this Section 9.1 shall
become due and payable without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Company, except where notice is
specifically required by the terms of this Agreement; provided, however, that
if, at any time after the principal of the Notes shall so become due and payable
prior to the date of maturity stated in such Notes, all arrears of scheduled
payments of principal and interest on such Notes shall be paid by or for the
account of the Company, the Purchaser, by written notice or notices to the
Company, may waive such Event of Default and its consequences and rescind or
annul such declaration, but no such waiver shall extend to or affect any
subsequent Event of Default or impair any right resulting therefrom.
9.2 OTHER REMEDIES. No remedy conferred in this Agreement upon
the holder of any Note is intended to be exclusive of any other remedy available
to such holder, and each and every such remedy shall be cumulative and shall be
in addition to every other remedy conferred herein or now or hereafter existing
at law or in equity or by statute or otherwise.
10. REPRESENTATIONS AND WARRANTIES. Except as set forth on Schedule 10.1
hereto, the Company represents and warrants for the benefit of each holder from
time to time of Notes and/or Warrants, as of the date hereof and as of Closing
and after giving effect to the transactions contemplated by this Agreement, as
follows:
10.1 ORGANIZATION; CORPORATE AUTHORITY. Except as set forth on
Schedule 10.1, each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to own and operate its properties and to carry on its business as
presently conducted and as proposed to be conducted after the Closing Date. Each
of the Company and its Subsidiaries is duly qualified and in good standing as a
foreign corporation duly authorized to do business in each jurisdiction where it
is or will be on the Closing Date required so to qualify, except in those
jurisdictions in which the failure to so qualify will not individually or in the
aggregate have a Material Adverse Effect.
36
10.2 AUTHORIZATION. All corporate action on the part of the
Company and its Subsidiaries, and their directors and stockholders, necessary
for the authorization, execution, delivery and performance of the Transaction
Documents and the consummation of the transactions contemplated thereby and for
the authorization, issuance and delivery of the Warrants and the Notes and of
the Ordinary Shares issuable hereunder or upon exercise of the Warrants, has
been taken or will be taken prior to the Closing. Each of the Transaction
Documents to which the Company or any of its Subsidiaries are a party is the
valid and binding obligation of the Company and such Subsidiary, enforceable in
accordance with their terms. The execution, delivery and performance by the
Company and its Subsidiaries of the Transaction Documents to which any is a
party and compliance therewith and, with respect to Company, the issuance and
sale of the Warrants and the Notes and the Ordinary Shares issuable hereunder or
upon exercise of the Warrants, will not result in any violation of and will not
conflict with, or result in a breach of, any of the terms of, or constitute a
default under, any provision of federal, state or local law to which the Company
or any Subsidiary is subject, their respective Certificates of Incorporation (or
equivalent organizational document) or By-Laws (or equivalent document), or any
mortgage, indenture, agreement, instrument, judgment, decree, order, rule or
regulation, or other restriction to which the Company or its Subsidiaries, is a
party or by which it is bound, or result in the creation of any Lien upon any of
the properties or assets of the Company or its Subsidiaries pursuant to any such
term, or result in the suspension, revocation, impairment, forfeiture or
nonrenewal of any permit, license, authorization or approval applicable to the
Company's or its Subsidiaries' operations or any of their assets or properties.
No stockholder has any preemptive rights or rights of first refusal by reason of
the issuance of the Warrants or the Notes or the Ordinary Shares issuable
hereunder or upon exercise of the Warrants. The Ordinary Shares issuable
hereunder and upon exercise of the Warrants have been duly and validly reserved
and are not subject to any preemptive rights or rights of first refusal and,
upon issuance, will be validly issued, fully paid and non-assessable.
10.3 CAPITAL STOCK AND RELATED MATTERS. (i) The authorized
capital stock of the Company consists of 100,000,000 Ordinary Shares, par value
(5 pence) per share, of which 54,793,472 shares are outstanding and 7,527,618
shares are reserved for issuance upon exercise of the Warrants; (ii) the
authorized and issued capital stock of each of the Company's Subsidiaries is set
forth on Schedule 10.3(ii) attached hereto (iii) all of the outstanding shares
of Capital Stock of the Company and each Subsidiary listed on Schedule 10.3(iii)
are validly issued and outstanding, fully paid and non-assessable; (iv) except
as listed on Schedule 10.3(iv) and for the Warrants, neither the Company nor its
Subsidiaries has any outstanding stock
37
or securities convertible into or exchangeable for any shares of Capital Stock,
or any outstanding rights (either preemptive or other, except as provided under
English law) to subscribe for or to purchase, or any outstanding options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any outstanding commitments of any character to issue any
Capital Stock or any stock or securities convertible into or exchangeable for
any Capital Stock of the Company or its Subsidiaries, or, except as set forth on
Schedule 10.3(iv), any outstanding demand or piggy-back registration rights to
register any Capital Stock or any stock or securities convertible into or
exchangeable for the Capital Stock of the Company or its Subsidiaries; (v)
neither the Company nor its Subsidiaries is subject to any obligation
(contingent or other) to repurchase, otherwise acquire or retire any shares of
their respective Capital Stock; and (vi) except as set forth on Schedule
10.3(vi) neither the Company nor its Subsidiaries has knowledge of any agreement
(except as set forth in this Agreement) restricting the transfer of any shares
of their respective Capital Stock except for restrictions imposed as a
consequence of U.S. federal or state securities laws or the equivalent laws of
the United Kingdom.
10.4 CHARTER; BY-LAWS. Each of the Company and its Subsidiaries
has furnished the Purchasers and their special counsel with true, correct and
complete copies of their respective Certificates of Incorporation (or equivalent
organizational documents) and By-Laws and all amendments thereto to date.
10.5 SUBSIDIARIES. Except as listed on Schedule 10.5, the
Company has no Subsidiaries and does not own of record or beneficially any
Capital Stock or equity interest or investment in any corporation, association,
partnership, joint venture or other entity.
10.6 RESERVATION OF SHARES. The Company has reserved for
issuance the number of its authorized but unissued Ordinary Shares necessary to
permit the exercise in full of all of the Warrants.
10.7 LITIGATION. Except as set forth on Schedule 10.7, there is
no action, suit, investigation or proceeding pending, or, to the Company's
knowledge threatened, whether or not purportedly on behalf of the Company or its
Subsidiaries, to which the Company or its Subsidiaries are or may be named as a
party or their property is or may be subject or which challenges this Agreement,
the Transaction Documents or any of the transactions contemplated hereby or
thereby, or to the Company's knowledge, to which any officer, employee or
stockholder of the Company or its Subsidiaries is subject.
10.8 COMPLIANCE WITH LAW. Except as set forth in the Schedules
to this Agreement, the operations of the Company and its
38
Subsidiaries have been conducted in accordance with all applicable laws,
regulations, orders and other requirements of all courts and other Governmental
Authorities having jurisdiction over the Company or its Subsidiaries and their
respective assets, properties and operations, including, without limitation, all
Environmental Laws, the CSA and FDCA, except where a failure to do so would not
have a Material Adverse Effect. Except as set forth in Schedule 10.8, none of
the Company or its Subsidiaries have received notice of any material violation
of any such law, regulation, order or other legal requirement, and none of the
Company or its Subsidiaries is in violation of or default with respect to any
order, writ, judgment, award, injunction or decree of any national, state or
local court or Governmental Authority or arbitrator, domestic or foreign,
applicable to the Company its Subsidiaries or any of their respective assets,
properties or operations except for any such violation or default which would
not have a Material Adverse Effect.
10.9 OFFERING. Assuming the accuracy of the representations and
warranties of each of the Purchasers set forth in Section 11 of this Agreement,
the offer, sale and issuance of the Warrants and the Notes and the Ordinary
Shares issuable upon the exercise of the Warrants, as contemplated by this
Agreement, are exempt from the registration requirements of the Securities Act
and from the registration or qualification requirements of the laws of any
applicable U.S. state, and neither the Company nor anyone acting on its behalf
will take any action hereafter that would cause the loss of such exemption.
10.10 COMPLIANCE WITH ERISA. Schedule 10.10 attached hereto
contains a true and complete list of the Company's and each of its Subsidiaries'
or ERISA Affiliates' written, foreign or domestic, employee bonus, retirement,
pension, profit sharing, savings, stock option, stock appreciation, stock
purchase, incentive, deferred compensation, employment, hospitalization,
medical, dental, vision, life or other health or disability (whether provided by
insurance or otherwise), severance, termination or other similar plan, policy or
program, including, without limitation, any collective bargaining agreement
involving direct or indirect compensation (including any employment agreement),
any Pension Plan or any "employee welfare benefit plan" as defined in Section
3(1) of ERISA that provides or may provide benefits or compensation to or in
respect of any employee of the Company, its Subsidiaries or ERISA Affiliates,
including any employee of the Company, its Subsidiaries, or ERISA Affiliates who
has retired or has otherwise terminated his or her employment with the Company,
its Subsidiaries or ERISA Affiliates (the "Employee Benefit Plans"). With
respect to former employees or retirees, neither the Company, nor its
Subsidiaries or ERISA Affiliates provides any life insurance, medical,
severance, pension benefits, and similar benefits to such former employees and
retirees, except as set forth on Schedule 10.10. The Company
39
and its ERISA Affiliates, are in compliance in all material respects with any
applicable provisions of ERISA and the regulations thereunder and of the Code
and regulations thereunder with respect to all Employee Benefit Plans. Each
Employee Benefit Plan that is intended to be qualified under Section 401(a) of
the Code has received a determination letter from the IRS so qualifying it, and
each related trust of such Employee Benefit Plan has been determined to be
exempt under Section 501(a) of the Code and nothing has occurred since the date
of such letter that would adversely affect the qualified status of such Employee
Benefit Plan. No material liability has been incurred by the Company or any
ERISA Affiliate which remains unsatisfied of for any taxes or penalties with
respect to any Employee Benefit Plan. Neither the Company nor any ERISA
Affiliate has engaged in any Prohibited Transaction. No Termination Event has
occurred or is reasonably expected to occur with respect to any Pension Plan or
Multiemployer Plan maintained or contributed to by the Company or any ERISA
Affiliate. Neither the Company nor any ERISA Affiliate has incurred or
reasonably expects to incur any withdrawal liability under ERISA to any
Multiemployer Plans. The actuarial present value of all benefit liabilities
under each Pension Plan maintained or contributed to by the Company or any ERISA
Affiliate, does not exceed the assets of such Pension Plan. Neither the Company
nor any ERISA Affiliate has (i) failed to make a required installment or other
required payment under Section 412 of the Code, Section 302 of ERISA or the
terms of such Pension Plans, (ii) incurred an accumulated funding deficiency,
whether or not waived, or any other liability to the PBGC which remains
outstanding other than the payment of premiums and there are no premium payments
which are due and unpaid or (iii) failed to make a contribution or payment to a
Multiemployer Plan. The offer, sale and issuance of the Warrants and Notes
hereunder or the conversion of the Notes or exercise of the Warrants, as
contemplated by this Agreement will not involve any Prohibited Transaction. No
material proceeding, claim, lawsuit and/or investigation exists or, to the best
of the knowledge of the Company, is threatened concerning or involving any
Employee Benefit Plan.
10.11 EXCHANGE ACT FILINGS; FINANCIAL STATEMENTS. (a) The
Company has furnished the Purchaser with the Company's most recent filings under
the Securities Exchange Act of 1934 (the "Exchange Act Filings"). The Exchange
Act Filings are accurate and complete in all material respects as of the date
thereof. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998 (the "1998 10-K") will, when filed with the U.S. Securities
and Exchange Commission, be accurate and complete in all material respects as of
the date of its filing. The Exchange Act Filings do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The 1998 10-K will not, when filed,
40
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
(b) The financial statements (including any related
notes thereto) contained in the Exchange Act Filings and the 1998 10-K (the
"Financial Statements") (i) were prepared in accordance with generally accepted
accounting principles ("GAAP") applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (ii) fairly presented or, in the case
of the Financial Statements included in the 1998 10-K, will fairly present the
financial position of Company as at the respective dates thereof and the results
of its operations and cash flows for the periods indicated, consistent with the
books and records of Company.
10.12 OUTSTANDING INDEBTEDNESS. Other than with respect to the
Notes and except as set forth on Schedule 10.12 hereto, neither the Company nor
its Subsidiaries has any outstanding secured or unsecured Indebtedness or
commitments for any such Indebtedness.
10.13 TAXES. Except as set forth on Schedule 10.13 hereto, each
of the Company and its Subsidiaries have timely filed all United States federal,
state, United Kingdom and other tax returns required by law to be filed by them,
and timely paid all taxes, assessments and other governmental charges required
to have been paid by them, other than those presently payable without penalty or
interest, have been timely paid. There are no tax liens upon any properties or
assets of the Company or any Subsidiary, other than liens securing payment of
taxes not yet due or which are being contested in good faith by the Company or
any of its Subsidiaries and for which adequate reserves are being maintained by
the Company. All such tax reports or returns fairly reflect the taxes of the
Company and its Subsidiaries for the periods covered thereby. Neither the
Company nor its Subsidiaries is delinquent in the payment of any material tax,
assessment or governmental charge, there is no material tax deficiency or
delinquency asserted against the Company or its Subsidiaries, and, except as
provided above, there is no material unpaid assessment, proposal for additional
taxes, deficiency or delinquency in the payment of any of the taxes of the
Company or its Subsidiaries or any violation of any federal, state, local or
foreign tax law currently being asserted by any taxing authority. No Internal
Revenue Service or Inland Revenue audit of the Company or its Subsidiaries is
pending or, to the knowledge of the Company, threatened, and the results of any
completed audits are properly reflected in the financial statements. Neither the
Company nor
41
its Subsidiaries have granted any extension to any taxing authority of the
limitation period during which any tax liability may be asserted. Neither the
Company nor its Subsidiaries have committed any material violation of any
federal, state, local or foreign tax laws. All monies required to be withheld by
the Company or its Subsidiaries from employees or collected from customers for
income taxes, social security and unemployment insurance taxes and sales, excise
and use taxes, and the portion of any such taxes to be paid by the Company or
its Subsidiaries to governmental agencies or set aside in accounts for such
purpose have been so paid or set aside, or such monies have been approved,
reserved against and entered upon the books and financial statements of the
Company or any Subsidiary.
10.14 YEAR 2000 COMPLIANCE. The Company is Year 2000 Compliant,
as that term is defined below, and there are no foreseeable expenses or other
liabilities associated with the process of securing full Year 2000 Compliance
except for any noncompliance that would not be reasonably expected to have a
Material Adverse Effect. "Year 2000 Compliant" means that such hardware or
software used by the Company or any of its Subsidiaries including, but not
limited to, microcode, firmware, system and application programs, files,
databases, computer services, and microcontrollers, including those embedded in
computer and non-computer equipment (the "Computer Systems") will (a) process
date data from at least the years 1900 through 2101 without error or
interruption; (b) maintain functionality with respect to the introduction,
processing, or output of records containing dates falling on or after January 1,
2000; and (c) be interoperable with other software or hardware which may deliver
records to, receive records from, or interact with such Computer Systems in the
course of conducting the business of the Company.
10.15 ENVIRONMENTAL AND OTHER REGULATIONS. (i) The operations of
the Company and its Subsidiaries are in compliance with Environmental Laws and
Requirements of Environmental Law, except where the failure to be in compliance
would not have a Material Adverse Effect; (ii) the Company and its Subsidiaries
have obtained all necessary Environmental Permits or authorizations required
under Environmental Laws except where a failure to do so would not have a
Material Adverse Effect; (iii) to the knowledge of the Company, there has been
no Release at any of the properties owned, leased or operated by the Company or
its Subsidiaries or any predecessor in interest, or at any disposal or treatment
facility which received Hazardous Materials generated by the Company or its
Subsidiaries or any predecessor in interest; (iv) no Environmental Claims
relating to (A) any assets, properties or businesses of the Company or its
Subsidiaries or any predecessor in interest; (B) properties adjoining properties
or businesses owned or operated by the Company or its Subsidiaries or any
predecessor in interest; or (C) any facilities which received
42
Hazardous Materials generated by the Company or its Subsidiaries or any
predecessor in interest, have been asserted against the Company or its
Subsidiaries or, to the Company's knowledge, any predecessor in interest, nor
does the Company have knowledge or notice that any such Environmental Claim is
threatened or pending; (v) to the knowledge of the Company, no Environmental
Claim has been asserted against any facilities that may have received Hazardous
Materials, if any, generated by the Company or its Subsidiaries; and (vi) none
of the Company or its Subsidiaries are subject to any Environmental Liabilities
which would have a Material Adverse Effect. None of the Company or its
Subsidiaries have received any notice from any governmental agency or other
authority alleging noncompliance with any material health, safety or
environmental laws or regulations.
10.16 INVESTMENT COMPANY ACT. Neither the Company nor its
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
10.17 LICENSES, PERMITS AND GOVERNMENTAL APPROVALS. Each of the
Company and its Subsidiaries has all material licenses, permits, franchises,
authorizations and approvals (the "Licenses and Permits") required of it by any
Governmental Authority to conduct its business as presently conducted. Schedule
10.17 sets forth a true and complete list of all such Licenses and Permits
issued to, or in the name of, the Company and its Subsidiaries, and all pending
applications therefor. Any and all past litigation concerning such Licenses and
Permits and all claims and causes of action raised therein, has been finally
adjudicated. No such License or Permit has been revoked, conditioned (except as
may be customary) or restricted, and no action (equitable, legal or
administrative), arbitration or other process is pending, or to the knowledge of
the Company, threatened, which in any way challenges the validity of, or seeks
to revoke, condition or restrict any such License, certificate of need, or
regulatory approval and each License and Permit has been duly obtained, is valid
and in full force and effect. The Licenses and Permits are sufficient and
adequate in all material respects to permit the continued lawful conduct of the
business of the Company and its Subsidiaries in the manner now conducted, and
none of the operations of the business of the Company or its Subsidiaries are
being conducted in a manner that violates any of the terms or conditions under
which any License or Permit was granted. No such License and Permit will in any
way be affected by, terminate or lapse by reason of, the transactions provided
for in this Agreement.
10.18 BROKER'S OR FINDER'S COMMISSIONS. No broker's or finder's
fee or commission will be payable by the Company with respect to the issuance
and sale of the Securities or the transactions contemplated hereby; provided,
however, that the
43
Company makes no representation or warranty with respect to any fee or
commission that might be payable to Mohamed Hadid, Al-Sabah Trading and
Development Co., The Alma Group, Ltd. or any Affiliate of any of the foregoing.
10.19 COMPLIANCE WITH OTHER INSTRUMENTS AND CONTRACTS. Neither
the Company nor its Subsidiaries is in violation of any term of their respective
Certificate of Incorporation (or equivalent organizational document), or
By-Laws. Schedule 10.19 hereto contains a list of the material Contracts of the
Company and its Subsidiaries. Neither the Company nor its Subsidiaries is in
violation of any term of any material Contract which would permit any party to
any material Contract to terminate, amend or modify such material Contract
except for any violations which do not cause and are not likely to result in a
Material Adverse Effect. To the Company's knowledge, none of the Company or its
Subsidiaries have waived any right or default by any party under any material
Contract. All material Contracts are in full force and effect, and the Company
has no knowledge that any party to any material Contract is or is seeking or
presently intends to seek to terminate, amend or modify any material Contract,
except where the termination, amendment or modification does not have, and is
not likely to result in, a Material Adverse Effect. All Contracts involving
aggregate consideration payable by or to the Company in any twelve-month period
in excess of $100,000 are listed on Schedule 10.19 as a material Contract.
10.20 INTELLECTUAL PROPERTY. Set forth on Schedule 10.20 hereto
is a true, correct and complete list of all Patents and Patent Applications,
material Trademarks, copyrights, licenses and trade/brand names owned by, or
licensed to, the Company and its Subsidiaries. Each of the Company and its
Subsidiaries possesses all Intellectual Property Rights necessary to conduct its
business as now being conducted, without conflict with or infringement upon any
valid rights of others, except where a failure to do so would not have a
Material Adverse Effect and has not received any notice of infringement upon or
conflict with the asserted rights of others. Except as set forth on Schedule
10.20, there are no outstanding options, licenses, or agreements of any kind
relating to the foregoing to which the Company or any Subsidiary is a party, nor
is the Company or its Subsidiaries bound by or a party to any option, license or
agreement of any kind with respect to the Patents and Patent Applications,
material Trademarks, copyrights, licenses and trade/brand names of any other
person or entity. No stockholder, director, officer or employee of the Company
or its Subsidiaries has any interest in any Intellectual Property Rights.
10.21 REAL PROPERTY. (a) Set forth on Schedule 10.21(a) hereto
is a true, correct and complete list of all real property owned by the Company
and its Subsidiaries. Each of the Company and its Subsidiaries has good and
marketable title to all
44
real property owned by it free and clear of all Liens other than Permitted
Liens. All required certificates of occupancy, certificates relating to
electrical work, zoning, building, housing, safety, fire and health approvals,
and other permits, franchises and licenses necessary to enable the Company and
its Subsidiaries to use or operate its facilities in the manner currently used
or operated by it or its Subsidiaries, have been issued and are in full force
and effect, except for those, the absence of which would not have a Material
Adverse Effect. No default or breach now exists and no event has occurred or is
continuing which, with notice or the passage of time or both, would constitute a
default under any of the covenants, restrictions, rights of way, easements or
other agreements affecting any of the facilities of the Company or its
Subsidiaries, except for those defaults, breaches or events that would not have
a Material Adverse Effect. Neither the Company nor its Subsidiaries have
knowledge of any condemnation or eminent domain proceedings now pending with
respect to their facilities.
(b) Set forth on Schedule 10.21(b) hereto is a true,
correct and complete list of all material leases of real property under which
the Company or its Subsidiaries is a lessee. Each of the Company and its
Subsidiaries enjoys peaceful and undisturbed possession under all such leases,
all of such leases are valid and subsisting and none of them is in default in
any material respect, nor has the Company or its Subsidiaries received any
written notice of its default under any such lease.
10.22 EMPLOYEES. (a) Set forth on Schedule 10.22 hereto is a
true, correct and complete list (including the term, expiration dated and amount
of annual compensation) of all written employment agreements to which the
Company or its Subsidiaries is a party or by which the Company or its
Subsidiaries is bound. No employee of the Company or its Subsidiaries is in
violation of any term of any written employment agreement to which it is a
party, and to the knowledge of the Company, no employee of the Company is in
violation of any contract or agreement with any former employer relating to the
right of any such employee to be employed by the Company or its Subsidiaries
because of the nature of the business conducted or to be conducted by the
Company or its Subsidiaries or to the use of trade secrets or proprietary
information of others, and the employment of the employees of the Company and
its Subsidiaries does not subject the Company or its Subsidiaries to liability
in connection with such covenants or agreements. There is neither pending nor,
to the Company's knowledge, threatened any actions, suits, proceedings or claims
with respect to any contract, agreement, covenant or obligation referred to
above. Neither the Company nor its Subsidiaries has any collective bargaining
agreement covering any of its employees.
(b) There are no labor disputes between the Company or
its Subsidiaries and any of their employees or
45
representatives of such employees. There are no discrimination charges (relating
to sex, age, race, national origin, handicap or veteran status or otherwise)
pending or threatened, in writing, against, or involving the Company or its
Subsidiaries before any court, administrative agency or arbitrator. Except as
set forth on Schedule 10.8 or otherwise disclosed to the Purchasers prior to the
Closing Date, neither the Company nor its Subsidiaries is delinquent in payments
to any of its employees for any wages, salaries, commissions, bonuses, benefits
or other direct or indirect compensation for any services performed by them to
the Closing Date or amounts required to be reimbursed to such employees. Each of
the Company and its Subsidiaries is in compliance with all federal, state, local
and foreign laws and regulations respecting labor, employment and employment
practices, terms and conditions of employment, wages, hours and benefits, except
where a failure to comply would not have a Material Adverse Effect.
10.23 INSURANCE. Schedule 10.23 contains a list and brief
description of all policies or binders of fire, liability, product liability,
workers compensation, health and other forms of insurance policies or binders
currently in force insuring against risks to which the Company and its
Subsidiaries have been a party, a named insured or otherwise the beneficiary of
coverage. With respect to each insurance policy listed in Schedule 10.23: (A)
the policy is in full force and effect; (B) none of the Company and its
Subsidiaries or any other party to the policy is in breach of default (including
with respect to the payment of premiums or the giving of notices), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination or modification under the policy; (C)
no party to the policy has repudiated any provision thereof; (D) there is no
claim pending under any of such policies as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or any
notice that a defense will be afforded with reservation of rights; (E) none of
the Company or its Subsidiaries have received (i) any notice that any issuer of
any such policy has filed for protection under applicable bankruptcy laws or is
otherwise in the process of liquidating or has been liquidated, or (ii) any
other indication that such policies are no longer in full force and effect or
that the issuer of any such policy is not longer willing or able to perform its
obligations thereunder; and (F) none of the Company or its Subsidiaries have
received any written notice from or on behalf of any insurance carrier issuing
such policies, that there will hereafter be a cancellation, or an increase in a
deductible or non-renewal of existing policies.
46
10.24 TITLE TO ASSETS. The Company has good and valid title to
all of its assets now carried on its books, free and clear of all Liens except
for Permitted Liens.
10.25 FDA MATTERS. (a) The testing, manufacture, storage,
distribution, use, promotion and sale of the Company's and its Subsidiaries'
products by the Company and its Subsidiaries and contractors has been performed
and is performed in compliance with all applicable requirements under the FDCA
and the CSA, including, without limitation, those relating to investigational
use, premarket clearance, good manufacturing practices, labeling, advertising,
record keeping, filing of reports, and security.
(b) All pending new drug applications of the Company and its
Subsidiaries are listed on Schedule 10.26. With respect to all such new drug
applications, the Company has complied with all applicable requirements in the
submission of such application.
11. REPRESENTATIONS OF THE PURCHASER. Each Purchaser severally (as to
itself and not any other Purchaser) and not jointly, represents and warrants to
the Company as follows:
11.1 AUTHORIZATION. Such Purchaser has full power and authority
to enter into this Agreement. This Agreement has been duly authorized, executed
and delivered by such Purchaser and constitutes its valid and legally binding
obligation, enforceable in accordance with its terms. Neither the execution,
delivery or performance by this Agreement by such Purchaser nor the consummation
by such Purchaser of the transactions contemplated hereby will result in a
violation of, conflict with, or result in any breach of any of the terms of, or
constitute a default under, any provision of federal, state or local law or
foreign law to which such Purchaser is subject, the organizational documents of
the Purchaser or any mortgage, indenture, agreement, instrument, judgment,
decree, order, rule or regulation or other restriction to which such Purchaser
is a party or by which it is bound.
11.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with such Purchaser in reliance upon such Purchaser's representation to the
Company, which by such Purchaser's execution of this Agreement such Purchaser
hereby confirms, that the Warrants, the Notes and the Ordinary Shares issuable
hereunder and upon exercise of the Warrants (collectively, the "Acquired
Securities") will be acquired for investment for such Purchaser's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part of the Acquired Securities in contravention of applicable law, and that
such Purchaser has no present intention of selling, granting any participation
in, or otherwise distributing the same. Such Purchaser does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person in or
with respect to any of the Acquired Securities.
47
11.3 ACCREDITED INVESTOR. Such Purchaser is and upon the
acquisition of Ordinary Shares upon exercise of the Warrants will be an
"accredited investor" within the meaning of Rule 501 of Regulation D of the
Rules and Regulations of the Securities and Exchange Commission under the
Securities Act. Such Purchaser has not been organized for the purposes of
acquiring the Acquired Securities.
11.4 RESTRICTED SECURITIES. Such Purchaser understands that the
Acquired Securities it is acquiring and may acquire as contemplated by this
Agreement are "restricted securities" within the meaning of Rule 144 under the
Securities Act ("Rule 144") inasmuch as they will be acquired from the Company
in a transaction not involving a public offering and that under the federal
securities laws and applicable regulations such Acquired Securities may be
resold without registration under the Securities Act only in certain limited
circumstances. In this connection, such Purchaser represents that it is familiar
with Rule 144 and understands the resale limitations imposed thereby and by the
Securities Act. Such Purchaser acknowledges that its investment in the Acquired
Securities may be an illiquid investment requiring such Purchaser to bear the
economic risk of the investment for an indefinite period.
11.5 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, such Purchaser further agrees not
to make any disposition of all or any portion of the Acquired Securities unless
and until the transferee has agreed in writing for the benefit of the Company to
be bound by the terms of this Agreement (provided and to the extent that such
terms are then applicable and provided that such Purchaser is making such
disposition in a transaction other than pursuant to Rule 144 or under an
effective registration statement under the Securities Act and in accordance with
any applicable state securities laws), and
(a) Such Purchaser shall have notified the Company of
the proposed disposition, and
(b) If requested by the Company, such Purchaser shall
have furnished the Company with an opinion of counsel, in form and substance
reasonably satisfactory to the Company, rendered by a law firm experienced in
matters involving the sale of securities under federal and state securities
laws, that such disposition will not require registration of the Acquired
Securities under the Securities Act or registration or qualification under any
state securities or "blue sky" law.
11.6 LEGENDS. It is understood that the certificates evidencing
the Acquired Securities will bear an appropriate legend restricting transfers
substantially in the following form:
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"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT") OR ANY APPLICABLE STATE SECURITIES LAWS.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER THE ACT AND THE REGISTRATION OR QUALIFICATION OF THE
SECURITIES UNDER APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, IN FORM AND CONTENT
REASONABLY SATISFACTORY TO THE COMPANY, THAT REGISTRATION OR
QUALIFICATION UNDER THE ACT AND STATE SECURITIES LAWS IS NOT REQUIRED."
11.7 CONSENTS. To such Purchaser's knowledge, no consent,
approval or authorization of or designation, declaration or filing with any
state, federal or foreign governmental authority on the part of such Purchaser
is required in connection with the valid execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby.
11.8 DISCLOSURE OF INFORMATION. The Purchaser represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the Company and its business and prospects and the terms and
conditions of the sale of the Acquired Securities.
12. MISCELLANEOUS.
12.1 PAYMENTS. The Company agrees that, so long as the
Purchasers shall hold any Notes, it will make payments of principal and interest
on such Notes, in compliance with the terms of this Agreement and the Notes, by
wire transfer of immediately available funds for credit to the account or
accounts as each Purchaser may designate in writing, notwithstanding any
contrary provision herein or in any Note with respect to the place of payment.
Each Purchaser agrees that, before disposing of any Note, the Purchaser will
make a notation thereon (or on a schedule attached thereto) of all principal
payments previously made thereon and of the date to which interest thereon has
been paid and, as soon as practicable thereafter, shall deliver a copy of such
Note or schedule to the Company. The Company agrees to afford the benefits of
this Section 12.1 to any transferee which shall have made the same agreement as
the Purchasers have made in this Section 12.1.
12.2 EXPENSES. The Company agrees, whether or not the
transactions hereby contemplated shall be consummated, to pay, and save each
Purchaser harmless against liability for the payment of, (i) a transaction fee
to Scorpion Holdings, LLC in the amount of $75,000, (ii) the reasonable fees and
expenses (including document production and duplication charges) of one special
counsel engaged
49
by the Purchasers in connection with this Agreement, (iii) the reasonable
out-of-pocket expenses of the Purchasers in connection with this Agreement, (iv)
the reasonable fees and expenses of one special counsel engaged by the
Purchasers in connection with any subsequent proposed amendment to, modification
of, or proposed consent under this Agreement, whether or not such proposed
modification shall be effected or proposed consent granted, and (v) the costs
and expenses, including attorney's fees, incurred by the Purchasers or any
subsequent Significant Holder in enforcing any rights under this Agreement, the
Notes, the Warrants or in responding to any subpoena or other legal process
issued in connection with this Agreement or the transactions contemplated hereby
or by reason of any Purchaser's or any subsequent Significant Holder's having
acquired any Notes or Warrants, including without limitation, costs and expenses
incurred in any bankruptcy case involving the Company or any of its Subsidiaries
provided, however, that the Company shall not be obligated to pay any costs,
fees and expenses incurred by any of the Purchasers substantially by reason of a
Purchaser's gross negligence or willful misconduct; and provided, further, that
the Company shall not be obligated to make payments described in clauses (ii) or
(iii) of this Section 12.2 in an aggregate amount in excess of $75,000. The
Company agrees to pay all depositary fees payable to the depositary in respect
of the issuance of American Depositary Shares or American Depositary Receipts in
respect of Ordinary Shares issued upon exercise of the Warrants. The obligations
of the Company under this Section 12.2 shall survive the transfer of any
Securities or portion thereof or interest therein by any Purchaser or any
subsequent Significant Holder and the payment of any Note.
12.3 CONSENT TO AMENDMENTS AND PROCEDURE FOR COVENANT WAIVER.
(a) As long as any of the Notes are outstanding, this Agreement may be amended
and the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only if the Company shall have
obtained the written consent to such amendment, action or omission to act, of
holders of Notes representing at least 51% of the principal amount of the Notes
then outstanding, and each holder of any Note at the time or thereafter
outstanding shall be bound by any consent authorized by this Section 12.3;
provided, however, that without the written consent of the holder or holders of
100% in principal amount of the Notes at the time outstanding, no amendment to
this Agreement shall change the maturity of any Note or reduce the rate or time
of payment of interest payable with respect to any Note or affect the time,
amount or allocation of any prepayments, or reduce the proportion of the
principal amount of the Notes required with respect to any consent.
(b) Once all of the Notes are repaid in full, this Agreement
shall terminate and the provisions hereof shall have no further force or effect.
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12.4 FORM, REGISTRATION, TRANSFER AND EXCHANGE OF NOTES; LOST
NOTES. (a) The Notes are issuable as registered Notes, as to both principal and
any stated interest, without coupons in denominations of at least $100,000,
except as may be necessary to reflect any principal amount not evenly divisible
by $100,000. The Company shall keep at its principal office a register in which
the Company shall provide for the registration of Notes and of transfers of
Notes. Upon surrender for registration of transfer of any Note at the principal
office of the Company, the Company shall, at its expense, execute and deliver
one or more new Notes of like tenor and of a like aggregate principal amount,
registered in the name of such transferee or transferees. Prior to effectuating
a transfer, the Company may require the transferor or transferee to deliver such
documents and provide such information as the Company reasonably believes is
necessary in order for such transfer to be made in compliance with applicable
tax and securities laws and regulatory requirements. At the option of the holder
of any Note, such Note may be exchanged for other Notes of like tenor and of any
authorized denominations, of a like aggregate principal amount, upon surrender
of the Note to be exchanged at the principal office of the Company. Whenever any
Notes are so surrendered for exchange, the Company shall, at its expense,
execute and deliver the Notes which the holder making the exchange is entitled
to receive. Every Note surrendered for registration of transfer or exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer
duly executed, by the holder of such Note or such holder's attorney duly
authorized in writing. Any Note or Notes issued in exchange for any Note or upon
transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, so that
neither gain nor loss of interest shall result from any such transfer or
exchange. Upon receipt of written notice from the holder of any Note of the
loss, theft, destruction or mutilation of such Note and, in the case of any such
loss, theft or destruction, upon receipt of such holder's unsecured indemnity
agreement, or indemnity bond or in the case of any such mutilation upon
surrender and cancellation of such Note, the Company will make and deliver a new
Note, of like tenor, in lieu of the lost, stolen, destroyed or mutilated Note.
Notwithstanding anything to the contrary contained herein, nothing in this
Section 12.4 shall be construed so as to limit the transferability of any of the
Notes.
(b) Notwithstanding anything contained in Section 12.4(a) or in
any other provision of this Agreement, prior to the occurrence of an Event of
Default, the Purchasers shall not transfer any of the Notes to any Person other
than an Affiliate of such Purchaser (i) without the prior written consent of the
Company, which consent shall not be unreasonably withheld and (ii) without
complying with the other provisions of this Agreement,
51
including the provisions of Section 11.5 hereof. Upon the occurrence of an Event
of Default, the foregoing consent of the Company shall not be required but any
transfer shall otherwise comply with the provisions of this Agreement, including
the provisions of Section 11.5 hereof.
12.5 PERSONS DEEMED OWNERS. Prior to due presentment for
registration of transfer, the Company may treat the Person in whose name any
Note is registered as the owner and holder of such Note for the purpose of
receiving payment of principal of, and interest and premium on, such Note and
for all other purposes whatsoever, whether or not such Note shall be overdue,
and the Company shall not be affected by notice to the contrary.
12.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE
AGREEMENT. All representations and warranties contained herein or made in
writing by or on behalf of the Company in connection herewith or in connection
with the transactions contemplated hereby shall survive the execution and
delivery of this Agreement and the Notes and Warrants, the transfer by any of
the Purchasers of any Notes and Warrants or portion thereof or interest therein
but shall expire upon the payment of the Notes in full, and may be relied upon
by any transferee regardless of any investigation made at any time by or on
behalf of any of the Purchasers or any subsequent Significant Holder. Subject to
the preceding sentence, this Agreement and the Notes and Warrants and the side
letter, dated the date hereof, regarding United Kingdom withholding taxes embody
the entire agreement and understanding among the Purchaser and the Company and
supersede all prior agreements and understandings relating to the subject matter
hereof.
12.7 SUCCESSORS AND ASSIGNS. All covenants and other 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 permitted successors and assigns
of the parties hereto (including, without limitation, any subsequent Significant
Holder) whether so expressed or not.
12.8 DISCLOSURE TO OTHER PERSONS. The Company acknowledges that
the holder of any Notes may deliver copies of any financial statements and other
documents delivered to such holder, and disclose any other information disclosed
to such holder, by or on behalf of the Company or any Subsidiary in connection
with or pursuant to this Agreement to (i) such holder's directors, officers,
employees, agents and professional consultants, (ii) any other holder of any
Notes, (iii) any Person to which such holder offers to sell such Notes or any
part thereof in accordance with this Agreement; or (iv) any other Person to
which such delivery or disclosure may be necessary or appropriate (a) in
compliance with any law, rule, regulation or order applicable to such holder,
(b) in response to any subpoena or other legal process, (c) in connection with
any litigation to
52
which such holder is a party or (d) in order to protect such holder's investment
in such Notes; provided, however, that prior to such disclosure pursuant to this
Section 12.8, such holder shall cause the recipient of such information to
execute a reasonable and appropriate confidentiality agreement with the Company.
12.9 NOTICES. All written communications provided for hereunder
shall be sent by airmail, first class mail or nationwide overnight delivery
service (with charges prepaid) and (i) if to any Purchaser, addressed to it at
c/o Robert T. Tucker, Esq., 61 Purchase Street, Suite #2, Rye, New York 10580,
with a copy to Pryor Cashman Sherman & Flynn LLP, 410 Park Avenue, New York, New
York 10022, Attention: Selig D. Sacks, Esq., or to such other address or
addresses as any Purchaser shall have specified to the Company in writing, (ii)
if to any other holder of any Note, addressed to such holder at such address as
such other holder shall have specified to the Company in writing or, if any such
other holder shall not have so specified an address to the Company, then
addressed to such other holder in care of the last holder of such Note which
shall have so specified an address to the Company, and (iii) if to the Company
addressed to it at 620 Airport Road, Napa, California 94558, Attention: Mr.
Frank J. Massino with copies to Latham & Watkins, 505 Montgomery Street, Suite
1900, San Francisco, California 94111, Attention: Jeffrey T. Pero, Esq. or to
such other address or addresses as the Company may have designated in writing to
each holder of the Securities at the time outstanding.
12.10 GOVERNING LAW. This Agreement has been executed and
delivered at and shall be deemed to have been made in New York, New York. This
Agreement and the rights granted herein shall be governed by and construed and
enforced under the laws of the State of New York (without giving effect to any
conflicts of law rules or principles). Any judicial proceeding brought by or
against the Company with respect to this Agreement or any related Agreement
shall be brought in any court of competent jurisdiction in the United States of
America in the Southern District of New York, and, by execution and delivery of
this Agreement, the Company accepts the exclusive jurisdiction of the aforesaid
courts and irrevocably agrees to be bound by any judgment rendered thereby in
connection with this Agreement. If any action is commenced in any other
jurisdiction the parties hereto hereby consent to the removal of such action to
the United States District Court for the Southern District of New York. The
Company hereby irrevocably designates Latham & Watkins-New York as the designee,
appointee and agent of the Company to receive, for and on behalf of the Company,
service of process in the above described jurisdiction in any legal action or
proceeding with respect to this Agreement or any other Transaction Document or
the rights and obligations hereunder or thereunder and such service shall be
deemed completed upon delivery thereof to such agent. It
53
is understood that a copy of such process served on such agent will be promptly
forwarded by mail to the Company at its address set forth in Section 12.9
hereof, but the failure of the Company to receive such copy shall not affect in
any way the service of such process. The Company further irrevocably consents to
the service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to the Company at its address, such service to become
effective 10 days after such mailing. Nothing herein shall affect the right of
the Purchaser to serve process in any other manner permitted by law or commence
legal proceedings in or otherwise proceed against the Company in any other
jurisdiction.
12.11 SECTION 151(1) OF THE COMPANIES ACT 1985 (UNITED KINGDOM).
For the avoidance of doubt and notwithstanding any other provision of any
Transaction Document, none of the Security Agreement, the UK Security Agreement,
the Patent and Trademark Security Agreement or the Pledge Agreement secure
amounts owing or payable by the Company under the Transaction Documents
(including, without limitation, the Warrants) where to do so would constitute a
breach of Section 151(1) of the Companies Act 1985 (United Kingdom).
12.12 SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
12.13 CONSTRUCTION. The Company acknowledges that it has had the
benefit of legal counsel of its own choice and has been afforded the opportunity
to review this Agreement, the Warrants, the Notes and other related documents
with its legal counsel and this Agreement, the Warrants, the Notes and related
documents shall be construed as if jointly drafted by the Company and the
Purchasers. Unless otherwise indicated, references to statutes are to statutes
of the United States of America. Accounting terms used herein shall be construed
in accordance with GAAP practiced in the United States of America. In addition,
unless the contrary intention appears, terms and expressions having a defined or
generally accepted meaning under the securities laws of the United States shall
have the same meaning in this Agreement.
12.14 COUNTERPARTS. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
54
12.15 REPRESENTATIVE OF THE PURCHASERS. Notwithstanding anything
to the contrary provided in this Agreement, prior to any transfer by the
Purchasers of the Notes and the Purchaser so transferring the Notes providing
the Company with written notice of the transfer and the name and address of the
transferee or an authorized agent of such transferee, whenever the Company is
required pursuant to this Agreement to (i) obtain the consent, waiver or
approval of any of the Purchasers or Significant Holders, or to (ii) provide any
notice to the Purchasers, the Company shall be deemed to have so obtained such
consent, waiver or approval if it shall have obtained, the written consent,
waiver or approval of Robert T. Tucker, Esq. acting on behalf of the Purchasers
and shall be deemed to have so provided such notice if it shall have provided
such notice to Robert T. Tucker, Esq. at his address set forth in Section 12.9.
The Purchasers should have the right, upon written notice to the Company, to
designate a representative other than Robert T. Tucker, Esq.
55
IN WITNESS WHEREOF, the Company and each of the Purchasers have executed
this Agreement as a deed as of the date first above written.
SENETEK PLC
By: /s/ Senetek PLC
-------------------------------------
Name:
Title:
SILVER CREEK INVESTMENTS, LTD.
By:/s/ Silver Creek Investments
-------------------------------------
Name:
Title:
BOMOSEEN INVESTMENTS, LTD.
By: /s/ Bomoseen Investments, Ltd.
-------------------------------------
Name:
Title:
ELSTREE HOLDINGS, LTD.
By: /s/ Elstree Holdings, Ltd.
-------------------------------------
Name:
Title:
DANDELION INVESTMENTS, LTD.
By: /s/ Dandelion Investments, Ltd.
-------------------------------------
Name:
Title:
56
SCHEDULE 1
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Principal Principal
Number of Amount of Amount of Number of Number of Number of
Ordinary Investment Settlement Series A Series B Series C
Shares Notes Notes Warrants Warrants Warrants
- -------------------------------------------------------------------------------------------------------
Silver Creek Investments, Ltd. 626,269 $1,487,069 $710,394 892,241 991,379 355,197
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Bomoseen Investments, Ltd. 626,269 $1,487,069 $710,394 892,241 991,379 355,197
- -------------------------------------------------------------------------------------------------------
Elstree Holdings, Ltd. 426,589 $1,012,931 $483,891 607,759 675,287 241,946
- -------------------------------------------------------------------------------------------------------
Dandelion Investments, Ltd. 426,588 $1,012,931 $483,891 607,759 675,287 241,946
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