WARRANT PURCHASE AGREEMENT
BETWEEN
AFGL INTERNATIONAL, INC.
AND
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
Dated as of May 31, 1996
TABLE OF CONTENTS
Page
RECITALS: 1
SECTION 1 Definitions 1
(a) Defined Terms 1
SECTION 2 Purchase and Sale of Warrants; Closing 11
SECTION 3 Investment Representations 12
SECTION 4 Conditions Precedent 12
SECTION 5 Warranties, etc. 13
(a) Credit Agreement Warranties 13
(b) Power, Authority, etc. 13
(c) Due Authorization 13
(d)Absence of Takeover Statutes 14
(e) Validity, etc. 14
(f) Capitalization and Ownership of the Company 14
(g) Authorization and Issuance of Warrants 15
(h) Securities Laws 15
(i) No Integration of Issue 15
SECTION 6 Covenants 15
(a) Financial and Business Information 16
(b) Public Company Information 17
(c) Maintenance of Corporate Existences, etc. 17
(d) Maintenance of Books and Records 17
(e) Inconsistent Agreements 17
(f) Organic Documents 17
(g) Transactions with Affiliates 18
(h) Issuance of Additional Rights, Options
and Warrants 18
(i) Antitakeover Statutes 18
(j) Governmental Approvals 18
(k) Issuance of Shares 18
SECTION 7 Warrant Certificates 19
SECTION 8 Execution of Warrant Certificates 19
SECTION 9 Registration 19
SECTION 10. Registration of Transfers and Exchanges 19
SECTION 11. Exercise of Warrants; Conversion of Warrants 21
SECTION 12. Payment of Taxes 23
SECTION 13. Mutilated or Missing Warrant Certificates 23
SECTION 14. Reservation of Warrant Shares 23
SECTION 15. Adjustment of Exercise Price and Number
of Warrant Shares Issuable 24
(a) Reorganization of the Company. 24
(b) When Issuance or Payment May Be Deferred. 25
SECTION 16. Fractional Interests 26
SECTION 17. Notice to Warrant Holders 26
SECTION 18. Cash Distributions and Dividends 27
SECTION 19. Put Rights; Tag-Along Rights 28
(a) Put by Holders 28
(b) Closing 28
(c) Restrictions on Purchase 29
(d) Tag-Along Rights 30
(e) Limitation on Put Rights of Others 31
(f) Severability 31
SECTION 20. Notices 31
SECTION 21. Costs and Expenses 32
SECTION 22. Indemnification 33
SECTION 23. Successors 34
SECTION 24. Termination 34
SECTION 25. Governing Law 34
SECTION 26. Benefits of this Agreement 34
SECTION 27. Counterparts 35
SECTION 28. Amendments; Waiver 35
SECTION 29. Waiver of Jury Trial 35
SECTION 30. Jurisdiction 35
SECTION 31. Specific Performance 36
SECTION 32. Confidentiality 36
SECTION 33. Entire Agreement 36
Exhibit A Form of Series E Warrant Certificate
Exhibit B Schedule of Exceptions
Exhibit C Holders of 5% of More of the Company's Stock
Exhibit D Existing Registration Rights
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of May 31, 1996 by and between AFGL
INTERNATIONAL, INC., a Nevada corporation (the "Company"), and
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, a Delaware
corporation (the "Purchaser").
W I T N E S S E T H:
RECITALS:
A. Simultaneously herewith, the Purchaser is entering
into a Credit Agreement, dated of even date herewith, by and
among the Company, the Purchaser and various other lenders that
may become parties thereto (the "Lenders") and the Purchaser in
its capacity as Agent for the Lenders (the "Agent");
B. It is a condition precedent to the extensions of
credit by the Purchaser to the Company contemplated by the Credit
Agreement that the Company agree to issue to the Purchaser (1)
Series E Warrants initially exercisable for 575,000 shares of
Series E Convertible Preferred Stock, par value $0.001 per share,
of the Company ("Series E Convertible Preferred Stock") for an
exercise price of $0.02 per share;
C. Shares of Series E Convertible Preferred Stock are
convertible, at the option of each of the holders thereof, into
shares of common stock, par value $.01 per share, of the Company
(the "Common Stock"); and
D. The Purchaser and the Company desire to set forth
in this Agreement the terms and provisions of the Series E
Warrants (the "Warrants") and the conditions to the issuance and
sale of the Warrants to the Purchaser;
NOW, THEREFORE, in consideration of the premises and
the agreements herein set forth and to induce the Purchaser to
proceed with the transactions contemplated by the Credit
Agreement, the parties hereto, intending to be legally bound,
hereby agree as follows:
SECTION 1. Definitions.
(a) Defined Terms. Capitalized terms appearing herein
and not otherwise defined herein shall have the meanings ascribed
thereto in the Credit Agreement (irrespective of whether the
Credit Agreement is in effect or has been terminated). The
following terms (whether or not underscored) when used in this
Agreement, including its preamble and recitals, shall, except
where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and
plural forms thereof):
"Affiliate" of any Person means any other Person which,
directly or indirectly, controls or is controlled by or under
common control with such Person (excluding any trustee under, or
any committee with responsibility for administering, any Plan).
A Person shall be deemed to be "controlled by" any other Person
if such other Person possesses, directly or indirectly, power (a)
to vote 5% or more of the securities having ordinary voting power
for the election of directors of such Person, or (b) to direct or
cause the direction of the management or policies of such Person
whether by contract or otherwise; provided that no Lender shall
be deemed to constitute an Affiliate of the Company solely by
virtue of holding Warrants or Warrant Shares.
"Agent" is defined in Recital A.
"Agreement" means this Warrant Purchase Agreement as in
effect on the date hereof and as hereafter amended, supplemented,
restated or otherwise modified.
"Authorized Officer" means, relative to the Company,
those officers of the Company whose signature, incumbency and
authority shall have been certified to the Agent and the Lenders
pursuant to Section 4.1.1 or Section 4.2.1 of the Credit
Agreement.
"Business Day" means any day which is neither a
Saturday or Sunday nor a legal holiday on which banks are
authorized or required to be closed in New York, New York.
"Capitalized Lease Liabilities" shall have the meaning
set forth in the Credit Agreement.
"Cash Equivalent Investment" means, at any time:
(a) any direct obligation issued or guaranteed by the
United States of America or any agency or instrumentality thereof
and backed by the full faith and credit of the United States of
America, or issued by any state or political subdivision or
public instrumentality thereof, (i) which has a remaining
maturity at the time of purchase of not more than one (1) year or
which is subject to a repurchase agreement with any Lender or any
Eligible Lending Institution exercisable within one (1) year from
the time of purchase so long as such direct obligation remains in
the possession of the Borrower or in the possession of any Lender
and (ii) which, in the case of obligations of any state or
political subdivision or public instrumentality thereof, is rated
AA or better by Moody's Investors Service, Inc.;
(b) certificates of deposit, time deposits, demand
deposits and bankers' acceptances, having a remaining maturity at
the time of purchase of not more than one (1) year, issued by any
Lender or by any Eligible Lending Institution;
(c) corporate obligations rated Prime-1 by Moody's
Investors Service, Inc. or A-1 by Standard & Poor's Corporation,
having a remaining maturity at the time of purchase of not more
than one (1) year;
(d) shares of funds registered under the Investment
Company Act of 1940, as amended, having assets of at least
$100,000,000 which invest only in obligations described above and
which shares are rated by Moody's Investors Service, Inc. or
Standard & Poor's Corporation in one of the two highest rating
categories assigned by such agencies for obligations of such
nature.
"Certificate of Designation" means the Certificate of
Designation, Preferences and Rights for the Series E Convertible
Preferred Stock filed with the Secretary of State of Nevada on
May 29, 1996.
"Change in Control" means (i) the failure of Gary S.
Goldstein to own at least 85% of the Stock of the Company which
he owns on the Closing Date, provided, however, that any Stock of
the Company sold or transferred to the Company in satisfaction of
the Goldstein Note shall not be considered for the purposes of
this clause (i), or (ii) the failure of either (A) Gary S.
Goldstein to be the Chief Executive Officer and President of the
Company and to be actively involved in the management of the
Company and its Subsidiaries or (B) any two of the following
individuals to be actively involved in the management of the
Company and its Subsidiaries at any time prior to the third
anniversary of the Closing Date or thereafter, at least one of
the following three individuals to be actively involved in the
management of the Company and its Subsidiaries at any time prior
to the fifth anniversary of the Closing Date: (1) Irene Cohen,
(2) Michael List, and (3) Ron Wendlinger, (iii) the acquisition
by any Person or group of Persons of beneficial ownership of more
than 20% of the outstanding Stock of the Company (within the
meaning of Section 13(d) or 14(d) of the Exchange Act and the
applicable rules and regulations thereunder); provided, however,
that this clause (iii) shall not apply to an underwriter(s) who
acquires Stock of the Company in connection with a public
offering of Stock of the Company which is being underwritten by
such underwriter(s), or (iv) during any period of 12 consecutive
months (whether commencing before or after the Closing Date), the
failure of individuals who on the first day of such period were
directors of the Company (together with any replacement or
additional directors who were nominated or elected by a majority
of directors then in office) to constitute a majority of the
Board of Directors of the Company.
"Closing" means the closing of the sale and purchase of
the Warrants as contemplated hereby.
"Closing Date" means May 31, 1996, the date of the
Closing.
"Common Stock" means shares now or hereafter authorized
of any class of common stock of the Company and any other capital
stock of the Company, however designated, that has the right
(subject to any prior rights of any class or series of preferred
stock) to participate in any distribution of the assets upon
voluntary or involuntary liquidation, dissolution or winding up
of the Company or in the earnings of the Company without limit as
to per share amount, and shall include, without limitation, the
presently authorized 20,000,000 shares of Common Stock, $0.01 par
value per share, of the Company. "Common Stock" shall not
include preferred or special stock.
"Company"is defined in the preamble to this Agreement.
"Contract Value per Share" means the value determined
in accordance with paragraphs (i), (ii) and, if the Company is
not a Public Company, (iii) below, and shall equal the highest
number yielded by such determination:
(i) If the Common Stock is traded on a national
securities exchange or quoted in a national inter-dealer
quotation system, the Contract Value per Share determined
pursuant to this paragraph (i) shall be an amount equal to
the average of the Quoted Prices for Common Stock for the
thirty (30) consecutive trading days commencing forty-five
(45) trading days before the date of determination.
(ii) The Contract Value per Share determined pursuant
to this paragraph (ii) shall equal the quotient of (A) five
and one half (5.5) times trailing twelve months EBITDA as of
the end of the end of the last fiscal month immediately
preceding a Put Date, minus (1) the outstanding principal
amount of Funded Indebtedness as of the last day of the
fiscal month ending immediately prior to the date of
determination, plus (2) cash and Cash Equivalent Investments
on the balance sheet of the Company and its Subsidiaries as
of the last day of the fiscal month ending immediately prior
to the date of determination, all determined in accordance
with GAAP, divided by (B) the sum of (1) the number of
shares of Common Stock outstanding on the date of
determination, plus (2) the number of Warrant Shares
purchasable and receivable upon exercise of the rights
represented by the Warrant Certificates as of the date of
determination.
(iii) If the Company is not a Public Company, the
Contract Value per Share determined pursuant to this
paragraph (iii) shall be equal to the Fair Market Value per
Share.
"Conversion Right" is defined in Section 11(b).
"Convertible Securities" means any evidences of
indebtedness, shares of stock or other securities which are
convertible into or exchangeable, with or without payment of
additional consideration in cash or property, for shares of
Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Credit Agreement" means the Credit Agreement, dated of
even date herewith, by and among the Company, the Purchaser and
various other Lenders that may become parties thereto and the
Purchaser as Agent for the Lenders, as in effect on the date
hereof and as hereafter amended, supplemented, restated or
otherwise modified.
"EBITDA" shall have the meaning specified for such term
in the Credit Agreement as in effect on the Closing Date.
"Eligible Lending Institution" means a financial
institution having a branch or office in the United States and
having capital and surplus and undivided profits aggregating at
least $100,000,000 and whose long-term debt securities are rated
Prime-1 or better by Moody's Investor Service, Inc. or A-1 or
better by Standard & Poor's Corporation.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
"Excluded Shares" means (i) shares of Common Stock to
be issued upon exercise or conversion of the Company's Series A
Convertible Preferred Stock, Series B Convertible Preferred
Stock, Series C 8% Convertible Preferred Stock, Series D 8%
Convertible Preferred Stock and the Warrants, (ii) shares of
Stock issued on exercise of warrants to purchase Common Stock
which the Board of Directors has, by resolution duly adopted
prior to May 31, 1996, authorized to be granted or issued, not to
exceed 809,711 shares, and (iii) shares of Stock issued to
officers, directors or employees of, or consultants to, the
Company upon exercise of any stock option granted prior to the
Closing Date not in excess of 701,113 shares plus shares issued
or options granted to employees pursuant to a stock option plan
approved in good faith by the Board of Directors of the Company
after the Closing Date not exceeding 500,000 shares.
"Exercise Price" means the Series E Exercise Price.
"Fair Market Value per Share" means the fair market
value of a share of Common Stock of the Company, and shall be
equal to the quotient of (A) the fair market value of the Company
and its Subsidiaries taken as a whole on the date of
determination, taking into account all the factors relevant
thereto, including, without limitation, the highest of the prices
that could be obtained from an arms'-length sale without time
constraints of (1) all or substantially all of the assets of the
Company and the Subsidiaries subject to or after satisfaction of
all liabilities of the Company and the Subsidiaries or (2) all of
the Fully Diluted Shares of Common Stock of the Company, whether
by stock sale, merger, consolidation or otherwise, divided by (B)
the number of Fully Diluted Shares of Common Stock on the date of
determination. In no event shall the Fair Market Value per Share
be reduced or discounted on the basis that any securities to be
valued on the basis of such Fair Market Value per Share may
represent the right to acquire a minority interest in the Company
or may not be freely transferable under federal or state
securities laws, or for any other reason. The Fair Market Value
per Share shall be determined as provided in clause (a) or (b)
below, as applicable.
(a) In any circumstances in which the Fair Market
Value per Share is required to be determined, not later than ten
(10) days following the date as of which such determination is
required to be made, the Board of Directors of the Company shall
determine in good faith the Fair Market Value per Share, and the
Company shall give to the Holders (or, if such determination
affects less than all of the Holders, to the Holders so affected)
prompt written notice of such determination. If within thirty
(30) days after the date such notice is given, the Company and
the Required Holders agree upon the Fair Value per Share, then
the Fair Market Value per Share shall be as so agreed. If within
such 30-day period, the Company and the Required Holders do not
agree upon such Fair Market Value per Share, then the Fair Market
Value per Share shall be determined as provided in clause (b) of
this definition.
(b) If the Required Holders and the Company do not
agree upon such Fair Market Value per Share within the 30-day
period specified in clause (a) of this definition, then the
Required Holders and the Company shall appoint a recognized
investment banking firm of national reputation, reasonably
acceptable to the Required Holders and the Company. If the
Company and the Required Holders cannot agree on the appointment
of a mutually acceptable investment banking firm, or if the firm
so appointed declines or fails to serve, then the Required
Holders and the Company shall each choose one such investment
banking firm and the respective firms so chosen shall appoint
another recognized investment banking firm of national
reputation. The investment banking firm so selected shall
appraise the value of the Company (which shall be in the form of
a written report signed by such investment banking firm), and
such appraised value of the Company determined as herein provided
shall be final and conclusive and binding on the Company and the
Holders. If the appraised value of the Company as determined by
such investment banking firm is equal to or less than that
determined by the Board of Directors of the Company in accordance
with clause (a) of this definition, then all fees and expenses of
such investment banking firm shall be paid by the Required
Holders requesting such appraisal. If the appraised value of the
Company as determined by such investment banking firm is greater
than that determined by the Board of Directors in accordance with
clause (a) of this definition, then all fees and expenses of such
investment banking firm shall be paid by the Company.
"Fiscal Quarter" means any quarter of a Fiscal Year.
"Fiscal Year" means each accounting period ending
December 31.
"Fully Diluted Shares" means, as of any date of
determination, the number of shares of Common Stock of the
Company equal to the sum of (i) the number of shares of Common
Stock outstanding on such date of determination, plus (ii) the
number of Warrant Shares receivable upon conversion of all
outstanding Warrants as of such date of determination pursuant to
Section 11(b), plus (iii) the number of shares of Common Stock
that would be issued in respect of all Option Securities of the
Company outstanding and immediately exercisable as of such date
of determination if such Option Securities were to be converted
into shares of Common Stock in accordance with the following
formula:
X = Y (A - B)
A
where: X = the number of shares to be
issued to the holders of
such Option Securities;
Y = the number of shares for which such
Option
Securities are exercisable;
A = the Fair Market Value per
Share determined on the basis of
the then outstanding Common Stock
and assuming that all Option
Securities outstanding are
converted to Common Stock as of the
date of determination; and
B = the exercise price for such Option
Securities.
"Funded Indebtedness" means (i) the indebtedness under
the Credit Agreement, (ii) Capitalized Lease Liabilities, and
(iii) all other indebtedness of the Company and its Subsidiaries
which matures more than one year from the date of its creation or
matures within one year from such date but is renewable or
extendable, at the option of the Company or any of its
Subsidiaries, to a date more than one year from such date or
arises under an agreement which obligates the lender or lenders
to extend credit during a period of more than one year from such
date.
"GAAP" means generally accepted accounting principles
in effect from time to time in the United States.
"Governmental Authority" means 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.
"Holders" means, collectively, Purchaser and any
subsequent registered holders, from time to time, of Warrant
Securities; provided, however, that the rights of any Holder
under this Agreement shall terminate when all Warrant Shares
beneficially owned by such Holder have been effectively
registered under the Securities Act and sold pursuant to a
Registration Statement or Shelf Registration Statement covering
such Holder's Warrant Shares.
"Indemnified Liabilities" is defined in Section 22.
"Indemnified Parties" is defined in Section 22.
"Legally Available Funds" means, with respect to any
purchase of Warrant Securities pursuant to Section 19(a), the
amount of funds of the Company legally available therefor under
the corporate laws under which the Company is organized and
existing.
"Lenders" is defined in Recital A.
"Lien" means any mortgage, pledge, hypothecation,
assignment, charge, deposit arrangement, encumbrance, lien
(statutory or other), adverse claim or preference, priority or
other security agreement or preferential arrangement of any kind
or nature whatsoever (including any conditional sale or other
title retention agreement, any financing lease involving
substantially the same economic effect as any of the foregoing
and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
"Loans" shall have the meaning set forth in the Credit
Agreement.
"Obligations" means all obligations of the Company with
respect to the repayment or performance of any obligations
(monetary or otherwise) of the Company arising under or in
connection with the Credit Agreement, the "Notes" or the other
"Loan Documents" (as such terms are defined in the Credit
Agreement) and the Warrant Documents.
"Option Securities" is defined in Section 15.
"Organic Document" means, relative to any Person, its
articles or certificate of incorporation or organization or
certificate of limited partnership, its by-laws, partnership or
operating agreement or other organizational documents, and all
stockholders agreements, voting trusts and similar arrangements
applicable to any of its Stock or partnership interests or other
ownership interests, in each case, as amended.
"Person" means any natural person, corporation,
partnership, limited liability company, firm, association,
government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Preferred Stock" means shares now or hereafter
authorized of any class of capital stock of the Company other
than Common Stock, and shall include, without limitation, the
presently authorized 5,000,000 shares of Preferred Stock of which
(i) 2,800 shares have been designated Series A 8% Convertible
Preferred Stock, $0.001 par value, 2,800 shares of which are
outstanding, (ii) 6,858 shares have been designated Series B
Convertible Preferred Stock, $0.001 par value, 6,858 shares of
which are outstanding, (iii) 150 shares have been designated
Series C 8% Convertible Preferred Stock, $0.001 par value, 101.74
shares of which are outstanding, (iv) 80 shares have been
designated Series D 8% Convertible Preferred Stock, $0.001 par
value, of which are outstanding, (v) 575,000 shares of
Series E Convertible Preferred Stock, $0.001 par value, of which
no shares are outstanding, and (vi) 4,415,112 shares are
undesignated and unissued.
"Prospective Purchaser" shall have the meaning set
forth in Section 19(d).
"Public Company" means a company (i) which is subject
to the reporting requirements of Section 15(d) of the Exchange
Act, or (ii) any of whose securities are registered pursuant to
Section 12(b) or 12(g) of the Exchange Act.
"Put Closing Date" is defined in Section 19(b).
"Put Event" means any of the following: (a) any
representation or warranty of the Company under any Warrant
Document is or shall be incorrect when made in any material
respect; (b) the Company shall default in the due performance and
observance of any of its obligations under any Warrant Document
and such default shall have continued for a period of thirty (30)
days after written notice thereof has been given to the Company
by the Required Holders; (c) an Event of Default shall have
occurred and be continuing under the Credit Agreement; (d) a
merger or consolidation of the Company with or into any other
Person or any acquisition of the Company by means of a share
exchange; and (e) a Change of Control.
"Put Exercise Notice" is defined in Section 19(a).
"Put Purchase Price" is the amount payable to each
Holder for such Holder's Warrant Securities, as calculated in
accordance with Section 19(a).
"Put Notice" is the written notice to the Company
specifying the number and type of Warrant Securities with respect
to which the Put Right is being exercised.
"Put Right" is the right of each Holder to require that
the Company purchase all or any portion of the Warrant Securities
then owned by such Holder.
"Quoted Price" of Common Stock for each day means the
last reported sales price of Common Stock on such day as reported
by NASDAQ or, if Common Stock is listed on a national securities
exchange, the last reported sales price of Common Stock on such
exchange (which shall be consolidated trading if applicable to
such exchange) on such day, or if not so reported or listed, the
average of the last reported bid and ask prices of Common Stock
on such day, in each case as appropriately adjusted for any stock
splits or reverse stock splits occurring after the Closing Date.
"Registration Rights Agreement" means the Registration
Rights Agreement, dated of even date herewith, between the
Company and the Purchaser, as in effect on the date hereof and as
hereafter amended, supplemented, restated or otherwise modified.
"Registration Statement" is defined in the Registration
Rights Agreement.
"Regulatory Approval" means each and every approval,
consent, filing and registration by or with any federal, state or
other regulatory authority (domestic or foreign) necessary to
authorize or permit the execution, delivery or performance of
this Agreement or any other Warrant Document, for the validity or
enforceability hereof or thereof or for the consummation of the
transactions contemplated hereby or thereby.
"Required Holders" means Holders holding at least 66-
2/3% of the Warrant Securities outstanding (treating all Warrants
as fully exercised for the Warrant Shares to which Holders would
be entitled upon exercise of such Warrants) or, if any matter
affects the interest of less than all of the Holders, then
Holders holding at least 66-2/3% of the Warrant Securities so
affected, as the context may require.
"Restriction on Purchase" exists if, at the time of a
Put Closing, (i) the purchase of such Warrant Securities would
result in a default under or a breach of any Restrictive
Provision (assuming that the covenants applicable to the Company
at the end of the Fiscal Quarter in which such purchase is to
occur were applicable on the date of such purchase), or (ii) the
Company would not have sufficient Legally Available Funds to pay
the Purchase Price for the Warrant Securities.
"Restrictive Provision" means any of the financial
covenants contained in Section 6.2.4 or the negative covenants
contained in Section 6.2.8 of the Credit Agreement, in each case
as the same may be amended from time to time; provided, however,
that to the extent noncompliance with any such covenant as a
result of the purchase by the Company of Warrant Securities is
waived in accordance with Section 9.1 of the Credit Agreement,
such covenant shall not constitute a Restrictive Provision.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended from time to time.
"Securities Legend" is defined in Section 10.
"Selling Holder" is defined in Section 19(c).
"Selling Holder Notice" is defined in Section 19(d).
"Selling Holder Offer" is defined in Section 19(d).
"Series E Convertible Preferred Stock" means the Series
E Convertible Preferred Stock, $0.001 par value per share, of the
Company, convertible into Common Stock at the option of the
Holder.
"Series E Exercise Price" means an amount per share
equal to $0.02.
"Series E Warrant Certificates" means the certificates
evidencing the Series E Warrants in the form of Exhibit A.
"Series E Warrants" means the warrants referred to in
clause (1) of Recital B as evidenced by the Series E Warrant
Certificates.
"Stock" means any capital stock of the Company.
"Shelf Registration Statement" is defined in the
Registration Rights Agreement.
"Subsidiary" of any corporation means any other
corporation greater than 50% of the outstanding shares of Stock
of which having ordinary voting power for the election of
directors is owned directly or indirectly by such corporation,
and, except as otherwise indicated herein, references to
Subsidiaries shall refer to Subsidiaries of the Company.
"Substitute Securities" is defined in Section 15.
"Transfer Agent" is defined in Section 14.
"Warrant Certificates" means, the Series E Warrant
Certificates.
"Warrant Documents" means, collectively, this
Agreement, the Warrants, the Registration Rights Agreement, the
Certificate of Designation and any other document, instrument or
agreement executed or delivered in connection with any of the
foregoing to which the Company is a party, but excluding the
Credit Agreement and the other Loan Documents (as defined in the
Credit Agreement).
"Warrant Securities" means, collectively, the Warrants
and Warrant Shares.
"Warrant Shares" means the securities which a Holder
may acquire upon exercise or conversion of a Warrant, together
with any other securities which such Holder may acquire on
account of any such securities, including, without limitation, as
the result of the shares of Series E Convertible Preferred Stock
being converted into shares of Common Stock and/or any dividend
or other distribution on Common Stock, any split-up of such
Common Stock, or in accordance with a recapitalization, merger,
consolidation, share exchange, reorganization or other
transaction or series of related transactions in which shares of
Common Stock are changed into or exchanged for securities of
another corporation or the exercise of any preemptive right (or
the exercise or conversion of any security which such Holder may
acquire in connection with the exercise of any preemptive right)
with respect to any such Common Stock.
"Warrants" means the Series E Warrants together with
any warrants issued in substitution or replacement therefor.
(b) Cross-References. Unless otherwise specified,
references in this Agreement to any Article or Section are
references to such Article or Section of this Agreement, and
unless otherwise specified, references in any Article, Section,
or definition to any clause are references to such clause of such
Section, Article or definition.
SECTION 2. Purchase and Sale of Warrants; Closing.
(a) The Company hereby agrees to sell to the Purchaser
and, subject to the provisions of Section 4, the Purchaser hereby
agrees to purchase from the Company for a total purchase price of
$1.00 Series E Warrants to purchase 575,000 shares of Series E
Convertible Preferred Stock of the Company for an initial
exercise price of $0.02 per share.
(b) The sale and purchase of the Warrants shall take
place at the Closing at the offices of Christy & Viener, 620
Fifth Avenue, New York, New York 10020-2457, at 10:00 a.m. on May
31, 1996, or such other place and time as may be agreed upon by
the Purchaser and the Company. At the Closing, the Company will
deliver to the Purchaser, upon payment therefor, (1) Series E
Warrant Certificates in the form of Exhibit A evidencing the
Series E Warrants to be purchased by the Purchaser in such
denomination or denominations as the Purchaser may request and
registered in its name or the name of its nominee and dated the
Closing Date.
SECTION 3. Investment Representations. Purchaser
represents and warrants that it is purchasing the Warrants and
any Warrant Shares issuable upon exercise or conversion of the
Warrants for its own account, for investment purposes and not
with a view to the distribution thereof; provided, however, that
the foregoing representation shall not be construed as imposing
any limitation on the Purchaser's right to transfer any of the
Warrants or Warrant Shares that is not otherwise expressly set
forth in the Warrant Documents or required under applicable law.
Each Holder agrees that it will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any of the Warrant Securities (or solicit any offers
to buy, purchase or otherwise acquire or take a pledge of the
Warrant Securities), except in compliance with the Securities Act
and applicable state securities laws. Each Holder agrees that it
will not transfer, sell, assign, pledge, hypothecate or otherwise
dispose of any of the Warrant Securities if any such disposition
would cause the Company to be required to register any Warrant
Securities pursuant to Section 12(g) of the Exchange Act.
SECTION 4. Conditions Precedent. The obligation of
the Purchaser to purchase the Series E Warrants on the Closing
Date pursuant to Section 2 hereof shall be subject to the prior
or concurrent satisfaction of each of the conditions precedent
set forth in this Section 4, except as the Purchaser shall
otherwise consent:
(a) the accuracy of the representations set forth in
this Agreement and in the other Warrant Documents in all material
respects;
(b) the compliance by the Company in all material
respects with all covenants and agreements required to be
performed by it on or prior to the Closing;
(c) the satisfaction of all of the conditions
precedent set forth in Sections 4.1 through 4.2.6 of the Credit
Agreement;
(d) Purchaser's receipt of Warrant Certificates
registered in Purchaser's name (or in the name of a nominee of
Purchaser) evidencing the Warrants;
(e) Purchaser's receipt of the Registration Rights
Agreement with respect to the Warrants, in form and substance
satisfactory to Purchaser, duly executed and delivered by the
Company and dated the Closing Date;
(f) Purchaser's receipt of a copy of the Company's
articles of incorporation including provisions satisfactory to
the Purchaser relating to the Company's capital structure,
certified as of a recent date by the Secretary of State of
Nevada.
(g) Purchaser's receipt of a certificate of the
secretary or an assistant secretary of the Company, together with
true and correct copies of the resolutions of the Board of
Directors and, to the extent necessary, the stockholders of the
Company authorizing or ratifying the execution, delivery and
performance of this Agreement and the other Warrant Documents,
authorizing the adoption and filing of the Certificate of
Designation and authorizing the creation and issuance of the
Warrants and the Warrant Shares; and setting forth the names of
the Authorized Officers of the Company executing this Agreement
and the other Warrant Documents, together with a sample of the
true signature of each such Authorized Officer;
(h) Purchaser's receipt of certified copies of all
documents evidencing any other necessary corporate action,
consents and governmental approvals or filings (if any) with
respect to this Agreement and the other Warrant Documents;
(i) Purchaser's receipt of opinions, dated the Closing
Date, from Christy & Viener, counsel to the Company, and Kravitz,
Schnitzer & Sloane, special Nevada counsel to the Company, in
form and substance satisfactory to Purchaser and its counsel, and
covering such matters as the Purchaser may request;
(j) All proceedings taken in connection with the
transactions contemplated by this Agreement and the other Warrant
Documents shall be satisfactory in form and substance to
Purchaser and its counsel, and Purchaser and its counsel shall
have received copies (executed or certified as may be
appropriate) of all documents, instruments and agreements which
Purchaser or its counsel may request in connection with the
consummation of such transactions.
SECTION 5. Warranties, etc. In order to induce
Purchaser to enter into this Agreement, to engage in the
transactions contemplated herein and in the other Warrant
Documents and to purchase the Warrants hereunder, the Company
represents and warrants unto Purchaser as set forth in this
Section 5, except as provided in the Schedule of Exceptions
attached as Exhibit B, each and all of which representations and
warranties are made as of the Closing Date and shall survive the
execution and delivery of this Agreement and the Closing
hereunder:
(a) Credit Agreement Warranties. Each of the
representations and warranties of the Company set forth in the
Credit Agreement is true and correct.
(b) Power, Authority, etc. The Company has full power
and authority to enter into and perform its obligations under
this Agreement and each of the other Warrant Documents.
(c) Due Authorization. The Certificate of Designation
has been duly adopted pursuant to applicable law, has been duly
filed with the Nevada Secretary of State and is in full force and
effect. The execution and delivery by the Company of this
Agreement and each of the other Warrant Documents, the
performance by the Company of its obligations hereunder and
thereunder and the issuance of the Warrants hereunder by the
Company have been duly authorized by all necessary corporate
action, do not require any Regulatory Approval (except those
Regulatory Approvals already obtained), do not and will not
conflict with, result in any violation of, or constitute any
default under, any provision of any Organic Document of the
Company or any Subsidiary, any agreement or instrument to which
the Company or any of it's Subsidiaries is a party or by which it
or any of its property is bound, or any law or governmental
regulation or court decree or order and will not result in or
require the creation or imposition of any Lien on any of the
Company's or any Subsidiary's properties pursuant to the
provisions of any such agreement or instrument. No vote
(including any vote under the rules of any securities exchange or
trading system or market on which any of the Company's securities
are listed or traded) on the part of the stockholders of the
Company, other than those which have been obtained, is required
to approve or authorize the adoption and filing of the
Certificate of Designation, any of the transactions contemplated
by this Agreement, any of the other Warrant Documents or any of
the Loan Documents or the authorization of the issuance of Series
E Convertible Preferred Stock or the Warrant Securities or any
shares of capital stock to be issued pursuant to the Loan
Documents. None of the transactions contemplated by this
Agreement, any of the other Warrant Documents or any of the Loan
Documents (including the issuance of Series E Convertible
Preferred Stock, the Warrant Securities or any shares of capital
stock to be issued pursuant to the Loan Documents) will give rise
to any payment or the acceleration of any obligation (whether
with or without the passage of time or upon the occurrence of any
event) to any director, officer or employee of the Company or any
Subsidiary.
(d) Absence of Takeover Statutes. The Board of
Directors of the Company has approved for purposes of Sections
78.411 through 78.444 inclusive of the Nevada Revised Statutes
(the "Nevada Business Combination Statute-Combinations with
Interested Stockholders) the transactions contemplated by this
Agreement, the Warrant Documents and the issuance of the Warrant
Securities. No other "fair price," "moratorium," "control share
acquisition," "shareholder protection", or similar antitakeover
statute will apply to any Holder, this Agreement, any of the
other Warrant Documents or the authorization or issuance of the
Warrant Securities. The Company is not a party to, and is not
subject to, any stockholder rights plan, rights agreement or
similar agreement, arrangement or understanding, other than as
may result from the place of incorporation or domicile of any
Holder.
(e) Validity, etc. This Agreement and each of the
other Warrant Documents constitutes the legal, valid and binding
obligations of the Company enforceable in accordance with their
respective terms, subject to (i) the effect of any applicable
bankruptcy, insolvency, moratorium or similar laws affecting
creditors' rights generally; and (ii) the effect of general
principles of equity (regardless of whether considered in a
proceeding in equity or at law).
(f) Capitalization and Ownership of the Company. The
authorized capital stock of the Company consists of (1)
20,000,000 shares of Common Stock, 4,899,592 of which will be
outstanding on the Closing Date; and (2) 5,000,000 shares of
Preferred Stock of which (i) 2,800 shares have been designated
Series A 8% Convertible Preferred Stock, $0.001 par value, 2,800
shares of which are outstanding, (ii) 6,858 shares have been
designated Series B Convertible Preferred Stock, $0.001 par
value, 6,858 shares of which are outstanding, (iii) 150 shares
have been designated Series C 8% Convertible Preferred Stock,
$0.001 par value, 101.74 shares of which are outstanding, (iv) 80
shares have been designated Series D 8% Convertible Preferred
Stock, $0.001 par value, shares of which are outstanding,
(v) 575,000 shares have been designated Series E Convertible
Preferred Stock, $0.001 par value, of which no shares are
outstanding; and (vi) 4,415,112 shares are undesignated and
unissued. The record and, to the best knowledge of the Company,
beneficial ownership of five percent (5%) or more of the
outstanding capital stock of the Company as of the Closing Date
is set forth in Exhibit C. All such outstanding shares are duly
authorized, validly issued, fully paid and nonassessable, and are
not, and will not have been, issued in violation of any
preemptive rights. Except as set forth in Exhibit C, no issued,
no authorized but unissued and no treasury shares of capital
stock of the Company are subject to any preemptive right, option,
warrant, right of conversion or purchase or any similar right
issued or granted by the Company or, to the best knowledge of the
Company, by any of its shareholders. Except as set forth in the
Organic Documents of the Company or in Section 19, there are no
agreements or understandings with respect to the voting, sale or
transfer of any shares of capital stock of the Company to which
the Company or, to the best knowledge of the Company, any of its
Affiliates is a party.
(g) Authorization and Issuance of Warrants. The
issuance of the Warrants has been duly authorized and, upon
delivery to Purchaser of the Warrant Certificates therefor in
accordance with the terms hereof, the Warrants will have been
validly issued and fully paid and nonassessable, free and clear
of all Liens and the issuance thereof will not give rise to any
preemptive rights. The issuance of the shares of Series E
Convertible Preferred Stock subject to the Warrants has been duly
authorized and, when issued upon exercise of the Warrants in
accordance with the terms thereof, such shares will have been
validly issued and will be fully paid and nonassessable. The
issuance of the shares of Common Stock issuable upon conversion
of the Series E Convertible Preferred Stock has been duly
authorized and, when issued upon conversion of the Series E
Convertible Preferred Stock in accordance with the terms thereof,
such shares will have been validly issued and will be fully paid
and nonassessable and the issuance thereof will not give rise to
any preemptive rights. 575,000 shares of Series E Convertible
Preferred Stock have been duly reserved for issuance upon the
exercise of the Warrants. Except as set forth in the
Registration Rights Agreement and on Exhibit D, no Person has the
right to demand or any other right to cause the Company to file
any registration statement under the Securities Act relating to
any securities of the Company or any right to participate in the
any such registration.
(h) Securities Laws. In reliance on the investment
representations contained in Section 3, the offer, issuance, sale
and delivery of the Warrants to the Purchaser as provided in this
Agreement, the issuance and delivery of Series E Convertible
Preferred Stock upon the exercise of the Warrants by the
Purchaser, and the conversion of the Series E Convertible
Preferred Stock into Common Stock, are and will be exempt from
the registration requirements of the Securities Act and all
applicable state securities laws, as such laws are currently in
effect.
(i) No Integration of Issue. Neither the Company nor
any Person authorized or employed by the Company as agent, broker
or otherwise in connection with the offering of the Warrants has
offered the Warrants for sale to, or solicited any offers to buy
the Warrants from, or otherwise approached or negotiated or
communicated in respect thereof with, anyone other than
Purchaser. Neither the Company nor any Person acting on behalf
of the Company will sell or offer any class of securities to, or
solicit any offers to buy any class of securities from, or
otherwise approach, negotiate or communicate in respect thereof
with, any Person so as to require the registration of the
Warrants under the Securities Act or any applicable state
securities laws.
SECTION 6. Covenants. The Company agrees with each
Holder that, until the termination of this Agreement pursuant to
Section 24 hereof, the Company will perform the obligations set
forth in this Section 6:
(a) Financial and Business Information. For so long
as the Company is not a Public Company, the Company will furnish,
or will cause to be furnished, to each Holder copies of the
following financial statements, reports and information:
(i) promptly when available and in any event
within ninety (90) days after the close of each Fiscal
Year, a consolidated and consolidating balance sheet at
the close of such Fiscal Year, and related consolidated
and consolidating statements of operations, retained
earnings, and cash flows for such Fiscal Year, of the
Company and its Subsidiaries (with comparable
information at the close of and for the prior Fiscal
Year), certified (in the case of consolidated
statements) without qualification by Mortenson & Co.,
Inc. or other independent public accountants
satisfactory to the Required Holders, together with a
report containing a description of projected business
prospects (including capital expenditures) and
management's discussion and analysis of the financial
condition and results of operation of the Company and
its Subsidiaries; and
(ii) promptly when available and in any event
within forty-five (45) days after the close of each
Fiscal Quarter, consolidated and consolidating balance
sheets at the close of such Fiscal Quarter, and
consolidated and consolidating statements of
operations, retained earnings, and cash flows for such
Fiscal Quarter and for the period commencing at the
close of the previous Fiscal Year and ending with the
close of such Fiscal Quarter, of the Company and its
Subsidiaries (with comparable information at the close
of and for the corresponding Fiscal Quarter of the
prior Fiscal Year and for the corresponding portion of
such prior Fiscal Year), certified by the chief
financial or executive officer of the Company, together
with a brief report containing management's discussion
and analysis of the financial condition and results of
operations of the Company and its Subsidiaries
(including a discussion and analysis of any changes
compared to prior results) generally similar in scope
to that which would be required in a quarterly report
on Form 10-Q filed under the Exchange Act (delivery to
the Holders of such a quarterly report on Form 10-Q
with respect to any Fiscal Quarter will satisfy the
requirements of this clause (a)(ii) with respect to
such Fiscal Quarter.
(iii) promptly when available and in any event
within thirty (30) days after the close of each
calendar month of each Fiscal Year consolidated and
consolidating balance sheets at the close of such
month, and consolidated and consolidating statements of
operations, retained earnings, and cash flows for such
month and for the period commencing at the close of the
previous Fiscal Year and ending with the close of such
month, of the Company and Subsidiaries (with comparable
information at the close of and for the corresponding
month of the prior Fiscal Year and for the
corresponding portion of such prior Fiscal Year),
certified by the principal accounting or chief
financial Authorized Officer of the Company, together
with a description of projected business prospects
(including capital expenditures) and a brief report
containing management's discussion and analysis of the
financial condition and results of operations of the
Company and its Subsidiaries (including a discussion
and analysis of any changes compared to prior results);
and
(iv) promptly upon the sending or filing thereof,
copies of all reports that the Company sends to its
security holders generally, and copies of all reports
and registration statements that the Company or any of
its Subsidiaries files with the Securities and Exchange
Commission or any national securities exchange; and
(b) Public Company Information. During any period
while the Company is a Public Company:
(i) Filings. The Company will file with the SEC
on or before the required date all regular or periodic
reports required pursuant to the Exchange Act and
deliver to each Holder, promptly upon its becoming
available, one copy of each report, notice or proxy
statement sent by the Company to its stockholders
generally, and of each regular or periodic report filed
pursuant to the Exchange Act and any registration
statement, prospectus or written communication (other
than transmittal letters) pursuant to the Securities
Act filed by the Company with (i) the SEC or (ii) any
national securities exchange; and
(ii) Rule 144. The Company will make publicly
available information concerning the Company sufficient
to allow any Holder to dispose of all or a portion of
the Warrant Securities pursuant to Rule 144 (or any
successor provision) promulgated by the SEC under the
Securities Act.
(c) Maintenance of Corporate Existences, etc. Except
as permitted pursuant to Section 6.2.10 of the Credit Agreement,
the Company will cause to be done at all times all things
necessary to maintain and preserve the corporate existences of
the Company and its Subsidiaries.
(d) Maintenance of Books and Records. The Company
will, and will cause each Subsidiary to, keep books and records
reflecting all of its business affairs and transactions in
accordance with GAAP.
(e) Inconsistent Agreements. The Company will not,
and will not permit any Subsidiary to, enter into any agreement
containing any provision which would be violated or breached by
the issuance of the Warrants or the Warrant Shares or by the
performance by the Company or any Subsidiary of its obligations
under this Agreement or under any other Warrant Documents.
(f) Organic Documents. So long as any Warrant
Securities are outstanding, the Company's articles of
incorporation shall contain the provisions regarding the Series E
Convertible Preferred Stock set forth in its Organic Documents as
constituted on the date hereof. The Company shall not permit to
occur any amendment, alteration or modification to its Organic
Documents, as constituted on the date hereof, the effect of
which, in Purchaser's or the Required Holders' judgment, would be
to alter, impair or adversely affect either the rights and
benefits of Purchaser or the Holders or the duties and
obligations of the Company under this Agreement and the other
Warrant Documents.
(g) Transactions with Affiliates. The Company will
not, and will not permit any Subsidiary to, enter into, or cause,
suffer or permit to exist:
(i) any arrangement or contract with any of its
Affiliates of a nature customarily entered into by Persons
which are Affiliates of each other (including management or
similar contracts or arrangements relating to the allocation
of revenues, expenses or otherwise) requiring any payments
to be made by the Company or any of its Subsidiaries to any
Affiliate, other than (i) any arrangement solely among the
Company and its wholly-owned Subsidiaries, and (ii) the
Merger; and
(ii) any other transaction, arrangement or contract
with any of its Affiliates which is on terms which are less
favorable than are obtainable in a transaction from any
Person which is not one of its Affiliates.
(h) Issuance of Additional Rights, Options and
Warrants. The Company will not issue any rights, options or
warrants to subscribe for or purchase or otherwise acquire Common
Stock or Convertible Securities, whether or not the right to
exercise such rights, options or warrants or to convert or
exchange such Convertible Securities is immediately exercisable
or is conditioned upon the passage of time, an occurrence or non-
occurrence of some other event, or both, other than any rights,
options or warrants which constitute Excluded Shares.
(i) Antitakeover Statutes. The Company shall take all
action necessary to avoid the application of any "fair price,"
"moratorium," "control share acquisition," "business
combination," "shareholder protection" or similar antitakeover
statute to the transactions contemplated by this Agreement or any
other Warrant Document (including the issuance of the Warrant
Securities).
(j) Governmental Approvals. The Company will, and
will cooperate with the Holders to, secure all necessary
consents, approvals, authorizations and exemptions from all
governmental authorities in connection with the exercise of the
Warrants, the issuance of shares of Series E Convertible
Preferred Stock upon exercise of the Warrants and the issuance of
shares of Common Stock upon the conversion of such shares of
Series E Convertible Preferred Stock.
(k) Issuances of Shares. The Company will not issue
any shares of Series E Convertible Preferred Stock other than
pursuant to the exercise of the Warrants.
SECTION 7. Warrant Certificates. The Warrant
Certificates to be delivered pursuant to this Agreement shall be
in registered form only as provided in Section 9 and in the form
set forth as Exhibit A.
SECTION 8. Execution of Warrant Certificates. Warrant
Certificates shall be signed on behalf of the Company by the duly
authorized officers of the Company under its corporate seal.
Each such signature upon the Warrant Certificates may be in the
form of a facsimile signature of the duly authorized officers of
the Company and may be printed or otherwise reproduced on the
Warrant Certificates and for that purpose the Company may adopt
and use the facsimile signature of any person who shall have been
a duly authorized officer of the Company, notwithstanding the
fact that at the time the Warrant Certificates shall be delivered
or disposed of such person shall have ceased to hold such office.
The seal of the Company may be in the form of a facsimile thereof
and may be impressed, affixed, imprinted or otherwise reproduced
on the Warrant Certificates. In case any officer of the Company
who shall have signed any of the Warrant Certificates shall cease
to be such officer before the Warrant Certificates so signed
shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be delivered or disposed of as
though such person had not ceased to be such officer of the
Company; and any Warrant Certificate may be signed on behalf of
the Company by any person who, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer
of the Company to sign such Warrant Certificate although at the
date of the execution of this Agreement such person was not such
officer.
SECTION 9. Registration. The Company shall number and
register the Warrant Certificates in a register as they are
issued. The Company may deem and treat the registered holder(s)
of the Warrant Certificates as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing
thereon made by anyone) for all purposes and shall not be
affected by any notice to the contrary.
SECTION 10. Registration of Transfers and Exchanges.
(a) The Company shall from time to time register the transfer of
any outstanding Warrant Certificates in a Warrant register to be
maintained by the Company upon surrender of such Warrant
Certificates accompanied by a written instrument or instruments
of transfer in form reasonably satisfactory to the Company, duly
executed by the registered Holder or Holders thereof or by the
duly appointed legal representative thereof or by a duly
authorized attorney; provided, however, that prior to effecting
such transfer, the transferee shall agree (in a form reasonably
satisfactory to the Company) to be bound by the terms of this
Agreement, including, without limitation, Section 19. Upon any
such registration of transfer, a new Warrant Certificate shall be
issued to the transferee(s) and the surrendered Warrant
Certificate shall be canceled and disposed of by the Company.
Until the Warrant Certificate is transferred on the Warrant
register of the Company, the Company may treat the Holder as
shown in the Warrant register as the absolute owner of the
Warrant Certificate for all purposes, and notwithstanding any
notice to the contrary. The Company agrees that it will make the
Warrant register available for inspection by the Holders during
normal business hours at its office and that the Holders may rely
on the Warrant register for purposes of complying with the
preceding sentence.
(b) The Warrants shall be transferable in whole or in
part and, in the event that a Warrant Certificate is transferred
in respect of fewer than all the Warrants evidenced by the
Warrant Certificate, a new Warrant Certificate evidencing the
remaining Warrant or Warrants will be issued and delivered
pursuant to the provisions of this Section 10 and of Section 8.
(c) If any transfer of Warrants or Warrant Shares is
not made pursuant to an effective registration statement under
the Securities Act, the Holder will, if reasonably requested by
the Company, deliver to the Company an opinion of counsel, which
may be counsel to the Holder but which must be reasonably
satisfactory to the Company, reasonably satisfactory in form,
scope and substance to the Company, that such Warrants or Warrant
Shares may be sold without registration under the Securities Act
and applicable state securities laws, as well as:
(1) an investment covenant reasonably
satisfactory to the Company signed by the proposed
transferee (except that no such covenant will be required in
connection with a transfer effected in accordance with Rule
144A under the Securities Act);
(2) an agreement by such transferee to the
impression of the restrictive legends set forth below on the
Warrant Certificate or on the certificate evidencing such
Warrant Shares.
The Holders agree that each Warrant Certificate and each
certificate representing Warrant Shares will bear the following
legend (the "Securities Legend"):
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS.
SAID SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION, OR AN
OPINION OF COUNSEL (WHICH MAY BE COUNSEL
TO THE HOLDER) AS TO AN EXEMPTION, FROM
THE REGISTRATION PROVISIONS OF SAID ACT
OR LAWS."
Notwithstanding the foregoing provisions of this Section 10, the
restrictions upon the transferability of the Warrant Securities
and the Securities Legend requirement set forth above in this
Section 10 shall terminate as to any of the Warrant Securities
(i) when and so long as such Warrant Security shall have been
effectively registered under the Securities Act and disposed of
pursuant thereto or (ii) when the Company shall have received an
opinion of counsel reasonably satisfactory to it that such
Securities Legend is not required in order to ensure compliance
with the Securities Act and applicable state securities laws.
Whenever the restrictions imposed by this Section 10 shall
terminate as to any Warrant Security, as hereinabove provided,
the Holder thereof shall be entitled to receive from the Company,
at the expense of the Company, a new Warrant Certificate or
certificate for Warrant Shares bearing the following legend in
place of the Securities Legend set forth above:
"THE RESTRICTIONS ON TRANSFERABILITY OF
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE TERMINATED ON
______________, 19__, AND ARE OF NO
FURTHER FORCE AND EFFECT."
The Holders further agree that each Warrant Certificate and each
certificate representing Warrant Shares will bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS OF
A WARRANT PURCHASE AGREEMENT, DATED AS
OF MAY 31, 1996, BETWEEN AFGL
INTERNATIONAL, INC. (THE "COMPANY") AND
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION (THE "PURCHASER"),
AND A REGISTRATION RIGHTS AGREEMENT,
DATED AS OF MAY 31, 1996, AMONG THE
COMPANY AND THE PURCHASER, COPIES OF
EACH OF WHICH ARE ON FILE AT THE MAIN
OFFICE OF THE COMPANY. ANY SALE OR
TRANSFER OF THE SECURITIES EVIDENCED BY
THIS CERTIFICATE IS SUBJECT TO THE TERMS
OF THOSE AGREEMENTS AND ANY SALE OR
TRANSFER OF SUCH SECURITIES IN VIOLATION
OF SAID AGREEMENTS SHALL BE INVALID."
Warrant Certificates may be exchanged at the option of the
Holder(s) thereof when surrendered to the Company at its office
for another Warrant Certificate or other Warrant Certificates of
like tenor and representing in the aggregate a like number of
Warrants, including, without limitation, upon an adjustment in
the Exercise Price or in the number of Warrant Shares purchasable
upon exercise of the Warrants. Warrant Certificates surrendered
for exchange shall be canceled and disposed of by the Company.
SECTION 11. Exercise of Warrants; Conversion of
Warrants. (a) Subject to the terms of this Agreement, each
Holder shall have the right, which may be exercised at any time
or from time to time prior to May 31, 2004, to receive from the
Company the number of fully paid and nonassessable Warrant Shares
which such Holder may at the time be entitled to receive on
exercise of all or any part of the Warrants and payment of the
appropriate Exercise Price then in effect for such Warrant
Shares. A Warrant may be exercised upon surrender to the Company
at its office designated for such purpose (the address of which
is set forth in Section 20) of the certificate or certificates
evidencing the Warrants to be exercised with the form of election
to purchase attached thereto properly completed and signed, upon
payment to the Company of the appropriate Exercise Price for the
number of Warrant Shares in respect of which such Warrants are
then exercised. Payment of the aggregate Exercise Price shall be
made in cash or by check payable to the order of the Company.
Upon such surrender of Warrant Certificates and payment of the
appropriate Exercise Price, the Company shall issue and cause to
be delivered with all reasonable dispatch (and in any event
within five (5) Business Days of such surrender and payment) to
or upon the written order of the Holder, and in the name of the
Holder or the Holder's nominee, a certificate or certificates for
the number of full Warrant Shares issuable upon the exercise of
such Warrants together with such other property (including cash)
and securities as may then be deliverable upon such exercise,
including cash for fractional Warrant Shares as provided in
Section 16. Such certificate or certificates shall be deemed to
have been issued and the Person so named therein shall be deemed
to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrant Certificates and
payment of the Exercise Price.
(b) Subject to the terms of this Agreement, each
Holder shall have the right (the "Conversion Right"), which may
be exercised at any time or from time to time prior to May 31,
2004, to convert the Warrants, in whole or in part, into the
number of fully paid and nonassessable Warrant Shares calculated
pursuant to the following formula:
X = Y (A-B)
A
where: X = the number of Warrant Shares to be
issued to the Holders;
Y = the number of Warrant Shares for which
the Conversion Right
is being exercised;
A = the Fair Market Value per Share as of
the date of exercise of such Conversion
Right; and
B = the Exercise Price with respect to such
Warrants.
A Warrant may be converted upon surrender to the Company at its
office designated for such purpose (the address of which is set
forth in Section 20) of the certificate or certificates
evidencing the Warrants to be converted with the form of election
to convert attached thereto properly completed and signed. Upon
such surrender of Warrant Certificates, the Company shall issue
and cause to be delivered with all reasonable dispatch (and in
any event within ten (10) Business Days of such surrender) to or
upon the written order of the Holder, and in the name of the
Holder or the Holder's nominee, a certificate or certificates for
the number of full Warrant Shares issuable upon the conversion of
such Warrants together with such other property (including cash)
and securities as may then be deliverable upon such conversion,
including cash for fractional Warrant Shares as provided in
Section 16. Such certificate or certificates shall be deemed to
have been issued and the Person so named therein shall be deemed
to have become a holder of record of such Warrant Shares as of
the date of the surrender of such Warrant Certificates.
(c) The Warrants shall be exercisable and convertible,
at the election of the Holders thereof, either in full or from
time to time in part, and in the event that a Warrant Certificate
is exercised or converted in respect of fewer than all of the
Warrant Shares issuable pursuant to such Warrant Certificate at
any time prior to the date of expiration of the Warrants, a new
Warrant Certificate evidencing the remaining Warrant or Warrants
will be issued and delivered pursuant to the provisions of this
Section 11 and of Section 8. All Warrant Certificates
surrendered upon exercise or conversion of Warrants shall be
canceled and disposed of by the Company. The Company shall keep
copies of this Agreement and any notices received hereunder
available for inspection during normal business hours at its
office. The Company will furnish, at its expense, copies of this
Agreement and all such notices, upon request, to any Holder of
any Warrant Certificates.
SECTION 12. Payment of Taxes. The Company will pay
all stamp and transfer taxes in connection with the issuance,
sale and delivery of the Warrants hereunder, as well as all such
taxes attributable to the initial issuance of Warrant Shares upon
the exercise of Warrants and payment of the appropriate Exercise
Price or upon conversion of the Warrants. The Company will not,
however, be required to pay any tax or other similar charges
imposed in connection with any transfer of any Warrant
Securities. Nothing herein shall be construed as requiring the
Company to pay any taxes imposed in respect of income realized by
any Holder upon the purchase, transfer or exercise of Warrants.
SECTION 13. Mutilated or Missing Warrant Certificates.
Upon receipt by the Company of evidence reasonably satisfactory
to the Company (which shall include an affidavit of the Holder)
that any Warrant Certificate shall have been mutilated, lost,
stolen or destroyed and, in the case of loss, theft or
destruction, a customary indemnity agreement from the Holder of
such Warrant Certificate, the Company shall issue, in exchange
and substitution for and upon cancellation of the mutilated
Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant
Certificate of like tenor and representing an equivalent number
of Warrants.
SECTION 14. Reservation of Warrant Shares. The
Company will at all times that any Warrant is exercisable reserve
and keep available, free from preemptive or similar rights, out
of the aggregate of its authorized but unissued capital stock or
its authorized and issued capital stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue
Warrant Shares upon exercise of Warrants, (i) the maximum number
of shares of each class of capital stock constituting a part of
the Warrant Shares which may then be deliverable upon the
exercise of all outstanding Warrants and (ii) the maximum number
of shares of each class of capital stock of the Company which may
then be delivered upon the conversion of all issued Warrant
Shares into Common Stock of the Company. The Company shall cause
all shares of Common Stock into which shares of Series E
Convertible Preferred Stock issuable upon exercise of the
Warrants are convertible to be (x) listed (or to be listed
subject to notice of issuance) on each securities exchange on
which shares of Common Stock are listed, or (y) admitted for
trading in any inter-dealer quotation system on which shares of
Common Stock are traded. The Company or, if appointed, the
transfer agent for shares of each class of capital stock of the
Company (the "Transfer Agent") and every subsequent transfer
agent for any shares of the Company's capital stock issuable upon
the exercise of the Warrants will be irrevocably authorized and
directed at all times to reserve such number of authorized shares
as shall be required for such purpose. The Company will keep a
copy of this Agreement on file with the Transfer Agent and with
every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of
purchase represented by the Warrants or of the rights of
conversion of the Warrant Shares. The Company will furnish such
Transfer Agent a copy of all notices of adjustments, and
certificates related thereto, transmitted to each Holder pursuant
to Section 17. Before taking any action which would cause an
adjustment pursuant to Section 15 to the maximum number of
Warrant Shares deliverable upon the exercise of all outstanding
Warrants above the then authorized number of shares of Series E
Convertible Preferred Stock, the Company shall cause to be
authorized additional shares of Series E Convertible Preferred
Stock such that such maximum number of shares of Series E
Convertible Preferred Stock deliverable upon exercise of all
outstanding Warrants does not exceed the number of shares of
Series E Convertible Preferred Stock authorized pursuant to the
Organic Documents of the Company. Before taking any action which
would cause an adjustment pursuant to Section 15 to reduce the
Exercise Price below the then par value (if any) of the Warrant
Shares, the Company will take any corporate action which may, in
the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares at the
Exercise Price as so adjusted.
SECTION 15. Adjustment of Exercise Price and Number of
Warrant Shares Issuable. The Exercise Price and the number of
Warrant Shares issuable upon the exercise of each Warrant are
subject to adjustment from time to time upon the occurrence of
any of the events enumerated in this Section 15.
(a) Reorganization of the Company. In the event of
any capital reorganization, recapitalization or reclassification
of the capital stock of the Company, or consolidation, merger or
amalgamation of the Company with another entity, any acquisition
of capital stock of the Company by means of a share exchange, or
the sale, lease, transfer, conveyance or other disposition of all
or substantially all of its assets to another entity, then, as a
condition of such reorganization, recapitalization,
reclassification, consolidation, merger, amalgamation, share
exchange or sale, lease, transfer, conveyance or other
disposition, lawful and adequate provision shall be made whereby
the Holders of the Warrant Certificates shall thereafter have the
right to purchase and receive, on the basis and upon the terms
and conditions specified in this Agreement and in lieu of the
Warrant Shares immediately theretofore purchasable and receivable
upon the exercise of the rights represented by the Warrants, such
shares of stock, securities, cash or property as may be issued or
payable with respect to or in exchange for the number of Warrant
Shares immediately theretofore purchasable and receivable upon
the exercise of the rights represented by the Warrant
Certificates had such reorganization, recapitalization,
reclassification, consolidation, merger, amalgamation, share
exchange or sale, lease, transfer, conveyance or other
disposition not taken place. If such consolidation, merger,
amalgamation, share exchange, sale, lease, transfer, conveyance
or other disposition is with any Person or group of Persons
(within the meaning of Section 13(d) or 14(d) of the Exchange
Act) who shall have made a purchase, tender or exchange offer
which was accepted by the holders of not less than twenty percent
(20%) of the outstanding shares of Common Stock of the Company,
the Holders of the Warrants shall have been given a reasonable
opportunity (and, in no event, less than 30 days) to elect to
receive, either (x) the stock, securities, cash or property it
would have received pursuant to the immediately preceding
sentence or (y) the stock, securities, cash or property issued or
paid (or to be issued or paid) to holders of the Common Stock in
accordance with such offer. In any such case appropriate
provision shall be made with respect to the rights and interests
of the Holders of the Warrants to the end that the provisions of
this Agreement (including, without limitation, provisions for
adjustment of the Exercise Price and of the number and type of
securities purchasable upon the exercise of the Warrants) shall
thereafter be applicable, as nearly as may be, in relation to any
shares of stock, securities, cash or property thereafter
deliverable upon the exercise of the Warrants. The Company shall
not effect any such consolidation, merger, amalgamation, share
exchange or sale, lease, transfer, conveyance or other
disposition unless prior to or simultaneously with the
consummation thereof the successor entity (if other than the
Company) resulting from such consolidation, merger or
amalgamation, share exchange or the entity purchasing or
otherwise acquiring such assets or shares (i) shall assume by a
supplemental Warrant Agreement, satisfactory in form, scope and
substance to the Required Holders (which shall be mailed or
delivered to the registered Holders of the Warrants at the last
address of such Holders appearing on the books of the Company)
the obligation to deliver to such Holders such shares of stock,
securities, cash or property as, in accordance with the foregoing
provisions, such Holders may be entitled to purchase (the
"Substitute Securities") and (ii) shall assume all of the
obligations of the Company set forth in this Agreement and the
Registration Rights Agreement. Following such assumption such
obligations shall apply to the Substitute Securities rather than
to the Warrant Shares. If the issuer of securities deliverable
upon exercise of Warrants under the supplemental Warrant
Agreement is an Affiliate of the formed, surviving, transferee or
lessee entity, such issuer shall join the supplemental Warrant
Agreement. The foregoing provisions of this paragraph shall
similarly apply to successive reorganizations, recapitalizations,
reclassifications, consolidations, mergers, amalgamations, share
exchanges, sales, leases, transfers, conveyances or other
dispositions.
(b) When Issuance or Payment May Be Deferred. In any
case in which this Section 15 shall require that an adjustment in
the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the
occurrence of such event (i) issuing to the Holder of any Warrant
exercised after such record date the Warrant Shares issuable upon
such exercise over and above the Warrant Shares issuable upon
such exercise on the basis of the Exercise Price prior to such
adjustment and (ii) paying to such Holder any amount in cash in
lieu of a fractional share pursuant to Section 16; provided,
however, that the Company shall deliver to such Holder a bill or
other appropriate instrument evidencing such Holder's right to
receive such additional Warrant Shares and cash upon the
occurrence of the event requiring such adjustment.
SECTION 16. Fractional Interests. The Company shall
not be required to issue fractional Warrant Shares on the
exercise of Warrants. If more than one Warrant shall be
presented for exercise in full at the same time by the same
Holder, the number of full Warrant Shares which shall be issuable
upon exercise thereof shall be computed on the basis of the
aggregate number of Warrant Shares purchasable on exercise of the
Warrants so presented. If any fraction of the Warrant Shares
would, except for the provisions of this Section 16, be issuable
on the exercise of any Warrants (or specified portion thereof),
the Company shall pay an amount in cash equal to the Fair Market
Value per Share on the day immediately preceding the date the
Warrant is presented for exercise, multiplied by such fraction.
SECTION 17. Notice to Warrant Holders. Upon any
adjustment of the Exercise Price or number or type of securities
purchasable upon exercise of the Warrants pursuant to Section 15,
and as otherwise required by Section 15, the Company shall
promptly thereafter (i) upon the request of the Required Holders,
cause to be filed with the Company a certificate of the chief
financial officer of the Company setting forth the Exercise Price
and the number and type of securities or other property
constituting Warrant Shares after such adjustment and setting
forth in reasonable detail the method of calculation and the
facts upon which such calculations are based and, in the case of
an adjustment pursuant to Section 15, setting forth the number
and type of securities or other property constituting Warrant
Shares (or portion thereof) issuable, after such adjustment in
the Exercise Price or number of Warrant Shares purchasable upon
exercise of the Warrants, upon exercise of a Warrant and payment
of the adjusted Exercise Price, and (ii) cause to be given to
each of the Holders of the Warrant Certificates written notice of
such adjustments, together with a copy of such certificate.
Where appropriate, such notice may be given in advance and
included as a part of the notice required to be given under the
other provisions of this Section 17. In the event:
(a) the Company shall authorize the issuance to
holders (although not necessarily to all such holders) of shares
of Stock or rights, options or warrants to subscribe for or
purchase or otherwise acquire shares of Stock or of any other
securities or property (including securities of any other issuer)
or of any other subscription rights, options or warrants; or
(b) the Company shall authorize the payment of any
dividend or distribution to holders of shares of Stock of cash,
Stock or other securities or property (including securities of
any other issuer) of the Company; or
(c) of any capital reorganization, reclassification or
recapitalization of the capital stock of the Company, or any
amalgamation, consolidation or merger to which the Company is a
party, or any acquisition of capital stock of the Company through
a share exchange, or of the sale, lease, conveyance, transfer or
other disposition of the properties and assets of the Company
substantially as an entirety, or a purchase, tender or exchange
offer for shares of Common Stock or other securities constituting
part of the Warrant Shares (whether by the Company or some other
party); or
(d) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) the Company proposes to take any action which
would require an adjustment of the Exercise Price or number of
Warrant Shares purchasable upon exercise of the Warrants pursuant
to Section 15;
then the Company shall cause to be given to each of the Holders,
at least 20 days prior to the applicable record date hereinafter
specified (or promptly in the case of events for which there is
no record date), a written notice stating (as applicable) (i) the
date as of which the holders of record of shares of Stock
entitled to receive any such rights, options, warrants or
dividends or distribution are to be determined, (ii) the date on
which any such reclassification, recapitalization or
reorganization, consolidation, merger, amalgamation, share
exchange, sale, lease, conveyance, transfer, disposition,
dissolution, liquidation or winding up is expected to become
effective or be consummated, or (iii) the initial expiration date
set forth in any purchase, tender or exchange offer for shares of
Stock, and the date as of which it is expected that holders of
record of shares of Stock or other securities constituting a part
of the Warrant Shares (or securities into which the Warrant
Shares may be converted) shall be entitled to exchange such
shares or securities for securities or other property, if any,
deliverable upon such reclassification, recapitalization,
reorganization, consolidation, merger, amalgamation, share
exchange, sale, lease, conveyance, transfer, disposition,
dissolution, liquidation or winding up. The failure to give the
notice required by this Section 17 or any defect therein shall
not affect the legality or validity of any distribution, right,
option, warrant, reorganization, recapitalization,
reclassification, consolidation, merger, amalgamation, share
exchange, sale, lease, conveyance, transfer, disposition,
dissolution, liquidation or winding up, or the vote upon any
action. Nothing contained in this Agreement or in any of the
Warrant Certificates shall be construed as conferring upon the
Holders the right to vote or to consent as stockholders in
respect of the meetings of stockholders or the election of
members of the Board of Directors of the Company or any other
matter, or any rights whatsoever as stockholders of the Company.
SECTION 18. Cash Distributions and Dividends. If the
Company pays a dividend or makes a distribution to the holders of
its Stock of any securities (other than Stock) or property
(including cash and securities of other companies) of the
Company, or any rights, options or warrants to purchase
securities (other than Stock) or property (including securities
of other companies) of the Company, then, simultaneously with the
payment of such dividend or the making of such distribution, and
as a condition precedent to its right to do so, it will pay or
distribute to the Holders of Series E Warrant Certificates an
amount of property (including without limitation cash) and/or
securities (including without limitation securities of other
companies) of the Company as would have been received by such
Holders had they exercised all of the Series E Warrants
represented by the Series E Warrant Certificates immediately
prior to the record date (or other applicable date) used for
determining stockholders of the Company entitled to receive such
dividend or distribution. No adjustment to the Exercise Price
shall be made for any distribution of Convertible Securities of
the Company to the Holders pursuant to the provisions of this
Section 18.
SECTION 19. Put Rights; Tag-Along Rights.
(a) Put by Holders. Unless the Required Holders have
otherwise agreed in writing, at any time and from time to time on
or after the occurrence of a Put Event, the Put Right shall be
exercisable by each of the Holders. After receipt of a Put
Notice from any Holder, the Company will promptly (and in any
event within ten (10) days) give written notice (the "Put
Exercise Notice") to each of the other Holders of Warrant
Securities that a Put Right has been exercised. Each Holder will
have the right to participate in the Put Right and require the
Company to repurchase all or any portion of such Holder's Warrant
Securities by delivering written notice to the Company within ten
(10) days following receipt of the Put Exercise Notice. All
such notices delivered by such other Holders will be deemed to
have been delivered as of the date of the initial Put Notice and
taken together will be deemed to be one exercise of the Put
Right. Upon the exercise by a Holder of the Put Right, the
purchase price payable to such Holder (the "Put Purchase Price")
by the Company for such Holder's Warrant Securities shall be as
follows:
(i) in the case of Warrants, an amount equal to the
product of (A) the Contract Value per Share, multiplied by
(B) the number of shares of Common Stock that may be
acquired upon the conversion by such Holder of the shares of
Series E Convertible Preferred Stock that would be received
upon exercise of such Holder's Warrants with respect to
which the Put Right is being exercised;
(ii) in the case of Series E Convertible Preferred
Stock, an amount equal to the product of (A) the Contract
Value per Share, multiplied by (B) the number of shares of
Common Stock that may be acquired upon the conversion by
such Holder of the shares of Series E Convertible Preferred
Stock with respect to which the Put Right is being
exercised; and
(iii) in the case of Common Stock, an amount equal
to the product of (A) the Contract Value per Share,
multiplied by (B) the number of shares of Common Stock with
respect to which the Put Right is being exercised.
Promptly upon the receipt of a Put Notice pursuant to Section
19(a) the Company shall cause the Contract Value per Share to be
determined, and shall give written notice of the determination
thereof to each Holder, promptly upon the determination thereof
and in any event within thirty (30) days following the Company's
receipt of the Put Notice. The provisions of this Section 19(a)
shall apply until the termination of this Agreement pursuant to
Section 24 to any Person who acquires in any manner any Warrant
Securities from any Holder.
(b) Closing. Each closing of the purchase and sale of any
Warrant Securities pursuant to Section 19(a) shall take place on
a date (a "Put Closing Date") which is the later of (i) thirty
(30) days after the giving of the Put Notice, and (ii) ten (10)
days after determination of the Contract Value per share,
provided that if such day is not a Business Day such closing
shall be on the next succeeding Business Day. Payment of the Put
Purchase Price shall be due and payable in full on the Put
Closing Date. The closing of such purchase and sale of Warrant
Securities shall take place at 10:00 a.m. on the Put Closing Date
at such location in Atlanta, Georgia, or New York, New York, as
the Required Holders may reasonably determine and notify the
Company or at such other location as may be agreed to by the
Company and the Required Holders. The Put Purchase Price shall
be paid in full at each such closing, by wire transfer of
immediately available federal funds, and the Warrant Securities
to be repurchased at such closing shall be duly endorsed for
transfer. Such Warrant Securities shall be free and clear of all
liens and encumbrances of any kind, nature and description, other
than applicable restrictions under federal and state securities
laws, and each Holder shall represent and warrant to the Company
to such effect with respect to such Holder's Warrant Securities.
The Company will pay all stamp and transfer taxes in connection
with the repurchase of the Warrant Securities hereunder.
(c) Restrictions on Purchase. The Company covenants and
agrees that, other than the Restrictive Provisions, it shall not,
and shall not permit any of its Subsidiaries to, without the
prior written consent of the Required Holders, enter into or
agree to become subject to any term, condition, provision or
agreement that would conflict with or restrict in any way the
performance of the Company's obligations under this Agreement or
that would by its terms restrict the availability of Legally
Available Funds with which to perform such obligations. Anything
in this Agreement to the contrary notwithstanding, the Company
shall not be required to purchase Warrant Securities under
Section 19(a) if at the time of closing of the purchase and sale
of any Warrant Securities pursuant to Section 19(a) there exists
any Restrictions on Purchase. Upon receipt of a Put Notice, if
the Company's obligations under Section 19(a) at the time of
performance would be subject to Restrictions on Purchase, then
the Company (i) shall promptly use all reasonable efforts
(excluding the payment of waiver, consent or similar
transactional fees, but including reasonable documentation costs
and other similar expenses) to cause the Required Lenders to
waive compliance with any such Restrictive Provisions and/or to
amend the Restrictive Provisions so as to permit the purchase of
the Warrant Securities pursuant to this Agreement, (ii) shall not
repay, redeem, purchase or otherwise retire any indebtedness for
borrowed money of, or any debt securities issued by, the Company
in an amount or for a price or other consideration in excess of
the principal amount thereof, and (iii) shall not declare or pay
any dividend or distribution on any shares of Stock (other than
dividends that accrue and cumulate on Preferred Stock in
accordance with the terms of such Preferred Stock as is in effect
on the date such Put Notice is received by the Company). If,
notwithstanding the Company's reasonable efforts required under
this Section 19(c), the Company is unable to fulfill its
obligations under Section 19(a) because of the existence of one
or more Restrictions on Purchase, the Company shall give prompt
written notice thereof to each Holder exercising Put Rights,
specifying in reasonable detail the nature thereof and the
extent, if any, to which the Company would be able to fulfill its
obligation to pay the Purchase Price within the Restrictions on
Purchase. If any Restrictions on Purchase exist on the proposed
Put Closing Date, then at the sole and independent election of
each such Holder, and pursuant to written notice given by any
such Holder to the Company: (i) such Holder's Put Right shall
remain exercised and the closing of the purchase and sale of
Warrant Securities pursuant to such Holder's Put Right shall be
deferred until not more than five Business Days after all such
Restrictions on Purchase cease to exist; provided, however, that,
as and to the extent that such Restrictions on Purchase cease to
exist, the Company shall promptly make partial payments of the
Purchase Price to such Holder, in which case there shall be a
series of such closings, each of which shall take place not more
than five Business Days after such Restrictions on Purchase have
ceased to exist to an extent that would permit such partial
payments of the Purchase Price in increments of not less than
$100,000 ("Partially Available Funds"); or (ii) the exercise of
such Holder's Put Right shall be rescinded and such Holder shall
reserve its right to exercise the Put Right at any subsequent
time. In the event that any Holders make the election provided
in clause (i) of the immediately preceding sentence, the Company
shall purchase from such selling Holders that number of Warrant
Securities as may be purchased at the Purchase Price using that
portion of Partially Available Funds for such purchase as equals
the product of (a) all Partially Available Funds, and (b) the
ratio of (i) the Warrant Securities originally proposed to be
sold by such Holders electing to sell and not electing to rescind
pursuant to clause (ii) of the immediately preceding sentence, to
(ii) the Warrant Securities originally proposed to be sold by all
Holders (treating all Warrants as fully exercised for the Warrant
Shares to which the Holders would be entitled upon exercise of
such Warrants). Such purchase shall be made from each selling
Holder pro rata based on the ratio of (i) the number of Warrant
Securities originally proposed to be sold by such Holder to (ii)
the Warrant Securities originally proposed to be sold by all
Holders. None of the provisions of this Section 19(c) shall be
construed to limit any other right or remedy under applicable law
which any Holder may have as a result of the failure by the
Company to purchase Warrant Securities as herein provided.
(d) Tag-Along Rights. Without limitation to the right of
any Holder to exercise its Put Right pursuant to Section 19(a),
if at any time either the Company or Gary S. Goldstein (each a
"Selling Shareholder") shall determine to enter into any
transaction or series of transactions that would result in a
Change of Control (a "Change of Control Transaction") (any third
party proposing to enter into such transaction or transactions
being hereinafter referred to in this Section 19(d) as a
"Prospective Purchaser"), the Company or Selling Shareholder, as
the case may be, and any Prospective Purchaser shall first give
written notice (the "Offer Notice") to all of the Holders,
specifying the name and address of the Prospective Purchaser and
the number of shares, if any, of Stock proposed to be issued,
sold, transferred or otherwise disposed of and setting forth in
reasonable detail the price, structure and other terms and
conditions of the Change of Control Transaction, as applicable.
The Offer Notice shall represent the offer (the "Offer") from the
Prospective Purchaser to each of the Holders of the right to sell
to the Prospective Purchaser as a condition to the consummation
of the proposed transaction described in the Offer Notice, all
Warrant Securities then owned by each Holder to the Prospective
Purchaser and, at the option of the Holders, on the same terms
and conditions (including price and form of consideration) as are
being offered by the Prospective Purchaser to the Company or the
Selling Shareholder, as the case may be, or at the Fair Market
Value per Share, determined as of the date of the Offer Notice.
Each Holder shall have thirty (30) days from the date of receipt
of the Offer Notice to give written notice of its intention to
accept or reject the Offer. Failure to respond within such
thirty-day period shall be deemed notice of rejection. In the
event that any Holder gives written notice to the Company or the
Selling Shareholder, as the case may be, and the Prospective
Purchaser of its intention to accept such Offer, then such
written notice, taken in conjunction with the Offer Notice, shall
constitute a valid and legally binding agreement, and each of the
Holders so giving such written notice shall be entitled to sell
to the Prospective Purchaser, contemporaneously with the
consummation of the Change of Control Transaction, all of the
Warrant Securities at the price specified therefor by such Holder
in accordance with this Section 19(d). In the event that all of
the Holders reject or are deemed to have rejected the offer
represented by the Offer Notice, the Company or the Selling
Shareholder, as the case may be, shall be free to proceed to
consummate such Change of Control Transaction on the terms and
conditions set forth in the Offer Notice, provided that such sale
is not otherwise prohibited by any agreement between the Company
and the Purchaser. In the event the Company fails to complete
the proposed sale, transfer or other disposition within ninety
(90) days after the Holder or Holders rejected or were deemed to
have rejected the Offer, such transaction or transactions shall
again be subject to the provisions of this Section 19(d). The
provisions of this Section 19(d) shall apply until the
termination of this Agreement pursuant to Section 24 to any
Person who acquires in any manner any Warrant Securities from any
Holder.
(e) Limitation on Put Rights of Others. The Company
covenants and agrees that, neither the Company nor any of its
Subsidiaries shall, directly or indirectly, grant to any Person
or agree to or otherwise become obligated in respect of any
rights to require the Company or any of its Subsidiaries to
purchase securities of the Company upon the demand of any Person.
The Company represents and warrants that neither it nor any of
its Subsidiaries has previously entered into any agreement
granting any such rights to any Person.
(f) Severability. If any provision of this Agreement shall
be held or deemed to be, or shall in fact be, invalid,
inoperative or unenforceable as applied to any particular case in
any jurisdiction or jurisdictions, or in all jurisdictions or in
all cases, because of the conflict of any provision with any
constitution, statute, rule or public policy, or for any other
reason, such circumstances shall not have the effect of rendering
the provision or provisions in question, invalid, inoperative or
unenforceable in any other jurisdiction or in any other case or
circumstance or of rendering any other provision or provisions
herein contained invalid, inoperative or unenforceable to the
extent that such other provisions are not themselves actually in
conflict with such constitution, statute, rule or public policy,
but this Agreement shall be reformed and construed in any such
jurisdiction or case as if such invalid, inoperative or
unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and
enforceable to the maximum extent permitted in such jurisdiction
or in such case.
SECTION 20. Notices. All notices, consents,
approvals, agreements and other communications provided hereunder
shall be in writing or by telecopy and shall be sufficiently
given to the Purchaser, the Holders and the Company if addressed
or delivered to them at the following addresses:
If to the Purchaser: ING Capital
135 East 57th Street
New York, New York 10022
Attention: Chief Credit Officer
Telecopier No.: (212) 750-8935
with copies to: ING Capital
Atlanta Office
200 Galleria Parkway
Suite 950
Atlanta, Georgia 30339
Attention: John N. Lanier
Telecopier No.: (770) 951-1005
and a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Walter W. Driver, Jr., Esq.
Telecopier No.: (404) 572-5100
If to any other At its last known address
appearing
Holder: on the books of the Company maintained
for such purpose
If to the Company: AFGL International, Inc.
850 Third Avenue. 11th Floor
New York, New York 10022
Date: Attention: Barry S. Roseman
Telecopier No.: (212) 508-3540
with a copy to: Christy & Viener
620 Fifth Avenue
New York, New York
Attention: Richard B. Salomon, Esq.
Telecopier No.: (212) 632-5555
or at such other address as any party may designate to any other
party by written notice. All such notices and communications
shall be deemed to have been duly given: (i) at the time
delivered by hand, if personally delivered, (ii) when received,
if deposited in the mail, postage prepaid, (iii) when
transmission is verified, if telecopied, and (iv) on the next
Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
SECTION 21. Costs and Expenses. The Company agrees to
pay all expenses of the Purchaser for the negotiation,
preparation, execution, and delivery of this Agreement and each
other Warrant Document and any consents, waivers, supplements or
other modifications to this Agreement or any Warrant Document
(including the reasonable fees of counsel retained by Purchaser
in connection therewith), whether or not the transactions
contemplated hereby are consummated, and the consideration of
legal questions relevant hereto and thereto. The Company also
agrees to reimburse the Purchaser and each Holder upon demand for
all out-of-pocket expenses (including reasonable attorneys' fees
and expenses) incurred by the Purchaser or such Holder in
enforcing the obligations of the Company under this Agreement or
any other Warrant Document or in connection with any amendment,
waiver, consent, supplement or other modification to this
Agreement or any Warrant Document.
SECTION 22. Indemnification. (a) In consideration of
the transactions contemplated by this Agreement and the other
Warrant Documents, the Company hereby agrees to indemnify,
exonerate and hold the Purchaser and each Holder, each of their
respective successors and assigns, each of the respective
officers, directors, employees, attorneys and agents of the
Purchaser and each Holder and each of their respective successors
and assigns (collectively, the "Indemnified Parties") free and
harmless from and against any and all actions, causes of action,
suits, losses, costs, liabilities, damages and expenses
(irrespective of whether such Indemnified Party is a party to the
action for which indemnification hereunder is sought), including
attorneys' fees and disbursements (the "Indemnified
Liabilities"), incurred by the Indemnified Parties or any
of them or asserted or awarded against the Indemnified Parties or
any of them as a result of, or arising out of, or relating to:
(i) any transaction contemplated by this Agreement or any
other Warrant Document;
(ii) the making of any claim by any investment banking firm,
broker or third party that it is entitled to
compensation from any Indemnified Party in connection
with this Agreement;
(iii) any claim, investigation, litigation, or
proceeding made or commenced by a third party related
to this Agreement or any other Warrant Documents,
whether or not the Indemnified Party or any other
Indemnified Party is party thereto;
(iv) the breach by the Company of any representation or
warranty set forth in this Agreement or in any other
Warrant Document; or
(v) the failure of the Company to comply with all terms,
conditions, and covenants set forth in this Agreement
or in any other Warrant Document;
except for any such Indemnified Liabilities arising for the
account of a particular Indemnified Party by reason of the
relevant Indemnified Party's gross negligence or wilful
misconduct as determined by a final and nonappealable decision of
a court of competent jurisdiction. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the
Company hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities
which is permissible under applicable law. The foregoing
indemnity shall become effective immediately upon the execution
and delivery hereof and shall remain operative and in full force
and effect notwithstanding the consummation of the transactions
contemplated hereunder, the issuance or exercise of the Warrants
hereunder, the termination of this Agreement pursuant to Section
24, the invalidity or unenforceability of any term or provision
of this Agreement or any other Warrant Document, or any
investigation made by or on behalf of any Holder or the
Purchaser.
(b) Promptly after receipt by an Indemnified Party of
notice of the commencement of any action (including any
governmental investigation or inquiry), such Indemnified Party
will, if such Indemnified Party intends to make a claim in
respect thereof against the Company, give written notice to the
Company of the commencement thereof, but the omission so to
notify the Company shall not relieve the Company from any of its
obligations hereunder. In case any such action is brought
against any Indemnified Party and it notifies the Company of the
commencement thereof, the Company shall be entitled to
participate in and to the extent that it may wish, to assume the
defense thereof, with counsel reasonably satisfactory to such
Indemnified Party, and after notice from the Company to such
Indemnified Party, the Company shall not be responsible for any
legal or other expenses subsequently incurred by such Indemnified
Party in connection with the defense thereof. The Company will
not consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of
a release from all liability in respect of such claim or
litigation.
SECTION 23. Successors. All the covenants and
provisions of this Agreement by or for the benefit of the Company
or the Holders shall bind and inure to the benefit of their
respective successors and assigns, including those by operation
of law, merger, consolidation or as otherwise provided in
subsection (i) or (j) of Section 15.
SECTION 24. Termination. Except as otherwise provided
herein, this Agreement shall terminate (i) with respect to any
Holder, with respect to any Warrant Shares beneficially owned by
such Holder which have been effectively registered under the
Securities Act and sold pursuant to a Registration Statement or
Shelf Registration Statement and (ii) in its entirety when (a)
all Warrants have been exercised or expired unexercised in
accordance with their terms or all Warrant Securities have been
purchased pursuant to Section 19 hereof, and (b) all obligations
of the Company (or any successor) shall have been satisfied in
full and all contingencies in respect thereof shall no longer
exist, including, without limitation, the obligations set forth
in subsection (a) or (b) of Section 15.
SECTION 25. Governing Law. THIS AGREEMENT AND THE
WARRANTS SHALL BE GOVERNED BY THOSE PROVISIONS OF THE CORPORATE
CODE OF THE JURISDICTION IN WHICH THE COMPANY IS INCORPORATED AND
ARTICLE 8 OF THE UNIFORM COMMERCIAL CODE OF THE JURISDICTION IN
WHICH THE COMPANY IS INCORPORATED WHICH ARE NECESSARILY
APPLICABLE TO SECURITIES ISSUED BY A CORPORATION INCORPORATED IN
SUCH JURISDICTION AND OTHERWISE SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES
SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF SAID
STATE.
SECTION 26. Benefits of this Agreement. Nothing in
this Agreement shall be construed to give to any Person other
than the Company and the Holders any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be
for the sole and exclusive benefit of the Company and the
Holders.
SECTION 27. Counterparts. This Agreement may be
executed in any number of counterparts and each such counterpart
shall for all purposes be deemed to be an original, and all such
counterparts shall together constitute one and the same
instrument.
SECTION 28. Amendments; Waiver. No provision of this
Agreement may be amended or waived except by an instrument in
writing signed by the party sought to be bound; provided,
however, that any amendment requested or waiver sought from the
Holders of any provision of this Agreement which affects Holders
generally may be given by the Required Holders and any waiver so
given shall be binding on all Holders; provided further, that the
provisions of Section 11 with respect to the type of securities
for which the Warrants are exercisable may not be changed without
the consent of each Holder affected thereby. No failure or delay
by any party in exercising any right or remedy hereunder shall
operate as a waiver thereof, nor shall a waiver of a particular
right or remedy on one occasion be deemed a waiver of any other
right or remedy or a waiver of the same right or remedy on any
subsequent occasion.
SECTION 29. Waiver of Jury Trial. THE PURCHASER, EACH
HOLDER AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, ON THE WARRANTS OR ON
ANY OF THE OTHER WARRANT DOCUMENTS, OR ARISING OUT OF, UNDER OR
IN CONNECTION WITH, THIS AGREEMENT, THE WARRANTS OR ANY OF THE
OTHER WARRANT DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE
PURCHASER, ANY HOLDER OR THE COMPANY. THIS PROVISION IS A
MATERIAL INDUCEMENT FOR THE PURCHASER'S ENTERING INTO THIS
AGREEMENT.
SECTION 30. Jurisdiction. The Company hereby agrees
that any legal action or proceeding against it with respect to
this Agreement, the Warrants or any of the other Warrant
Documents may be brought in the courts of the State of New York
or of the United States of America for the Southern District of
New York as any Holder may elect, and, by execution and delivery
hereof, it accepts and consents for itself and in respect of its
property, generally and unconditionally, the jurisdiction of the
aforesaid courts and agrees that such jurisdiction shall be
exclusive, unless waived by the Required Holders in writing, with
respect to any action or proceeding brought by it against such
Holders. The Company hereby irrevocably designates, appoints and
empowers CT Corporation System whose present address is 1633
Broadway, New York, New York 10019, as its authorized agent to
receive, for and on its behalf and its property, service of
process in the State of New York when and as legal actions or
proceedings may be brought in the courts of the State of New York
or of the United States of America sitting in New York, and such
service of process shall be deemed complete upon the date of
delivery thereof to such agent, or upon the earliest of any other
date permitted by applicable law. It is understood that a copy
of said process served on such agent will be forwarded to the
Company as soon as practicable, at its address set forth herein,
but its failure to receive such copy shall not affect in any way
the service of said process on said agent as the agent of the
Company. The Company irrevocably consents to the service of
process out of any of the aforementioned courts in any such
action or proceeding by the mailing of the copies thereof by
certified mail, return receipt requested, postage prepaid, to it
at its address set forth herein, such service to become effective
upon the earlier of (i) the date 10 calendar days after such
mailing and (ii) any earlier date permitted by applicable law.
The Company agrees that it will at all times continuously
maintain an agent to receive service of process in the State of
New York on behalf of itself and its properties and in the event
that, for any reason, the agent named above or its successor
shall no longer serve as its agent to receive service of process
in the State of New York on its behalf, it shall promptly appoint
a successor so to serve and shall advise the Holders thereof.
The Company agrees that Sections 5-1401 and 5-1402 of the General
Obligations Law of the State of New York shall apply to this
Agreement and each of the other Warrant Documents and waives any
right to stay or to dismiss any action or proceeding brought
before said courts on the basis of forum non conveniens. Nothing
herein shall affect the right of any Holder to bring proceedings
against the Company in the courts of any other jurisdiction or
to serve process in any other manner permitted by applicable law.
SECTION 31. Specific Performance. The Company
recognizes that the rights of the Holders under this Agreement
and the other Warrant Documents are unique and, accordingly, the
Holders shall, in addition to such other remedies as may be
available to any of them at law or in equity, have the right to
enforce their rights hereunder and thereunder by actions for
injunctive relief and specific performance to the extent
permitted by law. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Agreement or any of the
other Warrant Documents and hereby agrees to waive in any action
for specific performance the defense that a remedy at law would
be adequate. This Agreement is not intended to limit or abridge
any rights of the Holders which may exist apart from this
Agreement.
SECTION 32. Confidentiality. The Holders shall hold
all non-public, proprietary or confidential information (which
has been identified as such by the Company) obtained pursuant to
the requirements of this Agreement in accordance with their
customary procedures for handling confidential information of
this nature; provided, however, that each Holder may make
disclosure of any such information to its examiners, Affiliates,
outside auditors, counsel, consultants, appraisers and other
professional advisors in connection with this Agreement or as
reasonably required by any proposed transferee in connection with
the contemplated transfer of any Warrant Securities (but only if
the proposed transferee agrees to be bound by the terms of this
Section 32) or as required or requested by an Governmental
Authority or representative thereof or in connection with the
enforcement hereof or of any other Warrant Document or pursuant
to legal process. In no event shall any Holder be obligated or
required to return any materials furnished to it by the Company.
SECTION 33. Entire Agreement. The parties hereto
agree that this Agreement, the Registration Rights Agreement and
the Loan Documents constitute the entire agreement among the
parties with respect to the subject matter hereof and supersedes
all prior agreements and understandings between them as to such
subject matter; and there are no restrictions, agreements,
arrangements, oral or written, between any or all of the parties
relating to the subject matter hereof which are not fully
expressed or referred to herein or therein.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized as of the day and year first above written.
AFGL INTERNATIONAL, INC.
By:
________________________________
___
Name:
Title:
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
By:
________________________________
___
Name:
Title: