SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 1, 1999
ALYN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 000-21153 33-0709359
(State or Other (Commission File Number) (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation)
16761 Hale Avenue 92606
Irvine, California
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (949) 425-1525
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
Alyn Corporation ("ALYN") has entered into two Stock and Warrant
Purchase Agreements dated as of September 29, 1999 (the "PURCHASE Agreements"),
with Fleming US Discovery Fund III, L.P. ("FLEMING"), and Fleming US Discovery
Offshore Fund III, L.P. ("FLEMING OFFSHORE"). Pursuant to the Purchase
Agreements, Alyn is selling to Fleming and Fleming Offshore (a) an aggregate of
75,000 shares of Alyn's Series C Convertible Preferred Stock, the terms of which
are as set forth in the Certificate of Designations for such stock which is to
be filed with the Secretary of State of the State of Delaware in the form
attached to each of the Purchase Agreements as Exhibit A thereto, and (b)
warrants to purchase, in the aggregate, 1,875,000 shares of Alyn's common stock,
the terms of which are set forth in the Warrant Certificate which is anticipated
to be executed at the closing of the sale in the form attached to the Purchase
Agreement as Exhibit B thereto. A form of each of the Purchase Agreement, the
Certificate of Designations, and the Warrant Certificate is filed herewith as an
exhibit and is incorporated herein by reference.
Alyn has issued a press release announcing the Purchase Agreements,
which press release is filed herewith as an exhibit and incorporated herein by
reference.
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Item 7. Financial Statements and Exhibits.
(a) The following exhibits are filed with this report:
Exhibit Number Description
- -------------- -----------
4.1 Form of Stock and Warrant Purchase Agreement.
4.2 Form of Certificate of Designations.
4.3 Form of Warrant Certificate.
99.1 Press Release of Alyn issued October 1, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALYN CORPORATION
By: /S/ RICHARD L. LITTLE
-----------------------------------
Name: Richard L. Little
Title: Chief Financial Officer
Dated: October 4, 1999
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EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
4.1 Form of Stock and Warrant Purchase Agreement.
4.2 Form of Certificate of Designations.
4.3 Form of Warrant Certificate.
99.1 Press Release of Alyn issued October 1, 1999.
STOCK AND WARRANT PURCHASE AGREEMENT
This STOCK AND WARRANT PURCHASE AGREEMENT is dated as of
September 29, 1999 between Alyn Corporation, a Delaware corporation (the
"COMPANY"), and the Purchaser listed on the signature page of this Agreement
(the "PURCHASER").
W I T N E S S E T H :
-------------------
WHEREAS, the Company desires to issue and sell to the
Purchaser, and the Purchaser desires to purchase from the Company, shares of the
Company's Series C Convertible Preferred Stock, par value $.01 per share (the
"SERIES C PREFERRED"), and Warrants to purchase shares of the Company's Common
Stock, par value $.001 per share (the "COMMON STOCK"), all upon the terms and
provisions hereinafter set forth; and
WHEREAS, subsequent to the Closing Date, the Company may
desire to issue and to sell to the Purchasers, and the Purchasers may desire to
purchase from the Company, up to an aggregate of 25,000 additional shares of the
Company's Series C Preferred and Warrants to purchase shares of the Company's
Common Stock, pursuant to terms and provisions substantially similar to those as
hereinafter set forth, including the exhibits hereto;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK AND WARRANTS
(a) The Company agrees to sell to the Purchaser and, subject
to the terms and conditions hereof and in reliance upon the representations and
warranties of the Company contained herein or made pursuant hereto, the
Purchaser agrees to purchase from the Company at one or more of the Closings
provided for in Section 2 hereof, in the aggregate for all such Closings, the
number of shares of Series C Preferred and the number of Warrants, each such
Warrant being exercisable for the purchase of one share of Common Stock of the
Company, set forth opposite the Purchaser's name on SCHEDULE 1 hereto. The
shares of Series C Preferred being acquired under this Agreement and by the
other Purchaser under the other Stock and Warrant Purchase Agreement (as
hereinafter defined) are collectively referred to herein as the "SHARES", and
contain rights and privileges as more fully set forth in the
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Certificate of Designations of the Company in the form attached hereto as
Exhibit A (the "CERTIFICATE OF DESIGNATIONS"). As used herein, "WARRANTS" means
Warrants to purchase in the aggregate for both Purchasers up to the number of
shares of Common Stock equal to 75% of the number of shares of Common Stock
obtainable upon conversion of the Shares. The Warrants contain rights and
privileges, including certain clawback provisions, as more fully set forth in
the Warrant Certificates of the Company in the form attached hereto as Exhibit B
(the "WARRANT CERTIFICATES").
(b) The aggregate purchase price to be paid to the Company by
the Purchaser for the Shares and Warrants to be purchased by the Purchaser
pursuant to this Agreement shall be the amount set forth opposite the
Purchaser's name on Schedule 1 hereto. No further payment shall be required from
the Purchaser for the Shares and Warrants.
(c) The parties further acknowledge and agree that the Shares
are intended not to constitute "preferred stock" as that term is used in Section
305(b)(4) of the Code and Treasury Regulation section 1.305-5(a). Except as
required by any Taxing Authority or court, the Company and the Purchaser agree
to treat the Shares for Federal, state and local income and franchise tax
purposes as not constituting "preferred stock", and to take no position
inconsistent with such characterization on any Tax Return or before any Taxing
Authority or court.
(d) The Shares and Warrants are being sold to the purchasers
listed on Schedule 1 hereto (the "PURCHASERS") pursuant to this Agreement and
the other Stock and Warrant Purchase Agreement entered into simultaneously with
this Agreement (both of such agreements collectively, as either may be from time
to time assigned, supplemented or amended or as the terms thereof may be waived,
the "STOCK AND WARRANT PURCHASE AGREEMENTS"). Both Stock and Warrant Purchase
Agreements shall be dated the date hereof and shall be identical except as to
the identities of the respective Purchasers and the number of Shares and
Warrants purchased thereunder and the amount paid therefor. The sale of Shares
and Warrants to each Purchaser under each Stock and Warrant Purchase Agreement
is to be a separate sale, and no Purchaser shall have any liability under any
Stock and Warrant Purchase Agreement other than the Stock and Warrant Purchase
Agreement to which it is a party.
(e) The Company will use the net proceeds from the sale of the
Shares and Warrants it will receive (i) on the First Closing Date to repay the
Promissory Notes and (ii) on each Closing Date to fund future development
opportunities and for working capital purposes.
SECTION 2. CLOSINGS
(a) Subject to the terms and conditions hereof, the closing of
the purchase and sale of the Shares and Warrants to be purchased by the
Purchaser and
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the other Purchaser (the "CLOSING") will take place at the offices of Morgan,
Lewis & Bockius LLP, 101 Park Avenue, New York, New York at 10:00 A.M., New York
City time, (i) on October 5, 1999, or such other time and date as shall be
mutually agreed to by the Company and the Purchaser (the "FIRST CLOSING") (such
time and date are herein referred to as the "FIRST CLOSING DATE"), and (ii) on
the date which is within twenty-five days after the Company's Information
Statement on Schedule 14C informing the Company's stockholders that the Company
has obtained the consent of a majority of its stockholders to the issuance by
the Company of Common Stock (or securities convertible into or exercisable for
common stock) equal to 20% or more of the Common Stock or 20% or more of the
voting power outstanding before the issuance for less than the greater of book
or market value of the Common Stock (the "STOCKHOLDERS' NOTICE"), is first sent
or given to the Company's stockholders or such other time and date as shall be
mutually agreed to by the Company and the Purchaser, but in any event no later
than December 15, 1999; PROVIDED THAT the Company has taken the appropriate
corporate action to obtain proper stockholder approval prior to such Closing
(the "SECOND CLOSING") (such time and date are herein referred to as the "SECOND
CLOSING DATE"). The First Closing and the Second Closing are called individually
a "CLOSING" and collectively the "CLOSINGS"; the First Closing Date and the
Second Closing Date are called individually a "CLOSING DATE" and collectively,
the "CLOSING DATES." At any time prior to the First Closing Date, the Company
and the Purchasers may agree mutually to close the entire purchase and sale of
the Shares and Warrants on the First Closing Date (rather than in two separate
Closings). The sale and purchase of Shares and Warrants severally by each of the
Purchasers pursuant to the Stock and Warrant Purchase Agreements between each of
the Purchasers and the Company shall be consummated concurrently (i) (A) for an
aggregate purchase price of $3,750,000 on the First Closing Date and (B) for an
aggregate purchase price of $3,750,000 on the Second Closing Date or (ii) for an
aggregate purchase price of $7,500,000 on the First Closing Date, if the parties
mutually agree to have only one Closing pursuant to this Section 2(a).
(b) Subject to the terms and conditions hereof, at each
Closing (i) the Company will deliver to the Purchaser (x) a certificate
registered in the Purchaser's name (or the name of its nominee, if any, as
specified on Schedule 1 hereto) evidencing the number of Shares set forth
opposite the Purchaser's name on Schedule 1 and (y) a Warrant Certificate
registered in the Purchaser's name (or the name of its nominee, if any, as
specified on Schedule 1 hereto) evidencing a number of Warrants equal to the
number set forth opposite the Purchaser's name on Schedule 1, and (ii)
substantially simultaneously with the Purchaser's receipt thereof, the Purchaser
will deliver to the Company a certified or official bank check (or wire
transfer) in an amount equal to the aggregate purchase price (as specified in
Section 1(b) hereof) for the Shares and Warrants to be purchased by the
Purchaser payable to the order of the Company in federal or other immediately
available funds.
SECTION 3. DEFINITIONS
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(a) For purposes of this Agreement, the following definitions
shall apply (such definitions to be equally applicable to both the singular and
plural forms of the terms defined):
"AFFILIATE", when used with respect to any Person, means (i)
if such Person is a corporation, any officer or director thereof (other
than a director elected pursuant to Section 4(c) of the Certificate of
Designations) and any Person which is, directly or indirectly, the
beneficial owner (by itself or as part of any group) of more than five
percent (5%) of any class of any equity security (within the meaning of
the Securities Exchange Act) thereof, and, if such beneficial owner is
a partnership, any general partner thereof, or if such beneficial owner
is a corporation, any Person controlling, controlled by or under common
control with such beneficial owner, or any officer or director of such
beneficial owner or of any corporation occupying any such control
relationship, (ii) if such Person is a partnership, any general or
limited partner thereof, and (iii) any other Person which, directly or
indirectly, controls or is controlled by or is under common control
with such Person. For purposes of this definition, "control" (including
the correlative terms "controlling", "controlled by" and "under common
control with"), with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction
of the management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. The holding
of Shares (or of Conversion Shares obtained upon conversion of Shares)
or Warrants (or of Warrant Shares issuable upon the exercise of the
Warrants), and the rights under any Stock and Warrant Purchase
Agreement or under the Certificate of Designations, Warrant
Certificates, the Stockholders' Agreement or the Registration Rights
Agreement (or the exercise of any such rights, including, without
limitation, nominating a director to the Board (or Board committee) of
the Company and/or sending an observer to Board (or Board committee)
meetings of the Company), shall not in and of itself cause a Purchaser
to be deemed to be an "Affiliate" of the Company. For purposes of this
definition, Capital Guardian shall not be deemed an "Affiliate" of the
Company.
"AGREEMENT" means this Stock and Warrant Purchase Agreement
(together with exhibits and schedules) as such may be from time to time
assigned, supplemented or amended or as the terms hereof may be waived.
"BENEFIT PLAN" means, as of any Closing Date, any Plan,
existing at any Closing Date or prior thereto, established or to which
contributions have at any time been made by the Company, or any
predecessor of any of the foregoing, or under which any employee,
former employee or director of the Company or any
<PAGE>
beneficiary thereof is covered, is eligible for coverage or has benefit
rights.
"BOARD" or "BOARD OF DIRECTORS" means with respect to any
Person which is a corporation, a business trust or other entity, the
board of directors or other group, however, designated, which is
charged with legal responsibility for the management of such Person, or
any committee of such board of directors or group, however designated,
which is authorized to exercise the power of such board or group in
respect of the matter in question.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
any day on which banks in the location of the office of the Company
provided for in Section 17 hereof are authorized or obligated to close.
"CAPITALIZED LEASES" means any lease to which the Company is
party as lessee, or by which it is bound, under which it leases any
property (personal or mixed) from any lessor other than the Company,
and which either is required to be capitalized in accordance with
generally accepted accounting principles consistently applied, or, even
if not so required to be capitalized, shall have (or have had), at the
time first entered into, an initial term of greater than three (3)
years (including leases of shorter duration which are or were
extendible to a total term greater than three (3) years at the option
of the lessor).
"CAPITALIZED LEASE VALUE" means, as of the time of any
determination thereof, the sum of the then present values, determined
as hereinafter provided, of future obligations of the Company and its
subsidiaries under then existing Capitalized Leases. To compute the
value of any Capitalized Lease, the following methods shall be used, as
applicable:
(i) values of leases required to be capitalized in accordance
with generally accepted accounting principles shall be
computed in accordance with such principles; and
(ii) values of other leases (and values of contracts or other
items which this Agreement provides are to be valued as
if they were Capitalized Leases) shall be computed by
discounting, to the date of determination, at an assumed
interest rate of eight percent (8%) per annum, the
minimum amount of future rental payments that will be due
from the Company or its subsidiaries under the related
documentation, including rental payments that may be due
during extensions which are at the other party's option,
but excluding any amounts in respect of insurance on,
taxes on and/or maintenance of the properties subject to
such leases (provided that such amounts are owed and paid
only to the extent actually incurred).
<PAGE>
"CERTIFICATE OF DESIGNATIONS" has the meaning set forth in
Section 1(a) hereof.
"CLOSING" or "CLOSINGS" have the meaning set forth in Section
2(a) hereof.
"CLOSING DATE" or "CLOSING DATES" have the meaning set forth
in Section 2(a) hereof.
"CODE" means the Internal Revenue Code of 1986, as amended
from time to time.
"COMMISSION" means the Securities and Exchange Commission and
any other similar or successor agency of the federal government
administering the Securities Act or the Securities Exchange Act.
"COMMON STOCK" means the Company's Common Stock, par value
$.001 per share, and shall also include any common stock of the Company
hereafter authorized and any capital stock of the Company of any other
class hereafter authorized which is not preferred as to dividends or
assets over any other class of capital stock of the Company or which
has ordinary voting power for the election of directors of the Company;
PROVIDED that Common Stock shall not include the Series A Convertible
Preferred Stock or the Series C Preferred.
"COMPANY" means Alyn Corporation, a Delaware corporation, its
successors and assigns.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in
Section 7.5 hereof.
"CONSOLIDATED" or "CONSOLIDATED", when used with reference to
any financial term in this Agreement, means the aggregate for the
Company and any of its majority-owned subsidiaries of the amounts
signified by such term for all such Persons, with intercompany items
eliminated, and, with respect to net worth, after eliminating the
portion of net worth properly attributable to minority interests, if
any, in the capital of any such Person (other than in the capital of
the Company) and otherwise as determined in accordance with generally
accepted accounting principles consistently applied (except as
otherwise expressly provided herein).
"CONVERSION SHARE" or "CONVERSION SHARES" means the shares of
the Company's Common Stock obtained or obtainable upon conversion of
Shares and shall also include any capital stock or other securities
into which such shares of Common Stock are changed and any capital
stock or other securities resulting from or comprising a
reclassification,
<PAGE>
combination or subdivision of, or a stock dividend on, any such shares
of Common Stock. In the event that any Conversion Shares are sold
either in a public offering pursuant to a registration statement under
the Securities Act or pursuant to a Rule 144 Transaction, then the
transferees of such Conversion Shares shall not be entitled to any
benefits under this Agreement with respect to such Conversion Shares
and such Conversion Shares shall no longer be considered to be
"Conversion Shares" for purposes of any consent or waiver provision of
this Agreement.
"DISCLOSURE MATERIAL" has the meaning specified in Section
4.6(a) hereof.
"ENVIRONMENTAL LAWS" means all federal, state, local, foreign,
civil and criminal laws, statutes, ordinances, orders, codes, rules,
policies, and regulations and common law relating to the protection of
the environment and human health or relating to the handling, use,
generation, treatment, storage, transportation or disposal of Hazardous
Materials, including but not limited to the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. section 6901 et seq.; the Toxic
Substances Control Act, 15 U.S.C. section 2601 et seq.; the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. section 9601 et seq.; the Federal Water Pollution
Control Act, 33 U.S.C. section 1251 et seq.; the Clean Air Act, 42
U.S.C. section 7401 et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. section 1801 et seq.; The Occupational Safety and Health
Act, 29 U.S.C. section 651; the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. section 136Y et seq.; and the Oil Pollution
Act of 1990, 33 U.S.C. section 2701 et seq., all as may be amended or
superseded from time to time, and all common law claims relating to the
same.
"ENVIRONMENTAL LIEN" has the meaning set forth in Section 4.16
hereof.
"ENVIRONMENTAL PERMITS" means all permits, licenses,
approvals, authorizations or consents required by any Governmental
Authority under any applicable Environmental Law and includes any and
all orders, consent orders or binding agreements issued or entered into
by a Governmental Authority under any applicable Environmental Law.
"ERISA" means Employee Retirement Income Security Act of 1974,
as amended.
"ERISA AFFILIATE" means each "person" (as defined in Section
3(9) of ERISA) which is under "common control" with the Company (within
the meaning of Section 414(b), (c), (m) or (o) of the Code).
"EXCHANGEABLE NOTES" means the Company's Senior Exchangeable
<PAGE>
Promissory Notes due March 10, 2002.
"FIRST CLOSING" has the meaning set forth in Section 2(a)
hereof.
"FIRST CLOSING DATE" has the meaning set forth in Section 2(a)
hereof.
"FLEMING FUNDS" means Fleming US Discovery Fund III, L.P. and
Fleming US Discovery Offshore Fund III, L.P.
"FLEMING HOLDERS" means (i) the Fleming Funds and (ii) any
Affiliate, officer or employee of an Affiliate or investment fund
managed by an Affiliate of the Fleming Funds to which the Fleming Funds
may transfer record and/or beneficial ownership of the Shares, the
Conversion Shares, the Warrants or the Warrant Shares.
"GOVERNMENTAL AUTHORITY" means any federal, state, or local
governmental agency or authority (including regulatory authority)
having jurisdiction over the Company or any of its respective assets or
businesses.
"GUARANTY" means (i) any guaranty or endorsement of the
payment or performance of, or any contingent obligation in respect of,
any indebtedness or other obligation of any other Person, (ii) any
other arrangement whereby credit is extended to one obligor (directly
or indirectly) on the basis of any promise or undertaking of another
Person (a) to pay the indebtedness of such obligor, (b) to purchase an
obligation owed by such obligor, (c) to purchase or lease assets (or to
provide funds, goods or services) under circumstances that would enable
such obligor to discharge one or more of its obligations or (d) to
maintain the capital, working capital, solvency or general financial
condition of such obligor, in each case whether or not such arrangement
is disclosed in the balance sheet of such other Person or is referred
to in a footnote thereto and (iii) any liability as a general partner
of a partnership in respect of indebtedness or other obligations of
such partnership; PROVIDED, HOWEVER, that the term "Guaranty" shall not
include (1) endorsements for collection or deposit in the ordinary
course of business, (2) any guaranty of indebtedness of the Company by
a subsidiary of the Company or (3) obligations of the Company which
would constitute Guaranties solely by virtue of the continuing
liability of a Person which has sold assets subject to liabilities for
the liabilities which were assumed by the Person acquiring the assets,
unless such liability is required to be carried on the consolidated
balance sheet of the Company. The amount of any Guaranty and the amount
of indebtedness resulting from such Guaranty shall be the maximum
amount of the guarantor's potential obligation in respect of such
Guaranty.
"HAZARDOUS MATERIALS" means any petroleum, petroleum
hydrocarbons,
<PAGE>
petroleum waste or petroleum products, underground storage tanks,
asbestos or asbestos-containing materials, pesticides, lead and
lead-containing materials, urea formaldehyde insulation and
polychlorinated biphenyls (PCBs), ionizing and non-ionizing radiation
including radon and electromagnetic frequency radiation; and any
chemicals, materials, substances or wastes in any amount or
concentration which are "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted
hazardous wastes," "toxic substances," "toxic pollutants" or words of
similar import, under any applicable Environmental Law.
"INDEBTEDNESS" of any Person means, without duplication, as of
any date as of which the amount thereof is to be determined, (i) all
obligations of such Person to repay money borrowed (including, without
limitation, all notes payable and drafts accepted representing
extensions of credit, all obligations under letters of credit, all
obligations evidenced by bonds, debentures, notes or other similar
instruments and all obligations upon which interest charges are
customarily paid), (ii) Capitalized Lease Value of all Capitalized
Leases in respect of which such Person is liable as lessee or as the
guarantor of the lessee, (iii) all monetary obligations which are
secured by any Lien existing on property owned by such Person whether
or not the obligations secured thereby have been incurred or assumed by
such Person, (iv) all conditional sales contracts and similar title
retention debt instruments under which such Person is obligated to make
payments, (v) all Guaranties by such Person and (vi) all contractual
obligations (whether absolute or contingent) of such Person to
repurchase goods sold and distributed. "Indebtedness" shall not
include, however, any unfunded obligations in any of the Company's
employee pension benefit plans (as defined in ERISA), normal trade
payables, accrued liabilities and customer deposits and advances.
"INITIAL SHELF REGISTRATION" has the meaning set forth in
Section 8.9 hereof.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section
4.12 hereof.
"INTELLECTUAL PROPERTY LICENSES" has the meaning set forth in
Section 4.12 hereof.
"INVESTMENT" means, with respect to any Person, (i) any loan,
advance or extension of credit by such Person to, and any contributions
to the capital of, any other Person, (ii) any Guaranty by such Person,
(iii) any interest in any capital stock, equity interest or other
securities of any other Person, (iv) any transfer or sale of property
of such Person to any other Person other than upon full payment, in
cash or other consideration, of not less than the agreed sale price
bargained on an arms-length basis and (v) any commitment or option to
make an Investment if, in the case of an option, the consideration
therefor exceeds
<PAGE>
$50,000, and any of the foregoing under clauses (i) through (v) shall
be considered an Investment whether such Investment is acquired by
purchase, exchange, merger or any other method; PROVIDED, that the term
"Investment" (1) shall not include an Investment in the Company, (2)
shall not include current trade and customer accounts receivable and
allowances, provided they relate to goods furnished in the ordinary
course of business and are given in accordance with the customary
practices of the Company, (3) shall not include temporary investments
of excess cash of the Company in any of the following: (A) investment
grade obligations maturing within one year of their issuance which as
to principal and interest constitute direct obligations of, or
obligations guaranteed by, the United States of America, (B) negotiable
certificates of deposit of banks or trust companies which are organized
under the laws of the United States of America or any state thereof and
which have capital and surplus of at least $500,000,000, (C) commercial
paper or corporate bonds which are rated not less than prime-one or A-1
or their equivalents by Moody's Investor Service, Inc. or Standard &
Poor's Corporation or their successors, (D) any repurchase agreement
secured by any one or more of the foregoing and (E) money market funds
primarily investing in any of the foregoing securities and sponsored by
or affiliated with nationally recognized brokerage or investment
advisory firms, and (4) shall not include Investments of the Company
existing on the date hereof and disclosed on SCHEDULE 3(A) hereto.
"LIEN" means any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, or preference, priority or other
security interest of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement,
any financing lease having substantially the same effect as any of the
foregoing, any assignment or other conveyance of any right to receive
income and any assignment of receivables with recourse against the
assignor), any filing of a financing statement as debtor under the
Uniform Commercial Code or any similar statute and any agreement to
give or make any of the foregoing; PROVIDED that the term "Lien" shall
not include Permitted Liens.
"OUTSIDE DIRECTORS" means those directors on the Company's
Board of Directors at any time who are not otherwise Affiliates of or
employed by the Company; PROVIDED THAT notwithstanding the foregoing,
James L. Hesburgh and Harry Edelson shall be deemed Outside Directors
for the purposes of this definition.
"OUTSTANDING" or "OUTSTANDING" means (a) when used with
reference to the Shares, the Conversion Shares, the Warrants or the
Warrant Shares as of a particular time, all Shares, Conversion Shares,
Warrants or Warrant Shares theretofore duly issued except (i) Shares,
Conversion Shares, Warrants and Warrant Shares theretofore reported as
lost,
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stolen, mutilated or destroyed or surrendered for transfer, exchange or
replacement, in respect of which new or replacement Shares, Conversion
Shares, Warrants or Warrant Shares have been issued by the Company,
(ii) Shares, Conversion Shares, Warrants and Warrant Shares theretofore
canceled by the Company and (iii) Shares, Conversion Shares, Warrants
and Warrant Shares registered in the name of, as well as Shares,
Warrants and Warrant Shares owned beneficially by, the Company, or any
of its Affiliates. For purposes of the preceding sentence, in no event
shall "Affiliates" include (x) the Purchasers or (y) any Affiliates of
the Purchasers.
"PATENTS AND APPLICATIONS" has the meaning set forth in
Section 4.12 hereof.
"PENSION PLAN" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA.
"PERMITTED LIEN" means (i) any Lien for Taxes, governmental
charges or levies not yet due or delinquent or being contested in good
faith by appropriate proceedings for which adequate reserves have been
established in accordance with GAAP, (ii) any imperfections of title,
easements, rights of way or similar Liens, zoning laws or land use
restrictions as normally exist with respect to property similar in
character to the property affected thereby and which individually or in
the aggregate with other such Liens, zoning laws or land use
restrictions do not materially impair the value or marketability of the
property subject to such Liens, zoning laws or land use restrictions or
interfere with the use of such property in the conduct of the business
of the Company and which do not secure obligations for money borrowed,
(iii) Liens imposed by any law, such as mechanic's, materialman's,
landlord's, warehouseman's and carrier's Liens, securing obligations
incurred in the ordinary course of business which are not yet overdue
or which are being diligently contested in good faith by appropriate
proceedings and, with respect to such obligations which are being
contested, for which the Company has set aside adequate reserves, if
appropriate, and (iv) any Lien resulting from purchase by the Company
of goods in the ordinary course of business as to which Liens are not
filed of record.
"PERSON" or "PERSON" means an individual, corporation,
partnership, limited liability company, firm, association, joint
venture, trust, unincorporated organization, government, governmental
body, agency, political subdivision or other entity.
"PLAN" means any bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health,
<PAGE>
accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy
or arrangement of any kind, whether written or oral, or whether for the
benefit of a single individual or more than one individual including,
but not limited to, any "employee benefit plan" within the meaning of
Section 3(3) of ERISA.
"PREFERRED STOCK" means any class of the capital stock of a
corporation (whether or not convertible into any other class of such
capital stock) which has any right, whether absolute or contingent, to
receive dividends or other distributions of the assets of such
corporation (including, without limitation, amounts payable in the
event of the voluntary or involuntary liquidation, dissolution or
winding-up of such corporation), which right is superior to the rights
of another class of the capital stock of such corporation. "Preferred
Stock" includes, without limitation, the Series A Convertible Preferred
Stock and the Series C Preferred.
"PROMISSORY NOTES" means, collectively, (i) the Company's
Demand Promissory Note, dated the date hereof, to Fleming US Discovery
Fund III, L.P., in the principal amount of $861,867 and (ii) the
Company's Demand Promissory Note, dated the date hereof, in the
principal amount of $138,133 to Fleming US Discovery Offshore Fund III,
L.P.
"PURCHASER" means the person who accepts and agrees to the
terms hereof as indicated by such person's signature (as "the
undersigned Purchaser") on the execution page of this Agreement,
together with its successors and assigns.
"PURCHASERS" has the meaning set forth in Section 1(c) hereof,
together with their respective successors and assigns.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the First Closing Date, among the Company and
each of the Purchasers.
"RESTRICTED PAYMENT" means (i) every payment in connection
with the redemption, purchase, retirement or other acquisition by or on
behalf of the Company of any shares of the Company's capital stock (as
defined below), whether or not owned by the Company, (ii) any
prepayments or repayments made on Indebtedness of the Company, (iii)
every payment to or on behalf of any Affiliate of the Company on
account of or with respect to any lease arrangements, and (iv) every
payment by or on behalf of the Company (whether as repayment or
prepayment of principal or as interest or otherwise) on or with respect
to (A) any obligation to repay money borrowed owing to any Affiliate of
the Company or (B) any obligation, to
<PAGE>
any Person, of any Affiliate of the Company or to any other holder of
shares of the Company's capital stock (as defined below), which
obligation is assumed, or is the subject of a Guaranty, by the Company;
PROVIDED, HOWEVER, (a) that the restrictions of the foregoing clause
(i) shall not apply to (A) any payment in respect of capital stock of
the Company to the extent payable in shares of the capital stock of the
Company, (B) any redemption of the Series C Preferred, (C) any
redemption or repurchase pursuant to the 1996 Stock Incentive Plan and
the 1999 Stock Incentive Plan as in effect on the date hereof, (D) the
repayment or prepayment of the Exchangeable Notes, in accordance with
the amended terms thereof, (E) the forced conversion of the Series A
Convertible Preferred Stock or the Exchangeable Notes, in accordance
with the Series A Certificate of Designations, as amended, or the terms
of the Exchangeable Notes, as amended, or (F) a call on the Series A
Convertible Preferred Stock in accordance with the Series A Certificate
of Designations, as amended, (b) that the restrictions of the foregoing
clause (ii) shall not apply to any regularly scheduled prepayment or
repayment of Indebtedness, provided that such Indebtedness being
prepaid or repaid is not at the time of such prepayment or repayment or
at any prior time thereto owing to an Affiliate of the Company, and (c)
that none of the foregoing clauses shall apply to any payments,
distributions or other transfers or actions on or with respect to the
Shares or the Conversion Shares or to the Purchasers (or holders of
Shares or the Conversion Shares) under the Stock and Warrant Purchase
Agreements. For purposes of this definition, "capital stock" shall also
include warrants and other rights and options to acquire shares of
capital stock (whether upon exercise, conversion, exchange or
otherwise).
"RULE 144" means (i) Rule 144 under the Securities Act as such
Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"RULE 144A" means (i) Rule 144A under the Securities Act as
such Rule is in effect from time to time and (ii) any successor rule,
regulation or law, as in effect from time to time.
"RULE 144 TRANSACTION" means a transfer of Conversion Shares
or Warrant Shares, (A) complying with Rule 144 as such Rule is in
effect on the date of such transfer (but not including a sale other
than pursuant to "brokers' transactions" as defined in clauses (1) and
(2) of paragraph (g) of such Rule as in effect on the date hereof) and
(B) occurring at a time when Conversion Shares or Warrant Shares, as
the case may be, are registered pursuant to Section 12 of the
Securities Exchange Act.
"SEC REPORTS" has the meaning set forth in Section 4.19
hereof.
<PAGE>
"SECOND CLOSING" has the meaning set forth in Section 2(a)
hereof.
"SECOND CLOSING DATE" has the meaning set forth in Section
2(a) hereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the rules, regulations and interpretations thereunder.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, and the rules, regulations and interpretations
thereunder.
"SERIES A CERTIFICATE OF DESIGNATION" means the Certificate of
Designation of Series A Convertible Preferred Stock of Alyn
Corporation, as in effect on the date hereof.
"SERIES A CONVERTIBLE PREFERRED STOCK" means the Company's
Series A Convertible Preferred Stock, par value $.01 per share.
"SERIES C PREFERRED" means the Company's Series C Convertible
Preferred Stock, par value $.01 per share, which will have the rights,
powers and privileges on such Closing Date as more fully set forth in
the Certificate of Designations.
"SHARES" has the meaning set forth in Section 1(a) hereof. In
the event that any Shares are sold either in a public offering pursuant
to a registration statement under Section 5 of the Securities Act or
pursuant to a Rule 144 Transaction, then the transferees of such Shares
shall not be entitled to any benefits under this Agreement with respect
to such Shares and such Shares shall no longer be considered to be
"Shares" for purposes of any consent or waiver provision of this
Agreement.
"SHELF REGISTRATION" has the meaning set forth in Section 8.9
hereof.
"STOCK AND WARRANT PURCHASE AGREEMENTS" has the meaning set
forth in Section 1(c) hereof.
"STOCKHOLDERS' AGREEMENT" means the Stockholders' Agreement,
dated as of the First Closing Date, among the Company, the Purchasers
and certain other stockholders of the Company.
"SUBSEQUENT SHELF REGISTRATION" has the meaning set forth in
Section 8.9 hereof.
"SUBSIDIARY", with respect to any Person, means any
corporation,
<PAGE>
association or other entity of which more than 50% of the total voting
power of shares of stock or other equity interests (without regard to
the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is, at the time as of which any
determination is being made, owned or controlled, directly or
indirectly, by such Person or one or more of its Subsidiaries, or both.
The term "SUBSIDIARY" or "SUBSIDIARIES" when used herein without
reference to any particular Person, means a Subsidiary or Subsidiaries
of the Company.
"TAKEOVER PROPOSAL" shall mean any tender or exchange offer
for in excess of 15% of the outstanding securities involving the
Company, any proposal for a merger, consolidation or other business
combination involving the Company, any proposal or offer to acquire in
any manner a greater than 15% equity interest in, or a significant
portion of the business or assets of, the Company (other than
immaterial or insubstantial assets or inventory in the ordinary course
of business or assets held for sale), any proposal or offer with
respect to any recapitalization or restructuring with respect to the
Company or any proposal or offer with respect to any other transaction
similar to any of the foregoing with respect to the Company other than
pursuant to the transactions to be effected pursuant to the Stock and
Warrant Purchase Agreements.
"TAKEOVER PROPOSAL INTEREST" has the meaning set forth in
Section 7.4(e) hereof.
"TAX" or "TAXES" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, AD
VALOREM, value added, franchise, bank shares, withholding, payroll,
employment, excise, property, alternative or add-on minimum,
environmental or other taxes, assessments, duties, fees, levies or
other governmental charges of any nature whatsoever, whether disputed
or not, together with any interest, penalties, additions to tax or
additional amounts with respect thereto.
"TAX RETURNS" means any returns, reports or statements
(including any information returns) required to be filed for purposes
of a particular Tax.
"TAXING AUTHORITY" means any governmental agency, board,
bureau, body, department or authority of any United States federal,
state or local jurisdiction, or any foreign jurisdiction, having or
purporting to exercise jurisdiction with respect to any Tax.
"TRANSFEREES" shall mean any transferee (except for a Fleming
Holder) of the Shares, the Conversion Shares, the Warrants or the
Warrant Shares from a Fleming Holder. Transferees shall not include a
transferee of the Shares, the Conversion Shares, the Warrants or the
Warrant Shares sold in either a public
<PAGE>
offering pursuant to a registration statement under the Securities Act
or pursuant to a Rule 144 Transaction.
"WARRANT CERTIFICATES" has the meaning set forth in Section
1(a) hereof.
"WARRANTS" has the meaning set forth in Section 1(a) hereof.
"WARRANT SHARE" or "WARRANT SHARES" means the shares of the
Company's Common Stock obtained or obtainable upon the exercise of
Warrants and shall also include any capital stock or other securities
into which such shares of Common Stock are changed and any capital
stock or other securities resulting from or comprising a
reclassification, combination or subdivision of, or a stock dividend
on, any such shares of Common Stock. In the event that any Warrant
Shares are sold either in a public offering pursuant to a registration
statement under the Securities Act or pursuant to a Rule 144
Transaction, then the transferees of such Warrant Shares shall not be
entitled to any benefits under this Agreement with respect to such
Warrant Shares and such Warrant Shares shall no longer be considered to
be "Warrant Shares" for purposes of any consent or waiver provision of
this Agreement.
(b) For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(i) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Agreement as a whole and
not to any particular Section or other subdivision;
(ii) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally
accepted accounting principles consistently applied (except as
otherwise provided herein);
(iii) all computations provided for herein, if any, shall
be made in accordance with generally accepted accounting principles
consistently applied (except as otherwise provided herein);
(iv) any uses of the masculine, feminine or neuter
gender shall also be deemed to include any other gender, as
appropriate;
(v) all references herein to actions by the Company,
such as "create", "sell", "transfer", "dispose of", etc., mean such
action whether voluntary or involuntary, by operation of law or
otherwise;
(vi) the exhibits and schedules to this Agreement shall
be deemed a part of this Agreement;
<PAGE>
(vii) each of the representations and warranties of the
Company contained in Section 4 hereof is separate and is not limited,
qualified or modified by the existence, wording or satisfaction of any
other representation or warranty of the Company in Section 4 or
otherwise;
(viii) each of the covenants of the Company contained in
Sections 7, 8 and 9 hereof or otherwise contained in this Agreement,
the Certificate of Designations, the Warrant Certificates, the
Stockholders' Agreement or the Registration Rights Agreement is
separate and is not limited or satisfied by the existence, wording or
satisfaction of any other covenant of the Company in Section 7, 8 or 9
or otherwise; and
(ix) all references herein (in covenants or otherwise)
to any action(s) which are to be taken (or which are prohibited from
being taken) by any Person or the Company shall apply to such Person or
the Company, as the case may be, whether such action is taken directly
or indirectly.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as
follows as of the date hereof, except as set forth in the schedules attached
hereto:
4.1. CORPORATE EXISTENCE, POWER AND AUTHORITY.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation. The Company is duly qualified, licensed and authorized to do
business and is in good standing in each jurisdiction in which it owns or leases
any property or in which the conduct of its business requires it to so qualify
or be so licensed, except for such jurisdictions where the failure to so qualify
or be so licensed would not have a material adverse effect on the Company's
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects.
(b) No proceeding has been commenced looking toward the
dissolution or merger of the Company or the amendment of its certificate of
incorporation (other than the Certificate of Designations). The Company is not
in violation in any respect of its certificate of incorporation or by-laws.
(c) The Company has all requisite power, authority (corporate
and other) and legal right to own or to hold under lease and to operate the
properties it owns or holds and to conduct its business as now being conducted.
(d) The Company has all requisite power, authority (corporate
and other) and legal right to execute, deliver, enter into, consummate the
transactions
<PAGE>
contemplated by and perform its obligations under (i) the Stock and Warrant
Purchase Agreements, including, without limitation, the issuance by the Company
of the Shares and the Conversion Shares as contemplated herein and therein and
in the Certificate of Designations and the issuance by the Company of the
Warrants and Warrant Shares as contemplated herein and therein and in the
Warrant Certificates (subject to (I) the proper filing with the Secretary of
State of the State of Delaware of the Certificate of Designations for the Series
C Preferred contemplated in conjunction with this Agreement and the amendment to
the Certificate of Designations for the Series A Convertible Preferred Stock
contemplated in conjunction with this Agreement, (II) the amendment to the
Exchangeable Note contemplated in conjunction with this Agreement and (III) the
conversion in full of the Series B Exchangeable Preferred Stock), (ii) the
Stockholders' Agreement and (iii) the Registration Rights Agreement. The
execution, delivery and performance of the Stock and Warrant Purchase
Agreements, the Stockholders' Agreement and the Registration Rights Agreement by
the Company (including, without limitation, the issuance by the Company of the
Shares and the Conversion Shares as contemplated herein and therein and in the
Certificate of Designations and the issuance by the Company of the Warrants and
Warrant Shares as contemplated herein and therein and in the Warrant
Certificates) have been duly authorized by all required corporate and other
actions; PROVIDED that in the event that the parties do not mutually agree to
have only the First Closing, the Second Closing is contingent upon proper
stockholder approval and Stockholders' Notice, as described in Section 2(a)
hereof . The Company has duly executed and delivered the Stock and Warrant
Purchase Agreements and at the Closing will have duly executed and delivered the
Stockholders' Agreement, the Warrant Certificates and the Registration Rights
Agreement. This Agreement constitutes and, at any Closing, the Stockholders'
Agreement, the Warrant Certificates and the Registration Rights Agreement will
constitute the legal, valid and binding obligations of the Company enforceable
in accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to the rights of
creditors generally or under general principles of equity.
4.2. CAPITAL STOCK.
(a) SCHEDULE 4.2 (A) hereto correctly and completely
lists (i) the authorized capital stock of the Company (Common Stock and
Preferred Stock), (ii) the number of designated shares of Preferred Stock in
each Series or Class after giving effect to the Certificate of Designations and
(iii) after giving effect to the issuance of Shares on each Closing Date, as
contemplated by the Stock and Warrant Purchase Agreements, the number of shares
outstanding in each Series or Class. Other than the exchange in full of the
Series B Exchangeable Preferred Stock, there have been no material issuances of
shares since September 29, 1999. All of such outstanding shares are, or on such
Closing Date will be, duly authorized, validly issued and outstanding, fully
paid and non-assessable. The shares of the Company's Common Stock issuable upon
conversion of the Series C Preferred will be, when issued in accordance with the
terms of the Series C Preferred, duly authorized, validly issued, fully paid and
<PAGE>
non-assessable. Except as provided in the Certificate of Designations, none of
the shares of the Company's capital stock which will be outstanding at each
Closing (i) were or will be subject to preemptive rights when issued or (ii)
provide the holders thereof with any preemptive rights with respect to any
issuances of capital stock.
(b) SCHEDULE 4.2(b) hereto correctly and completely lists
the number and purpose for which shares of the Company's Common Stock are
reserved for issuance by the Company.
(c) Except as referred to in Section 4.2(b), there are no
outstanding options, warrants, subscriptions, rights, convertible securities or
other agreements or plans under which the Company may become obligated to issue,
sell or transfer shares of its capital stock or other securities.
(d) Except for the registration rights contained in the
Registration Rights Agreement, there are and will be no outstanding registration
rights with respect to any capital stock of the Company, including, without
limitation, any capital stock referred to in Section 4.2(b) or 4.2(c), which (in
either case) will be outstanding on such Closing Date.
(e) There are no voting agreements, voting trusts,
proxies or other agreements or understandings with respect to the voting of any
capital stock of the Company of which the Company is a party, except as provided
herein, in the Stockholders' Agreement and the Certificate of Designations.
(f) There are no anti-dilution protections or other
adjustment provisions in existence with respect to any capital stock of the
Company, including any capital stock referred to in Section 4.2(b) or 4.2(c).
(g) The Certificate of Designations has been duly adopted
by the Company and is fully effective as an amendment to the Company's
certificate of incorporation. The Shares will have all of the rights, priorities
and terms set forth in the Certificate of Designations.
(h) The Warrant Certificates have been duly adopted by
the Company, and the Warrants will have all of the rights and privileges set
forth in the Warrant Certificates.
(i) To the knowledge of the Company, those persons who
beneficially own, directly or indirectly, more than 5% (calculated in accordance
with Rule 13d-3 under the Securities Exchange Act) of the Company's outstanding
Common Stock are as follows: Kingdon Associates, LP, Kingdon Partners, LP, M.
Kingdon Offshore, NV, Edelson Technology Partners III, Robin Carden and Capital
Guardian.
4.3. SUBSIDIARIES.
<PAGE>
The Company has no Subsidiaries. The Company has no
Investments in any other Person.
4.4. BUSINESS.
The Company is engaged primarily in the business of producing
Boralyn(registered trademark), a unique metal matrix composite material that is
lighter than aluminum, stronger than titanium and has better wear properties
than steel, with principal applications in the nuclear, aerospace, automotive,
computer hardware and sporting goods industries. Boralyn combines ceramics,
which may include boron carbide, silicon carbide and aluminum oxide, with a
metal, which may include aluminum, titanium and magnesium, to create a material
that is a highly effective replacement for many premium priced metal products
such as titanium, since it is lighter, stiffer and can be more easily
fabricated. The Company is primarily a provider of Boralyn material to its
customers for their use in fabricating a wide range of products. For cast
products, such as most automobile engine components, the Company primarily
produces and sells ingots that are in turn re-melted and cast into the end
product by the customer or its suppliers. The Company does produce limited
quantities of precision pressure cast products. In high-strength applications
where the end product is machined or forged, such as aerospace and many sporting
goods products, the Company produces Boralyn billets and extrudes them into the
basic shape the customer or its suppliers need for final fabrication. In
addition to the production of Boralyn as described, the Company also extrudes
and casts aluminum products in order to gain market entry in certain of its
target industries and to accelerate the growth of the Company's revenues and
cash flow. The Company neither currently engages in, nor has any intention of
engaging in, any other business.
4.5. NO DEFAULTS OR CONFLICTS.
(a) Except as provided in SCHEDULE 4.5(a), the Company is
not in violation or default in any material respect (and is not in default in
any respect regarding any Indebtedness) under any indenture, agreement or
instrument to which it is a party or by which it or its properties may be bound.
The Company is not in default in any material respect under any material order,
writ, injunction, judgment or decree of any court or other governmental
authority or arbitrator(s).
(b) The execution, delivery and performance by the
Company of the Stock and Warrant Purchase Agreements, the Stockholders'
Agreement and the Registration Rights Agreement and any of the transactions
contemplated hereby or thereby (including, without limitation, the issuance of
the Shares and the Conversion Shares as contemplated herein and therein and in
the Certificate of Designations, the adoption of the Certificate of Designations
as an amendment to the Company's certificate of incorporation and the issuance
by the Company of the Warrants and Warrant Shares as contemplated herein and
therein and in the Warrant Certificates) do not and will not (i) violate or
conflict with, with or without the giving of notice
<PAGE>
or the passage of time or both, any provision of (A) the certificate of
incorporation or by-laws of the Company, (B) any law, rule, regulation or order
of any federal, state, county, municipal or other governmental authority, (C)
any judgment, writ, injunction, decree, award or other action of any court or
governmental authority or arbitrator(s), or (D) any agreement, indenture or
other instrument applicable to the Company or any of its respective properties,
(ii) result in the creation of any Lien upon any of the Company's properties,
assets or revenues, except as provided in the Certificate of Designations of the
Series C Preferred, (iii) require the consent, waiver, approval, order or
authorization of, or declaration, registration, qualification or filing with,
any Person (whether or not a governmental authority and including, without
limitation, any shareholder approval) (other than the stockholders' vote and
Stockholders' Notice described in Section 2(a) hereof prior to the Second
Closing Date (if applicable), and other than any necessary approvals which have
been obtained prior to any Closing Date), or (iv) cause antidilution clauses of
any outstanding securities to become operative or give rise to any preemptive
rights. No provision of any item referred to in Sections (A) and (C) of the
preceding clause (i) materially adversely affects the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis or the ability of
the Company to perform its obligations under the Stock and Warrant Purchase
Agreements, the Certificate of Designations, the Warrant Certificates, the
Stockholders' Agreement, the Registration Rights Agreement or any of the
transactions contemplated hereby or thereby.
4.6. DISCLOSURE MATERIALS; OTHER INFORMATION.
(a) The Company has previously furnished to one or both
of the Purchasers or their counsel the materials described on SCHEDULE 4.6(A)
hereto (the "DISCLOSURE MATERIAL"). The audited and unaudited financial
statements referred to or contained in the materials referred to on Schedule
4.6(a) fairly present the consolidated financial condition of the Company as of
the respective dates thereof and the consolidated results of the operations of
the Company for such periods and have been prepared in accordance with generally
accepted accounting principles consistently applied, except that any such
unaudited statements may omit notes and may be subject to normal recurring
adjustments and year-end adjustments.
(b) Since June 30, 1999, (i) the business of the Company
has been conducted in the ordinary course and (ii) there has been no material
adverse change in the assets, properties, liabilities, business, affairs,
results of operations, condition (financial or otherwise) or prospects of the
Company on a consolidated basis. As of such Closing Date and as of the date
hereof, there are no material liabilities of the Company which would be required
to be provided for in a consolidated balance sheet of the Company as of any such
date prepared in accordance with generally accepted accounting principles
consistently applied, other than liabilities provided for in the financial
statements referred to in Section 4.6(a). Since June 30, 1999, no amount or
property has directly or indirectly been declared, ordered, paid, made or set
aside for any Restricted Payment nor has any such action been agreed to.
(c) There are no material liabilities, contingent or
otherwise, of the Company
<PAGE>
that have not been disclosed in the financial statements referred to in Section
4.6(a) or otherwise disclosed in the schedules hereto.
(d) The financial projections included in the Disclosure
Material conform with the internal operating forecasts of the Company and were
based on reasonable assumptions when made and have been prepared in good faith.
(e) There is no fact known to the Company which is not in
the disclosure schedules hereto and which materially and adversely affects, or
in the future would be reasonably likely (as far as the Company currently can
reasonably foresee) to materially and adversely affect, the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis.
4.7. LITIGATION.
There is no action, suit, proceeding, investigation or claim
pending or, to the knowledge of the Company, threatened in law, equity or
otherwise before any court, administrative agency or arbitrator which (i)
questions the validity of the Stock and Warrant Purchase Agreements, the
Certificate of Designations, the Warrant Certificates, the Stockholders'
Agreement, the Registration Rights Agreement, the Shares, the Conversion Shares,
the Warrants or the Warrant Shares or any action taken or to be taken pursuant
hereto or thereto, (ii) might adversely affect the right, title or interest of
any Purchaser to the Shares, the Conversion Shares, the Warrants or the Warrant
Shares or (iii) might result in a material adverse change in the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis.
4.8. TAXES.
The Company has duly and timely filed all material Tax Returns
required to be filed by it, and each such Tax Return correctly and completely
reflects, in all material respects, the Tax liability and all other information
required to be reported thereon. The Company has paid or caused to be paid all
material Taxes (whether or not reflected on such Tax Returns) that are due and
payable. The provision for Taxes due by the Company in the most recent financial
statement included in the Disclosure Material is sufficient for all material
unpaid Taxes, being current Taxes not yet due and payable, of the Company, as of
the end of the period covered by such financial statement, and as of such
Closing Date, such provision, as adjusted for the passage of time through such
Closing Date, will be sufficient for the then-accrued and unpaid Taxes not yet
due and payable of the Company. No Tax Returns of the Company have ever been
audited by any Taxing Authority, there is no dispute concerning any Tax
liability of the Company either threatened, claimed or raised by any Taxing
Authority, and the Company does not expect any Taxing Authority to assess
additional Taxes against or in respect of it for any past period. The Company
has withheld and paid, or, if not yet due for payment, set aside in accounts for
such purposes, all Taxes required to have been withheld in connection with
amounts paid or owing to
<PAGE>
any employee, creditor, independent contractor or other third party. Other than
stamp taxes, the Company has no liability for Taxes of any Person other than the
Company (i) as a transferee or successor, (ii) by contract, or (iii) otherwise.
4.9. ERISA.
(a) All Benefit Plans are listed in Section 4.9(a) of
SCHEDULE 4.9, and copies of all documentation relating to such Benefit Plans
have been delivered to or made available for review by Purchasers (including
copies of written Benefit Plans, written descriptions of oral Benefit Plans,
summary plan descriptions, trust agreements, the three most recent annual
returns, employee communications, and IRS determination letters).
(b) Each Benefit Plan has at all times been maintained
and administered in all material respects in accordance with its terms and with
the requirements of all applicable law, including ERISA and the Code, and each
Benefit Plan intended to qualify under section 401(a) of the Code has at all
times since its adoption been so qualified, and each trust which forms a part of
any such plan has at all times since its adoption been tax-exempt under section
501(a) of the Code.
(c) No Benefit Plan has incurred any "accumulated funding
deficiency" within the meaning of section 302 of ERISA or section 412 of the
Code, and the "amount of unfunded benefit liabilities" within the meaning of
section 4001(a)(18) of ERISA does not exceed zero with respect to any Benefit
Plan subject to Title IV of ERISA.
(d) No "reportable event" (within the meaning of section
4043 of ERISA) has occurred with respect to any Benefit Plan or any Plan
maintained by an ERISA Affiliate since the effective date of said section 4043
for which notice is not waived under the regulations issued pursuant to said
section 4043.
(e) No Benefit Plan is a multiemployer plan within the
meaning of section 3(37) of ERISA.
(f) No direct, contingent or secondary liability has been
incurred or is expected to be incurred by the Company under Title IV of ERISA to
any party with respect to any Benefit Plan, or with respect to any other Plan
presently or heretofore maintained or contributed to by any ERISA Affiliate.
(g) Neither the Company nor any ERISA Affiliate has
incurred any liability for any tax imposed under section 4971 through 4980B of
the Code or civil liability under section 502(i) or (l) of ERISA.
(h) No benefit under any Benefit Plan, including, without
limitation, any severance or parachute payment plan or agreement, will be
established or become accelerated,
<PAGE>
vested or payable by reason of any transaction contemplated under this
Agreement.
(i) No Benefit Plan provides health or death benefit
coverage beyond the termination of an employee's employment, except as required
by Part 6 of Subtitle B of Title I of ERISA or section 4980B of the Code or any
State laws requiring continuation of benefits coverage following termination of
employment.
(j) No suit, action or other litigation (excluding claims
for benefits incurred in the ordinary course of plan activities and any other
claim which could reasonably be expected to result in a material liability or
expense to the Company) has been brought or, to the knowledge of the Company,
threatened against or with respect to any Benefit Plan and there are no facts or
circumstances known to the Company that could reasonably be expected to give
rise to any such suit, action or other litigation.
(k) All contributions to Benefit Plans that were required
to be made under such Benefit Plans have been made, and all benefits accrued
under any unfunded Benefit Plan have been paid, accrued or otherwise adequately
reserved in accordance with generally accepted accounting principles, all of
which accruals under unfunded Benefit Plans are as disclosed in Schedule 4.9,
and the Company has performed all material obligations required to be performed
under all Benefit Plans.
(l) The execution, delivery and performance of the Stock
and Warrant Purchase Agreements, the Stockholders' Agreement and the
Registration Rights Agreement and the consummation of the transactions
contemplated hereby and thereby (including, without limitation, the offer, issue
and sale by the Company, and the purchase by the Purchaser of the Shares, the
Conversion Shares, the Warrants and the Warrant Shares) will not involve any
"prohibited transaction" within the meaning of ERISA or the Code with respect to
any Benefit Plan.
4.10. LEGAL COMPLIANCE.
(a) The Company has complied with all applicable laws,
rules, regulations, orders, licenses, judgments, writs, injunctions, decrees or
demands, except to the extent that failure to so comply would not materially
adversely affect the assets, properties, liabilities, business affairs, results
of operations, condition (financial or otherwise) or prospects of the Company on
a consolidated basis.
(b) There are no adverse orders, judgments, writs,
injunctions, decrees, or demands of any court or administrative body, domestic
or foreign, or of any governmental agency or instrumentality, domestic or
foreign, outstanding against the Company.
4.11. OUTSTANDING SECURITIES.
<PAGE>
SCHEDULE 4.11 hereto correctly and completely lists the
outstanding securities (as defined in the Securities Act) of the Company. All
securities of the Company have been offered, issued, sold and delivered in
compliance with, or pursuant to exemptions from, all applicable federal and
state laws, and the rules and regulations of federal and state regulatory bodies
governing the offering, issuance, sale and delivery of securities.
4.12. INTELLECTUAL PROPERTY AND OTHER RIGHTS.
(a) (i) The Company owns, or has the right to use, all
United States and foreign patents, trademarks, service marks, trade names, brand
names, computer software and programs, franchises, technology, know-how and
processes, and registered copyrights, and any applications for any of the
foregoing (collectively, the "INTELLECTUAL PROPERTY") of any kind in which the
Company has an interest or which is otherwise used in, or relates to its
business. Schedule 4.12(A) hereto contains a true, correct and complete list of
all registered trademarks and service marks, all reserved trade names, all
registered copyrights and all filed patent applications and issued patents that
are material to the Company's business or are otherwise necessary for the
conduct of its business as heretofore conducted and as currently proposed to be
conducted and all licenses, permits, consents, approvals or agreements that in
any way affect the rights of the Company to any of its Intellectual Property or
any trade secret material (the "INTELLECTUAL PROPERTY LICENSES").
(ii) Subject to the limitations set forth in the
Intellectual Property Licenses, except as otherwise set forth in any exceptions
listed under Schedule 4.12(a), the Company has all right, title and interest in
all of the Intellectual Property, free and clear of all Liens. The Company owns
or has the exclusive or non-exclusive right to use all Intellectual Property or
trade secrets necessary to conduct its business as now being conducted. The
Company owns or possesses sufficient licenses, permits, consents, approvals or
other rights to use all Intellectual Property covered by its patents or patent
applications necessary to conduct its business as now being conducted and as
currently proposed to be conducted.
(iii) The Company has at all times maintained reasonable
procedures to protect and has enforced all of its Intellectual Property and
trade secrets.
(iv) The consummation of the transactions contemplated
hereby will not alter, adversely affect or impair the rights of the Company to
any of the Intellectual Property, any trade secret material to it, or under any
of the Intellectual Property Licenses.
(b) (i) No claim with respect to the Intellectual
Property, any trade secret material to the Company, or any Intellectual Property
License which would adversely affect the ability of the Company to conduct its
business as presently conducted is currently pending or, to the best knowledge
of the Company, has been asserted, or overtly threatened by any Person, nor does
the Company know of any grounds for any claim against the Company, (A) to the
effect that any material operation or activity of the Company presently
occurring, including, INTER ALIA, the
<PAGE>
manufacture, use or sale of any product, device, instrument, or other material
made or used according to the patents or patent applications included in the
Intellectual Property or Intellectual Property Licenses, infringes or
misappropriates any United States or foreign copyright, patent, trademark,
service mark or trade secret; (B) to the effect that any other Person infringes
on the Intellectual Property or misappropriates any trade secret or know-how or
other proprietary rights material to the Company; (C) challenging the ownership,
validity or effectiveness of any of the Intellectual Property or trade secret
material of the Company; or (D) challenging the license of the Company or other
legally enforceable right under, any Intellectual Property or the Intellectual
Property Licenses.
(ii) The Company is not aware of any presently existing
United States or foreign patents or any patent applications which if issued as
patents would be infringed by any activity contemplated by the Company.
(c) The United States and foreign patents and patent
applications owned by the Company listed in SCHEDULE 4.12(C) hereto (the
"Patents and Applications") as part of the Intellectual Property have been
properly prepared and filed on behalf of the Company as named therein and are
being diligently pursued by the Company. To the Company's best knowledge, there
are no defects in any of the Patents and Applications that would cause any of
them to be held invalid or unenforceable. All relevant prior art of which the
Company is aware has been filed in the Patents and Applications.
4.13. KEY EMPLOYEES.
The Company has good relationships with its employees and has
not had and does not expect any substantial labor problems. The Company has no
knowledge as to any intentions of any key employee or any group of employees to
leave the employ of the Company. The employees of the Company are not and have
never been represented by any labor union, and no collective bargaining
agreement is binding and in force against the Company or currently being
negotiated by the Company.
4.14. PROPERTIES.
Other than the Permitted Liens, the Company has good and
marketable title to its real property, all of which is disclosed on SCHEDULE
4.14 hereto, and good and marketable title to each of its other properties other
than leased properties. Certain real property used by the Company in the conduct
of its business is held under lease (as identified on Schedule 4.14 hereto), and
the Company is not aware of any pending or threatened claim or action by any
lessor of any such property to terminate any such lease. All such leases are
valid and in full force and effect, and none of such leases is in default. None
of the properties owned or leased by the Company is subject to any Liens which
could materially and adversely affect the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company on a consolidated basis.
<PAGE>
4.15. SUPPLIERS AND CUSTOMERS.
(a) The Company has adequate sources of supply for its
business as currently conducted and as proposed to be conducted. The Company has
good relationships with all of its material sources of supply of goods and
services and does not anticipate any material problem with any such material
sources of supply.
(b) The Company has no knowledge that the customer base
of the Company might materially decrease.
4.16. ENVIRONMENTAL COMPLIANCE.
(a) There is no Hazardous Material on, about, under or
in, any property, real or personal, in which the Company has or has formerly had
any interest in an amount or concentration which could constitute a violation
that would result in a liability in excess of $25,000 or otherwise result in a
liability in excess of $25,000 to the Company under any applicable Environmental
Law.
(b) There is no (and has not been any) off-site use,
handling, storage or disposal or on-site use, handling, storage or disposal of
Hazardous Material at or from any locations currently or formerly owned, leased,
operated or occupied by the Company as a result of which use, handling, storage
or disposal the Company could incur a material liability or obligation under any
applicable Environmental Law.
(c) The Company has not received any verbal or written
notice, citation, subpoena, summons, complaint or other correspondence or
communication from any person with respect to the presence of any non-indigenous
Hazardous Material upon, into, beneath, or emanating from or affecting any of
the real property (including improvements) currently or formerly owned or
occupied by the Company that could result in a liability to the Company in
excess of $25,000 under any applicable Environmental Law.
(d) There has been no intentional or unintentional,
gradual or sudden, release, disposal or discharge by the Company or, to the
Company's knowledge, by others, upon, into or beneath the real property
(including improvements) currently or formerly owned or occupied by the Company
that has caused or is causing soil or groundwater contamination which, under
applicable Environmental Laws could require investigation or remediation or
could otherwise create a material liability or obligation on the part of the
Company under any applicable Environmental Law.
(e) The Company is in material compliance with all
applicable Environmental Laws, has received all required Environmental Permits
and is in material compliance with the terms and conditions of all Environmental
Permits.
<PAGE>
(f) To the best knowledge of the Company after reasonable
inquiry, there are no Liens arising under or pursuant to any Environmental Law
("ENVIRONMENTAL LIENS") relating to any real property (including improvements
thereon) currently owned by the Company.
(g) There are no (i) underground storage tanks, (ii)
polychlorinated biphenyl containing equipment or (iii) asbestos-containing
materials at any site currently owned, operated or leased by the Company, except
in compliance with all applicable Environmental Laws.
4.17. NO BURDENSOME AGREEMENTS.
To the best of the knowledge of the Company, other than this
Agreement and the related documents, the Company is not a party to any contract
or agreement with any Affiliate of the Company, the terms of which are less
favorable to the Company than those which might have been obtained, at the time
such contract or agreement was entered into, from a person who was not such an
Affiliate.
4.18. OFFERING OF SHARES AND WARRANTS.
None of the Company, any agent or any other person acting on
its behalf, directly or indirectly, (i) offered any of the Shares, the Warrants
or any similar security of the Company (A) by any form of general solicitation
or general advertising (within the meaning of Regulation D under the Securities
Act) or (B) for sale to or solicited offers to buy any thereof from, or
otherwise approached or negotiated with respect thereto with, any person other
than (x) the Purchasers and (y) not more than ten other institutional investors,
each of which the Company reasonably believed at the time of such sale,
solicitation, approach or negotiation was an "accredited investor" within the
meaning of Regulation D under the Securities Act or (ii) has done or caused to
be done (or has omitted to do or to cause to be done) any act which act (or
which omission) would result in bringing the issuance or sale of the Shares
within the provisions of Section 5 of the Securities Act or the filing,
notification or reporting provisions of any state securities laws.
4.19. SEC REPORTS.
The Company has filed all proxy statements, reports and other
documents required to be filed by it under the Securities Exchange Act. The
Company has furnished the Purchaser with copies of (i) its Annual Report on Form
10-K for the fiscal year ended December 31, 1998, (ii) its Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1999 and June 30, 1999 and
(iii) its Proxy Statement dated April 30, 1999 (collectively, the "SEC
REPORTS"). Each SEC Report was in substantial compliance with the requirements
of its respective form and none of the SEC Reports, nor the financial statements
(and the notes thereto) included in the SEC Reports, as of their respective
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
<PAGE>
4.20. INDEBTEDNESS.
SCHEDULE 4.20 hereto sets forth (i) the amount of all
Indebtedness of the Company outstanding as of June 30, 1999 (and there is no
additional material amount of Indebtedness of the Company outstanding other than
as set forth on such Schedule 4.20), (ii) any Lien with respect to such
Indebtedness and (iii) a description of each instrument or agreement governing
such Indebtedness. The Company has made available to the Purchaser a complete
and correct copy of each such instrument or agreement (including all amendments,
supplements or modifications thereto). No material default exists with respect
to or under any such Indebtedness or any instrument or agreement relating
thereto and no event or circumstance exists with respect thereto that (with
notice or the lapse of time or both) could give rise to such a default.
4.21. USE OF PROCEEDS.
The Company will use the net proceeds realized from the sale
of the Shares and the Warrants (i) on the First Closing Date to repay the
Promissory Note and (ii) on each Closing Date to fund future development
opportunities and for working capital purposes. No portion of such proceeds will
be used for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying, within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended from time to time, any
"margin stock" as defined in said Regulation U, or any "margin stock" as defined
in Regulation G of the Board of Governors of the Federal Reserve System, as
amended from time to time, or for the purpose of purchasing, carrying or trading
in securities within the meaning of Regulation T of the Board of Governors of
the Federal Reserve System, as amended from time to time, or for the purpose of
reducing or retiring any indebtedness which both (i) was originally incurred to
purchase any such margin stock or other securities and (ii) was directly or
indirectly secured by such margin stock or other securities. None of the assets
of the Company includes any such "margin stock." The Company has no present
intention of acquiring any such "margin stock."
4.22. OTHER NAMES.
The businesses previously or presently conducted by the
Company has not been conducted under any corporate, trade or fictitious name.
4.23. BROKERS.
No broker, finder or investment banker or other party is
entitled to any brokerage, finder's or other similar fee or commission in
connection with any Stock and Warrant Purchase Agreement, the Stockholders'
Agreement, the Registration Rights Agreement, the Warrant Certificates or the
Certificate of Designations or any of the transactions contemplated hereby or
thereby, based upon arrangements made by or on behalf of the Company or any of
its Affiliates.
<PAGE>
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company as
follows:
5.1. CORPORATE POWER AND AUTHORITY.
The Purchaser has all requisite power, authority and legal
right to execute, deliver, enter into, consummate the transactions contemplated
by and perform its obligations under this Agreement, the Stockholders' Agreement
and the Registration Rights Agreement. The execution, delivery and performance
of this Agreement, the Stockholders' Agreement and the Registration Rights
Agreement by the Purchaser have been duly authorized by all required corporate
and other actions. The Purchaser has duly executed and delivered this Agreement,
the Stockholders' Agreement and the Registration Rights Agreement, and this
Agreement, the Stockholders' Agreement and the Registration Rights Agreement
constitute the legal, valid and binding obligations of the Purchaser enforceable
against the Purchaser in accordance with their respective terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to the rights of creditors generally or under general principles of
equity.
5.2. INVESTMENT INTENT.
The Purchaser is capable of evaluating the risk of its
investment in the Shares and Warrants being purchased by it hereunder and in the
Conversion Shares and the Warrant Shares, has been advised by counsel (including
tax counsel) as to the risk of such investment and is able to bear the economic
risk of such investment. The Purchaser is purchasing the Shares and the Warrants
to be purchased by it and is acquiring the Conversion Shares and the Warrant
Shares for its own account for investment and not with a present view to any
distribution thereof in violation of applicable securities laws; PROVIDED,
HOWEVER, that the Purchaser may transfer record and/or beneficial ownership of
the Shares, the Conversion Shares, the Warrants or the Warrant Shares to one or
more Affiliates, officers or employees of Affiliates or investment funds managed
by Affiliates of the Purchaser, in all cases in compliance with federal
securities laws. It is understood that the disposition of the Purchaser's
property shall at all times be within the Purchaser's control. If the Purchaser
should in the future decide to dispose of any of its Shares, Conversion Shares,
Warrants or Warrant Shares, it is understood that it may do so only in
compliance with the Securities Act, applicable state and federal securities laws
and this Agreement. The Purchaser is an "accredited investor" as defined in Rule
501(a) under the Securities Act.
5.3. BROKERS.
Except as disclosed on SCHEDULE 5.3 hereto, no broker, finder
or investment banker or other party is entitled to any brokerage, finder's or
other similar fee or commission in connection with any Stock and Warrant
Purchase Agreement, the Stockholders' Agreement, the
<PAGE>
Registration Rights Agreement, the Warrant Certificates or the Certificate
of Designations or any of the transactions contemplated hereby or thereby, based
upon arrangements made by or on behalf of the Purchaser or any of its
Affiliates.
5.4. SHORT SALES AND OTHER HEDGING TRANSACTIONS.
So long as the Purchaser holds any Shares, the Purchaser shall
not, and shall cause its Affiliates to not, enter into any hedging transaction
(including, but not limited to, short sales, put and call options, cashless
collar transactions or other forms of derivative security transactions) and
neither shall the Purchaser transfer any of the Shares or Warrant Shares to any
person, whether or not an affiliate, so as to enable or assist such person to
enter into any hedging transaction, in each case with respect to the Company's
Common Stock. Notwithstanding the foregoing, the Purchaser shall be permitted to
borrow shares in order to effect sales of Common Stock pursuant to a
registration statement filed with the Securities and Exchange Commission.
SECTION 6. RESTRICTIONS ON TRANSFER
The Purchaser agrees that it will not sell or otherwise
dispose of any Shares, Conversion Shares, Warrants or Warrant Shares unless such
Shares, Conversion Shares, Warrants or Warrant Shares have been registered under
the Securities Act and, to the extent required, under any applicable state
securities laws, or pursuant to an applicable exemption from such registration
requirements. The Company may endorse on all certificates representing Shares,
Conversion Shares, Warrants or Warrant Shares a legend stating or referring to
such transfer restrictions; PROVIDED, that no such legend shall be endorsed on
any Share certificates or Warrant Certificates which, when issued, are no longer
subject to the restrictions of this Section 6.
SECTION 7. INFORMATION AS TO THE COMPANY
The Company covenants and agrees as follows:
7.1. FINANCIAL INFORMATION.
(a) The Company will maintain a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in accordance with generally accepted
accounting principles consistently applied.
(b) So long as any of the Shares remain outstanding, the
Company will deliver to (I) the Fleming Holders and (II) each Transferee,
provided that such Transferee holds not less than an aggregate of 10,000 Shares,
the following:
<PAGE>
(i) as soon as practicable but not later than five
(5) Business Days after their issuance, and in any event within ninety (90) days
after the close of each fiscal year of the Company, (A) a consolidated balance
sheet of the Company as of the end of such fiscal year and (B) consolidated
statements of operations, stockholders' equity and cash flows of the Company for
such fiscal year, in each case setting forth in comparative form the
corresponding figures for the preceding fiscal year, all such balance sheets and
statements to be in reasonable detail and certified without qualification by
PriceWaterhouse Coopers LLP or any "Big Five" independent public accounting firm
selected by the Company, and such statements shall be accompanied by a
management analysis of any material differences between the results for such
fiscal year and the corresponding figures for the preceding year; the Company's
Annual Report on Form 10-K shall satisfy such requirement provided that it is in
compliance with all applicable requirements of the SEC and is certified by a
"Big Five" accounting firm;
(ii) as soon as practicable, copies (A) of all
financial statements, proxy material or reports sent to the Company's
stockholders, (B) of any public press releases and (C) of all reports or
registration statements filed with the Commission pursuant to the Securities Act
or the Securities Exchange Act;
(iii) as soon as practicable and in any event within
forty-five (45) days after the close of each of the first three (3) fiscal
quarters of the Company, (A) a consolidated balance sheet of the Company as of
the end of such fiscal quarter, (B) consolidated statements of operations,
stockholders' equity and cash flows of the Company for the portion of the fiscal
year ended with the end of such quarter, in each case in reasonable detail,
certified by the Chief Financial Officer, Chief Executive Officer or the
President of the Company and setting forth in comparative form the corresponding
figures for the comparable period one year prior thereto (subject to normal
recurring adjustments and year-end adjustments), together with a management
analysis of any material differences between such results and the corresponding
figures for such prior period and (C) a certificate of the Chief Financial
Officer, Chief Executive Officer or the President certifying the Company's
compliance with the covenants contained in Section 9 of this Agreement; the
Company's Quarterly Report on Form 10-Q shall satisfy such requirement provided
that it is in compliance with all applicable requirements of the SEC;
(iv) as soon as practicable but not later than thirty
(30) days after the end of each month other than the final month of the
Company's fiscal year, unaudited consolidated financial statements for the
Company and its subsidiaries (if any) including statements of income and cash
flow for the month and year-to-date periods ended at the end of such month and
for the corresponding periods of the prior fiscal year (to the extent available)
and a balance sheet as at the end of such month;
(v) as soon as practicable and without duplication of
any of the above items, any other materials furnished to the Company's Board of
Directors or to holders of the Company's capital stock or Indebtedness,
including, without limitation, any compliance certificates furnished in respect
of such Indebtedness; and
<PAGE>
(vi) as soon as practicable, such other information
as may reasonably be requested by (I) the Fleming Holders or (II) any
Transferee, provided that such Transferee holds not less than an aggregate of
10,000 Shares.
(c) The Company will deliver to each member of the
Company's Board of Directors and each observer to the Company's Board of
Directors appointed pursuant to Section 3(a) of the Stockholders' Agreement, as
soon as practicable (and in the case of (iii), prior to the end of each fiscal
year) and without duplication of any of the items listed below, the following:
(i) copies of any annual, special or interim audit
reports or management or comment letters with respect to the Company or their
operations submitted to the Company by independent public accountants;
(ii) copies of summary financial information prepared
on a quarterly basis regarding the Company on a consolidated basis as presented
to the Board and any other summary financial information otherwise prepared;
(iii) copies of the annual budget and business plan
for the next fiscal year;
(iv) copies of all formal communications, from time
to time, to directors of the Company (including without limitation all
information furnished to such directors in connection with such communications),
and copies of minutes of meetings of the Board of Directors (and of any
executive committees thereof) of the Company;
(v) notice of default under any material agreement,
contract or other instrument to which the Company is a party or by which it is
bound;
(vi) notice of any action or proceeding which has
been commenced or threatened against the Company and which, if adversely
determined, would have, individually or in the aggregate, a material adverse
effect on the assets, properties, liabilities, business, affairs, results of
operations, condition (financial or otherwise) or prospects of the Company on a
consolidated basis; and
(vii) copies of all filings made with the Commission.
(d) All such financial statements referred to in this
Section 7.1 shall be prepared in accordance with generally accepted accounting
principles consistently applied (except for any change in accounting principles
specified in the accompanying certificate, in the financial statements
themselves or required by GAAP, and except that any interim financial statements
may omit notes and may be subject to normal recurring adjustments and year-end
adjustments).
<PAGE>
(e) Without limiting the foregoing provisions of this
Section 7.1, the Company agrees that, if requested in writing by any holder of
Shares, it will not deliver to such holder (until otherwise instructed by such
holder) (x) any non-public information or non-public materials regarding the
Company (whether described in this Section 7.1 or otherwise) and (y) any
information (whether or not included in clause (x)) which such holder specifies
that it does not want to receive. The Company shall comply with any such request
with respect to each person entitled to information hereunder, until instructed
otherwise by the then holder of such Shares.
7.2. COMMUNICATION WITH ACCOUNTANTS.
The Company hereby authorizes (i) the Purchaser to communicate
directly with the independent certified public accountants for the Company,
provided that the Purchaser provides prior written notice to the Company of its
desire to communicate with such accountants, and (ii) such accountants to
disclose to the Purchaser any and all financial statements and any other
information of any kind that they may have with respect to the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company. The Company shall deliver
a letter addressed to such accountants instructing them to comply with the
provisions of this Section 7.2.
7.3. INSPECTION.
The Company will permit (I) the Fleming Holders, (II) any
Transferee, provided that such Transferee holds not less than an aggregate of
10,000 Shares, and (III) any authorized representative of the Fleming Holders or
such Transferee, to visit and inspect any of the properties of the Company, to
examine their respective books and records and to discuss with the Company's
officers their books and records and the assets, properties, liabilities,
business, affairs, results of operations, condition (financial or otherwise) or
prospects of the Company, all at such reasonable times, all on reasonable notice
and as often as may be reasonably requested.
7.4. NOTICES.
The Company will give notice to all holders of Shares promptly
after it learns (other than by notice from all of such holders) of the existence
of any of the following:
(a) any default under any Indebtedness (or under any
indenture, mortgage or other agreement relating to any Indebtedness) which
Indebtedness is in an aggregate principal amount exceeding $100,000 (or the
equivalent thereof in other currencies) in respect of which the Company is
liable;
(b) any action or proceeding which has been commenced or
threatened against the Company and which, if adversely determined, would have,
individually or in the aggregate, a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations,
<PAGE>
condition (financial or otherwise) or prospects of the Company on a consolidated
basis or the ability of the Company to perform its obligations under the Stock
and Warrant Purchase Agreements, the Stockholders' Agreement, the Registration
Rights Agreement, the Warrant Certificates or the Certificate of Designations;
(c) any dispute which may exist between the Company and
any governmental regulatory body which, in the reasonable opinion of the Company
is reasonably likely to, individually or in the aggregate, materially adversely
affect the normal business operations of the Company or the assets, properties,
liabilities, business, affairs, results of operations, condition (financial or
otherwise) or prospects of the Company on a consolidated basis or the ability of
the Company to perform its obligations under the Stock and Warrant Purchase
Agreements, the Stockholders' Agreement, the Registration Rights Agreement, the
Warrant Certificates or the Certificate of Designations; and
(d) if any (i) "reportable event" (as such term is
described in Section 4043(c) of ERISA) has occurred; or (ii) "accumulated
funding deficiency" (within the meaning of Section 412(a) of the Code) has been
incurred with respect to a Pension Plan maintained or contributed to (or
required to be maintained or contributed to) by the Company or any ERISA
Affiliate that is subject to the funding requirements of ERISA and the Code or
that an application may be or has been made to the Secretary of the Treasury for
a waiver or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code, in each case with respect to such a Pension Plan; or (iii)
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate has been terminated,
reorganized, petitioned or declared insolvent under Title IV of ERISA; or (iv)
Pension Plan maintained or contributed to (or required to be maintained or
contributed to) by the Company or any ERISA Affiliate has an unfunded current
liability giving rise to a lien under ERISA or the Code; or (v) proceeding has
been instituted pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Pension Plan maintained or contributed to (or required to be
maintained or contributed to) by the Company or any ERISA Affiliate; or (vi) of
the Company or its ERISA Affiliates will or may incur any liability (including
any contingent or secondary liability) to or on account of the termination or
withdrawal from a Pension Plan maintained or contributed to (or required to be
maintained or contributed to) by the Company or any ERISA Affiliate; or (vii)
"prohibited transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code) in connection with an "employee benefit plan" (as
defined in Section 3(3) of ERISA), maintained or contributed to (or required to
be maintained or contributed to) by the Company or any ERISA Affiliate.
(e) if any proposals, inquiries or expressions of
interest are received by, any information is requested from, or any negotiations
or discussions are sought to be initiated or continued with the Company or its
representatives, in each case in connection with any Takeover Proposal or the
possibility or consideration by a third party of making a Takeover Proposal
("TAKEOVER PROPOSAL INTEREST") indicating, in connection with such notice, the
name of the Person
<PAGE>
indicating such Takeover Proposal Interest and the terms and conditions of any
proposals or offers. The Company agrees that it will take the necessary steps to
inform the Persons referred to in the first sentence hereof of the obligations
undertaken in this Section 7.4(e). The Company agrees that it shall keep the
Fleming Holders informed, on a current basis, of the status and terms of any
Takeover Proposal Interest. Such notice with respect to this Section 7.4(e)
shall be given as soon as is practicable, but in any event within 24 hours.
Such notice (i) with respect to subsection (a) above, shall specify the nature
and period of existence of any such default and what the Company proposes to do
with respect thereto and (ii) with respect to subsections (b), (c) or (d) above,
shall specify the nature of any such matter referred to in such clause, what
action the Company proposes to take with respect thereto and what action any
other relevant Person is taking or proposes to take with respect thereto.
7.5. CONFIDENTIALITY AGREEMENT.
The Company's obligation to provide any non-public information
under this Section 7 or otherwise to any person other than members of its Board
of Directors shall be subject to prior execution of a confidentiality agreement
between the Company and the recipient of such information as more fully set
forth in the form attached hereto as Exhibit F (the "CONFIDENTIALITY
AGREEMENT").
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants and agrees as follows:
8.1. MAINTENANCE OF EXISTENCE, PROPERTIES AND FRANCHISES;
COMPLIANCE WITH LAW; TAXES; INSURANCE.
The Company will:
(a) maintain its corporate existence, rights and other
franchises in full force and effect;
(b) maintain its tangible assets in good repair, working
order and condition so far as necessary or advantageous to the proper carrying
on of its businesses;
(c) comply with all applicable laws and with all
applicable orders, rules, rulings, certificates, licenses, regulations, demands,
judgments, writs, injunctions and decrees, PROVIDED, that such compliance shall
not be necessary so long as (i) the applicability or validity of any such law,
order, rule, ruling, certificate, license, regulation, demand, judgment, writ,
injunction or decree shall be contested in good faith by appropriate proceedings
and (ii) failure to so comply will not have a material adverse effect on the
assets, properties, liabilities, business,
<PAGE>
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company on a consolidated basis;
(d) pay promptly when due all Taxes imposed upon its
properties, assets or income and all claims or indebtedness (including, without
limitation, vendor's, workmen's and like claims) which might become a lien upon
such properties or assets; PROVIDED, that payment of any such Tax shall not be
necessary so long as (i) the applicability or validity thereof shall be
contested in good faith by appropriate proceedings and a reserve, if
appropriate, shall have been established with respect thereto and (ii) failure
to make such payment will not have a material adverse effect on the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company on a consolidated basis;
and
(e) keep adequately insured, by financially sound and
reputable insurers of nationally recognized stature, all its properties of a
character customarily insured by entities similarly situated, against loss or
damage of the kinds and in amounts customarily insured against by such entities
and with such deductibles or coinsurance as is customary.
8.2. OFFICE FOR PAYMENT, EXCHANGE AND REGISTRATION;
LOCATION OF OFFICE; NOTICE OF CHANGE OF NAME OR
OFFICE.
(a) So long as any of the Shares or the Warrants is
outstanding, the Company will maintain an office or agency where Shares or
Warrants may be presented for redemption, exchange, conversion, exercise or
registration of transfer as provided in this Agreement. Such office or agency
initially shall be the office of the Company specified in Section 17 hereof,
subject to Section 8.2(b).
(b) The Company shall give each holder of Shares or
Warrants at least twenty (20) days' prior written notice of any change in (i)
the name of the Company as then in effect or (ii) the location of the office of
the Company required to be maintained under this Section 8.2.
8.3. FISCAL YEAR.
The fiscal year of the Company for tax, accounting and any
other purposes shall end on December 31 of each calendar year.
8.4. ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 8.4(a), the Company
shall keep and maintain any property either owned leased, operated or occupied
by the Company free and clear of any Environmental Liens, and the Company shall
keep all such property free of Hazardous Material contamination (other than de
minimis releases of Hazardous Materials that may occur in the ordinary course of
the Company's business that could not result in a material liability to the
Company) and in material compliance with all applicable Environmental Laws and
the terms and
<PAGE>
conditions of any Environmental Permits; PROVIDED, HOWEVER, that the Company
shall have the right at its cost and expense, and acting in good faith, to
contest, object or appeal by appropriate legal proceeding the validity of any
Environmental Lien. The contest, objection or appeal with respect to the
validity of an Environmental Lien shall suspend the Company's obligation to
eliminate such Environmental Lien under this paragraph pending a final
determination by appropriate administrative or judicial authority of the
legality, enforceability or status of such Environmental Lien, provided that the
following conditions are satisfied: (i) contemporaneously with the commencement
of such proceedings, the Company shall give written notice thereof to each
Fleming Holder and its Transferees while they hold Shares, Conversion Shares,
Warrants or Warrant Shares; and (ii) if under applicable law any real property
or improvements thereon are subject to sale or forfeiture for failure to satisfy
the Environmental Lien prior to a final determination of the legal proceedings,
the Company must successfully move to stay such sale, forfeiture or foreclosure
pending final determination of the Company's action; and (iii) the Company must,
if requested by a majority of the then-outstanding Shares, furnish to the
Fleming Holders and their Transferees, as a group, while they hold Shares,
Conversion Shares, Warrants or Warrant Shares, a good and sufficient bond,
surety, letter of credit or other security satisfactory to such holders equal to
the amount (including any interest and penalty) secured by the Environmental
Lien.
(b) The Company will, by administrative or judicial
process, enforce the obligations of any other Person who is potentially liable
for damages, contribution or other relief in connection with any violation of
Environmental Laws, including, but not limited to, asbestos abatement, Hazardous
Material remediation or off-site or on-site disposal.
(c) The Company will defend, indemnify and hold harmless
each current and future holder of Shares, Conversion Shares, Warrants or Warrant
Shares, its employees, officers, directors, stockholders, partners, financial
and legal representatives and assigns, from and against any liabilities,
obligations, losses, damages, penalties, actions, judgments, suits and claims,
joint or several, and any costs, disbursements and expenses (including
attorneys' fees and expenses and costs of investigation) of whatever kind or
nature, known or unknown, contingent or otherwise asserted against, imposed on,
or sustained by, them, arising out of or in any way related to (i) the presence,
disposal, release, removal, discharge or storage of any Hazardous Material upon,
into, from or affecting any real property (including improvements) currently or
formerly owned, leased, operated or occupied by or on behalf of the Company or
any predecessor thereof; (ii) any judicial or administrative action, suit or
proceeding, actual or threatened, relating to Hazardous Material upon, in, from
or affecting any real property (including improvements) currently or formerly
owned, leased, operated or occupied by the Company for which the Company could
be liable; (iii) any violation of any Environmental Law or Environmental Permit,
by the Company or any of their agents, tenants, subtenants or invitees; (iv) the
imposition of any Environmental Lien for the recovery of costs expended in the
investigation, study or remediation of any environmental liability of (or
asserted against) the Company; and (v) any liability arising out of or related
to the off-site shipment, transportation, disposal, treatment, handling or
disposal of Hazardous Materials by or on behalf of the Company or any
predecessor thereof. This Section
<PAGE>
8.4(c) and Section 8.4(d) shall survive any payment, conversion or transfer of
Shares or Warrants and any termination of this Agreement.
(d) To the extent that the Company is strictly liable
without regard to fault under any Environmental Law, the Company's obligations
to the holders of Shares, Conversion Shares, Warrants or Warrant Shares under
any of the indemnification provisions of this Purchase Agreement shall likewise
be strict without regard to fault with respect to the violation of any
Environmental Law, which results in any liability to any of the indemnified
persons referred to in Section 8.4(c).
8.5. RESERVATION OF SHARES.
There have been reserved, and the Company shall at all times
keep reserved, free from preemptive rights, out of its authorized Common Stock a
number of shares of Common Stock sufficient to provide for the exercise of the
conversion rights provided in Section 5 of the Certificate of Designations and
the exercise of the Warrants pursuant to Section 1 of the Warrant Certificates.
8.6. SECURITIES EXCHANGE ACT REGISTRATION.
(a) In accordance with and subject to the provisions of
the Registration Rights Agreement, the Company will maintain effective a
registration statement (containing such information and documents as the
Commission shall specify and otherwise complying with the Securities Exchange
Act), under Section 12(b) or Section 12(g), whichever is applicable, of the
Securities Exchange Act, with respect to the Common Stock of the Company, and
the Company will file on time such information, documents and reports as the
Commission may require or prescribe for companies whose stock has been
registered pursuant to such Section 12(b) or Section 12(g), whichever is
applicable.
(b) The Company will, upon the request of any holder of
Shares or Warrants, make whatever other filings with the Commission, or
otherwise make generally available to the public such financial and other
information, as any such holder may deem reasonably necessary or desirable in
order to enable such holder to be permitted to sell Conversion Shares or Warrant
Shares pursuant to the provisions of Rule 144.
8.7. DELIVERY OF INFORMATION FOR RULE 144A TRANSACTIONS.
If a holder of Shares or Warrants proposes to transfer any
such Shares or Warrants pursuant to Rule 144A under the Securities Act (as in
effect from time to time), the Company agrees to provide (upon the request of
such holder or the prospective transferee) to such holder and (if requested) to
the prospective transferee any financial or other information concerning the
Company which is required to be delivered by such holder to any transferee of
such Shares or Warrants pursuant to such Rule 144A, subject to confidentiality
provisions, if applicable.
<PAGE>
8.8. SENIOR SECURITIES.
The Company shall maintain the senior status of the Series C
Preferred such that it shall rank senior in all respects, including the payment
on liquidation and redemption, to all other equity securities of the Company,
including the Series A Convertible Preferred Stock.
8.9. SHELF REGISTRATION.
No later than sixty (60) days after the Closing Date, the
Company shall prepare and file with the SEC a registration statement for an
offering to be made on a delayed or continuous basis pursuant to Rule 415 of the
Securities Act (a "SHELF REGISTRATION") registering the resale from time to time
by the holders of all the Registrable Securities (the "INITIAL SHELF
REGISTRATION"). The registration statement shall be on Form S-3 or another
appropriate form permitting registration of such Registrable Securities (as
defined in the Registration Rights Agreement) for resale by the holders of such
Registrable Securities. If the Initial Shelf Registration or any Subsequent
Shelf Registration ceases to be effective for any reason at any time, the
Company shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall within forty-five
(45) days of such cessation of effectiveness amend the Shelf Registration in a
manner reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or to promptly file an additional Shelf Registration
covering all the Registrable Securities (a "SUBSEQUENT SHELF REGISTRATION").
8.10. EARTHQUAKE INSURANCE POLICY.
No later than ninety (90) after Closing, the Company shall
enter into, and thereafter maintain, an earthquake insurance policy in substance
reasonably satisfactory to the Purchasers.
8.11. FURTHER ASSURANCES.
From time to time, upon the Fleming Holders' and any
Transferee's (provided that such Transferee holds not less than an aggregate of
10,000 Shares and such obligation shall only extend to the first four
Transferees) (a) request, the Company shall promptly and duly execute and
deliver any and all such further instruments and documents as the Fleming
Holders or such Transferee as the case may be, may reasonably deem necessary or
desirable to obtain the full benefits of the obligations of the Company under
this Agreement and the other rights and powers herein granted, and (b)
instructions, the Company shall execute and cause to be filed any document or
filing presented to the Company in proper form for signing or filing, in each
case as the Fleming Holders or such Transferee may reasonably deem necessary or
desirable in light of the Company's obligations under this Agreement, and the
Company shall pay or cause to be paid any filing or other fees in connection
therewith.
<PAGE>
SECTION 9. NEGATIVE COVENANTS
The Company covenants and agrees that without the prior
written consent of the holders of more than 50% of outstanding Shares:
9.1. NO DILUTION OR IMPAIRMENT; NO CHANGES IN CAPITAL STOCK.
The Company will not, by amendment of its certificate of
incorporation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of the
Stock and Warrant Purchase Agreements, the Certificate of Designations, the
Warrant Certificates, the Registration Rights Agreement or the Stockholders'
Agreement. The Company will at all times in good faith assist in the carrying
out of all such terms, and in the taking of all such action, as may be necessary
or appropriate in order to protect the rights of the holders of Shares and
Warrants (as such rights are set forth in the Stock and Warrant Purchase
Agreements, the Warrant Certificates, the Certificate of Designations, the
Registration Rights Agreement and the Stockholders' Agreement) against dilution
or other impairment. Without limiting the generality of the foregoing, the
Company (a) will not issue any shares or class or series of equity or
equity-linked security, which is senior to, or pari passu with, the Series C
Preferred as to dividend payments or amounts payable in the event of liquidation
or winding up of the Company, (b) will not enter into any agreement or
instrument which would restrict or otherwise materially adversely affect the
ability of the Company to perform its obligations under the Stock and Warrant
Purchase Agreements, the Stockholders' Agreement, the Registration Rights
Agreement, the Warrant Certificates or the Certificate of Designations, (c) will
not amend its certificate of incorporation or by-laws in any manner which would
impair or reduce the rights of the Preferred Stock, including, without
limitation, an amendment which would alter or change the powers, privileges or
preferences of the holders of the Series C Preferred (including, without
limitation, changing the Certificate of Designations after any Shares have been
called for redemption), (d) except as otherwise provided in the Certificate of
Designations or the Warrant Certificates or in accordance with Section 4 of the
Exchangeable Notes, as in effect on the date hereof, will not redeem, repurchase
or otherwise acquire any shares of capital stock of the Company or any other
rights or options to subscribe for or purchase any capital stock of the Company
or any other securities convertible into or exchangeable for capital stock of
the Company, (e) will not permit the par value or the determined or stated value
of any shares of Common Stock receivable upon the conversion of the Shares or
exercise of the Warrants to exceed the amount payable therefor upon such
conversion, (f) will take all such action as may be necessary or appropriate in
order that the Company may at all times validly and legally issue duly
authorized, fully paid and nonassessable shares of the Common Stock free from
all taxes, Liens and charges with respect to the issue thereof, upon the
conversion of the Shares or exercise of the Warrants from time to time
outstanding, (g) will not take any action which results in any adjustment of the
current conversion price under the Certificate of Designations or the current
exercise price under the Warrant Certificates if the total number of shares of
the Common Stock
<PAGE>
(or other securities) issuable after the action upon the conversion of all of
the then outstanding Shares or the exercise of all of the then outstanding
Warrants would exceed the total number of shares of Common Stock (or other
securities) then authorized by the Company's certificate of incorporation and
available for the purpose of issuance upon such conversion or exercise, (h) will
not have any authorized Common Stock (and will not issue any Common Stock) other
than its existing authorized Common Stock, and (i) will not amend its
certificate of incorporation to change any terms of its Common Stock; PROVIDED
that any action pursuant to the foregoing clauses (g), (h) and (i) is permitted
solely to the extent necessary to provide sufficient authorized Common Stock for
all currently outstanding securities which are exercisable or convertible into
Common Stock.
9.2. INDEBTEDNESS.
The Company will not (i) incur Indebtedness, including any
Indebtedness set forth on Schedule 4.20 hereto, in excess of $15,000,000 in
aggregate principal amount; or (ii) enter into any agreement, amendment or
modification with respect to any Indebtedness and Capitalized Lease Value, as
applicable, which agreement, amendment or modification under clause (ii)
restricts or prohibits (or was intended primarily to restrict or prohibit) the
Company from making any payments under, or otherwise performing under the Stock
and Warrant Purchase Agreements.
9.3. CONSOLIDATION, MERGER AND SALE.
The Company will not (or will not agree to): (a) wind up,
liquidate or dissolve its affairs, (b) sell, lease, transfer or otherwise
dispose of all or substantially all of its assets to any other Person; or (c)
effect a merger or consolidation if the Company is not the surviving corporation
from such merger or consolidation.
9.4. NO CHANGE IN BUSINESS.
The Company will not change substantially the character of its
business as conducted on each Closing Date as represented in Section 4.4 hereof
and described in the Disclosure Material.
9.5. RESTRICTED PAYMENTS; INVESTMENTS.
The Company will not declare or make or permit to be declared
or made:
(a) any Restricted Payment; or
(b) any Investment.
9.6. SALE OF SUBSTANTIAL PORTION OF ASSETS.
<PAGE>
After the First Closing Date, (except with respect to the
1500-ton hydraulic forging press, 1600-ton mechanical forging press and the
Company's disc-finishing research facility located in Fremont, California) the
Company will not sell, transfer, lease or otherwise dispose of any assets to any
Person (OTHER THAN (A) assets consisting of inventory being disposed of in the
ordinary course of business and (B) assets which are, contemporaneously with
such disposition (or within ninety (90) days thereafter), being replaced with
other substantially similar (or improved) assets which are used by the Company
for substantially the same purpose as the assets being replaced) to the extent
the aggregate assets so sold, transferred, leased or disposed of:
(x) during the twelve (12) month period ending on
such sale, transfer, lease or disposition (i) had an aggregate
book value equal to ten percent (10%) or more of the aggregate
book value of the consolidated total assets of the Company at
the end of the most recent fiscal quarter preceding such sale,
transfer, lease or disposition or (ii) accounted for ten
percent (10%) or more of the consolidated revenues of the
Company as shown on the consolidated income statement of the
Company for the most recent fiscal quarter or the then
preceding fiscal year; or
(y) during the period from the First Closing Date
through such sale, transfer, lease or disposition had an
aggregate book value equal to thirty percent (30%) or more of
the aggregate book value of the consolidated total assets of
the Company at the end of the most recent fiscal quarter
preceding such sale, transfer, lease or disposition.
9.7. AFFILIATE LOANS AND GUARANTIES.
The Company may not incur or permit to exist any of the
following, except with respect to a wholly-owned subsidiary of the Company:
(a) any obligation of the Company to repay money borrowed
owing to (i) any Affiliate of the Company or (ii) any other holder of shares of
the capital stock of the Company, excluding any obligations under the Loan
Agreement, dated March 10, 1999, between the Company and Talisman Capital
Opportunity Fund Ltd., or pursuant to the Exchangeable Notes issued in
connection therewith; or
(b) any obligation, to any Person, which obligation is
assumed or guaranteed by the Company and which is an obligation of (i) any
Affiliate of the Company or (ii) any other holder of shares of the capital stock
of the Company (excluding, in the case of this clause (b), any obligation of the
Company which is not owed to an Affiliate of the Company or to an Affiliate or
to any other holder of shares of the capital stock of the Company).
This Section 9.7 shall NOT apply to (1) any obligations under the Stock and
Warrant Purchase
<PAGE>
Agreements or with respect to the Shares or Warrants, (2)
Investments in the Company or (3) Indebtedness identified on Schedule 4.20
hereto.
9.8. TRANSACTIONS WITH AFFILIATES.
The Company will not directly or indirectly, except with
respect to wholly-owned subsidiaries of the Company, enter into any transaction
or agreement (including, without limitation, the purchase, sale, distribution,
lease or exchange of any property or the rendering of any service) with any
Affiliate of the Company, unless such transaction or agreement (a) is approved
by a majority of the Outside Directors on the Board of Directors, and (b) is on
terms that are no less favorable to the Company, as the case may be, than those
which might be obtained at the time of such transaction from a Person who is not
such an Affiliate; PROVIDED, HOWEVER, that this Section 9.8 shall not limit, or
be applicable to, (i) employment arrangements with (and general salary and
benefits compensation for) any individual who is a full-time employee of the
Company if such arrangements are approved by a majority of the Compensation
Committee of the Board of Directors; PROVIDED FURTHER however, that the
Compensation Committee of the Board of Directors shall contain at least a
majority of Outside Directors; and (ii) the payment of reasonable and customary
regular fees to directors of the Company who are not employees of the Company;
and (iii) existing arrangements as disclosed on SCHEDULE 9.8 hereto.
9.9. LIENS.
The Company will not create or permit to exist, to create or
suffer to exist, any Lien upon or with respect to any of its assets or income,
other than Permitted Liens and existing liens set forth on SCHEDULE 9.9 hereto.
9.10. PRIVATE PLACEMENT STATUS.
Neither the Company nor any agent nor other Person acting on
the Company's behalf will do or cause to be done (or will omit to do or to cause
to be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares, the Conversion Shares, the Warrants or the
Warrant Shares within the provisions of Section 5 of the Securities Act or the
filing, notification or reporting requirements of any state securities law
(other than in accordance with a registration and qualification of Conversion
Shares or Warrant Shares pursuant to the Registration Rights Agreement).
9.11. MAINTENANCE OF PUBLIC MARKET.
The Company will not proceed with a program of acquisition of
its Common Stock, initiate a corporate reorganization or recapitalization or
undertake a consolidation or merger or authorize, consent to or take any action
which would have the effect of:
<PAGE>
(a) removing the Company from registration with the
Commission under the Securities Exchange Act with respect to the Company's
Common Stock;
(b) requiring the Company to make a filing under Section
13(e) of the Securities Exchange Act;
(c) reducing substantially or eliminating the public
market for shares of Common Stock of the Company;
(d) causing a delisting of the Company's Common Stock as
a Nasdaq National Market Security on the Nasdaq Stock Market (unless such stock
is delisted as a result of being listed on a national securities exchange); or
(e) if any shares of the Company's Common Stock are at
any time listed on a national securities exchange, causing a delisting of such
stock from such exchange, unless such delisting is in connection with a listing
on another national securities exchange.
9.12. ACTIONS PRIOR TO ANY CLOSING DATE.
From the date hereof through each Closing Date, the Company
will not, (a) issue or agree to issue any capital stock or any securities
exercisable for, or convertible or exchangeable into, capital stock or (b)
purchase, redeem or otherwise acquire any of its capital stock; PROVIDED,
HOWEVER, that this Section 9.12 shall not limit, or be applicable to, (i) the
transactions contemplated by the Stock and Warrant Purchase Agreements,
including any issuance of capital stock in connection with the transactions
contemplated by Sections 9.1 and 9.11 hereof, (ii) grants of options or
issuances of Common Stock to officers, directors or employees of the Company
pursuant to the current terms of the Company's 1996 Stock Incentive Plan and the
1999 Stock Incentive Plan and (iii) the conversion of the Series A Convertible
Preferred Stock, the Exchangeable Notes or the exercise of existing warrants.
SECTION10. CONDITIONS TO PURCHASER'S OBLIGATIONS
The Purchaser's obligation to purchase Shares and Warrants
hereunder is subject to satisfaction of the following conditions at any Closing
(any of which may be waived by the Purchaser); PROVIDED THAT Section 10.11 is a
condition to the obligations to consummate the transaction provided for herein
of each of (I) the Purchaser and (II) the Company:
10.1. CERTIFICATE OF DESIGNATIONS; STOCKHOLDERS' AGREEMENT;
REGISTRATION RIGHTS AGREEMENT; RESTRUCTURING.
(a) The certificate of incorporation of the Company shall have
been duly amended by the filing of the Certificate of Designations in the form
of EXHIBIT A hereto.
<PAGE>
(b) The Company, the Purchasers and certain other
stockholders of the Company named therein shall have entered into a
Stockholders' Agreement substantially in the form of EXHIBIT C hereto.
(c) The Company shall have entered into a Registration
Rights Agreement with the Purchasers substantially in the form of EXHIBIT D
hereto.
(d) The Company shall have satisfactorily completed, in
the sole judgment of the Fleming Funds, (i) the restructuring of the Series A
Convertible Preferred Stock and the Exchangeable Notes and (ii) the conversion
of all of the outstanding shares of the Series B Exchangeable Preferred Stock.
10.2. CERTIFICATES FOR SHARES AND WARRANTS.
The Purchaser shall concurrently receive the certificates for
Shares and Warrants contemplated by Section 2(b) hereof.
10.3. SENIOR STATUS.
The Company shall have taken all of the necessary actions,
including the amendment of the appropriate existing agreements, so that the
Series C Preferred shall rank senior in all respects, including the payment on
liquidation and redemption, to all other equity securities of the Company,
including the Series A Convertible Preferred Stock.
10.4. ACCURACY OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties of the Company contained in
the Stock and Warrant Purchase Agreement herein or in any certificate or
document delivered pursuant hereto shall be correct and complete on and as of
each Closing Date with the same effect as though made on and as of such Closing
Date (after giving effect to the transactions contemplated by this Agreement).
10.5. COMPLIANCE WITH AGREEMENTS.
The Company shall have performed and complied in all material
respects with all agreements, covenants and conditions contained in the Stock
and Warrant Purchase Agreements and any other document contemplated hereby or
thereby which are required to be performed or complied with by the Company on or
before such Closing Date.
10.6. OFFICERS' CERTIFICATES.
The Purchaser shall have received a certificate dated such
Closing Date and
<PAGE>
signed by the President or Chief Executive Officer and by the Secretary or the
Chief Financial Officer of the Company, to the effect that the conditions of
Sections 10.4, 10.5, 10.8 (second sentence only) and 10.9 have been satisfied.
10.7. PROCEEDINGS.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement, and all documents incident thereto,
shall be in form and substance reasonably satisfactory to the Purchaser and its
counsel, and the Purchaser shall have received all such originals or certified
or other copies of such documents as the Purchaser or its counsel may reasonably
request.
10.8. LEGALITY; GOVERNMENTAL AND OTHER AUTHORIZATION.
The purchase of and payment for the Shares and the Warrants
shall not be prohibited by any law or governmental order, rule, ruling,
regulation, release, interpretation or opinion applicable to the Purchaser and
shall not subject the Purchaser to any penalty, tax, liability or other onerous
condition. Any necessary consents, approvals, licenses, permits, orders and
authorizations of, and any filings, registrations or qualifications with, any
governmental or administrative agency or other Person, with respect to the
transactions contemplated by the Stock and Warrant Purchase Agreements shall
have been obtained or made and shall be in full force and effect. The Company
shall have delivered to the Purchaser, upon its reasonable request setting forth
what is required, factual certificates or other evidence, in form and substance
reasonably satisfactory to the Purchaser and its counsel, to enable the
Purchaser to establish compliance with this condition.
10.9. NO MATERIAL ADVERSE CHANGE.
There shall have been no material adverse change in the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company on a consolidated
basis since June 30, 1999, except that (i) its cash position as of August 31,
1999 is $109,538 and (ii) except as disclosed in SCHEDULE 10.9 hereto.
10.10. OPINION OF COUNSEL.
The Purchaser shall have received an opinion, dated such
Closing Date and addressed to the Purchasers, of Cadwalader, Wickersham & Taft,
counsel for the Company, which opinion shall be in form and substance
satisfactory to the Purchaser and its counsel and shall be to the effect set
forth in EXHIBIT E hereto.
10.11. ADDITIONAL PURCHASES OF SHARES AND WARRANTS.
The sale and purchase of Shares and Warrants by the Fleming
Funds pursuant to
<PAGE>
the Stock and Warrant Purchase Agreements between each of the Fleming Funds and
the Company shall be consummated concurrently (a)(i) for an aggregate purchase
price of $3,750,000 on the First Closing Date and (ii) for an aggregate purchase
price of $3,750,000 on the Second Closing Date, or (b) for an aggregate purchase
price of $7,500,000 on the First Closing Date, if the parties mutually agree to
have only one Closing pursuant to Section 2(a) hereof.
10.12. ACCEPTANCE OF AGENT FOR SERVICE OF PROCESS.
The Company shall have appointed and Cadwalader, Wickersham &
Taft shall have accepted its appointment as the Company's agent in New York to
receive service of process pursuant to Section 18(i) hereof. The Company shall
have delivered an Agency Letter to Cadwalader, Wickersham & Taft, substantially
in the form of EXHIBIT G hereto.
10.13. OTHER DOCUMENTS AND OPINIONS.
The Purchaser shall have received such other documents and
opinions, in form and substance reasonably satisfactory to the Purchaser and its
counsel, relating to matters incident to the transactions contemplated hereby as
the Purchaser may reasonably request.
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations, warranties, covenants and
agreements of the Company and the Purchaser contained in this Agreement, the
Stockholders' Agreement, the Registration Rights Agreement or in any document or
certificate delivered pursuant hereto or thereto or in connection herewith shall
survive from each Closing Date, and shall continue in effect following, the
execution and delivery of the Stock and Warrant Purchase Agreements, the
Stockholders' Agreement, the Registration Rights Agreement, the closings
hereunder and thereunder, any investigation at any time made by the Purchaser or
on its behalf or by any other Person, the issuance, sale and delivery of the
Shares or the Warrants, any disposition thereof and any payment, conversion or
cancellation of the Shares; provided that Section 9 shall terminate upon
conversion of all of the Shares. All statements contained in any certificate or
other document delivered by or on behalf of the Company pursuant hereto shall
constitute representations and warranties by the Company hereunder.
(b) The Company agrees to indemnify and hold the
Purchaser harmless from and against and will pay to the Purchaser an amount
sufficient to indemnify the Purchaser (net of any Taxes on any indemnity
payments) against the full amount of any loss, damage, liability or expense
(including amounts paid in settlement and reasonable attorneys' fees and
expenses) to the Purchaser resulting either directly or indirectly from any
breach of the representations, warranties, covenants or agreements of the
Company contained in any Stock and Warrant Purchase Agreement, or in the
Stockholders' Agreement, the Registration Rights Agreement or any other document
or certificate delivered pursuant hereto or thereto or in connection herewith
<PAGE>
or therewith.
SECTION 12. SPECIFIC PERFORMANCE
The parties agree that irreparable damage will result in the
event that this Agreement is not specifically enforced, and the parties agree
that any damages available at law for a breach of this Agreement would not be an
adequate remedy. Therefore, the provisions hereof and the obligations of the
parties hereunder shall be enforceable in a court of equity, or other tribunal
with jurisdiction, by a decree of specific performance, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies and all other remedies provided for in this Agreement shall, however,
be cumulative and not exclusive and shall be in addition to any other remedies
which a party may have under this Agreement or otherwise.
SECTION 13. EXPENSES
(a) Whether or not the transactions herein contemplated
are consummated, the Company shall pay (i) the costs, fees and expenses of the
Company and its counsel in connection with the Stock and Warrant Purchase
Agreements, the Certificate of Designations, the Warrant Certificates, the
Stockholders' Agreement and the Registration Rights Agreement, other related
documentation and the issuance of the Shares, the Conversion Shares, the
Warrants and the Warrant Shares and the furnishing of all opinions by counsel
for the Company, (ii) the costs, fees and expenses of Morgan, Lewis & Bockius
LLP in connection with the Stock and Warrant Purchase Agreements, the
Certificate of Designations, the Warrant Certificates, the Stockholders'
Agreement and the Registration Rights Agreement, the issuance of the Shares, the
Conversion Shares, the Warrants and the Warrant Shares, other related
documentation and the transactions contemplated hereby and thereby (whether or
not a Closing occurs hereunder) and if the First Closing occurs the Company will
make such payment on the First Closing Date (with respect to costs, fees and
expenses incurred prior to such date) and on the Second Closing Date (with
respect to the remainder of such costs, fees and expenses if such Second Closing
occurs)); PROVIDED, HOWEVER, that (x) such fees and expenses shall not exceed
$75,000 in the aggregate without the prior written approval of the Company and
(y) in the event that the First Closing does not occur, the Company shall pay
all such costs, fees and expenses (subject to the foregoing clause (x)) promptly
after the termination of negotiations between the Company and the Purchasers,
(iii) the reasonable costs, fees and expenses of one counsel to the Purchasers
in connection with any amendments to or modifications or waivers of any
provisions of the Stock and Warrant Purchase Agreements, the Certificate of
Designations, the Warrant Certificates, the Stockholders' Agreement or the
Registration Rights Agreement, other related documentation or in connection with
any other agreements between the Purchasers and the Company and (iv) the
reasonable costs, fees and expenses (including the fees and expenses of one
counsel) of any holder of Shares, Conversion Shares, Warrants or Warrant Shares
in enforcing its rights against the Company if the Company defaults in its
obligations hereunder, under the Certificate of
<PAGE>
Designations, the Warrant Certificates, the Stockholders' Agreement or the
Registration Rights Agreement.
(b) In addition to all other sums due hereunder or
provided for in this Agreement, the Company shall pay to the Purchaser or its
agents, respectively, an amount sufficient to indemnify such persons (net of any
Taxes on any indemnity payments) against all reasonable costs and expenses
(including reasonable attorneys' fees and expenses and reasonable costs of
investigation) and damages and liabilities incurred by the Purchaser or its
agents pursuant to any third-party investigation or proceeding against any or
all of the Company, the Purchasers, or their agents, arising out of or in
connection with this Agreement, the Stockholders' Agreement, the Registration
Rights Agreement, the Purchaser's purchase of the Shares or the Warrants (or any
transaction contemplated hereby or thereby or any other document or instrument
executed herewith or therewith or pursuant hereto or thereto), whether or not
the transactions contemplated by this Agreement are consummated, which
investigation or proceeding requires the participation of the Purchaser or its
agents or is commenced or filed against the Purchaser or its agents because of
this Agreement, the Stockholders' Agreement, the Registration Rights Agreement,
the Purchaser's purchase of the Shares or the Warrants or any of the
transactions contemplated hereby or thereby (or any other document or instrument
executed herewith or therewith or pursuant hereto or thereto), other than any
investigation or proceeding in which it is finally determined that there was (i)
gross negligence or willful misconduct on the part of the Purchaser or its
agents, (ii) a material breach by Purchaser of any of its representations or
warranties contained herein, (iii) a material breach by Purchaser of any
provision of the Confidentiality Agreement or any other confidentiality
agreement between the Company and the Purchaser, in any case, which was not made
by the Purchaser in reliance upon any of the Company's representations,
warranties, covenants or agreements in this Agreement, the Stockholders'
Agreement, the Registration Rights Agreement or in any other documents or
instruments contemplated hereby or thereby or executed herewith or therewith or
pursuant hereto or thereto. The Company shall assume the defense, and shall
appoint counsel of its choice to represent the Purchaser and such agents, in
connection with investigating, defending or preparing to defend any such action,
suit, claim or proceeding (including any inquiry or investigation); PROVIDED,
HOWEVER, that the Purchaser, or any such agent, shall have the right (without
releasing the Company from any of its obligations hereunder) to employ its own
counsel and either to direct its own defense or to participate in the Company's
defense, but the fees and expenses of such counsel shall be at the expense of
such person unless (i) the employment of such counsel shall have been authorized
in writing by the Company in connection with such defense, (ii) the Company
shall not have provided its counsel to take charge of such defense or (iii)
there may be defenses available to the Purchaser, or such agent of the Purchaser
which are different from or additional to those available to the Company, then
in any of such events referred to in clauses (i), (ii) or (iii) such reasonable
counsel fees and expenses (but only for one counsel for the Purchaser and its
agents) shall be borne by the Company. Any settlement of any such action, suit,
claim or proceeding shall require the consent of both the Company and such
indemnified person (neither of which shall unreasonably withhold its consent).
<PAGE>
(c) The Company agrees to pay, or to cause to be paid,
all documentary, stamp and other similar Taxes, other than transfer taxes
payable upon the transfer by the Purchaser of Shares to a Transferee, which
transfer taxes shall be paid by the Transferee, levied under the laws of the
United States of America, any state or local Taxing Authority thereof or therein
or any other applicable jurisdiction in connection with the issuance and sale of
the Shares or Warrants, the conversion of Shares into Conversion Shares or
exercise of Warrants and the execution and delivery of this Agreement, the
Stockholders' Agreement, the Registration Rights Agreement and any other
documents or instruments contemplated hereby or thereby and any modification of
the Certificate of Designations, the Warrant Certificates, the Stockholders'
Agreement, the Registration Rights Agreement or this Agreement or any such other
documents or instruments and will hold the Purchaser harmless without limitation
as to time against any and all liabilities with respect to all such Taxes.
(d) The obligations of the Company under this Section 13
shall survive any Closing hereunder and any termination of this Agreement.
SECTION 14. DIRECT PAYMENTS
As long as the Purchaser or any institutional holder which is
a direct or indirect transferee (as a result of one or more transfers) from the
Purchaser shall be the holder of any Shares or Warrants, the Company will make
all redemption payments, liquidation payments and other distributions by wire
transfer to the Purchaser's or such other holder's (or its nominee's) account at
any bank or trust company, notwithstanding any contrary provision herein or in
the Company's certificate of incorporation with respect to the place of payment.
The Purchaser has provided an address on Schedule 1 hereto for payments by wire
transfer, and such address may be changed for the Purchaser or any subsequent
holder by notice to the Company. All such payments shall be made in U.S. dollars
and in federal or other immediately available funds.
SECTION 15. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be
amended, waived, modified or terminated only with the written consent of the
holders of more than 50% of outstanding Shares; PROVIDED, HOWEVER, that no such
amendment, waiver, modification or termination shall change this Section 15(a)
without the written consent of the holders of all the Shares, Conversion Shares,
the Warrants and the Warrant Shares then outstanding.
(b) Promptly after obtaining the written consent of the
holders as herein provided, the Company shall transmit a copy of any amendment,
waiver, modification or termination which has been adopted to all holders of
Shares, Conversions Shares, Warrants and Warrant Shares then outstanding, but
failure to transmit copies shall not in any way affect the validity of any such
amendment, waiver, modification or termination.
<PAGE>
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES;
REPLACEMENT
(a) Subject to Section 6 hereof, at any time at the
request of any holder of Shares or Warrants to the Company at its address
provided under Section 17 hereof, the Company at its expense (other than
transfer taxes payable upon the transfer by the Purchaser of Shares to a
Transferee, which transfer taxes shall be paid by the Transferee) will issue and
deliver to or upon the order of the holder in exchange therefor a new
certificate or certificates in such amount or amounts as such holder may request
in the aggregate representing the number of Shares or Warrants represented by
such surrendered certificates, and registered in the name of such holder or as
such holder may direct.
(b) Any Share certificate which is converted into
Conversion Shares in whole or in part shall be canceled by the Company, and no
new Share certificates shall be issued in lieu of any Shares which have been
converted into Conversion Shares. The Company shall issue a new certificate with
respect to any Shares which were not converted into Conversion Shares and were
represented by a certificate which was converted in part. Any Warrant underlying
a Warrant Certificate which is exercised in whole or in part shall be canceled
by the Company, and no new Warrant Certificate shall be issued in lieu of any
Warrants which have been exercised. The Company shall issue a new certificate
with respect to any Warrants which were not exercised and were represented by a
certificate which was exercised in part.
(c) Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of any Share certificate or any
Warrant Certificate and, in the case of any such loss, theft or destruction,
upon delivery of an indemnity agreement reasonably satisfactory to the Company
(if requested by the Company and unsecured in the case of the Purchaser or
another similar institutional holder), or in the case of any such mutilation,
upon surrender of such Share certificate or Warrant certificate, as the case may
be, (which surrendered Share certificate or Warrant Certificate, as the case may
be, shall be canceled by the Company), the Company will issue a new Share
certificate, or Warrant Certificate, as the case may be, of like tenor in lieu
of such lost, stolen, destroyed or mutilated Share certificate or Warrant
Certificate, as the case may be, as if the lost, stolen, destroyed or mutilated
Share certificate or Warrant Certificate, as the case may be, were then
surrendered for exchange.
SECTION 17. NOTICES
All notices, requests, demands, consents and other
communications hereunder shall be in writing and shall be delivered by hand or
shall be sent by telex or telecopy (confirmed by registered, certified or
overnight mail or courier, postage and delivery charges prepaid), (i) if to the
Company, to Alyn Corporation, 16761 Hale Avenue, Irvine, CA 92606, Attention:
Richard L. Little, Chief Financial Officer, with a copy to Cadwalader,
Wickersham & Taft, 100
<PAGE>
Maiden Lane, New York, NY 10038-4892, Attention: Gerald A. Eppner, Esq. or (ii)
if to the Purchaser, at the address indicated on Schedule 1 hereto, with a copy
to Morgan, Lewis & Bockius LLP, 101 Park Avenue, New York, NY 10178-0060,
Attention: David W. Pollak, Esq., or at such other address as a party may from
time to time designate as its address in writing to the other party to this
Agreement. Whenever any notice is required to be given hereunder, such notice
shall be deemed given and such requirement satisfied only when such notice is
delivered or, if sent by telex or telecopier, when received.
SECTION 18. MISCELLANEOUS
(a) This Agreement, the Stockholders' Agreement, the
Registration Rights Agreement and, upon any closing hereunder, the Certificate
of Designations and the Warrant Certificates, together with any further
agreements entered into by the Purchaser and the Company at any closing
hereunder, contain the entire agreement between the Purchaser and the Company,
and supersede any prior oral or written agreements, commitments, terms or
understandings, regarding the subject matter hereof.
(b) Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereby waive any provision of law which may
render any provision hereof prohibited or unenforceable in any respect.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
whether so expressed or not; PROVIDED, that (a) the Company may not assign any
of its rights, duties or obligations under this Agreement, except with the
Purchaser's written consent, and (b) the Purchaser may assign any of its rights,
duties or obligations under this Agreement to a purchaser of its Shares,
PROVIDED further that such purchaser is reasonably acceptable to the Company.
(d) In addition to any assignment by operation of law,
the Purchaser may assign, in whole or in part, any or all of its rights (and/or
obligations) under this Agreement to any permitted transferee of any or all of
its Shares, Conversion Shares, Warrants or Warrant Shares, and (unless such
assignment expressly provides otherwise) any such assignment shall not diminish
the rights the Purchaser would otherwise have under this Agreement or with
respect to any remaining Shares, Conversion Shares, Warrants or Warrant Shares
held by the Purchaser.
(e) No course of dealing and no delay on the part of any
party hereto in exercising any right, power, or remedy conferred by this
Agreement shall operate as a waiver thereof or otherwise prejudice such party's
rights, powers and remedies. No single or partial
<PAGE>
exercise of any right, power or remedy conferred by this Agreement shall
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
(f) The headings and captions in this Agreement are for
convenience of reference only and shall not define, limit or otherwise affect
any of the terms or provisions hereof.
(g) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York (other than any conflict of
laws rule which might result in the application of the laws of any other
jurisdiction).
(h) This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument, and all signatures need not appear on any one counterpart.
(i) THE COMPANY HEREBY CONSENTS TO THE JURISDICTION OF
ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW
YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO THE PURCHASER'S ELECTION, ALL
ACTIONS OR PROCEEDINGS RELATING TO THIS AGREEMENT, THE CERTIFICATE OF
DESIGNATIONS, THE WARRANT CERTIFICATES, THE STOCKHOLDERS' AGREEMENT, THE
REGISTRATION RIGHTS AGREEMENT, THE SHARES OR THE CONVERSION SHARES MAY BE
LITIGATED IN SUCH COURTS. THE COMPANY ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED (SUBJECT TO APPEAL)
THEREBY IN CONNECTION WITH THIS AGREEMENT, THE CERTIFICATE OF DESIGNATIONS, THE
WARRANT CERTIFICATES, THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS
AGREEMENT, THE SHARES OR THE CONVERSION SHARES. THE COMPANY DESIGNATES AND
APPOINTS CADWALADER, WICKERSHAM & TAFT AND SUCH OTHER PERSONS AS MAY HEREAFTER
BE SELECTED BY THE COMPANY AND WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE AS
ITS AGENT, TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDING IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE
COMPANY TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH
PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO THE COMPANY AT THE
ADDRESS OF THE COMPANY PROVIDED HEREUNDER EXCEPT THAT UNLESS OTHERWISE PROVIDED
BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY
OF SERVICE OF PROCESS. AS AN ALTERNATIVE TO SERVICE OF PROCESS ON SUCH AGENT
(WHETHER OR NOT ANY SUCH AGENT HAS BEEN APPOINTED), THE COMPANY
<PAGE>
HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE
AND SERVICE OF PROCESS. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE PURCHASER
TO BRING PROCEEDINGS OR OBTAIN OR ENFORCE JUDGMENTS AGAINST THE COMPANY IN THE
COURTS OF ANY OTHER JURISDICTION.
(j) THE COMPANY AND THE PURCHASER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT, THE CERTIFICATE OF DESIGNATIONS, THE WARRANT
CERTIFICATES, THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT,
THE SHARES OR THE CONVERSION SHARES, OR ANY DEALINGS BETWEEN THEM RELATING TO
THE SUBJECT MATTER OF THIS TRANSACTION. THE COMPANY AND THE PURCHASER ALSO WAIVE
ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER,
BE REQUIRED OF THE PURCHASER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. THE COMPANY AND THE PURCHASER FURTHER WARRANT AND
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO (OR ASSIGNMENTS
OF) THIS AGREEMENT, THE CERTIFICATE OF DESIGNATIONS, THE WARRANT CERTIFICATES,
THE STOCKHOLDERS' AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT, THE SHARES OR
THE CONVERSION SHARES. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL (WITHOUT A JURY) BY THE COURT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first above written.
ALYN CORPORATION
By
---------------------------------
Name: Arne van Roon
Title: Chief Executive Officer
By
---------------------------------
Name: Richard L. Little
Title: Chief Financial Officer
Accepted and Agreed to as of the
date first above written by the
undersigned Purchaser:
[Fleming fund]
By: FLEMING US DISCOVERY
PARTNERS, L.P.,
its general partner
By: FLEMING US DISCOVERY, LLC,
its general partner
By:
---------------------------------
Robert L. Burr, member
<PAGE>
Schedule 1
to the Stock and Warrant
Purchase Agreement
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
NUMBER AT NUMBER AT PURCHASE PURCHASE
FIRST SECOND PRICE AT PRICE AT
Name of CLOSING CLOSING First Second
PURCHASER SHARES WARRANTS SHARES WARRANTS CLOSING CLOSING
<S> <C> <C> <C> <C>
Fleming US Discovery 32,320 808,000 32,320 808,000 $3,232,000 $3,232,000
Fund III, L.P.
Fleming US Discovery
Offshore Fund III, L.P. 5,180 129,500 5,180 129,500 $ 518,000 $ 518,000
</TABLE>
(a) address for communications:
Fleming Asset Management USA
320 Park Avenue
New York, NY 10022
Attention: Robert L. Burr
David J. Edwards
(b) address for payments by
wire transfer:
<TABLE>
<CAPTION>
<S> <C>
Fleming US Discovery Fund III, L.P. Fleming US Discovery Offshore Fund III, L.P.
Chase Manhattan Bank Citibank, N.A.
ABA # 021000021 ABA # 021000089 / Chips UID# 0008 / Swift Code -
CITIUS33A/C: Fleming US Discovery Fund III, L.P. A/C: The Bank of Bermuda Limited, Hamilton,
Bermuda
A/C # 400-704129 Chips UID# 005584
Swift Code: BBDA BM HM
A/C: Fleming US Discovery Offshore Fund III, L.P.
A/C # 0246769
</TABLE>
<PAGE>
EXHIBIT A
CERTIFICATE OF DESIGNATIONS
<PAGE>
EXHIBIT B
FORM OF WARRANT CERTIFICATES
<PAGE>
EXHIBIT C
STOCKHOLDERS' AGREEMENT
<PAGE>
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
<PAGE>
EXHIBIT E
OPINIONS OF COUNSEL FOR THE COMPANY
<PAGE>
EXHIBIT F
CONFIDENTIALITY AGREEMENT
<PAGE>
EXHIBIT G
AGENCY LETTER
<PAGE>
EXECUTION COPY
- --------------------------------------------------------------------------------
================================================================================
STOCK AND WARRANT PURCHASE AGREEMENT
====================================
DATED AS OF
===========
SEPTEMBER 29, 1999
==================
BETWEEN
=======
ALYN CORPORATION
=================
AND
===
FLEMING US DISCOVERY OFFSHORE FUND III, L.P.
============================================
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
TABLE OF CONTENTS
Page
<S> <C> <C>
SECTION 1. SALE AND PURCHASE OF PREFERRED STOCK AND WARRANTS...........................................
SECTION 2. CLOSINGS....................................................................................
SECTION 3. DEFINITIONS.................................................................................
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................
4.1. Corporate Existence, Power and Authority....................................................
4.2. Capital Stock...............................................................................
4.3. Subsidiaries................................................................................
4.4. Business....................................................................................
4.5. No Defaults or Conflicts....................................................................
4.6. Disclosure Materials; Other Information.....................................................
4.7. Litigation..................................................................................
4.8. Taxes.......................................................................................
4.9. ERISA.......................................................................................
4.10. Legal Compliance............................................................................
4.11. Outstanding Securities......................................................................
4.12. Intellectual Property and Other Rights......................................................
4.13. Key Employees...............................................................................
4.14. Properties..................................................................................
4.15. Suppliers and Customers.....................................................................
4.16. Environmental Compliance....................................................................
4.17. No Burdensome Agreements....................................................................
4.18. Offering of Shares and Warrants.............................................................
4.19. SEC Reports.................................................................................
4.20. Indebtedness................................................................................
4.21. Use of Proceeds.............................................................................
4.22. Other Names.................................................................................
4.23. Brokers.....................................................................................
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.............................................
5.1. Corporate Power and Authority...............................................................
5.2. Investment Intent...........................................................................
5.3. Brokers.....................................................................................
5.4. Short Sales and Other Hedging Transactions..................................................
SECTION 6. RESTRICTIONS ON TRANSFER....................................................................
<PAGE>
SECTION 7. INFORMATION AS TO THE COMPANY...............................................................
7.1. Financial Information.......................................................................
7.2. Communication with Accountants..............................................................
7.3. Inspection..................................................................................
7.4. Notices.....................................................................................
7.5. Confidentiality Agreement...................................................................
SECTION 8. AFFIRMATIVE COVENANTS.......................................................................
8.1. Maintenance of Existence, Properties and Franchises; Compliance with Law;
Taxes; Insurance............................................................................
8.2. Office for Payment, Exchange and Registration; Location of Office; Notice of
Change of Name or Office....................................................................
8.3. Fiscal Year.................................................................................
8.4. Environmental Matters.......................................................................
8.5. Reservation of Shares.......................................................................
8.6. Securities Exchange Act Registration........................................................
8.7. Delivery of Information for Rule 144A Transactions..........................................
8.8. Senior Securities...........................................................................
8.9. Shelf Registration..........................................................................
8.10. Earthquake Insurance Policy.................................................................
8.11. Further Assurances..........................................................................
SECTION 9. NEGATIVE COVENANTS..........................................................................
9.1. No Dilution or Impairment; No Changes in Capital Stock......................................
9.2. Indebtedness................................................................................
9.3. Consolidation, Merger and Sale..............................................................
9.4. No Change in Business.......................................................................
9.5. Restricted Payments; Investments............................................................
9.6. Sale of Substantial Portion of Assets.......................................................
9.7. Affiliate Loans and Guaranties..............................................................
9.8. Transactions with Affiliates................................................................
9.9. Liens.......................................................................................
9.10. Private Placement Status....................................................................
9.11. Maintenance of Public Market................................................................
9.12. Actions Prior to Any Closing Date...........................................................
SECTION10. CONDITIONS TO PURCHASER'S OBLIGATIONS.......................................................
10.1. Certificate of Designations; Stockholders' Agreement; Registration Rights
Agreement; Restructuring....................................................................
10.2. Certificates for Shares and Warrants........................................................
10.3. Senior Status...............................................................................
<PAGE>
10.4. Accuracy of Representations and Warranties..................................................
10.5. Compliance with Agreements..................................................................
10.6. Officers' Certificates......................................................................
10.7. Proceedings.................................................................................
10.8. Legality; Governmental and Other Authorization..............................................
10.9. No Material Adverse Change..................................................................
10.10. Opinion of Counsel..........................................................................
10.11. Additional Purchases of Shares and Warrants.................................................
10.12. Acceptance of Agent for Service of Process..................................................
10.13. Other Documents and Opinions................................................................
SECTION 11. BREACH OF REPRESENTATIONS, WARRANTIES AND
COVENANTS...................................................................................
SECTION 12. SPECIFIC PERFORMANCE........................................................................
SECTION 13. EXPENSES....................................................................................
SECTION 14. DIRECT PAYMENTS.............................................................................
SECTION 15. AMENDMENTS AND WAIVERS......................................................................
SECTION 16. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED
SHARES; REPLACEMENT.........................................................................
SECTION 17. NOTICES.....................................................................................
SECTION 18. MISCELLANEOUS...............................................................................
</TABLE>
EXHIBIT A Certificate of Designations
EXHIBIT B Form of Warrant Certificates
EXHIBIT C Stockholders' Agreement
EXHIBIT D Registration Rights Agreement
EXHIBIT E Opinion of Counsel for the Company
EXHIBIT F Confidentiality Agreement
EXHIBIT G Agency Letter
ALYN CORPORATION
CERTIFICATE OF DESIGNATIONS
OF
SERIES C CONVERTIBLE PREFERRED STOCK
------------------------------
Pursuant to Section 151(g) of the Delaware General Corporation Law
The undersigned officer hereby certifies that:
A. He is the duly elected and acting officer of ALYN
CORPORATION, a Delaware corporation (the "Corporation").
B. On September 26, 1999, the Board of Directors of the
Corporation duly adopted resolutions in order to designate the Series C
Convertible Preferred Stock (as set forth in the resolution below).
C. The resolution contained herein has not been modified,
altered or amended and is presently in full force and effect.
RESOLVED, that pursuant to the authority expressly vested in
the Board of Directors of the Corporation by Article 4 of the Certificate of
Incorporation of the Corporation, the Board of Directors hereby fixes and
determines the voting rights, designations, preferences, qualifications,
privileges, limitations, restrictions, options, conversion rights and other
special or relative rights of the foregoing series of the preferred stock, par
value $.01 per share, which shall be designated as Series C Convertible
Preferred Stock (the "Series C Preferred Stock").
1. DESIGNATION. Seventy-five thousand (75,000) shares of
preferred stock, par value $.01 per share, of the Corporation are hereby
constituted as a series of the preferred stock designated as "Series C
Convertible Preferred Stock."
2. DIVIDENDS.
(a) DIVIDENDS ON SERIES C PREFERRED STOCK. In the event
that the Corporation shall at any time or from time to time declare, order, pay
or make a dividend or other distribution (whether in cash, securities, rights to
purchase securities or other property) on its Common Stock, the holders of
shares of the Series C Preferred Stock shall be entitled to receive from the
Corporation, with respect to each share of Series C Preferred Stock held, a
dividend or distribution that is the same dividend or distribution that would be
received by a holder of the
<PAGE>
number of shares of Common Stock into which such share of Series C Preferred
Stock is convertible pursuant to the provisions of Section 5 hereof on the
record date for such dividend or distribution (except in the case of the payment
of a stock dividend in shares of its Common Stock if a holder of shares of
Series C Preferred Stock shall have given notice to the Corporation (within five
(5) business days after such holder's receipt of the Corporation's notice
regarding the stock dividend) of its election to have the Conversion Price of
its shares adjusted in accordance with Section 5(d)(i) hereof). Any such
dividend or distribution shall be declared, ordered, paid or made on the Series
C Preferred Stock at the same time such dividend or distribution is declared,
ordered, paid or made on the Common Stock. Dividends, if declared, on shares of
the Series C Preferred Stock shall accrue and be cumulative from the payment
date of such dividend on such shares.
(b) LIMITATION ON DIVIDENDS, REPURCHASES AND REDEMPTIONS.
So long as any shares of Series C Preferred Stock shall be outstanding, the
Corporation shall not declare or pay or set apart for payment any dividends or
make any other distributions on any Junior Securities, whether in cash,
securities, rights to purchase securities or other property (other than
dividends or distributions payable in shares of the class or series upon which
such dividends or distributions are declared or paid), nor shall the Corporation
purchase, redeem or otherwise acquire for any consideration or make payment on
account of the purchase, redemption or other retirement of any Parity Securities
or Junior Securities, nor shall any monies be paid or made available for a
sinking fund for the purchase or redemption of any Parity Securities or Junior
Securities, unless with respect to all of the foregoing all dividends or other
distributions to which the holders of Series C Preferred Stock shall have been
entitled, pursuant to Section 2(a) hereof, shall have been paid or declared and
a sum of money has been set apart for the full payment thereof.
(c) PRO RATA PAYMENTS. In the event that full dividends are
not paid or made available to the holders of all outstanding shares of Series C
Preferred Stock and of any Parity Securities and funds available for payment of
dividends shall be insufficient to permit payment in full to holders of all such
stock of the full preferential amounts to which they are then entitled, then the
entire amount available for payment of dividends shall be distributed ratably
among all such holders of Series C Preferred Stock and of any Parity Securities
in proportion to the full amount to which they would otherwise be respectively
entitled.
3. PREFERENCE ON LIQUIDATION.
(a) LIQUIDATION PREFERENCE FOR SERIES C PREFERRED STOCK. In
the event that the Corporation shall liquidate, dissolve or wind up, whether
voluntarily or involuntarily, no distribution shall be made to the holders of
shares of Common Stock or other Junior Securities (and no monies shall be set
apart for such purpose) unless prior thereto, the holders of shares of Series C
Preferred Stock shall have received an amount per share equal to the greater of
(i) the sum of (x) the Liquidation Value, plus (y) all declared but unpaid
dividends thereon through the date of distribution, (ii) ratable distributions
determined with respect to the holders of Series C Preferred Stock and Common
Stock on the basis of the number of shares of Common Stock into
<PAGE>
which such Series C Preferred Stock could be converted pursuant to the
provisions of Section 5 hereof immediately prior to such distribution and (iii)
the Payment Amount, on a per share basis (the greater of (i), (ii) and (iii)
above is herein referred to as the "Series C Liquidation Preference"). The
"LIQUIDATION VALUE" means $100 per share with respect to the Series C Preferred
Stock.
(b) PRO RATA PAYMENTS. If, upon any such liquidation,
dissolution or other winding up of the affairs of the Corporation, the assets of
the Corporation shall be insufficient to permit the payment in full of the
Series C Liquidation Preference for each share of Series C Preferred Stock then
outstanding and the full liquidating payments on all Parity Securities, then the
assets of the Corporation remaining shall be ratably distributed among the
holders of Series C Preferred Stock and of any Parity Securities in proportion
to the full amounts to which they would otherwise be respectively entitled if
all amounts thereon were paid in full.
(c) SALE NOT A LIQUIDATION. Neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all the property or assets of the
Corporation nor the consolidation, merger or other business combination of the
Corporation with or into one or more corporations shall be deemed to be a
liquidation, dissolution or winding-up, voluntary or involuntary, of the
Corporation.
(d) NOTICE OF LIQUIDATION. Written notice of any
liquidation, dissolution or winding up of the Corporation, stating the payment
date or dates when and the place or places where amounts distributable in such
circumstances shall be payable, shall be given by first class mail, postage
prepaid, not less than thirty (30) days prior to any payment date specified
therein, to the holders of record of the Series C Preferred Stock at their
respective addresses as shall appear on the records of the Corporation.
4. VOTING.
(a) GENERAL. In addition to any voting rights provided in
the Corporation's Certificate of Incorporation or by law, the Series C Preferred
Stock shall vote together with the Common Stock as a single class on all actions
to be voted on by the stockholders of the Corporation. Each share of Series C
Preferred Stock shall entitle the holder thereof to such number of votes per
share on each such action as shall equal the number of shares of Common Stock
into which each share of Series C Preferred Stock is then convertible. The
holders of Series C Preferred Stock shall be entitled to notice of any
stockholder's meeting in accordance with the By-Laws of the Corporation.
(b) BOARD OF DIRECTORS. The Corporation shall not, without
the written consent or affirmative vote of the holders representing at least a
majority of the shares of Series C Preferred Stock then outstanding, given in
writing or by vote at a meeting, consenting or voting (as the case may be)
separately as a class, increase the maximum number of directors, including the
Preferred Directors, constituting the Board of Directors to a number in excess
of seven (7).
<PAGE>
(c) ELECTION OF DIRECTORS. So long as either (i) the
Fleming Holders own at least 50% of the Shares or (ii) any Transferee owns at
least 50% of the Shares, the holders of Series C Preferred Stock, consenting or
voting (as the case may be) as a separate class, shall be entitled, but not
required, to elect up to two (2) directors of the Corporation. So long as either
(i) the Fleming Holders own at least 25% of the Shares or (ii) any Transferee
owns at least 25% of the Shares, the holders of Series C Preferred Stock,
consenting or voting (as the case may be) as a separate class, shall be
entitled, but not required, to elect one (1) director of the Corporation. A
director or the directors elected in accordance with this Section 4 are referred
to as a "Preferred Director" or the "Preferred Directors."
Holders of at least a majority of the outstanding shares of
Series C Preferred Stock shall exercise the right to elect a Preferred Director
by written notice to the Corporation, whereupon the Corporation shall call a
meeting of the holders of the Series C Preferred Stock to elect a Preferred
Director. Thereafter, the holders of Series C Preferred Stock, consenting or
voting as a class (as the case may be), shall be entitled to elect a Preferred
Director at any meeting (or in a written consent in lieu thereof) held for the
purpose of electing directors until such time as holders of at least a majority
of the outstanding shares of Series C Preferred Stock shall notify the
Corporation in writing that they no longer wish to exercise their right to elect
a Preferred Director.
At any meeting (or in a written consent in lieu thereof) held
for the purpose of electing directors, (i) the presence in person or by proxy
(or the written consent) of the holders representing a majority of the shares of
Series C Preferred Stock then outstanding shall constitute a quorum of such
class for the election of a Preferred Director; and (ii) the absence of the
presence in person or by proxy (or written consent) of the holders representing
a majority of the shares of Common Stock then outstanding shall not affect the
right of a quorum of holders of Series C Preferred Stock to elect a Preferred
Director. Any Preferred Director may be removed with or without cause by, and
shall not be removed except by, the holders representing a majority of the
shares of Series C Preferred Stock then outstanding, present in person or by
proxy and voting at a meeting of stockholders, or of the holders of Series C
Preferred Stock called for that purpose, or by written consent signed by the
holders representing a majority of the shares of Series C Preferred Stock then
outstanding.
A vacancy in the directorship to be held by a Preferred
Director shall be filled only by vote or written consent of the holders of the
Series C Preferred Stock as provided above. Unless otherwise required by the
laws of the State of Delaware, any holder or holders of at least a majority of
the outstanding shares of Series C Preferred Stock shall have the right to call
a meeting of the holders of Series C Preferred Stock of the Corporation for the
purpose of electing a Preferred Director and filling vacancies of Preferred
Directors.
5. CONVERSION. The holders of shares of Series C Preferred
Stock shall have the right to convert all or a portion of such shares into fully
paid and nonassessable shares of Common Stock or any capital stock or other
securities into which such Common Stock shall have been changed or any capital
stock or other securities resulting from a reclassification thereof
<PAGE>
as follows:
(a) RIGHT TO CONVERT. Subject to and upon compliance with
the provisions of this Section 5, a holder of shares of Series C Preferred Stock
shall have the right, at the option of such holder, at any time, to convert any
or all of such shares into the number of fully paid and nonassessable shares of
Common Stock (calculated as to each conversion rounded down to the nearest
1/100th of a share) obtained by dividing the aggregate Liquidation Value of the
shares to be converted, plus all declared but unpaid dividends thereon through
the date of conversion (unless the holder of shares of Series C Preferred Stock
being so converted shall have elected to receive any such dividends in respect
of the shares being converted subsequent to conversion), by the Conversion Price
and by surrender of such shares, such surrender to be made in the manner
provided in paragraph (b) of this Section 5. The Common Stock issuable upon
conversion of the shares of Series C Preferred Stock, when such Common Stock
shall be issued in accordance with the terms hereof, are hereby declared to be
and shall be duly authorized, validly issued, fully paid and nonassessable
Common Stock held by the holders thereof.
(b) MECHANICS OF CONVERSION. Each holder of Series C
Preferred Stock that desires to convert the same into shares of Common Stock
shall surrender the certificate or certificates therefor, duly endorsed, at the
principal office of the Corporation or of any transfer agent for the Series C
Preferred Stock or Common Stock, accompanied by written notice to the
Corporation that such holder elects to convert the same and stating therein the
number of shares of Series C Preferred Stock being converted and whether all
declared and unpaid dividends in respect of such shares shall be included in the
calculation set forth in Section 5(a) hereof, and setting forth the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued if such name or names shall be different than that of
such holder. Thereupon, the Corporation shall issue and deliver at such office
on not later than the fifth Business Day thereafter (unless such conversion is
in connection with an underwritten public offering of Common Stock, in which
event concurrently with such conversion) to such holder or on such holder's
written order, (i) a certificate or certificates for the number of validly
issued, fully paid and nonassessable full shares of Common Stock to which such
holder is entitled and (ii) if less than the full number of shares of Series C
Preferred Stock evidenced by the surrendered certificate or certificates are
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or certificates less
the number of shares converted.
Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date of such surrender of the
shares to be converted (except that if such conversion is in connection with an
underwritten public offering of Common Stock, then such conversion shall be
deemed to have been effected upon such surrender) so that the rights of the
holder thereof as to the shares being converted shall cease at such time except
for the right to receive shares of Common Stock and if the holder of the shares
being so converted shall have elected to receive dividends subsequent to such
conversion, all accrued and unpaid dividends in accordance herewith, and the
person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of
<PAGE>
Common Stock at such time.
(c) CONDITIONAL CONVERSION. Notwithstanding any other
provision hereof, if conversion of any shares of Series C Preferred Stock is to
be made in connection with a public offering of Common Stock or any transaction
described in Section 5(d)(vii) hereof, the conversion of any shares of Series C
Preferred Stock may, at the election of the holder thereof, be conditioned upon
the consummation of the public offering or such transaction, in which case such
conversion shall not be deemed to be effective until the consummation of such
public offering or transaction.
(d) ADJUSTMENT OF THE CONVERSION PRICE. The Conversion
Price shall be adjusted from time to time as follows:
(i) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation at any time or from time to time after the Issue Date, pays
a stock dividend in shares of its Common Stock, issues any convertible
debt securities without adequate consideration therefor, effects a
subdivision of the outstanding Common Stock, combines the outstanding
shares of Common Stock, issues by reclassification of shares of its
Common Stock any shares of capital stock of the Corporation, makes a
distribution of any of its assets (other than cash dividends payable
out of earnings or retained earnings in the ordinary course of
business) then, in each such case, the Conversion Price in effect
immediately prior to such event shall be adjusted so that each holder
of shares of Series C Preferred Stock shall have the right to convert
its shares of Series C Preferred Stock into the number of shares of
Common Stock which it would have owned after the event had such shares
of Series C Preferred Stock been converted immediately before the
happening of such event. Any adjustment under this Section 5(d)(i)
shall become effective retroactively immediately after the record date
in the case of a dividend and distribution and shall become effective
immediately after the effective date in the case of a issuance,
subdivision, combination or reclassification. If the Corporation pays a
stock dividend in shares of its Common Stock and the holders of the
Series C Preferred Stock received such stock dividend pursuant to
Section 2(a) hereof, the Conversion Price shall not be adjusted for
such stock dividend under this Section 5(d)(i).
(ii) ISSUANCE OF ADDITIONAL SHARES OF STOCK. If at any time
the Corporation shall (except as hereinafter provided) issue or sell
Additional Shares of Stock for an aggregate amount of consideration
(computed in accordance with Section 5(d)(vi)(A) hereof) exceeding
$500,000 in exchange for consideration in an amount per Additional
Share of Stock less than the Conversion Price in effect immediately
prior to such issuance or sale of Additional Shares of Stock, then the
Conversion Price as to the Common Stock into which the Series C
Preferred Stock is convertible immediately prior to such adjustment
shall be adjusted to equal the consideration paid per Additional Share
of Stock. The provisions of this Section 5(d)(ii) shall not apply to
any issuance of Additional Shares of Common Stock for which an
adjustment is provided under Section 5(d)(i) or which are dividends or
distributions received by the holders of the Series C
<PAGE>
Preferred Stock pursuant to Section 2(a) hereof.
(iii) (A) ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time
(i) the Corporation shall in any manner (whether directly or by
assumption in a merger in which the Corporation is the surviving
corporation) issue or sell any warrants or other rights to subscribe
for or purchase any Additional Shares of Stock or any Convertible
Securities, whether or not the rights to exchange or convert thereunder
are immediately exercisable, and the consideration (computed in
accordance with Section 5(d)(vi)(A) hereof) received for such warrants
or other rights or such Convertible Securities shall be less than the
Conversion Price in effect immediately prior to the time of such issue
or sale, then the Conversion Price shall be adjusted as provided in
Section 5(d)(ii). No further adjustments of the Conversion Price shall
be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such warrants or other rights
or upon the actual issue of such Common Stock upon such conversion or
exchange of such Convertible Securities.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the
Corporation shall in any manner (whether directly or by assumption in a
merger in which the Corporation is the surviving corporation) issue or
sell, any Convertible Securities, whether or not the rights to convert
thereunder are immediately exercisable, and the consideration (computed
in accordance with Section 5(d)(vi)(A) hereof) received for such
Convertible Securities shall be less than the Conversion Price in
effect immediately prior to the time of such issue or sale, then the
Conversion Price shall be adjusted as provided in Section 5(d)(ii). No
adjustment of the Conversion Price shall be made under this Section
5(d)(iii)(B) upon the issuance of any Convertible Securities which are
issued pursuant to the exercise of any warrants or other subscription
or purchase rights therefor, if any such adjustment shall previously
have been made upon the issuance of such warrants or other rights
pursuant to Section 5(d)(iii)(A). No further adjustments of the
Conversion Price shall be made upon the actual issue of such Common
Stock upon conversion of such Convertible Securities and, if any issue
or sale of such Convertible Securities is made upon exercise of any
warrant or other right to subscribe for or to purchase any such
Convertible Securities for which adjustments of the Conversion Price
have been or are to be made pursuant to other provisions of this
Section 5(d), no further adjustments of the Conversion Price shall be
made by reason of such issue or sale.
(iv) SUPERSEDING ADJUSTMENTS. If, at any time after any
adjustment of the Conversion Price at which the Series C Preferred
Stock is convertible shall have been made pursuant to Section 5(d)(iii)
as a result of any issuance of warrants, rights or Convertible
Securities,
(A) such warrants or rights, or the right of
conversion or exchange in such other Convertible Securities,
shall expire, and all or a portion of such warrants or rights,
or the right of conversion or exchange with respect to all or
a portion of such other Convertible Securities, as the case
may be, shall not have been
<PAGE>
exercised, or
(B) the consideration per share for which shares of
Stock are issuable pursuant to such warrants or rights, or the
terms of such other Convertible Securities, shall be increased
solely by virtue of provisions therein contained for an
automatic increase in such consideration per share upon the
occurrence of a specified date or event,
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of
the effect of such rights or options or other Convertible Securities on
the basis of
(C) treating the number of Additional Shares of Stock
or other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise of any such
warrants or rights or any such right of conversion or
exchange, as having been issued on the date or dates of any
such exercise and for the consideration actually received and
receivable therefor, and
(D) treating any such warrants or rights or any such
other Convertible Securities which then remain outstanding as
having been granted or issued immediately after the time of
such increase of the consideration per share for which shares
of Stock or other property are issuable under such warrants or
rights or other Convertible Securities;
whereupon a new adjustment of the Conversion Price at which the Series
C Preferred Stock is convertible shall be made, which new adjustment
shall supersede the previous adjustment so rescinded and annulled.
(v) ADJUSTMENTS UNDER OTHER SECURITIES. Without limiting any
other rights available hereunder to the holders of the Series C
Preferred Stock, if there is an adjustment in the exercise or purchase
price (i) under any Convertible Securities other than the Series C
Preferred Stock, whether issued prior to or after the Issue Date, or
(ii) under any rights, options or warrants to purchase Additional
Shares of Stock, whether issued prior to or after the Issue Date which,
in either case, results in a reduction in the exercise or purchase
price with respect to such security or rights such that such exercise
or purchase price is less than the Conversion Price, then an adjustment
shall be made to the Conversion Price hereunder such that the
Conversion Price pursuant to this Section 5(d)(v) shall be equal to the
exercise or purchase price with respect to such Convertible Security,
right, option or warrant. Any such adjustment under this Section
5(d)(v) shall only be made if it would result in a lower Conversion
Price than that which would be determined pursuant to any other
antidilution adjustment otherwise required hereunder as a result of the
event or circumstance which triggered the adjustment to such
Convertible
<PAGE>
Security, right, option or warrant, and if an adjustment is made
pursuant to this Section 5(d)(v), such other antidilution adjustment
otherwise required hereunder shall not be made as a result of such
event or circumstance.
(vi) OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to making
adjustments to the shares of Common Stock into which the Series C
Preferred Stock is convertible and the Conversion Price at which the
Series C Preferred Stock is convertible provided for in this Section
5(d):
(A) COMPUTATION OF CONSIDERATION. To the extent that any
Additional Shares of Stock or any Convertible Securities or
any warrants or other rights to subscribe for or purchase any
Additional Shares of Stock or any Convertible Securities shall
be issued for cash consideration, the consideration received
by the Corporation therefor shall be the amount of the cash
received by the Corporation therefor, or, if such Additional
Shares of Stock or Convertible Securities are offered by the
Corporation for subscription, the subscription price, or, if
such Additional Shares of Stock or Convertible Securities are
sold to underwriters or dealers for public offering without a
subscription offering, the public offering price (in each case
adding to the foregoing any amount by which such consideration
was reduced when paid by the purchaser thereof to reflect or
give effect to an offset of like amount that would be payable
by the Company to the holder of such security within one year
from its date of issuance and the elimination of the Company's
obligation to actually pay such like amount) (subtracting from
the foregoing (i) in any case, any amounts paid or payable by
the Company for accrued interest or accrued dividends at the
time of issuance, (ii) in the case of any public offering, any
compensation or discounts incurred by the Corporation for and
in the underwriting of, or otherwise in connection with, the
issuance thereof, and (iii) in the case of any transaction
other than a public offering, any compensation, discounts or
expenses paid or incurred by the Corporation for and in the
underwriting of, or otherwise in connection with, the issuance
thereof; PROVIDED THAT, in the case of clause (iii), such
amount is in excess of eight percent (8%) of the aggregate
costs of such transactions, and then only to the extent of
such excess). To the extent that such issuance shall be for a
consideration other than cash, then except as herein otherwise
expressly provided, the amount of such consideration shall be
deemed to be the fair value of such consideration at the time
of such issuance as determined in good faith by the Board of
Directors of the Corporation. In case any Additional Shares of
Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase such Additional Shares of
Stock or Convertible Securities shall be issued in connection
with any merger in which the Corporation issues any
securities, the amount of consideration therefor shall be
deemed to be the fair value, as determined in good faith by
the Board of Directors of the Corporation, of such portion of
the assets and business of the nonsurviving corporation as
such Board in good faith shall determine to be attributable to
such Additional Shares of Stock,
<PAGE>
Convertible Securities, warrants or other rights, as the case
may be. The consideration for any Additional Shares of Stock
issuable pursuant to any warrants or other rights to subscribe
for or purchase the same shall be the consideration received
by the Corporation for issuing such warrants or other rights
plus the additional consideration payable to the Corporation
upon exercise of such warrants or other rights. The
consideration for any Additional Shares of Stock issuable
pursuant to the terms of any Convertible Securities shall be
the consideration received by the Corporation for issuing
warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable
to the Corporation in respect of the subscription for or
purchase of such Convertible Securities, plus the additional
consideration, if any, payable to the Corporation upon the
exercise of the right of conversion or exchange in such
Convertible Securities. In case of the issuance at any time of
any Additional Shares of Stock or Convertible Securities in
payment or satisfaction of any dividends upon any class of
stock other than Common Stock, the Corporation shall be deemed
to have received for such Additional Shares of Stock or
Convertible Securities a consideration equal to the amount of
such dividend so paid or satisfied.
(B) WHEN ADJUSTMENTS TO BE MADE. The adjustments
required by this Section 5(d) shall be made whenever and as
often as any event requiring an adjustment shall occur, except
that any adjustment of the Conversion Price that would
otherwise be required may be postponed (except in the case of
a subdivision or combination of shares of the Common Stock, as
provided for in Section 5(d)(i)) up to, but not beyond the
date of exercise if such adjustment either by itself or with
other adjustments not previously made amount to a change in
the Conversion Price of less than $.05. Any adjustment
representing a change of less than such minimum amount (except
as aforesaid) which is postponed shall be carried forward and
made on the earlier of (I) such time as such adjustment,
together with other adjustments required by this Section 5(d)
and not previously made, would result in an aggregate
adjustment equal to or in excess of a minimum adjustment or
(II) on the date of conversion. For the purpose of any
adjustment, any event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(C) FRACTIONAL INTERESTS. In computing adjustments
under this Section 5(d), fractional interests in the Common
Stock shall be taken into account to the nearest 1/100th of a
share.
(D) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever
the Board of Directors of the Corporation shall be required to
make a determination in good faith of the fair value of any
item under this Section 5(d), such determination may be
challenged in good faith by a holder of Series C Preferred
Stock and any dispute shall be resolved by an investment
banking firm of recognized national
<PAGE>
standing jointly selected by the Corporation and such holder.
The fees of such investment banker shall be borne by such
holder if the Corporation's calculation is determined to be
between 90% and 110% of the calculation of such banker.
(vii) REORGANIZATION, RECLASSIFICATION, MERGER OR
CONSOLIDATION. If the Corporation shall at any time reorganize or
reclassify the outstanding shares of Common Stock (other than a change
in par value, or from no par value to par value, or from par value to
no par value, or as a result of a subdivision or combination) or
consolidate with or merge into another corporation (where the
Corporation is not the continuing corporation after such merger or
consolidation), the holders of Series C Preferred Stock shall
thereafter be entitled to receive upon conversion of the Series C
Preferred Stock in whole or in part, the same kind and number of shares
of stock and other securities, cash or other property (and upon the
same terms and with the same rights) as would have been distributed to
a holder upon such reorganization, reclassification, consolidation or
merger had such holder converted its Series C Preferred Stock
immediately prior to such reorganization, reclassification,
consolidation or merger (subject to subsequent adjustments under
Section 5(d) hereof). The Conversion Price upon such conversion shall
be the Conversion Price that would otherwise be in effect pursuant to
the terms hereof. Notwithstanding anything herein to the contrary, the
Corporation will not effect any such reorganization, reclassification,
merger or consolidation unless prior to the consummation thereof, the
corporation which may be required to deliver any stock, securities or
other assets upon the conversion of the Series C Preferred Stock shall
agree by an instrument in writing to deliver such stock, cash,
securities or other assets to the holders of the Series C Preferred
Stock. A sale, transfer or lease of all or substantially all of the
assets of the Corporation to another person shall be deemed a
reorganization, reclassification, consolidation or merger for the
foregoing purposes.
(viii) EXCEPTIONS TO ADJUSTMENT OF CONVERSION PRICE. Anything
herein to the contrary notwithstanding, the Corporation shall not make
any adjustment of the Conversion Price in the case of the issuance of
shares of Common Stock to holders of the Series C Preferred Stock upon
conversion of all or any portion of their shares of Series C Preferred
Stock.
(ix) CHIEF FINANCIAL OFFICER'S OPINION. Upon each adjustment
of the Conversion Price, and in the event of any change in the rights
of a holder of Series C Preferred Stock by reason of other events
herein set forth, then and in each such case, the Corporation will
promptly obtain a certificate of the chief financial officer of the
Corporation, stating the adjusted Conversion Price, or specifying the
other shares of the Common Stock, securities or assets and the amount
thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. The Corporation will promptly mail a
copy of such certificate to the holders of Series C Preferred Stock. If
a holder disagrees with such calculation, the Corporation agrees to
obtain within thirty (30) business days an opinion of a firm of
independent certified public accountants selected by the
<PAGE>
Corporation's Board of Directors and acceptable to such holder to
review such calculation and the opinion of such firm of independent
certified public accountants shall be final and binding on the parties
and shall be conclusive evidence of the correctness of the computation
with respect to any such adjustment of the Conversion Price.
(x) CORPORATION TO PREVENT DILUTION. In case at any time or
from time to time conditions arise by reason of action taken by the
Corporation, which in the good faith opinion of its Board of Directors
or a majority of the holders of the Series C Preferred Stock are not
adequately covered by the provisions of this Section 5(d), and which
might materially and adversely affect the exercise rights of the
holders of the Series C Preferred Stock, the Board of Directors of the
Corporation shall appoint such firm of independent certified public
accountants acceptable to a majority of the holders of the Series C
Preferred Stock, which shall give their opinion upon the adjustment, if
any, on a basis consistent with the standards established in the other
provisions of this Section 5(d), necessary with respect to the
Conversion Price, so as to preserve, without dilution (other than as
specifically contemplated by the Certificate of Incorporation), the
exercise rights of the holders of the Series C Preferred Stock. Upon
receipt of such opinion, the Board of Directors of the Corporation
shall forthwith make the adjustments described therein.
(e) NO IMPAIRMENT. The Corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of Section 5 hereof and in the taking of all
such action as may be necessary or appropriate in order to protect the
conversion rights of the holders of the Series C Preferred Stock against
impairment.
(f) NO FRACTIONAL SHARES ADJUSTMENTS. No fractional shares
shall be issued upon conversion of the Series C Preferred Stock. If more than
one share of the Series C Preferred Stock is to be converted at one time by the
same stockholder, the number of full shares issuable upon such conversion shall
be computed on the basis of the aggregate amount of the shares to be converted.
Instead of any fractional shares of Common Stock which would otherwise be
issuable upon conversion of any shares of Series C Preferred Stock, the
Corporation will pay a cash adjustment in respect of such fractional interest in
an amount equal to the same fraction of the Market Price per share of Common
Stock at the close of business on the day of conversion which such fractional
share of Series C Preferred Stock would be convertible into on such date.
(g) SHARES TO BE RESERVED. Subject to clause (ii) of this
Section 5(g), the Corporation shall at all times reserve and keep available, out
of its authorized and unissued stock, solely for the purpose of effecting the
conversion of the Series C Preferred Stock, such number of shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
of the Series C Preferred Stock from time to time outstanding. The Corporation
<PAGE>
shall from time to time, in accordance with the laws of the State of Delaware,
increase the authorized number of shares of Common Stock if at any time the
number of shares of authorized but unissued Common Stock shall be insufficient
to permit the conversion in full of the Series C Preferred Stock.
(h) TAXES AND CHARGES. The Corporation will pay any and
all issue or other taxes that may be payable in respect of any issuance or
delivery of shares of Common Stock on conversion of the Series C Preferred
Stock. The Corporation shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issuance or delivery of
Common Stock in a name other than that of the Series C Preferred Stock, and no
such issuance or delivery shall be made unless and until the Person requesting
such issuance has paid to the Corporation the amount of such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(i) ACCRUED DIVIDENDS. Upon conversion of any shares of
Series C Preferred Stock, the holder thereof shall be entitled to receive any
accrued but unpaid dividends in respect of the shares of Series C Preferred
Stock so converted to the date of such conversion.
(j) CLOSING OF BOOKS. The Corporation will at no time
close its transfer books against the transfer of any shares of Series C
Preferred Stock or of any shares of Common Stock issued or issuable upon the
conversion of any shares of Series C Preferred Stock in any manner which
interferes with the timely conversion of such shares of Series C Preferred
Stock.
6. REDEMPTION
(a) REDEMPTION PRICE. Any redemption of the Series C
Preferred Stock pursuant to Section 6(b) shall be at a price per share equal to
the Liquidation Value plus all declared but unpaid dividends thereon through the
redemption date (the "Mandatory Redemption Price"). Any redemption of the Series
C Preferred Stock pursuant to Section 6(d) shall be at a price per share equal
to the Series C Liquidation Preference, except that, for purposes of calculation
of the redemption price under this Section 6(a), clause (ii) of the definition
of Series C Liquidation Preference in Section 3(a) hereof shall provide for the
amount per share such holders would have received if such holders had converted
their shares of Series C Preferred Stock into shares of Common Stock immediately
prior to the Fundamental Change (the "Optional Redemption Price"). The Mandatory
Redemption Price shall be paid, at the election of the Corporation, in cash or
shares of Common Stock which has been registered under a registration statement
under the Securities Act of 1933, as amended, which registration statement is
effective, provided, that, for purposes of calculating the number of shares of
Common Stock to be received by each holder of Series C Preferred Stock, each
such share of Common Stock shall be valued at 10% less than the Market Price.
(b) MANDATORY REDEMPTION. Subject to Section 6(a) hereof, the
Corporation shall redeem all of the then outstanding shares of Series C
Preferred Stock at the Mandatory
<PAGE>
Redemption Price on September 30, 2004.
(c) PROCEDURES FOR REDEMPTION. In the event the
Corporation shall redeem shares of Series C Preferred Stock pursuant to Section
6(b), the Corporation shall give written notice of such redemption by first
class mail, postage prepaid, mailed not less than thirty (30) nor more than
ninety (90) days prior to the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as the same appears on the stock
records of the Corporation. Each such notice shall state: (i) the redemption
date; (ii) the number of shares of Series C Preferred Stock to be redeemed;
(iii) the Mandatory Redemption Price or Optional Redemption Price, as the case
may be; (iv) the place or places where certificates for such shares are to be
surrendered for payment of the Mandatory Redemption Price or Optional Redemption
Price, as the case may be; (v) that payment will be made upon presentation and
surrender of such Series C Preferred Stock; (vi) the then current Conversion
Price and the date on which the right to convert such shares of Series C
Preferred Stock will expire; (vii) that dividends on the shares to be redeemed
shall cease to accrue following such redemption date; (viii) that such
redemption is mandatory, if pursuant to Section 6(b) and (ix) that dividends, if
any, accrued to and including the date fixed for redemption will be paid as
specified in such notice. Notice having been mailed as aforesaid, from and after
the redemption date, unless the Corporation shall be in default in the payment
of the Mandatory Redemption Price or Optional Redemption Price, as the case may
be (including any accrued and unpaid dividends to (and including) the date fixed
for redemption), (A) dividends on the shares of the Series C Preferred Stock so
called for redemption shall cease to accrue, (B) such shares shall be deemed no
longer outstanding and (C) all rights of the holders thereof as stockholders of
the Corporation (except the right to receive from the Corporation (i) any moneys
payable upon redemption without interest thereon and (ii) any shares of Series C
Preferred Stock and Common Stock pursuant to Section 6(a) hereof) shall cease.
Upon surrender in accordance with such notice of the
certificates for any such shares so redeemed (properly endorsed or assigned for
transfer, if the Board of Directors shall so require and the notice shall so
state), such shares shall be redeemed by the Corporation at the applicable
Mandatory Redemption Price.
Notwithstanding the foregoing, if notice of redemption has
been given pursuant to this Section 6 and any holder of shares of Series C
Preferred Stock shall, prior to the close of business on the third (3rd)
Business Day preceding the redemption date, give written notice to the
Corporation pursuant to Section 5(b) hereof of the conversion of any or all of
the shares to be redeemed held by such holder (accompanied by a certificate or
certificates for such shares, duly endorsed or assigned to the Corporation),
then the conversion of such shares to be redeemed shall become effective as
provided in Section 5 hereof.
(d) REDEMPTION AT OPTION OF HOLDER UPON A FUNDAMENTAL
CHANGE. Subject to Section 6(a) hereof, if a Fundamental Change occurs, each
holder of Series C Preferred Stock shall have the right, at the holder's option,
to require the Corporation to repurchase all of such holder's Series C Preferred
Stock, or any portion thereof, on the date (the "Repurchase Date") selected by
the Corporation that is not less than ten (10) nor more than twenty
<PAGE>
(20) days after the Final Surrender Date, at a price per share equal to the
Optional Redemption Price. The Corporation agrees that it will not complete any
Fundamental Change unless proper provision has been made to satisfy its
obligations under this Section 6(d); provided that the Corporation must satisfy
its obligations under this Section 6(d) as soon as practicable, to the extent it
is not within the power of the Corporation to delay either (i) an involuntary
case under the Federal bankruptcy laws or any other applicable Federal or state
bankruptcy, insolvency or similar law or (ii) the acquisition after the date
hereof by any Person who is not an "affiliate" or "associate" (within the
meaning of the Exchange Act), of beneficial ownership within the meaning of Rule
13d-3 under the Exchange Act, which when aggregated with the beneficial
ownership on or prior to the date hereof, shall constitute greater than 50% of
the voting power of the capital stock of the Corporation.
(e) NOTICE OF FUNDAMENTAL CHANGE. Within thirty (30) days
after the occurrence of a Fundamental Change, the Corporation shall mail to all
holders of record of the Series C Preferred Stock a notice in the manner and
containing the information set out in Section 6(c), except that, for purposes of
this Section 6(e), such notice shall also describe the occurrence of such
Fundamental Change and of the repurchase right arising as a result thereof. To
exercise the repurchase right, a holder of Series C Preferred Stock must
surrender, on or before the date which is, subject to any contrary requirements
of applicable law, thirty (30) days after the date of mailing of the notice from
the Corporation (the "Final Surrender Date"), the certificates representing the
Series C Preferred Stock with respect to which the right is being exercised,
duly endorsed for transfer to the Corporation, together with a written notice of
election.
(f) ELECTION IRREVOCABLE. An election by a holder of
Series C Preferred Stock to have the Corporation repurchase shares of Series C
Preferred Stock pursuant to Section 6(d) shall become irrevocable at the close
of business on the relevant Repurchase Date.
7. SHARES TO BE RETIRED. Any share of Series C Preferred Stock
converted, redeemed, repurchased or otherwise acquired by the Corporation shall
be retired and cancelled and shall upon cancellation be restored to the status
of authorized but unissued shares of preferred stock, subject to reissuance by
the Board of Directors as shares of preferred stock of one or more other series
but not as shares of Series C Preferred Stock.
8. PREEMPTIVE RIGHTS.
(a) Except (i) for issuances of pro rata dividends to all
holders of Common Stock, (ii) stock issued to employees, officers or directors
in connection with management options or incentive plans approved by the Board
of Directors, (iii) stock issued in connection with any merger, acquisition or
business combination or (iv) stock issued for consideration amounting to less
than $500,000 in any single transaction where the purchase price is not less
than the then applicable Conversion Price, provided that the aggregate amount of
all such transactions shall not exceed $1,000,000, the holders of the Series C
Preferred Stock, in order to enable such holders to maintain their Fully Diluted
percentage ownership of the Corporation, shall have preemptive rights, as
hereinafter set forth, to purchase any capital stock, including any warrants or
securities convertible into capital stock, of the Corporation hereafter issued
by the
<PAGE>
Corporation so that a holder of the Series C Preferred Stock shall hereafter be
entitled to acquire a percentage of capital stock which is hereafter issued
equal to the same percentage of the issued and outstanding Common Stock of the
Corporation as is held (directly or obtainable upon conversion of the Series C
Preferred Stock) by such holder of Series C Preferred Stock immediately prior to
the date on which the capital stock is to be issued on a Fully Diluted basis. As
used herein, "issue" (and variations thereof) includes sales and transfers by
the Corporation of treasury shares.
(b) The Corporation shall, before issuing any additional
capital stock (other than the exceptions referred to in Section 8(a) hereof),
give written notice thereof to the holders of the Series C Preferred Stock. Such
notice shall specify what type of instrument the Corporation intends to issue
and the consideration which the Corporation intends to receive therefor. For a
period of twenty (20) days following receipt by the holders of the Series C
Preferred Stock of such notice, the Corporation shall be deemed to have
irrevocably offered to sell to the holders of the Series C Preferred Stock a
sufficient number of shares of such capital stock so that the holders of the
Series C Preferred Stock, if such holders elects to acquire such shares as
hereinafter set forth, shall be capable of acquiring the same percentage of such
shares as the percentage of Common Stock beneficially owned (directly or
obtainable upon conversion of the Series C Preferred Stock) by such holders
immediately prior to the proposed issuance on a Fully Diluted basis. In the
event any such offer is accepted, in whole or in part, by the holders of the
Series C Preferred Stock, the Corporation shall sell such shares to holders of
the Series C Preferred Stock for the consideration and on the precise terms set
forth in the Corporation's notice (given under the first two sentences of this
paragraph). In the event that one or more holders of the Series C Preferred
Stock elects not to, or fails to, exercise its rights under this Section within
the twenty (20) day period, then the Corporation may issue the remaining shares
of capital stock to third persons but only for the same consideration set forth
in the Corporation's notice (given under the first two sentences of this
paragraph) and no later than ninety (90) days after the expiration of such
twenty day period. The closing for such transaction shall take place as proposed
by the Corporation with respect to the shares of capital stock proposed to be
issued, at which closing the Corporation shall deliver certificates for the
shares of capital stock in the respective names of the holders of the Series C
Preferred Stock against receipt of the consideration therefor.
(c) Notwithstanding any other provision hereof, the preemptive
rights granted to holders of Series C Preferred Stock by this Section 8 shall
terminate with respect to a share of Series C Preferred Stock upon the
conversion or redemption of such share of Series C Preferred Stock in accordance
with the provisions hereof.
9. CALL
(a) CALL AT THE CORPORATION'S OPTION. Subject to the other
provisions of this Section 9, on any date beginning two years after the Issue
Date, the Corporation shall have the right to purchase any or all outstanding
shares of Series C Preferred Stock (the "Call"), provided, however, that (i) the
Market Price of a share of Common Stock is equal to, or greater than, an
<PAGE>
amount equal to 300% of the then applicable Conversion Price and (ii) the Common
Stock has traded, on the principal market for the Common Stock, with an average
daily volume in excess of 50,000 shares for a period of 30 consecutive days
ending on the day immediately prior to the Call Date (as hereinafter defined).
Any purchase of the Series C Preferred Stock pursuant to this Section 9(a) shall
be at a price per share of Series C Preferred Stock equal to the Mandatory
Redemption Price.
(b) PROCEDURES FOR CALL AT THE CORPORATION'S OPTION. The
Corporation's right to Call the Series C Preferred Stock pursuant to Section
9(a) shall be conditioned upon the Corporation giving notice (the "Call
Notice"), by first class mail, postage prepaid, of the exercise of the Call to
the holders of the Series C Preferred Stock not less than twenty five (25) days
prior to the date of the exercise of the Call (the "Call Date"). Each Call
Notice shall state: (i) the Call Date; (ii) the Mandatory Redemption Price;
(iii) the place or places where certificates for such shares are to be
surrendered for payment of the Mandatory Redemption Price; (iv) that payment
will be made upon presentation and surrender of such Series A Preferred Stock;
(v) the then current Conversion Price and the date on which the right to convert
such shares of Series A Preferred Stock will expire; (vi) that dividends on the
shares to be purchased shall cease to accrue following such Call Date; (vii)
that such Call is mandatory; and (viii) that dividends, if any, accrued to and
including the Call Date will be paid as specified in such notice. Notice having
been mailed as aforesaid, from and after the Call Date, unless the Corporation
shall be in default in the payment of the Mandatory Redemption Price (including
any accrued and unpaid dividends to (and including) the Call Date), (A)
dividends on the shares of the Series C Preferred Stock shall cease to accrue,
(B) such shares shall be deemed no longer outstanding and (C) all rights of the
holders thereof as stockholders of the Corporation (except the right to receive
from the Corporation (i) any moneys payable upon exercise of the Call without
interest thereon and (ii) any shares of Common Stock pursuant to Section 5
hereof) shall cease.
Upon surrender in accordance with the Call Notice of the
certificates for any such shares so purchased (properly endorsed or assigned for
transfer, if the Board of Directors shall so require and the Call Notice shall
so state), such shares shall be purchased by the Corporation at the applicable
Mandatory Redemption Price.
Notwithstanding the foregoing, if the Call Notice has been
given pursuant to this Section 9 and any holder of shares of Series C Preferred
Stock shall, prior to the close of business on the twentieth (20th) day after
receipt of such Call Notice, give written notice to the Corporation pursuant to
Section 5(b) hereof of the conversion of any or all of the shares to be
purchased held by such holder (accompanied by a certificate or certificates for
such shares, duly endorsed or assigned to the Corporation), then (i) the
conversion of such shares to be purchased shall become effective as provided in
Section 5 hereof and (ii) the Corporation's right to Call such shares to be
purchased shall terminate.
10. DEFINITIONS. As used herein, the following terms shall
have the respective meanings set forth below:
<PAGE>
"ADDITIONAL SHARES OF STOCK" means all shares of Common
Stock issued by the Corporation after the Issue Date, other
than (i) Common Stock to be issued upon conversion of the
Series C Preferred Stock, (ii) Common Stock to be issued upon
exercise of the Warrants, (iii) Common Stock to be issued upon
the exercise of currently outstanding warrants listed on
Schedule 4.2(b) to the Stock and Warrant Purchase Agreements,
other than the Warrants, (iv) up to 1,000,000 shares of Common
Stock to be issued pursuant to the 1996 Stock Incentive Plan
and up to 1,500,000 shares of Common Stock to be issued
pursuant to the 1999 Stock Incentive Plan and (v) up to 5,000
shares of Common Stock that may be issued under the Company's
Employee Stock Grant Plan.
"AFFILIATE", when used with respect to any Person, means
(i) if such Person is a corporation, any officer or director
thereof (other than a director elected pursuant to Section 4
hereof) and any Person which is, directly or indirectly, the
beneficial owner (by itself or as part of any group) of more
than five percent (5%) of any class of any equity security
(within the meaning of the Securities Exchange Act of 1934, as
amended) thereof, and, if such beneficial owner is a
partnership, any general partner thereof, or if such
beneficial owner is a corporation, any Person controlling,
controlled by or under common control with such beneficial
owner, or any officer or director of such beneficial owner or
of any corporation occupying any such control relationship,
(ii) if such Person is a partnership, any general or limited
partner thereof, and (iii) any other Person which, directly or
indirectly, controls or is controlled by or is under common
control with such Person. For purposes of this definition,
"control" (including the correlative terms "controlling",
"controlled by" and "under common control with"), with respect
to any Person, shall mean possession, directly or indirectly,
of the power to direct or cause the direction of the
management and policies of such Person, whether through the
ownership of voting securities or by contract or otherwise.
"BUSINESS DAY" means any day that is not a Saturday, a
Sunday or any day on which banks in the State of New York are
authorized or obligated to close.
"CALL" shall have the meaning set forth in Section 9(a).
"CALL DATE" shall have the meaning set forth in Section
9(b).
"CALL NOTICE" shall have the meaning set forth in Section
9(b).
"COMMON STOCK" means the Corporation's Common Stock, par
value $.001 per share, and shall also include any common stock
of the Corporation
<PAGE>
hereafter authorized and any capital stock of the Corporation
of any other class hereafter authorized which is not preferred
as to dividends or assets over any other class of capital
stock of the Corporation or which has ordinary voting power
for the election of directors of the Corporation.
"CONVERSION PRICE" means the Conversion Price per share of
Common Stock into which the Series C Preferred Stock is
convertible, as such Conversion Price may be adjusted pursuant
to Section 5 hereof. The initial Conversion Price will be
$3.00.
"CONVERSION SHARE" or "CONVERSION SHARES" means the shares
of the Corporation's Common Stock obtained or obtainable upon
conversion of Shares and shall also include any capital stock
or other securities into which such shares of Common Stock are
changed and any capital stock or other securities resulting
from or comprising a reclassification, combination or
subdivision of, or a stock dividend on, any such shares of
Common Stock.
"CONVERTIBLE SECURITIES" means evidences of indebtedness,
shares of preferred stock or other securities which are
convertible into or exchangeable, with or without payment of
additional consideration in cash or property, for Additional
Shares of Stock, either immediately or upon the occurrence of
a specified date or a specified event, including, without
limitation, the Series A Convertible Preferred Stock and the
Exchangeable Notes, but not including the Series C Preferred
Stock.
"EXCHANGEABLE NOTES" means the Corporation's Senior
Exchangeable Promissory Notes due March 10, 2002.
"FINAL SURRENDER DATE" shall have the meaning set forth in
Section 6(e).
"FLEMING FUNDS" means Fleming US Discovery Fund III, L.P.
and Fleming US Discovery Offshore Fund III, L.P.
"FLEMING HOLDERS" means (i) the Fleming Funds and (ii) any
Affiliate, officer or employee of an Affiliate or investment
fund managed by an Affiliate of the Fleming Funds to which the
Fleming Funds may transfer record and/or beneficial ownership
of any shares of Series C Preferred Stock (the "Shares") or
any shares of Common Stock obtained or obtainable upon
conversion of the Shares (the "Conversion Shares"). The
transferor and the transferee shall notify the Corporation in
writing as to the transferee's status as a Fleming Holder in
accordance with this definition, and shall notify the
Corporation if such transferee ceases to be a Fleming Holder.
The Conversion Shares shall include any capital stock or other
securities into which Conversion Shares are changed and any
capital stock or other securities resulting from or comprising
a reclassification,
<PAGE>
combination or subdivision of, or a stock dividend on, any
Conversion Shares.
"FULLY DILUTED" means, with respect to the calculation of
the number of shares of Common Stock, as of the time of
determination thereof, the sum of (i) all shares of Common
Stock outstanding at the time of determination and (ii) all
shares of Common Stock issuable upon the exchange, exercise or
conversion of all warrants, options and convertible securities
then outstanding (whether or not such warrants, options or
convertible securities are then exercisable, exchangeable,
convertible or subject to contingencies).
"FUNDAMENTAL CHANGE" means any of the following events:
(i) the sale (or functional equivalent of a sale) of
all or substantially all of the assets of the Corporation;
(ii) any event (A) which results in the registration
of the Corporation's Common Stock under the Securities
Exchange Act of 1934, as amended, to be no longer
required; (B) requiring the Corporation to make a filing
under Section 13(e) of the Securities Exchange Act of
1934, as amended; (C) reducing substantially or
eliminating the public market for shares of Common Stock
of the Corporation; or (D) causing a delisting of the
Corporation's Common Stock from the Nasdaq Stock Market,
unless such delisting is in connection with a listing on
another national securities exchange;
(iii) any consolidation of the Corporation with, or
merger of the Corporation into, any other person, any
merger of another person into the Corporation or any other
business combination involving the Corporation which
results in the holders of the Corporation's stock
immediately prior to giving effect to such transaction
owning shares of capital stock of the surviving
corporation in such transaction representing (x) fifty
percent (50%) or less of the total voting power of all
shares of capital stock of such surviving corporation
entitled to vote generally in the election of directors or
(y) fifty percent (50%) or less of the total value of all
capital stock of such surviving corporation;
(iv) the commencement by the Corporation of a
voluntary case under the Federal bankruptcy laws or any
other applicable Federal or state bankruptcy, insolvency
or similar law; the consent by the Corporation to the
entry of an order for relief in an involuntary case under
such law or to the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial
part of its property; any assignment by the Corporation
for the benefit of its creditors; any admission by the
Corporation in writing of its
<PAGE>
inability to pay its debts generally as they become due;
the entry of a decree or order for relief in respect of
the Corporation by a court having jurisdiction in the
premises in an involuntary case under Federal bankruptcy
laws or any other applicable Federal or state bankruptcy,
insolvency or similar law appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or
other similar official) of the Corporation or of any
substantial part of its property, or ordering the winding
up or liquidation of its affairs, and on account of any
such event the Corporation shall liquidate, dissolve or
wind up; or the liquidation, dissolution or winding up of
the Corporation under any other circumstances; or
(v) any Person, together with "affiliates" and
"associates" of such Person (within the meaning of the
Exchange Act), shall acquire after the date hereof
beneficial ownership within the meaning of Rule 13d-3
under the Exchange Act, which when aggregated with the
beneficial ownership on or prior to the date hereof, shall
constitute greater than 50% of the voting power of the
capital stock of the Corporation.
"ISSUE DATE" means, as to any share of Series C Preferred
Stock, the date of original issuance thereof by the
Corporation.
"JUNIOR SECURITIES" mean the Common Stock and any other
class of capital stock or series of preferred stock existing
on the date hereof, including the Series A Convertible
Preferred Stock, or hereafter created by the Corporation which
does not expressly provide that it ranks senior to or PARI
PASSU with the Series C Preferred Stock as to dividends, other
distributions, liquidation preference or otherwise.
"LIQUIDATION VALUE" shall have the meaning set forth in
Section 3(a).
"MANDATORY REDEMPTION PRICE" shall have the meaning set
forth in Section 6(a).
"MARKET PRICE" means, as to any security on the date of
determination thereof, the average of the closing prices of
such security's sales on all principal United States
securities exchanges on which such security may at the time be
listed, or, if there shall have been no sales on any such
exchange on any day, the last trading price of such security
on such day, or if such there is no such price, the average of
the bid and asked prices at the end of such day, on the Nasdaq
Stock Market, in each such case averaged for a period of
twenty (20) consecutive Business Days prior to the day when
the Market Price is being determined (except that, for
purposes of the calculation of the Market Price under clause
(i) of the first
<PAGE>
proviso in Section 9(a), such prices will be averaged for a
period of thirty (30) consecutive days prior to the day when
the Market Price is being determined under Section 9(a));
provided that if such security is listed on any United States
securities exchange the term "Business Days" as used in this
sentence means business days on which such exchange is open
for trading. Notwithstanding the foregoing, with respect to
the issuance of any security by the Corporation in an
underwritten public offering, the Market Price shall be the
per share purchase price paid by the underwriters. If at any
time such security is not listed on any exchange or the Nasdaq
Stock Market, the Market Price shall be deemed to be the fair
value thereof determined by an investment banking firm of
nationally recognized standing selected by the Board of
Directors of the Corporation and acceptable to holders of a
majority of the Series C Preferred Stock, as of the most
recent practicable date when the determination is to be made,
taking into account the value of the Corporation as a going
concern, and without taking into account any lack of liquidity
of such security or any discount for a minority interest.
"MARKET VALUE" means the amount obtained by multiplying
the Market Price by the number of securities issued.
"OPTIONAL REDEMPTION PRICE" shall have the meaning set
forth in Section 6(a).
"PARITY SECURITIES" mean any class of capital stock or
series of preferred stock existing on the date hereof or
hereafter created by the Corporation with the prior written
consent of the Fleming Holders, which expressly provides that
it ranks PARI PASSU with the Series C Preferred Stock as to
dividends, other distributions, liquidation preference or
otherwise.
"PAYMENT AMOUNT" means such amount received by the holders
as consideration for the redemption or sale of the Series C
Preferred Stock (the "PROCEEDS") as is necessary to cause the
net present value to equal zero as of any date of all Cash
Inflows and all Cash Outflows (each as defined below) with
respect to the Series C Preferred Stock being repurchased
pursuant to Section 6 or held on the date of the distribution
pursuant to Section 3, as the case may be, when calculated
with an annual interest rate (compounded annually) equal to
twelve percent (12%). "CASH INFLOWS" as used herein means all
cash payments, including the Proceeds, received by the holders
of the Series C Preferred Stock as a dividend or distribution
with respect to, or as consideration for the sale of, such
Series C Preferred Stock (whether such payments are received
from the Corporation or any other Person). "CASH OUTFLOWS" as
used herein means the sum of all cash payments made by the
holders of the Series C Preferred Stock to the Corporation to
acquire such Series C Preferred Stock. (For the avoidance of
doubt, Cash Inflows and Cash Outflows with respect to any
Series C Preferred Stock not included in the Series C
Preferred Stock being repurchased pursuant to Section 6 hereof
as part of the transaction for which the Payment Amount is
then
<PAGE>
being calculated shall not be included in the Cash Inflows and
Cash Outflows used to make such calculation (for purposes of
Section 6 only), and only the Cash Inflows and Cash Outflows
with respect to the Series C Preferred Stock which are then
being repurchased pursuant to Section 6 hereof in the
transaction for which the Payment Amount is then being
calculated shall be used in the Cash Inflows and Cash Outflows
used to make such calculation (for purposes of Section 6
only).)
"PERSON or "PERSON" shall mean an individual, partnership,
corporation, trust, unincorporated organization, joint
venture, government or agency, political subdivision thereof,
or any other entity of any kind.
"PREFERRED DIRECTOR" or "PREFERRED DIRECTORS" shall have
the meaning set forth in Section 4(c).
"REPURCHASE DATE" shall have the meaning set forth in
Section 6(d).
"SECURITIES ACT" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"SERIES A CONVERTIBLE PREFERRED STOCK" means the
Corporation's Series A Convertible Preferred Stock, par value
$.01 per share.
"SERIES C LIQUIDATION PREFERENCE" shall have the meaning
set forth in Section 3(a).
"SERIES C PREFERRED STOCK" shall have the meaning set
forth in the resolution paragraph in the preamble.
"SHARES" means, the shares of Series C Preferred Stock
initially acquired under the Stock and Warrant Purchase
Agreements.
"STOCK AND WARRANT PURCHASE AGREEMENTS" mean each of the
two Stock and Warrant Purchase Agreements dated as of the date
hereof between the Corporation and the purchaser listed on the
signature page of each such Agreement.
"TRANSFEREES" shall mean any transferee (except for a
Fleming Holder) of the Shares, the Conversion Shares, the
Warrants or the Warrant Shares from a Fleming Holder.
Transferees shall not include a transferee of the Shares, the
Conversion Shares, the Warrants or the Warrant Shares sold in
either a public offering pursuant to a registration statement
under the Securities Act or pursuant to Rule 144 under the
Securities Act.
"WARRANTS" shall mean Warrants to purchase the aggregate
of up to the
<PAGE>
number of shares of Common Stock equal to 75% of the number of
shares of Common Stock obtainable upon conversion of the
Series C Preferred Stock issued pursuant to the Stock and
Warrant Purchase Agreements, dated the date hereof, which
rights and privileges are more fully set forth in the Stock
and Warrant Purchase Agreements and the Warrant Certificates
attached as Exhibit B thereto.
"WARRANT SHARE" or "WARRANT SHARES" means the shares of
the Corporation's Common Stock obtained or obtainable upon the
exercise of Warrants and shall also include any capital stock
or other securities into which such shares of Common Stock are
changed and any capital stock or other securities resulting
from or comprising a reclassification, combination or
subdivision of, or a stock dividend on, any such shares of
Common Stock.
11. NOTICES. Except as may otherwise be provided for herein,
all notices referred to herein shall be in writing, and all notices hereunder
shall be deemed to have been given (i) upon receipt, in the case of a notice of
conversion given to the Corporation as contemplated in Section 5(b) hereof or in
the case of a notice of redemption at the holder's option given to the
Corporation as contemplated in Section 6(d) hereof, or (ii) in all other cases,
upon the earlier of (x) receipt of such notice, (y) three Business Days after
the mailing of such notice if sent by registered mail (unless first-class mail
shall be specifically permitted for such notice under the terms hereof) or (z)
the Business Day following sending such notice by overnight courier, in any case
with postage or delivery charges prepaid, addressed: if to the Corporation, to
its offices at 16761 Hale Avenue, Irvine, CA 92606, Attention: President, or to
an agent of the Corporation designated as permitted by the Certificate of
Incorporation, or, if to any holder of the Series C Preferred Stock, to such
holder at the address of such holder of the Series C Preferred Stock as listed
in the stock record books of the Corporation, or to such other address as the
Corporation or holder, as the case may be, shall have designated by notice
similarly given.
[SIGNATURE PAGE TO FOLLOW]
<PAGE>
IN WITNESS WHEREOF, Alyn Corporation has caused this
Certificate of Designations to be signed by its Chief Executive Officer and
attested to by its Secretary, all as of the ___ day of __________, 1999.
ALYN CORPORATION
By: _____________________________________
Name:
Title:
Attest:
By:________________________
Name:
Title: Secretary
[Signature page to Certificate of Designations of the Series C Convertible
Preferred Stock]
WARRANT CERTIFICATE
-------------------
NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR THE COMMON STOCK
ISSUABLE UPON THE EXERCISE HEREOF HAS BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND NEITHER MAY BE
SOLD OR OTHERWISE TRANSFERRED WITHOUT REGISTRATION UNDER SUCH ACT AND ANY
APPLICABLE STATE SECURITIES LAW UNLESS AN EXEMPTION FROM REGISTRATION IS THEN
AVAILABLE.
WARRANT TO PURCHASE COMMON STOCK
OF
ALYN CORPORATION
Initial Issuance Date: ______, 1999
No. PC-1
This is to certify that, FOR VALUE RECEIVED, the registered
holder hereof, [Fleming fund] (together with any successors and assigns
hereunder, the "HOLDER" or the "HOLDERS"), is entitled to purchase, subject to
the provisions of this Warrant Certificate, from ALYN CORPORATION, a Delaware
corporation (the "COMPANY"), the Formula Number of Warrant Shares at the
Exercise Price. The Exercise Price and Formula Number of Warrant Shares (and the
amount and kind of other securities) for which this Warrant is exercisable shall
be adjusted from time to time as hereinafter set forth.
This Warrant Certificate is one of the Warrant Certificates
(the "WARRANTS", which term includes all Warrants issued in substitution
therefor) originally issued in connection with the issue and sale by the Company
of 75,000 shares of the Company's Series C Convertible Preferred Stock, par
value $.01 per share (the "SERIES C PREFERRED STOCK"). Pursuant to the Stock and
Warrant Purchase Agreements, dated as of September 29, 1999 (as such agreements
may be amended, modified or restated from time to time, the "PURCHASE
AGREEMENTS"), between the Company and each of the Fleming Funds (the
"PURCHASERS"), the Warrants and the Series C Preferred Stock
<PAGE>
shall be issued on the date or dates as set forth in the Purchase Agreement (the
"CLOSING"). The Purchase Agreement under which this Warrant was originally
issued is herein referred to as the "PURCHASE AGREEMENT." This Warrant is
subject to the provisions, and is entitled to the benefits, of the Purchase
Agreement. The Warrants originally so issued evidence rights to purchase an
aggregate of up to 1,875,000 Warrant Shares at the Exercise Price pursuant to
both Purchase Agreements. Capitalized terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Purchase Agreement.
THIS WARRANT CERTIFICATE SHALL NOT BE VALID AND MAY NOT BE
TRANSFERRED OR EXERCISED UNLESS COUNTERSIGNED BY THE COMPANY.
Section 1. EXERCISE OF WARRANT.
1.1. MANNER OF EXERCISE. (a) This Warrant may be exercised by
the Holder, in whole or in part, at any time or from time to time, commencing on
the delivery by the Company of the Audited Financial Report, through and
including September 30, 2004 (the "EXERCISE PERIOD") during normal business
hours on any Business Day (as defined in the Purchase Agreement) by surrender of
this Warrant, duly countersigned by the Company, together with the form of
subscription duly executed by such Holder in substantially the form attached as
Annex A hereto, to the Company at its office designated pursuant to Section 9.2
of the Purchase Agreement (or, if such exercise is in connection with an
underwritten public offering of Warrant Shares subject to this Warrant, at the
location at which the underwriting agreement requires that such Warrant Shares
be delivered); provided that in the event that any Holder delivers a Notice of
Disagreement pursuant to Section 1.1(c) hereto, this Warrant may not be
exercised until such time as such disagreement has been resolved in accordance
with Section 1.1(c) hereof. Notwithstanding the foregoing, immediately prior to
the consummation of an Organic Change with respect to the Company, the Warrants
shall be immediately exercisable.
(b) Payment of the Exercise Price for the Warrant Shares shall
be made at the principal offices of the Company, (i) by certified or bank check
or wire transfer payable to the order of the Company, in any case, in an amount
equal to (x) the number of Warrant Shares specified in such form of
subscription, multiplied by (y) the then current Exercise Price or (ii) in the
manner provided in Section 1.6 hereof. The Holder shall thereupon be entitled to
receive the number of Warrant Shares specified in such form of subscription
(plus cash in lieu of any fractional share as provided in Section 1.3 hereof).
(c) On or prior to March 31, 2001, the Company shall cause to
be prepared by its accountants and delivered to the Holder a written audited
report (the "AUDITED FINANCIAL REPORT") setting forth the audited calculations
of EBITDA and Revenue either (i) for the fiscal year ending December 31, 2000 or
(ii) any shorter
<PAGE>
period commencing on January 1, 2000 as the Company may select, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. If any Holder disagrees with such calculations, then
such Holder shall provide written notice to the Company of such disagreement
(the "NOTICE OF DISAGREEMENT"), the Company thereupon agrees to obtain within
thirty (30) business days an opinion with respect to such calculations from a
firm of independent certified public accountants (which shall not be the firm
that delivered the Audited Financial Report) selected by the Company's Board of
Directors and acceptable to such Holder to review such calculation and the
opinion of such firm of independent certified public accountants shall be final
and binding on the parties and shall be conclusive evidence of the correctness
of the computation with respect to any such change in the Formula Number of
Warrant Shares so issuable.
1.2. EFFECTIVE DATE. Each exercise of this Warrant pursuant to
Section 1.1 hereof shall be deemed to have been effected immediately prior to
the close of business on the Business Day on which this Warrant is surrendered
to the Company as provided in Section 1.1 hereof unless a later time is
specified in writing by the Holder surrendering such Warrant (except that if
such exercise is in connection with an underwritten public offering of Warrant
Shares subject to this Warrant, then such exercise shall be deemed to have been
effected upon such surrender of this Warrant unless a later time is specified in
writing by the Holder surrendering such Warrant). On each such day that an
exercise of this Warrant is deemed effected, the person or persons in whose name
or names any certificate or certificates for Warrant Shares are issuable upon
such exercise (as provided in Section 1.3 hereof) shall be deemed to have become
the holder or holders of record thereof.
1.3. WARRANT SHARE CERTIFICATES, CASH FOR FRACTIONAL WARRANT
SHARES AND REISSUANCE OF WARRANTS. As promptly as practicable after the exercise
of this Warrant, in whole or in part, and in any event within five (5) Business
Days thereafter (unless such exercise shall be in connection with a public
offering of Warrant Shares subject to this Warrant, in which event concurrently
with such exercise), the Company at its expense (including the payment by it of
any applicable issue, stamp or other taxes) will cause to be issued in the name
of and delivered to the Holder or, subject to Section 6 of the Purchase
Agreement, as the Holder may direct:
(i) a certificate or certificates for the number of Warrant
Shares to which the Holder shall be entitled upon such exercise plus,
in lieu of any fractional share to which the Holder would otherwise be
entitled, cash in an amount equal to the same fraction of the Market
Price (as defined in Section 5.7(F) hereof) per Warrant Share on the
Business Day next preceding the date of such exercise; and
(ii) in case such exercise is in part only, a new Warrant or
Warrants, substantially identical hereto, representing the rights
formerly represented by this Warrant which have not expired or been
exercised.
<PAGE>
1.4. ACKNOWLEDGMENT OF OBLIGATION. The Company will, at the
time of or at any time after each exercise of this Warrant, upon the request of
the Holder hereof or of any Warrant Shares issued upon such exercise,
acknowledge in writing its continuing obligation to afford to such Holder all
rights (including, without limitation, any rights to registration of any such
Warrant Shares pursuant to the Registration Rights Agreement (as defined in the
Purchase Agreement)) to which such Holder shall continue to be entitled under
this Warrant, the Purchase Agreement and the Registration Rights Agreement;
PROVIDED, that if any such Holder shall fail to make any such request, the
failure shall not affect the continuing obligation of the Company to afford such
rights to such Holder.
1.5. CONDITIONAL EXERCISE. Notwithstanding any other provision
hereof, if any exercise of any portion of this Warrant is to be made in
connection with a public offering of Warrant Shares or any transaction described
in Section 5.8 hereof, the exercise of any portion of this Warrant may, at the
election of the Holder, be conditioned upon the consummation of the public
offering or such transaction, in which case such exercise shall not be deemed to
be effective until the consummation of such public offering or transaction.
1.6. NET ISSUANCE EXCHANGE OF WARRANT. In addition to and
without limiting the rights of the Holder under the terms of this Warrant, the
Holder shall have the option, but not the obligation, to convert this Warrant,
or any portion hereof (the "NET ISSUANCE EXCHANGE RIGHT"), into Warrant Shares
as provided in this Section 1.6 at any time during the Exercise Period. Upon
exercise of the Net Issuance Exchange Right with respect to a particular number
of shares subject to this Warrant (the "NET ISSUANCE EXCHANGE WARRANT SHARES"),
the Company shall deliver to the Holder (without payment by the Holder of any
Exercise Price or any cash or other consideration) that number of Warrant Shares
equal to the quotient obtained by dividing (i) the value of this Warrant (or the
specified portion hereof) on the effective date of the exercise of the Net
Issuance Exchange Right, as provided in Section 1.2 hereof (the "NET ISSUANCE
EXCHANGE DATE"), which value shall be determined by subtracting (x) the
aggregate exercise price of the Net Issuance Exchange Warrant Shares immediately
prior to the exercise of the Net Issuance Exchange Right from (y) the aggregate
Market Price (determined as provided in Section 5.7(F) hereof) of such Net
Issuance Exchange Warrant Shares on the Net Issuance Exchange Date by (ii) the
Market Price of one Warrant Share on the Net Issuance Exchange Date.
Section 2. RESERVATION OF SHARES.
The Company shall at all times during the Exercise Period
reserve and keep available, out of its authorized and unissued stock, solely for
the purpose of effecting the issuance and delivery upon exercise of this
Warrant, the number of Warrant Shares as shall be required for issuance and
delivery upon exercise in full of this Warrant. The Company shall from time to
time, in accordance with the laws of the
<PAGE>
State of Delaware, increase the authorized number of shares of Common Stock if
at any time the number of shares of authorized but unissued Common Stock shall
be insufficient to permit the exercise in full of this Warrant.
Section 3. TRANSFER, EXCHANGE, ASSIGNMENT OR LOSS OF WARRANT.
3.1. TRANSFER. This Warrant may be assigned in whole or in
part or transferred in whole or in part; subject, however, to compliance with
the provisions of the Act and the rules and regulations promulgated thereunder.
3.2. PROCEDURE FOR ASSIGNMENT OR TRANSFER. This Warrant shall
be transferable only on the books of the Company maintained at Company's
principal office upon delivery of this Warrant together with the form of
assignment, in substantially the form attached as Annex B hereto, duly completed
and signed by the Holder or by its duly authorized attorney or representative,
or accompanied by proper evidence of succession, assignment or authority to
transfer in form acceptable to the Company. The Company may, in its discretion,
require, as a condition to any transfer of Warrants, a signature guarantee by a
participant in a recognized signature guarantee medallion program in the United
States. Upon any registration of transfer, the Company shall deliver a new
Warrant Certificate or Certificates of like tenor and evidencing in the
aggregate a like number of Warrants to the person entitled thereto in exchange
for this Certificate, subject to the limitations provided herein, without any
charge except for any tax or other governmental charge imposed in connection
therewith. This Warrant may be divided or combined with other Warrants which
carry the same rights upon presentation thereof at the principal office of the
Company together with a written notice signed by the holder thereof, specifying
the names and denominations in which new Warrants are to be issued.
3.3. LOSS, THEFT, DESTRUCTION OR MUTILATION. Upon receipt by
the Company of evidence satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and (in the case of loss, theft or destruction) of
reasonably satisfactory indemnification to the Company or (in the case of
mutilation) presentation of this Warrant for surrender and cancellation, the
Company will execute and deliver a new Certificate of like tenor in lieu thereof
and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become
void.
Section 4. WARRANT CERTIFICATE HOLDER NOT DEEMED A
STOCKHOLDER.
The Holders shall not, solely because of holding this Warrant,
be entitled to vote, receive dividends or be deemed the holder of Common Stock
or any other securities of the Company which may at any time be issuable on the
exercise of the Warrant for any purpose whatsoever, nor shall anything contained
herein be construed to confer upon the Holders, as such, any of the rights of a
stockholder of the Company
<PAGE>
or any right to vote for the election of directors or upon any matters submitted
to stockholders at any meeting thereof, or to give or withhold consent to any
corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance or otherwise), or to receive notice of
meetings or other actions affecting stockholders, or to receive dividend or
subscription rights, or otherwise, until this Warrant shall have been exercised
in accordance with the provisions hereof.
Section 5. ANTI-DILUTION. In order to prevent dilution of the
rights granted under this Warrant, the Formula Number of Warrant Shares upon
exercise of this Warrant and the Exercise Price at which such Warrant Shares may
be purchased upon exercise of this Warrant shall be subject to adjustment from
time to time as set forth in this Section 5. The Company shall give the Holders
notice of any event described below which requires an adjustment pursuant to
this Section 5 at the time of such event.
5.1. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Company at any time or from time to time after the date hereof, pays a stock
dividend in shares of its Common Stock, issues any convertible debt securities
without adequate consideration therefor, effects a subdivision of the
outstanding Common Stock, combines the outstanding shares of Common Stock,
issues by reclassification of shares of its Common Stock any shares of capital
stock of the Company, makes a distribution of any of its assets (other than cash
dividends payable out of earnings or retained earnings in the ordinary course of
business) then, in each such case, (A) the Formula Number of Warrant Shares for
which this Warrant is exercisable immediately after the occurrence of any such
event shall be adjusted to equal the number of shares of Common Stock which a
record holder of the same number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the occurrence of such event would
own or be entitled to receive after the happening of such event, and (B) the
Exercise Price shall be adjusted to equal (x) the Exercise Price multiplied by
the Formula Number of Warrant Shares for which this Warrant is exercisable
immediately prior to the adjustment divided by (y) the Formula Number of Warrant
Shares for which this Warrant is exercisable immediately after such adjustment.
Any adjustment under this Section 5.1 shall become effective retroactively
immediately after the record date in the case of a dividend and distribution and
shall become effective immediately after the effective date in the case of an
issuance, subdivision, combination or reclassification.
5.2. ISSUANCE OF ADDITIONAL SHARES OF STOCK. If the Company
shall (except as hereinafter provided) issue or sell Additional Shares of Stock
for an aggregate amount of consideration, computed in accordance with Section
5.7(A), exceeding $500,000 in exchange for consideration in an amount per
Additional Share of Stock less than the Conversion Price (as defined in the
Purchase Agreement) in effect immediately prior to such issuance or sale of
Additional Shares of Stock, then the Exercise Price as to the Common Stock into
which this Warrant is exercisable immediately prior to such adjustment shall be
adjusted to equal the consideration paid
<PAGE>
per Additional Share of Stock. Upon each such adjustment of the Exercise Price
hereunder, the number of Warrant Shares specified in each clause of the
definition of Formula Number of Warrant Shares and acquirable upon exercise of
this Warrant (whether or not then acquirable or subject to a contingency) shall
be adjusted to equal the number of shares determined by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares acquirable (whether or not then acquirable or subject to a contingency)
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment. The
provisions of this Section 5.2 shall not apply to any issuance of Additional
Shares of Stock for which an adjustment is provided under Section 5.1.
5.3. (A) ISSUANCE OF WARRANTS OR OTHER RIGHTS. If at any time
(i) the Company shall in any manner (whether directly or by assumption in a
merger in which the Company is the surviving corporation) issue or sell any
warrants or other rights to subscribe for or purchase any Additional Shares of
Stock or any Convertible Securities, whether or not the rights to exchange or
convert thereunder are immediately exercisable, and the consideration, computed
in accordance with Section 5.7(A), received for such warrants or other rights or
such Convertible Securities shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the Exercise Price
shall be adjusted as provided in Section 5.2. No further adjustments of the
Exercise Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such warrants or other rights or
upon the actual issue of such Common Stock upon such conversion or exchange of
such Convertible Securities.
(B) ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the Company
shall in any manner (whether directly or by assumption in a merger in which the
Company is the surviving corporation) issue or sell, any Convertible Securities,
whether or not the rights to exchange or convert thereunder are immediately
exercisable, and the consideration, computed in accordance with Section 5.7(A),
received for such Convertible Securities shall be less than the Exercise Price
in effect immediately prior to the time of such issue or sale, then the Exercise
Price shall be adjusted as provided in Section 5.2. No adjustment of the
Exercise Price shall be made under this Section 5.3(B) upon the issuance of any
Convertible Securities which are issued pursuant to the exercise of any warrants
or other subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or other rights
pursuant to Section 5.3(A). No further adjustments of the Exercise Price shall
be made upon the actual issue of Common Stock upon conversion of such
Convertible Securities and, if any issue or sale of such Convertible Securities
is made upon exercise of any warrant or other right to subscribe for or to
purchase any such Convertible Securities for which adjustments of the Exercise
Price have been or are to be made pursuant to other provisions of this Section
5, no further adjustments of the Exercise Price shall be made by reason of such
issue or sale.
5.4. DECREASE IN CONVERSION PRICE OF SERIES C PREFERRED STOCK.
If, at
<PAGE>
any time, there is a decrease in the Conversion Price of the Series C Preferred
Stock under the Certificate of Designation of the Series C Convertible Preferred
Stock such that there is a new Conversion Price (the "Decreased Conversion
Price"), then (A) the Exercise Price as to the Common Stock into which this
Warrant is exercisable immediately prior to such decrease in Conversion Price
shall be adjusted by multiplying the Exercise Price by a fraction, of which (x)
the numerator shall be the Decreased Conversion Price and (y) the denominator
shall be the Conversion Price as to the Common Stock into which the Series C
Preferred Stock is exercisable immediately prior to such decrease in Conversion
Price and (B) the Formula Number of Warrant Shares for which this Warrant is
exercisable immediately after the occurrence of such decrease in the Conversion
Price shall be adjusted by multiplying the number of Formula Number of Warrant
Shares for which this Warrant is exercisable immediately prior to the occurrence
of such decrease in Conversion Price by a fraction, of which (x) the numerator
shall be the Conversion Price as to the Common Stock into which the Series C
Preferred Stock is exercisable immediately prior to such decrease in Conversion
Price and (y) the denominator shall be the Decreased Conversion Price. The
provisions of this Section 5.4 shall not apply to any decrease in Conversion
Price for which an adjustment is provided under Section 5.1, 5.2 or 5.3 hereof.
5.5. SUPERSEDING ADJUSTMENTS. If, at any time after any
adjustment of the Exercise Price at which the Warrant is exercisable shall have
been made pursuant to Section 5.3 as a result of any issuance of warrants,
rights or Convertible Securities,
(A) such warrants or rights, or the right of conversion or
exchange in such other Convertible Securities, shall expire,
and all or a portion of such warrants or rights, or the right
of conversion or exchange with respect to all or a portion of
such other Convertible Securities, as the case may be, shall
not have been exercised, or
(B) the consideration per share for which shares of Common
Stock are issuable pursuant to such warrants or rights, or the
terms of such other Convertible Securities, shall be increased
solely by virtue of provisions therein contained for an
automatic increase in such consideration per share upon the
occurrence of a specified date or event,
then such previous adjustment shall be rescinded and annulled and the
Additional Shares of Stock which were deemed to have been issued by
virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of
the effect of such rights or options or other Convertible Securities on
the basis of
(C) treating the number of Additional Shares of Stock or
other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise of any such
warrants or rights or any such right of
<PAGE>
conversion or exchange, as having been issued on the date or
dates of any such exercise and for the consideration actually
received and receivable therefor, and
(D) treating any such warrants or rights or any such other
Convertible Securities which then remain outstanding as having
been granted or issued immediately after the time of such
increase of the consideration per share for which shares of
Common Stock or other property are issuable under such
warrants or rights or other Convertible Securities;
whereupon a new adjustment of the Exercise Price at which the Warrant
is exercisable shall be made, which new adjustment shall supersede the
previous adjustment so rescinded and annulled.
5.6. ADJUSTMENTS UNDER OTHER SECURITIES. Without limiting any
other rights available hereunder to the Holders, if there is an adjustment in
the exercise or purchase price (i) under any Convertible Securities other than
the Series C Preferred Stock, whether issued prior to or after the date hereof,
or (ii) under any rights, options or warrants to purchase Additional Shares of
Stock (other than pursuant to the Series A Convertible Preferred Stock and the
6.00% Senior Exchangeable Promissory Note Due March 10, 2002), whether issued
prior to or after the date hereof which, in either case, results in a reduction
in the exercise or purchase price with respect to such security or rights such
that such exercise or purchase price is less than the Conversion Price, then an
adjustment shall be made to the Exercise Price hereunder such that the Exercise
Price pursuant to this Section 5.6 shall be equal to the exercise or purchase
price with respect to such Convertible Security, right, option or warrant. Any
such adjustment under this Section 5.6 shall only be made if it would result in
a lower Exercise Price than that which would be determined pursuant to any other
antidilution adjustment otherwise required hereunder as a result of the event or
circumstance which triggered the adjustment to such Convertible Security, right,
option or warrant, and if an adjustment is made pursuant to this Section 5.6,
such other antidilution adjustment otherwise required hereunder shall not be
made as a result of such event or circumstance.
5.7. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to making adjustments of
the Warrant Shares for which this Warrant is exercisable and the Exercise Price
at which such Warrant Shares may be purchased upon exercise of this Warrant
provided for in this Section 5:
(A) COMPUTATION OF CONSIDERATION. To the extent that any
Additional Shares of Stock or any Convertible Securities or
any warrants or other rights to subscribe for or purchase any
Additional Shares of Stock or any Convertible Securities shall
be issued for cash consideration, the
<PAGE>
consideration received by the Company therefor shall be the
amount of the cash received by the Company therefor, or, if
such Additional Shares of Stock or Convertible Securities are
offered by the Company for subscription, the subscription
price, or, if such Additional Shares of Stock or Convertible
Securities are sold to underwriters or dealers for public
offering without a subscription offering, the initial public
offering price (in each case adding to the foregoing any
amount by which such consideration was reduced when paid by
the purchaser thereof to reflect or give effect to an offset
of like amount that would be payable by the Company to the
holder of such security within one year from its date of
issuance and the elimination of the Company's obligation to
actually pay such like amount) (subtracting from the foregoing
(i) in any case, any amounts paid or payable by the Company
for accrued interest or accrued dividends at the time of
issuance, (ii) in the case of any public offering, any
compensation or discounts incurred by the Company for and in
the underwriting of, or otherwise in connection with, the
issuance thereof, and (iii) in the case of any transaction
other than a public offering, any compensation, discounts or
expenses paid or incurred by the Company for and in the
underwriting of, or otherwise in connection with, the issuance
thereof; PROVIDED THAT, in the case of clause (iii), such
amount is in excess of eight percent (8%) of the aggregate
costs of such transactions, and then only to the extent of
such excess). To the extent that such issuance shall be for a
consideration other than cash, then except as herein otherwise
expressly provided, the amount of such consideration shall be
deemed to be the fair value of such consideration at the time
of such issuance as determined in good faith by the Board of
Directors of the Company. In case any Additional Shares of
Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase such Additional Shares of
Stock or Convertible Securities shall be issued in connection
with any merger in which the Company issues any securities,
the amount of consideration therefor shall be deemed to be the
fair value, as determined in good faith by the Board of
Directors of the Company, of such portion of the assets and
business of the nonsurviving corporation as such Board in good
faith shall determine to be attributable to such Additional
Shares of Stock, Convertible Securities, warrants or other
rights, as the case may be. The consideration for any
Additional Shares of Stock issuable pursuant to any warrants
or other rights to subscribe for or purchase the same shall be
the consideration received by the Company for issuing such
warrants or other rights plus the additional consideration
payable to the Company upon exercise of such warrants or other
rights. The consideration for any Additional Shares of Stock
issuable pursuant to the terms of any Convertible Securities
shall be the consideration received by the Company for issuing
warrants or other rights to subscribe for or purchase such
Convertible Securities, plus the consideration paid or payable
to the Company in respect of the
<PAGE>
subscription for or purchase of such Convertible Securities,
plus the additional consideration, if any, payable to the
Company upon the exercise of the right of conversion or
exchange in such Convertible Securities. In case of the
issuance at any time of any Additional Shares of Stock or
Convertible Securities in payment or satisfaction of any
dividends upon any class of stock other than Common Stock, the
Company shall be deemed to have received for such Additional
Shares of Stock or Convertible Securities a consideration
equal to the amount of such dividend so paid or satisfied.
(B) WHEN ADJUSTMENTS TO BE MADE. The adjustments required
by this Section 5 shall be made whenever and as often as any
event requiring an adjustment shall occur, except that any
adjustment of the Exercise Price or the Formula Number of
Warrant Shares that would otherwise be required may be
postponed (except in the case of a subdivision or combination
of shares of the Common Stock, as provided for in Section 5.1)
up to, but not beyond the date of exercise if such adjustment
either by itself or with other adjustments not previously made
amount to a change in the Exercise Price or the Formula Number
of Warrant Shares of less than 1% of the shares of Common
Stock for which this Warrant is exercisable immediately prior
to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount (except as
aforesaid) which is postponed shall be carried forward and
made on the earlier of (I) such time as such adjustment,
together with other adjustments required by this Section 5 and
not previously made, would result in an aggregate adjustment
equal to or in excess of a minimum adjustment or (II) on the
date of conversion. For the purpose of any adjustment, any
event shall be deemed to have occurred at the close of
business on the date of its occurrence.
(C) CONVERSION OR TRANSFER OF SERIES C PREFERRED STOCK.
If, at any time, the Holder converts any shares of Series C
Preferred Stock into Conversion Shares (as defined in the
Purchase Agreements) or transfers any shares of Series C
Preferred Stock in accordance with the Purchase Agreements,
then the number of shares in this Warrant subject to the
anti-dilution provisions pursuant to this Section 5, shall be
adjusted by multiplying the number of shares in this Warrant
subject to the anti-dilution provisions pursuant to this
Section 5 immediately prior to such conversion or transfer by
a fraction, of which (x) the numerator shall be the number of
Shares that continue to be held by the Holder immediately
after such conversion or transfer, as the case may be, and (y)
the denominator shall be the total number of shares of Series
C Preferred Stock held by such Holder, immediately prior to
such conversion or transfer, as the case may be.
<PAGE>
(D) FRACTIONAL INTERESTS. In computing adjustments under
this Section 5, fractional interests in the Common Stock shall
be taken into account to the nearest 1/100th of a share.
(E) CHALLENGE TO GOOD FAITH DETERMINATION. Whenever the
Board of Directors of the Company shall be required to make a
determination in good faith of the fair value of any item
under this Section 5, such determination may be challenged in
good faith by a Holder and any dispute shall be resolved by an
investment banking firm of recognized national standing
jointly selected by the Company and such Holder. The fees of
such investment banker shall be borne by such holder if the
Company's calculation is determined to be between 90% and 110%
of the calculation of such banker.
(F) DETERMINATION OF MARKET PRICE. "MARKET PRICE" means,
as to any security on the date of determination thereof, the
average of the bid and asked prices at the end of such day, on
the Nasdaq Stock Market, in each such case averaged for a
period of twenty (20) consecutive Business Days prior to the
day when the Market Price is being determined (except that,
for purposes of the calculation of the Market Price in Section
1.6, such prices will be averaged for a period of ten (10)
consecutive Business Days prior to the day when the Market
Price is being determined under Section 1.6); provided that if
such security is listed on any United States securities
exchange the term "Business Days" as used in this sentence
means business days on which such exchange is open for
trading. Notwithstanding the foregoing, with respect to the
issuance of any security by the Company in an underwritten
public offering, the Market Price shall be the per share
purchase price paid by the underwriters. If at any time such
security is not listed on any exchange or the Nasdaq Stock
Market, the Market Price shall be deemed to be the fair value
thereof determined by an investment banking firm of nationally
recognized standing selected by the Board of Directors of the
Company and acceptable to holders of a majority of the
Warrants, as of the most recent practicable date when the
determination is to be made, taking into account the value of
the Company as a going concern, and without taking into
account any lack of liquidity of such security or any discount
for a minority interest.
(G) ESCROW OF PROPERTY. If the Company shall take a
record of the holders of its Stock for the purpose of
entitling them to receive any distribution of any kind of
property whatsoever, but prior to the payment of such
distribution the Holder exercises this Warrant, upon payment
of the Exercise Price, such property shall be held in escrow
for the Holder by the Company to be issued to the Holder upon
the occurrence of such distribution and to the extent such
distribution actually takes place.
<PAGE>
Notwithstanding any other provision to the contrary herein, if
the distribution for which such record was taken fails to
occur or is rescinded, then such escrowed property shall be
returned to the Company.
5.8. REORGANIZATION, RECLASSIFICATION, MERGER OR
CONSOLIDATION. If the Company shall at any time reorganize or
reclassify the outstanding shares of Common Stock (other than a change
in par value, or from no par value to par value, or from par value to
no par value, or as a result of a subdivision or combination) or
consolidate with or merge into another corporation (where the Company
is not the continuing corporation after such merger or consolidation),
the Holders shall thereafter be entitled to receive upon conversion of
the Warrant in whole or in part, the same kind and number of shares of
stock and other securities, cash or other property (and upon the same
terms and with the same rights) as would have been distributed to a
holder upon such reorganization, reclassification, consolidation or
merger had such holder converted its Series C Preferred Stock
immediately prior to such reorganization, reclassification,
consolidation or merger (subject to subsequent adjustments under this
Section 5). The Conversion Price upon such conversion shall be the
Conversion Price that would otherwise be in effect pursuant to the
terms hereof. Notwithstanding anything herein to the contrary, the
Company will not effect any such reorganization, reclassification,
merger or consolidation unless prior to the consummation thereof, the
corporation which may be required to deliver any stock, securities or
other assets upon the conversion of the Series C Preferred Stock shall
agree by an instrument in writing to deliver such stock, cash,
securities or other assets to the holders of the Warrants. A sale,
transfer or lease of all or substantially all of the assets of the
Company to another person shall be deemed a reorganization,
reclassification, consolidation or merger for the foregoing purposes.
5.9. EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. Anything
herein to the contrary notwithstanding, the Company shall not make any
adjustment of the Exercise Price in the case of the issuance of shares
of Common Stock to holders of the Warrants upon exercise of all or any
portion of their Warrants.
5.10. CHIEF FINANCIAL OFFICER'S OPINION. Upon each adjustment
of the Exercise Price and upon each change in the Warrant Shares
issuable upon the exercise of this Warrant, and in the event of any
change in the rights of a Holder by reason of other events herein set
forth, then and in each such case, the Company will promptly obtain a
certificate of the chief financial officer of the Company, stating the
adjusted Exercise Price and the new Warrant Shares so issuable, or
specifying the other shares of the Common Stock, securities or assets
and the amount thereof receivable as a result of such change in rights,
and setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based. The Company will
promptly mail a copy of such certificate to the Holders. If a Holder
disagrees with such calculation, the
<PAGE>
Company agrees to obtain within thirty (30) business days an opinion of
a firm of independent certified public accountants selected by the
Company's Board of Directors and acceptable to such Holder to review
such calculation and the opinion of such firm of independent certified
public accountants shall be final and binding on the parties and shall
be conclusive evidence of the correctness of the computation with
respect to any such adjustment of the Exercise Price and any such
change in the number of Warrant Shares so issuable.
5.11. COMPANY TO PREVENT DILUTION. In case at any time or from
time to time conditions arise by reason of action taken by the Company,
which in the good faith opinion of its Board of Directors or a majority
of the Holders are not adequately covered by the provisions of this
Section 5, and which might materially and adversely affect the exercise
rights of the Holders, the Board of Directors of the Company shall
appoint such firm of independent certified public accountants
acceptable to a majority of the Holders, which shall give their opinion
upon the adjustment, if any, on a basis consistent with the standards
established in the other provisions of this Section 5, necessary with
respect to the Exercise Price, so as to preserve, without dilution
(other than as specifically contemplated by this Warrant), the exercise
rights of the Holders. Upon receipt of such opinion, the Board of
Directors of the Company shall forthwith make the adjustments described
therein.
5.12. NO IMPAIRMENT. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Company, but will at all times in good faith assist in the carrying out of all
the provisions of Section 5 hereof and in the taking of all such action as may
be necessary or appropriate in order to protect the conversion rights of the
holders of the Warrants against impairment.
Section 6. CHARACTER OF SHARES OF STOCK.
All shares of the Common Stock issuable upon the exercise of
this Warrant shall, when issued to a Holder, be duly authorized, validly issued,
fully paid and nonassessable, free and clear of any lien or encumbrance and
without any preemptive rights.
Section 7. DEFINITIONS. The following terms have the meanings
set forth below:
"ADDITIONAL SHARES OF STOCK" means all shares of Common Stock issued by
the Company after the Issue Date, other than (i) Common Stock to be issued upon
conversion of the Series C Preferred Stock, (ii) Common Stock to be issued upon
<PAGE>
exercise of the Warrants, (iii) Common Stock to be issued upon the exercise of
currently outstanding warrants listed on Schedule 4.2(b) to the Purchase
Agreements, other than the Warrants, (iv) up to 1,000,000 shares of Common Stock
to be issued pursuant to the 1996 Stock Incentive Plan and up to 1,500,000
shares of Common Stock to be issued pursuant to the 1999 Stock Incentive Plan
and (v) up to 5,000 shares of Common Stock that may be issued under the
Company's Employee Stock Grant Plan.
"CONVERTIBLE SECURITIES" means evidences of indebtedness, shares of
preferred stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Stock, either immediately or upon the occurrence of a
specified date or a specified event, including, without limitation, the Series A
Convertible Preferred Stock and the Exchangeable Notes, but not including the
Series C Preferred Stock.
"COMMON STOCK" means the Company's Common Stock, par value $.001 per
share, together with any capital stock of the Company into which such class
shall be converted.
"DATE OF ISSUANCE" means the date the Company initially issues this
Warrant regardless of the number of times new certificates representing the
unexpired and unexercised rights formerly represented by this Warrant shall be
issued.
"EBITDA" means, the consolidated or combined, as the case may be, net
income for such period PLUS (a) the sum of, without duplication, to the extent
deducted in computing consolidated or combined net income: (i) income tax
expense, (ii) interest expense, (iii) depreciation, amortization (exclusive of
deferred rent amortization) and other non-cash charges and (iv) any
extraordinary or non-recurring losses or expenses, MINUS (b) the sum of (without
duplication), to the extent included in computing consolidated net income, (i)
interest or dividend income, (ii) non-operating income, (iii) any extraordinary
or non-recurring gains or income, including licensing revenues that do not
represent ongoing, contractual revenues and (iv) any earnings of any entity
acquired by the Company after the First Closing Date through purchase, merger,
consolidation or otherwise, all as determined in accordance with GAAP, where
applicable, consistently applied.
"EXERCISE PRICE" means $3.00 per Warrant Share, as such price may be
adjusted from time to time pursuant to Section 5 hereof.
"FORMULA NUMBER OF WARRANT SHARES" means, at the time of determination
thereof, 1,616,000 Warrant Shares; PROVIDED that if (a) (i) EBITDA for the
fiscal year ending December 31, 2000 is equal to or greater than $5,000,000 and
(ii) Revenue for the fiscal year ending December 31, 2000 is equal to or greater
than $29,000,000, then the term "Formula Number of Warrant Shares" shall mean
zero Warrant Shares; (b) (i) EBITDA for the fiscal year ending December 31, 2000
is equal to or greater than
<PAGE>
$4,000,000 and (ii) Revenue for the fiscal year ending December 31, 2000 is
equal to or greater than $26,000,000, then the term "Formula Number of Warrant
Shares" shall mean the number of 215,467 Warrant Shares; (c) (i) EBITDA for the
fiscal year ending December 31, 2000 is equal to or greater than $3,250,000 and
(ii) Revenue for the fiscal year ending December 31, 2000 is equal to or greater
than $24,000,000, then the term "Formula Number of Warrant Shares" shall mean
the number of 538,667 Warrant Shares; or (d) (i) EBITDA for the fiscal year
ending December 31, 2000 is equal to or greater than $2,750,000 and (ii) Revenue
for the fiscal year ending December 31, 2000 is equal to or greater than
$22,000,000, then the term "Formula Number of Warrant Shares" shall mean the
number of 1,077,333 Warrant Shares. Notwithstanding the foregoing, (I) in lieu
of determining both EBITDA and Revenue with respect to audited calculations
based upon the fiscal year ending December 31, 2000, the Company may base such
audited calculations of both EBITDA and Revenue on any shorter period commencing
on January 1, 2000 and (II) immediately prior to the consummation of an Organic
Change of the Company, the term "Formula Number of Warrant Shares" shall mean
1,616,000, and the foregoing provisos shall no longer be applicable.
"GAAP" means generally accepted accounting principles consistently
applied.
"ISSUE DATE" means, as to any share of Series C Preferred Stock, the
date of original issuance thereof by the Company under the Purchase Agreements.
"ORGANIC CHANGE" means (a) any recapitalization, reorganization,
reclassification, consolidation, merger or other transaction which is effected
in such a way that the holders of Common Stock no longer own a majority of the
voting rights or the ability to control the surviving entity in such transaction
or (b) upon the sale of all or substantially all of the Company's assets.
"REVENUE" means, revenue shown on the Company's audited financial
statements for the fiscal year ended December 31, 2000, or any shorter period
commencing on January 1, 2000, as the case may be, as described in Section
1.1(c) hereof; PROVIDED that Revenue shall not include any revenue of any entity
acquired by the Company after the First Closing Date through purchase, merger,
consolidation or otherwise.
"WARRANT SHARES" means shares of the Company's Common Stock; PROVIDED,
that if the securities issuable upon exercise of the Warrants are issued by an
entity other than the Company or there is a change in the class of securities so
issuable, then the term "Warrant Shares" shall mean shares of the security
issuable upon exercise of the Warrants if such security is issuable in shares,
or shall mean the equivalent units in which such security is issuable if such
security is not issuable in shares.
Section 8. NOTICE TO HOLDER.
So long as this Warrant shall be outstanding, (i) if the
Company shall pay
<PAGE>
any dividend or make any distribution upon the Common Stock, (ii) if the Company
shall offer to the holders of Common Stock, for subscription or purchase by
them, any shares of any class of stock of the Company or any other rights or
(iii) if there shall be any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger of
the Company with or into another corporation, sale, lease or transfer of all or
substantially all of the property and assets of the Company, voluntary or
involuntary dissolution, liquidation or winding up of the Company, then in any
such event, the Company shall cause to be mailed by certified mail to each
Holder, at least 30 days prior to the relevant date of the event described
above, a notice containing a brief description of the proposed action and
stating the date or expected date on which a record is to be taken for the
purpose of such dividend, distribution or rights, or the date or expected date
such reclassification, reorganization, consolidation, merger, conveyance, lease
or transfer, dissolution, liquidation or winding up shall take place or be voted
upon by holders of the Common Stock of record, and the date or expected date as
of which the holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable upon
any such event.
Section 9. DISPOSITION OF WARRANT SHARES.
The stock certificates of the Company that will evidence the
Warrant Shares or any other security issued or issuable upon exercise of this
Warrant will be imprinted with a legend in substantially the following form:
The securities represented by this Certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), or any
applicable state securities laws and may not be sold or otherwise
transferred (whether or not for consideration) unless registered under
the Act and any applicable state securities laws unless an exemption
from registration is then available.
Except as provided in the Registration Rights Agreement, the Company does not
agree to register any of the Warrant Shares for distribution in accordance with
the provisions of the Act or any applicable state securities laws, and the
Company has not agreed to comply with any exemption from registration under the
Act or any applicable state securities laws for the resale of the Warrant
Shares. Hence, it is the understanding of the Holder that by virtue of the
provisions of certain rules respecting "RESTRICTED SECURITIES" promulgated by
the Securities and Exchange Commission, the Warrant Shares may be required to be
held indefinitely, unless and until registered under the Act and any applicable
state securities laws unless an exemption from such registration is available,
in which case the Holders may still be limited as to the number of Warrant
Shares that may be sold.
Section 10. GOVERNING LAW.
<PAGE>
This Warrant shall be construed in accordance with the laws of
the State of New York applicable to contracts executed and to be performed
wholly within such state without regard to any conflicts of laws principles.
Section 11. NOTICE.
Any notice, demand, document or other communication given or
delivered hereunder shall be in writing, and may be (i) personally delivered,
(ii) given or made by United States registered or certified mail, return receipt
requested, postage prepaid, or (iii) given or made by overnight courier or
express mail for delivery the next Business Day, delivery charges prepaid,
addressed as follows:
IF TO THE COMPANY: Alyn Corporation
16761 Hale Avenue
Irvine, CA 92606
Facsimile No.: (949) 475-2359
Attention: Richard L. Little, Chief Financial Officer
with a copy to:
Cadwalader Wickersham & Taft
100 Maiden Lane
New York, NY 10038-4892
Facsimile No.: 212-504-6666
Attention: Gerald A. Eppner, Esq.
IF TO THE HOLDER: c/o Fleming Asset Management
320 Park Avenue
11th Floor
New York, New York 10022
Attention: Robert L. Burr
David J. Edwards
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: David W. Pollak, Esq.
The Company and the Holder shall each have the right to designate a different
address for itself by notice similarly given. All such notices, demands,
documents or other communication will be deemed to be delivered (i) upon
receipt, if personally delivered, (ii) on the third full Business Day following
the day of mailing, if sent by United States registered or certified mail and
(iii) on the Business Day following the date it was sent, if
<PAGE>
sent by overnight courier or express mail for delivery the next Business Day.
Section 12. REMEDIES.
The Company stipulates that the remedies at law of the Holder
in the event of any default or threatened default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that such terms may be specifically enforced by a
decree for the specific performance of any agreement contained herein or by an
injunction against a violation of any of the terms hereof or otherwise, in
addition to any other remedies which may be available at law or in equity.
Section 13. COMPANY WILL AVOID CERTAIN ACTIONS.
The Company will not, by amendment of its Certificate of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, issue or sale of securities or otherwise, avoid or take any action which
would have the effect of avoiding the observance or performance of any of the
terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in carrying out all of the provisions of this Warrant
Certificate and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of this Warrant
Certificate against dilution or other impairment, and in particular, will not
cause the par value of any share of Common Stock to be or become greater than
the then effective Exercise Price.
Section 14. COMPANY WILL NOT CLOSE BOOKS.
The Company will at no time close its transfer books against
the transfer of this Warrant or of any shares of Common Stock issued or issuable
upon the exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant.
Section 15. SUCCESSORS AND ASSIGNS.
This Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of the Holders hereof. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this Warrant
and shall be enforceable by any such Holder.
Section 16. AMENDMENT.
This Warrant Certificate may be modified or amended and any
provision hereof may be waived by a writing executed by the Company and holders
of Warrants representing a majority of the Warrant Shares obtainable upon
exercise of the Warrants.
<PAGE>
Section 17. HEADINGS.
Section headings in this Warrant are for reference only and
shall not affect the meaning or construction of any of the provisions hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the Company has executed this Warrant as
of the date first written above.
ALYN CORPORATION
By:____________________________________
Name:
Title:
[Signature page to Warrant Certificate]
<PAGE>
ANNEX A
FORM OF SUBSCRIPTION
--------------------
(To be executed only upon exercise of the Warrant
in whole or in part)
To Alyn Corporation
The undersigned registered holder of the accompanying Warrant
hereby irrevocably exercises such Warrant or portion thereof for, and purchases
thereunder, _______1/ Warrant Shares (as defined in such Warrant) and herewith
[makes payment therefor of $_______] [OR] [makes payment therefor by conversion
of _______ Warrant Shares represented by such Warrant pursuant to Section 1.6 of
such Warrant]. The undersigned requests that the certificates for such Warrant
Shares be issued in the name of, and delivered to, ____________________________,
whose address is ___________________________________________.
Dated:
Name of Warrant Holder: ______________________________________________
(Name must conform in all respects to name of
holder as specified on the face of the Warrant)
______________________________________________
(Street Address)
______________________________________________
(City) (State) (Zip Code)
- ---------------------------
1/ Insert the number of Warrant Shares as to which this Warrant is being
- -- exercised. In the case of a partial exercise, a new Warrant or Warrants
will be issued and delivered, representing the unexercised portion of
this Warrant, to the holder surrendering the same.
<PAGE>
ANNEX B
FORM OF ASSIGNMENT
------------------
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns and
transfers unto ____________________________ [Name] of _____________ [Address]
the right represented by the within Warrant to purchase ________ shares of
Common Stock of Alyn Corporation to which the within Warrant relates, and
appoints ____________________ Attorney to transfer such right on the books of
Alyn Corporation with full power of substitution in the premises.
Dated:________
---------------------------------
(Name must conform to name of holder as specified
on the face of the Warrant)
---------------------------------
(Street Address)
---------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
- ----------------------------
FOR IMMEDIATE RELEASE
---------------------
CONTACT: Richard L. Little
Chief Financial Officer
(949) 225-7360
Email: [email protected]
ALYN CORPORATION (LOGO)
Passion and Excellence A NASDAQ Company
In Materials (ALYN)
ALYN CORPORATION ANNOUNCES IT HAS CONCLUDED
$7.5 MILLION IN NEW EQUITY FUNDING
IRVINE, CALIFORNIA (October 1, 1999) - Alyn Corporation (Nasdaq: ALYN), an
advanced metal matrix composite technology company, today announced it has
reached agreement for $7.5 million in new funding. The net proceeds of
approximately $7.4 million will be used for working capital.
The funding, provided by two Fleming Asset Management funds, is in the
form of a Series C Convertible Preferred Stock. The Series C is convertible into
shares of Common Stock at a price of $3.00 per share (an approximately 9%
premium over the Company's closing share price on September 30, 1999). The
Closing is scheduled for October 5, 1999. The Company also announced that it has
renegotiated certain provisions of its outstanding 6% Exchangeable Note issued
to Talisman Capital on March 10, 1999 and of its Series B Exchangeable Preferred
Stock issued to AMRO International and related parties on March 17, 1999. The
terms of the Exchangeable Note were amended to include, among other elements, a
$2.00 floor to the market price-based conversion feature. The Series B
Exchangeable Preferred Stock is converting all of its Preferred Stock into
626,959 shares of Common Stock, to take place as of the Series C closing date.
The Company's management team is very pleased to have established a
long-term relationship with, and have the support of, Fleming Asset Management.
Flemings, based in the United Kingdom, carries out the investment management
activities of Robert Fleming Holdings Limited, a privately owned global merchant
bank. Together with Jardine Fleming, a wholly
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16761 Hale Avenue, Irvine, CA 92606-5006 USA
http://www.alyn.com (USA) http://www.alyn.co.uk (Europe)
<PAGE>
owned subsidiary of Robert Fleming, and its joint venture with T. Rowe Price,
Rowe-Price Fleming, Fleming Asset Management has over $113 billion under
management in 18 offices throughout the world.
Alyn Corporation produces Boralyn, a unique metal matrix composite
material that is lighter than aluminum, stronger than titanium and has better
wear properties than steel, with principal applications in the nuclear,
aerospace, automotive, computer hardware and sporting goods industries.
For additional information, contact Richard L. Little, Alyn
Corporation, (949) 225-7360 or email: [email protected].
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: The statements in this news release and oral statements which may be
made by representatives of the Company relating to plans, strategies, economic
performance and trends and other statements that are not descriptions of
historical facts may be forward-looking statements within the meaning of the
Federal Securities Laws. These forward-looking statements are subject to
significant risks and uncertainties, including without limitation those
identified in the section of the Form 10-Q for the quarter ended June 30, 1999
entitled "Factors That May Affect Future Results and Financial Condition" and in
the Company's Annual Report on Form 10-K for the year ended December 31, 1998 as
filed with the Securities and Exchange Commission (the "SEC"). Such risks and
uncertainties may cause actual results to differ materially and adversely from
those discussed in such forward-looking statements. The forward-looking
statements within this news release, any oral statements made by representatives
of the Company, and Forms 10-Q and 10-K are identified by words such as
"believes," "anticipates," "expects," "intends," "may" and other similar
expressions. However, these words are not the exclusive means of identifying
such statements. In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances are
forward-looking statements. The Company disclaims any obligation to publicly
release the results of any revisions to these forward-looking statements which
may be made to reflect events or circumstances occurring subsequent to this news
release or otherwise to revise or update any oral or written forward-looking
statement that may be made from time to time by or on behalf of the Company.
Readers are urged to carefully review and consider the various disclosures made
by the Company in its filings with the SEC, including its Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999 and its Annual Report on Form 10-K
for the year ended December 31, 1998, that attempt to advise interested parties
of certain risks, uncertainties and other factors that may affect the Company's
business.
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16761 Hale Avenue, Irvine, CA 92606-5006 USA
http://www.alyn.com (USA) http://www.alyn.co.uk (Europe)
