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) November 25, 1997
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AMERICAN BANKNOTE CORPORATION
(Exact name of registrant as specifie d in its charter)
Delaware 1-3410 13-0460520
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
200 Park Avenue, New York, New York 10166-4999
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 557-9100
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(Former name or former address, if changed since last report.)
The Exhibit Index appears on Page 5
Page 1 of pages.
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ITEM 5. OTHER EVENTS.
Pursuant to a Securities Purchase Agreement dated as of November
25, 1997 (the "Securities Purchase Agreement"), the Company sold in a private
placement to the two accredited investors named therein, $5,000,000 of a Zero
Coupon Subordinated Convertible Debenture, due November 25, 2002 (the
"Security") plus warrants. At maturity, the outstanding Security is
automatically converted into shares of the Company's common stock, resulting in
the Security being treated as a component of stockholders' equity. Interest
accretes at 5% per annum on the Security. Holders may convert the Security into
shares of the Company's common stock, from time to time, at a price per share
equal to 100% of the average of the 5 consecutive trading days' closing prices
yielding the lowest average price during the 25 trading days prior to conversion
or $6.56 (representing 130% of the closing price on November 24, 1997),
whichever is lower, except that during the 25 days following issuance no
conversions will be permitted at a conversion price which is less than $5.25.
The Security may be redeemed in cash at the election of the Company in lieu of
issuing shares of Common Stock if the closing price is below $4.00 per share on
a conversion date and, beginning 90 days after the effective date of the
registration statement required to be filed by the Company under the
Registration Rights Agreement dated as of November 25, 1997 by and among the
Company and the purchasers of the Security, if the closing price during 10
consecutive trading days is greater than $7.50 per share. Redemption prices vary
depending on the type of redemption transaction from the closing price on the
date of conversion (or an average of 5 days' prices) multiplied by the number of
shares that would have been issued upon conversion to 110% of the principal
amount called for redemption. Unless the closing price exceeds $7.22 or is
greater than 115% of the prior day's closing price (whereupon full conversion is
permitted on such day), no portion of the Security may be converted during the
first 90-day period, no more than 40% during the 60-day period thereafter until
the 150th day, no more than 60% during the 60-day period thereafter until the
210th day, and no more than 80% during the 60-day period thereafter until the
300th day, whereupon full conversion is permitted. The foregoing conversion
limitations do not apply in the event the Company publicly announces that (i) it
intends to consolidate with or merge with any other corporation or sell or
transfer all or substantially all of the Company's assets or (ii) any person,
group, or entity (including the Company) publicly announces a tender offer to
purchase 50% or more of the Company's common stock. In connection with the
Security, the Company issued 150,000 three-year warrants at $7.09 (representing
140% of the closing price on November 24, 1997). If the Company redeems the
Security, additional 5 year warrants for 21 shares for each $1,000 redeemed are
issuable with an exercise price equal to 105% of the closing price on the
redemption date. The Security is subordinated to all existing or future bank,
institutional, financial transaction or acquisition indebtedness. The Company
has agreed to seek registration for resale of the common stock into which the
Security and warrants are convertible within 120 days of closing. The foregoing
summary of the Security, the debenture and the warrants is qualified in its
entirety by reference to the Securities Purchase Agreement, the Registration
Rights Agreement and the forms of debenture and warrants relating thereto,
copies of which are attached as exhibits to this Current Report on Form 8-K.
On December 3, 1997, to the Credit Agreement dated as of January
29, 1996, as amended through December 3, 1997, among American Bank Note Company
and American Bank Note Holographics, Inc., the Company (collectively, the
"Borrowers"), the Lenders named therein, and The Chase Manhattan Bank (formerly
known as Chemical Bank), as Agent for such Lenders (the "Amendment"), was
amended to permit the Company to issue up to $100,000,000 of senior subordinated
notes, maturing in 2007, to be guaranteed on a subordinated basis by the
Borrowers. The foregoing summary of the Amendment is qualified in its entirety
by reference to the Amendment, a copy of which is attached as an exhibit to this
Current Report on Form 8-K.
Page 2 of pages.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
10.1 Securities Purchase Agreement by and among American Banknote
Corporation, RGC International Investors, LDC and Halifax Fund,
L.P., dated as of November 25, 1997.
10.2 Form of Zero Coupon Convertible Subordinated Debenture, dated
November 25, 1997.
10.3 Form of Warrant to purchase 150,000 shares of common stock of
American Banknote Corporation, dated November 25, 1997.
10.4 Registration Rights Agreement by and among American Banknote
Corporation, RGC International Investors, LDC and Halifax Fund,
L.P., dated as of November 25, 1997.
10.5 Amendment, dated December 3, 1997, to Credit Agreement dated as
of January 29, 1996, as amended through December 3, 1997, among
American Bank Note Company and American Bank Note Holographics,
Inc., American Banknote Corporation, the Lenders named therein,
and The Chase Manhattan Bank (formerly known as Chemical Bank),
as Agent for such Lenders.
Page 3 of pages.
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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 THEREUNTO DULY AUTHORIZED.
AMERICAN BANKNOTE CORPORATION
BY: /s/Harvey J. Kesner
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Name: Harvey J. Kesner
Title: Executive Vice President
and General Counsel
Date: December 10, 1997
Page 4 of pages.
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EXHIBIT INDEX
Exhibit Page
10.1 Securities Purchase Agreement by and among American
Banknote Corporation, RGC International Investors, LDC and
Halifax Fund, L.P., dated as of November 25, 1997.
10.2 Form of Zero Coupon Convertible Subordinated Debenture,
dated November 25, 1997.
10.3 Form of Warrant to purchase 150,000 shares of common stock
of American Banknote Corporation, dated November 25, 1997.
10.4 Registration Rights Agreement by and among American
Banknote Corporation, RGC International Investors, LDC and
Halifax Fund, L.P., dated as of November 25, 1997.
10.5 Amendment, dated December 3, 1997, to Credit Agreement
dated as of January 29, 1996, as amended through December
3, 1997, among American Bank Note Company and American
Bank Note Holographics, Inc., American Banknote
Corporation, the Lenders named therein, and The Chase
Manhattan Bank (formerly known as Chemical Bank), as Agent
for such Lenders.
Page 5 of pages.
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of November
25, 1997, by and among American Banknote Corporation, a Delaware corporation,
with headquarters located at 200 Park Avenue, 49th Floor, New York, New York
10166 ("COMPANY"), and each of the purchasers set forth on the signature pages
hereto (the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by Rule 506
under Regulation D ("REGULATION D") as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "1933 ACT");
B. The Company has authorized the issuance to the Buyers of (i) convertible
subordinated debentures, in the form attached hereto as EXHIBIT "A", in the
aggregate principal amount of Five Million Dollars ($5,000,000), convertible
into shares of common stock, $.01 par value per share, of the Company (together
with any rights attached to such common stock pursuant to the Company's
Stockholders Rights Plan, the "COMMON STOCK"), upon the terms and subject to the
limitations and conditions set forth in such debentures (the "DEBENTURES") and
(ii) warrants, in the form attached hereto as EXHIBIT "B", to purchase One
Hundred Fifty Thousand (150,000) shares of Common Stock (the "CLOSING
WARRANTS");
C. The Buyers desire to purchase and the Company desires to issue and sell, upon
the terms and conditions set forth in this Agreement, the Debentures and the
Closing Warrants, for an aggregate purchase price of Five Million Dollars
($5,000,000).
D. Each Buyer wishes to purchase, upon the terms and conditions stated in this
Agreement, such principal amount of Debentures and number of Warrants as is set
forth immediately below its name on the signature pages hereto;
E. Contemporaneous with the execution and delivery of this Agreement, the
parties hereto are executing and delivering a Registration Rights Agreement, in
the form attached hereto as EXHIBIT "C" (the "REGISTRATION RIGHTS AGREEMENT"),
pursuant to which the Company has agreed to provide certain registration rights
under the 1933 Act and the rules and regulations promulgated thereunder, and
applicable state securities laws; and
F. In accordance with the terms of the Debentures, under certain circumstances
the Company may redeem the Debentures for cash plus a number of additional
warrants, in the form attached hereto as EXHIBIT "D", determined based upon the
redemption amount (the "REDEMPTION WARRANTS" and, collectively with the Closing
Warrants, the "WARRANTS").
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NOW THEREFORE, the Company and each of the Buyers (severally and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND CLOSING WARRANTS.
a. Purchase of Debentures and Closing Warrants. The Company shall
issue and sell to each Buyer and each Buyer severally agrees to purchase from
the Company such principal amount of Debentures as are set forth immediately
below such Buyer's name on the signatures pages hereto at the aggregate purchase
price (the "PURCHASE PRICE") as is set forth immediately below such Buyer's name
on the signature pages hereto. The issuance, sale and purchase of the Debentures
and Closing Warrants shall take place at the closing (the "CLOSING"). Subject to
the satisfaction (or waiver) of the conditions thereto set forth in Section 6
and Section 7 below, at the Closing, the Company shall issue and sell to each
Buyer and each Buyer shall purchase from the Company the aggregate principal
amount of Debentures and Closing Warrants which such Buyer is purchasing
hereunder for the Purchase Price. The aggregate principal amount of Debentures
to be issued at the Closing is Five Million Dollars ($5,000,000) and the
aggregate number of Warrants to be issued at the Closing is One Hundred Fifty
Thousand (150,000), for an aggregate purchase price of Five Million Dollars
($5,000,000). The term Debentures includes the Debentures to be sold hereunder
and any debenture(s) issued in replacement thereof in accordance with the terms
thereof.
b. Form of Payment. On the Closing Date (as defined below), (i)
each Buyer shall pay the Purchase Price for the Debentures and Closing Warrants
to be issued and sold to it at the Closing by wire transfer of immediately
available funds to the Company, in accordance with the Company's written wiring
instructions, against delivery of the Debentures and Closing Warrants which such
Buyer is purchasing, and (ii) the Company shall deliver such Debentures and
Closing Warrants against delivery of such Purchase Price.
c. Closing Date. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 6 and Section 7 below, the date and time
of the issuance and sale of the Debentures and Closing Warrants pursuant to this
Agreement (the "CLOSING DATE") shall be 12:00 noon Eastern Standard Time on
November 25, 1997 or such other mutually agreed upon time. The Closing shall
occur on the Closing Date at the offices of the Company, 200 Park Avenue, 49th
Floor, New York, New York 10166.
2. BUYERS' REPRESENTATIONS AND WARRANTIES.
Each Buyer severally (and not jointly) represents and warrants to the
Company solely as to such Buyer that:
a. Investment Purpose. The Buyer is purchasing the Debentures and
the shares of Common Stock issuable upon conversion thereof (the "CONVERSION
SHARES") and the
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Warrants and the shares of Common Stock issuable upon exercise of the Warrants
(the "WARRANTS SHARES") (collectively, the "SECURITIES") for its own account for
investment only and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered or exempted under the
1933 Act.
b. Accredited Investor Status. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a) of Regulation D and a
sophisticated investor (as defined in Rule 506(b)(2)(ii) at Regulation D).
c. Reliance on Exemptions. The Buyer understands (i) that the
Securities are being offered and sold to it in reliance upon specific exemptions
from the registration requirements of United States federal and state securities
laws and that the Company is relying upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities and (ii) it is not authorized, and acknowledges that
it has not, relied on any analyst or other reports or other third party source
information relating to the Company.
d. Information. The Buyer and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Securities
which have been requested by the Buyer or its advisors. The Buyer and its
advisors, if any, have not relied on any oral or written representations or
assurances made by third parties or any oral or written representations or
assurances from the Company or any representative or agent of the Company other
than as set forth in this Agreement. The Buyer and its advisors, if any, have
been afforded the opportunity to ask questions of the Company and have received
what the Buyer believes to be satisfactory answers to any such inquiries.
Neither such inquiries nor any other due diligence investigation conducted by
Buyer or any of its advisors or representatives shall modify, amend or affect
Buyer's right to rely on the Company's representations and warranties contained
in Section 3 below. The Buyer understands that its investment in the Securities
is speculative and involves a significant degree of risk.
e. Governmental Review. The Buyer understands that no United
States federal or state agency or any other government or governmental agency
has passed upon or made any recommendation or endorsement of the Securities.
f. Transfer or Resale. The Buyer understands that (i) except as
provided in the Registration Rights Agreement, the Securities have not been and
are not being registered under the 1933 Act or any applicable state securities
laws, and may not be transferred unless (a) subsequently included in an
effective registration statement thereunder, or (b) the Buyer shall have
delivered to the Company an opinion of counsel (which opinion shall be
reasonably acceptable to the Company) to the effect that the Securities to be
sold or transferred may be sold or transferred pursuant to an exemption from
such registration or (c) sold pursuant to Rule 144
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promulgated under the 1933 Act (or a successor rule); (ii) any sale of such
Securities made in reliance on Rule 144 may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such Securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the 1933 Act) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Securities under the 1933 Act or any state securities laws or to comply
with the terms and conditions of any exemption thereunder (in each case, other
than pursuant to the Registration Rights Agreement). Notwithstanding the
foregoing or anything else contained herein to the contrary, the Securities may
be pledged as collateral in connection with a bona fide margin account.
g. Legends. The Buyer understands that the Debentures, Warrants
and, until such time as the Conversion Shares and Warrants Shares have been
registered under the 1933 Act, as contemplated by the Registration Rights
Agreement, the Conversion Shares and Warrant Shares, may bear a restrictive
legend in substantially the following form (and a stop-transfer order may be
placed against transfer of the certificates for such Securities):
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The securities have been
acquired for investment and may not be sold, transferred or assigned in
the absence of an effective registration statement for the securities
under said Act, or an opinion of counsel, in form, substance and scope
reasonably acceptable to the Company, that registration is not required
under said Act or unless sold pursuant to Rule 144 under said Act."
The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of any Security upon which it is
stamped, if, unless otherwise required by applicable state securities laws, (a)
such Security is registered for sale under an effective registration statement
filed under the 1933 Act, or (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope reasonably acceptable to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act and such Security is so sold or
transferred or (c) such holder provides the Company with reasonable assurances
that such Security can be sold pursuant to Rule 144 under the 1933 Act (or a
successor rule thereto) without any restriction as to the number of Securities
acquired as of a particular date that can then be immediately sold. The Buyer
agrees to sell all Securities, including those represented by a certificate(s)
from which the legend has been removed, in compliance with applicable prospectus
delivery requirements, if any.
h. Authorization; Enforcement. This Agreement and the
Registration Rights Agreement have been duly and validly authorized, executed
and delivered on behalf of the Buyer and are valid and binding agreements of the
Buyer enforceable in accordance with their terms
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except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
i. Residency. The Buyer is a resident of the jurisdiction set
forth immediately below such Buyer's name on the signature pages hereto.
j. No Legal Advice. The Buyer acknowledges that it has had the
opportunity to review this Agreement and the transactions contemplated hereby
with its own legal counsel and investment and tax advisors. The Buyer is relying
solely on such counsel and advisors and not on any statements of representatives
of the Company or its representatives as agents for legal, tax or investment
advice with respect to this investment, the transactions contemplated hereby or
the securities laws of any jurisdiction.
k. No Brokers. The Buyer has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each Buyer that:
a. Organization and Qualification. The Company and each of its
Subsidiaries (as defined below), is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated, with full power and authority (corporate and other) to own, lease,
use and operate its properties and to carry on its business as and where now
owned, leased, used, operated and conducted. SCHEDULE 3(A) sets forth a list of
all of the subsidiaries of the Company pursuant to which material operations of
the Company are conducted (the "SUBSIDIARIES") and the jurisdiction in which
each is incorporated. The Company and each of its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes such
qualification necessary except where the failure to be so qualified or in good
standing would not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT"
means any material adverse effect on the operations, assets, financial condition
or prospects of the Company and its Subsidiaries taken as a whole, or which
would prohibit or otherwise adversely interfere with the ability of the Company
to enter into and perform its obligations under this Agreement, the Debenture,
the Registration Rights Agreement and the Warrants.
b. Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Registration Rights Agreement, the Debentures and the Warrants and to consummate
the transactions contemplated hereby and thereby and to issue the Securities, in
accordance with the terms hereof and thereof,
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(ii) the execution and delivery of this Agreement, the Registration Rights
Agreement, the Debentures and the Warrants by the Company and the consummation
by it of the transactions contemplated hereby and thereby (including without
limitation the issuance of the Debentures and the Warrants and the issuance and
reservation for issuance of the Conversion Shares and Warrant Shares issuable
upon conversion or exercise thereof) have been duly authorized by the Company's
Board of Directors and no further consent or authorization of the Company, its
Board of Directors, or its shareholders is required, (iii) this Agreement has
been duly executed and delivered by the Company, and (iv) this Agreement
constitutes, and upon execution and delivery by the Company of the Registration
Rights Agreement, the Debentures and the Warrants, each such instrument will
constitute, a legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies or by other equitable principles of general
application.
c. Capitalization. As of November 18, 1997, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of Common Stock
of which 20,853,717 shares are issued and outstanding, 5,187,383 shares are
reserved for issuance pursuant to the Company's benefit plans, 1,850,000 shares
are reserved for issuance pursuant to securities (other than the Debentures and
the Warrants) exercisable for, or convertible into or exchangeable for shares of
Common Stock and 1,600,000 shares are reserved for issuance upon conversion of
the Debentures and exercise of the Warrants (subject to adjustment pursuant to
the Company's covenant set forth in Section 4(h) below); and (ii) 5,000,000
shares of preferred stock, none of which shares are issued and outstanding. All
of such outstanding shares of capital stock are, or upon issuance will be, duly
authorized, validly issued, fully paid and nonassessable. No shares of capital
stock of the Company are subject to preemptive rights or any other similar
rights of the stockholders of the Company. Except as disclosed in SCHEDULE 3(C)
and except for the transactions contemplated hereby and the transactions
pursuant to the Securities Purchase Agreement dated July 24, 1997 by and among
the Company and the Buyers named therein, as of the effective date of this
Agreement, (i) there are no outstanding options, warrants, scrip, rights to
subscribe for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for any shares of
capital stock of the Company, or arrangements by which the Company is or may
become bound to issue additional shares of capital stock of the Company, and
(ii) there are no agreements or arrangements under which the Company is
obligated to register the sale of any of its or their securities under the 1933
Act (except the Registration Rights Agreement) and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued by
the Company (or in any agreement providing rights to security holders) that will
be triggered by the issuance of the Debentures or Conversion Shares or the
Warrants or Warrant Shares. The Company has furnished to the Buyer true and
correct copies of the Company's Restated Certificate of Incorporation as in
effect on the date hereof ("CERTIFICATE OF INCORPORATION"), the Company's
By-laws, as in effect on the date hereof (the "BY-LAWS"), and the terms of all
securities convertible into or exercisable for Common
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Stock of the Company and the material rights of the holders thereof in respect
thereto. The Company shall provide the Buyer with a written update of this
representation signed by the Company's Chief Executive or Chief Financial
Officer on behalf of the Company as of the Closing Date.
d. Issuance of Shares. The Conversion Shares and Warrant Shares
are duly authorized and, upon issuance upon conversion of the Debentures or upon
exercise of the Warrants in accordance with the terms thereof will be validly
issued, fully paid and non-assessable, and free from liens and charges with
respect to the issue thereof and shall not be subject to preemptive rights or
other similar rights of stockholders of the Company. The term Conversion Shares
includes the shares of Common Stock issuable upon conversion of the Debentures,
including without limitation, such additional shares, if any, as are issuable as
a result of the events described in Section 2(c) of the Registration Rights
Agreement. The Company understands and acknowledges the potentially dilutive
effect to the Common Stock of the issuance of the Conversion Shares and Warrant
Shares upon conversion or exercise of the Debentures or Warrants. The Company
further acknowledges that its obligation to issue Conversion Shares upon
conversion of the Debentures and Warrant Shares upon exercise of the Warrants in
accordance with this Agreement, the Debentures and the Warrants is absolute and
unconditional (subject to the Company's redemption rights as provided in the
Debentures) regardless of the dilutive effect that such issuance may have on the
ownership interests of other stockholders of the Company.
e. No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Debentures and the Warrants by
the Company and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance and reservation
for issuance of the Conversion Shares and Warrant Shares) will not (i) conflict
with or result in a violation of any provision of the Certificate of
Incorporation or By-laws or (ii) violate or conflict with, or result in a breach
of any provision of, or constitute a default (or an event which with notice or
lapse of time or both could become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or any of its Subsidiaries or by which
any property or asset of the Company or any of its Subsidiaries is bound or
affected (except for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect and as set forth in SCHEDULE 3(E)).
Neither the Company nor any of its Subsidiaries is in violation of its
Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event has
occurred which with notice or lapse of time or both could put the Company or any
of its Subsidiaries in default) under, and neither the Company nor any of its
Subsidiaries has taken any action or failed to take any action that would give
to others any rights of termination, amendment, acceleration or cancellation of,
any agreement, indenture or
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instrument to which the Company or any of its Subsidiaries is a party or by
which any property or assets of the Company or any of its Subsidiaries is bound
or affected, except for possible defaults as would not, individually or in the
aggregate, have a Material Adverse Effect. To the knowledge of the Company, the
businesses of the Company and its Subsidiaries, are not being conducted, and
shall not be conducted so long as a Buyer owns any of the Securities, in
violation of any law, ordinance or regulation of any governmental entity which
violation would have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self regulatory agency in
order for it to execute, deliver or perform any of its obligations under this
Agreement, the Registration Rights Agreement, the Debentures or the Warrants in
accordance with the terms hereof or thereof. Except as disclosed in SCHEDULE
3(E), all consents, authorizations, orders, filings and registrations which the
Company is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company is unaware of
any facts or circumstances which would give rise to any of the foregoing. The
Company is not in violation of the listing requirements of the New York Stock
Exchange ("NYSE") and does not reasonably anticipate that the Common Stock will
be delisted by the NYSE in the foreseeable future.
f. SEC Documents; Financial Statements. Since December 31, 1995,
the Company has timely filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Exchange Act of 1934, as amended (the "1934 ACT") (all of
the foregoing filed prior to the date hereof and all exhibits included therein
and financial statements and schedules thereto and documents (other than
exhibits) incorporated by reference therein, being hereinafter referred to
herein as the "SEC DOCUMENTS"). The Company has delivered to each Buyer true and
complete copies of the SEC Documents, except for such exhibits and incorporated
documents. As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto. Such financial statements have been
prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and fairly present in all
material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject,
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<PAGE>
in the case of unaudited statements, to normal year-end audit adjustments).
Except as set forth in the financial statements of the Company included in the
SEC Documents or on SCHEDULE 3(F), the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to December 31, 1996 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in such financial
statements, which, individually or in the aggregate, are not material to the
financial condition or operating results of the Company.
g. Absence of Certain Changes. Since December 31, 1996, there has
been no adverse change and no adverse development in the assets, liabilities,
business, properties, operations, financial condition, results of operations or
prospects of the Company or any of its Subsidiaries except as disclosed on any
schedule hereto other than matters which would not, individually or in the
aggregate, have a Material Adverse Effect.
h. Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company (or any officer or director of the Company), threatened
against or affecting the Company or any of its Subsidiaries (or any officer or
director of the Company or any of its Subsidiaries) that could have a Material
Adverse Effect.
i. [Intentionally Omitted]
j. [Intentionally Omitted]
k. Tax Status. Except as set forth on SCHEDULE 3(K), the Company
and each of its Subsidiaries has made or filed all federal and state income and
all other tax returns, reports and declarations required by any jurisdiction to
which it is subject (unless and only to the extent that the Company and each of
its Subsidiaries has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes) and has paid all taxes and other
governmental assessments and charges that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those
being contested in good faith and has set aside on its books provisions
reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. There are no
unpaid taxes in any material amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim.
l. [Intentionally Omitted]
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m. Disclosure. All information relating to or concerning the
Company or any of its Subsidiaries set forth in this Agreement and provided to
the Buyers pursuant to Section 2(d) hereof and otherwise in connection with the
transactions contemplated hereby is true and correct in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made herein or therein, in light of the circumstances under
which they were made, not misleading. Except as set forth in SCHEDULE 3(F), no
event or circumstance has occurred or exists with respect to the Company or any
of its Subsidiaries or its or their business, properties, prospects, operations
or financial conditions, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed (assuming for this purposes that the
Company's reports filed under the 1934 Act are being incorporated into an
effective registration statement filed by the Company under the 1933 Act).
Notwithstanding the foregoing, the Company expressly disclaims any and all
responsibility for any oral or written statements about the Company made by any
third party (including but not limited to statements by analysts in research
reports or otherwise), and the Company makes no representation or warranty as to
the accuracy or completeness of such statements.
n. Acknowledgment Regarding Buyers' Purchase of Securities. The
Company acknowledges and agrees that the Buyers are acting solely in the
capacity of arm's length purchasers with respect to this Agreement and the
transactions contemplated hereby. The Company further acknowledges that no Buyer
is acting as a financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions contemplated
hereby and any advice given by any Buyer or any of their respective
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to the Buyers, purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.
o. No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales in any security or solicited any offers to
buy any security under circumstances that would require registration under the
1933 Act of the issuance of the Securities to the Buyers.
p. No Brokers. The Company has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments relating to this Agreement or the transactions contemplated
hereby.
4. COVENANTS.
a. Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Section 6 and 7 of this
Agreement.
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b. Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Securities as required under Regulation D and to provide a
copy thereof to each Buyer promptly after such filing. The Company shall, on or
before the Closing Date, take such action as the Company shall reasonably
determine is necessary to qualify the Securities for sale to the Buyers at the
applicable closing pursuant to this Agreement under applicable securities or
"blue sky" laws of the states of the United States (or to obtain an exemption
from such qualification), and shall provide evidence of any such action so taken
to each Buyer on or prior to such Closing Date.
c. Reporting Status; Eligibility to Use Form S-3. The Company's
Common Stock is registered under Section 12(b) of the 1934 Act. So long as any
Buyer beneficially owns any of the Securities, the Company shall timely file all
reports required to be filed with the SEC pursuant to the 1934 Act, and the
Company shall not voluntarily terminate its status as an issuer required to file
reports under the 1934 Act even if the 1934 Act or the rules and regulations
thereunder would permit such termination. The Company currently meets, and will
take all necessary action to continue to meet, the "registrant eligibility"
requirements set forth in the general instructions to Form S-3.
d. Use of Proceeds. The Company shall use the proceeds from the
sale of the Debentures and Warrants in the manner set forth in SCHEDULE 4(D)
attached hereto and made a part hereof.
e. Additional Equity Capital; Right of First Refusal. Subject to
the exceptions described below, the Company agrees that during the period
beginning on the date hereof and ending on the later of (i) seventy-five (75)
days thereafter or (ii) thirty (30) days following the effective date of the
Registration Statement to be filed pursuant to Section 2(a) of the Registration
Rights Agreement (the "LOCK-UP PERIOD"), the Company will not, without the prior
written consent of a majority-in-interest of the Buyers, conduct any additional
equity financing (including debt financing with a discounted or convertible
equity component or warrants) where the equity is issued on Floating Rate
Convertible Terms (as defined below). After the expiration of the Lock-Up
Period, subject to the exceptions described below, the Company shall not
negotiate or contract with any party (other than the Buyers) to obtain
additional equity financing (including debt financing with a discounted or
convertible equity component or warrants) where the equity is issued on Floating
Rate Convertible Terms as defined below) and that provides for the registration
under the 1933 Act of public resales of Common Stock within one hundred eighty
(180) days of the effective date of the Registration Statement to be filed
pursuant to Section 2(a) of the Registration Rights Agreement. Subject to the
exceptions described below, the Company will not conduct any equity financing
(including debt with a discounted or convertible equity component or warrants)
where the equity is issued on Floating Rate Convertible Terms ("FUTURE
OFFERINGS") during the period beginning on the Closing Date and ending one
hundred eighty (180) days after the expiration of the Lock-Up Period unless it
shall have first delivered to each Buyer, at least fifteen (15) business days
prior to the closing of such Future Offering, written notice describing the
proposed Future Offering,
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<PAGE>
including the terms and conditions thereof, and providing each Buyer an option
during the ten (10) business day period following delivery of such notice to
purchase its pro rata share (based on the ratio that the principal amount of the
Debentures purchased by it hereunder bears to the aggregate principal amount of
Debentures purchased hereunder) of the securities being offered in the Future
Offering on the same terms as contemplated by such Future Offering (the
limitations referred to in this paragraph are collectively referred to as the
"CAPITAL RAISING LIMITATIONS"), provided that if the Buyers, as a whole, do not
purchase all of such Future Offering, the Company will be free to pursue such
Future Offering entirely with third parties. The Lock-Up Period, Future Offering
and Capital Raising Limitations shall not apply to any transaction involving (i)
issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 1933 Act) or
(ii) issuances of securities as consideration for a merger, consolidation or
sale of assets, or in connection with any strategic partnership or joint venture
(the primary purpose of which is not to raise equity capital), or in connection
with the disposition or acquisition of a business, product or license by the
Company. The Lock-Up Period, Future Offering and Capital Raising Limitations
also shall not apply to the issuance of securities upon exercise or conversion
of the Company's options, warrants or other convertible securities outstanding
as of the date hereof or to the grant of additional options or warrants, or the
issuance of additional securities, under any Company stock option or restricted
stock plan approved by a majority of the Company's disinterested directors.
"FLOATING RATE CONVERTIBLE TERMS" means terms which include the right to buy an
indeterminate number of shares of Common Stock upon conversion of the securities
or other rights based upon a floating rate or reset conversion price derived
from the market price of the Common Stock subsequent to the issuance of the
convertible securities and preceding the date of conversion.
f. Expenses. The Company shall reimburse Rose Glen Capital
Management, L.P. ("RGC") for all expenses incurred by it in connection with the
negotiation, preparation, execution, delivery and performance of this Agreement
and the other agreements to be executed in connection herewith, including,
without limitation, attorneys' and consultants' fees and expenses. The Company's
obligation to reimburse RGC's expenses under this Section 4(f) shall be limited
to Fifteen Thousand Dollars ($15,000).
g. Financial Information. The Company agrees to send the
following reports to each Buyer until such Buyer transfers, assigns, or sells
all of the Securities: (i) within ten (10) days after the filing with the SEC, a
copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and
any Current Reports on Form 8-K; (ii) within one (1) day after release, copies
of all press releases issued by the Company or any of its Subsidiaries; and
(iii) contemporaneously with the making available or giving to the stockholders
of the Company, copies of any notices or other information the Company makes
available or gives to such stockholders.
h. Reservation of Shares. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to
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<PAGE>
provide for the full conversion of the outstanding Debentures and issuance of
the Conversion Shares in connection therewith (based on the Conversion Price of
the Debentures in effect from time to time) and the full exercise of the
Warrants and the issuance of the Warrant Shares in connection therewith (based
upon the Exercise Price of the Warrants in effect from time to time), initially,
1,600,000 shares. The Company shall not reduce the number of shares of Common
Stock reserved for issuance upon conversion of the Debentures or exercise of the
Warrants without the consent of each Buyer, which consent will not be
unreasonably withheld except pursuant to redemptions as provided in the
Debentures. The Company shall use its best efforts at all times to maintain the
number of shares of Common Stock so reserved for issuance at no less than one
hundred fifty percent (150%) of the number that is then actually issuable upon
full conversion of the Debentures (based on the Conversion Price of the
Debentures in effect from time to time) and the full exercise of the Warrants
(based on the Exercise Price of the Warrants in effect from time to time). If at
any time the number of shares of Common Stock authorized and reserved for
issuance is below the number of Conversion Shares and Warrant Shares issued and
issuable upon conversion or exercise of the Debentures and the Warrants (based
on the Conversion Price and Exercise Price then in effect), the Company will
promptly take all corporate action necessary to authorize and reserve a
sufficient number of shares, including, without limitation, calling a special
meeting of shareholders to authorize additional shares to meet the Company's
obligations under this Section 4(h), in the case of an insufficient number of
authorized shares, and using its best efforts to obtain shareholder approval of
an increase in such authorized number of shares.
i. Listing. The Company shall promptly secure the listing of the
Conversion Shares and Warrant Shares upon each national securities exchange or
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares and Warrant Shares from time to time issuable upon conversion
or exercise of the Debentures and the Warrants. The Company will obtain and
maintain the listing and trading of its Common Stock on the NYSE, Nasdaq
National Market ("NASDAQ"), or the American Stock Exchange ("AMEX") and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of Securities
Dealers ("NASD") and such exchanges, as applicable. The Company shall promptly
provide to each Buyer copies of any notices it receives from the NYSE regarding
the continued eligibility of the Common Stock for listing on the NYSE.
j. Corporate Existence. So long as a Buyer beneficially owns any
Debentures, the Company shall maintain its corporate existence and shall not
sell all or substantially all of the Company's assets, except in the event of a
merger or consolidation or sale of all or substantially all of the Company's
assets, where the surviving or successor entity in such transaction (i) assumes
the Company's obligations hereunder and under the agreements and instruments
entered into in connection herewith and (ii) is a publicly traded corporation
whose Common Stock is listed for trading on the NYSE, Nasdaq or AMEX.
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<PAGE>
k. Solvency. The Company (both before and after giving effect to
the transactions contemplated by this Agreement) is solvent and currently the
Company has no information that would lead it to reasonably conclude that the
Company would not have, nor does it intend to take any action that would impair,
its ability to pay or refinance its debts from time to time in connection
therewith. The Buyer hereby acknowledges (i) that the Company does not currently
have funds reserved specifically for the repayment of the Debentures and (ii)
that the Company expects all amounts payable under the Debentures to be
converted into Common Stock in accordance with Article I thereof. The Company
did not receive a qualified opinion from its auditors with respect to its most
recent fiscal year end and does not anticipate or know of any basis upon which
its auditors might issue a qualified opinion in respect of its current fiscal
year.
l. Compliance with Short Sale Regulations. To the extent the
Buyer's engage in any hedging transaction involving "short sales" of the
Company's Common Stock subsequent to the date hereof, the Buyers agree to comply
with applicable rules and regulations applying to short sales (subject to
applicable exemptions).
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent
to issue certificates, registered in the name of each Buyer or its nominee, for
the Conversion Shares and Warrant Shares in such amounts as specified from time
to time by each Buyer to the Company upon conversion or exercise of the
Debentures and the Warrants in accordance with the terms thereof (the "Transfer
Agent Instructions"). Prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act, all such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred to
in this Section 5, and stop transfer instructions to give effect to Section 2(f)
hereof (in the case of the Conversion Shares or Warrant Shares, prior to
registration of the Conversion Shares or Warrant Shares under the 1933 Act),
will be given by the Company to its transfer agent and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way the Buyer's obligations and
agreement set forth in Section 2(g) hereof to comply with all applicable
prospectus delivery requirements, if any, upon resale of the Securities. If a
Buyer provides the Company with an opinion of counsel, reasonably satisfactory
to the Company in form, substance and scope, that registration of a resale by
such Buyer of any of the Securities is not required under the 1933 Act, the
Company shall permit the transfer, and, in the case of the Conversion Shares or
Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by such Buyer.
The Company acknowledges that a breach by it of its obligations hereunder will
cause irreparable harm to the Buyers, by vitiating the intent and purpose of the
transaction contemplated hereby. Accordingly, the Company acknowledges that the
remedy at law for a breach of its obligations under this Section 5 will be
inadequate and agrees, in the event of a breach or threatened breach
14
<PAGE>
by the Company of the provisions of this Section, that the Buyers shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate transfer, without the necessity
of showing economic loss and without any bond or other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Debentures
and the Warrants to a Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date of each of the following conditions thereto, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion:
a. The applicable Buyer shall have executed this Agreement and
the Registration Rights Agreement, and delivered the same to the Company.
b. The applicable Buyer shall have delivered the Purchase Price
in accordance with Section 1(b) above.
c. The representations and warranties of the applicable Buyer
shall be true and correct in all material respects as of the date when made and
as of the Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date), and the applicable Buyer shall
have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the applicable Buyer at or prior to the Closing
Date.
d. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE.
The obligation of each Buyer hereunder to purchase the Debentures and
the Warrants at the Closing is subject to the satisfaction, at or before the
Closing Date, of each of the following conditions, provided that these
conditions are for such Buyer's sole benefit and may be waived by such Buyer at
any time in its sole discretion:
a. The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer.
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<PAGE>
b. The Company shall have delivered to such Buyer duly executed
Debentures and the Closing Warrants being so purchased in accordance with
Section 1(b) above.
c. The Transfer Agent Instructions, in form and substance
satisfactory to a majority-in-interest of the Buyers, shall have been delivered
to and acknowledged in writing by the Company's Transfer Agent.
d. The representations and warranties of the Company shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Closing Date. The Buyer shall
have received a certificate or certificates, executed by an executive officer of
the Company, dated as of the Closing Date, to the foregoing effect and as to
such other matters as may be reasonably requested by such Buyer, including, but
not limited to certifications with respect to the Company's Certificate of
Incorporation, By-laws and Board of Directors' resolutions relating to the
transactions contemplated hereby.
e. No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
f. The Conversion Shares and Warrant Shares shall have been
authorized for quotation on the NYSE and trading in the Common Stock on the NYSE
shall not have been suspended by the SEC or the NYSE.
h. The Buyer shall have received an opinion of the Company's
counsel, dated as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and in substantially the same form as EXHIBIT "E"
attached hereto.
i. The Buyer shall have received the officer's certificate
described in Section 3(c) above, dated as of the Closing Date.
8. GOVERNING LAW; MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws. The parties hereto hereby submit to the
exclusive jurisdiction of the United States Federal Courts located in Delaware
with respect to any dispute arising under this Agreement,
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the agreements entered into in connection herewith or the transactions
contemplated hereby or thereby.
b. Counterparts; Signatures by Facsimile. This Agreement may be
executed in two or more counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering this
Agreement.
c. Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other than by
an instrument in writing signed by the party to be charged with enforcement.
f. Notices. Any notices required or permitted to be given under
the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier (including a
recognized overnight delivery service) or by facsimile and shall be effective
five days after being placed in the mail, if mailed by regular U.S. mail, or
upon receipt, if delivered personally or by courier (including a recognized
overnight delivery service) or by facsimile, in each case addressed to a party.
The addresses for such communications shall be:
If to the Company:
American Banknote Corporation
200 Park Avenue
49th Floor
New York, New York 10166
Attention: Harvey J. Kesner, Esq.
Facsimile: (212) 338-0747
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With copy to:
Kramer, Levin, Natfalis & Frankel
919 Third Avenue, 38th Floor
New York, New York 10022
Attention: Scott S. Rosenblum, Esq.
Facsimile: (212) 983-0028
If to a Buyer: To the address set forth immediately below such Buyer's
name on the signature pages hereto.
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns.
Neither the Company nor any Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
Notwithstanding the foregoing, any Buyer may assign its rights hereunder to any
person that purchases Securities in a private transaction from a Buyer or to any
of its "affiliates," as that term is defined under the 1934 Act, without the
consent of the Company. Buyer agrees not to knowingly sell, assign, pledge or
otherwise dispose of or transfer in a private transaction the Debentures,
Conversion Shares or Warrant Shares to (i) any purchaser who is a direct
competitor of the Company or its Subsidiaries or (ii) any purchaser who alone or
together with other persons comprise a "group" within the meaning of Section
13(d) of the 1934 Act as the owner of 10% of the capital stock of the Company.
The foregoing sentence shall not apply to any transfer that does not constitute
a private transaction including, without limitation, open market transactions
affected on the NYSE or on any other stock exchange or quotation system on which
the Common Stock may be quoted or listed and shall terminate with respect to
such sales.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Survival. The representations and warranties of the Company
and the agreements and covenants set forth in Sections 2, 3, 4, 5 and 8 shall
survive the closing hereunder notwithstanding any due diligence investigation
conducted by or on behalf of the Buyers.
j. Publicity. The Company and each of the Buyers shall have the
right to review a reasonable period of time before issuance of any press
releases, SEC, NYSE or NASD filings, or any other public statements with respect
to the transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of each of the Buyers, to make any
press release or SEC, NYSE or NASD filings with respect to such
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<PAGE>
transactions as is required by applicable law and regulations (although each of
the Buyers shall be consulted by the Company in connection with any such press
release prior to its release and shall be provided with a copy thereof and be
given an opportunity to comment thereon). Buyers shall not make any public
announcement with respect to the transactions contemplated hereby without the
written consent of the Company.
k. Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the undersigned Buyers and the Company have caused
this Agreement to be duly executed as of the date first above written.
AMERICAN BANKNOTE CORPORATION
By: /s/Harvey J. Kesner, Esq.
--------------------------------------------------------
Harvey J. Kesner, Esq.
Executive Vice President, General Counsel and Secretary
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., General Partner
By: /s/Wayne D. Bloch
--------------------------------------------------------
Wayne D. Bloch
Managing Director
RESIDENCE: Cayman Islands
ADDRESS:
c/o 3 Bala Plaza East
251 St. Asaphs Road
Suite 200
Bala Cynwyd, PA 19004
Facsimile: (610) 617-0570
Telephone: (610) 617-5900
AGGREGATE SUBSCRIPTION AMOUNT:
Principal Amount of Debentures: $ 4,000,000
Number of Closing Warrants: 120,000
Aggregate Purchase Price: $ 4,000,000
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<PAGE>
HALIFAX FUND, L.P.
By: Palladin Group, L.P., as attorney-in-fact
By: Palladin Capital Management LLC, its General Partner
By: /s/Andrew Kaplan
--------------------------------------------------------------
Andrew Kaplan
Senior Vice President
RESIDENCE: Cayman Islands
ADDRESS:
c/o Palladin Group L.P.
40 West 57th Street
New York, NY 10019
Facsimile: (212) 698-0599
Telephone: (212) 698-0515
AGGREGATE SUBSCRIPTION AMOUNT:
Principal Amount of Debentures: $ 1,000,000
Number of Closing Warrants: 30,000
Aggregate Purchase Price: $ 1,000,000
21
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"). THE SECURITIES HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933
ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE
TO THE BORROWER THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER THE
1933 ACT.
FORM OF ZERO COUPON CONVERTIBLE SUBORDINATED DEBENTURE
New York, New York
November 25, 1997 $_________
THIS DEBENTURE (this "Debenture") is one of a duly authorized issue of
subordinated debentures of AMERICAN BANKNOTE CORPORATION, a corporation duly
organized and existing under the laws of the State of Delaware (the "Borrower"),
designated as its Zero Coupon Convertible Subordinated Debentures Due November
25, 2002, in an aggregate principal amount of _____________ (the "Debentures").
FOR VALUE RECEIVED, the Borrower promises to pay ______________ or
registered assigns (the "Holder"), the principal sum of _____________ Dollars
($______ ) (the "Maturity Date Principal Balance") on November 25, 2002 (the
"Maturity Date").
This Debenture has been issued at a purchase price of $_________
("Purchase Price"). The Debenture shall be deemed to accrete principal between
the date hereof (the "Issue Date") and the Maturity Date in accordance with the
following formula:
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P2 = P1 x [1 + (r/365)]n
Where:
"P1" is the principal amount of this Debenture at the opening of the
accretion period (i.e., the Purchase Price). P1 may be reduced by
conversions or partial payments of this Debenture in accordance with
Article I below.
"P2" is the principal amount of this Debenture as increased for
accretion at any close of the accretion period (i.e., the Maturity
Date Principal Balance on the Maturity Date).
"r" shall initially be .05, but is subject to increase in accordance
with the terms of this Debenture and the Registration Rights Agreement
(as hereinafter defined).
"n" is the number of days in the accretion period.
The accreted amount of any conversions or redemptions will be
calculated with respect to each converted or redeemed amount
separately from any prior converted or redeemed amount (and P1 will be
adjusted accordingly for any subsequent conversions or redemptions and
further accretion).
The principal balance of this Debenture as accreted from time to time
shall be referred to as the "Accreted Principal Balance". For example,
based upon a Purchase Price of $5,000,000, after 100 days the Accreted
Principal Balance would be $5,068,960 (assuming no prior conversions
or redemptions of the Debenture).
To the extent not converted into Common Stock, amounts due under this
Debenture are payable in such coin or currency of the United States of America
as of the time of payment is legal tender for payment of public and private
debts, at the address last appearing on the debenture register of the Borrower
as designated in writing by the Holder hereof from time to time. If the payments
set forth in Section 2(c) of the Registration Rights Agreement of even date
herewith among the Holder, the other holders of the Debentures and the Borrower
(the "Registration Rights Agreement") are not paid when due, the Holder may
elect to add such cash default payment amounts, in whole or in part, to the
Accreted Principal Balance. Any cash default payments when so added to the
Accreted Principal Balance due under this Debenture shall, for purposes of this
Debenture, be deemed to have been part of the principal indebtedness evidenced
by this Debenture including, without limitation, for purposes of determining
accretions to principal thereafter and amounts thereafter convertible into
Common Stock hereunder. For purposes of determining the
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amount payable at the Maturity Date or on redemption of this Debenture, and for
purposes of determining the number of shares issuable on conversion of this
Debenture, the Accreted Principal Balance shall accrete, from and after the
occurrence and during the continuance of a Redemption Event hereunder (as set
forth in Article III), at the rate (i.e., "r" in the formula above) equal to the
lower of (i) Chase Manhattan Bank's base lending rate plus two percent (2%) per
annum (but not less than the then applicable "r") or (ii) the highest rate
permitted by law. The Holder has certain additional rights, remedies and
benefits as set forth in the Registration Rights Agreement (the "Registration
Rights Agreement") and in the Securities Purchase Agreement (the "Purchase
Agreement") dated as of the date hereof among the Holder, the other holders of
the Debentures and the Borrower.
As used in this Debenture, the term "business day" shall mean any day
other than a Saturday, Sunday or a day on which commercial banks in the city of
New York, New York are authorized or required by law or executive order to
remain closed. Each capitalized term used herein, and not otherwise defined,
shall have the meaning ascribed thereto in the Purchase Agreement. The Maturity
Date is subject to extension pursuant to Section 1.4(a) below.
The following terms shall apply to this Debenture:
ARTICLE I. CONVERSION RIGHTS
1.1 CONVERSION RIGHT.
(a) Subject to the conversion schedule set forth in Section 1.1(b)
and to the terms of Sections 1.1(d) and 1.7 below, the Holder shall have the
right from time to time, and at any time on or prior to the day that all of the
Accreted Principal Balance and other amounts payable hereunder are paid in full,
to convert at any time all or from time to time any part of the outstanding and
unpaid Accreted Principal Balance of this Debenture of at least $25,000, or such
lesser amount as shall remain unpaid at the time of the conversion into fully
paid and non-assessable shares of Common Stock, as such Common Stock exists on
the date of issuance of this Debenture, or any shares of capital stock of the
Borrower into which such Common Stock shall hereafter be changed or reclassified
(the "Common Stock") at the conversion price determined as provided herein (the
"Conversion Price"); provided, however, that unless the Holder delivers a waiver
in accordance with the immediately following sentence, in no event (other than
in connection with an Automatic Conversion (as hereinafter defined) on the
Maturity Date) shall the Holder be entitled to convert any portion of this
Debenture in excess of that portion of this Debenture upon conversion of which
the sum of (1) the number of shares of Common Stock beneficially owned by the
Holder and its affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unconverted portion of this
Debenture) and (2) the number of
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shares of Common Stock issuable upon the conversion of the portion of this
Debenture with respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Holder and its affiliates of more
than 4.9% of the outstanding shares of Common Stock. For purposes of the proviso
in the immediately preceding sentence, (i) beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulation 13 D-G thereunder, except as otherwise provided
in clause (1) of such proviso and (ii) the Holder may waive the limitations set
forth therein by written notice to the Borrower upon not less than sixty-one
(61) days prior notice (with such waiver taking effect only upon the expiration
of such 61-day notice period).
(b) The Holder may convert only up to that percentage of the
Accreted Principal Balance specified below during the time period set forth
opposite such percentage.
Percentage Time Period
---------- -----------
0% 1-90 days following Issue Date
40% 91-150 days following Issue Date
60% 151-210 days following Issue Date
80% 211-300 days following Issue Date
100% 301 days following Issue Date
; provided, however, that there shall be excluded from any calculation of the
foregoing percentage any conversion(s) occurring on a Conversion Date on which
the Closing Price (as hereinafter defined) of the Common Stock (i) exceeds $7.22
or (ii) is greater than 115% of the Closing Price of the Common Stock on the
immediately preceding Trading Day. The foregoing conversion limitations shall
not be applicable in the event the Borrower (i) makes a public announcement that
it has signed an agreement to consolidate or merge with any other corporation or
sell or transfer all or substantially all of the assets of the Borrower or (ii)
any person, group or entity (including the Borrower) publicly announces a tender
offer to purchase 50% or more of the Borrower's Common Stock.
(c) The number of shares of Common Stock to be issued upon each
conversion of this Debenture shall be determined by dividing the Conversion
Amount (as hereinafter defined) by the Conversion Price in effect on the date a
notice of conversion, in the form attached hereto as Exhibit A (the "Notice of
Conversion"), is delivered to the Borrower by the Holder in accordance with
Section 1.4 below (the "Conversion Date"). The term "Conversion Amount" means,
with respect to any conversion of this Debenture, the sum of (1) the Accreted
Principal Balance of this Debenture to be converted on such Conversion Date plus
(2) at the Holder's option, any amounts owed to the Holder pursuant to Sections
1.3 and 1.4(g) hereof or pursuant to Section 2(c) of the Registration Rights
Agreement.
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(d) In the event that the Closing Price of the Common Stock is
below $4.00 per share (subject, in each case, to equitable adjustments for stock
splits, stock dividends or rights offerings by the Borrower relating to
Borrower's securities or relating to the securities of any subsidiary of the
Borrower, combinations, reclassifications, extraordinary distributions and
similar events) the Conversion Date, the Borrower shall have the right, in lieu
of issuing shares of Common Stock to the Holder, to redeem the portion of this
Debenture submitted for conversion for an amount equal to the number of shares
that would have otherwise been issued upon conversion of the Debenture,
multiplied by the Redemption Market Price (as hereinafter defined). "Redemption
Market Price" shall be equal to the Closing Price of the Common Stock on the
Conversion Date. From time to time following the date of issuance of this
Debenture (the "Issue Date"), the Holder may request advance notice as to
whether the Borrower will issue shares of Common Stock or redeem the portion of
this Debenture submitted for conversion pursuant to this Section 1.1(d). Such
request shall be made in writing and the Borrower shall respond in writing
within three (3) business days of receipt of the request. The Borrower will be
bound by such response for a period of twenty (20) days from the date of its
response. A failure to respond within three (3) business days shall be deemed to
be an election to issue Common Stock on conversion. Notwithstanding the
foregoing, if the Borrower is bound to issue Common Stock in lieu of a
redemption pursuant to this Section 1.1(d), it may by written notice to the
Holder by 9:00 a.m. on the Trading Day immediately following the Conversion Date
elect to redeem the shares issuable upon conversion at the Post-Conversion
Redemption Price (as hereinafter defined). The "Post-Conversion Redemption
Price" means the average Closing Price of the Common Stock over the five
consecutive (5) Trading Days beginning on the Trading Day immediately following
the Conversion Date. Any redemption amounts payable hereunder shall be paid to
the Holder within five (5) Trading Days of the Conversion Date. The "Closing
Price" means, for any security as of any date, the last sale price on The New
York Stock Exchange (the "NYSE") as reported by Bloomberg Financial Markets
("Bloomberg") or an equivalent, reliable reporting service mutually acceptable
to and hereafter designated by the Holders of a majority in interest of the
Debentures and the Borrower or, if the NYSE is not the principal trading market
for such security, the last sale price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last sale price of
such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no last sale price is
reported for such security by Bloomberg, then the average of the bid and ask
prices of all active market makers for such security as reported in the "pink
sheets" by the National Quotation Bureau, Inc. If the Closing Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Price of such security on such date shall be the fair market value as
mutually determined by the Borrower and the Holders of a majority in interest of
Debentures being converted for which the calculation of the Closing Price is
required in order to determine the Conversion Price of such Debentures. "Trading
Day" shall mean any day on which the Common Stock is traded
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for any period on the NYSE, or on the principal securities exchange or other
securities market on which the Common Stock is then being traded.
1.2 CONVERSION PRICE. (a) The Conversion Price shall be the lesser
of (i) the Market Price, where the Market Price means the average of the daily
Closing Prices of the Common Stock on the NYSE, or on the principal securities
exchange or other securities market on which the Common Stock is then being
traded, for the five (5) consecutive Trading Days yielding the lowest average
price during the twenty-five (25) Trading Day period (the "Pricing Period")
ending one (1) Trading Day prior to the date the Conversion Notice is sent by
the Holder to the Borrower via facsimile or other reasonable means of
communication (the "Conversion Date"), and (ii) $6.56 (the "Fixed Conversion
Price") (subject, in each case, to equitable adjustments for stock splits, stock
dividends or rights offerings by the Borrower relating to the Borrower's
securities or relating to the securities of any subsidiary of the Borrower,
combinations, recapitalization, reclassifications, extraordinary distributions
and similar events). If the average Closing Price of the Common Stock during the
ten (10) Trading Days immediately following the public release of the Borrower's
1997 year end results is greater than the Fixed Conversion Price, the Fixed
Conversion Price shall be adjusted to equal such 10-day average; provided,
however, that in no event shall the Fixed Conversion Price, as adjusted, exceed
$7.22. Notwithstanding the foregoing, no conversions shall be permitted during
the period beginning on the Issue Date and ending twenty-five (25) Trading Days
from the Issue Date at a Conversion Price below the highest sale price as
reported on the NYSE on the Issue Date.
(b) In the event that (1) the Borrower fails to obtain
effectiveness with the Securities and Exchange Commission of the Registration
Statement (as defined in the Registration Rights Agreement) prior to one hundred
twenty (120) days following the Issue Date, or (2) such Registration Statement
lapses in effect, or sales otherwise cannot be made thereunder, whether by
reason of the Borrower's failure or inability to amend or supplement the
prospectus (the "Prospectus") included therein in accordance with the
Registration Rights Agreement or otherwise, after such Registration Statement
becomes effective (including, without limitation, during an Allowed Delay (as
defined in the Registration Rights Agreement)), then the Pricing Period shall be
comprised of, (i) in the case of an event described in clause (1), the twenty
five (25) Trading Days preceding the 120th day following the Issue Date plus all
Trading Days through and including the third Trading Day following the date of
effectiveness of the Registration Statement; and (ii) in the case of an event
described in clause (2), the twenty five (25) Trading Days preceding the date on
which the Holder is first notified that sales may not be made under the
Prospectus, plus all Trading Days through and including the third Trading Day
following the date on which the Holder is first notified that such sales may
again be made under the Prospectus.
1.3 AUTHORIZED SHARES. The Borrower covenants that during the
period the conversion right exists, the Borrower will reserve from its
authorized and unissued
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Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the full conversion of the Debentures. As of the date of issuance of
this Debenture, 1,600,000 authorized and unissued shares of Common Stock have
been duly reserved for issuance upon conversion of this Debentures (the
"Reserved Amount"). The Borrower represents that upon issuance following
conversion, such shares will be duly and validly issued, fully paid and
non-assessable. The Borrower (i) acknowledges that it has instructed its
transfer agent to issue certificates for the Common Stock issuable upon
conversion of this Debenture upon the procedures properly established for
conversion and (ii) agrees that its issuance of this Debenture shall constitute
full authority to its officers and agents who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of Common Stock in accordance with the terms and conditions of this
Debenture and the Registration Rights Agreement.
If, at any time the Holder of this Debenture submits a Notice of
Conversion, the Borrower does not have sufficient authorized but unissued shares
of Common Stock available to effect such conversion in accordance with the
provisions of this Article I (a "Conversion Default"), subject to Section 6.8,
the Borrower shall issue to the Holder all of the shares of Common Stock which
are then available to effect such conversion. The portion of this Debenture
which the Holder included in its Conversion Notice and which exceeds the amount
which is then convertible into available shares of Common Stock (the "Excess
Amount") shall, notwithstanding anything to the contrary contained herein, not
be convertible into Common Stock in accordance with the terms hereof until (and
at the Holder's option at any time after) the date additional shares of Common
Stock are authorized by the Borrower, at which time the Conversion Price in
respect thereof shall be the lower of (i) the Conversion Price on the Conversion
Default Date (as hereinafter defined) and (ii) the Conversion Price on the
Conversion Date thereafter elected by the Holder in respect thereof. The
Borrower shall pay to the Holder payments ("Conversion Default Payments") for a
Conversion Default in the amount of (N/365) x .18 x the Excess Amount on the
Conversion Date in respect of the Conversion Default (the "Conversion Default
Date"), where (i) N = the number of days from the Conversion Default Date to the
date (the "Authorization Date") that the Borrower authorizes a sufficient number
of shares of Common Stock to effect conversion of the full outstanding principal
balance of this Debenture. The Borrower shall use its best efforts to authorize
a sufficient number of shares of Common Stock as soon as practicable following
the earlier of (i) such time that the Holder notifies the Borrower or that the
Borrower otherwise becomes aware that there are or likely will be insufficient
authorized and unissued shares to allow full conversion thereof and (ii) a
Conversion Default. The Borrower shall send notice to the Holder of the
authorization of additional shares of Common Stock, the Authorization Date and
the amount of the Holder's accrued Conversion Default Payments. The accrued
Conversion Default Payments for each calendar month shall be paid in cash or
shall be convertible into Common Stock (at such time as there are sufficient
authorized shares of Common Stock) at the Market Price, at the Borrower's
option, as follows:
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(a) In the event the Borrower elects to make such payment in
cash, cash payment shall be made to the Holder by the fifth (5th) day of the
month following the month in which it has accrued; and
(b) In the event the Borrower elects to make such payment in
Common Stock, such amount shall be added to the Accreted Principal Balance and
the Holder may convert such payment amount into Common Stock at the Conversion
Price (as in effect at the time of conversion) at any time after the fifth day
of the month following the month in which it has accrued (at such time as there
are sufficient authorized shares of Common Stock) in accordance with the terms
of this Article I.
The Borrower's election shall be made in writing to the Holder at any
time prior to 8:00 p.m., New York City Time, on the third day of the month
following the month in which Conversion Default payments have accrued. If no
election is made, the Borrower shall be deemed to have elected to make payment
in cash. Nothing herein shall limit the Holder's right to pursue actual damages
(to the extent in excess of the Conversion Default Payments) due to the
Borrower's failure to maintain a sufficient number of authorized shares of
Common Stock.
1.4 METHOD OF CONVERSION.
(a) The Accreted Principal Balance of this Debenture may be
converted by the Holder in whole or in part (provided such partial conversion is
at least $25,000, or such lesser amount as shall remain unpaid at the time of
the conversion at any time from time to time after the Issue Date, by (A)
submitting to the Borrower a Notice of Conversion (by facsimile or other
reasonable means of communication dispatched on the Conversion Date prior to
8:00 p.m., New York City Time) and (B) subject to Section 1.4(b), surrendering
this Debenture at the principal office of the Borrower. Each Debenture issued
and outstanding on the Maturity Date automatically shall be converted into
shares of Common Stock on such date at the then effective Conversion Price in
accordance with, and subject to, the provisions of this Article I (the
"Automatic Conversion"), provided that no Redemption Event has occurred which is
continuing on the Maturity Date. The Maturity Date shall be the Conversion Date
for purposes of determining the Conversion Price and the time within which
certificates representing the Common Stock must be delivered to the holder.
Notwithstanding anything to the contrary contained herein, the Maturity Date
shall be extended for the aggregate number of days comprising any Allowed Delays
under the Registration Rights Agreement and the Accreted Principal Balance shall
be adjusted accordingly.
(b) Notwithstanding anything to the contrary set forth herein,
upon conversion of this Debenture in accordance with the terms hereof, the
Holder shall not be required to physically surrender this Debenture to the
Borrower unless the entire unpaid
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principal amount of this Debenture is so converted. The Holder and the Borrower
shall maintain records showing the principal amount so converted and the dates
of such conversions or shall use such other method, reasonably satisfactory to
the Holder and the Borrower, so as not to require physical surrender of this
Debenture upon each such conversion. In the event of any dispute or discrepancy,
such records of the Borrower shall be controlling and determinative in the
absence of manifest error. Notwithstanding the foregoing, if any portion of this
Debenture is converted as aforesaid, the Holder may not transfer this Debenture
unless the Holder first physically surrenders this Debenture to the Borrower,
whereupon the Borrower will forthwith issue and deliver upon the order of the
Holder a new note of like tenor, registered as the Holder (upon payment by the
Holder of any applicable transfer taxes) may request, representing in the
aggregate the remaining unpaid principal amount of this Debenture. The Holder
and any assignee, by acceptance of this Debenture, acknowledge and agree that,
by reason of the provisions of this paragraph, following conversion of a portion
of this Debenture, the unpaid and unconverted principal amount of this Debenture
represented by this Debenture may be less than the amount stated on the face
hereof.
(c) The Borrower shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
shares of Common Stock or other securities or property on conversion of this
Debenture in a name other than that of the Holder (or in street name), and the
Borrower shall not be required to issue or deliver any such shares or other
securities or property unless and until the person or persons (other than the
Holder or the custodian in whose street name such shares are to be held for the
Holder's account) requesting the issuance thereof shall have paid to the
Borrower the amount of any such tax or shall have established to the
satisfaction of the Borrower that such tax has been paid.
(d) Upon receipt by the Borrower from the Holder of a
facsimile transmission (or other reasonable means of communication) of a Notice
of Conversion meeting the requirements for conversion as provided in this
Section 1.4, subject to the Borrower's redemption rights as provided in Section
1.1(d) above, the Borrower shall issue and deliver or cause to be issued and
delivered to the Holder certificates for the Common Stock issuable upon such
conversion within three (3) business days after such receipt (and, solely in the
case of conversion of the entire unpaid principal amount hereof, surrender of
this Debenture) (such third business day being hereinafter referred to as the
"Deadline") in accordance with the terms hereof and the Purchase Agreement
(including, without limitation, in accordance with the requirement that
certificates for shares of Common Stock issued on or after the effective date of
the Registration Statement (as defined in the Registration Rights Agreement)
upon conversion of this Debenture shall not bear any restrictive legend).
(e) Upon receipt by the Borrower of a Notice of Conversion,
subject to the Borrower's redemption rights as provided in Section 1.1(d) above,
the Holder
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shall be deemed to be the holder of record of the Common Stock issuable upon
such conversion, the Accreted Principal Balance on this Debenture shall be
reduced to reflect such conversion, and, unless the Borrower defaults on its
obligations under this Article I, all rights with respect to the portion of this
Debenture being so converted shall forthwith terminate except the right to
receive the Common Stock or other securities, cash or other assets, as herein
provided, on such conversion. If the Holder shall have given a Notice of
Conversion as provided herein, the Borrower's obligation to issue and deliver
the certificates for Common Stock, subject to the Borrower's redemption rights
as provided in Section 1.1(d) above, shall be absolute and unconditional,
irrespective of the absence of any action by the Holder to enforce the same, any
waiver or consent with respect to any provision thereof, the recovery of any
judgment against any person or any action to enforce the same, any failure or
delay in the enforcement of any other obligation of the Borrower to the holder
of record, or any setoff, counterclaim, recoupment, limitation or termination,
or any breach or alleged breach by the Holder of any obligation to the Borrower,
and irrespective of any other circumstance which might otherwise limit such
obligation of the Borrower to the Holder in connection with such conversion. The
date of receipt of such Notice of Conversion shall be the Conversion Date so
long as it is received before 8:00 p.m., New York City Time, on such date.
(f) In lieu of delivering physical certificates representing
the Common Stock issuable upon conversion, provided the Borrower's transfer
agent is participating in the Depository Trust Company ("DTC") Fast Automated
Securities Transfer ("FAST") program, upon the effectiveness of the Registration
Statement to be filed pursuant to the Registration Rights Agreement and upon the
request of the Holder and its compliance with the provisions contained in
Section 1.1 and in this Section 1.4, the Borrower shall endeavor to cause its
transfer agent to electronically transmit the Common Stock issuable upon
conversion to the Holder by crediting the account of the Holder's Prime Broker
with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. Such
transmission shall not affect the manner in which the shares issuable upon
conversion can be sold in accordance with Section 1.5 below or the Holder's
obligation to comply with the applicable prospectus delivery requirements.
(g) Without in any way limiting the Holder's right to pursue
other remedies, including actual damages and/or equitable relief, the parties
agree that if delivery of the Common Stock issuable upon conversion of this
Debenture is more than two (2) business day after the Deadline (other than a
failure due to the circumstances described in Section 1.3 above, which failure
shall be governed by such Section) the Borrower shall pay to the Holder $500 per
day in cash, for each of the first two (2) days beyond the Deadline and $2,500
per day in cash for each day thereafter that the Borrower fails to deliver such
Common Stock. Such cash amount shall be paid to the Holder by the fifth (5th)
day of the month following the month in which it has accrued or, at the option
of the Holder (by written notice to the Borrower by the first day of the month
following the month in which it
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has accrued), shall be added to the principal amount of this Debenture, in which
event interest shall accrue thereon in accordance with the terms of this
Debenture and such additional principal amount shall be convertible into Common
Stock in accordance with the terms of this Debenture. This paragraph shall apply
each time a Conversion Notice is submitted by the Holder.
1.5 CONCERNING THE SHARES. The shares of Common Stock issuable
upon conversion of this Debenture may not be sold or transferred unless either
(i) such shares shall have been included in an effective registration statement
under the Act or (ii) the Borrower or its transfer agent shall have been
furnished with an opinion or other similar letter of legal counsel (reasonably
acceptable to the Borrower) to the effect that such sale or transfer is exempt
from the registration requirements of the Act or (iii) such shares are sold
pursuant to Rule 144 under the Act (or a successor rule). Except as otherwise
provided in the Purchase Agreement (and subject to the removal provisions set
forth below), each physical certificate for shares of Common Stock issuable upon
conversion of this Debenture that has not been so included in an effective
registration statement or that has not been sold pursuant to an effective
registration statement or an exemption that permits removal of the legend, shall
bear a legend substantially in the following form, as appropriate:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER SAID
ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE
TO THE BORROWER THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID
ACT."
The legend set forth above shall be removed and the Borrower
shall issue to the Holder a new certificate therefor free of any transfer legend
if (i) the Borrower or its transfer agent shall have received an opinion or
other similar letter of counsel, to the effect that a public sale or transfer of
such Common Stock may be made without registration under the Act and any
applicable state securities laws and the shares are so sold or transferred, or
the Common Stock issuable upon conversion of this Debenture (to the extent such
securities are deemed to have been acquired on the same date) can be sold
pursuant to Rule 144 (or a successor rule thereto) without any restriction as to
the number of shares of Common Stock acquired as of a particular date that can
then be immediately sold or (ii) in the case of the Common Stock issuable upon
conversion of this Debenture, a registration statement under the Act covering
such securities is in effect. Nothing in this Debenture (including the removal
of the foregoing legend from physical certificates or the electronic
transmission of Common Stock for the Holder's account pursuant to Section
1.4(f)) shall (i) limit the Borrower's
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obligation under the Registration Rights Agreement or (ii) affect in any way the
Holder's obligations to comply with applicable prospectus delivery requirements
upon the resale of the securities referred to herein.
1.6 EFFECT OF CERTAIN EVENTS.
(a) If, at any time when this Debenture is issued and
outstanding, there shall be any merger, consolidation, exchange of shares,
recapitalization, reorganization, or other similar event, as a result of which
shares of Common Stock of the Borrower shall be changed into the same or a
different number of shares of another class or classes of stock or securities of
the Borrower or another entity, or in case of any sale or conveyance of all or
substantially all of the assets of the Borrower other than in connection with a
plan of complete liquidation of the Borrower, then the Holder of this Debenture
shall thereafter have the right to receive upon conversion of this Debenture,
upon the bases and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore issuable upon conversion,
such stock, securities or assets which the Holder would have been entitled to
receive in such transaction had this Debenture been converted in full
immediately prior to such transaction (without giving effect to any limitations
or restrictions on conversion set forth in this Debenture), and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the Holder of this Debenture to the end that the provisions hereof (including,
without limitation, provisions for adjustment of the Conversion Price and of the
number of shares issuable upon conversion of the Debenture) shall thereafter be
applicable, as nearly as may be practicable in relation to any securities or
assets thereafter deliverable upon the exercise hereof. The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers or
share exchanges.
(b) Subject to Section 2.1, if the Borrower shall declare or
make any distribution of its assets (or rights to acquire its assets) to holders
of Common Stock as a dividend, stock repurchase, by way of return of capital or
otherwise (including any dividend or distribution to the Borrower's shareholders
in cash or shares (or rights to acquire shares) of capital stock of a subsidiary
(i.e., a spin-off) (a "Distribution"), the Holder of this Debenture shall be
entitled, upon any conversion of this Debenture after the date of record for
determining shareholders entitled to such Distribution, to receive the amount of
such assets which would have been payable to the Holder with respect to the
shares of Common Stock issuable upon such conversion had the Holder been the
holder of such shares of Common Stock on the record date for the determination
of shareholders entitled to such Distribution.
(c) Subject to Section 2.1, if, at any time when any
Debentures are issued and outstanding, the Borrower issues any convertible
securities or rights to purchase stock, warrants, securities or other property
(the "Purchase Rights") pro rata to the record holders of Common Stock, then the
Holder of this Debenture will be entitled to acquire,
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upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which the Holder could have acquired if the Holder had held the number of shares
of Common Stock acquirable upon complete conversion of this Debenture (without
regard to any limitations on conversion contained herein) immediately before the
date on which a record is taken for the grant, issuance or sale of such Purchase
Rights or, if no such record is taken, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
(d) Upon the occurrence of each adjustment or readjustment of
the Conversion Price as a result of the events described in this Section 1.6,
the Borrower, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the Holder of a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Borrower shall, upon the written
request of the Holder, furnish to the Holder a like certificate setting forth
(i) such adjustment or readjustment, (ii) the Conversion Price at the time in
effect and (iii) the number of shares of Common Stock and the amount, if any, of
other securities or property which at the time would be received upon conversion
of the Debenture.
1.7 CERTAIN PAYMENTS IN LIEU OF CONVERSION. If it is determined
(upon written notice from the NYSE) that the provisions of Rule 312.03(c) of the
rules of the NYSE are applicable to the issuance of Common Stock upon conversion
of this Debenture in accordance with this Article 1, then notwithstanding
anything to the contrary contained herein, in no event shall the Borrower issue
more than the Maximum Share Amount (as hereinafter defined and subject to
adjustment as provided herein) upon conversion of this Debenture (including any
shares of capital stock or rights to acquire shares of capital stock issued by
the Borrower which are aggregated with the Common Stock issued or issuable upon
conversion of the Debentures for purposes of Rule 312.03(c)), unless the
Borrower shall have obtained Stockholder Approval (as hereinafter defined) or a
waiver of such requirement by the NYSE. As used herein, Stockholder Approval
means approval by the stockholders of the Borrower in accordance with Rule
312.03(c) of the rules of the NYSE. If the Borrower receives written notice from
the NYSE that such rule applies to the issuance of Common Stock hereunder, once
the Maximum Share Amount has been issued (the date of which is hereinafter
referred to as the "Maximum Conversion Date"), unless the Borrower shall have
obtained Stockholder Approval or a waiver of such requirement by the NYSE (or
Rule 312.03(c) is otherwise determined to be inapplicable), in lieu of any
further right to convert this Debenture, and in full satisfaction of the
Borrower's obligations under this Debenture, the Borrower shall pay to the
Holder, within fifteen (15) business days of the Maximum Conversion Date, an
amount equal to the greater of (i) the sum of (a) 110% times the then Accreted
Principal Balance immediately following the Maximum Conversion Date plus (b) any
optional amounts that may be added thereto at the Maximum Conversion Date by the
Holder in accordance with the terms hereof (the then Accreted Principal Balance
of this Debenture immediately following the Maximum Conversion Date plus the
amounts
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referred to in clause (b) above shall collectively be referred to as the
"Remaining Convertible Amount"), or (ii) the Remaining Convertible Amount
divided by the Conversion Price (based on the twenty-five (25) Trading Day
period ending one (1) Trading Day prior to the date of payment) multiplied by
the Closing Price of the Common Stock on the Trading Day immediately preceding
the date of payment. The Maximum Share Amount shall mean an aggregate of
4,168,658 shares of Common Stock (19.99% of the Borrower's outstanding shares of
Common Stock as of November 25, 1997), subject to equitable adjustment from time
to time for stock splits, stock dividends, combinations, capital reorganizations
and similar events relating to the Common Stock occurring after the date hereof.
With respect to each Holder of Debentures, the Maximum Share Amount shall refer
to the Holder's pro rata share thereof determined in accordance with Section 6.8
below. In the event that the Borrower obtains Stockholder Approval, the approval
of the NYSE or otherwise concludes that it is able to increase the number of
shares to be issued above the Maximum Share Amount (such increased number being
the "New Maximum Share Amount"), the references to Maximum Share Amount, above,
shall be deemed to be, instead, references to the greater New Maximum Share
Amount. In the event that Stockholder Approval is not obtained or a registration
statement covering the additional shares of Common Stock which constitute the
New Maximum Share Amount is not effective prior to the Maximum Share Amount
being issued (if such registration statement is necessary to allow for the
public resale of such securities), the Maximum Share Amount shall remain
unchanged; provided, however, that the Holder may grant an extension of the
effective date of such registration statement. In the event that (a) the
aggregate number of shares of Common Stock issued pursuant to the Debentures
(including any shares of capital stock or rights to acquire shares of capital
stock issued by the Borrower which are aggregated with the Common Stock issued
or issuable upon conversion of the Debentures for purposes of Rule 312.03(c))
represents at least fifty percent (50%) of the Maximum Share Amount and (b) the
sum of (x) the aggregate number of shares of Common Stock issued pursuant to the
Debentures plus (y) the aggregate number of shares of Common Stock that remain
issuable pursuant to the Debentures (including any shares of capital stock or
rights to acquire shares of capital stock issued by the Borrower which are
aggregated with the Common Stock issued or issuable upon conversion of the
Debentures for purposes of Rule 312.03(c)) represents at least one hundred
percent (100%) of the Maximum Share Amount (the "Triggering Event"), unless the
Borrower intends to exercise its redemption election (and provides the Holder
with written binding notification to that effect, together with reasonable
assurances regarding the source of funds therefor), the Borrower will seek and
use its best efforts to obtain Stockholder Approval (or obtain such other relief
as will allow conversions hereunder in excess of the Maximum Share Amount) as
soon as practicable following the Triggering Event and before the Maximum
Conversion Date.
1.8 STATUS AS STOCKHOLDER. Upon submission of a Notice of
Conversion by a Holder, (i) the shares covered thereby (other than the shares,
if any, which cannot be issued because their issuance would exceed such Holder's
allocated portion of the Reserved
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Amount) shall be deemed converted into shares of Common Stock and (ii) the
Holder's rights as a Holder of such converted portion of this Debenture shall
cease and terminate, excepting only the right to receive certificates for, or
DTC transfer of, such shares of Common Stock and to any remedies provided herein
or otherwise available at law or in equity to such Holder because of a failure
by the Borrower to comply with the terms of this Debenture. Notwithstanding the
foregoing, if a Holder has not received certificates for, or DTC transfer of,
all shares of Common Stock prior to the tenth (10th) business day after the
expiration of the Deadline with respect to a conversion of any portion of this
Debenture for any reason, then (unless the Holder otherwise elects to retain its
status as a holder of Common Stock by so notifying the Borrower), the Holder
shall regain the rights of a Holder of this Debenture with respect to such
unconverted portions of this Debenture and the Borrower shall, as soon as
practicable, return such unconverted Debenture to the holder or, if the
Debenture has not been surrendered, adjust its records to reflect that such
portion of this Debenture has not been converted. In all cases, the Holder shall
retain all of its rights and remedies (including, without limitation, (i) the
right to receive Conversion Default Payments pursuant to Section 1.3 the extent
required thereby for such Conversion Default and any subsequent Conversion
Default and (ii) the right to have the Conversion Price with respect to
subsequent conversions determined in accordance with Section 1.3) for the
Borrower's failure to convert this Debenture.
ARTICLE II. CERTAIN COVENANTS
2.1 DISTRIBUTIONS ON CAPITAL STOCK. So long as the Borrower shall
have any obligation under this Debenture, the Borrower shall not without the
Holder's written consent (a) pay, declare or set apart for such payment, any
dividend or other distribution (whether in cash, property or other securities)
on shares of capital stock other than dividends on shares of Common Stock solely
in the form of additional shares of Common Stock (unless at the time of
declaration and payment such action is permitted to be taken under all of the
Borrower's indebtedness senior to the Debenture).
2.2 RESTRICTION ON STOCK REPURCHASES. So long as the Borrower
shall have any obligation under this Debenture, the Borrower shall not without
the Holder's written consent redeem, repurchase or otherwise acquire (whether
for cash or in exchange for property or other securities or otherwise) in any
one transaction or series of related transactions any shares of capital stock of
the Borrower or any warrants, rights or options to purchase or acquire any such
shares (unless at the time of declaration and payment such action is permitted
to be taken under all of the Borrower's indebtedness senior to the Debenture).
2.3 TRADING RESTRICTIONS. The Holder covenants and agrees that,
during any period during which a Conversion Price is computed, neither Holder
nor others acting on its behalf shall be responsible for the low trading price
of the Borrower's Common Stock. In
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addition, the Holder represents that it has not been responsible for the low
trading price of the Borrower's Common Stock at any time prior to the execution
of this Agreement.
ARTICLE III. REDEMPTION EVENTS
If any of the following redemption events (each, a "Redemption
Event") shall occur:
3.1 FAILURE TO PAY PRINCIPAL BALANCE. The Borrower fails to pay
the Accreted Principal Balance hereof when due, whether at maturity, upon
mandatory prepayment pursuant to Section 1.7, upon acceleration or otherwise;
3.2 CONVERSION AND THE SHARES. The Borrower fails to issue shares
of Common Stock to the Holder (or announces that it will not honor its
obligation to do so) upon exercise by the Holder of the conversion rights of the
Holder in accordance with the terms of this Debenture (for a period of at least
ninety (90) days, if such failure is solely as a result of the circumstances
governed by Section 1.3 and the Borrower is using its best efforts to authorize
a sufficient number of shares of Common Stock as soon as practicable), fails to
transfer any certificate for shares of Common Stock issued to the Holder upon
conversion of this Debenture and when required by this Debenture or the
Registration Rights Agreement, or fails to remove any restrictive legend on any
certificate for any shares of Common Stock issued to the Holder upon conversion
of this Debenture as and when required by this Debenture, the Purchase Agreement
or the Registration Rights Agreement and any such failure shall continue uncured
(or any announcement not to honor conversions shall not be rescinded) for ten
(10) days after the Borrower shall have been notified thereof in writing by the
Holder.
3.3 FAILURE TO EFFECT REGISTRATION. The Borrower fails to obtain
effectiveness with the Securities and Exchange Commission of the Registration
Statement prior to April 30, 1998 or the Registration Statement lapses in effect
(or sales cannot otherwise be made thereunder) for more than ninety (90)
consecutive Trading Days or one hundred fifty (150) Trading Days in any twelve
month period after the Registration Statement becomes effective;
3.4 BREACH OF COVENANTS. The Borrower breaches any material
covenant or other material term or condition contained in Sections 1.3, 1.6, 1.7
or 4.1 of this Debenture, or Sections 4(e), 4(h), 4(i) or 4(j) of the Purchase
Agreement and such breach continues for a period of ten (10) days after written
notice thereof to the Borrower from the Holder;
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3.5 BREACH OF REPRESENTATIONS AND WARRANTIES. Any representation
or warranty of the Borrower made herein or in any agreement, statement or
certificate given in writing pursuant hereto or in connection herewith
(including, without limitation, the Purchase Agreement and the Registration
Rights Agreement), shall be false or misleading in any material respect when
made and the breach of which has (or with the passage of time will have) a
Material Adverse Effect (as defined in the Purchase Agreement);
3.6 RECEIVER OR TRUSTEE. The Borrower shall make an assignment
for the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business, or such a receiver or trustee shall otherwise be appointed;
3.7 BANKRUPTCY. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the relief of debtors shall be instituted by or against the
Borrower (which is not being contested if commenced against the Borrower); or
3.8 DELISTING OF COMMON STOCK. The Common Stock is not listed on
at least one of the NYSE, the Nasdaq National Market, or the American Stock
Exchange;
then, upon the occurrence and during the continuation of any
Redemption Event specified in Section 3.1, 3.2, 3.3, 3.4, 3.5 or 3.9, at the
option of the Holders of a majority of the aggregate principal amount of the
outstanding Debentures issued pursuant to the Purchase Agreement, the Borrower
shall, and upon the occurrence of a Redemption Event specified in Section 3.6 or
3.7, the Debentures shall become immediately due and payable and the Borrower
shall pay to the Holder, in full satisfaction of its obligations hereunder, an
amount equal to the greater of (i) the sum of (w) 110% times the then Accreted
Principal Balance of this Debenture plus (x) any amounts owed to the Holder
pursuant to Sections 1.3 and 1.4(g) hereof or pursuant to Section 2(c) of the
Registration Rights Agreement (the then outstanding principal amount of this
Debenture to the date of payment plus the amounts referred to in clause (x)
shall collectively be known as the "Default Sum") or (ii) the Default Sum
divided by the then applicable Conversion Price (based on the twenty-five (25)
Trading Day period ending one (1) Trading Day prior to the date the Holders
exercise their option pursuant to this paragraph or the date of the occurrence
of an event referred to in Section 3.6 or 3.7) multiplied by the Closing Price
of the Common Stock on the date the Holders exercise their option pursuant to
this paragraph or the date of the occurrence of an event referred to in Section
3.6 or 3.7 (the "Default Amount") and all other amounts payable hereunder shall
immediately become due and payable, all without demand, presentment or notice,
all of which hereby are expressly waived, together with all costs, including,
without limitation, legal fees and expenses, of collection, and the Holder shall
be entitled to exercise all other rights and remedies available at law or in
equity.
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If the Borrower fails to pay the Default Amount within five (5)
business days of written notice that such amount is due and payable, then the
Holder shall have the right at any time, so long as the Borrower remains in
default (and so long and to the extent that there are sufficient authorized
shares), to require the Borrower, upon written notice, to immediately issue, in
lieu of the Default Amount, the number of shares of Common Stock of the Borrower
equal to the Default Amount divided by the Conversion Price then in effect as
its sole and exclusive remedy.
ARTICLE IV. REDEMPTION
4.1 REDEMPTION. So long as no Redemption Event shall have
occurred and be continuing and so long as the Registration Statement to be filed
pursuant to the Registration Rights Agreement is then in effect and has been in
effect and sales can be made thereunder at all times between the receipt by the
Holders of the Redemption Notice (as defined below) and the Redemption Date (as
defined below), beginning ninety (90) days following effectiveness of the
Registration Statement (the "First Redemption Date"), in the event the Closing
Price of the Common Stock is greater than $7.50 per share for ten (10)
consecutive Trading Days, the Borrower may redeem, in whole but not in part,
this Debenture upon thirty (30) days prior written notice (a "Redemption
Notice") in accordance with this Section 4.1. The First Redemption Date shall be
delayed by one (1) Trading Day each for each Trading Day (subsequent to the
effective date of the Registration Statement) occurring prior thereto and prior
to the full conversion of this Debenture that (i) sales cannot be made pursuant
to the Registration Statement (whether by reason of the Borrower's failure to
properly supplement or amend the prospectus included therein in accordance with
the terms of the Registration Rights Agreement or otherwise, including during
any Allowed Delay as described in the Registration Rights Agreement) or (ii) any
Redemption Event (as defined in Article III) exists, without regard to whether
any cure periods shall have run. Any notice of redemption (a "Redemption
Notice") shall be delivered to the Holder at its registered address appearing on
the records of the Borrower and shall state (1) that the Borrower is exercising
its right to redeem the Debentures and (2) the date of redemption. On the date
fixed for redemption (the "Redemption Date"), the Borrower shall make payment of
the Redemption Amount (as hereinafter defined) in cash to or upon the order of
the Holder as specified by the Holder in writing to the Borrower at least one
business day prior to the Redemption Date. The Redemption Amount shall be equal
to the sum of (a) 110% times the then Accreted Principal Balance of this
Debenture plus (b) any amounts owed to the Holder pursuant to Sections 1.3 and
1.4(g) hereof or pursuant to Section 2(c) of the Registration Rights Agreement.
In the event that the Borrower redeems this Debenture pursuant to the
immediately preceding sentence, in addition to the Redemption Amount payable in
cash pursuant to the immediately preceding sentence, on the Redemption Date the
Borrower shall issue to the Holder, a number of warrants to purchase Common
Stock of the Borrower equal to the outstanding Accreted Principal Balance being
redeemed divided by
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1,000 multiplied by 21, which warrants will have a five (5) year term, an
exercise price equal to 115% of the Closing Price of the Common Stock on the
date of redemption and shall otherwise be in the form of the warrant attached as
Exhibit "D" to the Purchase Agreement. Notwithstanding anything to the contrary
contained in this Section 4.1, the Holder shall at all times prior to the
Redemption Date under this Section 4.1 maintain the right to convert all or any
part of this Debenture in accordance with Article I and any amounts so converted
after receipt of a Redemption Notice and prior to the Redemption Date set forth
in such notice which is otherwise subject to redemption pursuant to the
Redemption Notice.
ARTICLE V. SUBORDINATION
5.1. AGREEMENT TO SUBORDINATE. Except as otherwise provided in
Section 1.7, Article III and Article IV of this Debenture, the Accreted
Principal Balance of this Debenture is payable solely in shares of Common Stock
upon conversion in accordance with Article I hereof. Notwithstanding anything in
this Debenture to the contrary, the Borrower agrees, and by accepting this
Debenture the Holder agrees, that the indebtedness evidenced by this Debenture
is subordinate and subject in right of payment, to the extent and in the manner
expressly provided in this Article V, to the prior payment in full of all Senior
Debt, and that the subordination is for the benefit of and enforceable by the
holders of Senior Debt. This Debenture shall in all respects rank at least pari
passu with all other present and future obligations of the Borrower, and only
Senior Debt shall rank senior to this Debenture.
5.2 INSOLVENCY, BANKRUPTCY, DISSOLUTION OF BORROWER. Upon any
payment or distribution (whether in cash, securities or other property) to
creditors of the Borrower upon any Insolvency Event (as hereinafter defined):
(a) all Senior Debt shall first be paid in full before the
Holder shall be entitled to receive any payment or other distribution on
or in respect of this Debenture; and
(b) until all Senior Debt is paid in full, any payment or
distribution to which the Holder of this Debenture would be entitled but
for this Article V shall be made to holders of Senior Debt as their
interests may appear, except that the Holder may receive shares of the
Borrower as reorganized or readjusted or securities of the Borrower or
any other corporation if the payment of such securities is subordinate
to Senior Debt to at least the same extent as this Debenture is
subordinate to Senior Debt.
5.3 DEFAULT ON SENIOR DEBT. (a) The Borrower may not pay the
Accreted Principal Balance of this Debenture or make any deposit in respect of
this Debenture and
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may not repurchase, redeem or otherwise retire this Debenture (collectively,
"pay this Debenture") if (i) the principal of or interest on any Senior Debt is
not paid when due or (ii) any other default on Senior Debt occurs and the
maturity of such Senior Debt is accelerated in accordance with its terms unless,
in each case, the default has been cured or waived and any such acceleration has
been rescinded or such Senior Debt has been paid in full. During the continuance
of any default (other than a default described in clause (i) or (ii) of the
preceding sentence) with respect to any Senior Debt pursuant to which the
maturity thereof may be accelerated immediately without further notice (except
such notice as may be required to effect such acceleration) or the expiration of
any applicable grace periods, the Borrower may not pay this Debenture for a
period (a "Payment Blockage Period") commencing upon the receipt by the Borrower
and the Holder of written notice of such default from a representative of such
Senior Debt specifying an election to effect a Payment Blockage Period (a
"Payment Blockage Notice") and ending 179 days thereafter (or earlier if such
Payment Blockage Period is terminated (i) by written notice to the Borrower from
the representative which gave such Payment Blockage Notice, (ii) by repayment in
full of such Senior Debt or (iii) because the default specified in such Payment
Blockage Notice is no longer continuing and the prior default has been waived).
Notwithstanding the immediately preceding sentence (but subject to the
provisions contained in the first sentence of this Section), unless the holders
of such Senior Debt or the representative of such holders shall have accelerated
the maturity of such Senior Debt, the Borrower shall resume payments (including
any missed payments) on this Debenture after the end of such Payment Blockage
Period unless such payment is otherwise prohibited under this Article V.
Multiple Payment Blockage Periods may be imposed so long as (x) the cumulative
period covered by all such Payment Blockage Periods does not exceed 179 days in
any 365 consecutive day period and (y) no more than one Payment Blockage Period
may result from the same default.
(b) The failure to make a payment or distribution on this
Debenture by reason of this Article V shall not be construed or deemed to
prevent the occurrence of a Redemption Event hereunder; provided that any
acceleration of payment of this Debenture resulting therefrom shall be rescinded
if and when the following conditions shall be simultaneously satisfied (x) each
payment or distribution which gave rise to such Redemption Event shall be made
and (y) no other such Redemption Event shall have occurred.
5.4 SUBORDINATED ACCELERATION; STANDSTILL. (a) The Holder agrees
to give the Borrower not less than five (5) days' prior written notice of its
intention to accelerate the maturity of this Debenture pursuant to Article III
hereof. The Borrower will promptly notify holders of Senior Debt of any
obligation to make payments to be made under Section 1.7.
(b) The Holder will not for a period of 179 days following an
acceleration of this Debenture pursuant to Article III, including by reason of
the Borrower's breach of its covenants under Section 1.7 (other than if an
Insolvency Event shall have
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occurred or if the Senior Debt shall have been accelerated) pursue or exercise
any other right, power or remedy arising under Article III of this Debenture.
5.5. PERMITTED PAYMENTS. So as to eliminate any doubt, except in
the event of an Insolvency Event, or as provided in the first sentence of
Section 5.3(a) during any Payment Blockage Period, as set forth in Sections 5.2
and 5.3, respectively, accretion of principal, payments under 1.3, 1.4(g), 1.7
and 4.1 of this Debenture, and payments under Section 2(c) of the Registration
Rights Agreement (whether in cash or Common Stock (as applicable))
(collectively, "Permitted Payments") shall be credited or made by the Borrower
on the terms of this Debenture.
5.6 TURNOVER. If the Holder receives any payment or other
distribution on this Debenture (whether in cash, property, securities or
whatever) at a time when such payment or distribution should not have been made
to the Holder by reason of this Article V, such payment or distribution shall be
deemed to have been received and held in trust for the benefit of the holders of
the Senior Debt, and shall be segregated from other property of the Holder and
be paid and delivered as promptly as practicable to the holders of the Senior
Debt, as their interests may appear, for application to, or collateral for, the
payment or prepayment of the Senior Debt.
5.7 RELATIVE RIGHTS. This Article V defines the relative rights
of the Holder and the holders of Senior Debt. Nothing herein shall:
(a) impair, as between the Borrower and the Holder, the
obligation of the Borrower, which is absolute and unconditional, to pay
principal of, premium, if any, and interest on this Debenture in
accordance with its terms and to fulfill its other obligations
hereunder; or
(b) except as otherwise expressly provided herein, prevent
the Holder from exercising its available remedies upon a default,
subject to the rights of holders of Senior Debt to receive distributions
otherwise payable to the Holder.
5.8 AGREEMENT TO COOPERATE. In the event that a payment may not
be made on the Debentures as a result of the provisions of this Article V,
including without limitation, as a result of an Insolvency Event or a default on
any Senior Debt, the Borrower shall, if requested by the Holder, reasonably
assist the Holder in attempting to purchase such Senior Debt or otherwise cure
such default so that the payment may be made on the Debenture. Nothing in this
Section 5.8 shall obligate the Holder to purchase such Senior Debt or to attempt
to cure any such default.
5.9 CONVERSION. Notwithstanding anything to the contrary
contained in this Article V, nothing in this Article V shall restrict the rights
of the Holder to convert the
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Conversion Amount in accordance with Article I, including, without limitation,
after an Insolvency Event and during the pendency of a default on Senior Debt.
To the extent any Permitted Payments would be payable, but for the provisions of
this Article V, in cash (whether at the Borrower's option or the Holder's
option), such Permitted Payments shall automatically be added to the Accreted
Principal Balance including after an Insolvency Event or during the pendency of
a default on Senior Debt and shall thereafter and during such pendency be
convertible into Common Stock in accordance with Article I.
5.10 DEFINITIONS.
(a) "Bankruptcy Code" means the Bankruptcy Reform Act of 1978,
11 U.S.C. ss. 101 et seq., or any successor statute thereto.
(b) "Insolvency Event" means (i) any winding-up, insolvency,
bankruptcy, liquidation or reorganization of the Borrower, whether voluntary or
involuntary, (ii) any proceeding or case for reorganization, liquidation,
bankruptcy, dissolution or other winding-up of the Borrower or its assets,
whether or not involving insolvency or bankruptcy, (iii) any assignment by the
Borrower for the benefit of creditors or (iv) any receivership or other similar
proceeding or any marshalling of assets of the Borrower.
(c) "Senior Debt" means (i) all obligations and liabilities of
the Borrower or any of its subsidiaries, whether for or on account of principal,
reimbursement obligations, accrued and unpaid interest (including without
limitation all interest accruing on and after an Insolvency Event), fees,
expenses, indemnities and other amounts payable under or in connection with any
and all bank, institutional or other financial transaction indebtedness
including, without limitation, under that certain bank agreement dated January
29, 1996 among the Borrower, its subsidiaries, the lenders named therein and The
Chase Manhattan Bank, as agent, as amended to date, the 10 3/8% senior secured
indebtedness due June 1, 2002 and the 11 5/8% senior indebtedness due August 1,
2002, and all documents or instruments executed in connection therewith, as may
be amended or restated thereunder, or any similar replacement, successor or
additional indebtedness, whether outstanding on the date of issuance of this
Debenture or hereafter created, assumed or incurred and (ii) all obligations of
the Borrower or any of its subsidiaries for deferred purchase price payments in
connection with any business acquisitions by Borrower or any of its
subsidiaries.
ARTICLE VI. MISCELLANEOUS
6.1 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the
part of the Holder in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privileges. All
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rights and remedies existing hereunder are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
6.2 NOTICES. Any notice (including conversion notices) herein
required or permitted to be given shall be in writing and may be personally
served or delivered by courier or sent by United States mail and shall be deemed
to have been given upon receipt if personally served (which shall include
telephone line facsimile transmission) or sent by courier or three (3) days
after being deposited in the United States mail, certified, with postage
pre-paid and properly addressed, if sent by mail. For the purposes hereof, the
address of the Holder shall be as shown on the records of the Borrower; and the
address of the Borrower shall be American Banknote Corporation, 200 Park Avenue,
49th Floor, New York, New York 10166-4999, Attention: Secretary, facsimile
number: (212) 338-0747, and a copy to the attention of Patrick Reddy, Assistant
Secretary, facsimile number: (212) 338- 0728. Both the Holder and the Borrower
may change the address for service by service of written notice to the other as
herein provided.
6.3 AMENDMENTS. This Debenture and any provision hereof may only
be amended by an instrument in writing signed by the Borrower and the Holder.
The term "Debenture" and all reference thereto, as used throughout this
instrument, shall mean this instrument (and the other Debentures issued pursuant
to the Purchase Agreement) as originally executed, or if later amended or
supplemented, then as so amended or supplemented.
6.4 ASSIGNABILITY. This Debenture shall be binding upon the
Borrower and its successors and assigns, and shall inure to be the benefit of
the Holder and its successors and assigns. Each transferee of this Debenture
must be an "accredited investor" (as defined in Rule 501(a) of the 1933 Act). As
a condition to any assignment or transfer, the assignee or transferee shall
agree to be bound to the terms of this Debenture. This Debenture may be pledged
as collateral in connection with a bona fide margin account.
6.5 COST OF COLLECTION. If default is made in the payment of this
Debenture, the Borrower shall pay the Holder hereof costs of collection,
including reasonable attorneys' fees.
6.6 GOVERNING LAW. This Debenture shall be governed by the
internal laws of the State of Delaware, without regard to the principles of
conflict of laws.
6.7 CERTAIN AMOUNTS. Whenever pursuant to this Debenture the
Borrower is required to pay an amount in excess of the Accreted Principal
Balance (or the portion thereof required to be paid at that time), the Borrower
and the Holder agree that the actual damages to the Holder from the receipt of
cash payment on this Debenture may be difficult to determine and the amount to
be so paid by the Borrower represents stipulated damages and
23
<PAGE>
not a penalty and is intended to compensate the Holder in part for loss of the
opportunity to convert this Debenture and to earn a return from the sale of
shares of Common Stock acquired upon conversion of this Debenture at a price in
excess of the price paid for such shares pursuant to this Debenture.
6.8 ALLOCATIONS OF MAXIMUM SHARE AMOUNT AND RESERVED AMOUNT. The
Maximum Share Amount and the Reserved Amount (including any increases thereto)
shall be allocated pro rata among the Holders of Debentures based on the
principal amount of Debentures then held by the Holder relative to the aggregate
principal amount of the Debentures then outstanding.
6.9 DAMAGES SHARES. The shares of Common Stock that may be
issuable to the Holder pursuant to Sections 1.3 and 1.4(g) hereof and pursuant
to Section 2(c) of the Registration Rights Agreement ("Damages Shares") shall be
treated as Common Stock issuable upon conversion of this Debenture for all
purposes hereof and shall be subject to all of the limitations and afforded all
of the rights of the other shares of Common Stock issuable hereunder, including
without limitation, the right to be included in the Registration Statement filed
pursuant to the Registration Rights Agreement. For purposes of calculating
interest payable on the outstanding principal amount hereof, except as otherwise
provided herein, amounts convertible into Damages Shares ("Damages Amounts")
shall not bear interest but must be converted prior to the conversion of any
outstanding principal amount hereof, until the outstanding Damages Amounts is
zero.
6.10 DENOMINATIONS. At the request of the Holder, upon surrender
of this Debenture, the Borrower shall promptly issue new Debentures in the
aggregate outstanding principal amount hereof, in the form hereof, in such
denominations of at least $100,000 as the Holder shall request.
6.11 PURCHASE AGREEMENT. By its acceptance of this Debenture, the
Holder agrees to be bound by the applicable terms of the Purchase Agreement.
6.12 NOTICE OF CORPORATE EVENTS. Except as otherwise provided
below, the Holder of this Debenture shall have no rights as the Holder of Common
Stock unless and only to the extent that it converts this Debenture into Common
Stock. The Borrower shall provide the Holder with prior notification of any
meeting of the Borrower's shareholders (and copies of proxy materials and other
information sent to shareholders). In the event of any taking by the Borrower of
a record of its shareholders for the purpose of determining shareholders who are
entitled to receive payment of any dividend or other distribution, any right to
subscribe for, purchase or otherwise acquire (including by way of merger,
consolidation, reclassification or recapitalization) any share of any class or
any other securities or property, or to receive any other right, or for the
purpose of determining shareholders who are entitled to vote in connection with
any proposed sale, lease or
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<PAGE>
conveyance of all or substantially all of the assets of the Borrower or any
proposed liquidation, dissolution or winding up of the Borrower, the Borrower
shall mail a notice to the Holder, at least twenty (20) days prior to the record
date specified therein (or thirty (30) days prior to the consummation of the
transaction or event, whichever is earlier), of the date on which any such
record is to be taken for the purpose of such dividend, distribution, right or
other event, and a brief statement regarding the amount and character of such
dividend, distribution, right or other event to the extent known at such time.
Subject to Allowed Delays (as defined in Section 3(f) of the Registration Rights
Agreement), the Borrower shall make a public announcement of any event requiring
notification to the Holder hereunder substantially simultaneously with the
notification to the Holder in accordance with the terms of this Section 6.12.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK.]
25
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Debenture to be
signed in its name by its duly authorized officer this 25th day of November,
1997.
AMERICAN BANKNOTE CORPORATION
By: /s/Harvey J. Kesner
----------------------------------
Name: Harvey J. Kesner
Title: Executive Vice President, General
Counsel and Secretary
26
<PAGE>
Exhibit A
NOTICE OF CONVERSION
OF CONVERTIBLE DEBENTURE
TO: American Banknote Corporation
200 Park Avenue, 49th Floor
New York, New York 10166-4999
Attention: Secretary
Facsimile: (212) 338-0747
(1) Pursuant to the terms of the attached Convertible Debenture
(the "Debenture"), the undersigned hereby elects to convert $__________ Accreted
Principal Balance of the Debenture into shares of Common Stock of American
Banknote Corporation, a Delaware corporation (the "Borrower"). Capitalized terms
used herein and not otherwise defined herein have the respective meanings
provided in the Debenture.
(2) Please issue a certificate or certificates for the number of
shares of Common Stock into which such Accreted Principal Balance of the
Debenture is convertible (_____ shares, based on the Holder's calculation
attached hereto) in the name(s) specified immediately below or, if additional
space is necessary, on an attachment hereto:
- ----------------------------- -----------------------------
Name Name
- ----------------------------- -----------------------------
Address Address
- ----------------------------- -----------------------------
SS or Tax ID Number SS or Tax ID Number
(3) The Holder acknowledges and affirms that the Common Stock
issued pursuant to this Notice of Conversion has been or will be sold in
accordance with the requirements of the 1933 Act, if applicable, or pursuant to
an exemption under the 1933 Act.
(4) Capitalized terms used in this Notice of Conversion and not
otherwise defined herein shall have the respective meanings provided in the
Debenture.
Date_________________ ____________________________________
Signature of Registered Holder (must
be signed exactly as name appears in
the Debenture).
THIS WARRANT AND THE SHARES ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
EXCEPT AS OTHERWISE SET FORTH HEREIN OR IN A SECURITIES PURCHASE
AGREEMENT DATED AS OF NOVEMBER 25, 1997, NEITHER THIS WARRANT NOR ANY OF
SUCH SHARES MAY BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER SUCH ACT OR
AN OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT. ANY SUCH SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE SECURITIES
LAWS.
Right to
Purchase
150,000
Shares of
Common
Stock, par
value $.01 per
share
FORM OF STOCK PURCHASE WARRANT (CLOSING WARRANT)
THIS CERTIFIES THAT, for value received, _______________________ or its
registered assigns, is entitled to purchase from American Banknote Corporation,
a Delaware corporation (the "Company"), at any time or from time to time during
the period specified in Paragraph 2 hereof, One Hundred Fifty Thousand (150,000)
fully paid and nonassessable shares of the Company's Common Stock, par value
$.01 per share (the "Common Stock"), at an exercise price of $7.09 per share
(the "Exercise Price"). The term "Warrant Shares", as used herein, refers to the
shares of Common Stock purchasable hereunder. The Warrant Shares and the
Exercise Price are subject to adjustment as provided in Paragraph 4 hereof. The
term Warrants means this Warrant and the other Closing Warrants and Redemption
Warrants issued pursuant to that certain Securities Purchase Agreement, dated
November 25, 1997, by and among the Company and the Buyers listed on the
execution page thereof (the "Securities Purchase Agreement").
This Warrant is subject to the following terms, provisions, and
conditions:
<PAGE>
1. MANNER OF EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon (i)
payment to the Company in cash, by certified or official bank check or by wire
transfer for the account of the Company of the Exercise Price for the Warrant
Shares specified in the Exercise Agreement or (ii) delivery to the Company of a
written notice of an election to effect a "Cashless Exercise" (as defined in
Section 11(c) below) for the Warrant Shares specified in the Exercise Agreement.
The Warrant Shares so purchased shall be deemed to be issued to the holder
hereof or such holder's designee, as the record owner of such shares, as of the
close of business on the date on which this Warrant shall have been surrendered,
the completed Exercise Agreement shall have been delivered, and payment shall
have been made for such shares as set forth above. Certificates for the Warrant
Shares so purchased, representing the aggregate number of shares specified in
the Exercise Agreement, shall be delivered to the holder hereof within a
reasonable time, not exceeding three (3) business days, after this Warrant shall
have been so exercised. The certificates so delivered shall be in such
denominations as may be requested by the holder hereof and shall be registered
in the name of such holder or such other name as shall be designated by such
holder. If this Warrant shall have been exercised only in part, then, unless
this Warrant has expired, the Company shall, at its expense, at the time of
delivery of such certificates, deliver to the holder a new Warrant representing
the number of shares with respect to which this Warrant shall not then have been
exercised.
Notwithstanding anything in this Warrant to the contrary, in no
event shall the Holder of this Warrant be entitled to exercise a number of
Warrants (or portions thereof) in excess of the number of Warrants (or portions
thereof) upon exercise of which the sum of (i) the number of shares of Common
Stock beneficially owned by the Holder and its affiliates (other than shares of
Common Stock which may be deemed beneficially owned through the ownership of the
unexercised Warrants and unconverted Debentures (as defined in the Securities
Purchase Agreement) and (ii) the number of shares of Common Stock issuable upon
exercise of the Warrants (or portions thereof) with respect to which the
determination described herein is being made, would result in beneficial
ownership by the Holder and its affiliates of more than 4.9% of the outstanding
shares of Common Stock. For purposes of the immediately preceding sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D- G thereunder,
except as otherwise provided in clause (i) hereof.
2. PERIOD OF EXERCISE. This Warrant is exercisable at any time or from
time to time on or after the date on which this Warrant is issued and delivered
pursuant to the terms of the Securities Purchase Agreement and before 5:00 p.m.,
New York City time on November 25, 2000 (the "Exercise Period").
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<PAGE>
3. CERTAIN AGREEMENTS OF THE COMPANY. The Company hereby covenants and
agrees as follows:
(a) SHARES TO BE FULLY PAID. All Warrant Shares will, upon
issuance in accordance with the terms of this Warrant, be validly issued, fully
paid, and nonassessable and free from liens and charges with respect to the
issue thereof.
(b) RESERVATION OF SHARES. During the Exercise Period, the
Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise of this Warrant.
(c) LISTING. The Company shall promptly secure the listing of the
shares of Common Stock issuable upon exercise of the Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.
(d) CERTAIN ACTIONS PROHIBITED. The Company will not, by
amendment of its charter or through any reorganization, 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 by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the exercise privilege of the holder of this
Warrant against dilution or other impairment, consistent with the tenor and
purpose of this Warrant. Without limiting the generality of the foregoing, the
Company (i) will not increase the par value of any shares of Common Stock
receivable upon the exercise of this Warrant above the Exercise Price then in
effect, and (ii) will take all such actions as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant.
(e) SUCCESSORS AND ASSIGNS. This Warrant will be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.
4. ANTIDILUTION PROVISIONS. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Paragraph 4.
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<PAGE>
In the event that any adjustment of the Exercise Price as required
herein results in a fraction of a cent, such Exercise Price shall be rounded up
to the nearest cent.
(a) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. Except as otherwise provided in Paragraphs 4(c) and
4(e) hereof, if and whenever on or after the date of issuance of this Warrant
the Company issues or sells, or in accordance with Paragraph 4(b) hereof is
deemed to have issued or sold, any shares of Common Stock for no consideration
or for a consideration per share (before deduction of reasonable expenses or
commissions or underwriting discounts or allowances in connection therewith)
less than the Market Price (as hereinafter defined) on the date of issuance (a
"Dilutive Issuance"), then immediately upon the Dilutive Issuance, the Exercise
Price will be reduced to a price determined by multiplying the Exercise Price in
effect immediately prior to the Dilutive Issuance by a fraction, (i) the
numerator of which is an amount equal to the sum of (x) the number of shares of
Common Stock actually outstanding immediately prior to the Dilutive Issuance,
plus (y) the quotient of the aggregate consideration, calculated as set forth in
Paragraph 4(b) hereof, received by the Company upon such Dilutive Issuance
divided by the Market Price in effect immediately prior to the Dilutive
Issuance, and (ii) the denominator of which is the total number of shares of
Common Stock Deemed Outstanding (as defined below) immediately after the
Dilutive Issuance.
(b) EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes of
determining the adjusted Exercise Price under Paragraph 4(a) hereof, the
following will be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any
manner issues or grants any warrants, rights or options, whether or not
immediately exercisable, to subscribe for or to purchase Common Stock or other
securities convertible into or exchangeable for Common Stock ("Convertible
Securities") (such warrants, rights and options to purchase Common Stock or
Convertible Securities are hereinafter referred to as "Options") and the price
per share for which Common Stock is issuable upon the exercise of such Options
is less than the Market Price on the date of issuance or grant of such Options,
then the maximum total number of shares of Common Stock issuable upon the
exercise of all such Options will, as of the date of the issuance or grant of
such Options, be deemed to be outstanding and to have been issued and sold by
the Company for such price per share. For purposes of the preceding sentence,
the "price per share for which Common Stock is issuable upon the exercise of
such Options" is determined by dividing (i) the total amount, if any, received
or receivable by the Company as consideration for the issuance or granting of
all such Options, plus the minimum aggregate amount of additional consideration,
if any, payable to the Company upon the exercise of all such Options, plus, in
the case of Convertible Securities issuable upon the exercise of such Options,
the minimum aggregate amount of additional consideration payable upon the
conversion or exchange thereof at the time such Convertible Securities first
become convertible or exchangeable, by (ii) the maximum total number of shares
of Common Stock issuable upon the exercise of all such Options (assuming full
conversion of Convertible Securities, if applicable). No further adjustment to
the Exercise Price will be made upon the actual issuance of such Common
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<PAGE>
Stock upon the exercise of such Options or upon the conversion or exchange of
Convertible Securities issuable upon exercise of such Options.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Securities, whether or not immediately
convertible (other than where the same are issuable upon the exercise of
Options) and the price per share for which Common Stock is issuable upon such
conversion or exchange is less than the Market Price on the date of issuance,
then the maximum total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities will, as of the date
of the issuance of such Convertible Securities, be deemed to be outstanding and
to have been issued and sold by the Company for such price per share. For the
purposes of the preceding sentence, the "price per share for which Common Stock
is issuable upon such conversion or exchange" is determined by dividing (i) the
total amount, if any, received or receivable by the Company as consideration for
the issuance or sale of all such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Company
upon the conversion or exchange thereof at the time such Convertible Securities
first become convertible or exchangeable, by (ii) the maximum total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities. No further adjustment to the Exercise Price will be made
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If there is a
change at any time in (i) the amount of additional consideration payable to the
Company upon the exercise of any Options; (ii) the amount of additional
consideration, if any, payable to the Company upon the conversion or exchange of
any Convertible Securities; or (iii) the rate at which any Convertible
Securities are convertible into or exchangeable for Common Stock (other than
under or by reason of provisions designed to protect against dilution), the
Exercise Price in effect at the time of such change will be readjusted to the
Exercise Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. If, in any case, the total number of shares of Common Stock issuable
upon exercise of any Option or upon conversion or exchange of any Convertible
Securities is not, in fact, issued and the rights to exercise such Option or to
convert or exchange such Convertible Securities shall have expired or
terminated, the Exercise Price then in effect will be readjusted to the Exercise
Price which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such expiration or termination (other than in respect of
the actual number of shares of Common Stock issued upon exercise or conversion
thereof), never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common
Stock, Options or Convertible Securities are issued, granted or sold for cash,
the
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<PAGE>
consideration received therefor for purposes of this Warrant will be the amount
received by the Company therefor, before deduction of reasonable commissions,
underwriting discounts or allowances or other reasonable expenses paid or
incurred by the Company in connection with such issuance, grant or sale. In case
any Common Stock, Options or Convertible Securities are issued or sold for a
consideration part or all of which shall be other than cash, the amount of the
consideration other than cash received by the Company will be the fair value of
such consideration, except where such consideration consists of securities, in
which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Options or Convertible Securities are issued in connection with any acquisition,
merger or consolidation in which the Company is the surviving corporation,
unless the Board of Directors of the Company specifically provides otherwise,
the amount of consideration therefor will be deemed to be equal to the Market
Price of such Common Stock, Options or Convertible Securities, as the case may
be, on the date of issuance. The fair value of any consideration other than cash
or securities will be determined in good faith by the Board of Directors of the
Company.
(vi) EXCEPTIONS TO ADJUSTMENT OF EXERCISE PRICE. No adjustment
to the Exercise Price will be made (i) upon the exercise of any warrants,
options or convertible securities granted, issued and outstanding on the date of
issuance of this Warrant; (ii) upon the grant or exercise of any stock or
options which may hereafter be granted or exercised under any employee benefit
plan of the Company now existing or to be implemented in the future, so long as
the issuance of such stock or options is approved by a majority of the
independent members of the Board of Directors of the Company or a majority of
the members of a committee of independent directors established for such
purpose; (iii) upon the exercise of the Warrants; (iv) upon the conversion of
the Debentures issued pursuant to the Securities Purchase Agreement or (v) upon
issuance, exercise or conversion of any securities purchased by the Holder
pursuant to the provisions of Section 4(e) of the Securities Purchase Agreement.
(c) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the shares of Common Stock
acquirable hereunder into a greater number of shares, then, after the date of
record for effecting such subdivision, the Exercise Price in effect immediately
prior to such subdivision will be proportionately reduced. If the Company at any
time combines (by reverse stock split, recapitalization, reorganization,
reclassification or otherwise) the shares of Common Stock acquirable hereunder
into a smaller number of shares, then, after the date of record for effecting
such combination, the Exercise Price in effect immediately prior to such
combination will be proportionately increased.
(d) ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of the
Exercise Price pursuant to the provisions of this Paragraph 4, the number of
shares of Common Stock issuable upon exercise of this Warrant shall be adjusted
by multiplying a number equal to the Exercise Price in effect immediately prior
to such adjustment by the
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<PAGE>
number of shares of Common Stock issuable upon exercise of this Warrant
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.
(e) CONSOLIDATION, MERGER OR SALE. In case of any consolidation
of the Company with, or merger of the Company into any other corporation, or in
case of any sale or conveyance of all or substantially all of the assets of the
Company other than in connection with a plan of complete liquidation of the
Company, then as a condition of such consolidation, merger or sale or
conveyance, adequate provision will be made whereby the holder of this Warrant
will have the right to acquire and receive upon exercise of this Warrant in lieu
of the shares of Common Stock immediately theretofore acquirable upon the
exercise of this Warrant (without giving effect to any limitations or
restrictions on conversion set forth in the Debentures (as defined in the
Securities Agreement)), such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of shares of
Common Stock immediately theretofore acquirable and receivable upon exercise of
this Warrant had such consolidation, merger or sale or conveyance not taken
place. In any such case, the Company will make appropriate provision to insure
that the provisions of this Paragraph 4 hereof will thereafter be applicable as
nearly as may be in relation to any shares of stock or securities thereafter
deliverable upon the exercise of this Warrant. The Company will not effect any
consolidation, merger or sale or conveyance unless prior to the consummation
thereof, the successor corporation (if other than the Company) assumes by
written instrument the obligations under this Paragraph 4 and the obligations to
deliver to the holder of this Warrant such shares of stock, securities or assets
as, in accordance with the foregoing provisions, the holder may be entitled to
acquire.
(f) DISTRIBUTION OF ASSETS. In case the Company shall declare or
make any distribution of its assets (including cash) to holders of Common Stock
as a partial liquidating dividend, by way of return of capital or otherwise,
then, after the date of record for determining stockholders entitled to such
distribution, but prior to the date of distribution, the holder of this Warrant
shall be entitled upon exercise of this Warrant for the purchase of any or all
of the shares of Common Stock subject hereto, to receive the amount of such
assets which would have been payable to the holder had such holder been the
holder of such shares of Common Stock on the record date for the determination
of stockholders entitled to such distribution.
(g) NOTICE OF ADJUSTMENT. Upon the occurrence of any event which
requires any adjustment of the Exercise Price, then, and in each such case, the
Company shall give notice thereof to the holder of this Warrant, which notice
shall state the Exercise Price resulting from such adjustment and the increase
or decrease in the number of Warrant Shares purchasable at such price upon
exercise, setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Such calculation shall be certified
by the chief financial officer of the Company.
(h) MINIMUM ADJUSTMENT OF EXERCISE PRICE. No adjustment of the
Exercise Price shall be made in an amount of less than 5% of the Exercise Price
in effect at the time such adjustment is otherwise required to be made, but any
such lesser adjustment
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<PAGE>
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment which, together with any adjustments so carried
forward, shall amount to not less than 5% of such Exercise Price.
(i) NO FRACTIONAL SHARES. No fractional shares of Common Stock
are to be issued upon the exercise of this Warrant, but the Company shall pay a
cash adjustment in respect of any fractional share which would otherwise be
issuable in an amount equal to the same fraction of the Market Price of a share
of Common Stock on the date of such exercise.
(j) OTHER NOTICES. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(including dividends or distributions payable in cash out of retained earnings)
to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the
Company, or reclassification of the Common Stock, or consolidation or merger of
the Company with or into, or sale of all or substantially all its assets to,
another corporation or entity; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
(a) notice of the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution, or subscription rights or for determining the
holders of Common Stock entitled to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up and (b) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up, notice of
the date (or, if not then known, a reasonable approximation thereof by the
Company) when the same shall take place. Such notice shall also specify the date
on which the holders of Common Stock shall be entitled to receive such dividend,
distribution, or subscription rights or to exchange their Common Stock for stock
or other securities or property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding-up, as the case may be. Such notice shall be given at least 30 days
prior to the record date or the date on which the Company's books are closed in
respect thereto. Failure to give any such notice or any defect therein shall not
affect the validity of the proceedings referred to in clauses (i), (ii), (iii)
and (iv) above.
(k) CERTAIN EVENTS. If any event occurs of the type contemplated
by the adjustment provisions of this Paragraph 4 but not expressly provided for
by such provisions, the Company will give notice of such event as provided in
Paragraph 4(g) hereof, and the
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<PAGE>
Company's Board of Directors will make an appropriate adjustment in the Exercise
Price and the number of shares of Common Stock acquirable upon exercise of this
Warrant so that the rights of the Holder shall be neither enhanced nor
diminished by such event.
(l) CERTAIN DEFINITIONS.
(i) "Common Stock Deemed Outstanding" shall mean the number of
shares of Common Stock actually outstanding (not including shares of Common
Stock held in the treasury of the Company), plus (x) pursuant to Paragraph
4(b)(i) hereof, the maximum total number of shares of Common Stock issuable upon
the exercise of Options, as of the date of such issuance or grant of such
Options, if any, and (y) pursuant to Paragraph 4(b)(ii) hereof, the maximum
total number of shares of Common Stock issuable upon conversion or exchange of
Convertible Securities, as of the date of issuance of such Convertible
Securities, if any.
(ii) "Market Price," as of any date, (i) means the average of
the last reported sale prices for the shares of Common Stock on the New York
Stock Exchange ("NYSE") for the five (5) trading days immediately preceding such
date as reported by Bloomberg, L.P. ("Bloomberg"), or (ii) if the NYSE is not
the principal trading market for the shares of Common Stock, the average of the
last reported sale prices on the principal trading market for the Common Stock
during the same period as reported by Bloomberg, or (iii) if market value cannot
be calculated as of such date on any of the foregoing bases, the Market Price
shall be the fair market value as reasonably determined in good faith by (a) the
Board of Directors of the Corporation or, at the option of a
majority-in-interest of the holders of the outstanding Warrants by (b) an
independent investment bank of nationally recognized standing in the valuation
of businesses similar to the business of the corporation. The manner of
determining the Market Price of the Common Stock set forth in the foregoing
definition shall apply with respect to any other security in respect of which a
determination as to market value must be made hereunder.
(iii) "Common Stock," for purposes of this Paragraph 4,
includes the Common Stock, par value $.01 per share, and any additional class of
stock of the Company having no preference as to dividends or distributions on
liquidation, provided that the shares purchasable pursuant to this Warrant shall
include only shares of Common Stock, par value $.01 per share, in respect of
which this Warrant is exercisable, or shares resulting from any subdivision or
combination of such Common Stock, or in the case of any reorganization,
reclassification, consolidation, merger, or sale of the character referred to in
Paragraph 4(e) hereof, the stock or other securities or property provided for in
such Paragraph.
5. ISSUE TAX. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of any
certificate in a name other than the holder of this Warrant.
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<PAGE>
6. NO RIGHTS OR LIABILITIES AS A SHAREHOLDER. This Warrant shall not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the holder hereof to purchase Warrant Shares, and no mere enumeration
herein of the rights or privileges of the holder hereof, shall give rise to any
liability of such holder for the Exercise Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
7. TRANSFER, EXCHANGE, AND REPLACEMENT OF WARRANT.
(a) RESTRICTION ON TRANSFER. This Warrant and the rights granted
to the holder hereof are transferable, in whole or in part, upon surrender of
this Warrant, together with a properly executed assignment in the form attached
hereto, at the office or agency of the Company referred to in Paragraph 7(e)
below, provided, however, that any transfer or assignment shall be subject to
the conditions set forth in Paragraph 7(f) hereof and to the applicable
provisions of the Securities Purchase Agreement. Until due presentment for
registration of transfer on the books of the Company, the Company may treat the
registered holder hereof as the owner and holder hereof for all purposes, and
the Company shall not be affected by any notice to the contrary. Notwithstanding
anything to the contrary contained herein, the registration rights described in
Paragraph 8 are assignable only in accordance with the provisions of that
certain Registration Rights Agreement, dated as of November 25, 1997, by and
among the Company and the other signatories thereto (the "Registration Rights
Agreement").
(b) WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS. This
Warrant is exchangeable, upon the surrender hereof by the holder hereof at the
office or agency of the Company referred to in Paragraph 7(e) below, for new
Warrants of like tenor representing in the aggregate the right to purchase the
number of shares of Common Stock which may be purchased hereunder, each of such
new Warrants to represent the right to purchase such number of shares as shall
be designated by the holder hereof at the time of such surrender.
(c) REPLACEMENT OF WARRANT. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu thereof, a new Warrant of like tenor.
(d) CANCELLATION; PAYMENT OF EXPENSES. Upon the surrender of this
Warrant in connection with any transfer, exchange, or replacement as provided in
this Paragraph 7, this Warrant shall be promptly canceled by the Company. The
Company shall pay all taxes (other than securities transfer taxes) and all other
expenses (other than legal expenses, if any, incurred by the Holder or
transferees) and charges payable in connection with the preparation, execution,
and delivery of Warrants pursuant to this Paragraph 7.
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<PAGE>
(e) REGISTER. The Company shall maintain, at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee and
each prior owner of this Warrant.
(f) EXERCISE OR TRANSFER WITHOUT REGISTRATION. If, at the time of
the surrender of this Warrant in connection with any exercise, transfer, or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder), shall not be registered under the Securities
Act of 1933, as amended (the "Securities Act") and under applicable state
securities or blue sky laws, the Company may require, as a condition of allowing
such exercise, transfer, or exchange, (i) that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise, transfer, or exchange may be made without registration under
said Act and under applicable state securities or blue sky laws, (ii) that the
holder or transferee execute and deliver to the Company an investment letter in
form and substance acceptable to the Company, and (iii) that the transferee be
an "accredited investor" as defined in Rule 501(a) promulgated under the
Securities Act; provided that no such opinion, letter or status as an
"accredited investor" shall be required in connection with a transfer pursuant
to Rule 144 under the Securities Act. The first holder of this Warrant, by
taking and holding the same, represents to the Company that such holder is
acquiring this Warrant for investment and not with a view to the distribution
thereof.
8. REGISTRATION RIGHTS. The initial holder of this Warrant (and certain
assignees thereof) is entitled to the benefit of such registration rights in
respect of the Warrant Shares as are set forth in Section 2 of the Registration
Rights Agreement.
9. NOTICES. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as shall have been furnished to the
Company by notice from such holder. All notices, requests, and other
communications required or permitted to be given or delivered hereunder to the
Company shall be in writing, and shall be personally delivered, or shall be sent
by certified or registered mail or by recognized overnight mail courier, postage
prepaid and addressed, to the office of the Company at 200 Park Avenue, 49th
Floor, New York, New York 10166, Attention: Secretary, or at such other address
as shall have been furnished to the holder of this Warrant by notice from the
Company. Any such notice, request, or other communication may be sent by
facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests, and other
communications shall be deemed to have been given either at the time of the
receipt thereof by the person entitled to receive such notice at the address of
such person for purposes of this Paragraph 9,
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<PAGE>
or, if mailed by registered or certified mail or with a recognized overnight
mail courier upon deposit with the United States Post Office or such overnight
mail courier, if postage is prepaid and the mailing is properly addressed, as
the case may be.
10. GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE BODY OF LAW CONTROLLING CONFLICTS OF LAW.
11. MISCELLANEOUS.
(a) AMENDMENTS. This Warrant and any provision hereof may only be
amended by an instrument in writing signed by the Company and the holder hereof.
(b) DESCRIPTIVE HEADINGS. The descriptive headings of the several
paragraphs of this Warrant are inserted for purposes of reference only, and
shall not affect the meaning or construction of any of the provisions hereof.
(c) CASHLESS EXERCISE. Notwithstanding anything to the contrary
contained in this Warrant, this Warrant may be exercised by presentation and
surrender of this Warrant to the Company at its principal executive offices with
a written notice of the holder's intention to effect a cashless exercise,
including a calculation of the number of shares of Common Stock to be issued
upon such exercise in accordance with the terms hereof (a "Cashless Exercise").
In the event of a Cashless Exercise, in lieu of paying the Exercise Price in
cash, the holder shall surrender this Warrant for that number of shares of
Common Stock determined by multiplying the number of Warrant Shares to which it
would otherwise be entitled by a fraction, the numerator of which shall be the
difference between the then current Market Price per share of the Common Stock
and the Exercise Price, and the denominator of which shall be the then current
Market Price per share of Common Stock.
(d) Other Agreements. This Warrant is subject to the rights and
restrictions set forth in the Securities Purchase Agreement and the Registration
Rights Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
AMERICAN BANKNOTE CORPORATION
By: /s/Harvey J. Kesner, Esq.
----------------------------------
Harvey J. Kesner, Esq.
Executive Vice President, General
Counsel and Secretary
Dated as of November 25, 1997
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<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To:_____________________________
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of, or, if the resale of such Common Stock by the undersigned is not
currently registered pursuant to an effective registration statement under the
Securities Act of 1933, as amended, by surrender of securities issued by the
Company (including a portion of the Warrant) having a market value (in the case
of a portion of this Warrant, determined in accordance with Section 11(c) of the
Warrant) equal to $_________. Please issue a certificate or certificates for
such shares of Common Stock in the name of and pay any cash for any fractional
share to:
Name:
--------------------------------
Signature:
--------------------------------
Address:
--------------------------------
Note: The above signature should
correspond exactly with the name
on the face of the within Warrant.
and, if said number of shares of Common Stock shall not be all the shares
purchasable under the within Warrant, a new Warrant is to be issued in the name
of said undersigned covering the balance of the shares purchasable thereunder
less any fraction of a share paid in cash.
<PAGE>
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
all the rights of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock covered thereby set forth hereinbelow, to:
Name of Assignee Address No of Shares
, and hereby irrevocably constitutes and appoints ______________
________________________ as agent and attorney-in-fact to transfer said Warrant
on the books of the within-named corporation, with full power of substitution in
the premises.
Dated: _____________________, ____,
In the presence of
- ------------------
Name:
--------------------------------
Signature:
--------------------------------
Title of Signing Officer or Agent (if any):
--------------------------------
Address:
--------------------------------
Note: The above signature should
correspond exactly with the name
on the face of the within Warrant.
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of November
25, 1997, by and among American Banknote Corporation, a Delaware corporation,
with headquarters located at 200 Park Avenue, 49th Floor, New York, New York
10166 (the "COMPANY"), and each of the undersigned (together with their
respective affiliates and any assignee or transferee of all of their respective
rights hereunder, the "INITIAL INVESTORS").
WHEREAS:
A. In connection with the Securities Purchase Agreement by and among the
parties hereto of even date herewith (the "SECURITIES PURCHASE AGREEMENT"), the
Company has agreed, upon the terms and subject to the conditions contained
therein, to issue and sell to the Initial Investors (i) convertible subordinated
debentures (the "DEBENTURES") that are convertible into shares (the "CONVERSION
SHARES") of the Company's common stock (the "COMMON STOCK"), upon the terms and
subject to the limitations and conditions set forth in such Debentures and (ii)
warrants (the "CLOSING WARRANTS") to acquire 150,000 shares of Common Stock (the
"CLOSING WARRANT SHARES"), upon the terms and subject to the limitations and
conditions set forth in the Warrants dated November 25, 1997; and
B. In accordance with the terms of the Debentures, under certain
circumstances the Company may redeem the Debentures for cash plus a number of
additional warrants determined based upon the redemption amount (the "REDEMPTION
WARRANTS" and, collectively with the Closing Warrants, the "WARRANTS") to
acquire shares of Common Stock (the "REDEMPTION WARRANT SHARES" and,
collectively with the Closing Warrant Shares, the "WARRANT SHARES").
C. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 ACT"), and applicable state securities laws;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
of the Initial Investors hereby agree as follows:
<PAGE>
1. DEFINITIONS.
a. As used in this Agreement, the following terms shall have the
following meanings:
(i) "INVESTORS" means the Initial Investors and any
transferee or assignee who agrees to become bound by the provisions of this
Agreement in accordance with Section 9 hereof.
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the 1933 Act and pursuant to Rule 415 under the
1933 Act or any successor rule providing for offering securities on a continuous
basis ("RULE 415"), and the declaration or ordering of effectiveness of such
Registration Statement by the United States Securities and Exchange Commission
(the "SEC").
(iii) "REGISTRABLE SECURITIES" means the Conversion Shares
and Warrant Shares issued or issuable and any shares of capital stock issued or
issuable as a dividend on or in exchange for or otherwise with respect to any of
the foregoing (including, but not limited to, Common Stock issuable upon
conversion of the principal and interest of the Debentures or shares issuable
pursuant to the damage provisions of the Debentures and hereunder). Registrable
Securities shall cease to be Registrable Securities at such time as (i) they
have been sold pursuant to an effective registration statement or Rule 144 to a
person who acquires them free of restrictions on transfer or (ii) they may be
sold free of restrictions on transfer (including restrictions relating to volume
limitations) under Rule 144(k) or any similar or successor rule.
(iv) "REGISTRATION STATEMENT" means a registration statement
of the Company under the 1933 Act.
b. Capitalized terms used herein and not otherwise defined herein
shall have the respective meanings set forth in the Securities Purchase
Agreement.
2. REGISTRATION.
a. Mandatory Registration. The Company shall prepare, and, on or
prior to the date which is forty-five (45) days after the date of the Closing
under the Securities Purchase Agreement (the "CLOSING DATE"), file with the SEC
a Registration Statement on Form S-3 (or, if Form S-3 is not then available, on
such form of Registration Statement as is then available to effect a
registration of the Registrable Securities, subject to the consent of the
Initial Investors, which consent will not be unreasonably withheld) covering the
resale of the Registrable Securities underlying the Debentures and Warrants
issued or issuable pursuant to the Securities Purchase Agreement which
Registration Statement, to the extent allowable under the 1933 Act and the Rules
promulgated thereunder (including Rule 416), shall state that such Registration
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<PAGE>
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable upon conversion of the Debentures and exercise of
the Warrants (i) to prevent dilution resulting from stock splits, stock
dividends or similar transactions or (ii) by reason of changes in the Conversion
Price of the Debentures in accordance with the terms thereof or the Exercise
Price of the Warrants in accordance with the terms thereof. The number of shares
of Common Stock initially included in such Registration Statement shall be no
less than 1,600,000.
b. Underwritten Offering. If any offering pursuant to a
Registration Statement pursuant to Section 2(a) hereof involves an underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, with the consent of a
majority-in-interest of the Initial Investors, shall have the right to select
one legal counsel and an investment banker or bankers and manager or managers to
administer the offering, which investment banker or bankers or manager or
managers shall be reasonably satisfactory to the Company.
c. Payments by the Company. The Company shall use its best
efforts to obtain effectiveness of the Registration Statement as soon as
practicable. If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not declared effective by the SEC within one hundred twenty (120) days after
the Closing Date or if, after the Registration Statement has been declared
effective by the SEC, sales cannot be made pursuant to the Registration
Statement (other than by reason of an Allowed Delay as defined in Section 3(f)
below), or (ii) the Common Stock is not listed or included for quotation on any
one of the New York Stock Exchange (the "NYSE"), the Nasdaq National Market
("NASDAQ") or the American Stock Exchange (the "AMEX") after being so listed or
included for quotation, then the Company will make payments to the Investors in
such amounts and at such times as shall be determined pursuant to this Section
2(c) as partial relief for the damages to the Investors by reason of any such
delay in or reduction of their ability to sell the Registrable Securities (which
remedy shall not be exclusive of any other remedies available at law or in
equity). The Company shall pay to each holder of the Debentures or Registerable
Securities an amount equal to the then outstanding principal amount of the
Debentures (and, in the case of holders of Registerable Securities, the
principal amount of Debentures from which such Registerable Securities were
converted) ("OUTSTANDING PRINCIPAL AMOUNT") multiplied by the Applicable
Percentage (as defined below) times the sum of: (i) the number of months
(prorated for partial months) after the end of such 120-day period and prior to
the date the Registration Statement is declared effective by the SEC, provided,
however, that there shall be excluded from such period any delays which are
solely attributable to changes required by the Investors in the Registration
Statement with respect to information relating to the Investors, including,
without limitation, changes to the plan of distribution, or to the failure of
the Investors to conduct their review of the Registration Statement pursuant to
Section 3(h) below in a reasonably prompt manner; (ii) the number of months
(prorated for partial months) that sales cannot be made pursuant to the
Registration Statement after the Registration Statement has been declared
effective (including, without limitation, when sales cannot be made by reason of
the Company's failure to properly supplement or amend the prospectus included
therein in
3
<PAGE>
accordance with the terms of this Agreement, but excluding Allowed Delays (as
defined in Section 3(f)); and (iii) the number of months (prorated for partial
months) that the Common Stock is not listed or included for quotation on the
NYSE, Nasdaq or AMEX or that trading thereon is halted after the Registration
Statement has been declared effective. (For example, if the Registration
Statement becomes effective two hundred ten (210) days after the end of such
120-day period, the Company would pay $70,000, or $10,000 for each $1,000,000 of
Outstanding Principal Amount for each month during such 7-month period following
the 120-day period for which the Registration Statement is not effective. If
thereafter, sales could not be made pursuant to the Registration Statement for
an additional 30-day period, the Company would pay an additional $15,000 for
each $1,000,000 of Outstanding Principal Amount. Such amounts shall be paid in
cash or, at each Investor's option, may be added to the principal amount of the
Debenture and thereafter be convertible into Common Stock at the "CONVERSION
PRICE" (as defined in the Debentures). Any shares of Common Stock issued upon
conversion of such amounts shall be Registrable Securities. If the Investor
desires to convert the amounts due hereunder into Registrable Securities, it
shall so notify the Company in writing within two (2) business days of the date
on which such amounts are first payable in cash and such amounts shall be so
convertible (pursuant to the mechanics set forth under Article I of the
Debentures), beginning on the last day upon which the cash amount would
otherwise be due in accordance with the following sentence. Payments of cash
pursuant hereto shall be made within five (5) days after the end of each period
that gives rise to such obligation, provided that, if any such period extends
for more than thirty (30) days, interim payments shall be made for each such
thirty (30) day period. The term "APPLICABLE PERCENTAGE" means one hundredths
(.010) with respect to the first seven (7) months of any calculation under
Clause (i) of the sentence in which the term is used, and one and
one-half-hundredths (.015) for any other purpose. Notwithstanding anything to
the contrary set forth herein, in no event shall the aggregate payments pursuant
to this Section 2(c) exceed twelve hundredths (.12) of the Outstanding Principal
Amount.
d. Piggy-Back Registrations. If at any time prior to the
expiration of the Registration Period (as hereinafter defined) the Company shall
file with the SEC a Registration Statement relating to an offering for its own
account or the account of others under the 1933 Act of any of its equity
securities (other than on Form S-4 or Form S-8 or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans), the Company shall
send to each Investor who is entitled to registration rights under this Section
2(d) written notice of such determination and, if within fifteen (15) days after
the effective date of such notice, such Investor shall so request in writing,
the Company shall include in such Registration Statement all or any part of the
Registrable Securities such Investor requests to be registered, except that if,
in connection with any underwritten public offering for the account of the
Company the managing underwriter(s) thereof shall impose a limitation on the
number of shares of Common Stock which may be included in the Registration
Statement because, in such underwriter(s)' judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then the
Company shall be obligated to include in such
4
<PAGE>
Registration Statement only such limited portion of the Registrable Securities
with respect to which such Investor has requested inclusion hereunder as the
underwriter or the Company shall permit. Any exclusion of Registrable Securities
shall be made pro rata among the Investors seeking to include Registrable
Securities in proportion to the number of Registrable Securities sought to be
included by such Investors; provided, however, that the Company shall not
exclude any Registrable Securities unless the Company has first excluded all
outstanding securities, the holders of which are not entitled to inclusion of
such securities in such Registration Statement or are not entitled to pro rata
inclusion with the Registrable Securities; and provided, further, however, that,
after giving effect to the immediately preceding proviso, any exclusion of
Registrable Securities shall be made pro rata with holders of other securities
having the right to include such securities in the Registration Statement other
than holders of securities entitled to inclusion of their securities in such
Registration Statement by reason of demand registration rights, whose rights
shall be senior. No right to registration of Registrable Securities under this
Section 2(d) shall be construed to limit any registration required under Section
2(a) hereof. If an offering in connection with which an Investor is entitled to
registration under this Section 2(d) is an underwritten offering, then each
Investor whose Registrable Securities are included in such Registration
Statement shall, unless otherwise agreed by the Company, offer and sell such
Registrable Securities in an underwritten offering using the same underwriter or
underwriters and, subject to the provisions of this Agreement, on the same terms
and conditions as other shares of Common Stock included in such underwritten
offering. Notwithstanding anything to the contrary set forth herein, the
registration rights of the Investors pursuant to this Section 2(d) shall only be
available in the event that the Company fails to timely file, obtain
effectiveness or maintain the effectiveness of the Registration Statement to be
filed pursuant to Section 2(a) in accordance with the terms of this Agreement;
provided, however, that if the Registration Statement is not effective as a
result of an Allowed Delay, the Company will not be required to register the
Registrable Securities pursuant to this Section 2(d) and will be permitted to
use the Registration Statement upon the expiration of the Allowed Delay.
e. Eligibility for Form S-3. The Company represents and warrants
that it meets the registrant eligibility requirements for the use of Form S-3
for registration of the sale by the Initial Investors and any other Investors of
the Registrable Securities and the Company shall file all reports required to be
filed by the Company with the SEC in a timely manner so as to maintain such
eligibility for the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare promptly, and file with the SEC not
later than forty-five (45) days after the Closing Date, a Registration Statement
with respect to the number of Registrable Securities provided in Section 2(a),
and thereafter use its best efforts to cause such Registration Statement
relating to Registrable Securities to become effective as soon as possible
5
<PAGE>
after such filing, and keep the Registration Statement effective pursuant to
Rule 415 at all times until such date as is the earlier of (i) the date on which
all of the Registrable Securities have been sold and (ii) the date on which the
Registrable Securities (in the opinion of counsel to the Initial Investors) may
be immediately sold without restriction (including without limitation as to
volume by each holder thereof) without registration under the 1933 Act (the
"REGISTRATION PERIOD"), which Registration Statement (including any amendments
or supplements thereto and prospectuses contained therein) shall not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein, or necessary to make the statements therein in light of the
circumstances under which made, not misleading.
b. The Company shall prepare and file with the SEC such
amendments (including post-effective amendments) and supplements to the
Registration Statement and the prospectus used in connection with the
Registration Statement as may be necessary to keep the Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement. In the event the number of
shares available under a Registration Statement filed pursuant to this Agreement
is insufficient to cover all of the Registrable Securities issued or issuable
upon conversion of the Debentures or exercise of the Warrants, the Company shall
amend the Registration Statement, or file a new Registration Statement (on the
short form available therefore, if applicable), or both, so as to cover all of
the Registrable Securities, in each case, as soon as practicable, but in any
event within twenty (20) business days after the necessity therefor arises
(based on the market price of the Common Stock and other relevant factors on
which the Company reasonably elects to rely). The Company shall use its best
efforts to cause such amendment and/or new Registration Statement to become
effective as soon as practicable following the filing thereof. The provisions of
Section 2(c) above shall be applicable with respect to such obligation, with the
one hundred twenty (120) days running from the day after the date on which the
Company reasonably first determines (or reasonably should have determined) the
need therefor.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and its legal counsel (i)
promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each preliminary prospectus and prospectus and each amendment
or supplement thereto, and, in the case of the Registration Statement referred
to in Section 2(a), each letter written by or on behalf of the Company to the
SEC or the staff of the SEC, and each item of correspondence from the SEC or the
staff of the SEC, in each case relating to such Registration Statement (other
than any portion of any thereof which does not relate to the plan of
distribution or the Initial Investors, the Debentures or the Registerable
Securities or which contains information for which the Company has sought
confidential treatment), and (ii) such number of copies of a prospectus,
including a preliminary
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prospectus, and all amendments and supplements thereto and such other documents
as such Investor may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by such Investor. The Company will
immediately notify each Investor by facsimile of the effectiveness of the
Registration Statement or any post-effective amendment.
d. The Company shall use reasonable efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as the Investors who hold a majority in interest of the Registrable
Securities being offered reasonably request, (ii) prepare and file in those
jurisdictions such amendments (including post-effective amendments) and
supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions, in each case, if
necessary to enable Holder to dispose of Registrable Securities; provided,
however, that the Company shall not be required in connection therewith or as a
condition thereto to (a) qualify to do business in any jurisdiction where it
would not otherwise be required to qualify but for this Section 3(d), (b)
subject itself to general taxation in any such jurisdiction, (c) file a general
consent to service of process in any such jurisdiction, (d) provide any
undertakings that cause the Company undue expense or burden, or (e) make any
change in its charter or bylaws, which in each case the Board of Directors of
the Company determines to be contrary to the best interests of the Company and
its stockholders.
e. In the event Investors who hold a majority-in-interest of the
Registrable Securities being offered in the offering (with the approval of a
majority-in-interest of the Initial Investors) intend to distribute the
Registerable Securities by means of an underwriting, they shall notify the
Company of any such underwriting and will only be permitted to use an
underwriter designated or otherwise acceptable to the Company. Only one such
underwriting shall be permitted hereunder. The Company shall enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, including, without limitation, customary indemnification and contribution
obligations, with the underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor of the happening of any event, of which
the Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, and use its best
efforts promptly to prepare a supplement or amendment to the Registration
Statement to correct such untrue statement or omission, and deliver such number
of copies of such supplement or amendment to each Investor as such Investor may
reasonably request; provided that, for not more than forty-five (45) consecutive
trading days (or a total of not more than sixty (60) trading days in any twelve
(12) month period), the Company may delay the disclosure of material non-public
information concerning the Company (as well as prospectus or Registration
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<PAGE>
Statement updating) the disclosure of which at the time is not, in the good
faith opinion of the Company, in the best interests of the Company (an "ALLOWED
DELAY"); provided, further, that the Company shall promptly (i) notify the
Investors in writing of the existence of (but in no event, without the prior
written consent of an Investor, shall the Company disclose to such Investor any
of the facts or circumstances regarding) material non-public information giving
rise to an Allowed Delay and (ii) advise the Investors in writing to cease all
sales under the Registration Statement until the end of the Allowed Delay. Upon
expiration of the Allowed Delay, the Company shall again be bound by the first
sentence of this Section 3(f) with respect to the information giving rise
thereto.
g. The Company shall use its best efforts to prevent the issuance
of any stop order or other suspension of effectiveness of a Registration
Statement, and, if such an order is issued, to obtain the withdrawal of such
order at the earliest possible moment and to notify each Investor who holds
Registrable Securities being sold (or, in the event of an underwritten offering,
the managing underwriters) of the issuance of such order and the resolution
thereof.
h. The Company shall permit a single firm of counsel designated
by the Initial Investors to review the Registration Statement and all amendments
and supplements thereto (as well as all requests for acceleration or
effectiveness thereof) a reasonable period of time prior to their filing with
the SEC, and not file any document in a form to which such counsel reasonably
objects and will not request acceleration of the Registration Statement without
prior notice to such counsel. The sections of the Registration Statement
covering information with respect to the Investors, the Investor's beneficial
ownership of securities of the Company or the Investors intended method of
disposition of Registrable Securities shall conform to the information provided
to the Company by each of the Investors.
i. The Company shall make generally available to its security
holders as soon as practical, but not later than ninety (90) days after the
close of the period covered thereby, an earnings statement (in form complying
with the provisions of Rule 158 under the 1933 Act) covering a twelve-month
period beginning not later than the first day of the Company's fiscal quarter
next following the effective date of the Registration Statement.
j. At the request of any seller of Registrable Securities, the
Company shall furnish, on the date that Registrable Securities are delivered to
an underwriter, if any, for sale in connection with an underwritten offering and
the Registration Statement or, if such securities are not being sold by an
underwriter, on the date of effectiveness thereof (i) an opinion, dated as of
such date, from counsel representing the Company for purposes of such
Registration Statement, in form, scope and substance as is customarily given in
an underwritten public offering, addressed to the underwriters, if any, and the
seller of Registerable Securities and (ii) a letter, dated such date, from the
Company's independent certified public accountants in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and the
Investors.
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k. The Company shall make available for inspection by (i) any
Investor, (ii) any underwriter participating in any disposition pursuant to the
Registration Statement and (iii) one firm of attorneys and one firm of
accountants or other agents retained by the Initial Investors, (collectively,
the "INSPECTORS") all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the "RECORDS"),
as shall be reasonably deemed necessary by each Inspector to enable each
Inspector to exercise its due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information which any Inspector
may reasonably request for purposes of such due diligence; provided, however,
that each Inspector shall hold in confidence and shall not make any disclosure
(except to an Investor) of any Record or other information which the Company
determines in good faith to be confidential, and of which determination the
Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement, (b) release of such Records is ordered pursuant to a subpoena or
other order from a court or government body of competent jurisdiction, or (c)
the information in such Records has been made generally available to the public
other than by disclosure in violation of this or any other agreement. The
Company shall not be required to disclose any confidential information in such
Records to any Inspector until and unless such Inspector shall have entered into
confidentiality agreements (in form and substance satisfactory to the Company)
with the Company with respect thereto, substantially in the form of this Section
3(k). Each Investor agrees that it shall, upon learning that disclosure of such
Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investor's ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.
l. The Company shall hold in confidence and not make any
disclosure of information concerning an Investor provided to the Company unless
(i) disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration Statement, (iii) the
release of such information is ordered pursuant to a subpoena or other order
from a court or governmental body of competent jurisdiction, or (iv) such
information has been made generally available to the public other than by
disclosure in violation of this or any other agreement. The Company agrees that
it shall, upon learning that disclosure of such information concerning an
Investor is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to such Investor prior
to making such disclosure, and allow the Investor, at its expense, to undertake
appropriate action to prevent disclosure of, or to obtain a protective order
for, such information.
m. The Company shall (i) cause all the Registrable Securities
covered by the Registration Statement to be listed on the NYSE or each other
national securities exchange on which securities of the same class or series
issued by the Company are then listed, if any, if the
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<PAGE>
listing of such Registrable Securities is then permitted under the rules of such
exchange, or (ii) secure the designation and quotation, of all the Registrable
Securities covered by the Registration Statement on Nasdaq and, without limiting
the generality of the foregoing, to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc. ("NASD") as
such with respect to such Registrable Securities.
n. The Company shall provide a transfer agent and registrar,
which may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
o. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, within three (3)
business days after a Registration Statement which includes Registrable
Securities is ordered effective by the SEC, the Company shall deliver, and shall
cause legal counsel selected by the Company to deliver, to the transfer agent
for the Registrable Securities (with copies to the Investors whose Registrable
Securities are included in such Registration Statement) an instruction in the
form attached hereto as EXHIBIT 1 and an opinion of such counsel in the form
attached hereto as EXHIBIT 2.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least three (3)
business days prior to the first anticipated filing date of the Registration
Statement, the Company shall notify each Investor of the information the Company
requires from each such Investor.
b. Each Investor, by such Investor's acceptance of the
Registrable Securities, agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of the
Registration Statement hereunder, unless such Investor has notified the Company
in writing of such Investor's election to exclude all of such Investor's
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<PAGE>
Registrable Securities from the Registration Statement, in which case the
Company shall have no further obligation to such Investor under this Agreement.
c. In the event Investors holding a majority-in-interest of the
Registrable Securities being registered (with the approval of the Initial
Investors) determine to engage the services of an underwriter, each Investor
agrees to enter into and perform such Investor's obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
managing underwriter of such offering and take such other actions as are
reasonably required in order to expedite or facilitate the disposition of the
Registrable Securities, unless such Investor has notified the Company in writing
of such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement, in which case the Company shall have
no further obligation to such Investor under this Agreement.
d. Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3(f) or
3(g), such Investor will immediately discontinue disposition of Registrable
Securities pursuant to the Registration Statement covering such Registrable
Securities until such Investor's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3(f) or 3(g) and, if so directed by
the Company, such Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in such Investor's possession, of the prospectus covering such
Registrable Securities current at the time of receipt of such notice.
e. No Investor may participate in any underwritten registration
hereunder unless such Investor (i) agrees to sell all of such Investor's
Registrable Securities on the basis provided in any underwriting arrangements in
usual and customary form entered into by the Company if requested by the
Company, (ii) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements, and (iii) agrees to pay its
pro rata share of all underwriting discounts and commissions and any expenses in
excess of those payable by the Company pursuant to Section 5 below.
5. EXPENSES OF REGISTRATION.
All reasonable expenses, other than underwriting discounts and
commissions, incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualification fees, printers and accounting fees, the
fees and disbursements of counsel for the Company shall be borne by the Company,
and the actual documented fees and disbursements of one counsel selected by the
Initial Investors pursuant to Sections 2(b) and 3(h) hereof (not to exceed
$2,500) shall be borne by the Company.
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6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify,
hold harmless and defend (i) each Investor who holds such Registrable
Securities, (ii) the directors, officers, partners, employees, agents and each
person who controls any Investor within the meaning of Section 15 of the 1933
Act or Section 20 of the Securities Exchange Act of 1934, as amended (the "1934
ACT"), if any, (iii) any underwriter (as defined in the 1933 Act) for the
Investors, and (iv) the directors, officers, partners, employees and each person
who controls any such underwriter within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act, if any (each, an "INDEMNIFIED PERSON"),
against any joint or several losses, claims, damages, liabilities or expenses
(collectively, together with actions, proceedings or inquiries by any regulatory
or self-regulatory organization, whether commenced or threatened, in respect
thereof, "CLAIMS") to which any of them may become subject insofar as such
Claims arise out of or are based upon: (i) any untrue statement or alleged
untrue statement of a material fact in a Registration Statement or the omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading; (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
preliminary prospectus if used prior to the effective date of such Registration
Statement, or contained in the final prospectus (as amended or supplemented, if
the Company files any amendment thereof or supplement thereto with the SEC) or
the omission or alleged omission to state therein any material fact necessary to
make the statements made therein, in light of the circumstances under which the
statements therein were made, not misleading; or (iii) any violation or alleged
violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "VIOLATIONS"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Indemnified Person, promptly as such expenses are incurred and are due and
payable, for any reasonable legal fees or other reasonable expenses incurred by
them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(a): (i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in conformity
with information furnished in writing to the Company by any Indemnified Person
or underwriter for such Indemnified Person expressly for use in connection with
the preparation of the Registration Statement or any such amendment thereof or
supplement thereto, if such prospectus was timely made available by the Company
pursuant to Section 3(c) hereof; (ii) shall not apply to amounts paid in
settlement of any Claim if such settlement is effected without the prior written
consent of the Company, which consent shall not be unreasonably withheld; and
(iii) with respect to any preliminary prospectus, shall not inure to the benefit
of any Indemnified Person if the untrue statement or omission of material fact
contained in the preliminary prospectus was corrected on
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a timely basis in the prospectus, as then amended or supplemented, such
corrected prospectus was timely made available by the Company pursuant to
Section 3(c) hereof, and the Indemnified Person was promptly advised in writing
not to use the incorrect prospectus prior to the use giving rise to a Violation
and such Indemnified Person, notwithstanding such advice, used it. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, any
underwriter and any other stockholder selling securities pursuant to the
Registration Statement or any of its directors or officers or any person who
controls such stockholder or underwriter within the meaning of the 1933 Act or
the 1934 Act (collectively and together with an Indemnified Person, an
"INDEMNIFIED PARTY"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation by such Investor, in each case to the extent
(and only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished to the Company by such Investor
expressly for use in connection with such Registration Statement; and subject to
Section 6(c) such Investor will reimburse any legal or other expenses (promptly
as such expenses are incurred and are due and payable) reasonably incurred by
them in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 6(b) shall not
apply to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Agreement (including this Section 6(b) and Section 7) for only
that amount as does not exceed the net proceeds to such Investor as a result of
the sale of Registrable Securities pursuant to such Registration Statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of such Indemnified Party and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 9.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 6(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is to be made against any
indemnifying party under this Section 6, deliver to the indemnifying party a
written notice of the commencement thereof, and the indemnifying party shall
have the right
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to participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
legal counsel shall be selected by Investors holding a majority-in-interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of a majority-in-interest of the Initial
Investors), if the Investors are entitled to indemnification hereunder, or the
Company, if the Company is entitled to indemnification hereunder, as applicable.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
actually prejudiced in its ability to defend such action. The indemnification
required by this Section 6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as such expense,
loss, damage or liability is incurred and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(i) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (ii) no seller of Registrable Securities guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any seller of Registrable Securities who was not
guilty of such fraudulent misrepresentation, and (iii) contribution (together
with any indemnification or other obligations under this Agreement) by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities.
8. REPORTS UNDER THE 1934 ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the 1933 Act or any other similar rule or regulation of
the SEC that may at any time permit the investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
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a. make and keep public information available, as those terms are
understood and defined in Rule 144;
b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4(c) of the
Securities Purchase Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and
c. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights under this Agreement shall be automatically assignable by the
Investors to any transferee of all or any portion of Registrable Securities if:
(i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such assignment, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written notice of (a) the
name and address of such transferee or assignee, and (b) the securities with
respect to which such registration rights are being transferred or assigned,
(iii) following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the 1933 Act and
applicable state securities laws, (iv) at or before the time the Company
receives the written notice contemplated by clause (ii) of this sentence, the
transferee or assignee agrees in writing with the Company to be bound by all of
the provisions contained herein, (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement, and (vi) such transferee shall be an "ACCREDITED INVESTOR" as that
term defined in Rule 501 of Regulation D promulgated under the 1933 Act.
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with written consent of the Company, each
of the Initial Investors (to the extent such Initial Investor still owns
Registrable Securities) and Investors who hold a majority interest of the
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 10 shall be binding upon each Investor and the Company.
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11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms
hereof shall be sent by certified or registered mail (return receipt requested)
or delivered personally or by courier (including a recognized overnight delivery
service) or by facsimile and shall be effective five days after being placed in
the mail, if mailed by regular U.S. mail, or upon receipt, if delivered
personally or by courier (including a recognized overnight delivery service) or
by facsimile, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
American Banknote Corporation
200 Park Avenue
49th Floor
New York, New York 10166
Attention: Harvey J. Kesner, Esq.
Facsimile: 212-338-0747
With copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue, 38th Floor
New York, New York 10022
Attention: Scott S. Rosenblum
Facsimile: 212-983-0028
If to an Investor: to the address set forth immediately below such Investor's
name on the signature pages to the Securities Purchase Agreement.
c. Failure of any party to exercise any right or remedy under
this Agreement or otherwise, or delay by a party in exercising such right or
remedy, shall not operate as a waiver thereof.
d. This Agreement shall be enforced, governed by and construed in
accordance with the laws of Delaware applicable to agreements made and to be
performed entirely within such State. In the event that any provision of this
Agreement is invalid or unenforceable under any applicable statute or rule of
law, then such provision shall be deemed
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inoperative to the extent that it may conflict therewith and shall be deemed
modified to conform with such statute or rule of law. Any provision hereof which
may prove invalid or unenforceable under any law shall not affect the validity
or enforceability of any other provision hereof. The parties hereto hereby
submit to the exclusive jurisdiction of the United States Federal Courts located
in Delaware with respect to any dispute arising under this Agreement or the
transactions contemplated hereby.
e. This Agreement and the Securities Purchase Agreement
(including all schedules and exhibits thereto) constitute the entire agreement
among the parties hereto with respect to the subject matter hereof and thereof.
There are no restrictions, promises, warranties or undertakings, other than
those set forth or referred to herein and therein. This Agreement and the
Securities Purchase Agreement supersede all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof.
f. Subject to the requirements of Section 9 hereof, this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties hereto.
g. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same agreement. This Agreement, once executed by a party, may be
delivered to the other party hereto by facsimile transmission of a copy of this
Agreement bearing the signature of the party so delivering this Agreement.
i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.
j. Except as otherwise provided herein, all consents and other
determinations to be made by the Investors pursuant to this Agreement shall be
made by Investors holding a majority of the Registrable Securities, determined
as if the all of the Debentures and Warrants then outstanding have been
converted into or exercised for Registrable Securities.
k. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party.
17
<PAGE>
IN WITNESS WHEREOF, the Company and the undersigned Initial Investors
have caused this Agreement to be duly executed as of the date first above
written.
AMERICAN BANKNOTE CORPORATION
By: /s/Harvey J. Kesner, Esq.
-------------------------------------------------------
Harvey J. Kesner, Esq.
Executive Vice President, General Counsel and Secretary
RGC INTERNATIONAL INVESTORS, LDC
By: Rose Glen Capital Management, L.P., Investment Manager
By: RGC General Partner Corp., General Partner
By: /s/Wayne D. Bloch
-------------------------------------------------------
Wayne D. Bloch
Managing Director
HALIFAX FUND, L.P.
By: Palladin Group, L.P., as attorney-in-fact
By: Palladin Capital Management LLC, its General Partner
By: /s/Andrew Kaplan
-------------------------------------------------------
Andrew Kaplan
Senior Vice President
18
[THE CHASE LETTERHEAD]
December 3, 1997
American Banknote Corporation
200 Park Avenue - 49th Fl.
New York, New York 10166-4999
Re: Credit Agreement dated as of January 29, 1996 as amended to date
(the "Credit Agreement"), among the American Bank Note Company
and American Bank Note Holographics, Inc. (the "Borrowers"),
American Banknote Corporation ("ABNC"), the Lenders named
therein, and The Chase Manhattan Bank (formerly known as Chemical
Bank), as Agent for such Lenders
Gentlemen:
Reference is made to the Credit Agreement, and particularly Section
7.03, restriction on the incurrence of indebtedness.
We understand that by no later than December 31, 1997 ABNC will be
issuing up to $100,000,000 of senior subordinated notes, maturing in the year
2007 which will be guaranteed on a subordinated basis by the Borrowers, and we
have been requested to waive the provisions of Section 7.03 of the Credit
Agreement to permit the issuance of such indebtedness and such subordinated
guarantee.
We hereby waive the provisions of Section 7.03 of the Credit Agreement
to permit the issuance of such indebtedness by ABNC and the guarantee thereof by
the Borrowers on a subordinated basis. This waiver is specific to the
indebtedness referred to above, and is not intended to waive any other
provisions of the Credit Agreement.
Very truly yours,
THE CHASE MANHATTAN BANK
By: /s/ Robert J. Arth
----------------------
Name: Robert J. Arth
Title: V.P.
