SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D
Under the Securities Exchange Act of 1934
(Amendment No. )
AMERICAN BODY ARMOR & EQUIPMENT, INC.
(Name of Issuer)
Common Stock, $.03 Par Value
(Title of Class of Securities)
024635203
(CUSIP Number)
Nick G. Bouras
Richmont Capital Partners I, L.P.
4300 Westgrove
Dallas, Texas 75248
(214) 713-5000
with copies to:
Thomas W. Briggs
Kelly, Hart & Hallman, P.C.
201 Main Street, Suite 2500
Fort Worth, Texas 76102
(817) 332-2500
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
April 30, 1996
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box / /.
Check the following box if a fee is being paid with the statement /X/.
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1. Name of Reporting Person:
Richmont Capital Partners I, L.P.
2. Check the Appropriate Box if a Member of a Group:
(a)/ /
(b) / /
3. SEC Use Only
4. Source of Funds: WC
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e): / /
6. Citizenship or Place of Organization: Delaware
7. Sole Voting Power: -0-
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: -0-
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
700,000 (1)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
/ /
13. Percent of Class Represented by Amount in Row (11): 9.4% (2)
14. Type of Reporting Person: PN
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(1) Assumes conversion of 5% Convertible Subordinated Note due April 30, 2001
held by Richmont Capital Partners I, L.P. ("RCPI") into 600,000 shares of
Common Stock and the exercise of an option to purchase 100,000 shares of
Common Stock pursuant to an Option issued by the Issuer effective May 15,
1996.
(2) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are
7,463,331 shares of Common stock outstanding, which number includes the
600,000 shares of Common Stock into which the 5% Convertible Subordinated
Note due April 30, 2001 held by RCPI is presently convertible and options
to purchase 100,000 shares of Common Stock held by RCPI.
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Item 1. SECURITY AND ISSUER.
This statement relates to the Common Stock, $.03 par value (the "Common
Stock"), of American Body Armor & Equipment, Inc., a Florida corporation (the
"Issuer"), which has its principal executive offices at 191 Nassau Place Road,
Yulee, Florida 32097.
Item 2. IDENTITY AND BACKGROUND.
(a) Pursuant to Rule 13d-1 of Regulation 13D-G of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended (the "Act"),
this statement is being filed on behalf of Richmont Capital Partners I, L.P.,
a Delaware limited partnership ("RCPI"), J.R. Investments Corp., a Delaware
corporation ("JRIC"), John P. Rochon ("JPR"), New Arrow Corporation, a
Delaware corporation ("New Arrow"), Mary Kay Inc., a Delaware corporation
("MKI"), Mary Kay Holding Corporation, a Delaware corporation ("Mary Kay"),
and Richard R. Rogers ("RRR"). RCPI, JRIC, JPR, New Arrow, MKI, Mary Kay and
RRR are hereinafter sometimes collectively referred to as the "Item 2
Persons."
(b) - (c)
RCPI
RCPI is a Delaware limited partnership, the principal business of which
is the management of Mary Kay's investments in marketable securities. The
principal business address of RCPI, which also serves as its principal office,
is 4300 Westgrove, Dallas, Texas 75248. Pursuant to General Instruction C to
Schedule 13D under the Act, information with respect to JRIC and New Arrow,
the two general partners of RCPI, is set forth below.
JRIC
JRIC is a Delaware corporation, the principal business of which is
serving as the managing general partner of RCPI. The principal business
address of JRIC, which also serves as its principal office, is 4300 Westgrove,
Dallas, Texas 75248. A majority of the outstanding capital stock of JRIC is
beneficially owned by JPR. Pursuant to General Instruction C to Schedule 13D
under the Act, information with respect to the executive officers and
directors of JRIC is set forth in Schedule I attached hereto.
JPR
JPR's present principal occupation or employment is serving as President,
Chief Executive Officer and Director of Mary Kay. JPR's business address is
16251 North Dallas Parkway, Dallas, Texas 75247.
NEW ARROW
New Arrow is a Delaware corporation, the principal business of which is
serving as one of two general partners of RCPI. The principal business
address of New Arrow, which also serves as its principal office, is 4300
Westgrove, Dallas, Texas 75248. All of the outstanding capital stock of New
Arrow is owned by MKI. Pursuant to General Instruction C to Schedule 13D
under the Act, information with respect to the executive officers and
directors of New Arrow is set forth in Schedule I attached hereto.
MKI
MKI is a Delaware corporation, the principal business of which is the
production and distribution of cosmetics, toiletries and related products.
The principal business address of MKI, which also serves as its principal
office, is 16251 North Dallas Parkway, Dallas, Texas 75247. All of the
outstanding capital stock of MKI is owned by Mary Kay. Pursuant to General
Instruction C to Schedule 13D under the Act, information with respect to the
executive officers and directors of MKI is set forth in Schedule I attached
hereto.
MARY KAY
Mary Kay is a Delaware corporation that was organized in 1985 for the
purpose of acquiring all the capital stock of MKI. Since such acquisition,
Mary Kay has carried on substantially all its business activities through MKI.
The principal business address of Mary Kay, which also serves as its principal
office, is 16251 North Dallas Parkway, Dallas, Texas 75247. A majority of the
capital stock of Mary Kay is beneficially owned by RRR. Pursuant to General
Instruction C to Schedule 13D under the Act, information with respect to the
executive officers and directors of Mary Kay is set forth in Schedule I
attached hereto.
RRR
RRR's present principal occupation or employment is serving as Chairman
of the Board of Mary Kay. RRR's business address is 4300 Westgrove, Dallas,
Texas 75248.
(d) None of the Item 2 Persons and none of the persons identified in
Schedule I hereto has, during the last five years, been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) None of the Item 2 Persons and none of the persons identified in
Schedule I hereto has, during the last five years, been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any
violation with respect to such laws.
(f) All of the natural persons identified in this Item 2 (including
those set forth in Schedule I attached hereto) are citizens of the United
States of America.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
RCPI used $3,000,000 of its working capital to purchase a 5% Convertible
Subordinated Note Due April 30, 2001 issued by the Issuer (the "Convertible
Note"). None of such funds were borrowed or otherwise obtained for the
specific purpose of acquiring, handling, trading or voting the Common Stock.
This amount does not include any funds that may be expended in the future by
RCPI to acquire additional shares of the Common Stock upon exercise of the
options reported herein. It is expected that RCPI would use working capital
to exercise such options.
No other Item 2 Person has expended any funds to purchase or otherwise
acquire any shares of the Common Stock.
Item 4. PURPOSE OF TRANSACTION.
The Convertible Note reported herein was purchased and continues to be
held by RCPI for investment purposes. RCPI will continue to evaluate its
investment in the Convertible Note.
Each of the Item 2 Persons may buy or sell shares of the Common Stock and
RCPI may sell all or a portion of the Convertible Note (or the underlying
Common Stock) it now owns or hereafter may acquire in the open market or
otherwise on such terms and at such times as such Item 2 Person considers
desirable, subject to any restrictions contained in the Purchase Agreement
described in Item 6. Any decision by an Item 2 Person to increase, decrease
or dispose of its position in the Common Stock or the Convertible Note (or
underlying Common Stock) would be based upon factors including but not limited
to the business of the Issuer, the price of the shares of Common Stock, the
terms and conditions of the transaction, prevailing market conditions and
other factors the Item 2 Person may deem material to its investment decision.
Additionally, a designee of RCPI, which will be mutually agreed upon by
RCPI and the Issuer, is expected to join the Issuer's Board of Directors
pursuant to the Letter Agreement described in Item 6.
Except as set forth in this Item 4, the Item 2 Persons have no present
plans or proposals which may relate to or would result in any of the actions
specified in clauses (a) through (j) of Item 4 of Schedule 13D under the Act.
Item 5. INTEREST IN THE SECURITIES OF THE ISSUER.
(a)
RCPI
The aggregate number of shares of the Common Stock that RCPI owns
beneficially, pursuant to Rule 13d-3 under the Act, is 700,000, which number
includes the 600,000 shares of Common Stock into which the Convertible Note
held by RCPI is presently convertible and an option to purchase 100,000 shares
of Common Stock, which constitutes approximately 9.4% of the 7,463,331 shares
of the Common Stock outstanding deemed outstanding pursuant to Rule 13d-
3(d)(1)(i).
JRIC
Because of its position as one of two general partners of RCPI, JRIC may,
pursuant to Rule 13d-3 under the Act, be deemed to be the beneficial owner of
700,000 shares of the Common Stock, which number includes the 600,000 shares
of Common Stock into which the Convertible Note held by RCPI is presently
convertible and an option to purchase 100,000 shares of Common Stock, which
constitutes approximately 9.4% of the 7,463,331 shares of the Common Stock
deemed outstanding pursuant to Rule 13d-3(d)(1)(i).
JPR
Because of his position as the beneficial owner of a majority of the
outstanding capital stock of JRIC, JPR may, pursuant to Rule 13d-3 under the
Act, be deemed to be the beneficial owner of 700,000 shares of the Common
Stock, which number includes the 600,000 shares of Common Stock into which
the Convertible Note held by RCPI is presently convertible and an option to
purchase 100,000 shares of Common Stock, which constitutes approximately 9.4%
of the 7,463,331 shares of the Common Stock deemed outstanding pursuant to
Rule 13d-3(d)(1)(i).
NEW ARROW
Because of its position as one of two general partners of RCPI, New Arrow
may, pursuant to Rule 13d-3 under the Act, be deemed to be the beneficial
owner of 700,000 shares of the Common Stock, which number includes the
600,000 shares of Common Stock into which the Convertible Note held by RCPI is
presently convertible and an option to purchase 100,000 shares of Common
Stock, which constitutes approximately 9.4% of the 7,463,331 shares of the
Common Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i).
MKI
Because of its position as the sole stockholder of New Arrow, MKI may,
pursuant to Rule 13d-3 under the Act, be deemed to be the beneficial owner of
700,000 shares of the Common Stock, which number includes the 600,000 shares
of Common Stock into which the Convertible Note held by RCPI is presently
convertible and an option to purchase 100,000 shares of Common Stock, which
constitutes approximately 9.4% of the 7,463,331 shares of the Common Stock
deemed outstanding pursuant to Rule 13d-3(d)(1)(i).
MARY KAY
Because of its position as the sole stockholder of MKI, Mary Kay may,
pursuant to Rule 13d-3 under the Act, be deemed to be the beneficial owner of
700,000 shares of the Common Stock, which number includes the 600,000 shares
of Common Stock into which the Convertible Note held by RCPI is presently
convertible and an option to purchase 100,000 shares of Common Stock, which
constitutes approximately 9.4% of the 7,463,331 shares of the Common Stock
deemed outstanding pursuant to Rule 13d-3(d)(1)(i).
RRR
Because of his position as the beneficial owner of a majority of the
outstanding capital stock of Mary Kay, RRR may, pursuant to Rule 13d-3 under
the Act, be deemed to be the beneficial owner of 700,000 shares of the Common
Stock, which number includes the 600,000 shares of Common Stock into which the
Convertible Note held by RCPI is presently convertible and an option to
purchase 100,000 shares of Common Stock, which constitutes approximately 9.4%
of the 7,463,331 shares of the Common Stock deemed outstanding pursuant to
Rule 13d-3(d)(1)(i).
(b)
None of the Item 2 Persons presently has any power to vote or to direct
the vote or to dispose or to direct the disposition of any shares of the
Common Stock.
(c) On April 30, 1996, RCPI purchased the Convertible Note pursuant to
the Convertible Subordinated Note Purchase Agreement by and among the Issuer
and the purchasers listed therein (the "Purchase Agreement"). The Purchase
Agreement is attached hereto as Exhibit 10.1 and further described in Item 6
below. Other than this purchase, none of the Item 2 persons have effected any
transactions in the Common Stock during the past 60 days.
(d) - (e) Not applicable.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
CONVERTIBLE SUBORDINATED NOTE PURCHASE AGREEMENT
The description set forth in this Item 6 of the Purchase Agreement does
not purport to be complete and is qualified in its entirety by reference to
the Purchase Agreement, a copy of which is being filed as Exhibit 10.1 to this
Schedule 13D Statement.
On April 30, 1996, RCPI entered into the Purchase Agreement with the
Issuer and certain other purchasers listed therein, pursuant to which RCPI
agreed to purchase $3,000,000 of the total maximum of $11,500,000 of
Convertible Notes sold by the Issuer. The Convertible Note is due April 30,
2001, bears interest at a rate of 5% per annum and is subordinate to Senior
Indebtedness of the Issuer (as such term is defined in the Purchase
Agreement). The Convertible Note is convertible at any time by RCPI into the
number of shares of Common Stock equal to the aggregate principal amount of
the Convertible Note then being converted divided by the Conversion Price as
determined pursuant to the Purchase Agreement. The initial Conversion Price
as set forth in Article 24 of the Purchase Agreement is $5.00 and is subject
to customary anti-dilution adjustments set forth in Section 11.4 of the
Purchase Agreement. Under the Purchase Agreement, the Issuer has the right to
call the Convertible Note prior to April 30, 1998, provided that the closing
price for the Issuer's Common Stock equals or exceeds $7.50 per share for at
least 10 consecutive trading days; after April 30, 1998, the Issuer may call
the Convertible Note at any time. In the event of a call by the Issuer, RCPI
has the right to convert the Convertible Note or have it redeemed pursuant to
the Purchase Agreement.
The Issuer has also agreed to file a "shelf" registration statement no
later than June 30, 1996, registering any Common Shares issuable upon
conversion of the Convertible Note. In addition, RCPI, after April 30, 1997,
generally will have customary "piggy back" registration rights with respect to
shares of Common Stock received upon conversion of the Convertible Note. Any
such registration will be at the expense of the Issuer.
LETTER AGREEMENT
The description set forth in this Item 6 of the Letter dated April 3,
1996, delivered to RCPI by the Issuer (the "Letter Agreement") does not
purport to be complete and is qualified in its entirety by reference to the
Letter Agreement, a copy of which is being filed as Exhibit 10.2 to this
Schedule 13D Statement.
Pursuant to the Letter Agreement, the Issuer confirmed its agreement with
RCPI to entitle RCPI to nominate one director to the Issuer's Board of
Directors. Additionally, the Letter Agreement described the terms of the
Option as set forth below.
OPTION
The description set forth in this Item 6 of the Option issued by the
Issuer to be effective May 15, 1996 (the "Option") does not purport to be
complete and is qualified in its entirety by reference to the Option, a copy
of which is being filed as Exhibit 10.3 to this Schedule 13D Statement. Such
Option, however, is currently being held in escrow until such effective date,
when it is scheduled to be released from escrow and delivered to RCPI.
The Option provides RCPI the right to purchase an aggregate of 300,000
shares of Common Stock, subject to a vesting schedule described below, on or
before April 2006, for an exercise price of $7.50 per share, subject to
certain adjustments set forth in the Option. The right to exercise these
options vests in accordance with the following schedule: 100,000 shares
immediately, and 100,000 shares on each of the first and second anniversaries
of the date of the Option. RCPI's rights under the Option lapse in the event
that RCPI no longer has a designee on the Issuer's Board of Directors (other
than an involuntary removal of RCPI's designee). Additionally, in the event
that the closing price per share of the Common Stock equals or exceeds $10.00
for a period of 10 consecutive trading days after December 31, 1997, the
Issuer has the right to deem all options granted under the Option as fully
vested and to require RCPI to exercise the options granted under the Option.
Except as described above, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) among the persons named
in Item 2 or between such persons and any other person with respect to any
securities of the Issuer, including but not limited to transfer or voting of
any such securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of profits, division of profits or
loss, or the giving or withholding of proxies.
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 10.1 - Convertible Subordinated Note Purchase Agreement, dated as of
April 30, 1996, by and among Richmont Capital Partners I, L.P., American Body
Armor & Equipment, Inc and the other purchasers listed therein.
Exhibit 10.2 - Letter dated April 3, 1996 from American Body Armor &
Equipment, Inc. to Richmont Capital Partners I, L.P.
Exhibit 10.3 - Option issued by American Body Armor & Equipment, Inc. dated
effective as of May 15, 1996.<PAGE>
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SCHEDULE I
NAME OF INDIVIDUAL PRESENT PRINCIPAL OCCUPATION
Richard R. Rogers Chairman of the Board and Director of Mary Kay
John P. Rochon President and Director of JRIC; President,
Chief Executive Officer and Director of New
Arrow; President, Chief Executive Officer and
Director of Mary Kay
Timothy M. Byrd Vice President, Chief Financial Officer and
Treasurer of JRIC; Chief Financial Officer,
Treasurer and Director of New Arrow; Chief
Financial Officer and Treasurer of Mary Kay
Nick G. Bouras Vice President and Secretary of JRIC; Vice
President, Assistant Secretary and Director of
New Arrow. Business Address: 4300 Westgrove,
Dallas, Texas 75248.
Mary Kay Ash Chairman Emeritus of the Board of MKI
Richard C. Bartlett Vice Chairman of Mary Kay
Larry E. Harley President, U. S. Operations, and Director of
MKI
A. Raymond Patrick Chief Administrative Officer and Director of
MKI
Ronald B. Clark Executive Vice President, President, European
Operations, of MKI
Myra O. Barker, Ph.D. Chief Scientific Officer of MKI
Curran Dandurand Executive Vice President, Global Marketing
Group, of MKI
Ronald L. Smith Chief Financial Officer and Treasurer of MKI
Thomas J. Reynolds Vice President of New Arrow
R. Bradley Glendening Secretary and Director of New Arrow; Secretary
and General Counsel of Mary Kay
Amy DiGeso Executive Vice President of Mary Kay;
President, International, and Director of MKI
George E. Gustin President, Asia-Pacific Region of MKI
Rodger Bogardus Senior Vice President, Research and
Development, of MKI
Thomas R. Chowning Executive Vice President, Operations, of MKI
Sheila O'Connell Cooper Assistant Secretary of Mary Kay; Senior Vice
President, General Counsel, Secretary and
Director of MKI
Dennis M. Greaney Executive Vice President, Global Manufacturing
Group, of MKI
G. Lowrance Hodge Senior Vice President, Manufacturing Operations
and Engineering, of MKI
Timothy C. Wentworth President of the Americas and Senior Vice
President, Global Human Resources and
Administration, of MKI
Tom Whatley Senior Vice President, New Business Connections
and U.S. Sales, of MKI
Trey Bradley Senior Vice President and Chief Information
Officer of MKI
Thad R. Hogan Senior Vice President, International
Manufacturing of MKI
Unless otherwise stated, the business address of each person named above
is 16251 North Dallas Parkway, Dallas, Texas 75247.
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After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated this 10th day of May, 1996
RICHMONT CAPITAL PARTNERS I, L.P.
By: J.R. Investments Corp.,
General Partner
By: /s/ Nick G. Bouras
Nick G. Bouras,
Vice President
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
10.1 Convertible Subordinated Note Purchase Agreement, filed
herewith
10.2 Letter dated April 3, 1996 from American Body Armor &
Equipment, Inc. to Richmont Capital Partners I, L.P.
10.3 Option issued by American Body Armor & Equipment, Inc. dated
effective as of May 15, 1996.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
WITH
THE PURCHASERS LISTED
ON
EXHIBIT "A" HERETO
CONVERTIBLE SUBORDINATED NOTE PURCHASE AGREEMENT
Dated as of April 30, 1996
AMERICAN BODY ARMOR & EQUIPMENT, INC.
As of April 30, 1996
To the Purchasers set forth
on Exhibit "A" to this Agreement
Dear Sirs:
AMERICAN BODY ARMOR & EQUIPMENT, INC., a Florida corporation (the
"Company"), agrees with each Purchaser as follows:
1. AUTHORIZATION OF CONVERTIBLE NOTES.
The Company has authorized the issuance and sale of an
aggregate of $10,000,000 principal amount, together with a 15% overallotment
option for a total maximum of $11,500,000 principal amount, of its 5%
Convertible Subordinated Notes due April 30, 2001 (the "Convertible Notes").
The Convertible Notes are convertible into shares of the Company's Common
Stock, par value $.03 per share (such shares to be issued upon conversion of
the Convertible Notes being hereinafter referred to herein as the "Shares"),
at the Conversion Price defined in Article 24 of this Agreement. The
Convertible Notes are to be sold pursuant to this Agreement to the purchasers
listed on Exhibit "A" to this Agreement (the "Purchasers"). Interest on the
Convertible Notes is payable semi-annually on the last day of December and
June in each year, commencing on December 31, 1996 (which first interest
payment shall be for the period from and including the Closing Date specified
in Article 3 through December 31, 1996, at the interest rate specified in the
form of Convertible Note attached hereto as Exhibit "B".
2. SALE AND PURCHASE OF CONVERTIBLE NOTES.
Subject to the terms and conditions hereof, the Company will
sell to each Purchaser, and each Purchaser will purchase from the Company, on
the Closing Date specified in Article 3, a Convertible Note or Notes in the
aggregate principal amount set forth opposite such Purchaser's name on Exhibit
"A" hereto, at a purchase price of 100% of such principal amount.
3. CLOSING.
The closing (the "Closing") of the purchase and sale of the
Convertible Notes will take place at the offices of Kane Kessler, P.C., 1350
Avenue of the Americas, New York, New York 10019, at 10:00 a.m., New York City
time, on April 30, 1996 or such other time and date as shall be mutually
agreed upon by the Purchasers and the Company. Such time and date is herein
called the "Closing Date."
On the Closing Date, in the case of Purchasers that are
present at the Closing, or within one (1) Business Day after the Closing, in
the case of all other Purchasers, the Company shall deliver to each Purchaser
a Convertible Note or Notes, dated the Closing Date, in the aggregate
principal amount set forth opposite such Purchaser's name on Exhibit "A"
hereto, each such Convertible Note to be registered in the name of the
Purchaser or its nominee, against delivery by the Purchaser to the Company of
a certified or official bank check(s) or wire transfer(s) in an aggregate
amount equal to the aggregate purchase price for such Convertible Notes,
payable to the order of the Company in immediately available funds.
4. REPRESENTATIONS AND WARRANTIES BY THE COMPANY.
The Company represents and warrants that:
4.1 Organization and Existence, Authority, etc. The Company is
a corporation duly organized and validly existing and in good standing under
the laws of the State of Florida, and has all requisite corporate power and
authority to carry on its business as now conducted and proposed to be
conducted; the Company has all requisite corporate power and authority to
enter into this Agreement, to issue the Convertible Notes as contemplated
herein and to carry out the provisions and conditions of this Agreement and of
the Convertible Notes, including the issuance of the Shares in accordance with
the terms of this Agreement and the Convertible Notes. The Company has no
Subsidiaries as of the date hereof. This Agreement and the Convertible Notes
have been duly executed and delivered by, and constitute the valid and binding
obligations of, the Company, enforceable in accordance with their respective
terms, subject to the effect of any applicable bankruptcy, moratorium,
insolvency, reorganization or other similar law affecting the enforceability
of creditors' rights generally and to the effect of general principles of
equity which may limit the availability of remedies (whether in a proceeding
at law or in equity). The Company is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the conduct of its business or ownership of its properties would so
require, except where the failure to be so qualified would not have a material
adverse effect on its business and financial condition, taken as a whole.
4.2 Litigation. Except as disclosed in the Company Commission
Filings (as hereinafter defined), to the knowledge of the Company, there is no
action, suit or proceeding pending, or threatened, against the Company before
any court, administrative agency or arbitrator which could reasonably be
expected to result in any material adverse change in the business, properties,
condition (financial or otherwise) of the Company, taken as a whole, or which
challenges the validity of any action taken or to be taken pursuant to or in
connection with this Agreement or the Convertible Notes.
4.3 Charter Documents. Neither the execution nor the delivery of
this Agreement or the Convertible Notes, nor the consummation of the
transactions contemplated hereby or thereby,
nor compliance with the terms and provisions hereof or thereof, will conflict
with, or result in a breach of or creation of a lien under, the terms,
conditions or provisions of, or constitute a default under, the charter or by-
laws of the Company, as amended, copies of which have been provided to the
Purchasers.
4.4 Authorized and Outstanding Capital Stock. The Company has
authorized (i) 15,000,000 shares of Common Stock, par value $.03 per share
(the "Common Stock"), of which 6,763,331 shares are issued and outstanding as
of the date of this Agreement, and (ii) 1,700,000 shares of 3% convertible
preferred stock, stated value $1.00 per share (the "Preferred Stock"), all of
which have been either redeemed or converted into shares of Common Stock, and
after giving effect to such redemption and conversion, none of which are
issued and outstanding. All of such outstanding shares of Common Stock have
been validly issued and are fully paid and non-assessable. The Company has
authorized (i) the issuance and sale to the Purchasers of an aggregate of
$10,000,000 principal amount, together with a 15% overallotment option for a
total maximum of $11,500,000 principal amount, of the Convertible Notes and
(ii) the issuance upon conversion of the Convertible Notes of the Shares of
the Company's Common Stock into which such Convertible Notes are convertible
in accordance with Article 11 or 12, as applicable, of this Agreement. The
Shares, when issued in accordance with the terms of this Agreement and the
Convertible Notes, will be validly issued, fully paid and non-assessable.
4.5 Broker's and Finder's Fees. The Company will pay all
broker's and finder's fees incurred by the Company in connection with the sale
of the Convertible Notes.
4.6 Commission Filings and Financial Statements. The Company has
heretofore made available to the Purchasers true and complete copies of all
reports, registration statements, definitive proxy statements and other
documents (in each case together with all amendments and supplements thereto)
filed by the Company with the Commission since September 20, 1993 (such
reports, registration statements, definitive proxy statements and other
documents, together with any amendments and supplements thereto, are sometimes
collectively referred to as the "Company Commission Filings"). The Company
Commission Filings constitute all of the documents (other than preliminary
materials) that the Company was required to file with the Commission since
such date. As of their respective dates, each of the Company Commission
Filings complied in all material respects with the applicable requirements of
the Securities Act and the Exchange Act, as applicable, and the rules and
regulations under each such Act, and none of the Company Commission Filings
contained as of such date any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. When filed with the Commission the financial statements
included in the Company Commission Filings complied as to form in all material
respects with the applicable rules and regulations of the Commission and were
prepared in accordance with generally accepted accounting principles (as in
effect from time to time) applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto), and such financial
statements fairly present in accordance with generally accepted accounting
principles in all material respects the financial position of the Company as
at the dates thereof and the results of its operations and its cash flows for
the periods then ended, subject, in the case of the unaudited interim
financial statements, to normal, recurring year-end audit adjustments and the
absence of footnotes. Since January 1, 1996, except as disclosed in the
Company Commission Filings filed with the Commission prior to the date hereof,
the Company has not incurred any liability or obligation of any kind outside
of the ordinary course of business, and no other event has occurred, which in
any case or in the aggregate, would have a material adverse effect on the
business, assets, results of operations or financial condition of the Company.
4.7 Tax Returns and Payments. The Company has filed all tax
returns required by law to be filed by it and has paid all material taxes,
assessments and other governmental charges levied upon the Company and any of
its properties, assets, income or franchises which are due and payable, other
than those presently payable without penalty or interest or those that are
being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted and for which adequate reserves have been established
on the books of the Company in accordance with generally accepted accounting
principles. The charges, accruals and reserves on the books of the Company in
respect of Federal, state and foreign income taxes for all fiscal periods are
adequate in the opinion of the Company, and the Company has not been notified
of any material unpaid assessment for additional Federal, state or foreign
income taxes for any period or any basis for any such assessment for which
adequate provision has not been made in its accounts in accordance with
generally accepted accounting principles.
4.8 Indebtedness. The Company Commission Filings correctly
describe all material secured and unsecured Indebtedness of the Company
outstanding, or for which the Company has commitments, on the date of this
Agreement, and identify in all material respects the collateral securing any
such secured Indebtedness. The Company is not in material default with
respect to the payment of any material Indebtedness or with respect to any
instrument or agreement relating thereto.
4.9 Title to Properties. The Company has good and sufficient
title to its material properties and assets, including the properties and
assets reflected in the financial statements as of and for the period ended
December 31, 1995 (except properties and assets disposed of since such date in
the ordinary course of business and properties and assets held under Capital
Leases). The Company enjoys peaceful and undisturbed possession under all
material leases necessary in any material respect for the operation of its
material properties and assets, and all such leases are valid and subsisting
and are in full force and effect.
4.10 Compliance with Other Instruments, Etc. The Company is not
in violation of any term of its certificate or articles of incorporation or
by-laws, and the Company is not in material violation of any material term of
any material agreement or instrument to which it is a party or by which it is
bound or any material term of any applicable law, ordinance, rule or
regulation of any governmental authority or any material term of any
applicable order, judgment or decree of any court, arbitrator or governmental
authority, the consequences of which violation might have a materially adverse
effect on the business, condition (financial or other), operations, assets or
properties of the Company; the execution, delivery and performance of this
Agreement and the Notes will not result in any material violation of or be in
material conflict with or constitute a material default under any such term;
and there is no such term which materially adversely affects the business,
condition (financial or other), operations, assets, or properties of the
Company, taken as a whole.
4.11 Governmental Consent. No material consent, approval or
authorization of, or declaration or filing with, any governmental authority on
the part of the Company or any of its Subsidiaries is required for the valid
execution and delivery of this Agreement or the valid offer, issue, sale and
delivery of the Notes pursuant to this Agreement, except where the failure to
obtain such consent or make such filing would not have a material adverse
effect on the business, operations or assets of the Company, and except for
appropriate filings (i) with the Commission and the American Stock Exchange of
a Form D, (ii) with the American Stock Exchange of an additional listing
application for the Shares, and (iii) with such state securities commissions
in respect of "blue sky" laws as may be appropriate.
4.12 Use of Proceeds. The Company will apply the net proceeds of
the sale of the Convertible Notes principally for funding the Company's
acquisition program and for general corporate purposes, including the
repayment of certain outstanding Indebtedness.
4.13 Solvency. On the Closing date and after giving effect to the
application of the proceeds of the Convertible Notes as specified in Section
4.12, the Company will be Solvent.
4.14 Disclosure. To the best of the Company's knowledge, there is
no fact (other than matters of a general economic or political nature which
does not affect the Company uniquely) known to the Company which materially
adversely affects the business, condition (financial or other), operations,
assets or properties of the Company which has not been set forth either in the
Company Commission Filings or in this Agreement or in the other documents,
certificates and instruments delivered to the Purchasers by or on behalf of
the Company specifically for use in connection with the transactions
contemplated by this Agreement.
5. SUBORDINATION.
5.1 Agreement to Be Bound. The Company covenants and agrees, and
each holder of Convertible Notes by his (its) acceptance thereof, likewise
covenants and agrees, that the Convertible Notes shall be issued subject to
the provisions contained in this Article 5; and each person holding any
Convertible Notes, whether upon original issue or upon transfer or assignment
thereof, accepts and agrees to be bound by such provisions.
All Convertible Notes shall, to the extent and in the manner
hereinafter set forth, be subordinated and subject in right of payment to the
prior payment in full of all Senior Indebtedness (as defined herein).
5.2 Priority of Senior Indebtedness. (a) No payment on account
of principal or interest on the Convertible Notes shall be made, nor shall any
assets be applied to the purchase or other acquisition or retirement of the
Convertible Notes, if, at the time of such payment or application or
immediately after giving effect thereto, there shall exist a default in the
payment of any amount due on any Senior Indebtedness. Within ten (10)
Business Days after knowledge of any such default referred to in this Section
5.2(a), the Company shall furnish a copy thereof to each holder of the
Convertible Notes, in the manner and at the address specified pursuant to
Article 17 hereof.
(b) If there shall have occurred an event of default (other than
a default in the payment of any amount due) with respect to any issue of
Senior Indebtedness, as defined herein, or in the instrument under which the
same has been issued, permitting the holders thereof, after notice or lapse of
time, or both, to accelerate the maturity thereof, then, unless and until such
event of default shall have been cured or waived or shall have ceased to
exist, no payment on account of principal or interest on the Convertible Notes
shall be made, nor shall any assets be applied to the conversion, redemption
or other acquisition or retirement of the Convertible Notes until the earliest
to occur of (i) 75 days after the date that notice of such default is given to
the holders of Convertible Notes pursuant to the last sentence of this Section
5.2(b), or (ii) the date on which the Senior Indebtedness to which such event
of default related is discharged in accordance with its terms, or (iii) the
date such event of default is waived by the holders of such Senior
Indebtedness or otherwise cured. For purposes of this Section 5.2(b), so long
as LaSalle Business Credit, Inc. ("LaSalle") is a holder of Senior
Indebtedness of the Company, the time period referred to in clause (i) above
shall remain 75 days; and at any time that LaSalle is no longer a holder of
Senior Indebtedness of the Company, the Company shall use its commercially
reasonable efforts to cause such 75-day period to be reduced to 30 days.
Within ten (10) Business Days after knowledge of any such default referred to
in this Section 5.2(b), the Company shall furnish a copy thereof to each
holder of the Convertible Notes, in the manner and at the address specified
pursuant to Article 17 hereof.
(c) Upon the occurrence and during the continuance of any Event
of Default under this Agreement or the Convertible Notes, or upon the
occurrence of an event described in Sections 5.2(a) or (b) which gives rise to
the non-payment of principal or interest due on the Convertible Notes, and
notwithstanding any other provision contained herein or in the Convertible
Notes to the contrary, each Purchaser hereby agrees, for the benefit of the
holders of Senior Indebtedness, not to ask for, demand, sue for, take or
receive any amount owing under the Convertible Notes or exercise any remedy
(whether pursuant hereto, including, without limitation, acceleration of the
Convertible Notes, at law, in equity or otherwise) with respect thereto until
the earliest of (i) 75 days after (x) the occurrence of such Event of Default
or (y) the date that notice of such default is given to the holders of
Convertible Notes pursuant to Sections 5.2(a) or (b), (ii) the date on which
all Senior Indebtedness is accelerated, (iii) if applicable, the date on which
the Senior Indebtedness to which such event of default related is discharged
in accordance with its terms or such event of default is waived by the holders
of such Senior Indebtedness or otherwise cured or (iv) any voluntary or
involuntary petition in bankruptcy filed by or against the Company. For
purposes of this Section 5.2(c), so long as LaSalle is a holder of Senior
Indebtedness of the Company, the time period referred to in clause (i) above
shall remain 75 days; and at any time that LaSalle is no longer a holder of
Senior Indebtedness of the Company, the Company shall use its commercially
reasonable efforts to cause such 75-day period to be reduced to 30 days.
Within ten (10) Business Days after knowledge of any Event of Default under
this Agreement or the Convertible Notes, the Company shall furnish a copy
thereof to the holders of Senior Indebtedness in the manner and at the
addresses specified in the documents and/or agreements evidencing the
applicable Senior Indebtedness.
5.3 Acceleration of Convertible Notes; Insolvency. Upon (i) any
acceleration of the principal amount due on the Convertible Notes or Senior
Indebtedness or (ii) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any dissolution or winding up or total or partial liquidation or
reorganization of the Company, whether voluntary or involuntary or in
bankruptcy, insolvency, receivership or other proceedings, all amounts due or
to become due upon all Senior Indebtedness shall first be paid in full, or
payment thereof duly provided for, to the full satisfaction of the holders of
Senior Indebtedness before the holders of the Convertible Notes shall be
entitled to receive or retain any assets so paid or distributed in respect
thereof; and upon any such dissolution or winding up or liquidation or
reorganization, any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities, to which the
holders of the Convertible Notes would be entitled, except for these
provisions, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the holders of the Convertible Notes if received by them
or it, as the case may be, directly to the holders of Senior Indebtedness, to
the extent necessary to pay all such Senior Indebtedness in full, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness before any payment or distribution is made to the holders
of the Convertible Notes, except that the holders of Senior Indebtedness of
the type described in clause (i) of the definition of Senior Indebtedness
shall be entitled to receive payment in full of such Senior Indebtedness (or
provisions satisfactory to the holders of such Senior Indebtedness shall be
made for such payment) before the holders of other types of Senior
Indebtedness shall be entitled to receive payment on such other Senior
Indebtedness.
In the event that, notwithstanding the provision of the
preceding paragraph or of Section 5.2 hereof, any payment or
distribution of assets of the Company prohibited by the preceding paragraph or
by Section 5.2 hereof shall be received by the holders of the Convertible
Notes before all Senior Indebtedness is paid in full, or provision made for
such payment, to the full satisfaction of the holders of Senior Indebtedness,
in accordance with its terms, such payment or distribution shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders
of Senior Indebtedness or their representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all Senior
Indebtedness in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of such Senior
Indebtedness. All payments applied to Senior Indebtedness pursuant to this
paragraph of Section 5.3 shall be allocated among the holders of Senior
Indebtedness in accordance with the provisions of the preceding paragraph of
this Section 5.3.
5.4 Subrogation, Etc. Upon payment in full of all Senior
Indebtedness, the holders of Convertible Notes shall be subrogated to the
rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company pro rata in proportion to the
respective amounts then owing to the holders of Convertible Notes; and for
purposes of such subrogation, no payments or distributions to the holders of
Senior Indebtedness of any cash, property or securities to which the holders
of Convertible Notes would be entitled except for the provisions of this
Section 5, and no payment over pursuant to such provisions to the holders of
Senior Indebtedness, shall, as between the Company and its creditors (other
than the holders of Convertible Notes and the holders of the Senior
Indebtedness), be deemed to be a payment by the Company to or on account of
Senior Indebtedness, it being understood that the provisions of this Section
5 are and are intended solely for the purpose of defining the relative rights
of the holders of Convertible Notes on the one hand and the holders of Senior
Indebtedness on the other hand. The holders of Senior Indebtedness may amend,
modify and otherwise deal with Senior Indebtedness without any notice to or
approval of any holder of Indebtedness ranking junior to Senior Indebtedness.
5.5 Enforcement. The foregoing subordination provisions shall be
for the benefit of the holders of Senior Indebtedness and may be enforced
directly by such holders against the holders of the Convertible Notes. Each
holder of Convertible Notes by his (or its) acceptance thereof shall be deemed
to acknowledge and agree that the subordination provisions of this Article 5
are, and are intended to be, an inducement and a consideration to each holder
of any Senior Indebtedness, whether such Senior Indebtedness was created or
acquired before or after the issuance of the Convertible Notes, to acquire and
continue to hold, or to continue to hold, such Senior Indebtedness and each
holder of Senior Indebtedness shall be deemed conclusively to have relied on
such subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness.
Upon any payment or distribution of assets of the Company,
the holders of the Convertible Notes shall be entitled to rely upon a
certificate of the receiver, trustee in bankruptcy, liquidation trustee,
Company, agent or other person making such payment or distribution, delivered
to the holders of the Convertible Notes, for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of the
Senior Indebtedness and other indebtedness of the Company, the amount thereof
or payable thereon, the amount or amounts paid or distributed thereon and all
other facts pertaining thereto or to the provisions of this Article 5.
5.6 Obligations Unimpaired. Nothing contained in this Article 5,
or elsewhere in this Agreement, or in the Convertible Notes, is intended to or
shall impair as between the Company, its creditors other than the holders of
Senior Indebtedness, and the holders of the Convertible Notes, the obligation
of the Company, which shall be absolute and unconditional, to pay the holders
of the Convertible Notes the principal of and interest on the Convertible
Notes as and when the same shall become due and payable in accordance with the
terms thereof, or affect the relative rights of the holders of the Convertible
Notes and other creditors of the Company other than the holders of Senior
Indebtedness, nor shall anything herein or therein prevent the holder of any
Convertible Notes from exercising all remedies otherwise permitted by
applicable law upon default under this Agreement, subject to the rights, if
any, under this Article 5 of the holders of Senior Indebtedness in respect to
cash, property or securities of the Company received upon the exercise of any
such remedy. Nothing contained in this Article 5 or elsewhere in this
Agreement, or in any of the Convertible Notes, shall prevent the Company from
making payment of the principal of or interest on the Convertible Notes at any
time except under the conditions described in Section 5.2 or 5.3 or during the
pendency of any dissolution, winding up, liquidation or reorganization of the
Company.
5.7 Definition of Senior Indebtedness. The term "Senior
Indebtedness" shall mean the principal and interest on (i) all Indebtedness of
the Company and its Subsidiaries for money borrowed from time to time,
including that owing to banks or other financial institutions (including, but
not limited to, LaSalle), an agency or agencies of the federal government or
other institutions engaged in the business of lending money, (ii) all Capital
Leases of the Company and its Subsidiaries, (iii) obligations of the Company
for the reimbursement of any obligor on any Letter of Credit, banker's
acceptance or similar credit transaction, and (iv) any deferrals, renewals and
extensions of any indebtedness described in clauses (i) through (iii) above,
unless under the express provisions of the instrument creating or evidencing
any such indebtedness, or pursuant to which the same is outstanding, such
indebtedness is not superior in right of payment to the Convertible Notes;
provided, however, that Senior Indebtedness shall not include Indebtedness
owed or owing to any Subsidiary or any officer, director or employee of the
Company or any Subsidiary.
6. REPRESENTATIONS OF THE PURCHASERS.
6.1 Representations. (a) Each Purchaser hereby represents that
it is capable of evaluating the risk of its investment in the Convertible
Notes and is able to bear the economic risk of such investment, that it is
purchasing the Convertible Notes for its own account (or as trustee for one or
more trust or pension funds) and that in each such case the Convertible Notes
are being purchased by such Purchaser (or such funds) for investment and not
with a view to any resale or distribution thereof or of the Shares issuable
upon conversion thereof. If any Purchaser should in the future decide to
dispose of the Convertible Notes or the Shares (which it does not now
contemplate), it is understood that it may do so only in complete compliance
with the Securities Act and any applicable state Blue Sky or securities laws.
If any Purchaser is purchasing the Convertible Notes as trustee for one or
more trust or pension funds, it represents that, it is acting as sole trustee
and has sole investment discretion and that the determination and decision on
its behalf to purchase the Convertible Notes for all such funds is being made
by the same individual or group of individuals who customarily approves such
investments.
(b) Each Purchaser hereby represents that it is an "accredited
investor" within the meaning of Regulation D of the General Rules and
Regulations promulgated under the Securities Act ("Regulation D") and hereby
agrees to provide the Company and its counsel with such information
(including, but not limited to, a completed and signed Confidential Purchaser
Questionnaire in the form of Exhibit "C" attached hereto) as is reasonably
necessary to enable the Company to file a Form D with the Commission with
respect to the transactions contemplated hereby. In furtherance of the
foregoing, each Purchaser acknowledges that a purchase of the Convertible
Notes is only available to a Purchaser who is an "accredited investor." In
connection therewith, each Purchaser represents and warrants to the Company
that he or it, as the case may be, qualifies as an "accredited investor"
within the meaning of Regulation D, since he, or it meets one of the following
standards for determination of "accredited investor" status of Regulation D
set forth below:
1. Any broker or dealer registered pursuant to Section 15 of the
Exchange Act;
2. Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase
exceeds $1,000,000;
3. Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the
same income level in the current year;
4. Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person
as described in Rule 506(b)(2)(ii) of Regulation D;
5. Any organization described in Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, corporation,
Massachusetts or similar business trust, or partnership, not
formed for the specific purpose of acquiring the securities
offered, with total assets in excess of $5,000,000; or
6. Any entity in which all of the equity owners are "accredited
investors".
(c) Each Purchaser hereby represents that it (i) has received and
carefully reviewed the Company Commission Filings, and (ii) has had the
opportunity to ask questions and receive answers from the Company concerning
the Company Commission Filings and the terms and conditions of the offering of
the Convertible Notes and to obtain any documents relating to the Company
which are publicly available and any additional information or documents
relating to the Company which the Company possesses or can acquire without
unreasonable effort or expense.
(d) Each Purchaser hereby represents that it and any entity for
whose account it is purchasing Convertible Notes hereunder, is an entity
organized or established under the laws of one of the several states of the
United States of America.
(e) Each Purchaser hereby represents that the execution, delivery
and performance by it of this Agreement and the purchase by it of the
Convertible Notes (i) has been duly authorized by all requisite action on the
part of such Purchaser, (ii) does not violate any charter, bylaws, partnership
agreement, trust instrument or other organizational document applicable to
such Purchaser, and (iii) does not violate any material term of any law, rule,
regulation, court order, judgment or contractual or other obligation
applicable to such Purchaser, the consequences of which violation might have
a materially adverse effect on the business, condition (financial or other),
operations, assets or properties of such Purchaser.
6 A. CERTAIN CONSIDERATIONS.
The Purchasers acknowledge that they are aware of the risks
inherent in an investment in the Company and specifically the risks of an
investment in the Convertible Notes, and that they are capable of bearing a
complete loss of such investment. In connection with and in furtherance of
the foregoing, each Purchaser further acknowledges that he or it is aware that
(i) the Company currently contemplates growth through an acquisition strategy,
and that there can be no assurance that such acquisition strategy will be
successfully implemented, (ii) the Company will incur costs in connection with
pursuing such acquisition strategy, whether or not any such acquisitions are
completed, (iii) dilution may result in the event that acquisitions are
completed by issuing stock in the Company as consideration, in whole or in
part, for such acquisitions, (iv) the Company has recently emerged from
bankruptcy proceedings, and (v) there can be no assurance of the future
viability or profitability of the Company, nor can there be any assurance
relating to the current or future price of the Company's Common
Stock.
7. CONDITIONS TO OBLIGATIONS.
The Purchasers' obligation to purchase the Convertible Notes
hereunder is subject to satisfaction of the following conditions at the
Closing:
7.1 Accuracy of Representations and Warranties. The
representations and warranties of the Company herein or in any certificate or
document delivered pursuant hereto shall be true and correct on and as of the
Closing Date with the same effect as though made on and as of the Closing
Date.
7.2 Performance; No Default. The Company shall have performed
and complied, in each case in all material respects, with all material
agreements and conditions contained in this Agreement required to be performed
or complied with by it prior to or at the Closing and at the time of the
Closing, no Event of Default shall have occurred and be continuing.
7.3 Officers' Certificate. The Purchasers shall have received a
certificate dated the Closing Date and signed by the President, a Vice
President or Chairman or Vice Chairman of the Company and by the Secretary,
the Treasurer, an Assistant Secretary or an Assistant Treasurer of the
Company, to the effect that the conditions of Sections 7.1 and 7.2 hereof have
been satisfied.
7.4 Proceedings. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents incident thereto shall be in form and substance reasonably
satisfactory to you, and your counsel shall have received all such originals
or certified or other copies of such documents as you and they may reasonably
request.
7.5 Legal Investment. On the Closing Date, there shall have been
no change in applicable law or material facts in respect of the Company or any
Purchaser, making the purchase of the Convertible Notes no longer a legal
investment for any Purchaser.
7.6 No Litigation. No action, suit or proceeding before any
court or any governmental or regulatory authority shall have been commenced
and still be pending, and no investigation by any governmental or regulatory
authority shall have been commenced and still be pending, against the Company
seeking to restrain, prevent or change the transactions contemplated hereby or
questioning the validity or legality of any of such transactions.
7.7 Opinion of Counsel. The Purchasers shall have received from
counsel to the Company an opinion in form and substance reasonably
satisfactory to the Purchasers.
7.8 Sales to Other Purchasers. The Company shall have
concurrently sold to the other Purchasers the Convertible Notes to be
purchased by each of them at the Closing and shall have received payment in
full therefor and shall have delivered or caused to be delivered to each of
the other Purchasers such Convertible Notes in accordance with the terms
hereof.
7.9 Purchase Permitted by Applicable Laws. The offering,
issuance, purchase and sale of, and payment for, the Convertible Notes to be
purchased by the Purchasers on the Closing date on the terms and conditions
herein provided (including the use of the proceeds of such Convertible Notes
by the Company) shall not violate any law or governmental regulation
applicable to the Purchasers.
7.10 Compliance with Securities Laws. The offering and sale of
the Convertible Notes at or prior to the Closing under this Agreement shall
have complied in all material respects with all applicable requirements of
federal and state securities laws.
8. AFFIRMATIVE COVENANTS.
8.1 Financial Information. The Company and each Subsidiary will
maintain its books and records in accordance with generally accepted
accounting principles. So long as any of the Convertible Notes shall remain
outstanding, the Company will deliver to each holder of the Convertible Notes:
(a) as soon as practicable, and in any event within 90 days
after the close of each fiscal year of the Company, (i) a
consolidated balance sheet of the Company and its Subsidiaries as of
the end of such fiscal year-end (ii) consolidated statements of
income, cash flow and common stock and other stockholders' equity of
the Company and its Subsidiaries for such fiscal year, in each case
setting forth in comparative form the corresponding figures for the
preceding fiscal year and to be in reasonable detail and certified
without material exception by Deloitte & Touche or other nationally
recognized independent public accountants selected by the Company;
provided, however, that delivery pursuant to clause (c) below of
copies of the Annual Report on Form 10-KSB of the Company for such
fiscal year timely filed with the Commission (together with copies
of the financial statements required to be included therein) shall
be deemed to satisfy the requirements of this clause (a);
(b) as soon as practicable, and in any event within 45 days
after the close of each of the first three fiscal quarters of the
Company during such fiscal year (i) a consolidated balance sheet of
the Company and its Subsidiaries as of the end of such fiscal
quarter and (ii) consolidated statements of income, cash flow and
common stock and other stockholders' equity of the Company and its
Subsidiaries for the portion of the fiscal year ended with the end
of such quarter, in each case setting forth in comparative form the
corresponding figures for the comparable period of the preceding
fiscal year provided, however, that delivery pursuant to clause (c)
below of copies of the Quarterly Report on Form 10-QSB of the
Company for such quarterly period timely filed with the Commission
shall be deemed to satisfy the requirements of this clause (b);
(c) as soon as practicable, copies of all financial
statements, proxy materials or reports sent to the Company's
stockholders and of all reports or final registration statements
filed with the Commission pursuant to the Securities Act or the
Exchange Act; and
(d) with reasonable promptness, such other information and
data with respect to the Company or any of its Subsidiaries as from
time to time may be reasonably requested.
8.2 Office for Payment, Exchange and Registration. So long as
any of the Convertible Notes are outstanding, the Company will maintain an
office or agency in the United States where the Convertible Notes may be
presented for payment, conversion, exchange or registration of transfer as
provided in this Agreement. Such office or agency initially shall be the
office of the Company set forth in Article 17 hereof, which place may
thereafter from time to time be changed by notice to the holders of all
Convertible Notes then outstanding.
8.3 Notices. The Company will give notice to all holders of
Convertible Notes within 3 Business Days after it learns of the existence of
any Event of Default or any event which, with the giving of notice or the
lapse of time or both, would become an Event of Default, describing the same
and the period of existence thereof, and what action the Company has taken, is
taking or proposes to take with respect thereto.
8.4 Change in Control. In the event that Warren B. Kanders (i)
is no longer Chairman of the Board of Directors of the Company, or (ii) owns
less than 20% of either (x) the issued and outstanding shares of Common Stock,
or (y) the voting power, of the Company, then a "Change in Control" of the
Company shall be deemed to have occurred. Upon the occurrence of a Change in
Control, holders of Convertible Notes shall have the option, upon giving 30
days written notice to the Company, to have all, but not less than all, of the
outstanding principal amount of their respective Convertible Notes, together
with all accrued and unpaid interest thereon, repaid by the Company upon
expiration of such 30-day period.
8.5 Corporate Existence, Etc. The Company will at all times
preserve and keep in full force and effect its corporate existence, and rights
and franchises deemed material to its business, and those of each of its
material Subsidiaries, except as otherwise specifically permitted by Section
9.1 and except that the corporate existence of any Subsidiary of the Company
may be terminated if, in the good faith judgment of the Board of Directors,
such termination is in the best interest of the Company.
8.6 Payment of Taxes. The Company will, and will cause each of
its Subsidiaries to, pay all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or profits before any penalty or interest accrues
thereon, provided that no such tax, assessment, charge or claim need be paid
if being contested in good faith by appropriate proceedings promptly initiated
and diligently conducted and if such reserve or other appropriate provision,
if any, as shall be required by generally accepted accounting principles shall
have been made therefor.
8.7 Maintenance of Properties; Insurance. The Company will
maintain or cause to be maintained in reasonably good repair, working order
and condition, normal wear and tear excepted, all material properties used in
the business of the Company and its Subsidiaries. The Company will maintain
or cause to be maintained, with financially sound and reputable insurers,
insurance with respect to its properties and business and the properties and
business of its Subsidiaries against loss or damage of the kinds customarily
insured against by corporations of established reputation engaged in the same
or similar business and similarly situated, of such types and in such amounts
as are customarily carried under similar circumstances by such other
corporations.
8.8 Compliance with Laws. The Company will, and will cause each
Subsidiary to, comply in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
except where (i) noncompliance could not reasonably be expected to have a
material adverse effect on the business, operations or condition (financial or
otherwise) of the Company and its Subsidiaries, taken as a whole, or (ii) the
necessity of compliance therewith is contested in good faith by appropriate
proceedings.
9. NEGATIVE COVENANTS.
The Company covenants and agrees as follows:
9.1 Consolidation, Merger and Sale. The Company will not,
directly or indirectly, sell, lease, transfer or otherwise dispose of all or
a substantial portion of its assets or business to any other corporation, or
consolidate with or merge into any other corporation, unless if such surviving
or transferee corporation is a corporation other than the Company, (i) such
surviving or transferee corporation is a corporation organized under the laws
of the United States or of any State of the United States, (ii) all
liabilities and obligations (including registration obligations under Article
13) of the Company under this Agreement and the Convertible Notes shall have
been expressly assumed by such surviving or transferee corporation by
instruments and proceedings reasonably satisfactory to holders of at least
sixty-six and two-thirds percent (66 2/3%) in aggregate principal amount of
the outstanding Convertible Notes, and (iii) there shall exist no Event of
Default, and no event which, with notice, the lapse of time, or both, would
constitute an Event of Default, both immediately before such transaction, and
immediately after such transaction upon giving effect on a pro forma basis to
such transaction; provided, however, that the Company shall be permitted to
merge with and into a Delaware corporation for the purpose of reincorporating
in the State of Delaware, and the Purchasers hereby expressly consent to such
merger, so long as the conditions specified in clauses (i), (ii) and (iii) of
this Section 9.1, other than the requirement of having obtained the approval
of the holders of at least sixty-six and two thirds percent (66 2/3%) in
aggregate principal amount of the outstanding Convertible Notes as set forth
in clause (ii) of this Section 9.1, have been satisfied. In connection
therewith, the Purchasers further expressly consent to the transfer of assets
of the Company or the surviving company of the merger pursuant to which the
Company will be reincorporated in Delaware (the "Surviving Company"), as the
case may be, to one or more wholly-owned Subsidiaries of the Company or the
Surviving Company, as the case may be, for the purpose of creating a holding
company structure for the Surviving Company by which the Surviving Company
will be conducting operations through one or more Subsidiaries. In such
event, the obligations of the Company under this Agreement, including the
obligations of the Company under the Convertible Notes, shall become the
obligations of the parent company of the holding company structure to be
formed, and the Company and the Purchasers hereby agree to cooperate with each
other and to execute and deliver such instruments as may be necessary in order
to give effect to the foregoing.
9.2 Transactions with Affiliates. The Company will not, and will
not permit any of its Subsidiaries to, directly or indirectly, engage in any
transaction, including, without limitation, the purchase, sale or exchange of
assets or the rendering of any service, with any Affiliate of the Company,
except in the ordinary course of and pursuant to the reasonable requirements
of the Company's or such Subsidiary's business and upon fair and reasonable
terms that are no less favorable to the Company or such Subsidiary, as the
case may be, than those which might be obtained in an arm's length transaction
at the time from persons which are not Affiliates, provided that the foregoing
restrictions shall not apply to any transaction between the Company and a
wholly-owned Subsidiary of the Company or between one wholly-owned Subsidiary
of the Company and another wholly-owned Subsidiary of the Company. The
Company shall not permit any Affiliate of the Company to become the holder of
any Senior Indebtedness.
9.3 Restricted Indebtedness. The Company will not, directly or
indirectly, incur any Indebtedness the proceeds of which will be used to pay
dividends upon shares of the Company's Common Stock or any other capital stock
of the Company that may from time to time be outstanding.
9.4 Guaranties by Subsidiaries. Other than in the ordinary
course of business or to the holders of Senior Indebtedness, or unless the
holders of Convertible Notes shall approve, the Company shall cause its
Subsidiaries not to guaranty the Indebtedness of the Company or of any other
party.
10. DEFAULTS.
If any of the following events (herein called an "Event of
Default") shall occur and be continuing:
(a) If the Company shall default in the payment (whether or
not such payment is prohibited under Article 5 hereof) of (i) any
part of the principal on any Convertible Note, when the same shall
become due and payable, whether at maturity or by acceleration or
otherwise, or (ii) the interest on any Convertible Note, when the
same shall become due and payable, and such default in the payment
of interest shall have continued for fifteen (15) days;
(b) If the Company shall default in the performance of any
agreement or covenant contained in this Agreement or the Convertible
Notes and such default shall continue for thirty (30) days; or
(c) If any representation or warranty by the Company herein
or any certificate delivered by the Company pursuant hereto shall
prove to have been incorrect in any material respect when made; or
(d) If (i) the Company shall fail to make any payment in
respect of any Indebtedness when due or within any applicable grace
period; or (ii) any other event of default, as defined in any
material indenture or material instrument evidencing or under which
there is at the time outstanding any Indebtedness of the Company,
shall occur which (1) results in the acceleration of the maturity of
such Indebtedness or (2) enables (or, with the giving of notice,
would enable) the holder of such Indebtedness or any person acting
on such holder's behalf to accelerate the maturity thereof if, in
the case of subclause (2) hereof, such event or condition has been
in existence for 180 days without being cured or waived; provided,
that, the aggregate principal amount of the Indebtedness referred to
in clause (i) or (ii) (together with any other defaulted
Indebtedness) exceeds $750,000; or
(e) If a final judgment which, either alone or together
with other outstanding final judgments against the Company and its
Subsidiaries, exceeds an aggregate of $750,000 shall be rendered
against the Company or any Subsidiary and such judgment shall have
continued undischarged or unstayed for sixty (60) days after entry
thereof; or
(f) If the Company or any Subsidiary shall make an
assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts; or if the Company or any Subsidiary
shall suffer the appointment of a receiver or trustee for it or
substantially all of its assets and, if appointed without its
consent, not to be discharged or stayed within sixty (60) days; or
if the Company or any Subsidiary shall suffer proceedings under any
law relating to bankruptcy, insolvency or the reorganization or
relief of debtors to be instituted by or against it, and, if
contested by it, not to be dismissed or stayed within sixty (60)
days; or if the Company or any Subsidiary shall fail generally to
pay its debts as they become due; or if the Company or any
Subsidiary shall suffer any writ of attachment or execution or any
similar process to be issued or levied against it or any significant
part of its property with respect to claims in excess of $750,000,
which is not released, stayed, bonded or vacated within sixty (60)
days after its issue or levy; or if the Company or any Subsidiary
takes corporate action in furtherance of any of the aforesaid
purposes or conditions;
then and in each such event the holders of forty percent (40%) or more in
aggregate principal amount of the Convertible Notes then outstanding may at
any time (unless all defaults shall theretofore have been remedied) at its or
their option, by written notice or notices to the Company, declare all the
Convertible Notes to be due and payable, whereupon the same shall forthwith
mature and become due and payable, together with all interest accrued thereon,
without presentment, demand, protest or notice, all of which are hereby
waived; provided, however, that this provision is subject to the condition
that if, at any time after the principal of the Convertible Notes shall so
become due and payable, any arrears of principal and interest on the
Convertible Notes (with interest at the rate specified in the Convertible
Notes on any overdue principal and, to the extent legally enforceable, on any
interest overdue) shall be paid by or for the account of the Company, then the
holder or holders of at least fifty-one percent (51%) in aggregate principal
amount of the Convertible Notes then outstanding, by written notice or notices
to the Company, may waive such Event of Default and its consequences and
rescind or annul such declaration, but no such waiver shall extend to or
affect any subsequent Event of Default or impair any right resulting
therefrom; provided, further, that notwithstanding the foregoing, if there
shall occur an Event of Default under clause (f) above, or a breach of the
covenants contained in Sections 8.4, 9.1 or 9.3 hereof, then the Convertible
Notes, together with all interest accrued thereon, shall immediately mature
and become due and payable, without the necessity of any action by the
Purchasers or notice to the Company. If any holder of a Convertible Note
shall give any notice or take any other action with respect to a claimed
default, the Company, forthwith upon receipt of such notice or obtaining
knowledge of such other action, will give written notice thereof to all other
holders of the Convertible Notes then outstanding, describing such notice or
other action and the nature of the claimed default.
11. CONVERSION.
11.1 Conversion. On or after the date hereof, and prior to the
maturity of the Convertible Notes or, if sooner, the Call Date (as hereinafter
defined), the holder of a Convertible Note shall have the right, at the option
of such holder (whether or not payment upon the Convertible Notes is
prohibited by the subordination provisions of Article 5) to convert, subject
to the terms and provisions of this Article 11, all or, subject to the proviso
contained in this Section 11.1, any portion of the Convertible Notes held by
such holder into the number of fully paid and nonassessable Shares as shall be
equal to the aggregate principal amount of Convertible Notes then being
converted divided by the Conversion Price then in effect, by delivery of the
Convertible Notes to the Company at the office of the Company provided for in
Section 8.2 herein; provided, however, that no holder of a Convertible Note
shall be permitted to exercise its rights with respect to partial conversions
as herein described unless each such holder of a Convertible Note elects to
convert a minimum of at least $500,000 principal amount of its Convertible
Note or any additional amounts in multiples of $250,000 principal amount of
Convertible Notes; provided, further, that the Company shall not be required
to issue any fractional shares in connection with any conversion pursuant to
this Article 11. In the event that any Purchaser shall exercise the
Convertible Notes held by it with respect to less than the entire aggregate
principal amount outstanding of such Convertible Notes held by such Purchaser,
the Company shall, or shall direct its transfer agent to, issue to such
Purchaser certificates for the Shares of Common Stock for which such
Convertible Note is being exercised in such denominations as are required for
delivery to such Purchaser, and the Company shall, or shall direct its
transfer agent to, thereupon deliver such certificates to or in accordance
with the instructions of such Purchaser, and the Company shall issue to such
Purchaser a new Convertible Note, duly executed by the Company, in form and
substance identical to the Convertible Note surrendered by such Purchaser, for
the balance of the aggregate principal amount of Convertible Notes that have
not been so converted.
11.2 Delivery of Stock Certificates; Time Conversion Effective; No
Adjustment for Interest or Dividends. As promptly as practicable after the
surrender (as herein provided) of a Convertible Note for conversion, the
Company shall deliver or cause to be delivered to or upon the written order of
the holder of the Convertible Note so surrendered, certificates representing
the number of fully paid and nonassessable Shares into which the Convertible
Note may be converted. Subject to the following provisions of this Section
11.2, such conversion shall be deemed to have been made at the close of
business on the date that such Convertible Note shall have been surrendered
for conversion at the office of the Company provided for in Section 8.2 (the
"Conversion Date"), so that the rights of the holder of such Convertible Note
as a holder thereof, shall cease at such time and the person or persons
entitled to receive any of the Shares upon conversion of the Convertible Notes
shall be treated for all purposes as having become the record holder or
holders of such Shares at such time; provided, however, that no such surrender
on any date when the stock transfer books of the Company shall be closed,
shall be effective to constitute the person or persons entitled to receive
Shares upon such conversion as the record holder or holders of such Shares on
such date, but such surrender shall be effective to constitute the person or
persons entitled to receive such Shares as the record holder or holders
thereof for all purposes at the close of business on the next succeeding day
on which such stock transfer books are open or the Company is required to
convert Convertible Notes. The Company will, at the time of such conversion,
upon request of the holder of the Convertible Note, acknowledge in writing its
continuing obligation to such holder in respect of any rights (including,
without limitation, any right of registration of the Shares issued upon such
conversion) to which such holder shall continue to be entitled under this
Agreement after such conversion, provided, that, the failure of such holder to
make any such requests shall not affect the continuing obligation of the
Company to such holder in respect of such rights.
If the day for the exercise of the conversion right shall not
be a Business Day, then such conversion right will automatically be deemed to
be exercised on the next succeeding day which is a Business Day.
No adjustments in respect of interest or cash dividends shall
be made upon conversion of any Convertible Note. The Company shall pay all
unpaid interest on any Convertible Note so converted which has accrued to (but
not including) the date upon which such conversion is deemed to have been
effected in accordance with this Section 11.2.
11.3 Notice to Holders of Election. Upon receipt of an election
to convert by a holder of Convertible Notes pursuant to this Article 11, the
Company shall, as soon as practicable, notify the holders of the remaining
Convertible Notes of such election.
11.4 Adjustment of Conversion Price. The Conversion Price shall
be subject to adjustment as of the Closing Date as follows:
(a) In case the Company shall, after the date hereof, (i)
pay a stock dividend or make a distribution in shares of its capital
stock (whether shares of its Common Stock or of capital stock of any
other class), (ii) subdivide its outstanding shares of Common Stock,
(iii) combine its outstanding shares of Common Stock into a smaller
number of shares, or (iv) issue by reclassification of its shares of
Common Stock any shares of capital stock of the Company, the
Conversion Price in effect immediately prior to such action shall be
adjusted so that the holder of a Convertible Note thereafter
surrendered for conversion shall be entitled to receive an
equivalent number of shares of capital stock of the Company which he
would have owned immediately following such action had such
Convertible Note been converted immediately prior thereto. Any
adjustment made pursuant to this subsection (a) shall become
effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination
or reclassification.
(b) In case the Company, after the date of this Agreement,
shall issue rights, warrants or options entitling the recipients
thereof to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price per share less
than the Conversion Price then in effect, the Conversion Price in
effect immediately prior thereto shall be adjusted so that it shall
equal the price determined by multiplying the Conversion Price in
effect immediately prior to the date of issuance of such rights,
warrants or options by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding on the date of
issuance of such rights, warrants or options (immediately prior to
such issuance), plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of Common
Stock so offered for subscription or purchase (or the aggregate
conversion price of the convertible securities so offered to
subscription or purchase) would purchase at the Conversion Price
then in effect, and of which the denominator shall be the number of
shares of Common Stock outstanding on the date of issuance of such
rights, warrants or options (immediately prior to such issuance)
plus the number of additional shares of Common Stock so offered for
subscription or purchase (or into which the convertible securities
so offered for subscription or purchase are convertible). Such
adjustment shall be made successively whenever any such rights,
warrants or options are issued. In determining whether any rights,
warrants or options entitle the holders thereof to subscribe for or
purchase shares of Common Stock (or securities convertible into
Common Stock) at less than the Conversion Price then in effect and
in determining the aggregate offering price of such shares of Common
Stock (or conversion price of such convertible securities), there
shall be taken into account any consideration received by the
Company for such rights, warrants or options (and for such
convertible securities), the value of such consideration, if other
than cash, to be determined in good faith by the Board of Directors
of the Company (which determination shall be conclusive). If at the
end of the period during which such warrants, rights or options are
exercisable not all such warrants, rights or options shall have been
exercised, the adjusted Conversion Price shall be immediately
readjusted to what it would have been based on the number of
additional shares of Common Stock actually issued (or the number of
shares of Common Stock issuable upon conversion of convertible
securities actually issued).
(c) In case the Company, after the date of this Agreement,
shall distribute to all holders of its outstanding Common Stock any
shares of capital stock (other than Common Stock), evidences of its
Indebtedness or assets (including securities and cash, but excluding
any cash dividend paid out of current or retained earnings of the
Company and dividends or distributions payable in stock for which
adjustment is made pursuant to subsection (a) of this Section 11.4)
or rights, warrants or options to subscribe for or purchase
securities of the Company (excluding those referred to in subsection
(b) of this Section 11.4), then in each such case the Conversion
Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately
prior to the record date of such distribution by a fraction of which
the numerator shall be the Conversion Price then in effect less the
fair market value on such record date (as determined in good faith
by the Board of Directors of the Company, which determination shall
be conclusive) of the portion of the capital stock or the evidences
of Indebtedness or the assets so distributed to the holder of one
share of Common Stock or of such subscription rights, warrants or
options applicable to one share of Common Stock and of which the
denominator shall be the Conversion Price then in effect. Such
adjustment shall become effective immediately after the record date
for the determination of stockholders entitled to receive such
distribution. If at the end of the period during which warrants,
rights or options described in this subsection (c) are exercisable
not all such warrants, rights or options shall have been exercised,
the adjusted Conversion Price shall be immediately readjusted to
what it would have been based on the number of warrants, rights or
options actually exercised.
(d) Notwithstanding anything in subsection (b) or (c) of this
Section 11.4 to the contrary, with respect to any rights, warrants
or options covered by subsection (b) or (c) of this Section 11.4, if
such rights, warrants or options are only exercisable upon the
occurrence of certain triggering events, then for purposes of this
Section 11.4 such rights, warrants or options shall not be deemed
issued or distributed, and any adjustment to the Conversion Price
required by subsection (b) or (c) of this Section 11.4 shall not be
made until such triggering events occur and such rights, warrants or
options become exercisable.
(e) In case the Company, after the date of this Agreement,
shall issue shares of its Common Stock (excluding those rights,
warrants, options, shares of capital stock or evidences of its
Indebtedness or assets referred to in subsection (b) or (c) to this
Section 11.4) at a net price per share less than the Conversion
Price in effect on the date the Company fixes the offering price of
such additional shares, the Conversion Price shall be reduced
immediately thereafter so that it shall equal the price determined
by multiplying such Conversion Price in effect immediately prior
thereto by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the issuance
of such additional shares plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of
Common Stock so offered would purchase at the Conversion Price then
in effect and the denominator shall be the number of shares of
Common Stock that would be outstanding immediately after the
issuance of such additional shares. Such adjustment shall be made
successively whenever such an issuance is made. This subsection (e)
shall not apply to Common Stock issued to any employee, officer or
director of the Company under a bona fide employee or director
benefit plan adopted by the Company or any Subsidiary thereof and
approved by the stockholders of the Company or such Subsidiary, as
appropriate.
(f) In any case in which this Section 11.4 shall require
that an adjustment be made immediately following a record date or an
effective date, the Company may elect to defer (but only until five
Business Days following the mailing by the Company to the holders of
Convertible Notes of the certificate required by subsection (h) of
this Section 11.4) issuing to the holder of any Convertible Note
converted after such record date or effective date the shares of
Common Stock issuable upon such conversion over and above the shares
of Common Stock issuable upon such conversion on the basis of the
Conversion Price prior to adjustment, and paying to such holder any
amount of cash in lieu of a fractional share.
(g) No adjustment in the Conversion Price shall be required
to be made unless such adjustment would require an increase or
decrease of at least one percent (1%) in such price; provided,
however, that any adjustments which by reason of this subsection (g)
are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 11.4 shall be made to the nearest cent.
(h) Whenever the Conversion Price is adjusted as provided
in Section 11.4(a) herein, the Company will promptly mail to the
holders of the Convertible Notes, a certificate of the Company's
Treasurer or Chief Financial Officer setting forth the Conversion
Price as so adjusted and a brief statement of facts accounting for
such adjustment.
(i) Irrespective of any adjustment or change in the
Conversion Price and the number of Shares actually purchasable under
the Convertible Notes, the Convertible Notes theretofore and
thereafter issued may continue to express the Conversion Price per
Share and the number of Shares purchasable thereunder as the
Conversion Price per Share and the number of Shares purchasable as
expressed upon the Convertible Notes when initially issued.
11.5 Company's Consolidation or Merger. Except as otherwise
provided in Section 9.1 hereof, if the Company shall at any time consolidate
or merge with or into another corporation, (a) the Company shall give at least
five (5) days prior written notice to the holders of the Convertible Notes of
such consolidation or merger and the terms thereof, and (b) the holder of a
Convertible Note shall thereafter be entitled to receive, upon the conversion
thereof, the securities or property to which a holder of the number of Shares
then deliverable upon the conversion thereof would have been entitled upon
such consolidation or merger, and the Company shall take such steps in
connection with such consolidation or merger as may be necessary to assure
such holder that the provisions of this Agreement shall thereafter be
applicable, as nearly as reasonably may be in relation to any securities or
property thereafter deliverable upon the conversion of the Convertible Note
including, but not limited to, obtaining a written acknowledgement from the
continuing corporation or other appropriate corporation of its obligation to
supply such securities or property upon such conversion. Except as otherwise
provided in Section 9.1 hereof, a sale of all or substantially all the assets
of the Company shall be deemed a consolidation or merger for the foregoing
purposes.
11.6 Reserve of Sufficient Shares. The Company will reserve and
keep available a sufficient number of shares of its Common Stock to satisfy
the conversion requirements of all outstanding Convertible Notes. The Company
will take all such action as may be necessary to insure that all Shares issued
upon conversion of the Convertible Notes will be duly and validly authorized
and issued and fully paid and nonassessable.
11.7 Taxes on Conversion. The issuance of certificates for Shares
upon the conversion of Convertible Notes shall be made without charge to the
holders of Convertible Notes converting such Convertible Notes for any issue
or stamp tax in respect of the issuance of such certificates, and such
certificates shall be issued in the respective names of, or in such names as
may be directed by, the holders of the Convertible Notes converted; provided,
however, that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
any such certificate in a name other than that of the holder of the
Convertible Note converted, and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid.
11.8 Cancellation of Converted Convertible Notes. All Convertible
Notes which have been converted shall be cancelled by the Company and no
Convertible Notes shall be issued in lieu thereof.
11.9 Notice to Holders of Convertible Notes. In case at any time:
(a) the Company shall take any action which would require
an adjustment in the Conversion Price pursuant to Section 11.4(a);
or
(b) there shall be any capital reorganization or
reclassification of the Common Stock (other than a change in par
value or from par value to no par value or from no par value to par
value of the Common Stock), whether or not such reorganization or
reclassification results in an adjustment in the Conversion Price,
or any consolidation or merger to which the Company and its
Subsidiaries is a party and for which approval of any stockholders
of the Company is required, or any sale or transfer of all or
substantially all of the assets of the Company and its Subsidiaries;
or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give written notice
to the holders of the Convertible Notes, not less than thirty (30) days before
any record date or other date set for definitive action, of the date on which
such adjustment, distribution, reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up shall take
place, as the case may be. Such notice shall also set forth such facts as
shall indicate the effect of such action (to the extent such effect may be
known at the date of such notice) on the current Conversion Price and the kind
and amount of the Shares and other securities and property deliverable upon
conversion of the Convertible Notes. Such notice shall also specify the date
as of which the holders of the Common Stock of record shall be entitled to
exchange their Common Stock for securities or other property deliverable upon
such adjustment, distribution, reorganization, reclassification, sale,
consolidation, merger, dissolution, liquidation or winding up, as the case may
be (on which date, in the event of voluntary or involuntary dissolution,
liquidation or winding up of the Company, the right to convert the Convertible
Notes into Shares shall terminate).
Without limiting the obligation of the Company to provide notice to
the holders of Convertible Notes or Shares of corporate action hereunder, it
is agreed that failure of the Company to give such notice shall not invalidate
such corporate action of the Company.
12. CALL OF CONVERTIBLE NOTES BY THE COMPANY.
The Company shall not directly or indirectly, call, prepay,
redeem, repurchase, convert or otherwise acquire any Convertible Notes or any
portion thereof except as set forth in this Article 12.
12.1 Optional Conversion or Redemption Upon Call by the Company.
The Company may, at its option, call the Convertible Notes, either in whole or
in part on a pro-rata basis:
(i) at any time prior to the maturity of the Convertible Notes
and after April 30, 1998; or
(ii) at any time, whether prior to or after April 30, 1998
(providing, however, with respect to this clause (ii) only,
the Company may call the Convertible Notes only if: (A) the
Closing Price of the Company's Common Stock shall be equal to
or in excess of $7.50 per share for at least 10 consecutive
trading days; and (B) in the event of a conversion pursuant
to such call, the holders of the Convertible Notes shall be
entitled to receive registered shares of the Company's Common
Stock).
In the event of a call by the Company pursuant to this Section 12.1,
the holders, at their option, may require the Company to convert their
Convertible Notes (into fully paid and nonassessable shares of the Company's
Common Stock) at the Conversion Price (the "Holders Option").
12.2 Notice of Call. The right of the Company to call any
Convertible Notes pursuant to Section 12.1 shall be conditioned upon its
giving notice of such call (the "Call Notice"), by personal delivery,
overnight courier, certified mail or by facsimile, signed by an authorized
officer, to the holders of Convertible Notes, not less than fifteen (15)
Business Days prior to the date upon which the call is to be made (the "Call
Date"). The Call Notice shall specify (i) the aggregate principal amount of
the Convertible Notes to be called, (ii) the date of such call, and (iii) the
accrued and unpaid interest thereon (to, but not including, the Call Date).
Within ten (10) Business Days after receipt of the Call Notice by the holder
of a Convertible Note, such holder shall notify the Company, by personal
delivery, overnight courier, certified mail or by facsimile, signed by the
holder, of the Holders Option, pursuant to which the holder shall direct
whether he wishes the Convertible Notes to be converted or redeemed, pursuant
to Section 12.1 hereof (in the event that a holder fails to respond to the
Call Notice or fails to respond within the time period or via the means set
forth herein, the Holders Option shall become void and of no further effect
and the Company shall be entitled to redeem the Convertible Notes as provided
in Section 12.1 or 12.2, as the case may be).
12.3 Partial Call. In the event of a partial call by the Company
pursuant to this Article 12, the aggregate principal amount of each call of
Convertible Notes pursuant to Section 12.1 hereof, shall be allocated among
the Convertible Notes at the time outstanding, in proportion, as nearly as
practicable, to the respective unpaid principal amounts of such Convertible
Notes.
12.4 Surrender of Convertible Notes Upon Call. In the event that
any Convertible Notes shall be surrendered to the Company upon conversion as
provided in this Article 12, interest shall cease to accrue upon such
Convertible Notes so surrendered.
12.5 Section 11 Applicable. For purposes of conversion of the
Convertible Notes by the Company pursuant to this Article 12, the provisions
of Sections 11.1 through 11.4 herein, shall be controlling, as if the same
shall have been contained in this Article 12 (except that with respect to
Section 11.2, in the event that a holder shall choose redemption as the
Holders Option (pursuant to Section 12.2 herein), the Company shall make
payment to the holder as soon as practicable after the Conversion Date, by
bank or certified check or by wire transfer).
13. REGISTRATION RIGHTS; RESTRICTIONS ON TRANSFER.
13.1 Notification of Proposed Sale. (a) Unless paragraph (b) of
this Section 13.1 is applicable, each holder of a Convertible Note by
acceptance thereof agrees that it will notify the Company in writing before
offering for sale or selling or otherwise disposing (provided, that,
conversion will not be deemed to be a disposition) of any Convertible Note or
the Shares, describing briefly the nature of such sale or other disposition,
and no such sale or other disposition shall be made unless and until (i) the
holder has supplied to the Company, if requested by the Company within five
(5) Business Days after receipt of such notice, an opinion of counsel for the
holder (in-house counsel of a Purchaser shall be deemed to be satisfactory
counsel) which counsel shall be reasonably satisfactory to the Company, to the
effect that no registration under the Securities Act is required with respect
to such sale or other disposition (which opinion may be conditioned upon the
transferee's assuming the obligations of a holder of Convertible Notes or
Shares under this Section 13.1) or (ii) an appropriate registration statement
with respect to such sale or other disposition of such Convertible Notes or
Shares shall have been filed by the Company with the Commission and declared
effective by the Commission.
(b) If the holder of Convertible Notes or Shares has
obtained an opinion of its own counsel that the sale of such Convertible Notes
or Shares may be made without registration under the Securities Act pursuant
to Rule 144, the notification provided in paragraph (a) need not be given to
the Company prior to the proposed sale, provided, that, the Company shall not
be obliged to register on its registry or transfer books any transfer pursuant
to this subsection (b) unless it is satisfied that the requirements of Rule
144 or any successor thereto have been satisfied.
(c) The Company may endorse on all Convertible Notes and on
all certificates evidencing Shares (issued upon conversion of the Convertible
Notes) an appropriate legend restricting their transfer except upon compliance
with the provisions of paragraph (a) above, which in the case of the
Convertible Notes shall be in the terms set out in Exhibit "B" hereto and in
the case of the Shares shall read as follows - "THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
BE SOLD, TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES UNDER THE ACT
OR AN OPINION, IF REQUESTED, OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER THE ACT"; provided, that, no such legend
shall be endorsed on any Convertible Note or Share certificates which, when
issued, are no longer subject to the restrictions of this Section 13.1, and
provided, further, that if an opinion of satisfactory counsel (in-house
counsel of a Purchaser shall be deemed satisfactory counsel) which opinion
shall be reasonably satisfactory to counsel for the Company concludes that the
legend is no longer necessary, the Company will deliver upon transfer or
exchange Convertible Notes or Share certificates without such legends.
13.2 Obligation to Register. The Company agrees to use its best
efforts to file with the Commission as soon as practicable after the Closing
date, but in no event later than June 30, 1996, a registration statement for
an offering to be made on a continuous or delayed basis pursuant to Rule 415
under the Securities Act covering all of the Shares. Such registration
statement shall be on Form S-3 under the Securities Act, if such Form is then
available for use by the Company, or another appropriate form that is
available to the Company permitting registration of such Shares for resale by
the holders of Convertible Notes or Shares ("Holders") in the manner or
manners reasonably designated by them (including, without limitation, one or
more underwritten offerings). The Company shall not permit any securities to
be offered for sale by the Company to be included in such registration
statement. The Company shall use its best efforts to cause such registration
statement to be declared effective pursuant to the Securities Act as promptly
as practicable following the filing thereof, and, subject to applicable laws,
rules and orders, to keep such registration statement continuously effective
under the Securities Act for five years after the Closing date, or such
shorter period ending when there cease to be outstanding any Shares or
Convertible Notes held by the Holders. Notwithstanding the foregoing, the
Holders acknowledge that in connection with the Company's contemplated
acquisition strategy, the Company may file a registration statement relating
to shares of Common Stock to be issued in connection with such acquisition.
In such event, if the Board of Directors of the Company reasonably determines
that the Company will be filing a registration statement under the Securities
Act in connection with an acquisition, then any registration statement
required to be filed by this Section 13.2 or Section 13.3 hereof may be
temporarily delayed at the discretion of the Company's Board of Directors, and
the Shares which would have been otherwise included in such registration
statement shall be included in the Company's registration statement to be
filed in connection with the contemplated acquisition, so that the Company
would not be required to file more than one registration statement in any
consecutive six-month period; provided, however, that the provisions of this
sentence shall not be applicable, and the Company shall not be permitted to
delay the filing of a registration statement registering the Shares, in the
event that the Company proposes, in connection with any such acquisition, to
use a registration statement on Form S-4 or any successor form thereto.
13.3 "Piggyback" Registration Rights. At any time after April 30,
1997 and prior to the maturity of the Convertible Notes, the Company shall, at
least thirty (30) days prior to the filing of any registration statement under
the Securities Act (other than a registration statement on Form S-8 or Form S-
4 or any successor forms) relating to the public offering of its Common Stock
by the Company or any of its security holders, give written notice of such
proposed filing and of the proposed date thereof to the Holders, and if, on or
before the twentieth (20th) day following the date on which such notice is
given, the Company shall receive a written request from the Holders requesting
that the Company include among the securities covered by such registration
statement some or all of the Shares held by or to be held after conversion by
such Holder or Holders, the Company shall include such Shares in such
registration statement, if filed, so as to permit such Shares to be sold or
disposed of in the manner and on the terms of the offering thereof set forth
in such request.
13.4 Terms and Conditions of Registration. Except as otherwise
provided herein, in connection with any registration statement filed pursuant
to Sections 13.2 or 13.3 herein, the following provisions shall apply:
(i) If such registration statement shall be filed
pursuant to Section 13.3 hereof and if the managing underwriter advises the
Company in writing that the inclusion in such registration of some or all of
the Shares sought to be registered by the Holder(s) creates a substantial risk
that the proceeds or price per share that will be derived from such
registration will be reduced or that the number of shares to be registered at
the insistence of the Holder(s), plus the number of shares of Common Stock
sought to be registered by the Company and any other stockholders of the
Company is too large a number to be reasonably sold, then, in such event, the
number of shares sought to be registered for the stockholders of the Company
shall be reduced, pro rata in proportion to the number of shares sought to be
registered to the number of shares recommended be sold by the managing
underwriter.
(ii) If requested by the Holder(s) in connection with a
registration statement filed pursuant to Section 13.2, the Company will enter
into an underwriting agreement with the underwriters for such offering, such
agreement to be reasonably satisfactory in form and substance to the Company,
the Holder(s) and the underwriters, and to contain such representations,
warranties and covenants by the Company and such other terms as are
customarily contained in such agreements used by the managing underwriter,
including, without limitation, restrictions of sales of Common Stock or other
securities by the Company as may be reasonably agreed to between the Company
and such underwriters, and indemnities and rights to contributions to the
effect and to the extent provided in Sections 13.5 and 13.6 hereof. The
Holders shall be a party to any underwriting agreement relating to an
underwritten sale of their Shares and may, at their option, require that any
or all of the representations, warranties and covenants of the Company to or
for the benefit of such underwriters, shall also be made to and for the
benefit of the Holders. All representations and warranties of the Holders
shall be made to or for the benefit of the Company.
(iii) The Company shall provide a transfer agent and
registrar (which may be the same entity) for the Shares, not later than the
effective date of such registration.
(iv) All expenses in connection with the preparation and
filing of a registration statement filed pursuant to Sections 13.2 or 13.3
shall be borne solely by the Company, except for any transfer taxes payable
with respect to the disposition of such Shares, and any underwriting discounts
and selling commissions applicable solely to such sales of Shares, which shall
be paid by the Holders of the Shares being registered.
(v) The Company shall use its best efforts to cause all
of the shares covered by such registration statement to be listed on the
American Stock Exchange or if appropriate, such other national securities
exchange, or NASDAQ, on which similar shares are listed for trading, if the
listing of such registered shares is permitted by such exchange.
(vi) Following the effective date of such registration
statement, the Company shall, upon the request of the Holders, forthwith
supply such number of prospectuses (including exhibits thereto and preliminary
prospectuses and amendments and supplements thereto) meeting the requirements
of the Securities Act and such other documents as are referred to in the
prospectus as shall be reasonably requested by the Holders to permit the
Holders to make a public distribution of their Shares.
(vii) The Company shall prepare, if necessary, and file
such amendments and supplements to such registration statement filed pursuant
to Section 13.2 hereof, as may be necessary to keep such registration
statement effective, subject to applicable laws, rules and orders, for a
period of five years after the Closing date, or such shorter period ending
when there cease to be outstanding any Shares or Convertible Notes held by the
Holders, and to comply with the provisions of the Securities Act with respect
to the offer and sale or other disposition of the shares covered by such
registration statement during the period required for distribution of the
shares.
(viii) The Holders may select the underwriter or under-
writers (which shall be of nationally recognized standing), if any, who are to
undertake any offering and distribution of the Shares to be included in a
registration statement filed under the provisions of Subsection 13.2 hereof,
subject to the Company's prior approval of the underwriter, which approval
shall not be unreasonably withheld.
(ix) The Company shall use its best efforts to register
the Shares covered by any such registration statements filed pursuant to
Section 13.2 under such securities or Blue Sky laws in addition to those in
which the Company would otherwise sell shares, as the Holders reasonably
request, except that neither the Company nor the Holders shall for any such
purpose be required to execute a general consent to service of process or to
qualify to do business as a foreign corporation in any jurisdiction where it
is not so qualified. The fees and expenses incurred in connection with such
registration shall be borne by the Company.
(x) The Holders shall cooperate fully with the Company
and provide the Company with all information reasonably requested by the
Company for inclusion in the registration statement or as necessary to comply
with the Securities Act. The Company shall cooperate fully with any
underwriters selected by the Holders and counsel to such underwriters, and
shall provide reasonable and customary access to the Company's books and
records (upon receipt from such underwriters of customary confidentiality
agreements) in order to facilitate such underwriters' review and examination
of the Company in connection with such underwriting.
(xi) The Company shall notify the Holders, at any time
after effectiveness when a prospectus relating thereto is required to be
delivered under the Securities Act within the period mentioned in subdivision
(vii) of this Section 13.4, of the happening of any event as a result of which
the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of circumstances then existing (and upon receipt of
such notice and until a supplemented or amended prospectus as set forth below
is available, the Holders shall not offer or sell any securities covered by
such registration statement and shall return all copies of such prospectus to
the Company if requested to do so by it), and at the request of the Holders
prepare and furnish the Holders promptly a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such shares, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
(xii) The Company shall furnish to the Holders at the time
of the disposition of the Shares, a signed copy of an opinion of the Company's
regular in-house or outside general counsel, or other counsel of the Company's
selection reasonably acceptable to, and which opinion shall be reasonably
satisfactory in form and substance to, the Holders to the effect that: (a) a
registration statement covering such Shares has been filed with the Commission
under the Securities Act and has been made effective by order of the
Commission, (b) said registration statement and prospectus contained therein
comply as to form in all material respects with the requirements of the
Securities Act, and nothing has come to such counsel's attention (after due
inquiry) which would cause such counsel to believe that either said
registration statement or such prospectus contains any untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein (in the case of such prospectus,
in light of the circumstances under which they were made) not misleading, (c)
after due inquiry such counsel knows of no legal or governmental proceedings
required to be described in such registration statement or prospectus which
are not described as required, or of any contracts or documents of a character
required to be described in such registration statement or such prospectus to
be filed as an exhibit to such registration statement or to be incorporated by
reference therein which are not described and filed as required and (d) to
such counsel's knowledge, no stop order has been issued by the Commission
suspending the effectiveness of such registration statement; it being
understood that such opinion may contain such qualifications and assumptions
as are customary in the rendering of similar opinions, and that such counsel
may rely, as to all factual matters treated therein, on certificates of the
Company (copies of which shall be delivered to the Holders).
(xiii) The Company will use its best efforts to comply with
the reporting requirements of Sections 13 and 15(d) of the Exchange Act, to
the extent it shall be required to do so pursuant to such sections, and at all
times while so required shall use its best efforts to comply with all other
public information reporting requirements of the Commission (including
reporting requirements which serve as a condition to utilization of Rule 144
promulgated by the Commission under the Securities Act) from time to time in
effect and relating to the availability of an exemption from the Securities
Act for the sale of any of the Company's Common Stock held by the Holders.
The Company will also cooperate with the Holders in supplying such information
and documentation as may be necessary for the Holders to complete and file any
information reporting forms presently or hereafter required by the Commission
as a condition to the availability of an exemption from the Securities Act for
the sale of any Company Common Stock held by the Holders.
13.5 Indemnification.
(i) In the event of the registration of any shares of the
Company under the Securities Act pursuant to the provisions of Sections 13.2
or 13.3, the Company agrees to indemnify and hold harmless the Holders, each
underwriter, broker or dealer, if any, and their directors, officers and
employees, of such Shares, and each other person, if any, who controls the
holders of the Convertible Notes or the Shares (or a permitted assignee
thereof), such underwriter, broker or dealer within the meaning of the
Securities Act, from and against any and all losses, claims, damages or
liabilities (or actions in respect thereof), joint or several, to which the
Holders (and as applicable) its directors, officers or employees, or such
underwriter, broker or dealer or controlling person may become subject under
the Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such shares were registered under the
Securities Act, any preliminary prospectus or final prospectus relating to
such Shares, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by the Company of any rule or regulation under
the Securities Act applicable to the Company or relating to any action or
inaction required by the Company in connection with any such registration and
will reimburse the Holders, each such underwriter, broker or dealer and
controlling person, and their directors, officers or employees, for any legal
or other expenses reasonably incurred by the Holders or such underwriter,
broker or dealer or controlling person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
an untrue statement or alleged untrue statement or omission or alleged
omission made in such registration statement, such preliminary prospectus,
such final prospectus or such amendment or supplement thereto in reliance upon
and in conformity with written information furnished to the Company by the
Holders and as applicable, such Holders' directors, officers or employees, or
such underwriter, broker, dealer or controlling person for use in the
preparation thereof. Such indemnity shall remain in full effect irrespective
of any investigation by any person indemnified above.
(ii) In the event of the registration of any Shares of the
Holders under the Securities Act for sale pursuant to the provisions of this
Agreement, the Holders agree to indemnify and hold harmless the Company, its
directors, officers and employees, from and against any losses, claims,
damages or liabilities, joint or several, to which the Company, its directors,
officers or employees, may become subject under the Securities Act or other-
wise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in any registration
statement under which such Shares were registered under the Securities Act,
any preliminary prospectus or final prospectus relating to such Shares, or any
amendment or supplement thereto, or arise out of or are based upon omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, which
untrue statement or alleged untrue statement or omission or alleged omission
was made therein in reliance upon and in conformity with written information
furnished to the Company by the Holders for use in the preparation thereof.
Such indemnity shall remain in full effect irrespective of any investigation
by any person indemnified above.
(iii) Promptly after receipt by a person entitled to
indemnification under this Section 13.4 (for purposes of this Section 13.4, an
"Indemnified Party") of notice of the commencement of any action or claim
relating to any registration statement filed under Sections 13.2 or 13.3 or as
to which indemnity may be sought hereunder, such Indemnified Party will, if a
claim for indemnification hereunder in respect thereof is to be made against
any other party hereto (for purposes of this Section 13.4, an "Indemnifying
Party"), give written notice to such Indemnifying Party of the commencement of
such action or claim, but the failure to so notify the Indemnifying Party will
not relieve it from any liability which it may have to any Indemnified Party
otherwise than pursuant to the provisions of this Section 13.4 and shall also
not relieve the Indemnifying Party of its obligations under this Section 13.4,
except to the extent that the Indemnified Party is damaged solely as a result
of the failure to give timely notice. In case any such action is brought
against an Indemnified Party, and it notifies an Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled (at its own
expense) to participate in and, to the extent that it may wish, jointly with
any other Indemnifying Party similarly notified, to assume the defense with
counsel satisfactory to such Indemnified Party, of such action and/or to
settle such action and, after notice from the Indemnifying Party to such
Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party will not be liable to such Indemnified Party for any legal
or other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof, other than the reasonable cost of
investigation; provided, however, that no Indemnifying Party and no
Indemnified Party shall enter into any settlement agreement which would impose
any liability on such other party or parties without the prior written consent
of such other party or parties.
13.6 Contribution. If the indemnification provided for in Section
13.5 hereof is unavailable to the Indemnified Party in respect of any losses,
claims, damages or liabilities referred to herein, then each such Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or liabilities (i) as between the Company and the Holders on
the one hand and the underwriters on the other, in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Holders on the one hand and the underwriters on the other from the offering of
the Shares, or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company and the Holders on the one hand and of
the underwriters on the other in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations and (ii) as between the Company on the
one hand and each Holder on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of each Holder in connection
with such statements or omissions, as well as any other relevant equitable
considerations.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 13.6 exceed the amount that such Indemnifying
Party would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 13.5 hereof had been available
under the circumstances.
The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages and liabilities referred to in the next
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 13.6, no Holder or underwriter
shall be required to contribute any amount in excess of the amount by which
(i) in the case of a Holder, the net proceeds received by such Holder from the
sale of Shares or (ii) in the case of an underwriter, the total price at which
the Shares purchased by it and distributed to the public were offered to the
public exceeds, in any such case, the amount of any damages that such Holder
or underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
13.7 Survival. The indemnity and contribution agreements
contained in this Section 13 shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement or any underwriting
agreement, (ii) any investigation made by or on behalf of any Indemnified
Party or by or on behalf of the Company and (iii) the consummation of the sale
or successive resales of the Shares.
14. REPLACEMENT OF CONVERTIBLE NOTES.
Upon receipt of evidence satisfactory to the Company of the
loss, theft, destruction or mutilation of any Convertible Note and, in the
case of any such loss, theft, or destruction, upon delivery of a bond of
indemnity satisfactory to the Company (provided that, in the case of any
Purchaser, the written undertaking of such Purchaser to indemnify the Company
shall be satisfactory to the Company) or in the case of any such mutilation,
upon surrender and cancellation of such Convertible Note, the Company will
issue a new Convertible Note of like tenor as if the lost, stolen, destroyed
or mutilated Convertible Note were then surrendered for exchange in lieu of
such lost, stolen, destroyed or mutilated Convertible Note.
15. AMENDMENT AND WAIVER.
Except as set forth in Article 5, this Agreement may be
amended (or any provision thereof waived) with the consent of the Company and
the Holders of at least sixty-six and two-thirds percent (66 2/3%) in
aggregate principal amount of the Convertible Notes then outstanding;
provided, however, that no such amendment or waiver shall (i) change the fixed
maturity of any Convertible Note, the rate or the time of payment of interest
thereon, the principal amount thereof or the circumstances under which such
Convertible Note may be called, converted or redeemed without the consent of
the holders of all the Convertible Notes then outstanding, (ii) reduce the
aforesaid percentage of Convertible Notes, the holders of which are required
to consent to any such amendment or waiver, without the consent of the holders
of all the Convertible Notes then outstanding or (iii) increase the percentage
of the aggregate principal amount of the Convertible Notes that the holders of
which may declare the Convertible Notes to be due and payable under Article 10
herein, without the consent of the holders of all of the Convertible Notes
then outstanding or (iv) modify the conversion rights or the Conversion Price
and adjustments thereto (as outlined in Articles 11 and 12 herein) in any
material respect, without the consent of the holders of all of the Convertible
Notes then outstanding or (v) alter the registration rights under Article 13
herein in any material respect, without the consent of the holders of all of
the Convertible Notes then outstanding and all of the Shares outstanding other
than Shares which have been sold in registered public offerings; and provided,
further, that no amendment or waiver of any provision of Article 5 shall be
effective against any holder of Senior Indebtedness who has not consented
thereto. The Company and each holder of a Convertible Note then or thereafter
outstanding shall be bound by any amendment or waiver effected in accordance
with the provisions of this Article, whether or not such Convertible Note
shall have been marked to indicate such modification, but any Convertible Note
issued thereafter shall bear a notation as to any such modification. Promptly
after obtaining the written consent of the holders herein provided, the
Company shall transmit a copy of such modification to all of the holders of
the Convertible Notes then outstanding.
16. HOME OFFICE PAYMENT.
The Company will make payments of principal and interest by
check payable to the order of the holder of any such Convertible Notes duly
mailed or delivered to such holder at the address of such holder specified in
Exhibit "A", or at such other address as such holder may designate in writing,
or , if requested by any holder of the Convertible Notes, by wire transfer to
its (or its nominee's) account at any bank or trust company in the United
States of America, notwithstanding any contrary provisions herein or in any
Convertible Note with respect to the place of payment. All such payments
shall be made in immediately available funds. The Purchasers agree that,
before any such Convertible Note is assigned or transferred, the Purchasers
will make or cause to be made a notation thereon of principal payments
previously made thereon and of the date to which interest thereon has been
paid and will notify the Company of the name and address of the transferee of
such Convertible Note if such name and address are known to such Purchaser.
17. NOTICES.
All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been made when
delivered by courier or mailed express mail or transmitted by telex,
facsimile, or other means of electronic transmission:
(a) if to a Purchaser or its nominee, at such Purchaser's
address as set forth in Exhibit "A" hereto, or at such other address
as may have been furnished to the Company by a Purchaser in writing;
or
(b) if to any other holder of a Convertible Note, at such
address as the payee thereof shall have designated to the Company by
a written notice stating that such holder has acquired such
Convertible Note and designating such an address, or at such other
address as may have been furnished to the Company by such holder in
writing; or
(c) if to the Company, at 191 Nassau Place Road, Yulee,
Florida 32097 (fax number (904) 261-4408; Attention: Jonathan
Spiller, President and Chief Executive Officer, or at such other
address as may have been furnished to the Purchasers or other
holders of Convertible Notes in writing by the Company, with a copy
to Robert L. Lawrence, Esq., Kane Kessler, P.C., 1350 Avenue of the
Americas, New York, New York 10019 (fax number (212) 245-3009).
18. ENTIRE AGREEMENT.
This Agreement and the Convertible Notes embody the entire
agreement and understanding between the Purchasers and the Company and
supersede all prior agreements and understandings relating to the subject
matter hereof.
19. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Agreement contained by
or on behalf of any of the parties hereto shall bind and inure to the benefit
of the respective successors and assigns of the parties hereto whether so
expressed or not.
20. HEADINGS.
The headings of the articles and sections of this Agreement
have been inserted for convenience of reference only and shall in no way
restrict or otherwise modify any of the terms or provisions hereof.
21. GOVERNING LAW.
This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of New York, without giving effect
to its conflict of laws rules.
22. COUNTERPARTS.
This Agreement may be signed in any number of counterparts
with the same effect as if the signatures thereto and hereto were upon the
same instrument. Facsimile signatures shall be deemed acceptable and binding.
23. SEVERABILITY.
Any provision hereof or of the Convertible Notes which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
thereof, and any such prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
24. DEFINITIONS.
The following terms, when used in this Agreement, shall have
the following meanings:
"Affiliate" shall mean any person that controls, is
controlled by or is under common control with the person in question. For
purposes hereof, "control" and the correlative definitions "controlled by" and
"under common control with" shall mean the power and ability to direct the
management and affairs of the person in question, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" has the meaning set forth in Article 1.
"beneficial owner" has the meaning set forth in Rule 13d-3
promulgated by the Commission under the Exchange Act.
"Board" or "Board of Directors" means, with respect to any
person which is a corporation, a joint stock company or a business trust, the
board of directors or other group, however designated, which is charged with
legal responsibility for the management of such person, or any committee of
such board of directors or group, however designated, which is authorized to
exercise the power of such board or group in respect of the matter in
question.
"Business Day" means any day other than a Saturday, Sunday or
other day on which banks in the State of New York are legally authorized to
close.
"Capital Lease" shall mean a lease of property which is
capitalized on the financial statements of the lessee in accordance with
generally accepted accounting principles.
"Closing" has the meaning set forth in Article 3.
"Closing Date" has the meaning set forth in Article 3.
"Closing Price" means (i) the last reported sale price as
reported on the composite tape of the American Stock Exchange (or, in case no
such sale takes place on such day, the average of the closing bid and asked
prices on the American Stock Exchange) or the successor principal national
securities exchange on which the Common Stock is listed or admitted to trading
or on the National Market System, or (ii) if the Common Stock is not listed or
admitted to trading on any national securities exchange or on the NASDAQ
National Market System, the average of the highest reported bid and lowest
reported asked price as furnished by NASDAQ, the National Quotation Bureau,
Inc., or comparable system or organization, or (iii) in the absence of any of
the foregoing, the fair market value as determined in good faith by the Board
of Directors of the Company (which determination shall be conclusive).
"Commission" means the Securities and Exchange Commission and
any other similar or successor agency of the federal government administering
the Securities Act or the Exchange Act.
"Company" means American Body Armor & Equipment, Inc., a
Florida corporation, and its successors and assigns, including any successor
corporation by merger formed for the purpose of reincorporating the Company in
the State of Delaware.
"Consolidated" or "consolidated", when used with reference to
any financial term in this Agreement, means the aggregate for the Company and
its Subsidiaries of the amounts signified by such term, with intercompany
items eliminated and, with respect to earnings, after eliminating the portion
of earnings properly attributable to minority interests, if any, in the
capital of any such person, other than the parent of such group.
"Conversion Date" has the meaning set forth in Section 11.2.
"Conversion Price" means $5.00 per share, as the same may be
adjusted from time to time in accordance with the terms of this Agreement.
"Convertible Notes" has the meaning set forth in Article 1.
"Demand" has the meaning set forth in Section 13.2.
"Event of Default" has the meaning set forth in Article 10.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"generally accepted accounting principles" means, unless
otherwise stated, generally accepted accounting principles in effect from time
to time.
"Holders" has the meaning set forth in Section 13.2.
"Holders Option" has the meaning set forth in Section 12.1.
"Indebtedness" of any person means and includes, without
duplication, as of any date as of which the amount thereof is to be
determined, (i) all obligations of such person to repay money borrowed
(including, without limitation, all debentures payable and drafts accepted
representing extensions of credit, all obligations evidenced by bonds,
debentures or other similar instruments and all obligations upon which
interest charges are customarily paid), (ii) the value of all Capital Leases
(as such term is defined in accordance with generally accepted accounting
principles in effect on the date of this Agreement) in respect of which such
person is liable as lessee or as the guarantor of the lessee, (iii) the
principal amount of all monetary obligations which are secured by any lien or
security interest existing on property owned by such person whether or not the
obligations secured thereby shall have been assumed by such person, (iv) all
guaranties of the Indebtedness of any other person and (v) all amounts from
time to time owing to trade creditors arising in the ordinary course of such
person's business.
"NASDAQ" means the National Association of Securities Dealers
Automated Quotation System.
"Purchaser" has the meaning set forth in Article 1.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Indebtedness" has the meaning set forth in Section
5.7.
"Share" or "Shares" has the meaning set forth in Article 1.
"Solvent" shall mean when used with respect to any person
that as of the date as to which the person's solvency is to be measured:
(a) the fair saleable value of its assets is in excess of
the total amount of its liabilities (including
contingent liabilities as valued in accordance with
applicable law) as they become absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able to meet its debts as they mature.
"Subsidiary" means any corporation organized under the laws
of the United States or of any state or of the District of Columbia or any
foreign jurisdiction of which (other than directors' qualifying shares
required by law) at least a majority of the shares of each class of the
capital stock entitled to vote at the time as of which any determination is
being made, is owned, beneficially and of record, by the Company or one or
more of its Subsidiaries, or both.
If the foregoing correctly sets forth our understanding, please sign
below on the enclosed counterpart of this Agreement and return the same to the
undersigned.
Very truly yours,
AMERICAN BODY ARMOR & EQUIPMENT, INC.
By: /s/ Warren B. Kanders
Name: Warren B. Kanders
Title: Chairman
The foregoing Agreement is hereby
accepted and agreed to as of the
date first above written:
PURCHASER:
RICHMONT CAPITAL PARTNERS I, L.P.
By: J.R. INVESTMENTS CORP., General Partner
By: /s/ Nick Bouras
Name: Nick G. Bouras
Title: Vice President
<PAGE>
<PAGE>
EXHIBIT "A"
[EXCLUDED]
EXHIBIT "B"
THIS CONVERTIBLE SUBORDINATED NOTE AND THE SHARES OF COMMON STOCK ISSUABLE
UPON CONVERSION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND ARE NOT TRANSFERABLE EXCEPT UPON THE CONDITIONS SPECIFIED IN
THE PURCHASE AGREEMENT REFERRED TO HEREIN.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
5% Convertible Subordinated Note Due April , 2001
Dated: April , 1996
New York, New York
FOR VALUE RECEIVED, the undersigned, AMERICAN BODY ARMOR &
EQUIPMENT, INC. (the "Company"), a Florida corporation, hereby promises to pay
to or registered assigns, the principal
sum of ($ ) on April , 2001, with
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid balance of such principal sum from the date hereof at the interest
rate of 5% per annum, payable semi-annually on the last day of June and
December in each year, commencing on December 31, 1996 (which first interest
payment shall be for the period from the date hereof through December 31,
1996), until the principal hereof shall have become due and payable, whether
at maturity or by acceleration or otherwise.
Payments of principal and interest shall be made in lawful
money of the United States of America at the principal office of the Company
in New York, New York or at such other place as the Company shall have
designated for such purpose to the holder hereof in writing and may be paid by
check mailed, or wire transfer as provided in the Purchase Agreement referred
to below, to the registered address designated by the holder hereof for such
purpose.
This Convertible Note is one of a duly authorized issue of
Convertible Notes, aggregating $10,000,000 in principal amount, together with
a 15% overallotment option for a total maximum of $11,500,000 principal
amount, issued pursuant to a certain Convertible Subordinated Note Purchase
Agreement (hereinafter called the "Purchase Agreement") dated as of April ,
1996, between the Company and the Purchasers named in said Purchase Agreement
(capitalized terms not otherwise defined herein shall have their respective
meanings as set forth in the Purchase Agreement).
This Convertible Note is subject to the provisions of and is
entitled to the benefits of the Purchase Agreement. In addition, the payment
of the principal and interest on this Convertible Note is subordinated in
right of payment to the prior payment in full of certain other obligations of
the Company to the extent and in the manner set forth in the Purchase
Agreement. Each holder of this Convertible Note, by accepting the same,
agrees to and shall be bound by the provisions of the Purchase Agreement.
This Convertible Note is transferable only upon the
conditions specified in the Purchase Agreement. Notwithstanding the
foregoing, however, this Note is registered with the Company as to both
principal and interest and transfer of this Convertible Note can be effected
only by surrender of this Convertible Note and either reissuance by the
Company of this Convertible Note or by issuance by the Company of a new
Convertible Note. The Company shall maintain a register for the registration
and transfer of this Convertible Note (the "Schedule"), containing the name
and address of any holder(s) of this Convertible Note. All transfers of this
Convertible Note and/or transferees of this Convertible Note shall be
registered in the Schedule. This Convertible Note may be assigned only upon
the surrender thereof at the address of the Company set forth in the Purchase
Agreement. Thereupon, the Company shall execute in the name of the assignee
either a reissued Convertible Note or a new Convertible Note, shall register
such transfer in the Schedule and shall deliver either a reissued Convertible
Note or a new Convertible Note to the holder. Upon surrender or presentation
of this Convertible Note to the Company for transfer, this Convertible Note
shall be duly endorsed and shall specify the name and address of the
transferee.
This Convertible Note is convertible into Common Stock of the
Company (as set forth in Articles 11 and 12 of the Purchase Agreement) in the
manner, and upon the terms and conditions, including without limitation, the
anti-dilution provisions, provided in the Purchase Agreement.
In case an Event of Default, as defined in the Purchase
Agreement, shall occur and be continuing, the principal of this Convertible
Note may be declared due and payable in the manner and with the effect
provided in the Purchase Agreement.
No reference herein to the Purchase Agreement and no
provision hereof or thereof shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal hereof and
interest hereon at the respective times and places set forth herein and in the
Purchase Agreement.
This Convertible Note is delivered in and shall be construed
and enforced in accordance with and governed by the laws of the State of New
York, without giving effect to its conflict of laws rules.
Subject to the provisions of Article 19 of the Purchase
Agreement, the Company may treat the person in whose name this Convertible
Note is registered as the owner and holder of this Convertible Note for the
purpose of receiving payment of principal and interest on this Convertible
Note and for all other purposes whatsoever and the Company shall not be
affected by any notice to the contrary.
<PAGE>
<PAGE> IN WITNESS WHEREOF, AMERICAN BODY ARMOR & EQUIPMENT, INC. has
caused this Convertible Note to be dated, and to be executed on its behalf by
its officer thereunto duly authorized.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
By:
Name:
Title:<PAGE>
<PAGE> REGISTER FOR TRANSFERS
Holder
Name and Address
EXHIBIT C--FORM OF CONFIDENTIAL PURCHASER QUESTIONNAIRE EXCLUDED
AMERICAN BODY ARMOR & EQUIPMENT, INC.
191 Nassau Place Road
Yulee, Florida 32097
(904) 261-4035
April 3, 1996
Mr. Nick Bouras
Richmont Capital Partners I, L.P.
4300 Westgrove Drive
Dallas, Texas 75248
Re: Convertible Subordinated Note Offering
of American Body Armor & Equipment, Inc.
Dear Nick:
Reference is hereby made to the Convertible Subordinated Note
Purchase Agreement (the "Agreement") of American Body Armor & Equipment, Inc.
(the "Company"), a copy of which is enclosed for your review. Also enclosed
for your information is a copy of the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1995. In connection with the
investment by Richmont Capital Partners I, L.P. ("Richmont") in the 5%
Convertible Subordinated Notes (the "Notes") of the Company, this will confirm
our understanding that Richmont will be entitled to nominate one director to
the Company's board of directors. It is currently contemplated that
Richmont's nominee will be Mr. John Rochon, or if he is then unavailable,
another nominee will be designated which will be mutually agreed upon. In the
event that, for any reason, Mr. Rochon or such other nominee is unable to
attend or otherwise participate in any board meeting of the Company, Richmont
will be entitled to have a representative attend any such meeting of the
board.
In addition, in connection with Richmont having a nominee on the
Company's board of directors, Richmont or any of its affiliates or affiliated
entities will be entitled to receive an option to purchase an aggregate of
300,000 shares of common stock of the Company, of which 100,000 shares will
vest upon issuance, and 100,000 shares will vest in each of the first and
second anniversaries of the date of issuance of such option. In the event
that Richmont does not have a nominee on the Company's board of directors,
then such option shall lapse with respect to any unvested shares of the
Company's common stock. The exercise price for such option shall be equal to
$7.50 per share, and if the trading price of the common stock of the Company
is equal to or greater than $10 per share for a period of ten consecutive
trading days after December 31, 1997, the Company shall have the right to
declare the option and all shares of common stock into which the option is
exercisable immediately vested, and require the holder of such option to
exercise the option and convert them into shares of common stock at the stated
exercise price. In the event that the holder of such option does not elect to
convert such option as herein described, the option will lapse.
Also enclosed is a letter of instruction relating to the procedures
to be followed in connection with your purchase of the Notes. Please follow
the instructions contained therein carefully, and should you have any
questions regarding any of the procedures contained therein, please do not
hesitate to contact either Carol T. Burke, Vice President of Finance of the
Company, at (904) 261-4035, or Robert L. Lawrence, Esq. or Aris Haigian, Esq.
of Kane Kessler, P.C., at (212) 541-6222.
We look forward to your participation in the Convertible
Subordinated Note offering of the Company.
Very truly yours,
AMERICAN BODY ARMOR & EQUIPMENT, INC.
By: /s/ Warren B. Kanders
Warren B. Kanders
Chairman of the Board
OPTION
NEITHER THIS OPTION NOR THE SECURITIES UNDERLYING THIS OPTION HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR ANY STATE SECURITIES LAWS AND EACH OF THIS OPTION AND SUCH
SECURITIES ARE OFFERED IN RELIANCE UPON EXEMPTIONS THEREFROM.
NEITHER THIS OPTION NOR THE SECURITIES UNDERLYING THIS OPTION MAY BE
RESOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO A REGISTRATION
UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION
THEREFROM.
OPTION TO PURCHASE
300,000 SHARES OF COMMON STOCK, PAR VALUE $.03 PER SHARE
AMERICAN BODY ARMOR & EQUIPMENT, INC.
A Florida Corporation
VOID AFTER 5:00 P.M. EASTERN TIME APRIL ____, 2006
This certifies that, for value received, Richmont Capital Partners
I, L.P. (the "Option Holder"), is entitled, subject to the terms and
conditions hereof, the purchase from American Body Armor & Equipment, Inc.
(the "Company"), at any time or from time to time, but in any event subject to
the vesting schedules contained herein, on or before April __, 2006, up to
300,000 fully paid and non-assessable shares (the "Shares") of common stock,
par value $.03 per share, of the Company (the "Common Stock"), and to receive
a certificate or certificates for the Common Stock so purchased pursuant to
and subject to the terms and conditions set forth below.
1. (a) This Option may be exercised in whole or in part at any
time, or from time to time, subject to the provisions of this Option,
including, but not limited to, the vesting schedules contained herein, by
delivery and surrender to the Company, subject to Section 3 below, of this
Option and a subscription form substantially similar to that attached to this
Option as Exhibit A duly executed by the Option Holder at the offices of the
Company at 191 Nassau Place Road, Yulee, Florida 32097 accompanied by payment
in full, in lawful money of the United States, or by certified or bank check,
or postal or express money order payable in United States dollars to the order
of the Company, of the Exercise Price (as defined in Section 2 herein) for
each share of Common Stock as to which this Option is being exercised on or
before 5:00 p.m. Eastern time on April ___, 2006.
(b) Notwithstanding anything to the contrary contained
herein, the Shares into which this Option is exercisable shall vest in
accordance with the following schedule:
(i) 100,000 Shares shall vest immediately;
(ii) 100,000 Shares shall vest on the first anniversary of
the date hereof; and
(iii) 100,000 Shares shall vest on the second anniversary of
the date hereof.
(c) In the event that a designee of the Option Holder, or any
successor or replacement selected by the Option Holder for such designee, is
not a director of the Company because such person has either resigned or
otherwise elected not to serve on the Company's Board of Directors, then this
Option shall lapse and be of no further force or effect with respect to any
unvested Shares at such time, it being agreed that no such lapsing shall
result from such designee's, or such successor or replacement designee's,
involuntary removal from office. In the event that there is a voluntary
vacancy of the Option Holder's designee's seat on the Company's Board of
Directors, the Company will give prompt written notice of such fact to the
Option Holder, and the Option Holder will have a period of five business days
in which to name a successor or replacement designee. In the event that such
a successor or replacement designee is not named by the Option Holder to the
Company during such five day period, then the Option Holder shall be deemed to
have resigned or otherwise elected not to serve on the Company's Board of
Directors, whereupon this Option shall lapse and be of no further force or
effect with respect to any unvested Shares at such time.
(d) In the event that the closing price per share of the
Company's Common Stock is equal to or greater than $10 for a period of 10
consecutive trading days after December 31, 1997, the Company shall have the
right, upon giving written notice to the Option Holder within 30 days of the
conclusion of such ten consecutive trading days during which the closing price
per share of the Company's Common Stock was equal to or greater than $10, to
declare this Option and all of the Shares, whether vested or unvested, to be
deemed fully vested, and to require the Option Holder to exercise this Option
in whole with respect to all such Shares within 10 days of such notice to the
Option Holder. In the event that the Option Holder does not exercise this
Option as provided in this Section 1(d), the Option will lapse and be of no
further force or effect.
2. Subject to adjustment as hereinafter provided, the purchase
price per Share of Common Stock as to which this Option is exercised (the
"Exercise Price") shall be $7.50.
3. (a) Upon the exercise of this Option, in full, the Company
shall, or shall direct its transfer agent to, issue to the Option Holder
certificates for the total number of Shares of Common Stock issuable on the
date of such exercise pursuant to the terms of this Option in such
denominations as are required by the Option Holder, and the Company shall, or
shall direct its transfer agent to, thereupon deliver such certificates to or
in accordance with the instructions of the Option Holder.
(b) In the event that the Option Holder shall exercise this
Option with respect to less than all of the Shares of Common Stock that may be
purchased under the terms hereof, the Company shall, or shall direct its
transfer agent to, issue to the Option Holder certificates for the Shares of
Common Stock for which this Option is being exercised in such denominations as
are required for delivery to the Option Holder, and the Company shall, or
shall direct its transfer agent to, thereupon deliver such certificates to or
in accordance with the instructions of the Option Holder, and the Company
shall issue to the Option Holder a new Option, duly executed by the Company,
in form and substance identical to this Option for the balance of Shares of
Common Stock then issuable pursuant to the terms of this Option.
(c) Notwithstanding anything to the contrary contained
herein, neither the Company nor its transfer agent shall be required to issue
any fraction of a Share of Common Stock in connection with the exercise of
this Option, and the Company shall, upon exercise of this Option in whole or
in part, issue the largest number of whole Shares of Common Stock to which
this Option is entitled upon such full or partial exercise and shall return to
the Option Holder the amount of the Exercise Price paid by the Option Holder
in respect of any fractional Share.
4. The Option Holder, as such, shall not be entitled to vote or
receive dividends or be deemed the holder of Shares of Common Stock for any
purpose, nor shall anything contained in this Option be construed to confer
upon the Option Holder, as such, any of the rights of a shareholder of the
Company including, without limitation, any right to vote, give or withhold
consent to any action by the Company (whether upon the recapitalization, issue
of stock, reclassification of stock, consolidation, merger, conveyance or
otherwise), receive notice of meetings or other action affecting shareholders,
receive dividends or subscription rights, or otherwise, until this Option
shall have been exercised; provided, however, that any exercise of this
Option, in whole or in part, on any date when the stock transfer books of the
Company shall be closed shall constitute the person or persons in whose name
or names the certificate or certificates for such shares of Common Stock are
to be issued as the record holder or holders thereof for all purposes at the
opening of business on the next succeeding day on which such stock transfer
books are open, and this Option shall not be deemed to have been exercised, in
whole or in part, as the case may be, until that date for the purpose of
determining entitlement to dividends on the Common Stock, and that exercise
shall be at the actual Exercise Price in effect at such date.
5. The Exercise Price shall be subject to adjustment as follows:
(a) In case the Company shall, after the date hereof, (i)
pay a stock dividend or make a distribution in shares of its capital stock
(whether shares of its Common Stock or of capital stock of any other class),
(ii) subdivide its outstanding shares of Common Stock, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issue by reclassification of its shares of Common Stock any shares of capital
stock of the Company, the Exercise Price in effect immediately prior to such
action shall be adjusted so that the holder of this Option thereafter
surrendered for exercise shall be entitled to receive an equivalent number of
shares of capital stock of the Company which he would have owned immediately
following such action had this Option been exercised immediately prior
thereto. Any adjustment made pursuant to this subsection (a) shall become
effective immediately after the record date in the case of a dividend or
distribution and shall become effective immediately after the effective date
in the case of a subdivision, combination or reclassification.
(b) No adjustment in the Exercise Price shall be required to
be made unless such adjustment would require an increase or decrease of at
lest one percent (1%) in such price; provided, however, that any adjustments
which by reason of this subsection (b) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 5 shall be made to the nearest cent.
(c) Whenever the Exercise Price is adjusted as provided in
Section 5(a) herein, the Company will promptly mail to the Option Holder a
certificate of the Company's Treasurer or Chief Financial Officer setting
forth the Exercise Price as so adjusted and a brief statement of facts
accounting for such adjustment.
(d) Irrespective of any adjustment or change in the Exercise
Price and the number of Shares actually purchasable under this Option, this
Option may continue to express the Exercise Price per share and the number of
Shares purchasable hereunder as the Exercise Price per Share and the number of
Shares purchasable as expressed upon this Option when initially issued.
6. Except in connection with the Company's reincorporation in
Delaware and its creation of a holding company structure substantially in the
form previously disclosed by the Company to the Option Holder, if the Company
shall at any time consolidate or merge with or into another corporation, (a)
the Company shall give at least five (5) days prior written notice to the
Option Holder of such consolidation or merger and the terms thereof, and (b)
the Option Holder shall thereafter be entitled to receive, upon the exercise
thereof, the securities or property to which a holder of the number of Shares
then deliverable upon the exercise thereof would have been entitled upon such
consolidation or merger, and the Company shall take such steps in connection
with such consolidation or mergers may be necessary to assure the Option
Holder that the provisions of this Option shall thereafter be applicable, as
nearly as reasonably may be in relation to any securities or property
thereafter deliverable upon the exercise of this Option including, but not
limited to obtaining a written acknowledgement from the continuing corporation
or other appropriate corporation of its obligation to supply such securities
or property upon such exercise. Except in connection with the Company's
reincorporation in Delaware and its creation of a holding company structure,
a sale of all or substantially all the assets of the Company shall be deemed
a consolidation or merger for the foregoing purposes. In the event of any
such merger, consolidation or sale of all or substantially all the assets of
the Company, other than in connection with the Company's reincorporation in
Delaware and its creation of a holding company structure, all unvested Shares
shall be deemed fully vested and exercisable.
7. The Company will permit any authorized representatives
designated by the Option Holder, so long as this Option is outstanding,
without expense to the Company, to visit and inspect any of the properties of
the Company or any of its subsidiaries, including its and their books of
account, and to make copies and take extracts therefrom, and to discuss its
and their affairs, finances and accounts with its and their officers and
independent public accountants (and by this provision the Company authorizes
such accountants to discuss with such representatives the affairs, finances
and accounts of the Company and its subsidiaries, whether or not the Company
is present), all at such reasonable times and as often as may be reasonably
requested.
8. The Company and each subsidiary will maintain its books and
records in accordance with generally accepted accounting principles, and so
long as this Option shall remain outstanding, the Company will deliver to the
Option Holder:
(a) as soon as practicable, and in any event within 90 days
after the close of each fiscal year of the Company, (i) a
consolidated balance sheet of the Company and its subsidiaries as of
the end of such fiscal year-end and (ii) consolidated statements of
income, cash flow and common stock and other stockholders' equity of
the Company and its subsidiaries for such fiscal year, in each case
setting forth in comparative form the corresponding figures for the
preceding fiscal year and to be in reasonable detail and certified
without material exception by Deloitte & Touche or other nationally
recognized independent public accountants selected by the Company;
provided, however, that delivery pursuant to clause (c) below of
copies of the Annual Report on Form 10-KSB of the Company for such
fiscal year timely filed with the Securities and Exchange Commission
(together with copies of the financial statements required to be
included therein) shall be deemed to satisfy the requirements of
this clause (a);
(b) as soon as practicable, and in any event within 45 days
after the close of each of the first three fiscal quarters of the
Company during such fiscal year (i) a consolidated balance sheet of
the Company and its subsidiaries as of the end of such fiscal
quarter and (ii) consolidated statements of income, cash flow and
common stock and other stockholders' equity of the Company and its
subsidiaries for the portion of the fiscal year ended with the end
of such quarter, in each case setting forth in comparative form the
corresponding figures for the comparable period of the preceding
fiscal year provided, however, that delivery pursuant to clause (c)
below of copies of the Quarterly Report on Form 10-QSB of the
Company for such quarterly period timely filed with the Securities
and Exchange Commission shall be deemed to satisfy the requirements
of this clause (b);
(c) as soon as practicable, copies of all financial
statements, proxy materials or reports sent to the Company's
stockholders and of all reports or final registration statements
filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended, or the Securities Exchange Act
of 1934, as amended; and
(d) with reasonable promptness, such other information and
data with respect to the Company or any of its subsidiaries as from
time to time may be reasonably requested.
9. If this Option is lost, stolen or destroyed, the Company
shall, subject to such reasonable terms as to indemnity as are commonly
imposed in respect of options which are not registered pursuant to the Act,
issue a new Option of like denomination and tenor as, and in substitution for,
the Option so lost, stolen or destroyed, and in the event this Option shall be
mutilated, the Company shall, upon the surrender hereof, issue a new Option of
like denomination and tenor as, and in substitution for, the Option so
mutilated.
10. Notwithstanding anything to the contrary contained in this
Option, this Option and the shares of Common Stock underlying this Option may
not be sold, assigned or transferred at any time, in any manner or by any
person or entity unless the Option and the Shares, as the case may be, are
registered pursuant to the Act and under applicable state securities laws or
an exemption from the Act and such state securities laws is available in
respect of the Option and the Shares for such sale, assignment or transfer, as
the case may be.
11. The validity, interpretation and performance of this Option
shall be governed by the laws of the State of New York.
12. This Option cannot be amended, supplemented or changed, and
no provision hereof can be waived, except by a written instrument making
specific reference to this Option and signed by the party against whom
enforcement of any such amendment, supplement, modification or waiver is
sought. The Exhibit to this Option is incorporated herein by reference to the
same extent as if set forth herein in full. A waiver of any right derived
hereunder by the Option Holder shall not be deemed a waiver of any other right
derived hereunder.
13. This Option shall be binding upon the Company and shall inure
to the benefit of the Option Holder, and their respective successors and
permitted assigns.
AMERICAN BODY ARMOR & EQUIPMENT, INC.,
By
Name:
Title:<PAGE>
<PAGE> EXHIBIT A
SUBSCRIPTION FORM
(To be executed by the Option Holder to exercise the Option in whole
or in part)
TO: AMERICAN BODY ARMOR & EQUIPMENT, INC.
The undersigned, whose Social Security or Tax Identification Number
is ___________, hereby irrevocably elects the right of purchase represented by
the within Option for, and to purchase thereunder, shares of Common Stock
provided for therein and tenders payment herewith to the order of American
Body Armor & Equipment, Inc. in the amount of $__________. The undersigned
requests that certificates for such shares of Common Stock be issued in the
name of the undersigned Option Holder as follows:
Name:
Address:
Deliver to:
Address:
and, if said number of shares of Common Stock shall not be all the shares of
the Common Stock purchasable thereunder, then a new Option for the balance of
the remaining shares of Common Stock purchasable under the within Option be
registered in the name of, and delivered to, the undersigned at the address
stated below.
Address:
Dated:
Option Holder: Signature Guaranteed:
By:______________________
