SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) April 30, 1996
American Body Armor & Equipment, Inc
(Exact name of registrant as specifed in its charter)
Florida 0-18863 59-2044869
State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
191 Nassau Place Road, Yulee, Florida 32097
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (904) 261-4035
85 Nassau Place, Yulee, Florida 32097
(Former name of former address, if changed since last report.)
ITEM 5. OTHER EVENTS
On April 30, 1996 American Body Armor & Equipment, Inc. (the "Company")
completed a private placement (the "Transaction") of its 5% Convertible
Subordinated Notes due April 30, 2001 (the "Notes") pursuant to which
$11,500,000 aggregate principal amount of Notes were sold by the Company
solely to accredited investors pursuant to a Convertible Subordinated
Note Purchase Agreement dated as of April 30, 1996 (the "Convertible
Subordinated Note Purchase Agreement"). The following description of the
Transaction, the Convertible Subordinated Note Purchase Agreement and
the Notes is not intended to be complete and is qualified in its
entirety by the complete texts of the form of Convertible Subordinated
Note Purchase Agreement and the form of Note set forth in Exhibits 4.1
and 4.2, respectively.
The Notes bear interest at 5% per annum, mature five years from the date
of issuance, and are subordinated to all existing and future Senior
Indebtedness of the Company, as defined and as more fully set forth in the
Convertible Subordinated Note Purchase Agreement. In addition, the Notes may
be convertible into shares of common stock of the Company (the "Common
Stock") at the option of the holder thereof at any time prior to the maturity
date at a conversion price of $5.00 per share, subject to adjustment as set
forth in the Convertible Subordinated Note Purchase Agreement.
The Company may redeem the Notes at par at any time two years after
issuance, or at any time after their issuance if the closing price of the Common
Stock exceeds $7.50 per share for 10 consecutive trading days and the shares of
Common Stock underlying the Notes have been registered under the Securities Act
of 1933, as amended. In the event the Company elects to redeem the Notes, the
holders of the Notes will have the option to convert the Notes into shares of
the Company's Common Stock at a conversion price of $5.00 per share prior to
such redemption, subject to adjustment as set forth in the Convertible
Subordinated Note Purchase Agreement.
The Company has agreed to use its best efforts to file with the Securities
and Exchange Commission a registration statement for the shares of Common Stock
into which the Notes are convertible by June 30, 1996.
Burtt R. Ehrlich, a director of the Company, purchased $250,000
principal amount of Notes. Such Notes are convertible into shares of
Common Stock pursuant to the terms and conditions of the Convertible
Subordinated Note Purchase Agreement.
Thomas W. Strauss, who subsequent to the completion of the
Transaction became a director of the Company, purchased $200,000
principal amount of Notes. Such Notes are convertible into shares of
Common Stock pursuant to the terms and conditions of the Convertible
Subordinated Note Purchase Agreement.
Richmont Capital Partners I, L.P. ("Richmont") purchased $3,000,000
principal amount of Notes. Such Notes are convertible into shares of
Common Stock pursuant to the terms and conditions of the Convertible
Subordinated Note Purchase Agreement. Subsequent to the completion of
the Transaction, Richmont nominated Richard C. Bartlett to the Board of
Directors of the Company.
The Company intends to use the proceeds from the sale of the Notes for
funding the Company's acquisition program and for general corporate purposes,
including the repayment of certain outstanding indebtedness.
On May 13, 1996, the Board of Directors of the Company (the "Board") held a
meeting at which the Board amended the Amended and Restated Bylaws of the
Company to provide for the appointment of two new directors, subsequent to which
the Board appointed Thomas W. Strauss and Richard C. Bartlett to serve on the
Board.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits.
The following Exhibits are hereby filed as part of this Current
Report on Form 8-K.
EXHIBIT DESCRIPTION
3.1 Amended and Restated Bylaws of American Body Armor & Equipment,
Inc., as amended on May 13, 1996.
4.1 Form of Convertible Subordinated Note Purchase Agreement, dated
as of April 30, 1996, by and among the Company and the Purchaser
parties thereto.
4.2 Form of 5% Convertible Subordinated Note due April 30, 2001.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN BODY ARMOR & EQUIPMENT, INC.
/s/ Jonathan M. Spiller
Jonathan M. Spiller
President and Chief Executive Officer
Dated: May 14, 1996
EXHIBIT INDEX
The following Exhibits are filed herewith:
EXHIBIT DESCRIPTION
- ------- -----------
3.1 Amended and Restated Bylaws of American Body Armor & Equipment,
Inc., as amended on May 13, 1996.
4.1 Form of Convertible Subordinated Note Purchase Agreement, dated
as of April 30, 1996, by and among the Company and the Purchaser
parties thereto.
4.2 Form of 5% Convertible Subordinated Note due April 30, 2001.
EXHIBIT 3.1
AMENDED AND RESTATED BYLAWS
OF
AMERICAN BODY ARMOR & EQUIPMENT, INC.
ARTICLE I.
Office and Seal.
Section 1. The principal office of the corporation
in Florida shall be located in the City of Yulee. The corporation
may have such additional offices as the Board of Directors from
time to time may determine.
Section 2. The corporate seal of the corporation
shall have inscribed thereon the name of the corporation, the year
in which incorporated and the words "Florida - Corporate - Seal."
ARTICLE II.
Stockholders.
Section 1. All meetings of the stockholders shall
be held at the principal office of the corporation in Florida, or
at such other place, either within or without the State of Florida,
as from time to time may be determined by the Board of Directors
and specified in the notice of such meeting.
Section 2. The annual meeting of the stockholders
shall be held at a date, time and place designated by the Board of
Directors and stated in the notice of meeting, in compliance with
the Florida Statutes. At such meeting, the stockholders shall
elect the entire Board of Directors and shall transact such other
business as properly may come before the meeting.
Section 3. Special meetings of stockholders may be
called at any time by the President or by a majority of the
Directors. It shall also be the duty of the President to call such
meetings whenever requested in writing to do so by the records
holders of more than 10% of the stock issued and outstanding and
entitled to vote, which request shall state the objects of the
proposed meeting. Business transacted at all special meetings
shall be confined to the objects stated in the notice.
Section 4. A majority in number of shares issued
and outstanding and entitled to vote, represented by the holders in
person or by proxy, shall be requisite at all meetings to
constitute a quorum for the election of directors or the
transaction of other business. If, however, such majority shall
not be present or represented at any such meeting, the stockholders
entitled to vote thereat, present in person or by proxy, shall have
power to adjourn the meeting from time to time without notice other
than announcement at the meeting, until the requisite amount of
voting stock shall be present. At any such adjourned meeting at
which the requisite amount of voting stock shall be represented,
any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 5. At any meeting of the stockholders at
which a quorum is present, the affirmative vote of the holders of
a majority of the stock entitled to vote thereat, present in person
or by proxy, shall be had on any matter coming before such meeting
in order to constitute such action the valid act of the stockholders
thereon, unless otherwise provided by law, except for the election of
directors who shall be elected by a plurality vote.
Section 6. At each meeting of the stockholders,
every stockholder of stock shall be entitled to one vote for every
share of common stock and one vote for every share of preferred
stock on each matter submitted to a vote at a meeting of
stockholders. Every stockholder may vote the stock the stockholder
owns as shown in the record of stockholders of the corporation as
of the record date, determined pursuant to Section 7 of this
Article II, either in person, or by proxy appointed by an
instrument in writing subscribed by such stockholder personally or
by his attorney-in-fact and bearing a date not more than 11 months
prior to the date of the meeting, unless the authority granted by
such instrument shall have terminated by its own terms prior to the
date of such meeting. If such instrument expressly provides, any
proxy holder may appoint, in writing, a substitute to act in his or
her place. A telegraph, telex, or cablegram, a facsimile
transmission of a signed instrument, or a photographic, photostatic,
or equivalent reproduction of a signed instrument is a sufficient
instrument.
Section 7. The Board of Directors may fix in
advance a date, not exceeding 70 days prior to the date of holding
any meeting of stockholders, or the date for the payment of any
dividend, or the date for the allotment of rights, as a record date
for the determination of the stockholders entitled to notice of,
and to vote at, any such meeting, or entitled to receive payment of
any such dividend, or to any such allotment of rights, and in such
case only stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting, or to
receive payment of such dividend, or to receive such allotments of
rights, as the case may be. If no record date is established by
the Board of Directors prior to authorization of payment of any
dividend, such record date for purposes of determining entitlement
to receive payment of such dividend shall be the day the Board of
Directors authorize payment of a dividend.
Section 8. Notice of the time and place of the
annual meeting of stockholders and notice of the time, place and
purpose of each special meeting of the stockholders shall be given
at least 10 and not more than 60 days before the date set for such
meeting to each stockholder of record having the right and entitled
to vote at such meeting.
Section 9. No notice of any stockholders' meeting
shall at any time be required to be published in any newspaper.
However, the Board of Directors may, if it so desires, cause notice
of any stockholders' meeting to be published in such newspapers as
the Board may designate.
ARTICLE III.
Board of Directors.
Section 1. The management of all of the affairs,
business and property of the corporation shall be vested in its
Board of Directors. The number of Directors of the corporation
shall be not less than three nor more than fifteen. The number of
Directors may be fixed from time to time by action of the Board of
Directors within such limits. The Directors shall be elected at
the annual meeting of stockholders, except as otherwise provided
for filling vacancies. Each Director shall hold office until the
annual meeting of stockholders held next after his or her election
or other manner of appointment, and until his or her successor
shall have been elected and shall qualify or until his or her
death, resignation or removal. Directors need not be stockholders.
Section 2. The annual meeting of the Board of
Directors shall be held in each year immediately after and at the
same place as the annual meeting of stockholders. No notice of the
annual meeting of the Board of Directors need be given.
Section 3. Regular meetings of the Board of
Directors may be held at such places and at such times as the Board
from time to time shall determine by resolution. If any day fixed
for a regular meeting shall be a legal holiday at the place where
the meeting is to be held, then the meeting which otherwise would
be held on that day shall be held at the same hour on the next
succeeding business day not a legal holiday. No notice of regular
meetings of the Board of Directors need be given.
Section 4. Special meetings of the Board of
Directors shall be held whenever called by the President or by a
majority of the Directors. Notice of each special meeting of the
Board of Directors shall be given to each Director at least ten
days before the day on which the special meeting is to be held.
Every such notice shall state the time and place of the meeting and
the purpose thereof. The business transacted at such special
meeting shall be confined to the purposes stated in the notice.
Section 5. At least a majority of the Directors
shall be present at each meeting of the Board of Directors in order
to constitute a quorum for the transaction of business. Members of
the Board of Directors shall be deemed present at a meeting of such
Board of Directors if a conference telephone or similar
communications equipment by means of which all persons
participating in the meeting can hear each other is used. The
affirmative vote of a majority of the Directors present at any
meeting of the Board of Directors, at which a quorum is present,
shall be had upon any matter coming before said Board in order to
constitute such action the valid action of the Board thereon. In
the absence of a quorum, any two of the Directors present may
adjourn any meeting from time to time until a quorum is had.
Notice of any such adjourned meeting need not be given.
Section 6. Any action required or permitted to be
taken at any meeting of the Board of Directors or any Committee
thereof may be taken without a meeting, if a written consent to
such action is signed by all members of the Board of Directors or
of such Committee, as the case may be, and such written consent or
consents are filed with the minutes of proceedings of the Board of
Directors or Committee.
Section 7. The Board of Directors may hold its
meetings at such places within or without the State of Florida as
it from time to time may determine or as shall be specified or
fixed in the respective notice or waivers of notice thereof.
Section 8. All vacancies in the Board of Directors,
whether caused by death, resignation, removal or otherwise, shall
be filled by a majority vote of the remaining Directors.
Section 9. Any Director may resign at any time by
giving written notice to the President or to the Secretary. The
resignation of any Director shall take effect at the time specified
in such notice; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it
effective.
Section 10. Any Director may be removed at any
time, with or without cause, by a vote of the holders of a majority
of the stock present, in person or by proxy, at any special meeting
of the stockholders called for that purpose.
Section 11. The Directors may appoint from their
number, one or more Committees, including an Executive Committee
consisting of the President and one or more other members of the
Board, except that the President shall not serve on an Audit
Committee. Any Committee may hold meetings at such place as may be
agreed upon by the members thereof. The president or any members
of any Committee may call a meeting upon ten days' notice, given in
person or by mail, telegram or telephone. Any meeting of any
Committee shall be a legal meeting without notice if all the
members shall be present thereat or if written waiver thereof shall
have been given either before, at or after such meeting. Members
of any such Committee shall be deemed present at a meeting of such
Committee if a conference telephone, or similar communications
equipment by means of which all persons participating in the
meeting can hear each other is used. A majority of a Committee
shall constitute a quorum and in any case the affirmative vote of
a majority of the entire Committee shall be necessary to adopt any
resolution. The Committee may make its own rules of procedure but
shall keep regular minutes of its proceedings and shall report the
same to the Board of Directors at the next Directors' meeting held
thereafter.
During the intervals between meetings of the Board
of Directors, the Executive Committee, if appointed hereunder, may
have and shall exercise all the powers of the Board of Directors in
the management of the affairs, business and property of the
corporation, in such manner as the Executive Committee shall deem
for the best interests of the corporation in all cases in which
specific directions shall not have been given by the Board of
Directors. The Executive Committee shall not have power to fill
vacancies in said Committee or in the Board of Directors or to make
or amend the By-Laws of the corporation.
Section 12. The Board of Directors, irrespective of
any personal interest of any of its members, may establish
reasonable compensation of all directors for services to the
corporation as directors, officers, or otherwise, or may delegate
such authority to a Committee.
ARTICLE IV.
Officers of the Corporation.
Section 1. The officers of the corporation shall be
a President, such number of Vice Presidents as the Board of
Directors from time to time may determine, a Secretary, a
Treasurer, and such Assistant Secretaries and Assistant Treasurers
and such other subordinate officers as the Board from time to time
may elect or appoint. All officers elected or appointed by the
Board shall hold their respective offices only at and during the
pleasure of the Board of Directors, and may be removed at any time
with or without cause, and notwithstanding the contract rights, if
any, of the removed officer. Removal of an officer shall be
without prejudice to any contract rights pursuant to a written
employment contract or agreement entered into between the
corporation and any such officer pursuant to authorization of the
Board of Directors.
Section 2. Any person may hold two or more offices,
except that the President shall not be also the Secretary or
Assistant Secretary, but in no case shall one person sign a single
instrument of any kind in more than one capacity. None of the
officers except the President need be a member of the Board of Directors.
Section 3. The President shall be the chief
executive officer of the corporation. He or she shall preside at
all meetings of the stockholders and directors, shall have active
and general management of the business of the corporation, and
shall see that all orders and resolutions of the Board are carried
into effect. He or she shall be ex-officio a member of all
standing Committees except the audit Committee, and shall have the
general powers and duties of supervision and management usually
vested in the office of president of a corporation. The President
also shall appoint and discharge all subordinate agents and
employees and fix their salaries, subject to review by the Board of
Directors, and shall designate the duties they are to perform.
Section 4. The Vice President or Vice Presidents,
if such shall be elected, shall perform such duties as may be
assigned by the Board of Directors or by the President.
Section 5. The Secretary shall keep the minutes of
the meetings of the Board of Directors and the minutes of the
meetings of the stockholders. He or she shall attend to the giving
and serving of all notices of the corporation. He or she shall
have charge of the stock certificate books and such other books and
papers as the Board may direct, and shall perform all the duties
incidental to his office.
Section 6. The Treasurer shall have the care and
custody of all of the funds and securities of the corporation and
shall deposit the same in the name of the corporation in such banks
or depositaries as the Board of Directors may from time to time select.
Section 7. The other officers of the corporation
shall perform such duties as may be assigned by the Board of
Directors or by the President.
Section 8. The Board of Directors, by resolution,
may require any or all of the officers of the Corporation to give
bonds in favor of the corporation, with sufficient surety or
sureties, and in such amounts as the Board of Directors may fix,
conditioned for the faithful performance of the duties of their
respective offices.
ARTICLE V.
Stock.
Section 1. The certificates for shares of the
capital stock of the corporation shall be in such form as shall be
approved by the Board of Directors. The shares of stock of the
corporation shall be transferable only on the books of the
corporation by the holder thereof in person or by his attorney,
upon surrender for cancellation of the certificate or certificates,
with an assignment and power of transfer endorsed thereon or
attached thereto duly executed, and with such proof of authenticity
of the signature as the corporation or its agents reasonably may require.
Section 2. All stock certificates shall be signed
by the President or a Vice President, and the Secretary or an
Assistant Secretary, or the Treasurer or an Assistant Treasurer,
and shall bear the seal of the company, which seal may be
facsimile, engraved or printed. Where such certificate is signed
by a transfer agent or an assistant transfer agent, other than the
corporation itself, or by transfer clerk acting on behalf of the
corporation and a registrar, the signature of any of the officers
named above may be facsimile. In case any officer who signed, or
whose facsimile signature has been used on any certificate, shall
cease to be such officer for any reason before the certificate has
been delivered by the corporation, such certificate may
nevertheless be issued and delivered by the corporation as though
the person who signed it or whose facsimile signature has been used
thereon had not ceased to be such officer of the corporation.
Section 3. No certificate for shares of stock in
the corporation shall be issued in place of any certificate alleged
to have been lost, stolen or destroyed, except upon production to
the corporation or its agents of satisfactory evidence of such
loss, theft or destruction, and upon delivery to the corporation of
a bond of indemnity in such amount and upon such terms and secured
by such security as the Board of Directors in its discretion may require.
ARTICLE VI.
Execution of Contracts - Fiscal Year.
Section 1. All checks, drafts, notes, bonds,
contracts and other instruments shall be signed by such officers as
may be designated from time to time by resolution of the Board of Directors.
Section 2. The fiscal year of the corporation shall
be the 12 month period ending on December 31.
ARTICLE VII.
Notices.
Section 1. Whenever the provisions of a statute, or
the Articles of Incorporation or any of these By-Laws require or
permit notice to be given to any Director, officer or stockholder,
it shall not be construed to require personal notice, but any such
notice may be given in writing by depositing the same in a post
office or letter box in a post-paid sealed wrapper, or by
delivering the same to a telegraph company for transmission by
wire, the cost thereof being prepaid, in either case addressed as
the same appears on the books of the corporation, and the time when
the same shall be so mailed or delivered to the telegraph company
shall be deemed to be the time of the giving of such notice.
Section 2. Any stockholder or Director may waive in
writing or by telegraph any notice required or permitted to be
given under any provisions of any statute or of the Articles of
Incorporation or of these By-laws, either before, at or after the
meeting or other event of which notice is so provided. All
stockholders or Directors present at any meeting shall be deemed to
have waived any and all notice thereof.
ARTICLE VIII.
Reimbursement and Indemnification of
Directors and Officers
The corporation shall indemnify and hold harmless
each person who shall serve at any time after September 22, 1993 as
a Director or officer of the corporation from and against any and
all claims and liabilities to which such person shall or may become
subject by reason of his or her having heretofore or hereafter been
a Director or officer of the corporation, or by reason of any
action alleged to have been heretofore or hereafter taken or
omitted by him or her as such Director or officer, and shall
reimburse each such person for all legal and other expenses
reasonably incurred by him or her in connection with any such claim
or liability, except that no such person shall be indemnified
against or be reimbursed for any expense incurred in connection
with any claim or liability which shall be finally adjudged to have
arisen out of his or her own gross and willful negligence or
misconduct. The rights accruing to any person under the foregoing
provisions of this Article shall not exclude any other right to
which he or she lawfully may be entitled, nor shall anything herein
contained restrict the right of the corporation to indemnify or
reimburse such person in any proper case even though not
specifically provided for herein. The corporation, its Directors,
officers, employees and agents, shall be fully protected in taking
any action or making any payment under this Article, or in refusing
so to do, in reliance upon the advice of counsel.
ARTICLE IX.
Amendment of By-Laws
The Board of Directors, by a vote of a majority of
those present at any meeting at which a quorum is present, may
alter, amend or repeal these By-Laws or any of them, and any By-Law
or alteration, amendment or repeal so made may be further amended,
altered or repealed by the Board of Directors as herein provided,
or by the stockholders entitled to vote at any regular or special
meeting of the stockholders.
EXHIBIT 4.1
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 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 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:
Name: Warren B. Kanders
Title: Chairman
The foregoing Agreement is hereby
accepted and agreed to as of the
date first above written:
PURCHASER:
By:
Name:
Title:
EXHIBIT 4.2
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.
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:
REGISTER FOR TRANSFERS
Holder Name and Address
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