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Exhibit 2
PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
June 1, 2000, between SEMX CORPORATION, a Delaware corporation (the "Company"),
and the parties listed on the Schedule of Purchasers attached to this Agreement
as Exhibit A (each hereinafter individually referred to as a "Purchaser" and
collectively referred to as the "Purchasers").
ARTICLE I
AUTHORIZATION, PURCHASE AND SALE OF PREFERRED SHARES
1.01 Authorization of the Preferred Shares and the Warrants. Pursuant to
its Certificate of Incorporation, as amended, the Company has established a
class of preferred stock designated as "Series B Preferred Stock" and authorized
the issuance of up to 100,000 shares of such preferred stock (each such share, a
"Preferred Share") in accordance with the terms of the Certificate of
Designation, Number, Powers, Preferences and Relative, Participating, Optional
and Other Rights of Series B Preferred Stock, attached as Exhibit B hereto (the
"Certificate of Designation"). The Company has authorized the issuance and sale
to the Purchasers of an aggregate amount of 100,000 Preferred Shares and the
issuance to the Purchasers of warrants (the "Warrants") to purchase an aggregate
amount of 1,000,000 shares of the Company's common stock, $.10 par value (the
"Common Stock"). The terms of the Warrants are set forth in the form of Warrant
attached as Exhibit C hereto. The shares of Common Stock issuable upon exercise
of the Warrants are referred to as the "Warrant Shares." The Preferred Shares,
the Warrants and the Warrant Shares are sometimes referred to herein as the
"Securities." This Agreement, the Certificate of Designation, the Warrants, the
Registration Rights Agreement (as hereinafter defined) and the amendment to the
Rights Plan required under Section 3.01(k), including the schedules and exhibits
attached hereto and thereto, are referred to herein as the "Basic Documents."
1.02 Purchase and Sale of Preferred Shares.
(a) The Closing. The Company agrees to issue and sell to each
Purchaser, and, subject to and in reliance upon the representations, warranties,
terms and conditions of this Agreement, each Purchaser agrees, severally and not
jointly, to purchase the number of Preferred Shares set forth beside such
Purchaser's name on Exhibit A, at a purchase price (the "Purchase Price") of
$100.00 per Preferred Share. Such purchase and sale shall take place at a
closing (the "Closing") to be held contemporaneous with the execution of this
Agreement as of the date first written above (the "Closing Date"). At the
Closing, the Company will issue to each Purchaser a certificate or certificates
("Preferred Share Certificates") representing the number of Preferred Shares
purchased by such Purchaser. At the Closing, each Purchaser will deliver to the
Company, by wire transfer of immediately available funds to an account
designated by the Company by written notice to the Purchasers, the Purchase
Price for such Purchaser's Preferred Shares. If at the Closing, the Company
shall fail to issue
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any Preferred Shares to the Purchasers as provided above in this Section
1.02(a), or any of the conditions specified in Article III shall not have been
fulfilled, the Purchasers shall, at their election, be relieved of all further
obligations under this Agreement.
(b) Use of Proceeds. The Company agrees to use the full proceeds from
the sale of the Preferred Shares for acquisitions and the Company's working
capital, capital expenditures and other corporate purposes.
(c) Allocation of Purchase Price. Under both generally accepted
accounting principles and the regulations promulgated under the Internal Revenue
Code of 1986, as amended (the "Code"), the purchase of Preferred Shares and the
Warrants for an aggregate Purchase Price may require an allocation of the
Purchase Price between the Preferred Shares and the Warrants. Accordingly, on or
as soon as practicable following the Closing Date, the Company and the
Purchasers shall mutually agree in writing upon the aggregate value allocated to
the Preferred Shares and the aggregate value allocated to the Warrants (which
values shall be used by the Company and the Purchasers for all purposes,
including the preparation of tax returns and the preparation of financial
statements of the Company and its Subsidiaries).
ARTICLE II
PREFERRED SHARE CERTIFICATES; CERTAIN TERMS OF THE PREFERRED SHARES
2.01 Form of Preferred Shares. The Preferred Share Certificates shall be
substantially in the form of Exhibit D hereto, and may have such letters,
numbers or other marks of identification and such legends printed, lithographed
or engraved upon them as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement or the Certificate of
Designation.
2.02 Replacement of Preferred Share Certificates. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Share Certificate, and, if requested in the case of
any such loss, theft or destruction, upon delivery of an indemnity bond or other
agreement or security reasonably satisfactory to the Company, or, in the case of
any such mutilation, upon surrender and cancellation of any such Preferred Share
Certificate, the Company will issue a new Preferred Share Certificate, of like
tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Preferred
Share Certificate; provided, however, if any Preferred Share Certificate of
which a Purchaser, its nominee, or any of its officers or principals is the
registered holder is lost, stolen or destroyed, the affidavit of such principal
or officer of such holder setting forth the circumstances with respect to such
loss, theft or destruction, together with an agreement by ACI Capital America
Fund, LP or ACI Capital Co., Inc. to indemnify the Company with respect thereto,
shall be accepted as satisfactory evidence thereof, and no bond or other
security shall be required as a condition to the execution and delivery by the
Company of a new Preferred Share Certificate in replacement of such lost, stolen
or destroyed Preferred Share Certificate.
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2.03 Registration; Transfer; Registration of Transfer and Exchange of
Preferred Shares. The Preferred Shares shall be issued in registered form only.
The Company, or a transfer agent appointed by the Company (the Company or such
designated agent, in such capacity, the "Preferred Share Agent"), shall number
and list each Preferred Share Certificate, as it is issued, in a register (the
"Preferred Share Register") which the Company or such agent shall maintain at
the principal executive offices of the Company or at such office specified in a
notice to the registered holders (the "Holders") of the Preferred Shares
pursuant to Section 8.04 of this Agreement (the "Office").
At the option of any Holder of Preferred Shares, any Preferred Share
Certificate may be exchanged at the Office for a new Preferred Share Certificate
(or new Preferred Share Certificates, in the same or different denominations),
upon payment of the charges (if any) hereinafter provided. Whenever any
Preferred Share Certificates are so surrendered for exchange the Company shall
execute, and, if applicable, the Preferred Share Agent shall countersign and
deliver, the Preferred Share Certificates that the Holder making the exchange is
entitled to receive.
Subject to compliance with the restrictions set forth in this Agreement
(including, without limitation, Section 7.02 hereof), the Preferred Share
Certificates shall be transferable only on the Preferred Share Register, upon
delivery thereof duly endorsed by the Holder or by his duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment
or authority to transfer. In all cases of transfer by an attorney, the original
power of attorney, duly approved, or a copy thereof, duly certified, shall be
deposited and remain with the Company or the Preferred Share Agent. In case of
transfer by executors, administrators, guardians or other legal representatives,
duly authenticated evidence of their authority shall be produced, and may be
required to be deposited and to remain with the Preferred Share Agent in its
discretion. Upon any registration of transfer, the Company shall execute and, if
applicable, the Preferred Share Agent shall countersign and deliver, a new
Preferred Share Certificate(s) to the Persons entitled thereto. As used in this
Agreement, "Person" means any natural person, corporation, partnership, joint
venture, limited liability company, firm, association, joint-stock company,
trust, unincorporated organization, government or governmental agency or
political subdivision or any other entity, whether acting in an individual,
fiduciary or other capacity.
All Preferred Share Certificates issued upon any registration of transfer
or exchange of Preferred Share Certificates shall be the valid obligations of
the Company, evidencing the same obligations, and entitled to the same benefits
under this Agreement, as the Preferred Share Certificates surrendered for such
registration of transfer or exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Preferred Share Certificates. The Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Preferred Share Certificates.
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Any Preferred Share Certificate when duly endorsed in blank shall be deemed
negotiable, and when a Preferred Share Certificate shall have been so endorsed,
the Holder thereof may be treated by the Company, the Preferred Share Agent and
all other Persons dealing therewith as the absolute owner thereof for any
purpose and as the Person entitled to exercise the rights represented thereby,
or the transfer thereof on the Preferred Share Register, any notice to the
contrary notwithstanding, but until such transfer on the Preferred Share
Register, the Company and the Preferred Share Agent may treat the registered
Holder thereof as the owner for all purposes.
2.04 Taxes. The Company will pay all taxes (including interest and
penalties), other than taxes imposed on the income of the Purchasers, which may
be payable in respect of the execution and delivery of this Agreement or of the
issuance and delivery (but not the transfer) of any of the Securities.
ARTICLE III
CONDITIONS TO CLOSING
3.01 Conditions to Purchasers' Obligations. The obligation of the
Purchasers to purchase and pay for the Preferred Shares at the Closing is
subject to the fulfillment by the Company or waiver by the Purchasers of each of
the following conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company set forth in Article IV hereof and in the Basic
Documents shall have been true and correct in all material respects when made
and, except for representations expressly stated to have been made as of a
specific date, shall be true and correct in all material respects on the Closing
Date as if made on the Closing Date.
(b) Performance. The Company shall have performed and complied in all
material respects with all covenants and agreements contained herein and
received any and all consents, approvals or waivers necessary in order to
complete the transactions required to be performed or complied with by it or
prior to or at the Closing.
(c) All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be satisfactory in
form and substance to the Purchasers, including, without limitation, the filing
of the duly adopted Certificate of Designation with the Secretary of State of
the State of Delaware. The Purchasers shall have received all such counterpart
originals or certified or other copies of such documents as it reasonably may
request.
(d) Legal Opinion. The Purchasers shall have received an originally
executed copy of the opinion of Salon, Marrow, Dyckman & Newman, LLP, special
counsel for the
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Company, in form and substance reasonably satisfactory to the Purchasers and
their counsel, dated as of the Closing Date and setting forth substantially the
matters in the opinions designated in Exhibit E hereto, and as to such other
matters as the Purchasers may reasonably request.
(e) Necessary Consents. On or before the Closing Date, the Company
shall have obtained any required governmental authorizations with respect to the
Basic Documents and shall have obtained all material consents to the
transactions contemplated under the Basic Documents, of any Person required
under any contractual obligation or any other obligations (including any
obligations imposed by law) of the Company or any of its Subsidiaries. As used
in this Agreement, the word "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
(f) No Material Adverse Effect. Since December 31, 1999, no Material
Adverse Effect shall have occurred. As used in this Agreement, any reference to
"Material Adverse Effect" means any event, change or effect that is materially
adverse to the consolidated financial condition, businesses, results of
operations, cash flows or prospects of the Company and its Subsidiaries, taken
as a whole, or that impairs the ability of the Company to perform or the
Purchasers to enforce the obligations of the Company under the Basic Documents.
(g) Payment of Fees and Expenses. Without limiting the provisions of
Sec tion 8.05 hereof, the Company shall have paid to the Purchasers on or before
the Closing, a funding fee in the amount of $150,000, and all other reasonable
fees, charges and disbursements of the Purchasers, including the fees and
expenses of Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel to the
Purchasers, such payments not to exceed $75,000 in the aggregate.
(h) No Injunctions, Restraining Order or Adverse Litigation. No order,
judgment or decree of any Governmental Entity (as hereinafter defined) shall
purport to enjoin or restrain the Purchasers from acquiring Preferred Shares on
the Closing Date. As of the Closing Date, there shall not be pending or, to the
knowledge of Company, threatened, any action, suit, proceeding, governmental
investigation or arbitration against or affecting the Company or any of its
Subsidiaries or any property of the Company or any of its Subsidiaries that has
not been disclosed by the Company in writing pursuant to Section 4.09, and there
shall have occurred no development not so disclosed in any such action, suit,
proceeding, governmental investigation or arbitration so disclosed, that, in
either event, could reasonably be expected to have a Material Adverse Effect;
and no injunction or other restraining order shall have been issued and no
hearing to cause an injunction or other restraining order to be issued shall be
pending or noticed with respect to any action, suit or proceeding seeking to
enjoin or otherwise prevent the consummation of, or to recover any damages or
obtain relief as a result of, the transactions contemplated by this Agreement or
the other Basic Documents.
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(i) Side Letter. The Company shall have signed and delivered to the
Purchasers an side letter in the form of Exhibit F attached hereto.
(j) Issuance of Warrants. The Warrants shall have been issued to the
Purchasers.
(k) Rights Plan. The Company shall have complied with Section 18 of the
Warrants with respect to the issuance of "Rights" to the holders of the Warrants
under the Rights Plan (as defined in Section 4.18 hereof), by amending the
Rights Plan.
(l) Documentation at Closing. The Purchasers shall have received prior
to or at the Closing all of the following, each in form and substance
satisfactory to the Purchasers:
(i) A Registration Rights Agreement executed by the Company,
substantially in the form attached as Exhibit G hereto (the "Registration Rights
Agreement");
(ii) The Certificate of Designation, adopted by the Board of
Directors of the Company, as attested by the Secretary or an Assistant Secretary
of the Company and filed with the Secretary of State of the State of Delaware;
(iii) A certified copy of the Company's Certificate of
Incorporation, as amended, and the Company's Bylaws; a certified copy of the
resolutions of the Board of Directors evidencing approval of the Basic
Documents, the Preferred Shares, the Warrants and other matters contemplated
hereby; and certified copies of all documents evidencing other necessary
corporate, shareholder or other action and governmental approvals, if any, with
respect to the execution, delivery and performance of the Basic Documents, the
Preferred Shares and the Warrants;
(iv) A certificate of the Secretary or an Assistant Secretary of the
Company which shall certify the names of the officers authorized to sign this
Agreement and the other Basic Documents and issue the Preferred Shares and the
Warrants on behalf of the Company, together with the true signatures of such
officers. The Purchasers may rely conclusively on such certificates until it
shall receive a further certificate of the Secretary or an Assistant Secretary
of the Company canceling or amending the prior certificate and submitting the
signatures of the officers named in such further certificate;
(v) A certificate from a duly authorized officer of the Company
stating that (a) the representations and warranties contained in Article IV
hereof and the other Basic Documents or otherwise made by the Company in writing
in connection with the transactions contemplated hereby were true and correct in
all material respects when made and, except for representations expressly stated
to have been made as of a specific date, are true and correct in all material
respects on the Closing Date as if made on the Closing Date; (b) the Company has
performed and complied with all covenants and agreements contained herein in all
material respects and has
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received any and all consents, approvals or waivers necessary in order to
complete the transactions required to be performed or complied with by it prior
to or on the Closing Date; (c) no event shall have occurred and be continuing as
of the Closing, or would result from the consummation of the purchase of the
Preferred Shares or the other transactions contemplated by the Basic Documents,
that would constitute a "Triggering Event" under the Certificate of Designation
or a breach or violation of any Basic Document; and (d) the Company has
delivered to the Purchasers all documents and satisfied all conditions referred
to in Sections 3.01(e) and (h) hereof; and
(vi) other evidence reasonably requested by the Purchasers of the
satisfaction of the conditions set forth in this Article III.
3.02 Conditions to the Company's Obligations. The obligation of the Company
to issue and deliver the Securities on the Closing Date, as provided in Article
II hereof, is subject to the performance by the Purchasers of their agreements
theretofore to be performed hereunder and to the fulfillment, prior thereto or
concurrently therewith, of the following further conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Purchasers contained in this Agreement shall be true and
correct in all material respects when made and shall be true and correct in all
material respects on the Closing Date as if made on the Closing Date, except as
otherwise affected by the transactions contemplated hereby.
(b) Purchasers' Certificates. The Company shall have received a
certificate from each Purchaser, dated the Closing Date, signed by a duly
authorized representative of such Purchaser, certifying that (a) the
representations and warranties contained in Articles VI and VII hereof and the
other Basic Documents or otherwise made by such Purchaser in writing in
connection with the transactions contemplated hereby were true and correct in
all material respects when made and, except for representations expressly stated
to have been made as of a specific date, are true and correct in all material
respects on the Closing Date as if made on the Closing Date; and (b) such
Purchaser has performed and complied with all covenants and agreements contained
herein in all material respects and has received any and all consents, approvals
or waivers necessary in order to complete the transactions required to be
performed or complied with by it prior to or on the Closing Date.
(c) Injunction. There shall be no effective injunction, writ,
preliminary restraining order or any order of any nature issued by a court of
competent jurisdiction directing that the transactions provided for herein not
be consummated as herein provided.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce the Purchasers to enter into this Agreement and purchase
the Preferred Shares, the Company represents, warrants and covenants to the
Purchasers as follows:
4.01 Organization. (a) Each of the Company and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and authority and all necessary governmental approvals to own, lease and operate
its properties and to carry on its business as now being conducted. The Company
and each of its Subsidiaries is duly qualified or licensed to do business and in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect or prevent
the Company from consummating any of the transactions contemplated hereby.
(b) The Company has heretofore made available to the Purchasers a
complete and correct copy of its Certificate of Incorporation, as amended as of
the date hereof, and its By-Laws and the organizational documents of each of its
Subsidiaries, as currently in effect. Each such document is in full force and
effect and no other organizational documents are applicable to or binding upon
the Company or any Subsidiary.
(c) Schedule 4.01 identifies all Subsidiaries of the Company.
4.02 Capitalization. (a) The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock, $.10 par value, 20,000 shares of
Series A Preferred Stock, $.10 par value and 980,000 shares of preferred stock,
$.10 par value, undesignated as to class or series. Schedule 4.02 sets forth the
(i) the number of issued and outstanding shares of Common Stock as of the date
hereof; (ii) a description of all unexpired options to purchase Common Stock
("Company Options"), including number of shares, exercise price, date of vesting
and exercise date as well as a statement describing outstanding Company options;
and (iii) all other shares of Common Stock issuable to any person pursuant to
any existing options, warrants, calls, preemptive (or similar) rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character. As of the date hereof and immediately prior to the Closing, no shares
of preferred stock are issued and outstanding or held in the treasury of the
Company, and no shares of Common Stock are held in the treasury of the Company.
The Company has taken all necessary corporate, shareholder and other action to
authorize and reserve and to permit it to issue shares of Common Stock which may
be issued pursuant to Company Options or the transactions contemplated hereby.
There are no bonds, debentures, notes or other indebtedness having general
voting rights (or convertible into securities having such rights) ("Voting
Debt") of the Company or any of its Subsidiaries issued and outstanding.
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Except as set forth in Schedule 4.02, as of the date hereof, (i) there are no
shares of capital stock of the Company authorized, issued or outstanding, (ii)
there are no existing options, warrants, calls, preemptive (or similar) rights,
subscriptions or other rights, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of the Company or
any of its Subsidiaries, obligating the Company or any of its Subsidiaries to
issue, transfer or sell or cause to be issued, transferred or sold any shares of
capital stock or Voting Debt of, or other equity interest in, the Company or any
of its Subsidiaries or securities convertible into or exchangeable for such
shares or equity interest or obligations of the Company or any of its
Subsidiaries, and (iii) there are no outstanding contractual obligations of the
Company or any of its Subsidiaries to register under the Securities Act of 1933,
as amended (the "Securities Act") or to repurchase, redeem or otherwise acquire
any shares or Common Stock, or capital stock of the Company or any Subsidiary or
affiliate of the Company.
(b) All of the outstanding shares of capital stock of each of the
Company's Subsidiaries are beneficially owned by the Company, directly or
indirectly, free and clear of all security interests, liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances of any
nature whatsoever.
(c) There are no voting trusts or other agreements or understandings to
which the Company or any of its Subsidiaries is a party with respect to the
voting of the capital stock of the Company or any of its Subsidiaries. None of
the Company or its Subsidiaries is required to redeem, repurchase or otherwise
acquire shares of capital stock of the Company, or any of its Subsidiaries,
respectively, as a result of the transactions contemplated by this Agreement.
(d) As of the Closing, the Preferred Shares and the Warrants will be
validly issued, fully paid and non-assessable and not subject to preemptive (or
similar) rights. The rights, privileges and preferences of the Preferred Shares
will be as set forth in the Certificate of Designation. If issued in accordance
with the terms of the Warrants, the Warrant Shares will be validly issued, fully
paid and non-assessable and not subject to preemptive (or similar) rights.
(e) The Company has authorized and reserved 1,000,000 shares of Common
Stock for issuance upon exercise of the Warrants.
4.03 Authorization; Validity of Agreement; Company Action. The Company has
full corporate power and authority to execute and deliver each Basic Document
and the Warrants, to issue the Preferred Shares and the Warrants and to
consummate the transactions contemplated hereby and thereby. The Certificate of
Designation has been duly approved by the Company and filed with the Secretary
of State of the State of Delaware. The execution, delivery and performance by
the Company of each Basic Document and the Warrants and the consummation by it
of the transactions contemplated hereby and thereby have been duly authorized by
the Board of Directors of the Company and no other corporate or shareholder
action on the part of the Company is necessary to authorize the execution,
delivery or performance by the Company of any Basic Document or Warrant, the
issuance of any Preferred Shares or Warrants or the consummation by it of the
transactions contemplated hereby and
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thereby. This Agreement, the Warrants and the Registration Rights Agreement have
been duly executed and delivered by the Company and (assuming due and valid
authorization, execution and delivery hereof by the other parties hereto and
thereto) this Agreement and the other Basic Documents are valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now or
hereafter in effect, affecting creditors' rights generally, and (ii) the remedy
of specific performance and injunctive and other forms of equitable relief may
be subject to equitable defenses and to the discretion of the court before which
any proceeding therefor may be brought.
4.04 Consents and Approvals; No Violations; Licenses. (a) None of the
execution, delivery or performance of any Basic Document or Warrant by the
Company, the issuance of any Preferred Shares or Warrants or the consummation by
the Company of the transactions contemplated hereby or thereby, nor compliance
by the Company with any of the provisions hereof or thereof will (i) conflict
with or result in any breach of any provision of the Certificate of
Incorporation, as amended, or the By-Laws or other organizational documents of
the Company or of any of its Subsidiaries, (ii) require on the part of the
Company any filing with, or permit, authorization, consent or approval of, any
court, arbitral tribunal, administrative agency or other governmental or
regulatory authority or agency (a "Governmental Entity"), including, without
limitation, any consent or approval of any federal, state, local or foreign
insurance industry agency, commission or other governing body, except for in the
case of clause (ii) filings, permits, authorizations, consents and approvals as
may be required under state securities or blue sky laws, and the laws of other
states in which the Company is qualified to do or is doing business, (iii)
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any material note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound (the "Material Agreements") or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company, any
of its Subsidiaries or any of their properties or assets.
(b) The Company or one of its Subsidiaries holds all material licenses,
permits, certificates, franchises, ordinances, registrations, or other rights,
applications, consents, approvals and authorizations filed with, granted or
issued by, or entered by any Governmental Entity, or any federal, state, local
or foreign regulatory authorities or any federal, state, local or foreign public
service commission, public utility commission or industry agency or commission
that are required for the conduct of the Company's and its Subsidiaries'
businesses as now being conducted.
4.05 SEC Reports and Financial Statements. (a) The Company and its
Subsidiaries have filed with the Securities and Exchange Commission ("SEC") all
forms, reports, schedules, statements, and other documents required to be filed
by them with the SEC (as such documents have been amended since the time of
their filing, collectively, the "SEC Documents"), and have filed all exhibits
required to be filed with the SEC Documents. As of their respective dates or, if
amended, as of the date of the last such amendment, the SEC Documents,
including, without limitation, any financial
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statements or schedules included therein, complied in all material respects with
the applicable requirements of the Securities Act and the Securities Exchange
Act of 1934 (the "Exchange Act"), and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of the Company's Subsidiaries
is required to file any forms, reports or other documents with the SEC pursuant
to Section 12 or 15 of the Exchange Act. The financial statements of the Company
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (including the related notes thereto), copies of which have
been furnished to the Purchasers (together, the "Financial Statements"), have
been prepared from, and are in accordance with, the books and records of the
Company and its consolidated Subsidiaries, comply in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto and
subject, in the case of unaudited interim financial statements, to normal
year-end adjustments), and fairly present the consolidated financial position
and the consolidated results of operations and cash flows of the Company and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein. The Company and its Subsidiaries have maintained a system of accounting
established in accordance with sound business practices to permit preparation of
financial statements in conformity with GAAP.
(b) No representation or warranty of the Company contained in any Basic
Document or in any other document, certificate or written statement furnished to
the Purchasers by or on behalf of the Company or any of its Subsidiaries for use
in connection with the transactions contemplated by this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements contained herein or therein when made not
misleading in light of the circumstances in which the same were made.
4.06 No Undisclosed Liabilities. Except (i) as disclosed in the SEC
Documents that have been delivered to the Purchasers prior to the date hereof,
(ii) as set forth in Schedule 4.06, and (iii) for liabilities incurred in the
ordinary course of business and consistent with past practice, and liabilities
incurred in connection with the consummation of the transactions contemplated
hereby (none of which, individually or in the aggregate, could reasonably have a
Material Adverse Effect) since December 31, 1999, neither the Company nor any of
its Subsidiaries has incurred any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) which would be required by
GAAP to be reflected on a consolidated balance sheet of the Company and its
Subsidiaries (including the notes thereto), or which individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
4.07 Absence of Certain Changes. Except as contemplated by this Agreement
and the other Basic Documents, or as disclosed in the SEC Documents that have
been delivered to the Purchasers prior to the date hereof or in Schedule 4.07,
since December 31, 1999, (i) the Company and its Subsidiaries have conducted
their respective businesses only in the ordinary course of business
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and consistent with past practice, (ii) there has not been any change in the
business, properties, assets, liabilities, financial condition, cash flows,
operations, licenses, franchises, results of operations or prospects of the
Company or its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect, (iii) the Company has not (A) declared, set aside or
paid any dividend or other distribution payable in cash, stock or property with
respect to its capital stock; (B) directly or indirectly, split, combined or
reclassified the outstanding shares of Common Stock; or (C) adopted a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization of the Company or any of
its Subsidiaries.
4.08 Employee Benefit Plans; ERISA; Labor. Except as set forth on Schedule
4.08, neither the Company nor any trade or business which, together with the
Company, is treated as a single employer under the applicable provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA") or the Code, including
but not limited to Section 414 thereof, ("ERISA Affiliate") maintains,
contributes or has any obligation with respect to, and none of the employees of
the Company or any ERISA Affiliate is covered by, any "employee benefit plan"
(as defined in Section 3(1) of ERISA) or any plan that provides benefits
following employment or retirement that is not intended to be "qualified" within
the meaning of Section 401(a) of the Code (collectively, a "Plan"). Except as
set forth on Schedule 4.08, neither the Company nor any ERISA Affiliate has (1)
ever maintained or had an obligation to contribute to an "employee pension
benefit plan" (as defined in Section 3(2) of ERISA that is subject to Title IV
of ERISA ("Pension Plan") or a "multiemployer plan" (as defined in Section 3(37)
or 4001(a)(3) of ERISA ("Multiemployer Plan"), or (2) incurred any liability or
taken any action, and neither the Company nor any ERISA Affiliate has any
knowledge of any action or event, that could reasonably be expected to cause it
to incur any liability (A) with respect to any Pension Plan (including, without
limitation, any liability under Section 412 of the Code or Title IV of ERISA),
(B) on account of a partial or complete withdrawal (as such terms are defined in
Sections 4203 and 4205 of ERISA, respectively) with respect to any Multiemployer
Plan, or (C) on account of unpaid contributions to any Multiemployer Plan.
Except as set forth on Schedule 4.08, neither the Company nor any ERISA
Affiliate has any obligation to provide benefits to any employee or former
employee.
4.09 Litigation. Schedule 4.09 hereto sets forth each suit, action or
proceeding pending (as to which the Company has received notice), or, to the
knowledge of the Company, threatened against the Company, any of its
Subsidiaries, or their properties or assets on the date hereof, or to which the
Company or any of its Subsidiaries is a party. Except as set forth on Schedule
4.09 hereto, none of the foregoing, individually or in the aggregate, could
reasonably be expected to have a Material Adverse Effect if resolved adversely
to the Company or its Subsidiaries. As of the date hereof, neither the Company
nor any of its Subsidiaries, nor any of their respective properties, is subject
to any material order, writ, judgment, injunction, decree, determination or
award.
4.10 No Default; Compliance with Applicable Laws. Neither the Company nor
any of its Subsidiaries is in default or violation in any material respect of
any term, condition or provision of (i) its respective Certificate of
Incorporation or By-laws or other organizational documents, (ii) any Material
Agreement or (iii) any federal, state, local or foreign statute, law, ordinance,
rule, regulation,
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judgment, decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to the Company or any of
its Subsidiaries or by which they or their respective assets may be bound (other
than matters addressed in Sections 4.04, 4.08, 4.11, and 4.12).
4.11 Taxes. The Company and its Subsidiaries have filed all tax returns,
reports, schedules and other documents which are required to be filed by them
with the Internal Revenue Service or any other domestic or foreign governmental
taxing authority. All such tax returns are accurate and complete in all material
respects and all taxes shown to be due and payable on such returns, any charges,
fees, levies or other assessments imposed, and all other taxes and estimated
payments ("Taxes") due and payable by the Company and each Subsidiary on or
before the Closing Date have been paid. The charges, accruals and reserves on
the books of the Company for all fiscal periods are adequate for the payment of
all Taxes not yet due and payable. The Company knows of no unpaid assessment for
additional Taxes for any period or any basis for any such assessment, except for
assessments the amount or the validity of which is currently being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves in accordance with GAAP have been provided on the books of the Company.
There are no audits or other proceedings presently pending with regard to any
Taxes of the Company or its Subsidiaries. The Company and its Subsidiaries have
complied with all applicable laws and regulations relating to the payment and
withholding of Taxes. The Company and its Subsidiaries are not party to any tax
sharing agreement.
4.12 Environmental Matters. (a) The Company and its Subsidiaries have
complied in all material respects with all applicable Environmental Laws (as
defined below). There is no pending or, to the knowledge of the Company,
threatened, civil or criminal litigation, written notice or violation, formal
administrative proceeding or investigation, inquiry or information request by
any Governmental Entity relating to any Environmental Law involving the Company
or any of its Subsidiaries or any of their properties. For purposes of this
Agreement, "Environmental Law" means any foreign, federal, state or local law,
statute, rule or regulation or the common law relating to the environment or
occupational health and safety, including, without limitation, any statute,
regulation or order pertaining to (i) treatment, storage, disposal, generation
or transportation of industrial, toxic or hazardous substances or solid or
hazardous waste; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the release or threatened release into the environment of
industrial, toxic or hazardous substances, or solid or hazardous waste,
including, without limitation, emissions, discharges, injections, spills,
escapes or dumping of pollutants, contaminants or chemicals; (v) the protection
of wildlife, marine sanctuaries and wetlands, including, without limitation, all
endangered and threatened species; (vi) storage tanks, vessels and containers;
(vii) underground and other storage tanks or vessels, abandoned, disposed or
discarded barrels, containers and other closed receptacles; (viii) health and
safety of employees and other persons; and (ix) manufacture, processing, use,
distribution, treatment, storage, disposal, transportation or handling of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or oil or petroleum products or solid or hazardous waste. As used above, the
terms "release" and "environment" shall have the meaning set forth in the
federal Comprehensive Environmental Response, Compensation and Liability Act of
1980 ("CERCLA").
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(b) There have been no releases of any Materials of Environmental
Concern (as defined below) into the environment by the Company or any of its
Subsidiaries, or, to the knowledge of the Company, by any other party at any
parcel of real property or any facility formerly or currently owned, operated or
controlled by the Company or any of its Subsidiaries. For purposes of this
Agreement, "Materials of Environmental Concern" means any chemicals, pollutants
or contaminants, hazardous substances (as such term is defined under CERCLA),
solid wastes and hazardous wastes (as such terms are defined under the federal
Resource Conservation and Recovery Act), toxic materials, oil or petroleum and
petroleum products, or any other material subject to regulation under any
Environmental Law.
4.13 Insurance. There is in full force and effect one or more policies of
insurance issued by insurers of recognized responsibility, insuring the Company
and its Subsidiaries and their properties and businesses against such losses and
risks, and in such amounts, as are customary in the case of corporations of
established reputation engaged in the same or similar businesses and similarly
situated. None of the Company or any of its Subsidiaries has been refused any
insurance coverage sought or applied for, and the Company and its Subsidiaries
have no reason to believe that they will be unable to renew their existing
insurance coverage as and when the same shall expire upon terms at least as
favorable as those presently in effect, other than possible increases in
premiums that do not result from any act or omission of the Company or any of
its Subsidiaries.
4.14 Transactions with Affiliates. Except as set forth in the SEC Documents
that have been delivered to the Purchasers prior to the date hereof or on
Schedule 4.14, since December 31, 1999, neither the Company nor any of its
Subsidiaries has entered into any transaction with any current director or
officer of the Company or any Subsidiary or any transaction which would be
subject to disclosure under the Exchange Act pursuant to the requirements of
Item 404 of Regulation S-K.
4.15 Patents and Other Intangible Assets.
(a) Except as set forth on Schedule 4.15, the Company and its
Subsidiaries (i) own or have the right to use, free and clear of any lien,
pledge, mortgage, security interest, encumbrance or charge of any kind
(collectively "Encumbrances"), and any other claim or restriction, all patents,
trademarks, service marks, trade names, internet domain names, copyrights,
licenses and rights with respect to the foregoing, used in or necessary for the
conduct of their businesses as now conducted or proposed to be conducted (all of
which are set forth on Schedule 4.15), (ii) are not infringing upon or otherwise
acting adversely to the right or claimed right of any Person under or with
respect to any patent, trademark, service mark, trade name, internet domain
name, copyright or license with respect thereto, and (iii) are not obligated or
under any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service mark, trade name, internet domain name, copyright or other
intangible asset, with respect to the use thereof or in connection with the
conduct of their businesses or otherwise.
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(b) The Company and/or one or more of its Subsidiaries owns and has the
unrestricted right to use all material product rights, manufacturing rights,
trade secrets, including know-how, negative know-how, formulas, patterns,
compilations, programs, devices, methods, techniques, processes, inventions,
designs, computer programs and technical data and all information that derives
independent economic value, actual or potential, from not being generally known
or known by competitors and which the Company and its Subsidiaries have taken
reasonable steps to maintain in secret (all of the foregoing of which are
collectively referred to herein as "intellectual property") required for or
incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company or any of its Subsidiaries,
free and clear of any right, Encumbrance or claim of others, including without
limitation former employers of its employees; provided, however, that the
possibility exists that other Persons, completely independently of the Company
and its Subsidiaries or their employees or agents, could have developed trade
secrets or items of technical information similar or identical to those of the
Company and its Subsidiaries. The Company and its Subsidiaries are not aware of
any such development of similar or identical trade secrets or technical
information by others.
(c) Except as specifically disclosed in the SEC Documents, no director,
officer, employee, agent or stockholder of the Company or any of its
Subsidiaries owns or has any right in the intellectual property of the Company
and its Subsidiaries, or any patents, trademarks, service marks, trade names,
internet domain names, copyrights, licenses or rights with respect to the
foregoing, or any inventions, developments or discoveries used in or necessary
for the conduct of the Company's and its Subsidiaries' businesses as now
conducted or as proposed to be conducted.
(d) Except as set forth on Schedule 4.15, none of the Company or any of
its Subsidiaries has received any communication alleging or stating that the
Company or any of its Subsidiaries or any employee or agent has violated or
infringed, or by conducting business as proposed, would violate or infringe, any
patent, trademark, service mark, trade name, internet domain name, copyright,
trade secret, proprietary right, process or other intellectual property of any
other Person.
4.16 Brokers. Except as set forth on Schedule 4.16, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission from the Company in connection with the issuance and sale of
securities pursuant to this Agreement and the Company hereby indemnifies each of
the Purchasers against, and agrees that it will hold each Purchaser harmless
from, any claim, demand or liability for any such broker's or finder's fees
alleged to have been incurred in connection therewith and any expenses
(including reasonable fees, expenses and disbursements of counsel) arising in
connection with any such claim, demand or liability.
4.17 Nasdaq Approvals. The issuance by the Company of the Securities will
not require shareholder approval under the applicable rules of The Nasdaq Stock
Market.
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4.18 Rights Plan Not Triggered. Neither (i) the execution of this Agreement
and the other Basic Documents, nor (ii) the exercise at any time of any or all
of the Warrants, nor (iii) the performance by the Company or the Purchasers at
any time of any or all of their other respective rights and obligations under
this Agreement or any of the other Basic Documents, shall cause the Purchasers
at any time to be deemed an "Acquiring Person" or constitute a "Triggering
Event" under that certain Rights Agreement dated as of June 15, 1999, between
the Company and Continental Stock Transfer & Trust Company, Rights Agent (the
"Rights Plan"). Other than the Rights Plan, the Company is not a party to, and
its Board of Directors has not adopted or authorized the adoption of, any
shareholder rights or similar agreement.
4.19 Certain Payments. To the best of the Company's knowledge, since
January 1, 1997, neither the Company nor any director, officer, agent or
employee of the Company, nor any other Person associated with or acting for or
on behalf of the Company, has directly or indirectly (a) made any contribution,
gift, bribe, rebate, payoff, influence payment, kickback or other payment to any
entity or person, private or public, regardless of form, whether in money,
property or services (i) to obtain favorable treatment in securing business,
(ii) to pay for favorable treatment for business secured, (iii) to obtain
special concessions or for special concessions already obtained, for or in
respect of the Company or any affiliate of the Company or (iv) in violation of
any federal, state, local or foreign statute, law, ordinance, rule or regulation
or (b) established or maintained any fund or asset for such purposes that has
not been recorded in the books and records of the Company.
ARTICLE V
COVENANTS OF THE COMPANY
5.01 Financial and Business Information. The Company will maintain, and
cause each of its Subsidiaries to maintain, a system of accounting established
in accordance with sound business practices to permit preparation of financial
statements in conformity with GAAP. The Company during the term of this
Agreement will, and (where applicable) will cause its Subsidiaries to, deliver
to the Purchasers (provided that the Company shall not deliver to the Purchasers
any such information to the extent that the Purchaser have requested in writing
to the Company that such information not be delivered to the Purchasers):
(a) As soon as practicable and in any event within 90 days after the
close of each fiscal year of the Company, beginning with the current fiscal
year, a consolidated balance sheet of the Company and its Subsidiaries as of the
close of such fiscal year and consolidated statements of operations,
shareholders' equity and cash flows for the Company and its Subsidiaries for the
fiscal year then added, certified by the chief executive officer or chief
financial officer of the Company to be true and accurate in all material
respects (it being understood by the parties hereto that the delivery to the
Purchasers of the Company's annual report on Form 10-K will satisfy the
requirements of this Sec tion 5.01(a));
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(b) As soon as practicable and in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year, the
consolidated and consolidating balance sheet of Company and its Subsidiaries as
at the end of such fiscal quarter and the related consolidated and consolidating
statements of operations, shareholders' equity and cash flows of Company and its
Subsidiaries for such fiscal quarter and for the period from the beginning of
the current fiscal year to the end of such fiscal quarter, all in reasonable
detail and certified by the chief financial officer of Company that they fairly
present the financial condition of Company and its Subsidiaries as at the dates
indicated and the results of its operations and its cash flows for the periods
indicated, subject to changes resulting from audit and normal year-end
adjustments (it being understood by the parties hereto that the delivery to the
Purchasers of the Company's quarterly report on Form 10-Q will satisfy the
requirements of this Section 5.01(b));
(c) As soon as practicable and in any event within 45 days after the
end of each fiscal quarter of each fiscal year, a written certificate from the
chief financial officer of the Company certifying the Company's ratio of
Indebtedness to Consolidated EBITDA for such fiscal quarter.
For purposes of this Section 5.01(c), "Indebtedness" means, with
respect to any period, the aggregate amount of indebtedness for borrowed
money incurred by the Company and its Subsidiaries, without duplication,
including, without limitation, any capitalized lease obligations, accounts
receivable financing or other asset-backed financing, any guarantee or
other similar contingent obligation or any lease financing (whether a
capitalized lease, operating lease, pursuant to a sale leaseback
arrangement or otherwise), but excluding the incurrence of indebtedness the
proceeds of which are intended to be and are immediately used to redeem all
of the outstanding shares of Series B Preferred Stock in accordance with
the terms of the Certificate of Designation and to repurchase all of the
outstanding Warrants in accordance with the terms thereof. All issued and
outstanding shares of preferred stock (valued at the amount of the
liquidation preference of such preferred stock) shall be included in the
calculation of Indebtedness.
For purposes of this Section 5.01(c), "Consolidated EBITDA" means,
with respect to any period, the consolidated earnings before interest,
taxes, depreciation and amortization for the Company and its consolidated
subsidiaries for such period, determined in accordance with generally
accepted accounting principles, consistently applied;
(d) Prompt notice of any event having a Material Adverse Effect;
(e) Promptly upon their becoming available, copies of (i) all financial
statements, reports, notices and proxy statements sent or made available
generally by Company to its security holders, (ii) all regular and periodic
reports, if any, filed by Company or any of its Subsidiaries with any securities
exchange or with the SEC or any governmental or private regulatory authority,
and (iii) all press releases and other statements made available generally by
Company or any of its
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Subsidiaries to the public concerning material developments in the business of
Company or any of its Subsidiaries;
(f) Promptly upon any officer of Company or any of its Subsidiaries
obtaining knowledge of any condition or event that constitutes a Triggering
Event (as defined in the Certificate of Designation) or a violation or default
of any material term of any Basic Document or Warrant or an event of default or
potential event of default under any indebtedness of Company or any of its
Subsidiaries, or becoming aware that any person has given any notice or taken
any other action with respect to a claimed event of default or potential event
of default; and
(g) Within a reasonable time, such other information about the
property, financial condition and operations of the Company and its Subsidiaries
as the Purchasers may from time to time reasonably request.
5.02 Notice of Certain Events. Unless the Purchasers shall otherwise
request in writing, the Company during the term of this Agreement will, and will
cause its Subsidiaries to, promptly give notice in writing to the Purchasers of
any litigation or proceeding before any court or administrative body involving
the Company or any Subsidiary which, if determined adversely to the Company or
such Subsidiary, would be reasonably likely to have a Material Adverse Effect.
5.03 Public Announcement. Following the Closing, the Company will issue a
press release regarding the transactions contemplated hereby, which press
release shall be satisfactory in all respects to the Purchasers.
5.04 Expiration of Covenants. The Company's obligations under Sections 5.01
and 5.02 shall terminate at such time as the Purchasers and their affiliates (as
such term is defined in Rule 501 under the Securities Act of 1933) no longer
hold in the aggregate at least 25% of the Preferred Shares.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS
6.01 Representations by Purchasers. Each Purchaser represents and warrants
to the Company that:
(a) It has full power and authority to execute and deliver this
Agreement and the other Basic Documents to which it is a party and to perform
its obligations hereunder and thereunder.
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(b) It has taken all action necessary for the authorization, execution,
delivery, and performance of this Agreement and the other Basic Documents to
which it is a party, and its obligations hereunder and thereunder, and, upon
execution and delivery by the Company, this Agreement and other Basic Documents
to which it is a party shall constitute the valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with their respective
terms, except that (i) such enforcement may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws, now or hereafter
in effect, affecting creditors' rights generally, and (ii) the remedy of
specific performance and injunctive and other relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(c) There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the issuance and sale of Preferred
Shares pursuant to this Agreement based on any arrangement made by or on behalf
of the Purchaser and the Purchaser agrees to indemnify and hold the Company
harmless against any costs or damages incurred as a result of any such claim.
ARTICLE VII
CERTAIN SECURITIES LAW MATTERS;
RESTRICTIONS ON TRANSFER
7.01 Representations by Purchasers. Each Purchaser represents and warrants
to the Company that:
(a) The Purchaser is an "Accredited Investor" within the meaning of
Rule 501 under the Securities Act.
(b) The Preferred Shares are being acquired for the Purchaser's own
account for the purpose of investment and not with a present view to or for sale
in connection with any distribution thereof; provided, that the disposition of
the Purchaser's property shall at all times be and remain within its control.
(c) The Purchaser understands that (i) none of the Preferred Shares or
the Warrants have been registered under the Securities Act, (ii) the Preferred
Shares and the Warrants must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or an exemption from
registration is available under applicable securities laws then in effect, and
(iii) the Preferred Shares and the Warrants will bear a legend to such effect
and the Company will make a notation on its transfer books to such effect.
(d) The Purchaser understands that no public market now exists for the
Preferred Shares or the Warrants.
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7.02 Restrictions on Transfer. (a) The Preferred Shares, the Warrants and
the Warrant Shares (collectively, the "Restricted Securities") shall be
transferable only if sold pursuant to a registration statement under the
Securities Act (as hereinafter defined), or pursuant to an exemption from the
registration requirements of the Securities Act.
(b) Securities Legend. The Warrant and certificates representing the
Warrant Shares shall bear legends in accordance with Section 10 of the Warrants.
Each certificate representing the Preferred Shares initially shall bear a legend
in substantially the following form:
"The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended, or under the securities or
blue sky laws of any state, and may not be sold, or otherwise transferred,
in the absence of such registration or an exemption therefrom under such
Act and under any such applicable state laws."
(c) Termination of Restriction. The restrictions imposed by Sec tion
7.02(a) upon the transferability of the Restricted Securities shall cease and
terminate as to any particular Restricted Securities and any securities issued
in exchange therefor or upon transfer thereof when, in the opinion of counsel
reasonably acceptable to the Company, such restrictions are no longer required
in order to assure compliance with the Securities Act, or when such Restricted
Securities have been registered under the Securities Act. Whenever any of such
restrictions shall cease and terminate as to any Restricted Securities, the
holder thereof shall be entitled to receive from the Company, without expense,
new certificates not bearing the legend set forth in Section 7.02(b).
(d) The Restricted Securities shall be subject to other restrictions on
transferability set forth in Section 10.3 of the Warrant and Section 9 of the
Certificate of
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Designation. In addition to the securities legend set forth in Section 7.02(b),
each certificate representing the Preferred Shares shall bear a legend in
substantially the following form:
"The securities represented by this certificate are subject to a
restriction on transfer as set forth in the Corporation's Certificate of
Designation, Number, Powers, Preferences and Relative, Participating,
Optional and Other Rights of Series B Preferred Stock, as may be amended
from time to time."
ARTICLE VIII
MISCELLANEOUS
8.01 Indemnification. In addition to the payment of expenses pursuant to
Section 8.05, the Company agrees to defend, indemnify, pay and hold harmless,
each Purchaser, and the officers, directors, partners, stockholders, members,
managers, employees, agents and affiliates of the Purchaser (collectively, the
"Indemnitees") from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened by any Person, whether or not any such Indemnitee shall
be designated as a party or a potential party thereto), whether direct, indirect
or consequential and whether based on any federal, state or foreign laws,
statutes, rules or regulations (including, without limitation, securities and
commercial laws, statutes, rules or regulations), on common law or equitable
cause or on contract or otherwise, that may be imposed on, incurred by, or
asserted against any such Indemnitee, in any manner relating to or arising out
of this Agreement, the other Basic Documents, the Warrants or the transactions
contemplated hereby or thereby (including, without limitation, the Purchasers'
agreement to purchase the Preferred Shares or the use or intended use of the
proceeds of such purchase) or the statements contained in any letter of intent
delivered by any Purchaser to the Company with respect thereto (collectively
called the "Indemnified Liabilities"); provided that the Company shall not have
any obligation to any Indemnitee hereunder with respect to any Indemnified
Liabilities to the extent such Indemnified Liabilities arise from the gross
negligence or willful misconduct of that Indemnitee as determined by a final
judgment of a court or competent jurisdiction. To the extent that the
undertaking to defend, indemnify, pay and hold harmless set forth in the
preceding sentence may be unenforceable because it is violative of any law or
public policy, the Company shall contribute the maximum portion that it is
permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
8.02 No Waiver: Cumulative Remedies. No failure or delay on the part of the
Purchasers, or any other holder of any Security in exercising any right, power
or remedy hereunder or thereunder shall operate as a waiver thereof; nor shall
any single or partial exercise of any such right,
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power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder or thereunder. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
8.03 Amendments. Waiver and Consents. No amendment, modification or
addition to this Agreement, and no waiver of or consent to noncompliance with
any covenant or other provision of this Agreement shall be effective unless in
writing and duly executed by the party against whom enforcement of such
amendment, modification, addition, waiver or consent is sought. Any waiver or
consent may be given subject to satisfaction of conditions stated therein and
any waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
8.04 Notices. All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery (including delivery by courier), or
facsimile transmission, addressed as follows:
(a) If to the Company:
SEMX Corporation
1 Labriola Court
Armonk, NY 10504
Attention: Gilbert D. Raker, Chairman, President and CEO
Facsimile: (914) 273-5860
with a copy to:
Joel Salon, Esquire
Salon, Marrow, Dyckman & Newman, LLP
685 Third Avenue
New York, NY 10017
Facsimile: (212) 661-3339
(b) If to the Purchasers, to their
respective addresses listed on Exhibit
A, with a copy to:
Kaye, Scholer, Fierman, Hays
& Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Emanuel Cherney, Esq.
Facsimile: (212) 836-8689
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Each party may designate by notice in writing a new address to which any notice,
demand, request or communication may thereafter be so given, served or sent.
Each notice, demand, request or communication shall be deemed to have been duly
given five business days after being deposited in the mail, postage prepaid, if
mailed; when delivered by hand, if personally delivered; or upon receipt, if
sent by facsimile (followed by a confirmation copy sent by either overnight or
two (2) day courier).
8.05 Expenses. The Company agrees to pay promptly (a) the fees, expenses
and disbursements of counsel to the Purchasers in connection with the
negotiation, preparation, execution and administration of the Basic Documents
and the Warrants, which payments by the Company shall not exceed $75,000 in the
aggregate, and any consents, amendments, waivers or other modifications hereto
or thereto and any other documents or matters requested by the Company; (b) the
funding fee in accordance with Section 3.01(g) hereof; and (c) all costs and
expenses, including reasonable attorneys' fees and costs of settlement, incurred
by the Purchasers in enforcing any obligations of or in collecting any payments
due from the Company hereunder or under the other Basic Documents or the
Warrants by reason of any breach or default by the Company or in connection with
any refinancing or restructuring of the arrangements provided under the Basic
Documents or the Warrants in the nature of a "work-out" or pursuant to any
insolvency or bankruptcy proceedings.
8.06 Binding Effect; Assignment. This Agreement shall be binding upon and
inure to the benefit of the Company and the Purchasers and their respective
heirs, estates, personal representatives, successors and assigns, except that
the Company shall not have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Purchasers.
8.07 Survival of Representations and Warranties. All representations and
warranties made in this Agreement or any other Basic Document or Warrant, shall
survive the execution and delivery hereof and thereof and the issuance of any of
the Securities. Notwithstanding anything in this Agreement or implied by law to
the contrary, the agreements of the Company set forth in Sec tions 2.05, 4.16,
8.01 and 8.05 shall survive the payment or redemption of any Securities.
8.08 Severability. In case any provision in or obligation under this
Agreement or the Securities shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
8.09 Prior Agreements. This Agreement constitutes the entire agreement
between the parties and supersedes any prior understandings or agreements
concerning the subject matter hereof.
8.10 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to the
conflict of laws principles thereof.
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8.11 Arbitration. Any claim or dispute between the parties hereto arising
out of or in connection with this Agreement or any of the provisions hereof, or
the interpretation, meaning or effect hereof, or the transactions contemplated
hereby, shall be submitted to and determined by arbitration in New York, New
York in accordance with the procedures, rules and regulations of the American
Arbitration Association as in effect at such time. The decision, findings or
award of the arbitrator(s) in the matter shall be final and nonappealable and
binding upon the parties (and their respective successors) with respect to the
subject matter herein concerned, and judgment thereon may be entered in any
court or forum having jurisdiction thereof.
8.12 Headings. Article, Section and subsection headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
8.13 Counterparts. This Agreement may be executed in any number of counter
parts, all of which taken together shall constitute one and the same instrument,
and each of the parties hereto may execute this Agreement by signing any such
counterpart.
8.14 Further Assurances. From and after the date of this Agreement, upon
the request of the Purchasers, the Company and each Subsidiary shall execute and
deliver such instru ments, documents and other writings as may be necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement, the Preferred Shares, the Warrants, the Registration
Rights Agreement and the other agreements and instruments contemplated hereby.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed on its behalf as of the date first above written.
SEMX CORPORATION
By: /s/ Gilbert D. Raker
------------------------------------
Name: Gilbert D. Raker
Title: Chairman, President and CEO
ACI CAPITAL AMERICA FUND, LP
By: ACI Capital America GP, LLC, its General
Partner
By: /s/ Kevin S. Penn
----------------------------------
Name: Kevin S. Penn
Title: Managing Member
EXETER VENTURE LENDERS, L.P.
By: Exeter Venture Advisors, Inc., its corporate
General Partner
By: /s/ Kurt F. Bergquist
----------------------------------
Name: Kurt F. Bergquist
Title: Vice President
25
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EXHIBIT A
SCHEDULE OF PURCHASERS
Name and Address Number of Shares of Series B
of Purchaser Purchase Price Purchase Price
------------ -------------- --------------
ACI Capital America Fund, LP 90,000 $9,000,000
65 East 55th Street
18th Floor
New York, NY 10022
Attention: Kevin S. Penn
Facsimile: (212) 634-3351
Exeter Venture Lenders, L.P. 10,000 $1,000,000
10 East 53rd Street, 32nd Floor
New York, NY 10022
Attention: Kurt F. Bergquist
Facsimile: (212) 872-1198
26
