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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 8-K
Current Report
Pursuant to
Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of Earliest Event Reported): November 25, 1997
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SIGHT RESOURCE CORPORATION
(Exact name of Registrant as specified in charter)
Delaware 1-1196 ###-##-####
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(State or other jurisdiction of (Commission file number) (I.R.S. Employer
incorporation) Identification No.)
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100 Jeffrey Avenue, Holliston, MA 01746
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(Address of Principal Executive Offices) (Zip Code)
(508) 429-6916
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Registrant's Telephone number, including area code
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ITEM 5. OTHER EVENTS
On November 25, 1997, Sight Resource Corporation (the "Registrant") completed
the closing under the Series B Convertible Preferred Stock ("Series B") Purchase
Agreement by and between the Registrant and Carlyle Venture Partners, L.P., C/S
Venture Investors, L.P., Carlyle U.S. Venture Partners, L.P. and Carlyle Venture
Coinvestment, L.L.C. (collectively the "Purchasers"), dated October 9, 1997,
pursuant to which the Registrant issued to the Purchasers an aggregate of
1,452,119 shares of Series B Convertible Preferred Stock as well as Class I and
Class II Warrants for a purchase price of $5,082,417. The following is a
description of material facts related to the transaction:
- - The Class I (Mirror) Warrants entitle the Purchasers to purchase an amount
of shares of the Registrant's Common Stock, par value $.01 per share (the
"Common Stock"), equal to an aggregate of up to 19.9% (presently 842,294
shares) of the shares of Common Stock purchasable under the Registrant's
outstanding warrants and options on the same terms and conditions of
existing warrant and option holders. The Purchasers are obligated to
exercise these warrants at the same time the options and warrants of
existing holders are exercised, subject to certain limitations.
- - The Class II Warrants entitle the Purchasers to purchase an aggregate of
290,424 shares of the Registrant's Common Stock at an exercise price of
$7.00 for a term of five years.
- - If the Registrant proposes to sell any shares of its Common Stock in the
future, other than in certain permitted circumstances, the Purchasers shall
be entitled to preemptive rights to purchase an amount of shares of such
sale or issuance which would enable the Purchasers to maintain the same
proportionate percentage of ownership as was held by the Purchasers
immediately prior to such issuance or sale, calculated as if the Series B
had been converted and the Class II Warrants had been exercised.
- - The Purchasers are entitled to "shelf" registration rights and "piggyback"
registration rights with respect to the shares of Common Stock underlying
the Series B, the Class I Warrants and the Class II Warrants.
- - The Registrant is required to hire, as soon as practical, an individual
reasonably satisfactory to it and the Purchasers to become the Registrant's
new President.
- - Each share of Series B is convertible into one share of Common Stock,
subject to adjustment, at the Purchaser's option at any time and at the
Registrant's option if the average price per share of Common Stock during
any period of thirty consecutive trading days equals or exceeds $7.00 at
any time during the first three years or $9.00 at any time thereafter.
- - The holders of the Series B have the right to appoint one director to the
Registrant's Board of Directors immediately and a second director at the
Registrant's 1998 Annual Meeting of Stockholders. In connection with the
closing of this transaction, the holders appointed Richard Darman to the
Board of Directors of the Registrant.
- - Upon a change of control of the Registrant, defined as (i) a change in any
person or group obtaining a majority of the securities ordinarily having
the right to vote in an election of Directors; (ii) during any two year
period, the individuals who at the beginning of the period constituted the
Registrant's Board of Directors no longer constitute a majority of the
Board of Directors; (iii) any merger, consolidation, recapitalization,
reorganization, dissolution or
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liquidation of the Registrant which results in the current stockholders no
longer owning more than 50% of the voting securities of the Registrant;
(iv) any sale, lease, exchange or other transfer of all, or substantially
all, of the assets of the Registrant; or (v) the adoption of a plan leading
to the liquidation or dissolution of the Registrant, at the option of the
Purchasers, the Registrant would have to redeem the Series B at a price of
105% of the offering price, subject to certain adjustments, plus accrued
and unpaid dividends.
- - The Registrant filed a Certificate of Designation, Preferences and Rights
to designate the Series B and to provide its rights and terms.
- - The Registrant amended the Rights Agreement between it and American Stock
Transfer & Trust Company, dated as of May 15, 1997, to revise the
definition of "Acquiring Person" contained therein to permit the sale of
the Series B to the Purchasers.
The Registrant presently intends to use the net proceeds to implement its plan
for consolidating primary eye care centers.
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ITEM 7. EXHIBITS
EXHIBIT NUMBER TITLE
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4.1 Certificate of Designation, Preferences, and
Rights of Series B Convertible Preferred
Stock of Sight Resource Corporation
4.2 Form of Class I (Mirror) Warrant to Purchase
Shares of Common Stock, Par Value $0.01 per
Share, of Sight Resource Corporation
4.3 Form of Class II Warrant to Purchase up to
290,424 Shares of Common Stock, Par Value
$0.01 per Share, of Sight Resource
Corporation
4.4 Amendment to Rights Agreement
10.1 Series B Convertible Preferred Stock
Purchase Agreement
99.1 News Release regarding Series B Convertible
Preferred Stock Purchase Agreement
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIGHT RESOURCE CORPORATION
Date: December 8, 1997 /s/ ALAN MACDONALD
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Alan MacDonald,Vice President of Finance &
Administration (principal financial and chief accounting
officer)
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Exhibit 4.1
CERTIFICATE OF DESIGNATION, PREFERENCES,
AND RIGHTS OF
SERIES B CONVERTIBLE PREFERRED STOCK
OF
SIGHT RESOURCE CORPORATION
SIGHT RESOURCE CORPORATION, a Delaware corporation (the "Corporation"),
DOES HEREBY CERTIFY:
That, pursuant to authority conferred on the Board of Directors of the
Corporation by the Certificate of Incorporation of the Corporation and pursuant
to the provisions of Section 151 of Title 8 of the Delaware Code, the Board of
Directors, at a meeting of its members held on September 2, 1997, adopted a
resolution providing for the designation, preferences and relative,
participating, optional or other rights, and qualifications, limitations or
restrictions thereof, of one million four hundred fifty two thousand one hundred
nineteen (1,452,119) shares of the Corporation's Preferred Stock, par value $.01
per share, which resolution is as follows:
RESOLVED: That pursuant to the authority granted to and vested in the
Board of Directors of the Corporation in accordance with the
provisions of the Certificate of Incorporation of the
Corporation, the Board hereby designates a series of Preferred
Stock of the Corporation, par value $.01 per share (the
"Preferred Stock"), consisting of 1,452,119 shares of the
authorized unissued Preferred Stock, as Series B Convertible
Preferred Stock (the "Series B Preferred"), and hereby fixes
such designation and number of shares, and the powers,
preferences and relative, participating, optional or other
rights, and the qualifications, limitations and restrictions
thereof as set forth below, and that the officers of the
Corporation, and each acting singly, are hereby authorized,
empowered and directed to file with the Secretary of State of
the State of Delaware a Certificate of Designation,
Preferences and Rights of the Series B Convertible Preferred
Stock, as such officer or officers shall deem necessary or
advisable to carry out the purposes of this Resolution.
Series B Convertible Preferred Stock. The preferences, privileges and
restrictions granted to or imposed upon the Corporation's Series B Convertible
Preferred Stock, par value $.01 per share, or the holders thereof, are as
follows:
1. Designation and Amount. The shares of such series shall be designated
as "Series B Convertible Preferred Stock" (the "Series B Preferred") and the
number of shares constituting the Series B Preferred shall be one million four
hundred fifty two thousand one hundred nineteen (1,452,119). Such number of
shares may be increased or decreased by resolution of the Board of Directors,
provided, however, that no decrease shall reduce the number of shares of Series
B Preferred to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding options,
rights or warrants or upon the conversion of any outstanding securities issued
by the Corporation and convertible into Series B Preferred.
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2. Dividends and Distributions.
2.1 Preferred Stock Dividends. Subject to the provisions of law and
this Certificate of Incorporation, the holders of shares of Series B Preferred,
in preference to the holders of shares of Common Stock and of any other capital
stock of the Corporation ranking junior to the Series B Preferred as to payment
of dividends, shall be entitled to receive, out of funds legally available
therefor, cumulative dividends at the annual rate of ten percent (10%) times the
Liquidation Preference, as defined in Section 3.1, commencing on and after the
third anniversary of the date of original issuance of each share of Series B
Preferred and thereafter such dividends on the Series B Preferred shall accrue
daily and shall be payable quarterly in arrears in cash or in additional shares
of Series B Preferred, at the holder's option. The amount of dividends payable
for the initial dividend period and any period shorter than a full quarterly
period during which shares are outstanding shall be computed on the basis of a
360-day year of twelve 30-day months and the actual number of days elapsed in
the period in which payable. The number of shares of Series B Preferred issuable
in payment of any dividends shall be calculated by dividing the cumulative
dividends then payable by the Liquidation Preference. No dividends shall accrue
or be payable prior to the third anniversary of the date of original issuance of
each share of Series B Preferred.
2.2 Dividend Restrictions. Unless all accrued dividends on the
Series B Preferred pursuant to this Section 2 shall have been paid or declared
and a sum sufficient for the payment thereof set apart, no dividend shall be
paid or declared, and no distribution shall be made on any Common Stock or any
class or series of capital stock ranking junior to the Series B Preferred. If
dividends are declared with respect to the Common Stock or any class or series
of capital stock ranking junior to the Series B Preferred and the foregoing
condition is satisfied, then holders of Series B Preferred shall be entitled to
receive a dividend equivalent to that which would have been payable had the
Series B Preferred been converted into shares of Common Stock immediately prior
to the record date for payment of the dividends on the Common Stock. No
dividends or other distributions shall be authorized, declared, paid or set
apart for payment on any class or series of the Corporation's stock heretofore
or hereafter issued ranking, as to dividends, on a parity with or junior to the
Series B Preferred for any period unless full cumulative dividends have been, or
contemporaneously are, authorized, declared, paid or set apart in trust for such
payment on the Series B Preferred.
3. Liquidation, Dissolution or Winding-Up.
3.1 Series B Preferred Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding-up of the Corporation, after
payment of all amounts owing to holders of capital stock ranking senior to the
Series B Preferred, the holders of shares of Series B Preferred then outstanding
shall be entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders, before any payment shall be made to the
holders of the Common Stock or any class or series of capital stock ranking
junior to the Series B Preferred by reason of their ownership thereof, an amount
equal to $3.50 per share (the "Liquidation Preference") of Series B Preferred
(subject to equitable adjustment in the event of any stock dividend, stock
split, combination, reorganization, recapitalization, reclassification, or other
similar event affecting such shares) plus all accrued but unpaid dividends, if
any, to the date of winding up, whether or not declared, on the Series B
Preferred.
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If upon such liquidation, distribution or winding-up of the Company,
whether voluntary or involuntary, the assets to be distributed are insufficient
to permit payment in full to the holders of Series B Preferred, then the entire
assets of the Corporation to be distributed, after distribution to capital stock
ranking senior to the Series B Preferred, shall be distributed ratably among the
holders of Series B Preferred.
3.2 Remaining Liquidating Distribution. After payment has been made
in full pursuant to Section 3.1 above, and to holders of capital stock of the
Corporation ranking senior to the Series B Preferred, or the Corporation shall
have set aside funds sufficient for such payments in trust for the account of
such holders so as to be available for such payment, all remaining assets
available for distribution (after payment or provision for payment of all debts
and liabilities of the Corporation) shall be distributed to the respective
holders of any capital stock ranking junior to the Series B Preferred but senior
to the Common Stock ratably in proportion to the number of shares of such stock
they then hold, if any such stock is then outstanding, and thereafter to the
respective holders of the Common Stock ratably in proportion to the number of
shares of Common Stock they then hold.
3.3 Other Distributions. The amount deemed distributed to the
holders of Series B Preferred upon any liquidation, dissolution, or winding-up
shall be the cash or the fair market value of the property, rights, or
securities distributed to such holders by the acquiring person, firm, or other
entity. The value of such property, rights, or other securities shall be
determined in good faith by the Board of Directors of the Corporation.
4. Voting Rights. Except as otherwise required by law or, with
respect to any series of Preferred Stock, as otherwise provided by the Board
of Directors, the holders of the Series B Preferred shall have the following
respective voting rights:
4.1 Series B Preferred Voting Rights. Each holder of shares of
Series B Preferred shall be entitled to notice of any stockholders' meeting and
to vote on any matters on which the Common Stock may be voted. Each share of
Series Preferred shall be entitled to a number of votes equal to the number of
whole shares of Common Stock into which such share of Series B Preferred is then
convertible (as adjusted from time to time in the manner set forth herein).
Unless otherwise required by law, holders of Series B Preferred shall vote
together with holders of Common Stock as a single class on all matters submitted
to a vote of the Company's stockholders.
4.2 Series B Director Representation. Commencing on the date of
issuance of the Series B Preferred, the holders of Series B Preferred, voting as
a separate class, shall have the right to elect one director to the Board of
Directors of the Corporation (the "Series B Director"). Commencing on the
earlier to occur of (i) a vacancy on the Board of Directors due to the
resignation, death, retirement or non-election of any member other than the
Series B Director, or (ii) the date of the Corporation's 1998 annual meeting of
stockholders, the holders of Series B Preferred, voting as a separate class,
shall have the right to elect a second member of the Board of Directors of the
Corporation. Thereafter, the holders of Series B Preferred shall have the right,
voting as a separate class, to elect two members of the Board of Directors of
the Corporation (including the Series B Director) until such time as at least
one-half but less than all of the outstanding shares of Series B Preferred have
been redeemed, repurchased, retired or converted into shares of Common Stock of
the Corporation, in which case the holders of Series B Preferred shall have the
right, voting as a separate class, to elect only one member to the Board of
Directors of the
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Corporation until such time as all of the outstanding shares of Series B
Preferred have been redeemed, repurchased, retired or converted into shares of
Common Stock of the Corporation. In the event that the Corporation is unable to
provide the holders of the Series B Preferred with the foregoing right to elect
two members to the Board of Directors on or before May 31, 1998, then thereafter
and until such right is provided by the Corporation, the holders of Class B
Preferred shall be entitled to receive, out of funds legally available therefor,
cumulative dividends at the annual rate of twelve percent (12%) times the
Liquidation Preference.
4.3 Matters Requiring Class Vote. So long as any shares of Series B
Preferred are outstanding, the Corporation shall not, without the affirmative
vote of the holders of at least two-thirds of the outstanding shares of Series B
Preferred given in writing or by a vote at a meeting, consenting or voting (as
the case may be) as a single class:
(a) create, authorize or issue any shares of any other security
or class of stock ranking senior to, or pari passu with, the Series B Preferred
with respect to dividend rights, liquidation preference or otherwise;
(b) amend, alter or repeal, whether by merger, consolidation or
otherwise, the Certificate of Incorporation or By-Laws of the Corporation, if
such amendment, alteration or repeal adversely affects the powers, preferences
or special rights of the Series B Preferred;
(c) redeem any security ranking junior to the Series B Preferred
for cash, stock or other consideration of any kind (other than the redemption,
pursuant to that certain Rights Agreement between the Corporation and American
Stock Transfer & Trust Company, of the Rights issued thereby and as defined
therein);
(d) enter into any transaction with any officer, director,
employee or affiliate of the Corporation or any relative thereof, other than a
transaction in the ordinary course of the Corporation's business, and on terms
and conditions at least as favorable to the Corporation as could be negotiated
with a third party; or
(e) increase the size of the Board of Directors of the
Corporation (except as contemplated hereunder).
5. Conversion of Series B Preferred. The holders of Series B
Preferred and the Corporation shall have conversion rights as follows (the
"Series B Conversion Rights"):
5.1 Right of Holder to Convert Series B Preferred. Each issued and
outstanding share of Series B Preferred shall be convertible, at the option of
the holder thereof, at any time after the date of issuance and without the
payment of any additional consideration therefor, into that number of fully paid
and nonassessable shares of Common Stock as is determined by dividing $3.50 by
the Series B Conversion Price (as defined below) in effect at the time of
conversion. The "Series B Conversion Price" at which shares of Common Stock
shall be deliverable upon conversion of Series B Preferred shall initially be
$3.50 per share. Such initial Series B Conversion Price shall be subject to
adjustment (in order to adjust the number of shares of Common Stock into which
the Series B Preferred is convertible) as herein provided.
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5.2 Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of the Series B Preferred. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Corporation shall
pay cash equal to the product of such fraction multiplied by the then effective
Series B Conversion Price (rounded to the nearest whole cent).
5.3 Mechanics of Conversion.
(a) In order for a holder of Series B Preferred to convert
shares of Series B Preferred into shares of Common Stock, such holder shall
surrender the certificate or certificates for such shares of Series B Preferred,
at the office of the transfer agent for the Series B Preferred (or at the
principal office of the Corporation if the Corporation serves as its own
transfer agent), together with written notice that such holder elects to convert
all or any number of the shares of the Series B Preferred represented by such
certificate or certificates. Such notice shall state such holder's name or the
names of the nominees in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued and the number of shares of
Series B Preferred to be converted. If required by the Corporation, certificates
surrendered for conversion shall be endorsed or accompanied by a written
instrument or instruments of transfer, in form satisfactory to the Corporation,
duly executed by the registered holder or his or its attorney duly authorized in
writing. The date of receipt of such certificates and notice by the transfer
agent (or by the Corporation if the Corporation serves as its own transfer
agent) shall be the conversion date (the "Conversion Date") and the conversion
shall be deemed effective as of the close of business on the Conversion Date.
The Corporation shall, as soon as practicable after the Conversion Date, issue
and deliver at such office to such holder of Series B Preferred, or to his or
its nominees, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled, together with cash in lieu of any
fraction of a share. In case the number of Series B Preferred represented by the
certificate or certificates surrendered pursuant to Section 5.1 exceeds the
number of shares converted, the Corporation shall, upon such conversion, execute
and deliver to the holder, at the expense of the Corporation, a new certificate
or certificates for the number of shares of Series B Preferred represented by
such certificate or certificates surrendered but not converted.
(b) The Corporation shall at all times when the Series B
Preferred shall be outstanding, reserve and keep available out of its authorized
but unissued stock, for the purpose of effecting the conversion of the Series B
Preferred, such number of its duly authorized shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
Series B Preferred. Before taking any action that would cause an adjustment
reducing the Series B Conversion Price below the then-existing par value of the
shares of Common Stock issuable upon conversion of the Series B Preferred, the
Corporation shall take any corporate action that may, in the opinion of its
counsel, be necessary in order that the Corporation may validly and legally
issue fully paid and nonassessable shares of Common Stock at such adjusted
Series B Conversion Price.
(c) Upon any such conversion, no adjustment to the Series B
Conversion Price shall be made for any accrued and unpaid dividends on the
Series B Preferred surrendered for conversion or on the Common Stock delivered
upon conversion.
(d) All shares of Series B Preferred surrendered for conversion
as herein provided shall no longer be deemed to be outstanding and all rights
with respect to such shares, including the rights, if any, to receive notices,
to vote and to accrual of dividends shall immediately cease and terminate at the
close of business on the Conversion Date (except only the right of the
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holders thereof to receive shares of Common Stock in exchange therefor) and any
shares of Series B Preferred so converted shall be retired and canceled and
shall not be reissued, and the Corporation from time to time shall take
appropriate action to reduce the authorized Preferred Stock accordingly.
5.4 Adjustments to Series B Conversion Price for Diluting
Issues:
(a) Special Definitions. For the purposes of this Section 5,
the following definitions shall apply:
(1) "Option" means any outstanding right, option or warrant
to subscribe for, purchase or otherwise acquire Common Stock or Convertible
Securities excluding any rights, warrants and options granted or to be granted
by the Corporation or any subsidiary thereof pursuant to any stock option plan
or agreement which was adopted by the Board of Directors on or before the date
hereof.
(2) "Original Issue Date" with respect to the Series B
Preferred means the date on which any shares of Series B Preferred first were
issued.
(3) "Convertible Securities" means any evidences of
indebtedness, shares (other than Common Stock or Series B Preferred), or other
securities directly or indirectly convertible into or exchangeable for Common
Stock.
(4) "Additional Shares of Common Stock" means, as to the
Series B Preferred, all shares of Common Stock issued (or, pursuant to Section
5.4(c), deemed to be issued) by the Corporation after the Original Issue Date,
other than shares of Common Stock issued or issuable:
(i) upon conversion of shares of Series B Preferred;
(ii) as a dividend or distribution on Preferred Stock;
(iii) by reason of a dividend, stock split, split-up or
other distribution on shares of Common Stock;
(iv) upon the exercise of any right, warrant or option
granted or to be granted pursuant to any stock option
plan or agreement, as excluded from the definition of
"Option" in Section 5.4(a)(1); or
(v) under a registration statement pursuant to the
Securities Act of 1933, as amended, which is declared
effective by the Securities and Exchange Commission.
(5) "Common Stock Deemed Outstanding" means, at any given
time, the number of shares of Common Stock actually outstanding at such time,
plus the number of shares of Common Stock issuable at such time upon conversion
of Preferred Stock, and any other Convertible Securities then outstanding, plus
the number of shares of Common Stock issuable at any time upon the exercise of
all then outstanding Options.
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(b) No Adjustment of Series B Conversion Price. No adjustment
shall be made in the Series B Conversion Price as the result of the issuance of
Additional Shares of Common Stock or otherwise, unless the consideration per
share determined pursuant to Section 5.4(e) for an Additional Share of Common
Stock issued or deemed to be issued by the Corporation is less than the Series B
Conversion Price in effect on the date of, and immediately prior to, the issue
of such Additional Shares of Common Stock.
(c) Issue of Options and Convertible Securities Deemed Issue of
Additional Shares of Common Stock. If the Corporation at any time or from time
to time shall issue any Options or Convertible Securities, or shall fix a record
date for the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent adjustment of such
number) issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided, that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share determined pursuant to Section 5.4(e) of such
Additional Shares of Common Stock would be less than the Series B Conversion
Price in effect on the date of and immediately prior to such issue, or such
record date, as the case may be, and provided, further, that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustment in the Series B Conversion Price shall
be made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(2) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase in the
consideration payable to the Corporation, or decrease in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Series B Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon any such increase or decrease becoming
effective, be recomputed to reflect such increase or decrease insofar as it
affects such options or the right of conversion or exchange under such
Convertible Securities.
(3) upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not have
been exercised, the Series B Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto) and any
subsequent adjustments based thereon shall, upon such expiration, be recomputed
as if:
(A) In the case of Convertible Securities or Options for Common
Stock, the only Additional Shares of Common Stock issued were the shares of
Common Stock, if any, actually issued upon the exercise of such Options or the
conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Corporation for
the issue of all such Options, whether or not exercised, plus the
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consideration actually received by the Corporation upon such exercise, or for
the issue of all such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually received by the
Corporation upon such conversion or exchange; and
(B) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued upon the exercise thereof were
issued at the time of issue of such Options, and the consideration received by
the Corporation for the Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received by the Corporation for the
issue of all such Options, whether or not exercised, plus the consideration
deemed to have been received by the Corporation determined pursuant to Section
5.4(f) upon the issue of the Convertible Securities with respect to which such
Options were actually exercised;
(4) no recomputation pursuant to the preceding clauses (2) and
(3) shall have the effect of increasing the Series B Conversion Price to an
amount that exceeds the lower of (i) the applicable Series B Conversion Price on
the original adjustment date, or (ii) the Series B Conversion Price that would
have resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such recomputation date;
(5) in the case of any Options which expire by their terms not
more than thirty (30) days after the date of issue thereof, no adjustment of the
Series B Conversion Price shall be made until the expiration or exercise of all
such Options, whereupon such adjustment shall be made in the same manner
provided in clause (3) above; and
(6) if such record date shall have been fixed and such Options
or Convertible Securities are not issued on the date fixed therefor, the
adjustment previously made in the Series B Conversion Price which became
effective on such record date shall be canceled as of the close of business on
such record date, and thereafter the Series B Conversion Price shall be adjusted
pursuant to this Section 5.4(c) as of the actual date of their issuance.
(d) Stock Dividends, Stock Distributions and Subdivisions. In
the event the Corporation at any time or from time to time after the Original
Issue Date shall declare or pay any dividend or make any other distribution on
the Common Stock payable in Common Stock, or effect a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in Common Stock), then and in any such event, Additional
Shares of Common Stock shall be deemed to have been issued:
(1) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of any class of securities entitled to receive such dividend or
distribution, or
(2) in the case of any such subdivision, at the close of
business on the date immediately prior to the date upon which such corporate
action becomes effective.
If such record date shall have been fixed and such dividend shall not have
been fully paid on the date fixed therefor, the adjustment previously made in
the Conversion Price which became effective on such record date shall be
canceled as of the close of business on such record date, and thereafter the
Conversion Price shall be adjusted pursuant to this Section 5.4(d) as of the
time of actual payment of such dividend.
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(e) Adjustment of Conversion Price Upon Certain Events. If the
Corporation shall issue Additional Shares of Common Stock, including Additional
Shares of Common Stock deemed to be issued pursuant to Section 5.4(c) hereof,
but excluding Additional Shares of Common Stock issued pursuant to Section
5.4(d), which event is dealt with in Section 5.4(g), without consideration or
for a consideration per share less than the Series B Conversion Price in effect
on the date of and immediately prior to such issue, then and in such event, such
Series B Conversion Price shall be reduced, concurrently with such issue in
order to increase the number of shares of Common Stock into which the Series B
Preferred is convertible, to a price (calculated to the nearest cent) determined
by multiplying such Series B Conversion Price by a fraction (x) the numerator of
which shall be (A) the number of shares of Common Stock outstanding immediately
prior to such issue (including shares of Common Stock issuable upon conversion
of any outstanding Options or Convertible Securities), plus (B) the number of
shares of Common Stock which the aggregate consideration received by the
Corporation for the total number of Additional Shares of Common stock so issued
would purchase at such Conversion Price, and (y) the denominator of which shall
be (A) the number of shares of Common Stock outstanding immediately prior to
such issue (including shares of Common Stock issuable upon conversion of any
outstanding Options or Convertible Securities), plus (B) the number of such
Additional Shares of Common Stock so issued, provided that the Series B
Conversion Price shall not be so reduced at such time if the amount of such
reduction would be an amount less than $0.05, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and any
other amounts so carried forward, shall aggregate $0.05 or more.
(f) Determination of Consideration. For purposes of this Section
5.4, the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property: Such consideration shall:
(A) insofar as it consists of cash, be computed at the aggregate
of cash received by the Corporation, excluding amounts paid or payable for
accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash, be
computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are issued
together with other shares or securities or other assets of the Corporation for
consideration which covers both, be the proportion of such consideration so
received, computed as provided in clauses (A) and (B) above, as determined in
good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration per
share received by the Corporation for Additional Shares of Common Stock deemed
to have been issued pursuant to Section 5.4(c), relating to Options and
Convertible Securities, shall be determined by dividing:
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(A) the total amount, if any, received or receivable by the
Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration until such
subsequent adjustment occurs) payable to the Corporation upon the exercise of
such Options or the conversion or exchange of such Convertible Securities, or in
the case of Options for Convertible Securities, the exercise of such Options for
Convertible Securities and the conversion or exchange of such Convertible
Securities, by
(B) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision contained
therein for a subsequent adjustment of such number until such subsequent
adjustment occurs) issuable upon the exercise of such Options or the conversion
or exchange of such Convertible Securities.
(g) Adjustment for Stock Splits, Stock Dividends,
Subdivisions, Combinations or Consolidation of Common Stock. In the event the
outstanding shares of Common Stock shall be split, subdivided, combined or
consolidated, by reclassification or otherwise, into a greater or lesser number
of shares of Common Stock, and in the event that the Corporation shall issue
shares of Common Stock by way of a stock dividend or other distribution to the
holders of Common Stock, the Series B Conversion Price in effect immediately
prior to such split, subdivision, stock dividend, combination or consolidation
shall, concurrently with the effectiveness of such split, subdivision, stock
dividend, combination or consolidation, be increased or decreased
proportionately.
5.5 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series B Conversion Price pursuant to this
Section 5, the Corporation at its expense shall promptly compute such adjustment
or readjustment in accordance with the terms hereof and furnish to each holder
of Series B Preferred a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series B Preferred, furnish or cause to be furnished to
such holder a similar certificate setting forth (i) such adjustments and
readjustments, (ii) the Series B Conversion Price then in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property that
then would be received upon the conversion of Series B Preferred.
5.6 Notice of Record Date. In the event that there occurs any
of the following events:
(a) the Corporation declares a dividend (or any other
distribution) on its Common Stock payable in Common Stock or other securities
of the Corporation;
(b) the Corporation subdivides or combines its outstanding
shares of Common Stock;
(c) there occurs or is proposed to occur any reclassification
of the Common Stock of the Corporation (other than a subdivision or combination
of its outstanding shares of Common Stock or a stock dividend or stock
distribution thereon), or of any consolidation
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or merger of the Corporation into or with another corporation, or of the sale of
all or substantially all of the assets of the Corporation;
(d) the involuntary or voluntary liquidation, dissolution, or
winding-up of the Corporation; or
(e) a Conversion Event (as defined in Section 5.7);
then the Corporation shall cause to be filed at its principal office or at the
office of the transfer agent of the Preferred Stock, and shall cause to be
mailed to the holders of the Series B Preferred at their addresses as shown on
the records of the Corporation or such transfer agent, at least fifteen days
prior to the record date specified in (1) below or thirty days before the date
specified in (2) below, a notice stating the following information:
(1) the record date of such dividend, distribution, subdivision
or combination, or, if a record is not to be taken, the date as of which the
holders of Common Stock of record to be entitled to such dividend, distribution,
subdivision, or combination are to be determined, or
(2) the date on which such reclassification, consolidation,
merger, sale, liquidation, dissolution, winding-up or Conversion Event is
expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, liquidation, dissolution,
winding-up or Conversion Event.
5.7 Right of Corporation to Convert Series B Preferred.
(a) At any time after the date of issuance and at the option of
the Corporation, upon fifteen (15) days prior written notice to the holders, all
of the issued and outstanding shares of Series B Preferred shall be converted
automatically, without the payment of any additional consideration therefor and
without any action by any other person or entity, into shares of Common Stock at
the then effective Series B Conversion Price, provided that (i) the Average
Price Per Share, as defined below, of the Common Stock during the three year
period commencing on the Original Issue Date and ending on the third anniversary
of the Original Issue Date shall have been equal to or greater than $7.00, or
(ii) the Average Price Per Share at any time following the third anniversary of
the Original Issue Date shall have been equal to or greater than $9.00 (in each
case, a "Conversion Event"). The "Average Price Per Share" shall mean the
quotient derived by calculating a fraction (y) the numerator of which is the sum
of the closing prices of the Common Stock as provided on the NASDAQ Stock
Market, Inc. (or, if the Common Stock is then traded on any other exchange, the
closing prices on such other exchange) during any period of thirty (30)
consecutive trading days, and (z) the denominator of which is thirty (30).
Notwithstanding the foregoing, with respect to the
condition regarding the $7.00 minimum stock price set forth in subsection (a)(i)
of Section 5.7 hereof (the "Minimum Price Condition"), a Conversion Event shall
be deemed not to have occurred unless a person reasonably satisfactory to the
Purchaser, as defined in that certain Series B Convertible Preferred Stock
Purchase Agreement, dated October 9, 1997, has been employed by the Company
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<PAGE> 12
as its President (the "Employment Condition"). Therefore, if the Employment
Condition has been satisfied at the time that the Minimum Price Condition is
satisfied, then the Conversion Event shall be deemed to have occurred on the
date that such Minimum Price Condition is satisfied; if the Employment Condition
has not been satisfied at the time that the Minimum Price Condition is
satisfied, then the Conversion Event shall be deemed to have been postponed
until the date that the Employment Condition is satisfied.
(b) On or after the date of occurrence of an Conversion Event,
and in any event within twenty (20) days after receipt of notice, by mail,
postage prepaid from the Corporation of the occurrence of such event, each
holder of record of shares of Series B Preferred being converted shall surrender
such holder's certificates evidencing such shares at the principal office of the
Corporation or at such other place as the Corporation shall designate, and shall
thereupon be entitled to receive certificates evidencing the number of shares of
Common Stock into which such shares of Series B Preferred are automatically
converted and cash as provided in Section 5.2 in respect of any fraction of a
share of Common Stock otherwise issuable upon such conversion. On the date of
the occurrence of a Conversion Event, each holder of record of shares of Series
B Preferred shall be deemed to be the holder of record of the Common Stock
issuable upon such conversion and all shares of Series B Preferred shall no
longer be deemed to be outstanding and all rights with respect to such shares,
including the rights, if any, to receive notices, to vote and to accrual of
dividends shall immediately cease and terminate at the close of business on the
Conversion Date (except only the right of the holders thereof to receive shares
of Common Stock in exchange therefor), notwithstanding that the certificates
representing such shares of Series B Preferred shall not have been surrendered
at the office of the Corporation, that notice from the Corporation shall not
have been received by any holder of record of shares of Series B Preferred, or
that the certificates evidencing such shares of Common Stock shall not then be
actually delivered to such holder.
(c) All certificates evidencing shares of Series B Preferred
that are required to be surrendered for automatic conversion in accordance with
the provisions hereof, from and after the date such certificates are so required
to be surrendered shall be deemed to have been retired and canceled and the
shares of Series B Preferred represented thereby converted into Common Stock for
all purposes, notwithstanding the failure of the holder or holders thereof to
surrender such certificates on or prior to such date. The Corporation from time
to time thereafter shall take appropriate action to reduce the authorized
Preferred Stock accordingly.
5.8 Reorganization, Reclassification, Recapitalization,
Consolidation, Merger or Sale. If any capital reorganization, reclassification
or recapitalization of the capital stock of the Corporation, or consolidation or
merger of the Corporation, or sales of all or substantially all of its assets to
another entity, shall be effected in such a way that holders of Common Stock
shall be entitled to receive stock, securities, cash or assets with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, recapitalization, consolidation, sale or merger, lawful and
adequate provisions shall be made whereby each holder of Series B Preferred
shall thereupon have the right and option to receive, upon the basis and upon
the terms and conditions specified herein and in lieu of conversion of the
Series B Preferred into Common Stock, such shares of stock, securities, cash or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of Common Stock equal to the number of shares of Common
Stock as would have been received upon conversion of the Series B Preferred at
the Series B Conversion Price then in effect immediately before such
reorganization, reclassification,
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recapitalization, consolidation, sale or merger, and in any such case
appropriate provisions shall be made with respect to the rights and interests of
the holders to the end that the provisions hereof (including without limitation
provisions for adjustments of the applicable Series B Conversion Price) shall
thereafter be applicable, as nearly as may be practicable, in relation to any
shares of stock or securities delivered to holders in connection with such
reorganization, reclassification, recapitalization, consolidation, sale or
merger. Prior to the consummation of any consolidation or merger or sale of
assets of the Corporation, the successor corporation resulting from such
consolidation or merger, or the purchaser of such assets, shall agree in writing
to be bound by the provisions hereof.
6. Reacquired Shares. Any shares of Series B Preferred converted,
redeemed, purchased, or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition thereof,
and shall not be reissued and the Corporation from time to time shall take such
action as may be necessary to reduce the authorized Series B Preferred
accordingly.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be signed by and attested by its duly authorized officers this
24th day of November, 1997.
SIGHT RESOURCE CORPORATION
/s/ William G. McLendon
By:________________________________
William G. McLendon
President
ATTEST:
Alan B. MacDonald
________________________________
Secretary
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Exhibit 4.2
THESE SECURITIES HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FOR NONPUBLIC OFFERINGS
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, THESE SECURITIES MAY NOT
BE RESOLD OR OTHERWISE DISPOSED OF UNLESS, IN THE OPINION OF COUNSEL FOR OR
REASONABLY SATISFACTORY TO THE ISSUER, REGISTRATION UNDER THE APPLICABLE FEDERAL
OR STATE SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH
REGISTRATION REQUIREMENTS. THIS LEGEND SHALL BE ENDORSED UPON ANY MIRROR WARRANT
ISSUED IN EXCHANGE FOR THIS MIRROR WARRANT.
CLASS I (MIRROR) WARRANT TO PURCHASE SHARES OF
COMMON STOCK, PAR VALUE $.01 PER SHARE, OF
SIGHT RESOURCE CORPORATION
No.:___ ____________ __, 1997
THIS CERTIFIES THAT, _______________("Holder"), for value received, or its
registered assigns, is entitled to purchase, on the terms and subject to the
conditions hereinafter set forth, from Sight Resource Corporation, a Delaware
corporation (the "Company"), at any time, and from time to time, during the
period beginning on the date hereof and ending on the earlier of (i) the date
that all of the warrants set forth in Schedule A attached hereto and
incorporated herein by reference (the "Warrants") have been exercised for the
full number of shares issuable thereunder, or (ii) the date that all of the
Warrants shall have expired or otherwise terminated (the "Exercise Period"),
such aggregate number of shares of Common Stock, par value $.01 per share, of
the Company, that constitute 19.9% of the shares of Common Stock of the Company
issued upon exercise of the Warrants. The aggregate number of such shares
("Mirror Warrant Shares") currently is 842,294 shares of Common Stock, which is
subject to adjustment from time to time pursuant to Section 4 hereof. The
Company and the Holder acknowledge and agree that the intent of the parties is
that Holder be granted and have the right to exercise this Mirror Warrant to
purchase the number of Mirror Warrant Shares equal to 19.9% of the number of
shares of Common Stock issued upon the exercise of any Warrant from time to time
in the future.
SECTION 1. EXERCISE PRICE. The exercise price per each Mirror Warrant
Share at which this Class I (Mirror) Warrant (the "Mirror Warrant") may be
exercised shall be equal to the exercise price per share (the "Mirror Warrant
Exercise Price") pursuant to that Warrant, the exercise of which gave rise to
the right to acquire Mirror Warrant Shares hereunder (the "Counterpart
Warrant"), as adjusted from time to time in accordance with the provisions of
Section 4 hereof.
SECTION 2. MIRROR WARRANT SHARES.
2.1 Grant and Exercise of Mirror Warrant Shares. For purposes hereof, each
exercise of a Counterpart Warrant shall constitute a separate grant of Mirror
Warrant Shares subject to this Mirror Warrant (a "Mirror Grant"). Holder agrees
that it shall be obligated to and shall exercise this Mirror Warrant to purchase
the Mirror Warrant Shares pursuant to the Mirror Grant no later than 60 days
following the date of each Mirror Grant, provided, however, that Holder shall
not be
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required to purchase Mirror Warrant Shares until the applicable aggregate Mirror
Warrant Exercise Price, from time to time, equals or exceeds One Million Dollars
($1,000,000). Notwithstanding anything herein to the contrary, Holder shall have
no obligations to exercise this Mirror Warrant and fund the purchase of Mirror
Warrant Shares on or after June 30, 1998 if the Certificate of Incorporation of
the Company has not been amended by such date to provide that the holders of
Series B Convertible Preferred Stock, par value $.01 per share, of the Company,
voting as a separate class, have the right to elect two members to the Board of
Directors of the Company.
2.2 Terms and Conditions of Mirror Warrant Shares. Except as otherwise
provided herein, each Mirror Grant shall have terms identical to the Counterpart
Warrant from which it arose, such that each and every term and condition
applicable to the Mirror Warrant Shares pursuant to any Mirror Grant, including,
but not limited to, the manner of exercise of the Mirror Warrant, the payment of
the exercise price of the Mirror Warrant Shares, the anti-dilution provisions,
the lock-up provisions and the registration rights applicable thereto, shall be
identical to the terms and conditions applicable to the warrant shares issuable
under the Counterpart Warrant, and such terms and conditions shall be
incorporated by reference herein.
2.3. Counterpart Warrant. The Company shall attach copies of each
Counterpart Warrant hereto as Schedule B. Upon each exercise of any Counterpart
Warrant, the Company shall promptly provide Holder with written notice of the
(i) the number of shares issued pursuant to such exercise of a Counterpart
Warrant, (ii) the date of exercise, (iii) the applicable exercise price, (iv)
the number of Mirror Warrant Shares granted pursuant to the Mirror Warrant
Grant, (iv) the identity of the Counterpart Warrant, (v) the aggregate number of
Mirror Warrant Shares issuable pursuant to this Mirror Warrant, and (vi) the
aggregate exercise price for issuance of Mirror Warrant Shares then issuable
upon exercise of this Mirror Warrant.
2.4. Transfer Restriction Legend. This Mirror Warrant and each certificate
for Mirror Warrant Shares initially issued upon exercise of this Mirror Warrant,
unless at the time of exercise such Warrant Shares are registered under the
Securities Act of 1933, as amended (the "Act"), shall bear the following legend
(and any additional legend required by any securities exchange upon which such
Warrant Shares may, at the time of such exercise, be listed and any applicable
state securities administration or commission) on the face thereof:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD OR TRANSFERRED UNLESS REGISTERED PURSUANT TO THE PROVISIONS
OF SUCH LAWS, OR IF, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO
SIGHT RESOURCE CORPORATION, AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
2.5. Acknowledgment of Continuing Obligation. The Company will, at the
time of the exercise of this Mirror Warrant, in whole or in part, upon request
of the Holder, acknowledge in writing its continuing obligation to the Holder in
respect of any rights to which the Holder shall continue to be entitled after
such exercise in accordance with this Mirror Warrant, provided, that the failure
of the Holder to make any such request shall not affect the continuing
obligation of the Company to the Holder in respect of such rights.
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<PAGE> 3
2.6. Investment Representation. The Holder of this Mirror Warrant, by
acceptance hereof, acknowledges that this Mirror Warrant and, upon exercise, the
Mirror Warrant Shares, are being acquired solely for the Holder's own account
and not as a nominee for any other party, and for investment and that the Holder
will not offer, sell, transfer, assign or otherwise dispose of this Mirror
Warrant or the Mirror Warrant Shares issued upon exercise hereof, unless
registered under the Act and applicable state securities laws or pursuant to an
opinion of counsel reasonably satisfactory to the Company that an exemption from
registration under such laws is available. Upon exercise of this Mirror Warrant,
the Holder shall, if requested by the Company, confirm, in writing, in a form
reasonably satisfactory to the Company, that the Mirror Warrant Shares so
purchased are being acquired solely for the Holder's own account and not as a
nominee for any party for investment.
2.7. Accredited Investor; Experience; Risk. The Holder is an accredited
investor within the definition of Regulation D of the Act. The Holder has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of purchase of the Mirror Warrants and the
Mirror Warrant Shares.
SECTION 3. OWNERSHIP, TRANSFER.
3.1. Ownership of this Mirror Warrant. The Company may deem and treat the
person in whose name this Mirror Warrant is registered as the Holder and owner
hereof (notwithstanding any notations of ownership or writing hereon made by
anyone other than the Company) for all purposes and shall not be affected by any
notice to the contrary, until presentation of this Mirror Warrant for
registration of transfer as provided in this Section 3.
3.2. Exchange, Transfer and Replacement. This Mirror Warrant is
exchangeable upon the surrender hereof by the Holder to the Company at its
office or agency for new Mirror Warrants of like tenor and date representing in
the aggregate the right to purchase the number of Mirror Warrant Shares
purchasable hereunder, each of such new Mirror Warrants to represent the portion
of this Mirror Warrant exchanged as shall be designated by the Holder at the
time of such surrender. Subject to the terms of this Mirror Warrant, this Mirror
Warrant and all rights hereunder are transferable in whole or in part upon the
books of the Company by the Holder in person or by duly authorized attorney, and
a new Mirror Warrant shall be made and delivered by the Company, of the same
tenor as this Mirror Warrant but registered in the name of the transferee, upon
surrender of this Mirror Warrant duly endorsed at said office or agency of the
Company. Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Mirror Warrant, and, in
case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and upon surrender and cancellation of this Mirror Warrant,
if mutilated, the Company will make and deliver a new Mirror Warrant of like
tenor, in lieu of this Mirror Warrant. This Mirror Warrant shall be promptly
canceled by the Company upon the surrender hereof in connection with any
exchange, transfer or replacement. The Company shall pay all expenses, taxes
(other than stock transfer taxes and income taxes) and other charges payable in
connection with the preparation, execution and delivery of Mirror Warrant Shares
pursuant to this Section 3.
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<PAGE> 4
3.3 Restricted Transfer of Securities. The Holder agrees that, for a
period of two (2) years commencing on the date of this Mirror Warrant (the
"Restricted Period"), the securities issued or to be issued pursuant to this
Mirror Warrant (collectively, the "Issued Securities"), may not be sold,
assigned or otherwise transferred to a Restricted Person without the prior
written consent of the Company. For purposes of this Section 3.3, "Restricted
Person" means any Person engaged in or intending to be engaged in, either
directly or indirectly (including, without limitation, through an Affiliate or
in concert with another Person), any business in which the Company is operating
on the date of the proposed sale, assignment or transfer of the Issued
Securities. Following the Restricted Period, the Issued Securities may be sold,
assigned or otherwise transferred without limitation if the average closing
price for the Common Stock quoted on the Nasdaq National Market System (or on
any exchange on which the Common Stock is then listed) for the thirty (30)
trading days immediately prior to the last day of the Restricted Period (the
"Benchmark Price") is equal to or less than $12.00 per share. If the Benchmark
Price is greater than $12.00 per share, then the restrictions on the Issued
Securities set forth in the first sentence of this Section 3.3 shall continue
after the Restricted Period. Notwithstanding anything contained in this Section
to the contrary, the Holder may assign any or all of the Issued Securities to
partners or Affiliates of the Holder or officers or directors of partners or
Affiliates of the Holder without consent of the Company so long as such partner,
Affiliate, officer or director agrees in writing to be bound by the terms of
this Mirror Warrant.
SECTION 4. ADJUSTMENT OF EXERCISE PRICE.
4.1. Adjustment of Exercise Price. The Mirror Warrant Exercise Price shall
be adjusted, if and whenever the Company shall issue, grant or sell, or is,
deemed to have issued, granted or sold any shares of Common Stock of the
Company, or options, rights or warrants exercisable for, or convertible
securities convertible into, Common Stock of the Company, for no consideration
or for a consideration per share less than the applicable Mirror Warrant
Exercise Price in effect immediately prior to the time of such issuance or sale
(such issuance being referred to as a "Dilutive Issuance"), in the same manner
and in accordance with the same terms as the exercise price of warrant shares
issuable upon exercise of the Counterpart Warrant shall be adjusted pursuant to
the terms of the Counterpart Warrant, if such terms so provide.
4.2 Adjustment of Number or Type of Mirror Warrant Shares. The number or
type of Mirror Warrant Shares shall be adjusted, if and whenever the Company
shall (i) make a Dilutive Issuance, (ii) subdivide or combine its securities,
(iii) declare a stock dividend, or (iv) effect a reorganization,
reclassification, recapitalization, consolidation or merger, in the same manner
and in accordance with the same terms as the number or type of warrant shares
issuable upon exercise of the Counterpart Warrant shall be adjusted pursuant to
the terms of the Counterpart Warrant, if such terms so provide.
4.3 Other Adjustments.Notwithstanding anything herein to the contrary, the
number or type of Mirror Warrant Shares or the Mirror Warrant Exercise Price, as
the case may be, will be adjusted for any other event that shall cause an
adjustment to the number or type of warrant shares or exercise price of warrant
shares under a Counterpart Warrant in the manner and in accordance
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<PAGE> 5
with the terms set forth therein, if such terms so provide.
SECTION 5. COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees that:
5.1. Reservation of Mirror Warrant Shares. The Company will reserve and
set apart and have at all times, free from pre-emptive rights, a number of
shares of authorized but unissued Common Stock deliverable upon the exercise of
this Mirror Warrant or of any other rights or privileges provided for herein
sufficient to enable it at any time to fulfill all its obligations hereunder.
5.2. Avoidance of Certain Actions. The Company will not, by amendment of
its organizational documents or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the effect of avoiding the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in carrying out all of the provisions of
this Mirror Warrant and in taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder of this Mirror Warrant
against dilution or other impairment.
5.3. Governmental Approvals. If any shares of Common Stock required to be
reserved for the purposes of exercise of this Mirror Warrant require
registration with or approval of any governmental authority under any Federal
law (other than the Act) or under any state law before such shares may be issued
upon exercise of this Mirror Warrant, the Company will, at its expense, as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered or approved, as the case may be.
5.4. Binding on Successors. This Mirror Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
5.5 Right of Holder. The Company covenants and agrees that it is bound by
all the duties and obligations under, and the Holder of any Mirror Warrant or
Mirror Warrant Shares issued pursuant thereto, has all the rights under, the
applicable Counterpart Warrant, to the same extent as if those terms had been
set forth herein.
SECTION 6. COVENANTS OF HOLDER. The Holder of any Mirror Warrant or Mirror
Warrant Shares issued pursuant thereto, covenants and agrees that it will be
bound by, and comply with, the terms of the applicable Counterpart Warrant, to
the same extent as if those terms had been set forth herein in full.
SECTION 7. NOTICES. Any notice or other document required or permitted to
be given or delivered to the Holder shall be delivered at, or sent by certified
or registered mail to each Holder at the address listed in the stock records of
the Company or to such other address as shall have been furnished to the Company
in writing by such Holder. Any notice or other document required or
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<PAGE> 6
permitted to be given or delivered to the Company shall be delivered at, or sent
by certified or registered mail to, the principal office of the Company, at 100
Jeffrey Avenue, Holliston, Massachusetts 01746, Attention: William McLendon or
such other name or address as shall have been furnished to the Holder by the
Company.
SECTION 8. LIMITATION OF LIABILITY. No provision hereof, in the absence of
affirmative action by the Holder to purchase Mirror Warrant Shares, and no mere
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of the Holder for the Mirror Warrant Exercise Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
SECTION 9. GOVERNING LAW. This Mirror Warrant shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware,
without giving effect to its conflicts of laws provisions.
SECTION 10. MISCELLANEOUS. No term of this Mirror Warrant may be amended,
except with the joint written consent of the Holder and the Company. The
headings in this Mirror Warrant are for purposes of reference only and shall not
affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, Sight Resource Corporation has caused this Mirror
Warrant to be signed by its duly authorized officer under its corporate seal,
attested by its duly authorized officer, on the date first above written.
ATTEST: SIGHT RESOURCE CORPORATION
By:_______________________ By:__________________________________
Name:_____________________ Name:________________________________
Title:____________________ Title:_______________________________
(SEAL)
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ASSIGNMENT
TO BE EXECUTED BY THE REGISTERED HOLDER IF IT DESIRES AND
IS PERMITTED TO TRANSFER THE WITHIN MIRROR WARRANT OF
SIGHT RESOURCE CORPORATION
FOR VALUE RECEIVED____________________________ hereby sells, assigns and
transfers unto ______________________ the right to purchase ___ of the number of
shares of Common Stock covered by the within Mirror Warrant, and does hereby
irrevocably constitute and appoint ________________ Attorney to transfer the
said Mirror Warrant on the books of the Company (as defined in said Mirror
Warrant) with full power of substitution.
Signature:________________________________(SEAL)
Address: _________________________________
_________________________________
Dated:_________________
In the presence of: [Name of Institution]
_________________ By:________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Mirror Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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MIRROR WARRANT CERTIFICATE
TO BE EXECUTED BY THE REGISTERED HOLDER
IF IT DESIRES TO EXERCISE THE WITHIN MIRROR WARRANT OF
SIGHT RESOURCE CORPORATION
The undersigned hereby irrevocably exercises the right to purchase
_______shares of Common Stock obtainable by exercise of the within Mirror
Warrant, according to the conditions thereof and herewith makes payment of the
Mirror Warrant Exercise Price for such shares in full.
Signature___________________(SEAL)
Address:____________________
____________________
Dated:_____________________
In the presence of: [Name of Institution]
___________________________ By:____________________
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SCHEDULE A
SCHEDULE OF COUNTERPART WARRANTS
9
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SCHEDULE B
COPIES OF ALL COUNTERPART WARRANTS
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Exhibit 4.3
THESE SECURITIES HAVE BEEN ISSUED PURSUANT TO EXEMPTIONS FOR NONPUBLIC OFFERINGS
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, THESE SECURITIES MAY NOT
BE RESOLD OR OTHERWISE DISPOSED OF UNLESS, IN THE OPINION OF COUNSEL FOR OR
REASONABLY SATISFACTORY TO THE ISSUER, REGISTRATION UNDER THE APPLICABLE FEDERAL
OR STATE SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS MADE WITH SUCH
REGISTRATION REQUIREMENTS. THIS LEGEND SHALL BE ENDORSED UPON ANY WARRANT ISSUED
IN EXCHANGE FOR THIS WARRANT.
CLASS II WARRANT TO PURCHASE UP TO 290,424 SHARES OF
COMMON STOCK, PAR VALUE $.01 PER SHARE, OF
SIGHT RESOURCE CORPORATION
No.:___ ____________ __, 1997
THIS CERTIFIES THAT,__________________("Holder"), for value received, or its
registered assigns, is entitled to purchase, on the terms and subject to the
conditions hereinafter set forth, from Sight Resource Corporation, a Delaware
corporation (the "Company"), at any time, and from time to time, during the
period beginning on the date hereof and ending on the fifth anniversary of the
date hereof, that number of shares (the "Warrant Shares") of common stock, par
value One Cent ($0.01) per share, of the Company (the "Common Stock"), as
determined in accordance with the provisions of Section 2 hereof.
SECTION 1. EXERCISE PRICE. The exercise price per Warrant Share at which
this Class II Warrant (the "Warrant") may be exercised shall be equal to Seven
Dollars ($7.00) per share of Common Stock (the "Exercise Price"), as adjusted
from time to time in accordance with the provisions of Section 4.4 hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1. Number of Warrant Shares for Which Warrant is Exercisable. The number
of Warrants Shares for which this Warrant may be exercised at any time prior to
its expiration shall be determined by (a) multiplying Two Hundred Ninety
Thousand Four Hundred Twenty-Four (290,424) by the Exercise Price and (b)
dividing the result by the reference price (the "Reference Price") initially
equal to the Exercise Price or, in case an adjustment of the Reference Price has
taken place pursuant to the provisions of Section 4 of this Warrant, then by the
Reference Price as last adjusted and in effect at the date of any partial or
full exercise of this Warrant.
2.2. Procedure for Exercise of Warrant.
(a) To exercise this Warrant in whole or in part, the Holder shall deliver
to the Company, at its principal executive office (or such other office of the
Company in the United States as the Company may designate by notice in writing
to the Holder), (i) the Warrant Certificate attached
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hereto completed to specify the fraction of the Warrant which the Holder is
electing to exercise, (ii) consideration in an amount equal to the aggregate
Exercise Price of the Warrant Shares being purchased, consisting of (A) cash or
a certified or official bank check, payable to the order of the Company, (B)
cancellation by the Holder of indebtedness of the Company to the Holder, or (C)
a combination of (A) and (B) above, and (iii) if this Warrant is being exercised
in whole or the last fraction of this Warrant is being exercised, this Warrant.
(b) Notwithstanding any provisions herein to the contrary, if the fair
market value of one share of Common Stock is greater than the Exercise Price for
one share of Common Stock (at the date of calculation, as set forth below), in
lieu of exercising this Warrant for cash, the Holder may elect to receive shares
of Common Stock equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company, together with the properly endorsed Warrant Certificate,
substantially in the form as attached hereto, in which event the Company shall
issue to the Holder that number of shares of Common Stock computed using the
following formula:
WS = WCS (FMV-EP)
-----------
FMV
WHERE:
WS equals the number of Warrant Shares to be issued to the Holder
WCS equals the number of shares of Common Stock purchasable under the Warrant
or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised (at the date of such calculation)
FMV equals the fair market value of one share of Common Stock (at the date of
such calculation)
EP equals the per share Exercise Price (as adjusted to the date of such
calculation) of the Warrant
For purposes of the above calculation, the fair market value ("FMV") of one
share of Common Stock shall be determined in accordance with the provisions of
Section 2.3 hereof. Notwithstanding the foregoing, where there exists a public
market for the Common Stock at the time of such exercise, the FMV per share
shall be equal to the average of the closing bid and asked prices of the Common
Stock quoted in the Over-The-Counter Market Summary or the average of the last
reported sale price of the Common Stock or the closing price quoted on the
Nasdaq National Market System or on any exchange on which the Common Stock is
listed, whichever is applicable, as published in The Wall Street Journal for the
five (5) trading days prior to the date of determination of the FMV. Upon
receipt of the Warrant Certificate, the Warrant, or both, as applicable, the
Holder shall be deemed to be the holder of record of the Warrant Shares issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such
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Warrant Shares shall not then be actually delivered to the Holder, and the
Company shall, as promptly as practicable, and in any event within five (5)
business days thereafter, execute or cause to be executed and delivered to the
Holder, or as the Holder may direct, a certificate or certificates representing
the aggregate number of shares of Common Stock specified in said Warrant
Certificate. Each stock certificate so delivered shall be in such denomination
as may be requested by the Holder. If this Warrant shall have been exercised
only in part, the Company shall, at the time of delivery of said stock
certificate or certificates, deliver to the Holder a certificate evidencing the
fraction of this Warrant which remains exercisable. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
execution and delivery of stock certificates pursuant to this Section 2.2,
except that, in case such stock certificates shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all stock
transfer taxes, which shall be payable upon the execution and delivery of such
stock certificate or certificates, shall be paid by the Holder to the Company at
the time of delivering this Warrant to the Company as mentioned above.
2.3 Fair Market Value. Except as set forth above, for determining the
FMV of one share of Common Stock in connection with a "net exercise" pursuant to
the provisions of Section 2.2 hereof, the following shall apply:
(a) Agreement of the Company and the Holder. If the Company and the
Holder can agree in writing as to the FMV, such agreed value shall be the FMV.
If no agreement on the FMV can be reached within five (5) days from the date of
the exercise of this Warrant, then the FMV shall be determined pursuant to
subsection (b) below.
(b) Third Party Appraisal. If the FMV is not agreed upon as provided
in subsection (a) above within the period therein stated, then five (5) days
thereafter, an appraiser or appraisers shall be jointly selected by the Company
and the Holder, and the determination of such jointly selected appraiser or
appraisers as to the FMV shall be binding and conclusive upon all parties. If
the Company and the Holder are unable to reach an agreement as to an appraiser,
the provisions of subsection (c) below shall apply.
For purposes of this subsection (b), the FMV shall take into
account, among other things, earnings and book value of the Company, but shall
not take into account any minority stockholder, marketability or other such
discount.
(c) Additional Appraiser. If the Company and the Holder do not agree
upon the selection of an appraiser or appraisers, as provided in subsection (b)
within the period therein stated, then, within three (3) days after the
expiration of the five (5) day period provided for in subsection (b) above, each
of the Company and the Holder shall deliver, by written notice to the other, a
list of three appraisers and each of the Company and the Holder shall select one
(1) appraiser from the list delivered by the other. In the event either party
falls to deliver a list of appraisers or to select an appraiser from such list
within said three (3) day period, the other party may select an appraiser from
its list and such appraiser shall serve as the sole appraiser. Each of the
appraisers so selected shall, within ten (10) days of being selected, determine
the FMV. In
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the event the lower of the two (2) appraisals is at least ninety percent (90%)
of the higher appraisal, then the FMV shall be equal to the average of the two
(2) appraisals. In the event that the lower of the two (2) appearances is less
than ninety percent (90%) of the higher appraisal, then the two (2) appraisers
shall appoint a third appraiser within three (3) days after the end of said ten
(10) day period, and such third appraiser shall, within ten (10) days of being
selected, determine the FMV.
The FMV shall be equal to the average of (x) the third appraisal and
(y) whichever of the first two appraisals is closest in dollars to the third
appraisal or equal to the third appraisal if such appraisal is mid-way between
the first two appraisals. The determination of such appraiser shall be
determinative of the FMV and shall be binding, final and conclusive on the
Company and the Holder.
(d) Costs of Appraisals. The parties shall share equally the
entire cost of any appraisals hereunder.
2.4. Transfer Restriction Legend. This Warrant and each certificate for
Warrant Shares initially issued upon exercise of this Warrant, unless at the
time of exercise such Warrant Shares are registered under the Securities Act of
1933, as amended (the "Act"), shall bear the following legend (and any
additional legend required by any securities exchange upon which such Warrant
Shares may, at the time of such exercise, be listed and any applicable state
securities administration or commission) on the face thereof
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE
OFFERED, SOLD OR TRANSFERRED UNLESS REGISTERED PURSUANT TO THE PROVISIONS
OF SUCH LAWS, OR IF, IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO
SIGHT RESOURCE CORPORATION, AN EXEMPTION FROM SUCH REGISTRATION IS
AVAILABLE.
2.5. Acknowledgment of Continuing Obligation. The Company will, at the
time of the exercise of this Warrant, in whole or in part, upon request of the
Holder, acknowledge in writing its continuing obligation to the Holder in
respect of any rights to which the Holder shall continue to be entitled after
such exercise in accordance with this Warrant, provided, that the failure of the
Holder to make any such request shall not affect the continuing obligation of
the Company to the Holder in respect of such rights.
2.6. Investment Representation. The Holder of this Warrant, by acceptance
hereof, acknowledges that this Warrant and, upon exercise, the Warrant Shares,
are being acquired solely for the Holder's own account and not as a nominee for
any other party, and for investment and that the Holder will not offer, sell,
transfer, assign or otherwise dispose of this Warrant or the Warrant Shares
issued upon exercise hereof, unless registered under the Act and applicable
state securities laws or pursuant to an opinion of counsel reasonably
satisfactory to the Company that an exemption from registration under such laws
is available. Upon exercise of this Warrant, the Holder shall, if requested by
the Company, confirm, in writing, in a form reasonably satisfactory to the
Company, that the Warrant Shares so purchased are being acquired solely for
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the Holder's own account and not as a nominee for any party for investment.
2.7. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current FMV of a share, determined in accordance with the
provisions of Section 2.3 hereof.
2.8 Accredited Investor; Experience; Risk. The Holder is an accredited
investor within the definition of Regulation D of the Act. The Holder has such
knowledge and experience in financial and business matters that its capable of
evaluating the merits and risks of purchase of the Warrants and the Warrant
Shares.
SECTION 3. OWNERSHIP, TRANSFER.
3.1. Ownership of this Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the Holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Section 3.
3.2. Exchange, Transfer and Replacement. This Warrant is exchangeable upon
the surrender hereof by the Holder to the Company at its office or agency for
new Warrants of like tenor and date representing in the aggregate the right to
purchase the number of Warrant Shares purchasable hereunder, each of such new
Warrants to represent the portion of this Warrant exchanged as shall be
designated by the Holder at the time of such surrender. Subject to the terms of
this Warrant, this Warrant and all rights hereunder are transferable in whole or
in part upon the books of the Company by the Holder in person or by duly
authorized attorney, and a new Warrant shall be made and delivered by the
Company, of the same tenor as this Warrant but registered in the name of the
transferee, upon surrender of this Warrant duly endorsed at said office or
agency of the Company. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in case of loss, theft or destruction, of indemnity or security
reasonably satisfactory to it, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will make and deliver a new Warrant of like
tenor, in lieu of this Warrant. This Warrant shall be promptly canceled by the
Company upon the surrender hereof in connection with any exchange, transfer or
replacement. The Company shall pay all expenses, taxes (other than stock
transfer taxes and income taxes) and other charges payable in connection with
the preparation, execution and delivery of Warrant Shares pursuant to this
Section 3.
3.3. Restricted Transfer of Securities. The Holder agrees that, for a
period of two (2) years commencing on the date of this Warrant (the "Restricted
Period"), the securities issued or to be issued pursuant to this Warrant
(collectively, the "Issued Securities"), may not be sold, assigned or otherwise
transferred to a Restricted Person without the prior written consent of the
Company. For purposes of this Section 3.3, "Restricted Person" means any Person
engaged in or intending to
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be engaged in, either directly or indirectly (including, without limitation,
through an Affiliate or in concert with another Person), any business in which
the Company is operating on the date of the proposed sale, assignment or
transfer of the Issued Securities. Following the Restricted Period, the Issued
Securities may be sold, assigned or otherwise transferred without limitation if
the average closing price for the Common Stock quoted on the Nasdaq National
Market System (or on any exchange on which the Common Stock is then listed) for
the thirty (30) trading days immediately prior to the last day of the Restricted
Period (the "Benchmark Price") is equal to or less than $12.00 per share. If the
Benchmark Price is greater than $12.00 per share, then the restrictions on the
Issued Securities set forth in the first sentence of this Section 3.3 shall
continue after the Restricted Period. Notwithstanding anything contained in this
Section to the contrary, the Holder may assign any or all of the Issued
Securities to partners or Affiliates of the Holder or officers or directors of
partners or Affiliates of the Holder without consent of the Company so long as
such partner, Affiliate, officer or director agrees in writing to be bound by
the terms of this Warrant.
SECTION 4. ADJUSTMENT OF REFERENCE PRICE.
4.1. Adjustment of Reference Price. If and whenever the Company shall
issue or sell, or is, in accordance with Section 4.2(a) through 4.2(h) hereof,
deemed to have issued or sold any Securities of the Company for no consideration
or for a consideration per share less than the applicable Reference Price in
effect immediately prior to the time of such issuance or sale (such issuance
being referred to as a "Dilutive Issuance"), then, forthwith upon such issue or
sale, the Reference Price shall be adjusted by multiplying the Reference Price
in effect immediately prior to the Dilutive Issuance by the fraction:
X+Y
---
X+Z
WHERE:
X equals the number of shares of Common Stock issued and outstanding
immediately prior to the Dilutive Issuance;
Y equals the number of shares of Common Stock of the Company which the
aggregate net consideration received by the Company in the Dilutive
Issuance would have purchased at the Reference Price in effect immediately
before the Dilutive Issuance; and
Z equals the number of shares of Common Stock of the Company issued or deemed
issued in the Dilutive Issuance.
By way of illustration, but not limitation, of the foregoing, assume that (a)
Eight Million Five Hundred Thousand (8,500,000) shares of Common Stock are
issued and outstanding as of the date of the Dilutive Issuance, (b) the
Reference Price is equal to Seven Dollars ($7.00). If the Company were to issue
One Hundred Thousand (100,000) shares of Common Stock at a per share price of
Five Dollars ($5.00), then the Reference Price and the number of Warrant Shares
evidenced by this
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certificate would be adjusted as follows:
71,429 equals the number of shares of Common Stock which the
aggregate net consideration received by the Company in
the Dilutive Issuance would have purchased at the
Reference Price in effect immediately before the
Dilutive Issuance, calculated as follows: 100,000 shares
x ($5.00 / $7.00) = 71,429 shares.
100,000 equals the number of shares of Common Stock issued or
deemed issued in the Dilutive Issuance.
Therefore, the new Reference Price is equal to $6.976 calculated as
follows: ($7.00) x [(8,500,000 + 71,429) / (8,500,000 + 100,000] = $6.976.
For purposes of this Section 4.1, "Securities" means shares of Common Stock of
the Company and any securities or other rights convertible or exchangeable into
or exercisable for shares of Common Stock; provided, however, "Securities" shall
not include (i) Common Stock issued or issuable upon conversion of the
Convertible Preferred Stock issued to Purchaser; (ii) Common Stock issued or
issuable upon exercise of the Warrants issued to Holder, (iii) securities issued
by the Company as part of any public offering pursuant to an effective
registration statement under the Securities Act; (iv) securities issued in
connection with any stock split, stock dividend or recapitalization of the
Company; (v) equity securities and options to purchase equity securities issued
to management, directors or employees of or consultants to the Company pursuant
to plans outstanding as of the date hereof; (vi) equity securities and options
to purchase equity securities issued in accordance with additional stock option
or similar plans approved by the Board or any class of stockholders, as
required; (vii) securities issued in connection with any merger or acquisition
by the Company; and (viii) Common Stock or other securities issued or issuable
upon conversion of rights, options, warrants or convertible securities issued
and outstanding prior to the date hereof.
4.2 For purposes of Section 4.1 hereof, the following Sections 4.2(a)
through 4.2(h) shall also be applicable:
(a) Issuance of Rights or Options. In case at any time after the
date of this Warrant the Company shall in any manner grant (whether directly or
by assumption in a merger or otherwise) any Warrants or other rights to
subscribe for or to purchase, or any options for the purchase of, Common Stock
or any stock or security convertible into or exchangeable for Common Stock (such
warrants, rights or options being called "Options" and such convertible or
exchangeable stock or securities being called "Convertible Securities") whether
or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the effective price per share for
which Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of such Options which relate to Convertible
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Securities, the minimum aggregate amount of additional consideration, if any,
payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (ii) the total maximum number of shares of
Common Stock issuable upon the exercise of all such Options or upon the
conversion or exchange of all such Convertible Securities issuable upon the
exercise of such Options) shall be less than the Reference Price in effect
immediately prior to such Dilutive Issuance, then the total maximum number of
shares of Common Stock issuable upon the exercise of such Options or upon
conversion or exchange of the total maximum amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to have
been issued for such effective price per share as of the date of granting of
such Options or the issuance of such Convertible Securities and thereafter shall
be deemed to be outstanding. Except as otherwise provided in Section 4.2(c)
hereof, no adjustment of the Reference Price shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.
(b) Issuance of Convertible Securities. In case after the date of
this Warrant the Company shall in any manner issue (whether directly or by
assumption in a merger or otherwise) or sell any Convertible Securities, whether
or not the rights to exchange or convert any such Convertible Securities are
immediately exercisable, and the effective price per share for which Common
Stock is issuable upon such conversion or exchange (determined by dividing (i)
the total amount received or receivable by the Company as consideration for the
issue or sale of such Convertible Securities plus the minimum aggregate amount
of additional consideration, if any, payable to the Company upon the conversion
or exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Reference Price in effect immediately prior to such
Dilutive Issuance, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall be
deemed to have been issued for such effective price per share as of the date of
the issuance or sale of such Convertible Securities and thereafter shall be
deemed to be outstanding. Except as otherwise provided in Section 4.2(c) hereof,
no adjustment of the Reference Price shall be made upon the actual issuance of
such Common Stock upon conversion or exchange of such Convertible Securities and
if any such issue or sale of such Convertible Securities is made upon exercise
of any Options to purchase any such Convertible Securities for which adjustments
of the Reference Price have been or are to be made pursuant to other provisions
of this Section 4.2, no further adjustment of the Reference Price shall be made
by reason of such issuance or sale.
(c) Change in Option Price or Conversion Rate. Upon the happening of
any of the following events, after the date of this Warrant, namely, if the
purchase price provided for in any Option referred to in Section 4.2(a) hereof,
the additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in Section 4.2(a) or 4.2(b) hereof, or
the rate at which Convertible Securities referred to in Section 4.2(a) or 4.2(b)
are convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Reference Price at the time of such
event shall forthwith be readjusted upward or downward to the Reference Price
which would
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have been in effect at such time had such Options or Convertible Securities
still outstanding provided for such changed purchase price, additional
consideration or conversion rate, as the case may be, at the time initially
granted, issued or sold.
(d) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Company therefor. In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the net fair value of such consideration as determined in good
faith unanimously by the Board of Directors. In case any Options shall be issued
in connection with the issue and sale of other securities of the Company,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good faith
unanimously by the Board.
(e) Subdivision or Combination of Shares. If the Company, at any
time while this Warrant is outstanding, shall subdivide or combine any class or
classes of its Common Stock, the Reference Price shall be proportionately
reduced, in case of subdivision of shares, to reflect the increase in the total
number of shares of Common Stock outstanding as a result of such subdivision, as
at the effective date of such subdivision, or shall be proportionately
increased, in the case of combination of shares, to reflect the reduction in the
total number of shares of Common Stock outstanding as a result of such
combination, as at the effective date of such combination.
(f) Stock Dividends. If the Company, at any time while this Warrant
is outstanding, shall pay a dividend in, or make any other distribution of,
Common Stock, the Reference Price shall be adjusted, (as at the date of such
payment or other distribution), to that price determined by multiplying the
Reference Price in effect immediately prior such payment or other distribution,
by a fraction (i) the numerator of which shall be the total number of shares of
Common Stock outstanding immediately prior to such dividend or distribution, and
(ii) the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution (plus in the
event that the Company paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Company issued fractional
shares in connection with said dividends).
(g) Treasury Shares. The disposition of any shares of Common Stock
owned or held by or for the account of the Company shall be considered an issue
or sale of Common Stock for the purpose of this Section 4.2.
4.3 Reorganization, Reclassification, Recapitalization Consolidation,
Merger or Sale. If any capital reorganization, reclassification or
recapitalization of the capital stock of the Company, or consolidation or merger
of the Company, or sales of all or substantially all of its assets to another
entity, shall be effected in such a way that holders of Common Stock shall be
entitled to receive stock, securities, cash or assets with respect to or in
exchange for Common Stock, then, as a condition of such reorganization,
reclassification, recapitalization, consolidation, sale or merger,
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lawful and adequate provisions shall be made whereby each holder of Warrants
shall thereupon have the right and option to receive, upon the basis and upon
the terms and conditions specified herein and in lieu of the Warrant Shares,
such shares of stock, securities, cash or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of Common
Stock equal to the number of shares of Warrant Stock as would have been received
upon exercise of the Warrants at the Reference Price then in effect immediately
before such reorganization, reclassification, recapitalization, consolidation,
sale or merger, and in any such case appropriate provisions shall be made with
respect to the rights and interests of the holders to the end that the
provisions hereof (including without limitation provisions for adjustments of
the applicable Reference Price) shall thereafter be applicable, as nearly as may
be practicable, in relation to any rights to acquire or shares of stock or
securities delivered to holders in connection with such reorganization,
reclassification, recapitalization, consolidation, sale or merger. Prior to the
consummation of any consolidation or merger or sale of assets of the Company,
the successor corporation resulting from such consolidation or merger, or the
purchaser of such assets, shall agree in writing to be bound by the provisions
hereof.
4.4 Adjustment of the Exercise Price. Upon any adjustment in the number of
Warrant Shares purchasable pursuant to this Warrant as the result of the
provisions of this Section 4, the Exercise Price per share shall be adjusted so
that the adjusted Exercise Price shall be equal to the aggregate Exercise Price
payable with respect to all Warrant Shares on the date hereof divided by the
adjusted number of Warrant Shares then purchasable hereunder as determined
pursuant to the provisions of this Section 4.
4.5 Minimum Level for Adjustments. Notwithstanding any provision to the
contrary contained herein, no adjustment of the Reference Price shall be made if
the amount of said adjustment shall aggregate less than three cents ($.03);
provided however, that in such case any adjustment that would otherwise be
required then to be made shall be carried forward and shall be made at the time
of and together with the next subsequent adjustment which, together with any
adjustment so carried forward, shall aggregate at least three cents ($.03).
SECTION 5. COVENANTS OF THE COMPANY. The Company hereby covenants and
agrees that:
5.1. Reservation of Shares. The Company will reserve and set apart and
have at all times, free from pre-emptive rights, a number of shares of
authorized but unissued Common Stock deliverable upon the exercise of the
Warrants or of any other rights or privileges provided for herein sufficient to
enable it at any time to fulfill all its obligations hereunder.
5.2. Avoidance of Certain Actions. The Company will not, by amendment of
its organizational documents or through any reorganization, transfer of assets,
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the effect of avoiding the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in carrying out all of the provisions of
this Warrant and in taking of all such action as may be necessary or appropriate
in order to protect the
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<PAGE> 11
rights of the Holder of this Warrant against dilution or other impairment.
5.3. Governmental Approvals. If any shares of Common Stock required to be
reserved for the purposes of exercise of this Warrant require registration with
or approval of any governmental authority under any Federal law (other than the
Act) or under any state law before such shares may be issued upon exercise of
this Warrant, the Company will, at its expense, as expeditiously as possible,
use its best efforts to cause such shares to be duly registered or approved, as
the case may be.
5.4. Binding on Successors. This Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
SECTION 6. SHELF REGISTRATION.
6.1 Right to Shelf Registration. From and after any exercise of this
Warrant, in whole or in part, within 45 days after receipt of written notice
from the Holder, the Company shall effect a Shelf Registration (the "Initial
Shelf Registration") for all or a portion of the Warrant Shares which have been
theretofore issued to Holder; provided, however, that (A) the number of Warrant
Shares sought to be included in any Shelf Registration shall not be less than
50% of the shares of Common Stock or other securities for which the Warrant is
exercisable and (B) in no event shall the Company be obligated to effect a Shelf
Registration pursuant to this Section 6.1 on more than one occasion in any
12-month period. For purposes hereof, the term "Shelf Registration" means the
preparation and filing with the Securities and Exchange Commission (the "SEC")
of a registration statement for an offering to be made on a delayed or
continuous basis pursuant to Rule 415 of the Act. The registration statement for
any Shelf Registration shall be on Form S-3 or another appropriate form
permitting registration of such Warrant Shares for resale by each Holder in the
manner or manners designated by them, including an underwritten offering, the
underwriter to be mutually agreeable to the Company and the Holders. The Company
shall use its best efforts to cause the Initial Shelf Registration to become
effective under the Act as promptly as is practicable and to keep the Initial
Shelf Registration continuously effective under the Act until the end of the
Effectiveness Period. For purposes of this Section 6, the term "Effectiveness
Period" means the period commencing on the date of this Warrant and ending on
the date that all Warrant Shares that have been registered are disposed of
pursuant to an effective registration statement under the Act.
6.2 Subsequent Shelf Registration.If the Initial Shelf Registration or any
Subsequent Shelf Registration (as defined below) ceases to be effective for any
reason at any time during the Effectiveness Period (other than because all
Warrant Shares shall have been sold or shall have ceased to be Warrant Shares),
the Company shall use its best efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereof, and in any event shall within thirty
days of such cessation of effectiveness amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional Shelf Registration covering all of
the Warrant Shares included in the Initial Shelf Registration or Subsequent
Shelf that ceased to be effective as described in this Section 6.2 (a
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<PAGE> 12
"Subsequent Shelf Registration"). If a Subsequent Shelf Registration is filed,
the Company shall use all reasonable efforts to cause the Subsequent Shelf
Registration to become effective as promptly as is practicable after such filing
and to keep such registration statement continuously effective until the end of
the Effectiveness Period.
6.3 Covenants of the Company.
(a) The Company shall supplement and amend the Shelf Registration if
required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration, if required
by the Act or the SEC, or if reasonably requested by a majority of Holders or by
any managing underwriter, if any, of such Warrant Shares with respect to the
offer and sale or other disposition of the Warrant Shares during the
Effectiveness Period.
(b) From time to time, the Company shall (i) prepare and file with
the SEC a post-effective amendment to the Shelf Registration or a supplement to
the related prospectus or a supplement or amendment to any document incorporated
therein by reference or any other required document, so that such registration
statement will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, so that, as thereafter delivered to
purchasers of the Warrant Shares being sold thereunder, such prospectus will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; (ii)
provide the Holders with copies of any registration statement, prospectus,
document incorporated by reference therein, or such other documents filed with
the SEC in such numbers as the Holders shall reasonably request; and (iii)
inform the Holders that the Company has complied with its obligations and that
the registration statement and related prospectus may be used for the purpose of
selling all or any of such Warrant Shares (or that, if the Company has filed a
post-effective amendment to the Shelf Registration which has not yet been
declared effective, the Company will notify the Holders to that effect, will use
its best efforts to secure the effectiveness of such post-effective amendment
and will immediately so notify Holders when the amendment has become effective).
(c) The Company shall cause the Warrant Shares covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Holder to consummate the
disposition of such Warrant Shares.
(d) The Company shall cause all Warrant Shares covered by the
registration statement to be listed with The Nasdaq Stock Market, Inc., or on
each securities exchange on which similar securities issued by the Company are
then listed and, unless the same already exists, provide a transfer agent,
registrar and CUSIP number for all such Warrant Shares not later than the
effective date of the registration statement.
(e) The Company shall enter into such customary agreements
(including an underwriting agreement in customary form, if applicable) and take
all such other actions as the
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<PAGE> 13
Holder or the underwriters, if any, reasonably request in order to expedite or
facilitate the disposition of such Warrant Shares pursuant to the registration
statement.
(f) The Company shall make available for inspection by the Holders
and any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
the Holders or underwriter (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and agreements and access to
properties and management and other information of the Company as shall be
necessary to enable them to exercise their due diligence responsibility, and
cause the Company's officers, directors and employees to supply all information
reasonably requested by any Inspector in connection with such registration
statement, provided that any Inspector shall have first executed and delivered
to the Company a confidentiality agreement in customary form protecting the
confidentiality of such information, except as otherwise required to be
disclosed by law.
(g) If the shares are to be sold in an underwritten offering or in a
private transaction involving at least forty percent (40%) of the Warrant
Shares, the Company shall obtain "cold comfort" letters and updates thereof from
the Company's independent public accountants and an opinion from the Company's
counsel in customary form and covering such matters of the type customarily
covered by "cold comfort" letters and opinion of counsel, respectively, as the
Holders or managing underwriter, as the case may be, may reasonably request, and
one copy of such "cold comfort" letter and opinion letter shall be provided to
the Holders.
(h) The Holders shall upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 6.3(k), discontinue
disposition of its Warrant Shares pursuant to the registration statement
covering such Warrant Shares until receipt of the copies of the supplemented or
amended prospectus and, if so directed by the Company, Holders will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in the Holders' possession, of the prospectus covering such Warrant
Shares current at the time of receipt of such notice.
(i) All fees and expenses incident to the Company's performance of
or compliance with a shelf registration requirement pursuant to this Warrant
shall be borne by the Company whether or not any of the registration statements
become effective, other than commissions, and underwriter's discounts, if any,
and transfer taxes payable by the Holders. Such fees and expenses shall include,
without limitation, (i) all registration and filing fees (including, without
limitation, fees and expenses (x) with respect to filings required to be made
with the National Association of Securities Dealers, Inc. and (y) of compliance
with federal securities or Blue Sky laws (including, without limitation, fees
and disbursements of one counsel to the Holders in connection with Blue Sky
qualifications of the Warrant Shares under the laws of such jurisdictions as the
managing underwriter, if any, or the Holders may designate)), (ii) printing
expenses, (iii) messenger, telephone and delivery expenses, (iv) reasonable fees
and disbursements of counsel for the Company and one counsel for the Holders in
connection with the registration, (v) fees and disbursements of all independent
certified public accountants (including the expenses of any special audit and
"comfort" letters required by or incident to such performance) and (vi) the Act
liability
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<PAGE> 14
insurance obtained by the Company in its sole discretion. In addition, the
Company shall pay its internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the Warrant Shares on any securities
exchange or the Nasdaq Stock Market, as the case may be, on which similar
securities issued by the Company are then listed and the fees and expenses of
any Person, including special experts, retained by the Company. Notwithstanding
the provisions of this subsection, the Holders, shall pay all registration
expenses to the extent the Company is prohibited by applicable Blue Sky laws
from paying for or on their behalf.
(j) Blue Sky Laws. The Company shall use its reasonable best efforts
to register or qualify the Warrant Shares under such securities or Blue Sky laws
in such jurisdictions as the Holders may reasonably request; provided, however,
that the Company shall not be required in connection therewith or as a condition
thereof to (i) qualify or register as a foreign corporation in any such
jurisdiction, (ii) execute a general or limited consent to service of process in
any such jurisdiction, (iii) make any undertaking with respect to the conduct of
its business, (iv) subject itself to taxation as a foreign corporation in any
such jurisdiction, or (v) enter into any agreement with any state securities or
"blue sky" commission or agency, including, without limitation, any agreement to
escrow shares of its capital stock.
(k) Delay of Offering.If, in the reasonable judgment of the Company,
it is advisable to suspend use of the prospectus for a period of time due to
pending material corporate developments or similar material events that have not
yet been publicly disclosed and as to which the Company believes public
disclosure will be prejudicial to the Company, the Company shall deliver a
certificate in writing, signed by its Chief Executive Officer, Chief Financial
Officer or General Counsel, to Holders and the managing underwriter, if any, to
the effect of the foregoing and, upon receipt of such certificate, the Holders'
selling period will not commence until the Holders or managing underwriter, if
any, has received copies of the supplemented or amended prospectus, or until it
is or they are advised in writing by the Company that the prospectus may be
used, and has received copies of any additional or supplemental filings that are
incorporated or deemed incorporated by reference in such prospectus. The Company
will use all reasonable efforts to ensure that the use of the prospectus may be
resumed, and the selling period may commence, upon the earlier of (x) public
disclosure of such pending material corporate development or similar material
event or (y) a determination by the Company that, in the judgment of the
Company, public disclosure of such material corporate development or similar
material event would not be prejudicial to the Company. Notwithstanding the
foregoing, the Company shall not under any circumstances be entitled to exercise
its right under this Section 6.3(k) to defer the selling period more than one
time in any 12-month period or two times in any 24-month period, and the period
in which a selling period is suspended shall not exceed ninety (90) days.
(l) Indemnity.
(i) In the event of the registration or qualification of any
Warrant Shares pursuant to a Shelf Registration, the Company agrees to indemnify
and hold harmless
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<PAGE> 15
Holders and each officer, partner, employee, agent and representative of
Holders, each underwriter, broker or dealer, if any, of such Warrant Shares, and
each other Person, if any, who controls Holders, underwriter, broker or dealer
within the meaning of the Act, the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), or any other applicable securities laws, from and against
any and all losses, claims, damages or liabilities (or actions in respect
thereof) (collectively, the "Losses") , joint or several, to which any of them
may become subject under the Act or any other applicable securities laws or
otherwise, insofar as such Losses 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 Warrant Shares were registered or
qualified under the Act or any other applicable securities laws, any preliminary
prospectus or final prospectus relating to such Warrant 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 Act or any other applicable
securities laws applicable to the Company or relating to any action or inaction
required by the Company in connection with any such registration or
qualification and will reimburse Holders, each officer, director, employee,
agent and representative of Holders, underwriter, broker or dealer and each such
controlling Person for any legal or other expenses reasonably incurred by any of
them in connection with investigating or defending any such Loss; provided,
however, that the Company will not be liable in any such case to the extent that
any such Loss arises out of or is based upon an untrue statement of a material
fact or omission of a material statement necessary to make the statements, in
light of the circumstances under which they were made in such registration
statement, such preliminary prospectus, such final prospectus or such amendment
or supplement thereto, not misleading, in reliance upon and in conformity with
written information furnished to the Company by Holders, or any officer,
partner, employee, agent and representative thereof specifically and expressly
for use in the preparation thereof, or any violation of any rule or regulation
under the Securities Act or applicable securities laws, in which case such
person agrees to indemnify and hold harmless the Company and its Affiliates from
and against any and all Losses, joint or several, to which any of them may
become subject under the Act or any other applicable securities laws or
otherwise; and provided, further, that the Company shall not be liable to any
Person who participates as an underwriter in the offering or sale of Warrant
Shares or any other Person, if any, who controls such underwriter within the
meaning of the Act, in any such case to the extent that any such Loss (or action
or proceeding in respect thereof) or expense arises out of such Person's failure
to send or give a copy of the prospectus, as the same may be then supplemented
or amended, to the Person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Warrant Shares to such Person if such statement or
omission was corrected in such prospectus so long as such prospectus, and any
amendments or supplements thereto, have been furnished to such underwriter in
sufficient numbers and in a timely-manner to permit distribution thereof.
(ii) Promptly after receipt by a Person entitled to
indemnification under this Section (an "Indemnified Party") of notice of the
commencement of any action or claim relating to any registration statement filed
pursuant to a Shelf Registration 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 (an
"Indemnifying Party"), give written
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<PAGE> 16
notice to such Indemnifying Party of the commencement of such action or claim,
but the omission to so notify the Indemnifying Party will not relieve the
Indemnifying Party from any liability that it may have to any Indemnified Party
except to the extent that the Indemnifying Party is actually prejudiced thereby.
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 reasonably satisfactory to such Indemnified
Party, of such action provided that the Indemnifying Party shall not settle or
compromise such action, except upon the prior written consent of the Indemnified
Party 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 the
assumption of such defense shall not give rise in the reasonable opinion of the
Indemnified Party or its counsel to any conflict. Notwithstanding the foregoing,
the Indemnified Party shall have the right to employ its own counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (A) the employment of such counsel shall have been
authorized in writing by the Indemnifying Party in connection with the defense
of such suit, action, claim or proceeding, (B) the Indemnifying Party shall not
have employed counsel (reasonably satisfactory to the Indemnified Party) to take
charge of the defense of such action, suit, claim or proceeding, or (C) such
Indemnified Party shall have reasonably concluded, based upon the advice of
counsel, that there may be defenses available to it that are different from or
additional to those available to the Indemnifying Party which, if the
Indemnifying Party and the Indemnified Party were to be represented by the same
counsel, could result in a conflict of interest for such counsel or materially
prejudice the prosecution of the defenses available to such Indemnified Party.
If any of the events specified in clauses (A), (B) or (C) of the preceding
sentence shall have occurred or shall otherwise be applicable, then the
reasonable fees and expenses of one counsel or firm of counsel selected by the
Indemnified Party (and reasonably acceptable to the Indemnifying Party) shall be
borne by the Indemnifying Party. If, in any such case, the Indemnified Party
employs separate counsel, the Indemnifying Party shall not have the right to
direct the defense of such action, suit, claim or proceeding on behalf of the
Indemnified Party and the Indemnified Party shall assume such defense and/or
settle or compromise such action; provided, however, that an Indemnifying Party
shall not be liable for the settlement or compromise of any action, suit, claim
or proceeding effected without its prior written consent, which consent shall
not be unreasonably withheld.
(iii) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with any underwritten public offering
contemplated by this Agreement are in conflict with the foregoing provisions,
the provisions in such underwriting agreement shall be controlling.
(m) Information by the Holders. Each Holder holding securities
included in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to
16
<PAGE> 17
in this Section 6.3.
(n) Mergers, Etc. The Company shall not, directly or indirectly,
enter into any merger, consolidation, or reorganization in which the Company
shall not be the surviving corporation unless the proposed surviving corporation
shall, prior to such merger, consolidation, or reorganization, agree in writing
to assume the obligations of the Company under this Section, and for that
purpose references hereunder to "Warrant Shares" shall be deemed to be
references to the securities that the Holders, as the case may be, would be
entitled to receive in exchange for Warrant Shares under any such merger,
consolidation, or reorganization; provided, however, that the provisions of this
Section shall not apply in the event of any merger, consolidation, or
reorganization in which the Company is not the surviving corporation if Holders
are entitled to receive in exchange for their Warrant Shares consideration
consisting solely of (i) cash, (ii) securities of the acquiring corporation that
may be immediately sold to the public without registration under the Act, or
(iii) securities of the acquiring corporation that the acquiring corporation has
agreed to register within 90 days of completion of the transaction for resale to
the public pursuant to the Act.
SECTION 7. NOTIFICATIONS BY THE COMPANY. In case at any time:
(a) the Company shall declare any dividend payable in stock upon
Common Stock or make any distribution (other than cash dividends which are not
in a greater amount per share than the most recent cash dividend) to the holders
of the Common Stock;
(b) the Company shall propose to make an offer for subscription pro
rata to the holders of its Common Stock of any additional shares of stock of any
class or other rights;
(c) there shall be proposed any other transaction of a type
referred to in Section 4 hereof, and
(d) there shall be proposed a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give written notice to
the Holder of the date on which (i) the books of the Company shall close or a
record shall be taken for such dividend, distribution, subscription rights, or
other transaction, and (ii) such reorganization, reclassification,
consolidation, merger, sale, dissolution, other transaction, liquidation or
winding-up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Common Stock of record shall participate in
such dividend, distribution or subscription rights, or shall be entitled to
exchange their Common Stock for, or receive in respect of their Common Stock,
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, other transaction,
liquidation, or winding-up, as the case may be. Such written notice shall be
given not less than five (5) Business days prior to the taking of the action in
question.
SECTION 8. NOTICES. Any notice or other document required or permitted to
be given
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<PAGE> 18
or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to each Holder at the address listed in the stock records of the
Company or to such other address as shall have been furnished to the Company in
writing by such Holder. Any notice or other document required or permitted to be
given or delivered to the Company shall be delivered at, or sent by certified or
registered mail to, the principal office of the Company, at 100 Jeffrey Avenue,
Holliston, Massachusetts 01746, Attention: William McLendon or such other name
or address as shall have been furnished to the Holder by the Company.
SECTION 9. LIMITATION OF LIABILITY. No provision hereof, in the absence of
affirmative action by the Holder to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of the Holder for the Exercise Price or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
SECTION 10. GOVERNING LAW. This Warrant shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware,
without giving effect to its conflicts of laws provisions.
SECTION 11. MISCELLANEOUS. No term of this Warrant may be amended, except
with the joint written consent of the Holder and the Company. The headings in
this Warrant are for purposes of reference only and shall not affect the meaning
or construction of any of the provisions hereof.
IN WITNESS WHEREOF, Sight Resource Corporation has caused this Warrant to
be signed by its duly authorized officer under its corporate seal, attested by
its duly authorized officer, on the date first above written.
ATTEST: SIGHT RESOURCE CORPORATION
By:_____________________ By:________________________________
Name:___________________ Name:______________________________
Title:____________________ Title:_______________________________
(SEAL)
18
<PAGE> 19
ASSIGNMENT
TO BE EXECUTED BY THE REGISTERED HOLDER IF IT DESIRES AND
IS PERMITTED TO TRANSFER THE WITHIN WARRANT OF
SIGHT RESOURCE CORPORATION
FOR VALUE RECEIVED____________________________ hereby sells, assigns and
transfers unto ______________________ the right to purchase ___ of the number of
shares of Common Stock covered by the within Warrant, and does hereby
irrevocably constitute and appoint ________________ Attorney to transfer the
said Warrant on the books of the Company (as defined in said Warrant) with full
power of substitution.
Signature:________________________________(SEAL)
Address: _________________________________
_________________________________
Dated:_________________
19
<PAGE> 20
In the presence of: [Name of Institution]
_________________ By:________________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
20
<PAGE> 21
WARRANT CERTIFICATE
TO BE EXECUTED BY THE REGISTERED HOLDER
IF IT DESIRES TO EXERCISE THE WITHIN WARRANT OF
SIGHT RESOURCE CORPORATION
The undersigned hereby irrevocably exercises the right to purchase shares
of Common Stock obtainable by exercise of ___________ % of the within Warrant,
according to the conditions thereof and herewith makes payment of the Exercise
Price for such shares in full.
Signature___________________(SEAL)
Address:____________________
____________________
Dated:_____________________
In the presence of : [Name of Institution]
___________________________ By:____________________
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<PAGE> 1
Exhibit 4.4
AMENDMENT TO RIGHTS AGREEMENT
This AMENDMENT is entered into as of November 24, 1997 by and between
SIGHT RESOURCE CORPORATION, a Delaware corporation (the "Company"), and AMERICAN
STOCK TRANSFER & TRUST COMPANY (the "Rights Agent").
WHEREAS, the Company and the Rights Agent have entered into that certain
Rights Agreement, dated as of May 15, 1997 (the "Rights Agreement");
WHEREAS, the Board of Directors of the Company has authorized and directed
the Company to execute and deliver this Amendment to the Rights Agreement; and
WHEREAS, the Company and the Rights Agent are authorized to execute and
deliver this Amendment pursuant to the provisions of Section 27 of the Rights
Agreement.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
Section 1. Amendment to Rights Agreement. The definition of "Acquiring
Person" as set forth in Section 1 of the Rights Agreement is amended by deleting
the first sentence thereof and substituting in lieu thereof the following:
"Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial
Owner of 15% or more of the Common Shares of the Company then outstanding,
but shall not include (i) the Company, (ii) any Subsidiary of the Company,
(iii) any employee benefit plan of the Company or any Subsidiary of the
Company, or (iv) any entity holding Common Shares for or pursuant to the
terms of any such employee benefit plan. Notwithstanding the foregoing,
(1) no Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares by the Company which, by reducing the number
of shares outstanding, increases the proportionate number of shares
beneficially owned by such Person to 15% or more of the Common Shares of
the Company then outstanding; provided, however, that if a Person shall so
become the Beneficial Owner of 15% or more of the Common Shares of the
Company then outstanding by reason of an acquisition of Common Shares by
the Company and shall, after such share purchases by the Company, become
the Beneficial Owner of an additional 1% of the outstanding Common Shares
of the Company, then such Person shall be deemed to be an "Acquiring
Person"; (2) if the Board of Directors of the Company determines in good
faith that a Person who would otherwise be an "Acquiring Person," as
defined pursuant to the foregoing provisions of this paragraph, has become
such inadvertently, and such Person divests as promptly as practicable a
sufficient number of Common Shares so that such Person would no longer be
an "Acquiring Person," as defined pursuant to the foregoing provisions of
this paragraph, then such Person shall not be deemed to have become an
"Acquiring Person" for any purposes of this Agreement; and (3) neither The
Carlyle Group nor any of its Affiliates shall be deemed to have become an
"Acquiring Person" for any purposes of this Agreement solely as the result
of the consummation of the transactions contemplated by the Series B
Convertible Preferred Stock Purchase Agreement dated as of October 9, 1997
(the "Purchase Agreement"), including, without
<PAGE> 2
limitation, the purchase of the Series B Preferred Stock and the issuance
of shares of Common Stock upon the conversion of the Series B Preferred
Stock and upon the exercise of the warrants issued pursuant to the
Purchase Agreement, provided, however, that the foregoing exception shall
not apply if The Carlyle Group or any of its Affiliates becomes the
Beneficial Owner of 15% or more of the Common Shares of the Company then
outstanding in any manner other than as contemplated by the Purchase
Agreement.
Section 2. Rights Agent. In accordance with the provisions of Section 27
of the Rights Agreement, upon the delivery of a certificate from an appropriate
officer of the Company that states that this Amendment is in compliance with the
terms of Section 27 of the Rights Agreement, the Rights Agent shall execute this
Amendment, shall be under no obligation to investigate such compliance, and
shall be fully protected hereunder and thereunder by so doing.
Section 3. Effect of Amendment. The parties hereby ratify and confirm all
of the provisions of the Rights Agreement, as amended hereby, and agree and
acknowledge that the Rights Agreement as so amended remains in full force and
effect.
Section 4. Governing Law. This Amendment shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts to be made and performed entirely within such State.
Section 5. Counterparts. This Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
[THE NEXT PAGE IS THE SIGNATURE PAGE]
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and attested, all as of the day and year first above written.
Attest: SIGHT RESOURCE CORPORATION
Alan B. MacDonald William G. McLendon
By:____________________________ By:_______________________________
Title: VP/CFO Title: CEO
Attest: AMERICAN STOCK TRANSFER &
TRUST COMPANY
Susan Silber Herbert J. Lemmer
By:____________________________ By:______________________________
Title: Assistant Secretary Title: Vice President
<PAGE> 1
EXHIBIT 10.1
SIGHT RESOURCE CORPORATION
SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
DATED OCTOBER 9, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C> <C>
SECTION 1. DEFINITIONS.....................................................................................1
1.1 Defined Terms...................................................................................1
1.2 Other Defined Terms.............................................................................6
1.3 Other Definitional Provisions...................................................................7
SECTION 2. AUTHORIZATION AND SALE OF CONVERTIBLE PREFERRED
STOCK; WARRANTS AND WARRANT SHARES..............................................................7
2.1 Authorization of Convertible Preferred Stock;
Warrants and Warrant Shares.....................................................................7
2.2 Sale and Purchase of Convertible Preferred Stock;
Issuance of Warrants............................................................................7
2.3 Use of Proceeds.................................................................................7
SECTION 3. CLOSING DATE; DELIVERY..........................................................................8
3.1 Closing Date....................................................................................8
3.2 Delivery........................................................................................8
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................................8
4.1 Organization, Good Standing and Qualification...................................................8
4.2 Capitalization..................................................................................8
4.3 Subsidiaries....................................................................................8
4.4 Partnerships, Joint Ventures...................................................................10
4.5 Authorization..................................................................................10
4.6 Governmental Consents..........................................................................10
4.7 Absence of Litigation..........................................................................10
4.8 Insurance......................................................................................10
4.9 Patents and Trademarks.........................................................................11
4.10 Compliance with Other Instruments and Legal Requirements.......................................11
4.11 Material Agreements; Action....................................................................11
4.12 Broker's Fees..................................................................................12
4.13 Registration Rights............................................................................12
4.14 Corporate Documents............................................................................12
4.15 Real Property..................................................................................13
4.16 Tangible Personal Property.....................................................................14
4.17 Environmental Matters..........................................................................14
4.18 Company SEC Reports and Financial Statements...................................................15
4.19 Changes........................................................................................16
4.20 Employee Benefit Plans.........................................................................17
4.21 Taxes..........................................................................................20
</TABLE>
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<TABLE>
<S> <C> <C>
4.22 Labor and Employment Matters...................................................................20
4.23 No Pending Transactions........................................................................21
4.24 Disclosure.....................................................................................21
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASER......................................................................................22
5.1 Accredited Investor; Experience; Risk..........................................................22
5.2 Investment.....................................................................................22
5.3 Authorization..................................................................................22
5.4 Governmental Consents..........................................................................22
5.5 Broker's Fees..................................................................................22
5.6 Unregistered Shares............................................................................22
5.7 Access to Information..........................................................................23
5.8 Restricted Transfer of Securities .............................................................23
SECTION 6. CONDITIONS TO CLOSING OF PURCHASER.............................................................24
6.1 Representations and Warranties Correct.........................................................24
6.2 Covenants......................................................................................24
6.3 Opinion of Company's Counsel...................................................................24
6.4 No Material Adverse Change.....................................................................24
6.5 Certificate of Designation.....................................................................24
6.6 Consents.......................................................................................24
6.7 Issuance of Shares.............................................................................24
6.8 Certificates...................................................................................24
6.9 Warrants; Reservation of Common Stock..........................................................24
6.10 Appointment of Director........................................................................25
6.11 Bank Credit Facility...........................................................................25
SECTION 7. CONDITIONS TO CLOSING OF THE COMPANY...........................................................25
7.1 Representations................................................................................25
7.2 Covenants......................................................................................25
7.3 Purchase Price.................................................................................25
7.4 Certificate....................................................................................25
SECTION 8. COVENANTS OF THE COMPANY.......................................................................25
8.1 Information....................................................................................25
8.2 Preemptive Rights..............................................................................26
8.3 Company Registration...........................................................................27
8.4 Shelf Registration.............................................................................28
8.5 Certain Registration Matters...................................................................29
8.6 Regulatory Matters.............................................................................34
8.7 Access.........................................................................................34
8.8 Confidentiality................................................................................35
8.9 Amendment to NASD Listing Application..........................................................35
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
8.10 Reservation of Warrant Shares..................................................................35
8.11 Bank Credit Facility...........................................................................35
8.12 Repurchase Rights .............................................................................36
8.13 Directors' and Officers' Insurance ............................................................36
8.14 Selection of President ........................................................................36
SECTION 9. MISCELLANEOUS..................................................................................36
9.1 Amendment; Waiver..............................................................................36
9.2 Notices........................................................................................36
9.3 Severability...................................................................................37
9.4 Successors and Assigns.........................................................................37
9.5 Survival of Representations, Warranties and Covenants..........................................38
9.6 Entire Agreement...............................................................................38
9.7 Choice of Law..................................................................................38
9.8 Counterparts...................................................................................38
9.9 Costs and Expenses.............................................................................38
9.10 No Third-Party Beneficiaries...................................................................38
9.11 Indemnification................................................................................38
</TABLE>
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<PAGE> 5
SIGHT RESOURCE CORPORATION
SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT dated as of
October 9, 1997 (this "Agreement"), by and between SIGHT RESOURCE CORPORATION, a
Delaware corporation (the "Company"), and the purchasers listed on the signature
page hereto (collectively herein the "Purchaser").
W I T N E S S E T H
WHEREAS, the Company has issued and outstanding the shares of capital
stock described in Section 4.2 hereof and the Company has reserved for issuance
additional shares of capital stock upon the exercise of the outstanding
convertible securities, including rights, options and warrants, identified in
Section 4.2; and
WHEREAS, the Company proposes to issue and sell, and the Purchaser
desires to purchase, shares of the Company's Series B Convertible Preferred
Stock, par value $.01 per share, on the terms and conditions set forth herein;
and
WHEREAS, the Company proposes to issue, and the Purchaser desires to
acquire, the Class I Warrants and the Class II Warrants (each as hereafter
defined).
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
SECTION 1
Definitions
1.1. Defined Terms. The following terms are defined as follows:
"Affiliate" means, with respect to any Person, (i) any Person that
holds direct or indirect beneficial ownership (as defined in Rule 13d-3 under
the Exchange Act) of voting securities or other voting interests representing at
least 10% of the outstanding voting power of a Person or equity securities or
other equity interests representing at least 10% of the outstanding equity
securities or equity interests in a Person, (ii) any brother, sister, parent,
child or spouse of such Person or any Person described in clause (i), and (iii)
any Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such entity.
"Benefit Arrangement" means any benefit arrangement, obligation,
custom, or practice, whether or not legally enforceable, to provide benefits,
other than salary, as compensation for services rendered, to present or former
directors, employees, agents, or independent contractors, other than any
obligation, arrangement, custom or practice that is an Employee Benefit Plan,
<PAGE> 6
including, without limitation, employment agreements, severance agreements,
executive compensation arrangements, incentive programs or arrangements, sick
leave, vacation pay, severance pay policies, plant closing benefits, salary
continuation for disability, consulting, or other compensation arrangements,
workers' compensation, retirement, deferred compensation, bonus, stock option or
purchase, hospitalization, medical insurance, life insurance, tuition
reimbursement or scholarship programs, employee discounts, any plans subject to
Section 125 of the Code, and any plans providing benefits or payments in the
event of a change of control, change in ownership, or sale of a substantial
portion (including all or substantially all) of the assets of any business or
portion thereof, in each case with respect to any present or former employees,
directors, or agents.
"Change of Control" for the purpose of Section 8.12 of this Agreement
only, means any event or series of events by which (i) any Person or group
obtains a majority (by voting or otherwise) of the securities of the Company
ordinarily having the right to vote in the election of directors; (ii) during
any two year period, individuals who at the beginning of any such two year
period constituted the Board of Directors of the Company (together with any new
directors whose election by such Board or whose nomination for election by the
stockholders of the Company was approved by a vote of the majority of the
directors then still in office who were either directors at the beginning of
such period or whose election, recommendation, or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office; (iii) the merger,
consolidation, reorganization, recapitalization, dissolution or liquidation of
the Company if as a result the current stockholders no longer own more than 50%
of the voting securities of the Company; (iv) any sale, lease, exchange or other
transfer of all, or substantially all, of the assets of the Company; or (v) the
adoption of a plan leading to the liquidation or dissolution of the Company.
"Class I Warrants" means the Class I Warrants in the form attached
hereto as Exhibit A.
"Class II Warrants" means the Class II Warrants in the form attached
hereto as Exhibit B.
"Code" means the Internal Revenue Code of 1986 (or any successor
thereto), as amended from time to time.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Company Benefit Arrangement" means any Benefit Arrangement sponsored
or maintained by the Company or its Subsidiaries or with respect to which the
Company or a Subsidiary has or may have any liability (whether actual,
contingent, with respect to any of its assets or otherwise) as of the Closing
Date, in each case with respect to any present or former directors, employees,
or agents of the Company or the Subsidiaries.
"Company Plan" means, as of the Closing Date, any Employee Benefit Plan
for which the Company or any Subsidiary is the "plan sponsor" (as defined in
Section 3(16)(B) of ERISA) or any Employee Benefit Plan maintained by the
Company or any Subsidiary or to which the Company or any Subsidiary is obligated
to make payments, in each case with respect to any present or former
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<PAGE> 7
employees of the Company or the Subsidiaries.
"Company's Knowledge" or derivations thereof shall mean the knowledge
of the officers of the Company and each Subsidiary, and, with respect to
Sections 4.20 and 4.22, each person who conducts human resource and employee
benefits management functions for the Company or any Subsidiary, whether or not
an officer of the Company or such Subsidiary.
"Convertible Preferred Stock" means the Series B Convertible Preferred
Stock, par value $.01 per share, of the Company.
"Effectiveness Period" means the period commencing on the Closing Date
and ending on the date that all Registrable Securities shall have ceased to be
Registrable Securities.
"Employee Benefit Plan" has the meaning given in Section 3(3) of ERISA.
"Environmental Law" means any applicable foreign, federal, state or
local statute, regulation, ordinance or rule of common law as now in effect in
any way relating to the protection of human health and the environment
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Sections 9601 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. App. Sections 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Sections 6901 et seq.), the
Clean Water Act (33 U.S.C. Sections 1251 et seq.), the Clean Air Act (42 U.S.C.
Sections 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Sections
2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Sections 136 et seq.), and the Occupational Safety and Health Act (29 U.S.C.
Sections 651 et seq.), regulations promulgated pursuant to these statutes, and
common law principles of tort liability.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation or rule issued thereunder.
"ERISA Affiliate" means any Person that together with the Company,
would be or was at any time treated as a single employer under Section 414 of
the Code or Section 4001 of ERISA and any general partnership of which the
Company is or has been a general partner.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Hazardous Material" means any substance, material or waste that is
regulated by the United States, the foreign jurisdictions in which the Company
or its Subsidiaries conducts business, or any applicable state or local
governmental authority including, without limitation, petroleum and its
by-products, asbestos, and any material or substance that is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste,"
- 3 -
<PAGE> 8
"contaminant," "pollutant," "toxic waste" or "toxic substance" under any
provision of Environmental Law.
"Holder" means, individually, a general or limited partner of the
Purchaser who shall acquire Registrable Securities, and, collectively, the
general or limited partners of the Purchaser who shall acquire Registrable
Securities.
"Lien" means any lien, pledge, mortgage, deed of trust, security
interest, claim, lease, charge, option, right of first refusal, easement,
servitude, transfer restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"Material Adverse Effect" means a material adverse change to the
business, operations, financial condition, prospects (insofar as can reasonably
be foreseen), liabilities, assets or properties of any Person taken as whole.
"Multiemployer Plan" means any Employee Benefit Plan described in
Section 3(37) of ERISA.
"New Securities" means shares of Common Stock of the Company and any
securities or other rights convertible or exchangeable into or exercisable for
shares of Common Stock; provided, however, "New Securities" shall not include
(i) Common Stock issued or issuable upon conversion of the Convertible Preferred
Stock issued to Purchaser; (ii) Common Stock issued or issuable upon exercise of
the Warrants issued to Purchaser, (iii) securities issued by the Company as part
of any public offering pursuant to an effective registration statement under the
Securities Act; (iv) securities issued in connection with any stock split, stock
dividend or recapitalization of the Company; (v) equity securities and options
to purchase equity securities issued to management, directors or employees of or
consultants to the Company pursuant to plans outstanding as of the date hereof;
(vi) equity securities and options to purchase equity securities issued in
accordance with additional stock option or similar plans approved by the Board
or any class of stockholders, as required; (vii) securities issued in connection
with any merger or acquisition by the Company, and (viii) Common Stock or other
securities issued or issuable upon conversion of rights, options, warrants or
convertible securities issued and outstanding prior to the date hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means any approvals, authorizations, consents, licenses,
permits or certificates.
"Permitted Exceptions" means (i) all defects, exceptions, restrictions,
easements, rights of way and encumbrances disclosed in policies of title
insurance that have been made available to the Company; (ii) statutory Liens for
current taxes, assessments or other governmental charges not yet delinquent or
the amount or validity of which is being contested in good faith by appropriate
proceedings, provided an appropriate reserve is established therefor; (iii)
mechanics', carriers', workers', repairers' and similar Liens arising or
incurred in the ordinary course of business that
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<PAGE> 9
would not result in a Material Adverse Effect on the Company or its
Subsidiaries; (iv) zoning, entitlement and other land use and environmental
regulations by any governmental body, provided that such regulations have not
been violated; and (v) such other imperfections in title, charges, easements,
restrictions and encumbrances that would not result in a Material Adverse Effect
on any Company Property subject thereto or affected thereby.
"Person" means an individual, partnership, limited liability company,
corporation, joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"Qualified Plan" means any Employee Benefit Plan that meets, purports
to meet, or is intended to meet the requirements of Section 401(a) of the Code.
"Registrable Securities" means (i) shares of Common Stock or other
securities issued or issuable upon conversion of the Convertible Preferred
Stock; (ii) shares issued in connection with the exercise of the Preemptive
Rights as set forth in Section 8.2; (iii) shares of Common Stock issued or
issuable upon exercise of the Warrants, and (iv) any other shares of Common
Stock or securities issued in respect of such shares (because of stock splits,
stock dividends, reclassifications, recapitalization, mergers, consolidation,
share exchange or similar events); provided, however, that the foregoing shall
cease to be Registrable Securities upon the earlier of (x) the date that the
same are registered and disposed of pursuant to an effective registration
statement under the Securities Act and (y) the date upon which the Purchaser or
Holder has sold such Registrable Securities held by such Person without
registration pursuant to Rule 144 promulgated under the Securities Act.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal or leaching into the indoor
or outdoor environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up, remove, treat or
in any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsidiaries" means each corporation in which the Company owns or
controls, directly or indirectly, capital stock or other equity interests
representing at least 50% of the outstanding voting stock or other equity
interests.
"Warrants" means (i) the Class I Warrants and (ii) the Class II
Warrants.
"Welfare Plan" means any Employee Benefit Plan described in Section
3(1) of ERISA.
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<PAGE> 10
1.2 Other Defined Terms. The following terms shall have the meanings
assigned to them in the identified Sections of this Agreement.
"Balance Sheet" as defined in Section 4.18.
"Balance Sheet Date" as defined in Section 4.18.
"Bank Credit Facility" as defined in Section 6.11.
"Certificate of Designation" as defined in Section 2.1.
"Closing" as defined in Section 3.1.
"Closing Date" as defined in Section 3.1.
"Company 401(k) Plan" as defined in Section 4.20.
"Company Property" as defined in Section 4.16.
"Company SEC Reports" as defined in Section 4.18.
"GAAP" as defined in Section 4.18.
"Indemnified Party" as defined in Section 8.3.
"Indemnifying Party" as defined in Section 8.3.
"Initial Shelf Registration" as defined in Section 8.3.
"Inspectors" as defined in Section 8.3.
"Intellectual Property" as defined in Section 4.9.
"IRS" as defined in Section 4.20.
"Leased Properties" as defined in Section 4.15.
"Lock-up Period" as defined in Section 8.3(n).
"Losses" as defined in Section 8.3.
"Offer Period" as defined in Section 8.2.
"Owned Properties" as defined in Section 4.15.
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<PAGE> 11
"Personal Property Leases" as defined in Section 4.16.
"Preferred Stock" as defined in Section 4.2.
"Proportionate Percentage" as defined in Section 8.2.
"Real Property Leases" as defined in Section 4.15(a).
"Shelf Registration" as defined in Section 8.3.
"Subsequent Shelf Registration" as defined in Section 8.3.
"Transaction Documents" as defined in Section 4.5.
1.3. Other Definitional Provisions. Terms defined in the singular shall
have a comparable meaning when used in the plural and vice versa.
SECTION 2
Authorization and Sale of Convertible Preferred Stock; Warrants and
Warrant Shares
2.1. Authorization of Convertible Preferred Stock; Warrants and Warrant
Shares. At Closing, the Company will have authorized the issuance and sale to
the Purchaser of 1,452,119 shares of Convertible Preferred Stock, having the
rights, preferences, privileges and restrictions set forth in the Certificate of
Designation attached to this Agreement as Exhibit 2.1 hereto (the "Certificate
of Designation"). In addition, the Company will have authorized the issuance of
the Class I Warrants and the Class II Warrants, and shall have reserved for
issuance the number of shares of Common Stock issuable, from time to time, upon
exercise thereof.
2.2. Sale and Purchase of Convertible Preferred Stock; Issuance of
Warrants. In reliance on the representations and warranties of the Company
contained herein and subject to the terms and conditions hereof, the Purchaser
agrees to purchase from the Company, and the Company agrees to sell to the
Purchaser, 1,452,119 shares of Convertible Preferred Stock, the Class I Warrants
and the Class II Warrants for the aggregate purchase price of Five Million
Eighty-Two Thousand Four Hundred Seventeen Dollars ($5,082,417). The aggregate
number of shares of Common Stock issuable upon conversion of the Convertible
Preferred Stock and upon exercise of the Class II Warrants represents
approximately 19.9% of the issued and outstanding Common Stock of the Company at
the date of Closing.
2.3 Use of Proceeds. The Company agrees to use the full proceeds from
the sale of the Convertible Preferred Stock (after deduction of the expenses of
this transaction) for acquisitions and related costs, fees and expenses and for
working capital purposes.
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<PAGE> 12
SECTION 3
Closing Date; Delivery
3.1. Closing Date. The closing of the purchase and sale of the
Convertible Preferred Stock and the issuance of the Class I Warrants and Class
II Warrants hereunder (the "Closing") shall be held at the offices of Wilmer,
Cutler & Pickering, 2445 M Street, N.W., Washington, D.C. 20037 on the earlier
of (i) November 24, 1997, (ii) the date on which the Company and the Company's
new President, which individual shall be reasonably acceptable to both the
Company and Purchaser, shall have executed an employment agreement, which
employment agreement shall be reasonably acceptable to both the Company and the
Purchaser, or (iii) on such other date or at such other place as the Purchaser
and the Company shall mutually agree (the date of the Closing being referred to
herein as the "Closing Date").
3.2. Delivery. At the Closing, the Company shall deliver to Purchaser a
certificate or certificates evidencing the shares of Convertible Preferred Stock
and the Class I Warrants and the Class II Warrants being purchased by it
registered in the Purchaser's name against delivery to the Company of payment in
an amount equal to the full purchase price of the shares of Convertible
Preferred Stock and the Class I Warrants and the Class II Warrants being
purchased by the Purchaser by certified check or wire transfer to an account
designated by the Company.
SECTION 4
Representations and Warranties of the Company
The Company hereby represents and warrants to, and agrees with, the
Purchaser as follows:
4.1. Organization, Good Standing and Qualification. Each of the Company
and its Subsidiaries (i) is an entity duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization, (ii) has
all requisite power and authority to carry on its business, (iii) is duly
qualified to transact business and is in good standing in all jurisdictions
where its ownership, lease or operation of property or the conduct of its
business requires such qualification, except where the failure to be so
qualified would not, and reasonably could not be expected to, have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole. The Company
has the corporate power and authority and is in possession of all franchises,
grants, authorizations, licenses, permits, easements, consents, certificates,
approvals and orders to (i) own, lease and operate its properties and to carry
on its business as now being conducted and (ii) execute and deliver this
Agreement and the documents and instruments contemplated hereby and to
consummate the transactions contemplated hereby.
4.2. Capitalization.
(a) The authorized capital stock of the Company is 25,000,000
shares, consisting of 20,000,000 shares of common stock, par value $.01 per
share ("Common Stock") of which 8,756,500 shares are issued and outstanding and
30,600 shares are held in treasury, and 5,000,000 shares of preferred stock, par
value $.01 per share ("Preferred Stock"), none of which are issued and
outstanding. Schedule 4.2 lists the options, rights and warrants of the Company
issued and outstanding prior to Closing. The Company has reserved for issuance
3,548,281 shares of Common
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<PAGE> 13
Stock upon exercise or conversion of currently outstanding shares of
convertible preferred stock and rights, options, warrants and other convertible
securities. The Company has reserved for issuance 1,500,000 shares of Common
Stock under employee stock purchase plans, stock option plans or other Employee
Benefit Plans. The Company has reserved for issuance 2,584,837 shares of Common
Stock upon conversion of the authorized shares of Convertible Preferred Stock
and the Warrants. Except as set forth in this Section or listed on Schedule 4.2,
there are outstanding (a) no shares of capital stock or other voting stock of
the Company, (b) no securities of the Company or any Subsidiary convertible into
or exchangeable for shares of capital stock or voting securities of the Company,
(c) no options, warrants or other rights to acquire from the Company or any
Subsidiary (including any rights issuable or issued under any shareholder rights
plan or similar arrangement), and no obligations, contingent or otherwise, of
the Company or any Subsidiary to issue any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of the Company or any Subsidiary, (d) no equity equivalent in the
earnings or ownership of the Company or any Subsidiary or any similar rights to
share earnings or ownership, and (e) no outstanding obligations of the Company
to repurchase, redeem or otherwise acquire any of its securities or to make any
investment (by loan, capital contribution or otherwise) in any entity. All
outstanding options, rights and warrants have been duly and validly issued and
are in full force and effect. All shares of capital stock subject to issuance
upon exercise of any options, rights or warrants or otherwise, upon issuance
pursuant to the instruments under which they are issuable, shall be duly
authorized, validly issued, fully paid for and non-assessable and free of all
preemptive rights. No outstanding options, warrants or other securities
exercisable for or convertible into shares of capital stock of the Company
require anti-dilution adjustments by reason of the consummation of the
transactions contemplated hereby.
(b) The issued and outstanding shares of capital stock of the
Company are duly authorized, validly issued, fully paid and non-assessable. The
shares of Convertible Preferred Stock to be issued pursuant to this Agreement,
upon delivery to the Purchaser of certificates therefor against payment in
accordance with the terms of this Agreement, and the shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock and exercise of the
Warrants when issued upon conversion of such Convertible Preferred Stock or upon
exercise of such Warrants, (i) will be validly issued, fully paid and
non-assessable, (ii) will be free and clear of all Liens, and (iii) based upon
applicable federal and state securities laws presently in effect and assuming
that the representations of the Purchaser in Section 5 hereof are true and
correct, will be issued in compliance with all applicable federal and state
securities laws.
4.3. Subsidiaries. Schedule 4.3 sets forth a complete and accurate list
of all Subsidiaries of the Company, showing (as to each such Subsidiary) the
date of its incorporation, the jurisdiction of its incorporation, the number of
shares of its authorized capital stock, the number and class of shares thereof
duly issued and outstanding, the names of all stockholders of such Subsidiaries
and the number and percentage of the outstanding shares of each such class
owned, directly or indirectly, by all such stockholders, including the Company.
All of the outstanding capital stock of, or other ownership interests in, each
Subsidiary, is owned by the Company, directly or indirectly, free and clear of
any Lien. All outstanding shares of the capital stock of the Company and any
Subsidiary have been duly authorized and validly issued and are fully paid and
non-assessable and are free of
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<PAGE> 14
any preemptive rights. There are no outstanding securities of any Subsidiary
convertible into or evidencing the right to purchase or subscribe for any shares
of capital stock of any Subsidiary, there are no outstanding or authorized
options, warrants, calls, subscriptions, rights, commitments or any other
agreements of any character obligating any Subsidiary to issue any shares of its
capital stock or any securities convertible into or evidencing the right to
purchase or subscribe for any shares of such stock, and there are no agreements
or understandings with respect to the voting, sale, transfer or registration of
any shares of capital stock of any Subsidiary.
4.4. Partnerships, Joint Ventures. Except as set forth on Schedule 4.4,
the Company is not a party to, and does not hold, any equity interests in any
partnership, limited partnership, limited liability company or other joint
venture of any kind.
4.5. Authorization. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and each agreement, document or
instrument adopted, entered into or delivered by it as contemplated herewith
(the "Transaction Documents") and to perform its obligations hereunder and
thereunder. The execution, delivery and performance of the Agreement and the
transactions contemplated hereby have been duly authorized by all necessary
corporate, including shareholder (if required), action on the part of the
Company. Each Transaction Document to which it is a party has been duly and
validly executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) and except to the extent that rights to indemnification and
contribution under this Agreement may be limited by federal or state securities
laws or public policy relating thereto.
4.6. Governmental Consents. Except as set forth on Schedule 4.6, no
consent, approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any federal, state, or local
governmental authority on the part of the Company is required in connection with
the valid execution and delivery by the Company of the Transaction Documents to
which it is a party, or the consummation by the Company of the transactions
contemplated by the Transaction Documents to which it is a party.
4.7. Absence of Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries, or any properties or
rights of the Company or its Subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, that could reasonably be expected to have a Material Adverse Effect on
the Company and its Subsidiaries taken as a whole.
4.8. Insurance. The Company and its Subsidiaries maintain insurance of
the type and in the amount described in Schedule 4.8, and that is customary in
their industries, from time to time,
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with respect to their respective businesses and are in compliance with all
material requirements and provisions thereof.
4.9. Patents and Trademarks. The Company and its Subsidiaries have
sufficient title and ownership of (or rights under license agreements to use)
all patents, trademarks, service marks, trade names, copyrights, trade secrets,
proprietary rights and processes ("Intellectual Property") necessary for their
businesses. There are no outstanding options, licenses or agreements of any kind
relating to the foregoing, nor is the Company or any of its Subsidiaries bound
by or a party to any options, licenses or agreements of any kind with respect to
the patents, trademarks, service marks, trade names, copyrights, trade secrets,
proprietary rights and processes of any other Person. A list of all patents,
patent applications, registered trademarks, trademark applications, registered
copyrights and copyright applications owned by the Company or any of its
Subsidiaries is set forth on Schedule 4.9. Within the past five years, the
Company has not received any communications alleging that the Company or any of
its Subsidiaries has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights,
trade secrets, proprietary rights and processes of any other Person, nor is the
Company aware of any such violations.
4.10. Compliance with Other Instruments and Legal Requirements.
(a) None of the Company or any of its Subsidiaries is in
violation or default of any provisions of its certificate of incorporation,
by-laws, or comparable organizational documents. None of the Company or any of
its Subsidiaries is in violation or default in any material respect under any
provision, instrument, judgment, order, writ, decree, contract or agreement to
which it is a party or by which it is bound or of any provision of any federal,
state or local statute, rule or regulation applicable to the Company or any of
its Subsidiaries (including, without limitation, any law, rule or regulation
relating to protection of the environment and the maintenance of safe and
sanitary premises), which could reasonably be expected to have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole. Except as
set forth on Schedule 4.10, the execution, delivery and performance of each
Transaction Document and the consummation of the transactions contemplated
hereby and thereby will not result in any such violation or be in conflict with
or constitute, with or without the passage of time or giving of notice, either a
default under or give rise to any obligations under, the Certificate of
Incorporation or By-Laws of the Company, or any note, bond, mortgage, indenture,
lease, license, permit, contract, agreement or other instrument or obligation,
decree or order to which the Company or any Subsidiary is a party or by which
the Company or any Subsidiary or its properties or assets is or may be bound, or
violate any law, order, rule or regulation applicable to the Company or any
Subsidiary, except for conflicts, breaches and violations which could not result
in a Material Adverse Effect on the Company and its Subsidiaries taken as a
whole, and does not require any consent, waiver or approval thereunder, or
constitute an event that results in the creation of any material Lien upon any
assets of the Company or any of its Subsidiaries.
(b) The Company and its Subsidiaries have all material Permits
of all governmental entities required to conduct their respective businesses as
currently conducted by the
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<PAGE> 16
Company and its Subsidiaries.
(c) Except as set forth on Schedule 4.10, the transactions
contemplated by this Agreement and the Transaction Documents will not constitute
a change of control under any Employee Benefit Plan, rights plan, contract or
agreement to which it is a party, or under any law, rule or regulation to which
it is subject.
4.11. Material Agreements; Action. Except as set forth on Schedule
4.11, there are no material contracts, agreements, commitments, understandings
or proposed transactions, whether written or oral, to which the Company or any
of its Subsidiaries is a party or by which it is bound that involve or relate
to: (i) any of their respective officers, directors, stockholders or partners or
any Affiliate thereof; (ii) the sale of any of the assets of the Company or any
of its Subsidiaries other than in the ordinary course of business; (iii)
covenants of the Company or any of its Subsidiaries not to compete in any line
of business or with any Person in any geographical area; (iv) the acquisition by
the Company or any of its Subsidiaries of any operating business or the capital
stock of any other Person; (v) the borrowing of money; (vi) the expenditure of
more than $50,000 in the aggregate or the performance by the Company or any
Subsidiary extending for a period more than one year from the date hereof, other
than in the ordinary course of business, or (vii) the license of any
Intellectual Property or other material proprietary right to or from the Company
or any of its Subsidiaries. There have been made available to the Purchaser and
its representatives true and complete copies of all such agreements. All such
agreements are in full force and effect and are the legal, valid and binding
obligation of the Company or its Subsidiaries, enforceable against them in
accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether enforcement is sought in a proceeding at law or in
equity). None of the Company or any of its Subsidiaries is in default in any
material respect under any such agreements nor, to the Company's Knowledge, is
any other party to any such agreements in default thereunder in any material
respect.
4.12. Brokers' Fees. Except as set forth on Schedule 4.12, no broker,
finder, investment banker or other Person is entitled to any brokerage fee,
finder's fee or other commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by the Company.
4.13. Registration Rights. Except as set forth in Schedule 4.13 or
pursuant to this Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback registration rights, to any Person.
Schedule 4.13 sets forth the name of the persons granted such registration
rights and a description of such registration rights.
4.14. Corporate Documents. True and correct copies of the Certificate
of Incorporation and the By-laws of the Company, as amended, have been delivered
to the Purchaser.
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<PAGE> 17
4.15. Real Property.
(a) Schedule 4.15(a) sets forth a complete list of all real
property and interests in real property owned (the "Owned Properties") or leased
(the "Leased Properties") by the Company and its Subsidiaries as lessee or
lessor (the Leased Properties together with the Owned Properties, being referred
to herein individually as a "Company Property" and collectively as the "Company
Properties"). The Company Property constitutes all interests in real property
currently used or currently held for use in connection with the businesses of
the Company and its Subsidiaries and which are necessary for the continued
operation of the businesses of the Company and its Subsidiaries as such
businesses are currently conducted. The Company and its Subsidiaries have a
valid and enforceable leasehold interest under each of the leases for Leased
Property (the "Real Property Leases"), and none of the Company or any of its
Subsidiaries has received any written notice of any default or event which, with
notice or lapse of time, or both, would constitute a default by the Company or
any of its Subsidiaries under any of the Real Property Leases. All of the
Company Property, buildings, fixtures and improvements thereon owned or leased
by the Company and its Subsidiaries are in good operating condition and repair
(subject to normal wear and tear) except for deficiencies which do not have a
Material Adverse Effect. The Company has delivered or otherwise made available
to the Purchaser true, correct and complete copies of the Real Property Leases,
together with all amendments, modifications or supplements, if any, thereto.
(b) The Company and its Subsidiaries have all material
certificates of occupancy and Permits of any governmental body necessary or
useful for the current use and operation of each Company Property, and the
Company and its Subsidiaries have fully complied with all material conditions of
the Permits applicable to them. No default or violation, or event which, with
the lapse of time or giving of notice or both would become a default or
violation, has occurred in the due observance of any such Permit, which could
reasonably be expected to have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole.
(c) There does not exist any actual, or, to the Company's
Knowledge, threatened or contemplated condemnation or eminent domain proceedings
that affect any Company Property or any part thereof, and none of the Company or
any of its Subsidiaries has received any notice, oral or written, of the
intention of any governmental body or other Person to take or use all or any
part thereof.
(d) None of the Company or any of its Subsidiaries has
received any written notice from any insurance company that has issued a policy
with respect to any Company Property requiring performance of any structural or
other repairs or alterations to such Company Property.
(e) Except as set forth in Schedule 4.15(e) none of the
Company or any of its Subsidiaries owns or holds, and is obligated under or a
party to, any option, right of first refusal or other contractual right to
purchase, acquire, sell, assign or dispose of any real estate or any portion
thereof or interest therein.
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<PAGE> 18
4.16. Tangible Personal Property.
(a) Schedule 4.16(a) sets forth all leases of personal
property ("Personal Property Leases") involving annual payments in excess of
$50,000 relating to personal property used in the business of the Company and
its Subsidiaries or to which the Company or any of its Subsidiaries is a party
or by which the properties or assets of the Company or any of its Subsidiaries
is bound. The Company has delivered or otherwise made available to the Purchaser
true, correct and complete copies of the Personal Property Leases, together with
all amendments, modifications or supplements, if any, thereto.
(b) Each of the Company and its Subsidiaries has a valid
leasehold interest under each of the Personal Property Leases under which it is
a lessee, and there is no material default under any Personal Property Lease by
the Company or any of its Subsidiaries, or, to the Company's Knowledge, by any
other party thereto, and no event has occurred which, with the lapse of time or
the giving of notice or both would constitute a default thereunder.
(c) Except as set forth on Schedule 4.16(c), each of the
Company and its Subsidiaries has good and marketable title to all of the items
of tangible personal property reflected in the balance sheets referred to in
Section 4.18 (except as sold or disposed of subsequent to the date thereof in
the ordinary course of business consistent with past practice), free and clear
of any and all Liens other than the Permitted Exceptions. All such items of
tangible personal property that, individually or in the aggregate, are material
to the operation of the business of the Company and its Subsidiaries are in good
condition and in a state of good maintenance and repair (ordinary wear and tear
excepted).
(d) All of the items of tangible personal property used by the
Company and its Subsidiaries under the Personal Property Leases are in good
condition and repair (ordinary wear and tear excepted) and are suitable for the
purposes used except for deficiencies which could not reasonably be expected to
have a Material Adverse Effect.
4.17. Environmental Matters.
Except as set forth on Schedule 4.17:
(a) The operations of each of the Company and its Subsidiaries
are in compliance in all material respects with all applicable Environmental
Laws and all Permits issued to them pursuant to Environmental Laws or otherwise;
(b) Each of the Company and its Subsidiaries has obtained all
material Permits required under all applicable Environmental Laws necessary to
operate its business;
(c) None of the Company or any of its Subsidiaries is the
subject of any outstanding written order, agreement or arrangement with any
governmental authority or Person respecting (i) Environmental Laws, (ii)
Remedial Action or (iii) any Release or threatened Release
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<PAGE> 19
of a Hazardous Material;
(d) None of the Company or any of its Subsidiaries has
received any written communication alleging either or both that the Company or
any of its Subsidiaries may be in violation of any Environmental Law, or any
Permit issued pursuant to Environmental Law, or may have any liability under any
Environmental Law;
(e) None of the Company or any of its Subsidiaries, to the
Company's Knowledge, has any current contingent liability in connection with any
Release of any Hazardous Materials into the indoor or outdoor environment
(whether on-site or off-site);
(f) None of the Company or any of its Subsidiaries has
received notice of any investigations of the business, operations, or currently
or previously owned, operated or leased property of the Company or its
Subsidiaries, and to the Company's Knowledge, there are no pending or threatened
investigations that could lead to the imposition of any liability pursuant to
Environmental Law;
(g) There is not located at any of the properties owned, or to
the Company's Knowledge, at any of the properties leased or operated by the
Company or any of its Subsidiaries any (i) underground storage tanks, (ii)
asbestos-containing material, (iii) equipment containing polychlorinated
biphenyls, any (iv) Hazardous Materials located at any Company Property (other
than for Hazardous Materials used or stored by the Company or any Subsidiary in
the ordinary course of business and in material compliance with applicable
Environmental Laws and Permits); and
(h) The Company has provided to the Purchaser all
environmentally related audits, studies, reports, analyses and results of
investigations, if any, to the Company's Knowledge, that have been performed
with respect to the currently or previously owned, leased or operated properties
of the Company or any of its Subsidiaries.
4.18. Company SEC Reports and Financial Statements.
(a) The Company has delivered to Purchaser true and complete
copies of all periodic reports, statements and other documents that the Company
has filed with the SEC under the Exchange Act since December 31, 1996
(collectively, the "Company SEC Reports"), each in the form (including exhibits
and any amendments thereto) required to be filed with the SEC. Except as set
forth on Schedule 4.18, as of their respective dates, each of the Company's SEC
Reports (i) complied in all material respects with all applicable requirements
of the Securities Act and the Exchange Act, and the rules and regulations
promulgated thereunder, respectively, (ii) were filed in a timely manner, and
(iii) 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 Subsidiaries is required to file any forms, reports
or other documents with the SEC.
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<PAGE> 20
(b) Each of the audited consolidated financial statements of
the Company (including any related notes and schedules thereto) included (or
incorporated by reference) in its Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, are accurate and complete and fairly presents, in
conformity with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be noted
therein), and in conformity with the SEC's Regulation S-X, the consolidated
financial position of the Company and its consolidated subsidiaries as of its
date and the consolidated results of operations and changes in financial
position for the period then ended.
(c) Except as and to the extent set forth (or incorporated by
reference) in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 (the "Balance Sheet Date") or as set forth on Schedule 4.18,
none of the Company or any of its Subsidiaries has incurred any liability or
obligation of any nature whatsoever (whether due or to become due, accrued,
fixed, contingent, liquidated, unliquidated or otherwise) that would be required
by GAAP to be accrued on, reflected on, or reserved against it, on a
consolidated balance sheet (the "Balance Sheet") (or in the applicable notes
thereto) of the Company or any of its Subsidiaries prepared in accordance with
GAAP consistently applied, other than liabilities or obligations which arose in
the ordinary course of business and consistent with past practices since such
date and which do not or could not individually or in the aggregate have a
Material Adverse Effect.
4.19. Changes. Except as set forth on Schedule 4.19, since December 31,
1996, there has not been:
(a) any change in the assets, liabilities, financial condition
or operating results of the Company or any of its Subsidiaries, except changes
in the ordinary course of business that could not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect;
(b) any damage, destruction or loss, whether or not covered by
insurance that could reasonably be expected, individually or in the aggregate,
to have a Material Adverse Effect;
(c) any waiver by the Company or any of its Subsidiaries of a
valuable right or of a material debt owed to it outside of the ordinary course
of business or that otherwise could reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect;
(d) any satisfaction or discharge of any Lien or payment of
any obligation by the Company or any of its Subsidiaries that could reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect;
(e) any change or amendment to a contract or arrangement by
which the Company or any of its Subsidiaries or any of their respective assets
or properties is bound or subject that could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect;
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<PAGE> 21
(f) other than in the ordinary course of business, any
material increase in excess of $25,000 annually in any compensation arrangement
or agreement with any employee of the Company or any of its Subsidiaries
receiving compensation;
(g) any events or circumstances that otherwise could
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; and
(h) none of the Company or any of its Subsidiaries has (i)
declared or paid any dividends, or authorized or made any distribution upon or
with respect to any class or series of its capital stock or equity interests,
(ii) incurred any indebtedness for money borrowed in excess of $20,000, (iii)
made any loans or advances to any Person, other than ordinary advances for
travel expenses not exceeding $20,000, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights for consideration in excess of $20,000
in any one transaction or series of related transactions.
4.20. Employee Benefit Plans
(a) Schedule 4.20(a) contains a complete and accurate list of
all Company Plans and Company Benefit Arrangements. Schedule 4.20(a)
specifically identifies all Company Plans (if any) that are Qualified Plans.
(b) With respect, as applicable, to Employee Benefit Plans and
Benefit Arrangements:
(i) true, correct, and complete copies of all of the
following documents with respect to each Company Plan and Company Benefit
Arrangement, to the extent applicable, have been delivered to the
Purchaser: (A) all documents constituting the Company Plans and Company Benefit
Arrangements, including, but not limited to, trust agreements, insurance
policies, service agreements, and formal and informal amendments thereto; (B)
the most recent applicable Forms 5500 or 5500 C/R and any financial statements
attached thereto for the prior three years; (C) the most recent Internal Revenue
Service (the "IRS") determination letter and the latest IRS determination letter
that covered the qualification of the entire Company Plan (if different), and
copies of the materials submitted by the Company to obtain those letters; (D)
the most recent summary plan descriptions (if required by ERISA); (E) the most
recent written descriptions of all non-written agreements relating to any such
plan or arrangement (if such documents or writings exist), (F) all material
reports submitted within the two years preceding the date of this Agreement by
third-party administrators, actuaries, investment managers, consultants, or
other independent contractors; (G) all material notices that were given to the
Company within the two years preceding the date of this Agreement by the IRS,
Department of Labor, or any other governmental agency or entity with respect to
any plan or arrangement; and (H) employee manuals or handbooks containing
personnel or employee relations policies;
(ii)the Sight Resource 401(k) Plan (the "Company
401(k) Plan") is the only Qualified Plan. The Company and its Subsidiaries have
never maintained or contributed
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<PAGE> 22
to another Qualified Plan. The Company 401(k) Plan qualifies in all material
respects under Section 401(a) of the Code, and any trusts maintained pursuant
thereto are exempt from federal income taxation under Section 501 of the Code,
and no material event has occurred with respect to the design or operation of
any of the Company's Qualified Plans that could cause the loss of such
qualification or exemption or the imposition of any liability, lien, penalty, or
tax under ERISA or the Code;
(iii) the Company and the Subsidiaries have never sponsored or
maintained, had any obligation to sponsor or maintain, or had any liability
(whether actual or contingent, with respect to any of its assets or otherwise)
with respect to any Employee Benefit Plan subject to Section 302 of ERISA or
Section 412 of the Code or Title IV of ERISA (including any Multiemployer Plan);
(iv) each Company Plan and each Company Benefit Arrangement has been
operated in material compliance with its constituent documents and with all
applicable provisions of the Code, ERISA and other laws, including federal and
state securities laws;
(v) to the Company's Knowledge, there are no pending claims or lawsuits
by, against, or relating to any Employee Benefit Plans or Benefit Arrangements
that are Company Plans or Company Benefit Arrangements that would, if
successful, result in liability of the Company or any Stockholder, and no claims
or lawsuits have been asserted, instituted or, to the Company's Knowledge,
threatened by, against, or relating to any Company Plan or Company Benefit
Arrangement, against the assets of any trust or other funding arrangement under
any such Company Plan, by or against the Company or the Subsidiaries with
respect to any Company Plan or Company Benefit Arrangement, or by or against the
plan administrator or any fiduciary of any Company Plan or Company Benefit
Arrangement. No notice has been received of a pending or potential audit or
examination by the IRS, Department of Labor, or any other governmental agency or
entity of any Company Plan or Company Benefit Arrangement, and, to the Company's
Knowledge, no such audit or examination is presently being conducted. No matters
are pending with respect to the Company 401(k) Plan under the IRS's Voluntary
Compliance Resolution Program, its Closing Agreement Program, or any other
governmental compliance programs;
(vi) no Company Plan or Company Benefit Arrangement contains any
provision or is subject to any law that would prohibit the transactions
contemplated by this Agreement or that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions contemplated by this Agreement;
(vii) with respect to each Company Plan, there has occurred no non-
exempt "prohibited transaction" (within the meaning of Section 4975 of the Code)
or transaction prohibited by Section 406 of ERISA or breach of any fiduciary
duty described in Section 404 of ERISA that would, if successfully litigated,
result in any material liability for the Company or any Stockholder, officer,
director, or employee of the Company;
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<PAGE> 23
(viii) the Company has complied, in all material respects, with all
reporting, disclosure, and notice requirements of ERISA and the Code with
respect to each Company Plan and each Company Benefit Arrangement;
(ix) all amendments and actions required to bring the Company Benefit
Plans into conformity with the applicable provisions of ERISA, the Code, and
other applicable laws have been made or taken except to the extent such
amendments or actions (A) are not required by law to be made or taken until
after the Effective Date and (B) are disclosed on Schedule 4.20(b)(ix);
(x) arrangements for payment have been made of all amounts that the
Company and each Subsidiary is required to pay as contributions to the Company
Benefit Plans as of the last day of the most recent fiscal year of each of the
plans ended before the date of this Agreement; all benefits accrued under any
unfunded Company Plan or Company Benefit Arrangement will have been paid,
accrued, or otherwise adequately reserved in accordance with GAAP as of the
Balance Sheet Date; and all monies withheld from employee paychecks with respect
to Company Plans have been transferred to the appropriate plan within 30 days of
such withholding;
(xi) except as disclosed on Schedule 4.20(b)(xi), the Company and the
Subsidiaries have not prepaid or prefunded any Welfare Plan through a trust,
reserve, premium stabilization, or similar account, nor do they provide benefits
through a voluntary employee beneficiary association as defined in Section
501(c)(9);
(xii) to the Company's Knowledge, no statement, either written or oral,
has been made by the Company or the Subsidiaries to any Person with regard to
any Company Plan or Company Benefit Arrangement that was not in accordance with
the Company Plan or Company Benefit Arrangement and that could have an adverse
economic consequence to the Company or the Subsidiaries;
(xiii) the Company and the Subsidiaries have no liability (whether
actual, contingent, with respect to any of its assets or otherwise) with respect
to any Employee Benefit Plan or Benefit Arrangement that is not a Company
Benefit Arrangement or with respect to any Employee Benefit Plan sponsored or
maintained (or which has been or should have been sponsored or maintained) by
any ERISA Affiliate;
(xiv) all group health plans of the Company and its ERISA Affiliates
have been operated in material compliance with the requirements of Sections
4980B (and its predecessor) and 5000 of the Code; and
(xv) no employee or former employee of the Company or beneficiary of
any such employee or former employee is, by reason of such employee's or former
employee's employment, entitled to receive any benefits, including, without
limitation, death or medical benefits (whether or not insured) beyond retirement
or other termination of employment as described in Statement of Financial
Accounting Standards No. 106, other than (i) death or retirement benefits under
a Qualified Plan, (ii) deferred compensation benefits accrued as liabilities on
the Closing
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<PAGE> 24
Statement or (iii) continuation coverage mandated under Section 4980B of the
Code or other applicable law.
(c) Schedule 4.20(c) hereto sets forth an accurate list, as of
the date hereof, of all officers, directors, and key employees of the Company
and lists all employment agreements with such officers, directors, and key
employees and the rate of compensation (and the portions thereof attributable to
salary, bonus, and other compensation respectively) of each such Person as of
(a) December 31, 1996 and (b) the date hereof.
(d) The Company has not declared or paid any bonus
compensation in contemplation of the transactions contemplated by this
Agreement.
4.21. Taxes. Except as set forth on Schedule 4.21, all federal and
state and all material local and foreign tax returns, reports and statements
required to be filed by the Company and its Subsidiaries have been filed or have
been caused to be filed with the appropriate governmental agencies in all
jurisdictions in which such returns, reports and statements are required to be
filed and all such returns, reports and statements are true, complete and
correct in all material respects. All taxes, charges and other impositions due
and payable by the Company and its Subsidiaries have been paid in full on a
timely basis except where contested in good faith and by appropriate proceedings
if adequate reserves therefor have been established on the books and records of
the Company or Subsidiary in accordance with GAAP. The provision for taxes of
each of the Company and its Subsidiaries as shown in the Company SEC Reports is
sufficient for all unpaid taxes, charges and other impositions of any nature due
or accrued as of the date of the financial statements contained in such Company
SEC Report, whether or not assessed or disputed. Proper and accurate amounts
have been withheld by the Company and its Subsidiaries from their respective
employees for all periods in full and complete compliance with the tax, social
security and unemployment withholding provisions of applicable federal, state,
local and foreign law and such withholdings have been timely paid to the
respective governmental agencies. The Company has not received notice of any
audit or of any proposed deficiencies from any governmental authority, and no
controversy with respect to taxes of any type is pending or threatened. Except
for routine filing extensions granted as a matter of right under applicable law,
none of the Company or any of its Subsidiaries has executed or filed with the
IRS or any other governmental authority any agreement or other document
extending, or having the effect of extending, the period of assessment or
collection of any taxes, charges or other impositions. None of the Company or
any of its Subsidiaries has agreed or is required to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise. Further, none of the Company or any of its Subsidiaries has any
obligation under any tax-sharing agreement.
4.22. Labor and Employment Matters. With respect to employees of and
service providers to the Company and the Subsidiaries: (a) the Company and the
Subsidiaries are and have been in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, including without limitation any
such laws respecting employment discrimination, workers' compensation, family
and medical leave, the Immigration Reform and Control Act, and occupational
safety and health requirements,
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<PAGE> 25
and have not and are not engaged in any unfair labor practice; (b) there is not
now, nor within the past three years has there been, any unfair labor practice
complaint against the Company or any Subsidiary pending or, to the Company's or
any Subsidiary's Knowledge, threatened before the National Labor Relations Board
or any other comparable authority; (c) there is not now, nor within the past
three years has there been, any labor strike, slowdown or stoppage actually
pending or, to the Company's or any Subsidiary's Knowledge, threatened against
or directly affecting the Company or any Subsidiary; (d) to the Company's or any
Subsidiary's Knowledge, no labor representation organization effort exists nor
has there been any such activity within the past three years; (e) no grievance
or arbitration proceeding arising out of or under collective bargaining
agreements is pending and, to the Company's or any Subsidiary's Knowledge, no
claims therefor exist or have been threatened; (f) the employees of the Company
and the Subsidiaries are not and have never been represented by any labor union,
and no collective bargaining agreement is binding and in force against the
Company or any Subsidiary or currently being negotiated by the Company or any
Subsidiary; and (g) to the Company's Knowledge, all Persons classified by the
Company or its Subsidiaries as independent contractors do satisfy and have
satisfied the requirements of law to be so classified, and the Company and its
Subsidiaries have fully and accurately reported their compensation on IRS Forms
1099 when required to do so. To the Company's Knowledge, none of the employees
of the Company or any of its Subsidiaries is obligated under any contract or
other agreement (including licenses, covenants or commitments of any nature), or
subject to any judgment, decree or order of any court or administrative agency,
that materially interferes with the use of the employee's best efforts to
promote the interests of the Company and its Subsidiaries or conflicts with the
business as currently conducted by the Company or its Subsidiaries.
4.23 No Pending Transactions. Except for the transactions contemplated
by this Agreement, neither the Company nor any Subsidiary is a party to or bound
by or the subject of any agreement, undertaking, commitment or discussions or
negotiations with any person that could result in (i) the sale, merger,
consolidation or recapitalization of the Company or any Subsidiary, (ii) the
sale of all or substantially all of the assets of the Company or any Subsidiary,
or (iii) a change of control of more than five percent of the outstanding
capital stock of the Company or any Subsidiary.
4.24 Disclosure. Neither this Agreement nor any of the Transaction
Documents nor any Exhibit or Schedule hereto or thereto, nor any report,
certificate or instrument furnished to the Purchaser or its counsel in
connection with the transactions contemplated hereby or thereby, when read
together, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
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SECTION 5
Representations, Warranties and Covenants of the Purchaser
The Purchaser hereby represents and warrants to and agrees with the
Company, as follows:
5.1. Accredited Investor; Experience; Risk. The Purchaser is an
accredited investor within the definition of Regulation D of the Securities Act.
The Purchaser has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the purchase of
the Convertible Preferred Stock and Warrants.
5.2. Investment. The Purchaser is acquiring the Convertible Preferred
Stock and Warrants for investment purposes only, for its own account and not as
a nominee or agent for any other Person, and not with a view to, or for resale
in connection with, any distribution thereof in violation of applicable law.
5.3. Authorization. The Purchaser represents that it has all requisite
power and authority to enter into and perform its obligations under the
Transaction Documents to which it is a party. The execution, delivery and
performance of the Transaction Documents to which Purchaser is a party have been
duly authorized by all necessary action on the part of Purchaser. Each
Transaction Document to which the Purchaser is a party has been duly and validly
executed and delivered by the Purchaser and constitutes the legal, valid and
binding obligation of the Purchaser, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally, and subject, as to enforceability, to general principles of
equity, including principles of commercial reasonableness, good faith and fair
dealing (regardless of whether enforcement is sought in a proceeding at law or
in equity) and except to the extent that rights to indemnification and
contribution under this Agreement may be limited by federal or state securities
laws or public policy relating thereto.
5.4. Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, or local governmental authority on the part of
Purchaser is required in connection with the valid execution and delivery by the
Purchaser of the Transaction Documents to which it is a party, or the
consummation by the Purchaser of the transactions contemplated by the
Transaction Documents to which it is a party, except for such filings as have
been made prior to the Closing.
5.5. Brokers' Fees. No broker, finder, investment banker or other
Person is entitled to any brokerage fee, finder's fee or other commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by the Purchaser.
5.6. Unregistered Shares. The Purchaser understands and acknowledges
that none of the Convertible Preferred Stock, the shares of Common Stock
issuable upon conversion of the Convertible Preferred Stock, the Warrants or the
shares of Common Stock issuable upon exercise
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<PAGE> 27
of the Warrants have been registered under the Securities Act or any state
securities laws and are therefore "unregistered securities" as that term is used
in the Securities Act, and as such may not be offered for sale, sold or
otherwise disposed of without such registration or an opinion of counsel
reasonably satisfactory to the Company that such sale or disposition can be made
pursuant to an exemption from registration under the Securities Act and any
applicable state securities laws. Purchaser agrees a legend that reflects the
foregoing shall be placed on any certificates evidencing the securities
purchased herein and that, so long as the legend may remain on such
certificates, that the Company may maintain appropriate "stop transfer" orders
with respect to such securities on its books and records and with those to whom
it may delegate registrar and transfer functions. Purchaser further agrees and
acknowledges that, except as set forth in Section 8.3 of this Agreement, the
Company does not have any obligation or other commitment to register any of the
securities issued or to be issued pursuant to this Agreement.
5.7. Access to Information. The Purchaser acknowledges receipt of the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1996
and Quarterly Report on Form 10-Q for the fiscal period ended June 30, 1997. The
Purchaser further represents and acknowledges that it has carefully read such
reports and has been furnished by the Company during the course of this
transaction with all additional information regarding the Company that it has
requested; that Purchaser has been afforded the opportunity to ask questions of
and receive answers from duly authorized officers or other representatives of
the Company concerning the Company and the terms and conditions of this
transaction and has utilized such opportunity to Purchaser's satisfaction.
5.8 Restricted Transfer of Securities. The Purchaser agrees that, for a
period of two (2) years commencing on the date of this Agreement (the
"Restricted Period"), the securities issued or to be issued pursuant to this
Agreement, including without limitation the Registrable Securities
(collectively, the "Issued Securities"), may not be sold, assigned or otherwise
transferred to a Restricted Person without the prior written consent of the
Company. For purposes of this Section 5.8, "Restricted Person" means any Person
engaged in or intending to be engaged in, either directly or indirectly
(including, without limitation, through an Affiliate or in concert with another
Person), any business in which the Company is operating on the date of the
proposed sale, assignment or transfer. Following the Restricted Period, the
Issued Securities may be sold, assigned or otherwise transferred without
limitation if the average closing price for the Common Stock quoted on the
Nasdaq National Market System (or on any exchange on which the Common Stock is
then listed) for the thirty (30) trading days immediately prior to the last day
of the Restricted Period (the "Benchmark Price") is equal to or less than $12.00
per share. If the Benchmark Price is greater than $12.00 per share, then the
restrictions on the Issued Securities set forth in the first sentence of this
Section 5.8 shall continue after the Restricted Period. Notwithstanding anything
contained in this Section to the contrary, the Purchaser may assign any or all
of the Issued Securities to partners or Affiliates of the Purchaser or officers
or directors of partners or Affiliates of the Purchaser without consent of the
Company so long as such partner, Affiliate, officer or director agrees in
writing to be bound by the terms of this Agreement.
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<PAGE> 28
SECTION 6
Conditions to Closing of Purchaser
The Purchaser's obligation to purchase the Convertible Preferred Stock
at the Closing is, at the option of the Purchaser, subject to the fulfillment on
or prior to the Closing Date of the following conditions:
6.1. Representations and Warranties Correct. The representations and
warranties made by the Company in Section 4 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date with the same force
and effect as if they had been made on and as of such date.
6.2. Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date
shall have been performed or complied with in all material respects.
6.3. Opinion of Company's Counsel. The Purchaser shall have received
from Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., counsel to the
Company, an opinion addressed to the Purchaser, dated the Closing Date, in
substantially the form of Exhibit 6.3 hereto.
6.4. No Material Adverse Change. Since December 31, 1996, there shall
not have occurred any events or circumstances that could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect.
6.5. Certificate of Designation. The Certificate of Designation shall
have been duly adopted and executed by the Company and accepted for record by
the Secretary of State of Delaware.
6.6. Consents. All consents, approvals, registrations, qualifications
and Permits from, and all filings with, any third party or governmental
authority necessary for the consummation of the transactions contemplated herein
or in the Transaction Documents shall have been obtained.
6.7. Issuance of Shares. The Company shall have issued 1,452,119 shares
of Convertible Preferred Stock at the Closing pursuant to this Agreement, and
shall have delivered to the Purchaser a stock certificate representing such
Convertible Preferred Stock.
6.8. Certificates. The Purchaser shall have received a certificate of
the President or a Vice President of the Company to the effect set forth in
Sections 6.1, 6.2, 6.4, and 6.5.
6.9 Warrants; Reservation of Common Stock. The Company shall have
issued the Class I Warrant and the Class II Warrant in the forms attached hereto
as Exhibits A and B, respectively, to the Purchaser, and shall have reserved for
issuance a sufficient number of shares of Common Stock issuable to Purchaser or
Holders upon exercise thereof.
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<PAGE> 29
6.10 Appointment of Director. The directors of the Company shall have
appointed the designee of Purchaser as a director of the Company effective as of
the Closing.
6.11 Bank Credit Facility. The Company shall have secured from the
lenders under the Credit Facility dated February 20, 1997 (the "Bank Credit
Facility"), by and among the Company and Creditanstalt Corporate Finance, Inc.
(the "Bank"), (i) appropriate amendments to the Bank Credit Facility modifying
the covenants thereunder so that the Company shall be in full compliance with
all of the covenants thereunder on the Closing Date, and (ii) waivers of all
violations, breaches of covenants and events of default under the Bank Credit
Facility, in form and substance acceptable to the Purchaser, in its sole
discretion.
SECTION 7
Conditions to Closing of the Company
The Company's obligation to issue and sell the Convertible Preferred
Stock at the Closing is, at the option of the Company, subject to the
fulfillment of the following conditions:
7.1. Representations. The representations and warranties made by the
Purchaser in Section 5 hereof shall be true and correct when made, and shall be
true and correct on the Closing Date with the same force and effect as if they
had been made on and as of such date.
7.2. Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchaser on or prior to the Closing Date
shall have been performed or complied with in all respects.
7.3. Purchase Price. The Purchaser shall have tendered the purchase
price for the Convertible Preferred Stock and Warrants of Five Million
Eighty-Two Thousand Four Hundred Seventeen Dollars ($5,082,417).
7.4. Certificate. The Company shall have received a certificate from
the General Partner of the Purchaser to the effect set forth in Sections 7.1 and
7.2.
SECTION 8
Covenants of the Company
8.1. Information. Commencing on the Closing Date and continuing so long
as any shares of Convertible Preferred Stock remain outstanding, the Company
shall deliver to the Purchaser the information specified in this Section 8.1
unless the Purchaser at any time specifically requests that such information not
be delivered to it:
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<PAGE> 30
(a) Monthly Financial Statements. As soon as available, but in
any event not later than thirty (30) days after the end of each monthly fiscal
period (other than the last monthly fiscal period of the fourth fiscal quarter
of the Company), the unaudited consolidated balance sheet of the Company and its
Subsidiaries as at the end of each such period and the related unaudited
consolidated statements of income and cash flows of the Company and its
Subsidiaries for such period and for the elapsed period in such fiscal year, all
in reasonable detail and stating in comparative form the figures as of the end
of and for the comparable periods of the preceding fiscal year. All such
financial statements shall be prepared in accordance with GAAP on a consistent
basis throughout the periods reflected therein except as stated therein and
shall be accompanied by a certificate of the Company's President or Chief
Financial Officer to such effect.
(b) Board Materials. As soon as available, but in no event
later than when delivered to members of the Company's Board of Directors, all
materials which the Company distributes to the members of the Board of
Directors.
(c) Budget. The Company shall furnish the Purchaser as soon as
available, but in no event later than 30 days following the end of each fiscal
year, a consolidated and consolidating budget for the following fiscal year.
(d) Other Reports and Statements. Promptly upon any
distribution to its stockholders generally, to its directors or to the financial
community of an annual report, quarterly report, proxy statement, registration
statement or other similar report or communication, a copy of each such annual
report, quarterly report, proxy statement, registration statement or other
similar report or communication and promptly upon filing by the Company with the
SEC or with The National Market System, Inc., the National Association of
Securities Dealers, Inc. or any national securities exchange or other market
system of any all regular and other reports or applications, a copy of each such
report or application; and a copy of such report or statement and copies of all
press releases and other statements made available generally by the Company to
the public concerning material developments in the Company.
8.2 Preemptive Rights.
(a) If, after the Closing Date but prior to the conversion of
the Convertible Preferred Stock into Common Stock the Company shall propose to
issue or sell New Securities or enters into any contracts, commitments,
agreements, understandings or arrangements of any kind relating to the issuance
or sale of any New Securities, the Purchaser shall have the right to purchase
that number of New Securities at the same price and on the same terms proposed
to be issued or sold by the Company so that the Purchaser would after the
issuance and sale of all such New Securities, hold the same proportionate
interest (the "Proportionate Percentage") of the then outstanding shares of
Common Stock as was held by the Purchaser immediately prior to such issuance and
sale (based upon the number of shares of Common Stock to be received upon
conversion of the Convertible Preferred Stock and exercise of the Class II
Warrants).
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<PAGE> 31
(b) The Company shall give the Purchaser written notice of its
intention to issue and sell New Securities, describing the type of New
Securities, the price and the general terms and conditions upon which the
Company proposes to issue the same. The Purchaser shall have fifteen (15) days
(the "Offer Period") from the giving of such notice to agree to purchase all (or
any part) of its Proportionate Percentage of New Securities for the price and
upon the terms and conditions specified in the notice by giving written notice
to the Company and stating therein the quantity of New Securities to be
purchased.
(c) If the Purchaser fails to provide notice to the effect
that Purchaser agrees to exercise in full such right within the Offer Period,
the Company shall have 125 days thereafter to sell the New Securities in respect
of which the Purchaser's rights were not exercised, at a price and upon general
terms and conditions no more favorable to the buyers thereof than specified in
the Company's notice to Purchaser pursuant to this Section. If the Company has
not sold the New Securities within such 125-day period, the Company shall not
thereafter issue or sell any New Securities, except by giving the Purchaser the
right to purchase its Proportionate Percentage in the manner provided above.
8.3 Company Registration.
(a) If the Company proposes to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating to a corporate reorganization or other transaction under Rule 145, or a
registration on any registration form that does not permit secondary sales, the
Company will (i) promptly give to the Purchaser and to each Holder written
notice thereof, and (ii) use its best efforts to include in such registration
(and any related qualification under blue sky laws or other compliance), except
as set forth in Section 8.3(b) below, and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests, made
by the Purchaser and any Holder and received by the Company within fifteen (15)
days after the written notice from the Company described in clause (i) above is
delivered by the Company.
(b) If the registration as to which the Company gives notice
is for a registered public offering involving an underwriting, the Company shall
so advise the Purchaser and the Holders as a part of the written notice given
pursuant to Section 8.3(a). In such event, the right of the Purchaser and any
Holder to registration pursuant to this Section 8.3 shall be conditioned upon
such participation in such underwriting and the inclusion of the Purchaser's and
the Holder's Registrable Securities in the underwriting to the extent provided
herein. The Purchaser and all Holders proposing to distribute their securities
through such underwriting shall (together with the Company and the other holders
of securities of the Company with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
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<PAGE> 32
Notwithstanding any other provision of this Section 8.3, if the
underwriters advise the Company in writing that marketing factors require a
limitation on the number of shares to be underwritten, the underwriters may
(subject to the limitations set forth below) exclude all Registrable Securities
from, or limit the number of Registrable Securities to be included in, the
registration and underwriting. The Company shall so advise all holders of
securities requesting registration, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated first to the Company and to the Purchaser and thereafter to all other
holders of securities requesting registration. If any person does not agree to
the terms of any such underwriting, he shall be excluded therefrom by written
notice from the Company or the underwriter. Any Registrable Securities or other
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
8.4. Shelf Registration.
(a) As soon as practicable after Closing, the Company shall
prepare and file with the SEC a registration statement for an offering to be
made on a delayed or continuous basis pursuant to Rule 415 of the Securities Act
(a "Shelf Registration") registering the resale from time to time by the
Purchaser and each Holder of all of the Registrable Securities issuable upon
conversion of the Convertible Preferred Stock (the "Initial Shelf
Registration"). The registration statement for any Shelf Registration shall be
on Form S-3 or another appropriate form permitting registration of such
Registrable Securities for resale by the Purchaser and each Holder in the manner
or manners designated by them, from time to time, which may include an
underwritten offering, subject to the underwriter being reasonably acceptable to
the Company and the Purchaser. The Company shall use its best efforts to cause
the Initial Shelf Registration to become effective under the Securities Act as
promptly as is practicable and to keep the Initial Shelf Registration
continuously effective under the Securities Act until the end of the
Effectiveness Period.
(b) From and after the exercise of any Warrant, in whole or in
part, within 45 days after receipt of written notice from the Purchaser or
Holder, the Company shall effect a Shelf Registration for all or a portion of
the Warrant shares which have been theretofore issued to Purchaser or Holder;
provided, however, that (A) the number of Warrant shares sought to be included
in any Shelf Registration shall not be less than 50% of the shares of Common
Stock or other securities for which the Warrant is exercisable and (B) in no
event shall the Company be obligated to effect a Shelf Registration pursuant to
this paragraph on more than one occasion in any 12-month period.
(c) If the Initial Shelf Registration or any Subsequent Shelf
Registration (as defined below) ceases to be effective for any reason at any
time during the Effectiveness Period (other than because all Registrable
Securities shall have been sold or shall have ceased to be Registrable
Securities), the Company shall use its best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof, and in any event
shall within thirty (30) days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the withdrawal of the
order suspending the effectiveness thereof, or file an additional Shelf
Registration covering all of the Registrable Securities then outstanding (a
"Subsequent Shelf
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<PAGE> 33
Registration"). If a Subsequent Shelf Registration is filed, the Company shall
use all reasonable efforts to cause the Subsequent Shelf Registration to become
effective as promptly as is practicable after such filing and to keep such
registration statement continuously effective until the end of the Effectiveness
Period.
(d) The Company shall supplement and amend the Shelf
Registration if required by the rules, regulations or instructions applicable to
the registration form used by the Company for such Shelf Registration, if
required by the Securities Act or the SEC, or if reasonably requested by the
Purchaser or a majority of Holders or by any managing underwriter, if any, of
such Registrable Securities with respect to the offer and sale or other
disposition of the Registrable Securities during the Effective Period.
(e) From time to time, the Company shall (i) prepare and file
with the SEC a post-effective amendment to the Shelf Registration or a
supplement to the related prospectus or a supplement or amendment to any
document incorporated therein by reference or any other required document, so
that such registration statement will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, so that, as thereafter
delivered to purchasers of the Registrable Securities being sold thereunder,
such prospectus will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; (ii) provide the Purchaser and the Holders with copies of any
registration statement, prospectus, document incorporated by reference therein,
or such other documents filed with the SEC in such numbers as the Purchaser and
the Holders shall reasonably request; and (iii) inform the Purchaser and the
Holders that the Company has complied with its obligations and that the
registration statement and related prospectus may be used for the purpose of
selling all or any of such Registrable Securities (or that, if the Company has
filed a post-effective amendment to the Shelf Registration which has not yet
been declared effective, the Company will notify Purchaser to that effect, will
use its best efforts to secure the effectiveness of such post-effective
amendment and will immediately so notify Purchaser when the amendment has become
effective).
8.5 Certain Securities Registration Matters. Whenever the Company is
required under Section 8.3 or 8.4 to effect the registration with the SEC of any
Registrable Securities, the following provisions shall apply:
(a) The Company shall cause the Registrable Securities covered
by such registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable Purchaser or Holder to
consummate the disposition of such Registrable Securities.
(b) The Company shall cause all Registrable Securities covered
by any registration statement to be listed with the Nasdaq Stock Market, or on
each securities exchange on which similar securities issued by the Company are
then listed and, unless the same already exists, provide a transfer agent,
registrar and CUSIP number for all such Registrable Securities not later
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<PAGE> 34
than the effective date of the registration statement.
(c) The Company shall enter into such customary agreements
(including an underwriting agreement in customary form, if applicable) and take
all such other actions as the Purchaser or Holder or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities pursuant to the registration statement.
(d) The Company shall make available for inspection by the
Purchaser, Holder and any underwriter participating in any disposition pursuant
to such registration statement, and any attorney, accountant or other agent
retained by the Purchaser, Holder or underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and agreements and access to properties and management and other information of
the Company as shall be necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any Inspector in connection with
such registration statement, provided that any Inspector shall have first
executed and delivered to the Company a confidentiality agreement in customary
form protecting the confidentiality of such information, except as otherwise
required to be disclosed by law.
(e) If the Registrable Securities are to be sold in an
underwritten offering or in a private transaction involving the sale or transfer
of at least forty percent (40%) of the Registrable Securities issuable upon
conversion of the Convertible Preferred Stock acquired pursuant to this
Agreement, the Company shall obtain "cold comfort" letters and updates thereof
from the Company's independent public accountants and an opinion from the
Company's counsel in customary form and covering such matters of the type
customarily covered by "cold comfort" letters and opinion letters as the
managing underwriter or Purchaser, as the case may be, may reasonably request,
and one copy of such "cold comfort" letter and opinion letter shall be provided
to each of the Purchaser and the Holder.
(f) The Purchaser and Holders shall, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 8.5(i), discontinue disposition of its Registrable Securities pursuant
to the registration statement covering such Registrable Securities until receipt
of the copies of the supplemented or amended prospectus and, if so directed by
the Company, the Purchaser and Holders will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in the
Purchaser's and Holders' possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
(g) All fees and expenses incident to the Company's
performance of or compliance with a registration statement requirement pursuant
to this Agreement shall be borne by the Company whether or not any of the
registration statements become effective, other than commissions and
underwriter's discounts, if any, and transfer taxes payable by Purchaser and/or
the Holder. Such fees and expenses shall include, without limitation, (i) all
registration and filing fees (including, without limitation, fees and expenses
(x) with respect to filings required to be made with the National Association of
Securities Dealers, Inc. and (y) of compliance with federal securities or
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<PAGE> 35
Blue Sky laws (including, without limitation, fees and disbursements of one
counsel to Purchaser in connection with Blue Sky qualifications of the
Registrable Securities under the laws of such jurisdictions as the managing
underwriter, if any, or the Purchaser may designate)), (ii) printing expenses,
(iii) messenger, telephone and delivery expenses, (iv) reasonable fees and
disbursements of counsel for the Company and one counsel for the Purchaser in
connection with the registration, (v) fees and disbursements of all independent
certified public accountants (including the expenses of any special audit and
"comfort" letters required by or incident to such performance) and (vi)
Securities Act liability insurance obtained by the Company in its sole
discretion. In addition, the Company shall pay its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit, the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange or the Nasdaq Stock Market, as the case
may be, on which similar securities issued by the Company are then listed and
the fees and expenses of any Person, including special experts, retained by the
Company. Notwithstanding the provisions of this subsection, the Purchaser or the
Holders, as the case may be, shall pay all registration expenses to the extent
the Company is prohibited by applicable Blue Sky laws from paying for or on
their behalf.
(h) The Company shall use its reasonable best efforts to
register or qualify the Registrable Securities under such securities or Blue Sky
laws in such jurisdictions as the Purchaser or the Holders may reasonably
request; provided that the Company shall not be required in connection therewith
or as a condition thereof to (i) qualify or register as a foreign corporation in
any such jurisdiction, (ii) execute a general or limited consent to service of
process in any such jurisdiction, (iii) make any undertaking with respect to the
conduct of its business, (iv) subject itself to taxation as a foreign
corporation in any such jurisdiction or (v) enter into any agreement with any
state securities or "blue sky" commission or agency, including, without
limitation, any agreement to escrow shares of its capital stock.
(i) If, in the reasonable judgment of the Company, it is
advisable to suspend use of the prospectus for a period of time due to pending
material corporate developments or similar material events that have not yet
been publicly disclosed and as to which the Company believes public disclosure
will be prejudicial to the Company, the Company shall deliver a certificate in
writing, signed by its Chief Executive Officer, Chief Financial Officer or
General Counsel, to the Purchaser and Holders and the managing underwriter, if
any, to the effect of the foregoing and, upon receipt of such certificate, the
Purchaser's and Holders' selling period will not commence until the Purchaser,
Holders or managing underwriter, if any, has received copies of the supplemented
or amended Prospectus, or until it is or they are advised in writing by the
Company that the Prospectus may be used, and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in such Prospectus. The Company will use all reasonable efforts to
ensure that the use of the Prospectus may be resumed, and the selling period may
commence, upon the earlier of (x) public disclosure of such pending material
corporate development or similar material event or (y) a determination by the
Company that, in the judgment of the Company, public disclosure of such material
corporate development or similar material event would not be prejudicial to the
Company. Notwithstanding the foregoing, the Company shall not under any
circumstances be entitled to exercise its right under this Section 8.5(i) to
defer the selling period
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<PAGE> 36
more than one time in any 12-month period or two times in any 24-month period;
and provided, further, that the period in which a selling period is suspended
shall not exceed ninety (90) days.
(j) In the event of the registration or qualification of any
Registrable Securities with the SEC pursuant to a registration statement, the
Company agrees to indemnify and hold harmless Purchaser, Holders and each
officer, partner, employee, agent and representative of Purchaser and Holders,
each underwriter, broker or dealer, if any, of such Registrable Securities, and
each other Person, if any, who controls Purchaser and Holder, underwriter,
broker or dealer within the meaning of the Securities Act, Exchange Act or any
other applicable securities laws, from and against any and all losses, claims,
damages or liabilities (or actions in respect thereof) (collectively, the
"Losses") joint or several, to which any of them may become subject under the
Securities Act or any other applicable securities laws or otherwise, insofar as
such Losses 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 Registrable Securities were registered or qualified under the
Securities Act or any other applicable securities laws, any preliminary
prospectus or final prospectus relating to such Registrable Securities, 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 or
any other applicable securities laws applicable to the Company or relating to
any action or inaction required by the Company in connection with any such
registration or qualification and will reimburse Purchasers, each officer,
director, employee, agent and representative of Purchaser, Holders, underwriter,
broker or dealer and each such controlling Person for any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such Loss; provided, however, that the Company will not be liable
in any such case to the extent that any such Loss arises out of or is based upon
untrue statement of a material fact or omission to state a material fact
necessary to make the statements, in light of the circumstances under which they
were made in such registration statement, such preliminary prospectus, such
final prospectus or such amendment or supplement thereto, not misleading, in
reliance upon and in conformity with written information furnished to the
Company by Purchaser, Holders, or any officer, partner, employee, agent and
representative thereof specifically and expressly for use in the preparation
thereof,or any violation of any rule or regulation under the Securities Act or
applicable securities laws, in which case such person agrees to indemnify and
hold harmless the Company and its Affiliates from and against any and all
Losses, joint or several, to which any of them may become subject under the
Securities Act or any other applicable securities laws or otherwise; and
provided, further, that the Company shall not be liable to any Person who
participates as an underwriter in the offering or sale of Registrable Securities
or any other Person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such Loss (or action
or proceeding in respect thereof) or expense arises out of such Person's failure
to send or give a copy of the Prospectus, as the same may be then supplemented
or amended, to the Person asserting an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such Prospectus so long as such
Prospectus, and any amendments or supplements thereto, have been furnished to
such underwriter in sufficient numbers and in a timely-manner to permit
distribution thereof.
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<PAGE> 37
Promptly after receipt by a Person entitled to indemnification
under this Section 8.5(j) (an "Indemnified Party") of notice of the commencement
of any action or claim relating to any registration statement 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 (an "Indemnifying Party"), give written notice to such Indemnifying
Party of the commencement of such action or claim, but the omission to so notify
the Indemnifying Party will not relieve the Indemnifying Party from any
liability that it may have to any Indemnified Party except to the extent that
the Indemnifying Party is actually prejudiced thereby. 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
reasonably satisfactory to such Indemnified Party, of such action provided that
the Indemnifying Party shall not settle or compromise such action, except upon
the prior written consent of the Indemnified Party 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 the assumption of such defense shall not
give rise in the reasonable opinion of the Indemnified Party or its counsel to
any conflict. Notwithstanding the foregoing, the Indemnified Party shall have
the right to employ its own counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party unless (A) the
employment of such counsel shall have been authorized in writing by the
Indemnifying Party in connection with the defense of such suit, action, claim or
proceeding, (B) the Indemnifying Party shall not have employed counsel
(reasonably satisfactory to the Indemnified Party) to take charge of the defense
of such action, suit, claim or proceeding, or (C) such Indemnified Party shall
have reasonably concluded, based upon the advice of counsel, that there may be
defenses available to it that are different from or additional to those
available to the Indemnifying Party which, if the Indemnifying Party and the
Indemnified Party were to be represented by the same counsel, could result in a
conflict of interest for such counsel or materially prejudice the prosecution of
the defenses available to such Indemnified Party. If any of the events specified
in clauses (A), (B) or (C) of the preceding sentence shall have occurred or
shall otherwise be applicable, then the reasonable fees and expenses of one
counsel or firm of counsel selected by the Indemnified Party (and reasonably
acceptable to the Indemnifying Party) shall be borne by the Indemnifying Party.
If, in any such case, the Indemnified Party employs separate counsel, the
Indemnifying Party shall not have the right to direct the defense of such
action, suit, claim or proceeding on behalf of the Indemnified Party and the
Indemnified Party shall assume such defense and/or settle or compromise such
action; provided, however, that an Indemnifying Party shall not be liable for
the settlement or compromise of any action, suit, claim or proceeding effected
without its prior written consent, which consent shall not be unreasonably
withheld.
(iii) Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with any underwritten public
offering contemplated by this Agreement are in conflict with the foregoing
provisions, the provisions in such underwriting agreement shall be controlling.
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<PAGE> 38
(k) The Purchaser and each Holder holding securities included
in any registration shall furnish to the Company such information regarding the
Purchaser or such Holder and the distribution proposed by the Purchaser or such
Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 8.
(l) The Company shall not, directly or indirectly, enter into
any merger, consolidation, or reorganization in which the Company shall not be
the surviving corporation unless the proposed surviving corporation shall, prior
to such merger, consolidation, or reorganization, agree in writing to assume the
obligations of the Company under this Section, and for that purpose references
hereunder to "Registrable Securities" shall be deemed to be references to the
securities that the Purchaser or Holders, as the case may be, would be entitled
to receive in exchange for Registrable Securities under any such merger,
consolidation, or reorganization; provided, however, that the provisions of this
Section shall not apply in the event of any merger, consolidation, or
reorganization in which the Company is not the surviving corporation if the
Purchaser and Holders are entitled to receive in exchange for their Registrable
Securities consideration consisting solely of (i) cash, (ii) securities of the
acquiring corporation that may be immediately sold to the public without
registration under the Securities Act, or (iii) securities of the acquiring
corporation that the acquiring corporation has agreed to register within 90 days
of completion of the transaction for resale to the public pursuant to the
Securities Act.
8.6 Regulatory Matters. Each of the Company and Purchaser will (i) make
on a prompt and timely basis all governmental or regulatory notifications,
filings or submissions, as necessary for the consummation of the transactions
contemplated hereby, including any filings required pursuant to the
Hart-Scott-Rodino Antitrust Act, if required, (ii) use all reasonable efforts to
cooperate with the other and its representatives in (A) determining which
notifications, filings and submissions are required to be made prior to the
Closing Date with, and which consents, approvals, permits or authorizations are
required to he obtained prior to the Closing Date from, any governmental
authority in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby, and (B) timely making of all
such notifications, filings or submissions and timely seeking all such consents,
approvals, permits or authorizations, and (iii) use all reasonable efforts to
take, or cause to be taken, all other action and do, or cause to be done, all
other reasonable things necessary or appropriate to consummate the transactions
contemplated by this Agreement. The Purchaser shall have no obligation to expend
any funds in connection with the action to be taken by the Company pursuant to
this section.
8.7 Access. So long as the Purchaser holds at least fifteen percent
(15%) of the Convertible Preferred Stock purchased hereunder, subject to the
provisions of Section 8.8 hereof, upon the written request of the Purchaser, the
Company shall afford the Purchaser and its accountants, counsel and other
representatives, full access during normal business hours to all of its
properties, books, contracts, commitments and records, permit them to copy or
make extracts therefrom and, the Company shall furnish promptly to Purchaser all
information concerning its business, properties and personnel as Purchaser may
reasonably request; provided, however, that no investigation pursuant to this
Section 8.7 shall affect any representations or warranties of either
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<PAGE> 39
party hereunder.
8.8 Confidentiality. From and after the date of this Agreement, each of
the Company and Purchaser agree to hold, and will cause its employees, agents
and representatives to hold, in confidence, unless compelled to disclose by
judicial or administrative process or, in the written opinion of their counsel,
by other requirements of law, information furnished by the Company, on the one
hand, to Purchaser and information furnished by Purchaser, on the other hand, to
the Company in connection with the transactions contemplated by this Agreement,
and each of such persons agree that they shall not release or disclose such
information to any other person, except their respective officers, directors,
partners, employees, auditors, attorneys, financial advisors and other
consultants, advisors and representatives who need to know such information and
who have been informed of the confidential nature of such information and have
been directed to treat such information as confidential. The foregoing
provisions of this Section 8.8 shall not apply to any such information which (i)
becomes generally available to the public other than as a result of a disclosure
by any person bound hereunder, (ii) was available to a person bound hereunder on
a non-confidential basis prior to its disclosure hereunder, or (iii) becomes
available to any person bound hereunder on a non-confidential basis by virtue of
the disclosure thereof by a source other than the party providing such
information in reliance upon the protection of confidentiality reposed hereby.
Notwithstanding anything herein to the contrary, from and after the
date of this Agreement, if either party to this Agreement or any agreement
contemplated herein shall be required by law to file as part of any public
record this Agreement or the agreements relating to any transactions
contemplated hereby, both parties shall jointly identify those provisions, if
any, of such agreements that shall remain confidential and shall request and
seek confidential treatment of those provisions in accordance with the
applicable provisions of any applicable law, rule or regulation, and shall take
all reasonable actions necessary to secure such confidential treatment.
8.9 Amendment to NASD Listing Application. As soon as practical
following the execution of this Agreement, the Company shall prepare and file
with the NASD, and obtain the NASD's approval of, an amendment to the Company's
Nasdaq National Market Listing Application reflecting the consummation of the
transactions completed hereby, together with all documents, instruments and
other materials which are or will be required to be filed or delivered under the
Company's Nasdaq listing agreement and the NASD By-Laws.
8.10 Reservation of Warrant Shares. From and after the consummation of
the transactions contemplated herein and under the Warrants, the Company shall
at all times reserve for issuance the number of shares of Common Stock issuable
upon exercise of the Warrant on a fully-diluted basis in accordance with the
terms thereof.
8.11 Bank Credit Facility. At the Closing Date, the Company covenants
and agrees that (i) the loan covenants under the Bank Credit Facility presently
allows the Company and its Subsidiaries to conduct business as currently
conducted without violating such covenants, and (ii) all past conflicts,
violations or breaches of, or defaults under, the loan covenants have been cured
or waived by the Bank.
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<PAGE> 40
8.12 Repurchase Rights. If at any time there shall be a Change of
Control of the Company, the Purchaser and Holders shall have the right (the
"Repurchase Right"), at its or their sole option, upon ten days' prior written
notice to the Company (the "Redemption Notice"), to require the Company to
purchase from the Purchaser or Holders, all but not less than all, of the shares
of the outstanding Convertible Preferred Stock held by the Purchaser or Holder
(the "Repurchase Right"), at a price equal to 105% of the liquidation preference
for the Convertible Preferred Stock (subject to adjustment in accordance with
adjustments to the Series B Conversion Price provided for in the Certificate of
Designation relating to the Convertible Preferred Stock), plus accrued and
unpaid dividends to the date of redemption, whether or not declared. The Company
shall deliver written notice to the Purchaser and Holders promptly upon the
occurrence of an event of a Change of Control.
8.13 Directors' and Officers' Insurance. As soon as practical following
the execution of this Agreement, but in no event later than December 1, 1997,
the Company shall obtain a directors' and officers' liability insurance policy
providing coverage in the amount of $5 million and having such other terms as
are reasonably acceptable to Purchaser.
8.14 Selection of President. As soon as practical following the
execution of this Agreement, the Company shall reach an agreement, which
agreement shall be reasonably acceptable to both the Company and Purchaser, to
hire an individual to become the Company's new President, which individual shall
be reasonably acceptable to both the Company and Purchaser.
SECTION 9
Miscellaneous
9.1. Amendment; Waiver. Neither this Agreement nor any provision hereof
may be amended, modified, supplemented or waived, except by a written instrument
executed by (i) the Company and (ii) the Purchaser.
9.2. Notices. Any notices or other communications required or permitted
hereunder shall be sufficiently given if in writing and delivered in Person,
transmitted by facsimile transmission (fax) or sent by registered or certified
mail (return receipt requested) or recognized overnight delivery service,
postage pre-paid, addressed as follows, or to such other address has such party
may notify to the other parties in writing:
(a) if to the Company:
Sight Resource Corporation
100 Jeffrey Avenue
Holliston, Massachusetts 01746
Attn: William G. McLendon, Chief Executive Officer
Telephone No.: 508-429-6916
Facsimile No.: 508-429-6023
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<PAGE> 41
with a copy to:
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
One Financial Center
Boston, Massachusetts 02111
Attn: Lewis J. Geffen, Esq.
Telephone No.: 617-542-6000
Facsimile No.: 617-542-2241
(b) if to the Purchaser:
Carlyle Venture Partners, L.P.
1001 Pennsylvania Avenue, N.W.
Suite 220 South
Washington, D.C. 20004-2505
Attn: Brian D. Bailey
Telephone No.: 202-347-2626
Facsimile No.: 202-347-1818
with a copy to:
Wilmer, Cutler & Pickering
1445 M Street, N.W.
Washington, D.C. 21202
Attn: John B. Watkins, Esq.
Telephone No.: 202-663-6552
Facsimile No.: 202-663-6363
A notice or communication will be effective (i) if delivered in Person or by
overnight courier, on the business day it is delivered, (ii) if transmitted by
telecopier, on the business day of actual confirmed receipt by the addressee
thereof, and (iii) if sent by registered or certified mail, three (3) business
days after dispatch.
9.3. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
9.4. Successors and Assigns. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors and permitted assigns of the parties hereto. No party hereto may
assign its rights or delegate its obligations under this Agreement without the
prior written consent of the other parties hereto, except that Purchaser may
assign its rights under this Agreement to the Holders.
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<PAGE> 42
9.5 Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants made in, pursuant to, or in connection
with, this Agreement shall survive the execution and delivery of this Agreement,
any investigation at any time made by or on behalf of the Purchaser, and the
sale and purchase of the Convertible Preferred Stock, and issuance of the
Warrants for a period of eighteen (18) months commencing on the Closing Date.
9.6. Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede and cancel all prior representations, alleged warranties, statements,
negotiations, undertakings, letters, acceptances, understandings, contracts and
communications, whether verbal or written, among the parties hereto and thereto
or their respective agents with respect to or in connection with the subject
matter hereof.
9.7. Choice of Law. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without regard to
principles of conflict of laws.
9.8. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, with the
same effect as if all parties had signed the same document. All such
counterparts shall be deemed an original, shall be construed together and shall
constitute one and the same instrument.
9.9. Costs and Expenses. The Company shall pay all reasonable fees and
disbursements incurred in connection with the transactions contemplated hereby
(including the fees and disbursements of the Purchaser's legal counsel) as well
as other reasonable out-of-pocket expenses incurred by Purchaser in connection
with the negotiation and execution of the Transaction Documents and the fees and
expenses of any required governmental filings, not to exceed $75,000 if the
Closing occurs, but not to exceed $25,000 if the Closing does not occur.
9.10. No Third-Party Beneficiaries. Nothing in this Agreement will
confer any third party beneficiary or other rights upon any Person (specifically
including any employees of the Company and its Subsidiaries) or entity that is
not a party to this Agreement.
9.11. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Purchaser and its Affiliates, and their respective partners, co-investors,
officers, directors, employees, agents, consultants, attorneys and advisers
(each, an "Indemnified Party"), from and against any and all actual losses,
claims, damages, liabilities, costs and expenses (including, without limitation,
liabilities, costs and expenses and all reasonable fees, expenses and
disbursements of counsel), joint or several (hereinafter collectively referred
to as a "Loss"), which may be incurred by or asserted or awarded against any
Indemnified Party in connection with or in any manner arising out of or relating
to any investigation, litigation or proceeding or the preparation of any defense
with respect thereto, arising out of or in connection with or relating to the
transactions contemplated by this Agreement and the other Transaction Documents,
except to the extent such Loss is found in a final
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<PAGE> 43
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct.
(b) An Indemnified Party shall give written notice to the
Company of any claim with respect to which it seeks indemnification within ten
(10) days after the discovery by such parties of any matters giving arise to a
claim for indemnification pursuant to Section 9.11(a); provided that the failure
of any Indemnified Party to give notice as provided herein shall not relieve the
Company of its obligations under this Section 9.11, except to the extent that
the Company is actually prejudiced by such failure to give notice. In case any
such action or claim is brought against any Indemnified Party, the Company shall
be entitled to participate in and, unless in the reasonable good faith judgment
of the Indemnified Party a conflict of interest between such Indemnified Party
and the Company may exist in respect of such action or claim, to assume the
defense thereof, with counsel reasonably satisfactory to the Indemnified Party
and, after notice from the Company to the Indemnified Party of its election so
to assume the defense thereof, the Company shall not be liable to such
Indemnified Party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable costs of
investigation. In any event, unless and until the Company elects in writing to
assume and does so assume the defense of any such action or claim the
Indemnified Party's reasonable costs and expenses arising out of the defense,
settlement or compromise of any such action or claim shall be Losses subject to
indemnification hereunder. If the Company elects to defend any such action or
claim, then the Indemnified Party shall be entitled to participate in such
defense with counsel of its choice at its sole cost and expense. The Company
shall not be liable for any settlement of any action or claim effected without
its written consent. Anything in this Section 9.11 to the contrary
notwithstanding, the Company shall not, without the Indemnified Party's prior
written consent, settle or compromise any claim or consent to entry of any
judgment in respect thereof that imposes any future obligation on the
Indemnified Party or that does not include, as an unconditional term thereof,
the giving by the claimant or the plaintiff to the Indemnified Party, a release
from all liability in respect of such claim.
[Remainder of Page Intentionally Left Blank]
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<PAGE> 44
SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT SIGNATURE PAGE
IN WITNESS WHEREOF, the Company and the Purchaser have caused this
Agreement to be executed effective as of the date first above written.
SIGHT RESOURCE CORPORATION
By: /s/ William McLendon
-----------------------------------------
Name: William McLendon
---------------------------------------
Title: CEO
--------------------------------------
CARLYLE VENTURE PARTNERS, L.P.
By: /s/ J. Mitchell Reese
----------------------------------------
Authorized Signatory
C/S VENTURE INVESTORS, L.P.
By: /s/ J. Mitchell Reese
----------------------------------------
Authorized Signatory
CARLYLE U.S. VENTURE PARTNERS, L.P.
By: /s/ J. Mitchell Reese
----------------------------------------
Authorized Signatory
CARLYLE VENTURE COINVESTMENT, L.L.C.
By: /s/ J. Mitchell Reese
----------------------------------------
Authorized Signatory
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<PAGE> 1
Exhibit 99.1
[SIGHT RESOURCE CORPORATION LOGO] NEWS RELEASE
November 25, 1997
SIGHT RESOURCE COMPLETES $5.1 MILLION
FINANCING WITH THE CARLYLE GROUP
(Holliston, Massachusetts) - Sight Resource Corporation (NASDAQ: VISN), a
leading provider of primary eye care services and managed primary eye care
programs, announced today that it has completed a previously announced financing
with The Carlyle Group, pursuant to which investment funds affiliated with The
Carlyle Group purchased 1,452,119 shares of the Company's Series B Convertible
Preferred Stock and a warrant to purchase 290,424 shares of the Company's common
stock for an aggregate purchase price of $5,082,417. As previously announced,
the Company presently expects to use the net proceeds of the financing to
continue to implement its plans for consolidating primary eye care chains.
In connection with the financing, The Carlyle Group immediately has the right to
appoint one member to the Sight Resource Board of Directors. Also in connection
with the financing, the Company amended its Shareholder Rights Plan in order to
permit The Carlyle Group financing without triggering a distribution of the
Rights issuable under the Plan.
William G. McLendon, President and Chief Executive Officer of Sight Resource
Corporation, stated "I would like to reiterate the comments I made at the time
we signed the definitive purchase agreement with The Carlyle Group; we are
excited to have such a distinguished partner assisting us and believe that their
participation sends a strong message concerning the viability of our
consolidation strategy."
The Carlyle Group is a Washington, D.C. based investment group. Since its
founding in 1987, Carlyle has served as lead investor in transactions with over
$7 billion in market value. Among Carlyle's principal areas of focus are
aerospace/defense, healthcare, telecommunications, environmental services and
information services.
Sight Resource provides a complete range of primary eye care products and
services through its primary eye care centers, laser vision correction centers
and integrated networks of opticians, optometrists and ophthalmologists. The
Company's wholly-owned subsidiaries include Cambridge Eye Doctors in
Massachusetts, E.B. Brown Opticians in Ohio, Vision Plaza in Louisiana, and
Vision World in Rhode Island.
CONTACT: Nils Bonde-Henriksen, Manager of Corporate Communications,
508-429-6916.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995: Statements contained in this news release which are not historical fact
are forward-looking statements based upon management's current expectations that
are subject to risks and uncertainties that could cause actual results to differ
materially from those set forth in or implied by forward-looking statements.
These risks and additional factors affecting the Company's business are
described in the Company's Form 10-K for the fiscal year ended December 31, 1996
filed with the Securities and Exchange Commission.
100 Jeffrey Avenue - Holliston, Massachusetts 01746 USA -
Tel: 508-429-6916 - FAX 508-429-6023
