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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
SIGHT RESOURCE CORPORATION
--------------------------
(Name of Issuer)
COMMON STOCK, $.01 PAR VALUE
----------------------------
(Title of Class of Securities)
82655N105
---------
(CUSIP Number)
George P. Stamas
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
(202) 663-6000
--------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
November 25, 1997
-----------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
(Continued on following pages)
Page 1 of 12 Pages
<PAGE> 2
SCHEDULE 13D
CUSIP NO. 82655N105 PAGE 2 OF 12 PAGES
---------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Carlyle Venture Partners, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [ ]
PURSUANT TO ITEMS 2(d) OR 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands, British West Indies
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
1,823,763
--------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES 0
BENEFICIALLY
OWNED BY --------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,823,763
PERSON
WITH --------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,823,763
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
11.71%
- --------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14 PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 3
SCHEDULE 13D
CUSIP NO. 82655N105 PAGE 3 OF 12 PAGES
---------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
C/S Venture Investors, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands, British West Indies
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
372,455
--------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES 0
BENEFICIALLY
OWNED BY --------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 372,455
PERSON
WITH --------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
372,455
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.4%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 4
SCHEDULE 13D
CUSIP NO. 82655N105 PAGE 4 OF 12 PAGES
---------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Carlyle U.S. Venture Partners, L.P. 52-2038006
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [ ]
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
241,879
--------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES 0
BENEFICIALLY
OWNED BY --------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 241,879
PERSON
WITH --------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
241,879
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.55%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
PN
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 5
SCHEDULE 13D
CUSIP NO. 82655N105 PAGE 5 OF 12 PAGES
----------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Carlyle Venture Coinvestment, L.L.C. 52-2033493
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
OO
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS [ ]
IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e)
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
146,740
--------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES 0
BENEFICIALLY
OWNED BY --------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 146,740
PERSON
WITH --------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
146,740
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
.94%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
OO (limited liability company)
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE> 6
SCHEDULE 13D (CONTINUED) PAGE 6 OF 12 PAGES
ITEM 1. SECURITY AND ISSUER.
This statement relates to the common stock, $.01 par value (the "Common
Stock") of Sight Resource Corporation, a Delaware corporation (the "Company").
Each Reporting Person holds (i) shares of Series B Convertible Preferred Stock,
par value $.01 per share ("Preferred Stock"), and (ii) Warrants to purchase
shares of Common Stock (the "Warrants," together with the Preferred Stock, are
referred to herein as the "Securities"). The address of the Company is 100
Jeffrey Avenue, Holliston, Massachusetts 01746.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(c), (f) The names of the persons filing this Schedule 13D are (i)
Carlyle Venture Partners, L.P., a Cayman Islands exempted limited partnership
("CVP"); (ii) C/S Venture Investors, L.P., a Cayman Islands exempted limited
partnership ("C/S"), (iii) Carlyle U.S. Venture Partners, L.P., a Delaware
limited partnership ("CUS"), and (iv) Carlyle Venture Coinvestment, L.L.C., a
Delaware limited liability corporation ("CVC") (collectively, CVP, C/S, CUS and
CVC are referred to herein as the "Reporting Persons").
TCG Ventures, Ltd., a Cayman Islands corporation ("TCGVentures"), is the
general partner of CVP and C/S. The business address of TCGVentures is c/o Bank
Julius Baer, Kirk House, Albert Panton Street, Georgetown, Grand Cayman, Cayman
Islands, British West Indies. The principal business of CVP and C/S is to make
investments in start-up or venture capital situations and in connection with
leveraged buyouts and management buyouts.
TCG Ventures, L.L.C., a Delaware limited liability company ("TCG
L.L.C."), is the general partner of CUS. TCG L.L.C. is the managing member of
CVC. The business address of TCG L.L.C. is c/o The Carlyle Group, 1001
Pennsylvania Avenue, N.W., Suite 200 South, Washington, D.C. 20004. TCG
Holdings, L.L.C., a Delaware limited liability company ("TCG"), is the managing
member of, and holds a controlling interest in, TCG L.L.C. The names of the
managing members of TCG, their business addresses, citizenship and principal
occupation are as follows:
<TABLE>
<CAPTION>
Name and Office Held Business Address Citizenship
- -------------------- ---------------- -----------
<S> <C> <C>
William E. Conway, Jr. c/o The Carlyle Group, 1001 USA
Managing Director Pennsylvania Avenue, N.W.,
Suite 220, Washington, D.C.
20004-2505
Daniel A. D'Aniello, c/o The Carlyle Group, 1001 USA
Managing Director Pennsylvania Avenue, N.W.,
Suite 220, Washington, D.C.
20004-2505
Frank C. Carlucci III c/o The Carlyle Group, 1001 USA
Managing Director Pennsylvania Avenue, N.W.,
Suite 220, Washington, D.C.
20004-2505
James A. Baker III c/o The Carlyle Group, 1001 USA
Managing Director Pennsylvania Avenue, N.W.,
Suite 220, Washington, D.C.
20004-2505
Allan M. Holt c/o The Carlyle Group, 1001 USA
Managing Director Pennsylvania Avenue, N.W.,
Suite 220, Washington, D.C.
20004-2505
David W. Dupree c/o The Carlyle Group, 1001 USA
Managing Director Pennsylvania Avenue, N.W.,
Suite 220, Washington, D.C.
20004-2505
</TABLE>
<PAGE> 7
SCHEDULE 13D (CONTINUED) PAGE 7 OF 12 PAGES
<TABLE>
<CAPTION>
Name and Office Held Business Address Citizenship
- -------------------- ---------------- -----------
<S> <C> <C>
Richard G. Darman c/o The Carlyle Group, 1001 USA
Managing Director Pennsylvania Avenue, N.W.,
Suite 220, Washington, D.C.
20004-2505
David M. Rubenstein c/o The Carlyle Group, 1001 USA
Managing Director Pennsylvania Avenue, N.W.,
Suite 220, Washington, D.C.
20004-2505
</TABLE>
The principal business of CUS and CVC is to make investments, side-by-side
with CVP, in start-up or venture capital situations and in connection with
leveraged buyouts and management buyouts.
(d) and (e) To the best knowledge of the Reporting Persons, none of
the entities or persons identified in this Item 2 has, during the past five
years, been convicted of any criminal proceeding (excluding traffic violations
or similar misdemeanors), nor been a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The source of the consideration paid by the Reporting Persons was
contributions from the partners of each individual Reporting Person.
ITEM 4. PURPOSE OF TRANSACTION.
The acquisition of the Securities described in response to Item 1 by the
Reporting Persons was consummated by the Reporting Persons as a long-term
strategic investment in the Company. The acquisition by the Reporting Persons of
the Securities from the Company was consummated on November 25, 1997. The
aggregate consideration paid by the Reporting Persons was $5,082,417. The
consideartion paid by (i) CVP was $3,585,961, (ii) C/S was $732,337, (iii) CUS
was $475,592, and (iv) CVC was $288,527.
All Securities held by the Reporting Persons are held by the Reporting
Persons for investment purposes. Each Reporting Person may, subject to the
continuing evaluation of the factors discussed herein, acquire from time to time
additional securities (including shares of Common Stock) of the Company in the
open market or in privately negotiated transactions, by exchange offer or
otherwise. Depending on the factors discussed herein, each Reporting Person may,
from time to time, retain or sell all or a portion of his holdings of the
Securities in the open market or in privately negotiated transactions,
including, by way of distribution of some or all of the Securities to their
partners or members, as applicable, the conversion of Preferred Stock into
Common Stock or the exercise of Warrants. Representatives of each Reporting
Person may also have discussions with management regarding methods of increasing
sales, cash flow and profitability. Any actions that any Reporting Person might
undertake will depend upon such person's review of numerous factors, including,
among other things, the availability of Securities of the Company (including
Common Stock) for purchase and the price levels of such shares; general market
and economic conditions; ongoing evaluation of the Company's business operations
and prospects; the relative attractiveness of alternative business and
investment opportunities; the actions of the management and the Board of
Directors of the Company; and other future developments.
<PAGE> 8
SCHEDULE 13D (CONTINUED) PAGE 8 OF 12 PAGES
The Reporting Persons acquired 1,452,119 shares of newly issued
Preferred Stock which are convertible into Common Stock. The Preferred Stock is
convertible at the holder's option at any time. The Preferred Stock is
convertible (i) in the first three years, at the Company's option if the 30 day
trading average of the Common Stock is $7.00 per share and (ii) after three
years, at the Company's option if the 30 day trading average of the Common Stock
is $9.00 per share.
The Reporting Persons also received Warrants to purchase up to 842,294
shares of Common Stock ("Class I (Mirror) Warrants"), which represent 19.9% of
the Company's existing options and warrants (the "Counterpart Warrants") that
have exercise prices ranging from $4.63 per share to $9.90 per share. These
Class I (Mirror) Warrants must be exercised by the Reporting Persons, on the
same terms and conditions as the holders of the Counterpart Warrants, when the
Counterpart Warrants are exercised. The Reporting Persons cannot force the
holders of the Counterpart Warrants to exercise such Counterpart Warrants and
the Reporting Persons cannot exercise the Class I (Mirror) Warrants unless and
until the holders of Counterpart Warrants exercise such Counterpart Warrants.
The Reporting Persons also received Warrants to purchase 290,424 additional
shares of Common Stock at an exercise price of $7.00 per share and an exercise
period of five years (the "Class II Warrants").
The terms and conditions for the conversion of the Preferred Stock are
set forth in the Certificate of Designation, Preferences and Rights of
Series B Convertible Preferred Stock (the "Certificate of Designation"),
comprising a portion of the Company's Certificate of Incorporation. The
acquisition was effected pursuant to the Series B Convertible Preferred Stock
Purchase Agreement, dated October 9, 1997, by and among the Company, CVP, C/S,
CUS and CVC, which is attached hereto as Exhibit 2. The terms and conditions of
the Class I (Mirror) Warrants are set forth in the form of Class I (Mirror)
Warrant, which is attached hereto as Exhibit 3. The terms and conditions of the
Class II Warrants are set forth in the form of Class II Warrant, which is
attached hereto as Exhibit 4.
Under the terms of the Certificate of Designation, the holders of
Preferred Stock, voting as a separate class, shall have the right to elect one
director to the Board of Directors of the Company (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 Company's 1998 annual
meeting of stockholders, the holders of Preferred Stock, voting as a separate
class, shall have the right to elect a second member of the Board of Directors
of the Company. Thereafter, the holders of Preferred Stock shall have the right,
voting as a separate class, to elect two members of the Board of Directors of
the Company until such time as at least one-half but less than all of the
outstanding shares of Preferred Stock have been redeemed, repurchased, retired
or converted into shares of Common Stock of the Company, in which case the
holders of Preferred Stock shall have the right, voting as a separate class, to
elect only one member to the Board of Directors of the Company until such time
as all of the outstanding shares of Preferred Stock have been redeemed,
repurchased, retired or converted into shares of Common Stock.
The holders of Preferred Stock are entitled to cumulative dividends at
an annual rate of ten percent (10%) times the liquidation preference of $3.50
per share, commencing on and after the third anniversary of the date of original
issuance of the Preferred Stock. In addition, the holders of Preferred Stock
have the right to participate in any dividends paid with respect to the Common
Stock, on the basis of the number of shares of Common Stock into which the
Preferred Stock may be converted.
Upon a Change of Control of the Company, the holders of Preferred Stock
shall have the right to compel the Company to redeem the Preferred Stock at a
price of 105% of the liquidation preference of $3.50 per share. For purposes of
the Certificate of Designation, the term "Change of Control" is defined as (i)
any person or group obtaining a majority of the securities ordinarily having the
right to vote in an election of the Board of Directors; (ii) during any two year
period, the individuals who at the beginning of the period no longer constitute
a majority of the Board of Directors; (iii) the merger, consolidation,
recapitalization, reorganization, dissolution, or liquidation of the Company as
a result of the current stockholders no longer owning 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.
<PAGE> 9
SCHEDULE 13D (CONTINUED) PAGE 9 OF 12 PAGES
Other than as set forth in this statement, the Reporting Persons do not
have any present plans or proposals that relate to or would result in any of the
consequences listed in paragraphs (a)-(j) of Item 4 of Schedule 13D, or any
agreement regarding such matters, although they may in the future take actions
which would have such consequences.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The following table sets forth the beneficial ownership of shares
of the Company's Common Stock by each Reporting Person. As of November 25, 1997,
the Company informed the Reporting Persons that there were 8,756,500 shares of
Common Stock that were issued and outstanding.
<TABLE>
<CAPTION>
Right to Common Class I (Mirror) Warrants: Class II Warrants: Total
Stock Upon Conversion Right to Purchase Right to Purchase Beneficial
of Preferred Stock Common Stock* Common Stock Ownership
------------------ ------------- ------------ ---------
<S> <C> <C> <C> <C>
CVP 1,024,560 594,291 204,912 1,823,763
C/S 209,239 121,368 41,848 372,455
CUS 135,884 78,818 27,177 241,879
CVC 82,436 47,817 16,487 146,740
Reporting Persons 1,452,119 842,294 290,424 2,584,837
</TABLE>
- --------------------
* The Class I (Mirror) Warrants represent 19.9% of the Company's existing
options and warrants and carry exercise prices ranging from $4.63 per share to
$9.90 per share. The Reporting Persons must exercise these Class I (Mirror)
Warrants when the Counterpart Warrants are exercised. The maximum number of
shares of Common Stock issuable upon exercise of the Class I (Mirror) Warrants
is included for the purposes of this calculation because the Counterpart
Warrants are exercisable within sixty days by the holders of such Counterpart
Warrants, see Rule 13d-3(d)(1). As described in Item 4, although the Reporting
Persons must exercise the Class I (Mirror) Warrants when the Counterpart
Warrants are exercised, the Reporting Persons cannot force the holders of
Counterpart Warrants to exercise such Counterpart Warrants and the Reporting
Persons cannot exercise the Class I (Mirror) Warrants unless and until the
holders of Counterpart Warrants exercise such Counterpart Warrants.
The following table sets forth the approximate percentage of Common
Stock of the Company that is beneficially owned by each Reporting Person.**
<TABLE>
<CAPTION>
Right to Common Class I (Mirror) Warrants: Class II Warrants: Total
Stock Upon Conversion Right to Purchase Right to Purchase Beneficial
of Preferred Stock Common Stock Common Stock Ownership
------------------ ------------- ------------ ---------
<S> <C> <C> <C> <C>
CVP 6.58% 3.81% 1.32% 11.71%
C/S 1.34% .78% .28% 2.4%
CUS .87% .51% .17% 1.55%
CVC .53% .31% .11% .94%
Reporting Persons 9.32% 5.41% 1.86% 16.60%
</TABLE>
- --------------------
** All percentages calculated are based on 15,573,970 shares which equals the
total of (i) 8,756,500 shares of Common Stock which has been reported by the
Company as being presently issued and outstanding, plus
<PAGE> 10
SCHEDULE 13D (CONTINUED) PAGE 10 OF 12 PAGES
(ii) 1,452,119 shares of Common Stock issuable upon conversion of the Preferred
Stock, plus (iii) 842,294 shares of Common Stock issuable upon exercise of the
Class I (Mirror) Warrants, plus (iv) 290,424 shares of Common Stock issuable
upon exercise of the Class II Warrants plus (v) 4,232,633 shares of Common
Stock issuable upon exercise of the Counterpart Warrants (as reported to the
Reporting Persons by the Company as of November 27, 1997). The maximum number
of shares of Common Stock issuable upon exercise of the Class I (Mirror)
Warrants is included for the purposes of this calculation because the
Counterpart Warrants are exercisable by the holders of such Counterpart
Warrants within sixty days, see Rule 13d-3(d)(1). As described in Item 4,
although the Reporting Persons must exercise the Class I (Mirror) Warrants when
the Counterpart Warrants are exercised, the Reporting Persons cannot force the
holders of Counterpart Warrants to exercise such Counterpart Warrants and the
Reporting Persons cannot exercise the Class I (Mirror) Warrants unless and
until the holders of Counterpart Warrants exercise such Counterpart Warrants.
(b) The managing members of TCG (William E. Conway, Daniel A.
D'Aniello, Frank C. Carlucci III, James A. Baker III, Richard G. Darman,
David M. Rubenstein, Allan M. Holt and David W. Dupree) may be deemed to share
beneficial ownership of any shares of Common Stock beneficially owned by CUS
and CVC. Such individuals disclaim any such beneficial ownership.
(c) Not applicable.
(d) No person other than the Reporting Persons is known to the
Reporting Persons to have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the shares of
Common Stock of the Company owned by the Reporting Persons.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO
SECURITIES OF THE ISSUER.
The response to Item 4 is incorporated by reference herein.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
<TABLE>
<S> <C>
Exhibit 1 Joint Filing Agreement, dated as of December 5, 1997, by and among CVP, C/S,
CUS and CVC
Exhibit 2 Series B Convertible Preferred Stock Purchase Agreement, dated October 9, 1997, by
and among the Company and CVP, C/S, CUS and CVC
Exhibit 3 Form of Class I (Mirror) Warrants
Exhibit 4 Form of Class II Warrants
</TABLE>
<PAGE> 11
SCHEDULE 13D (CONTINUED) PAGE 11 OF 12 PAGES
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
<TABLE>
<S> <C>
Dated: December 5, 1997
CARLYLE VENTURE PARTNERS, L.P.,
a Cayman Islands exempted limited partnership
By: TCG Ventures, Ltd., as the General Partner
By: /s/ J. Mitchell Reese
------------------------------------------------------
Name: J. Mitchell Reese
Title: Attorney-in-Fact
C/S VENTURE INVESTORS, L.P.,
a Cayman Islands exempted limited partnership
By: TCG Ventures, Ltd., as the General Partner
By: /s/ J. Mitchell Reese
------------------------------------------------------
Name: J. Mitchell Reese
Title: Attorney-in-Fact
CARLYLE U.S. VENTURE PARTNERS, L.P.,
a Delaware limited partnership
By: TCG Ventures, L.L.C., as the General Partner
By: /s/ J. Mitchell Reese
------------------------------------------------------
Name: J. Mitchell Reese
Title: Managing Director
CARLYLE VENTURE COINVESTMENT, L.L.C.,
a Delaware limited liability company
By: TCG Ventures, L.L.C., as the Managing Member
By: /s/ J. Mitchell Reese
------------------------------------------------------
Name: J. Mitchell Reese
Title: Attorney-in-Fact
</TABLE>
<PAGE> 12
SCHEDULE 13D (CONTINUED) PAGE 12 OF 12 PAGES
<TABLE>
<CAPTION>
EXHIBIT INDEX Page Number
------------- -----------
<S> <C>
Exhibit 1 Joint Filing Agreement, dated as of December
5, 1997, by and among CVP, C/S, CUS and CVC
Exhibit 2 Series B Convertible Preferred Stock Purchase Agreement,
dated October 9, 1997, by and among the Company and CVP,
C/S, CUS and CVC
Exhibit 3 Form of Class I (Mirror) Warrants
Exhibit 4 Form of Class II Warrants
</TABLE>
<PAGE> 1
EXHIBIT 1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f) promulgated under the Securities
Exchange Act of 1934, as amended, the undersigned hereby agree to the joint
filing with all other Reporting Persons (as such term is defined in the Schedule
13D referred to below) on behalf of each of them of a statement on Schedule 13D
(including amendments thereto) with respect to the common stock, par value $.01
per share, of Sight Resource Corporation, a Delaware corporation, and that this
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned hereby execute this Agreement as of
the 5th day of December, 1997
<TABLE>
<S> <C>
Dated: December 5, 1997
CARLYLE VENTURE PARTNERS, L.P.,
a Cayman Islands exempted limited partnership
By: TCG Ventures, Ltd., as the General Partner
By: /s/ J. Mitchell Reese
------------------------------------------------------
Name: J. Mitchell Reese
Title: Attorney-in-Fact
C/S VENTURE INVESTORS, L.P.,
a Cayman Islands exempted limited partnership
By: TCG Ventures, Ltd., as the General Partner
By: /s/ J. Mitchell Reese
------------------------------------------------------
Name: J. Mitchell Reese
Title: Attorney-in-Fact
CARLYLE U.S. VENTURE PARTNERS, L.P.,
a Delaware limited partnership
By: TCG Ventures, L.L.C., as the General Partner
By: /s/ J. Mitchell Reese
------------------------------------------------------
Name: J. Mitchell Reese
Title: Managing Director
CARLYLE VENTURE COINVESTMENT, L.L.C.,
a Delaware limited liability company
By: TCG Ventures, L.L.C., as the Managing Member
By: /s/ J. Mitchell Reese
------------------------------------------------------
Name: J. Mitchell Reese
Title: Attorney-in-Fact
</TABLE>
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EXHIBIT 2
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SIGHT RESOURCE CORPORATION
SERIES B CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
DATED OCTOBER 9, 1997
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TABLE OF CONTENTS
<TABLE>
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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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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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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 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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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
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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 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,
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<PAGE> 14
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 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
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<PAGE> 15
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, 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
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<PAGE> 16
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 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.
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<PAGE> 17
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.
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
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<PAGE> 18
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.
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
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<PAGE> 19
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 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
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<PAGE> 20
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.
(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;
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<PAGE> 21
(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;
(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
uPurchaser: (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
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<PAGE> 22
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 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
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<PAGE> 23
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;
(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
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<PAGE> 24
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 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
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<PAGE> 25
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, 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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<PAGE> 26
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:
(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
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<PAGE> 30
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).
(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
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<PAGE> 31
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.
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
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<PAGE> 32
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 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
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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 than the effective date of the registration statement.
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(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
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
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<PAGE> 35
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 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.
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<PAGE> 36
(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.
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
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<PAGE> 37
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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(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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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
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<PAGE> 41
Telephone No.: 508-429-6916
Facsimile No.: 508-429-6023
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
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<PAGE> 42
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.
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
- 38 -
<PAGE> 43
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 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]
- 39 -
<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 G. McLendon
-------------------------------------
Name: William G. McLendon
-----------------------------------
Title: President and 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
- 40 -
<PAGE> 45
EXHIBIT A
CLASS I WARRANT
- 41 -
<PAGE> 46
EXHIBIT B
CLASS II WARRANT
- 42 -
<PAGE> 47
EXHIBIT 2.1
Certificate of Designation of Series B Convertible Preferred Stock
- 43 -
<PAGE> 48
EXHIBIT 6.3
Company's Counsel Legal Opinion
- 44 -
<PAGE> 49
SCHEDULE 4.3
SUBSIDIARIES
- 45 -
<PAGE> 50
SCHEDULE 4.11
MATERIAL AGREEMENTS
- 46 -
<PAGE> 51
SCHEDULE 4.12
FEES
- 47 -
<PAGE> 52
SCHEDULE 4.13
REGISTRATION RIGHTS
- 48 -
<PAGE> 53
SCHEDULE 4.15
REAL PROPERTY
- 49 -
<PAGE> 54
SCHEDULE 4.16
TANGIBLE PERSONAL PROPERTY
- 50 -
<PAGE> 55
- 51 -
<PAGE> 56
SCHEDULE 4.17
ENVIRONMENTAL
- 52 -
<PAGE> 57
SCHEDULE 4.18
LIABILITIES
- 53 -
<PAGE> 58
SCHEDULE 4.19
CHANGES
- 54 -
<PAGE> 59
SCHEDULE 4.20
EMPLOYEE BENEFIT PLANS
- 55 -
<PAGE> 1
EXHIBIT 3
BALT: 11417/4
10/6/97, 3:49pm
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
1
<PAGE> 2
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.
2
<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.
3
<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
4
<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
5
<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)
6
<PAGE> 7
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.
7
<PAGE> 8
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:
- --------------------------- --------------------
8
<PAGE> 9
SCHEDULE A
SCHEDULE OF COUNTERPART WARRANTS
9
<PAGE> 10
SCHEDULE B
COPIES OF ALL COUNTERPART WARRANTS
10
<PAGE> 1
EXHIBIT 4
BALT: 11389/4
9/30/97, 2:26pm
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
1
<PAGE> 2
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
2
<PAGE> 3
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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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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"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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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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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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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
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<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)
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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:
-----------------
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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.
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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:
- --------------------------- --------------------------
21
