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EXHIBIT 2.10
PURCHASE AGREEMENT
PURCHASE AGREEMENT ("AGREEMENT") dated as of June 5, 2000 between
APPLIEDTHEORY CORPORATION, a Delaware corporation (the "COMPANY"), and each
person or entity listed as an investor on SCHEDULE I attached to this Agreement
(each individually an "INVESTOR" and collectively the "INVESTORS"). Undefined
terms contained herein shall have the meaning ascribed to them in the
Debentures.
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Investors, and
the Investors wish to purchase from the Company, 5% Convertible Debentures due
June 5, 2003 (the "DEBENTURES"), in the aggregate principal amount of
$30,000,000 at an aggregate purchase price of $30,000,000, having the rights and
privileges set forth in the Debentures in the form of EXHIBIT 1.1A attached
hereto (the "INITIAL ISSUANCE"), on the terms and conditions set forth herein;
and
WHEREAS, pursuant to the terms of the Debentures, the Debentures will
be convertible into shares ("COMMON SHARES") of common stock, par value $.01 of
the Company ("COMMON STOCK") and/or pursuant to Section 7 of the Debenture,
warrants ("FORCED CONVERSION WARRANTS") exercisable for Common Shares pursuant
to Section 7(b) of the Debentures;
WHEREAS, to induce the Investors to purchase the Debentures, the
Company has agreed to issue to the Investors warrants (the "INITIAL WARRANTS")
exercisable for shares of Common Stock ("WARRANT SHARES" and collectively with
the Forced Conversion Warrants, and the Option Warrants (defined below), the
"WARRANTS") in the form attached as EXHIBIT 1.1B;
WHEREAS, the Investors shall have the option to compel the Company to
sell, and the Company shall have the option to compel the Investors to purchase
(collectively, the "OPTIONS" and, collectively with the Debentures and the
Warrants, the "SECURITIES"), warrants (collectively, the "OPTION WARRANTS")
exercisable for additional shares of Common Stock (collectively, the "OPTION
SHARES");
WHEREAS, the Investors will have registration rights with respect to
such Common Shares, the Option Shares, and the Warrant Shares pursuant to the
terms of that certain Registration Rights Agreement to be entered into between
the Company and the Investors substantially in the form of EXHIBIT 4.2(e) hereto
("REGISTRATION RIGHTS AGREEMENT");
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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ARTICLE 1
PURCHASE AND SALE OF DEBENTURES AND INITIAL WARRANTS, ETC.
Section 1.1 Initial Issuance of Debentures and Initial Warrants.
(a) Initial Issuance. Upon the following terms and conditions, the
Company shall issue and sell to each Investor severally, and each Investor
severally shall purchase from the Company, the outstanding principal amount of
Debentures and the number of Initial Warrants indicated next to such Investor's
name on SCHEDULE I attached hereto.
(b) Purchase Price. The purchase price for the Debentures and
Initial Warrants to be acquired by each Investor (the "PURCHASE PRICE") shall be
the Purchase Price set forth next to such Investor's name on SCHEDULE I.
(c) The Closing.
(i) The closing of the purchase and sale of the
Debentures and the Initial Warrants (the "CLOSING") in the Initial
Issuance, shall take place at the offices of Kleinberg, Kaplan, ▇▇▇▇▇ &
▇▇▇▇▇, P.C. ("INVESTORS' COUNSEL") or at such other place as is
mutually agreeable, at 10:00 am., local time on: (x) the date on which
the last to be fulfilled or waived of the conditions set forth in
Article 4 hereof and applicable to the Closing shall be fulfilled or
waived in accordance herewith, or (y) such other time and place and/or
on such other date as the Investors and the Company may agree. The date
on which the Closing occurs is referred to herein as the "CLOSING
DATE".
(ii) On the Closing Date, the Company shall deliver to
each Investor (x) one or more debentures (with the number of and
outstanding principal amount of each debenture to be as reasonably
requested by such Investor) representing the aggregate Debentures
purchased hereunder by such Investor at the Closing registered in the
name of such Investor or its nominee and (y) the Initial Warrants
registered in the name of Investor or its nominee in such denominations
as reasonably requested by such Investor, and such Investor shall
deliver to the Company the Purchase Price for the Debentures purchased
by such Investor hereunder by wire transfer in immediately available
funds to an account designated in writing by the Company. The delivery
of payment by each Investor of the Purchase Price applicable to it as
set forth in this paragraph shall constitute a payment delivered to the
Company in satisfaction of such Investor's obligation to pay the
Purchase Price hereunder. In addition, each party shall deliver all
documents, instruments and writings required to be delivered by such
party pursuant to this Agreement at or prior to the Closing. In
addition, at the Closing, the Company shall pay to the Investors'
Counsel its legal fees and disbursements as set forth in Section 3.4.
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Section 1.2 The Investor Call Option
(a) At any time and from time to time during the Option Period (as
defined in Section 1.2(b)), each Investor may severally compel, in each of their
sole discretion, the Company to sell ("THE INVESTOR CALL OPTION") warrants
(collectively, the "CALL OPTION WARRANTS") to each such Investor for an
aggregate purchase price of such Investor's pro rata share (as set forth on
Schedule 1 hereto) of $10,000,000 less the product of $.01 multiplied by such
Investor's pro rata share of the total number of Call Option Shares (as defined
in the following sentence). Call Option Warrants shall be exercisable for a
total number of shares of Common Stock equal to $10,000,000 divided by the
Initial Conversion Price (as defined in, and as may be adjusted pursuant to, the
Debentures and Section 2(b)(i) of the Registration Rights Agreement, but which
shall not be subject to any Reset as provided in the Debentures) at an exercise
price of $.01 per share (the "CALL OPTION SHARES") and shall be in the form of
Exhibit 1.3(a) hereto. Each Investor may assign its right to purchase Call
Option Warrants to any other Investor without the consent of the Company or any
other Investor.
(b) Except as otherwise set forth to the contrary in this Section
1.2, each Investor may exercise the Investor Call Option at any time and from
time to time in whole or in part during the period commencing upon the Closing
Date and expiring on the one year anniversary thereof (the "OPTION PERIOD") by
providing the Company with at least 3 Trading Days written notice (the "CALL
OPTION NOTICE") stating that such Investor is exercising its Investor Call
Option, setting forth the number of Call Option Warrants that the Investor seeks
to purchase (in accordance with Section 1.2(a) above) and specifying the date
that the purchase is to occur (each, a "CALL OPTION CLOSING DATE").
(c) Upon delivery of a Call Option Notice from an Investor, the
Company shall be obligated to sell, issue and deliver to such Investor, and such
Investor shall be obligated to purchase, the Call Option Warrants specified in
the Call Option Notice, subject to the terms of this Section 1.2. Closing of any
such purchase shall take place in the same manner as the Closing and shall be
subject to the same conditions as are set forth in Section 4.1. On the Call
Option Closing Date, the Company shall deliver certificates evidencing the Call
Option Warrants being purchased against the cash payment of the purchase price
therefor. The Registration Rights Agreement shall apply to the Call Option
Shares as provided therein. In the event that the Investor has not received such
certificates within three (3) Trading Days from the Call Option Closing Date, in
addition to any other rights or remedies the Investor may have, the Investor may
revoke the Call Option Notice.
Section 1.3 The Company Put Option
(a) At any time during the Option Period (as defined in Section
1.2(b)), the Company may compel all but not less than all of the Investors,
severally, to purchase (the "COMPANY PUT OPTION") warrants (collectively, the
"PUT OPTION WARRANTS") for an aggregate purchase price of $10,000,000 less the
product of $.01 multiplied by the total number of Put Option Shares (as defined
in the following
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sentence). Put Option Warrants shall be exercisable for a total number of shares
of Common Stock equal to $10,000,000 divided by the Initial Conversion Price (as
defined in, and as may be adjusted pursuant to, the Debentures, but which shall
not be subject to any Reset as provided in the Debentures) at an exercise price
of $.01 per share (the "PUT OPTION SHARES") and shall be in the form of Exhibit
1.3(a) hereto. Each Investor may only be compelled to purchase a percentage of
the total Put Option Warrants subject to the Company Put Option equal to such
Investor's pro rata share.
(b) Except as otherwise set forth to the contrary in this Section
1.3, the Company may exercise the Company Put Option at any time and from time
to time during the Option Period by providing each Investor with at least 15
Trading Days written notice (the "PUT OPTION NOTICE") stating that the Company
is exercising its Company Put Option, setting forth the number of Put Option
Warrants that each Investor is required to purchase (in accordance with Section
1.3(a) above) and specifying the date that the purchase is to occur (the "PUT
OPTION CLOSING DATE" and, collectively, with the Call Option Closing Date, the
"OPTION CLOSING DATE").
(c) Upon delivery of a Put Option Notice from the Company, each
Investor shall be severally obligated to purchase from the Company, and the
Company shall be obligated to issue, sell and deliver, the Put Option Warrants
specified in the Put Option Notice applicable to such Investor, subject to the
terms of this Section 1.3. Closing of any such purchase shall take place in the
same manner as the Closing and shall be subject to the same conditions as are
set forth in Section 4.2. On the Put Option Closing Date, the Company shall
deliver warrants evidencing the Put Option Warrants being purchased against the
cash payment of the purchase price therefor. The Registration Rights Agreement
shall apply to the Put Option Shares as provided therein. The obligations of the
Investors to purchase the Put Option Warrants hereunder shall be in all respects
several and not joint.
(d) Notwithstanding anything herein to the contrary, the right of
the Company to exercise the Company Put Option under this Section 1.3 as to an
Investor shall be conditional upon the following (unless waived by such
Investor):
(i) At least thirty (30) Trading Days shall have expired
since the most recent exercise by any Investor of the Investor Call
Option; provided that this condition shall not apply to any exercise by
the Company of the Company Put Option during the last (30) days of the
Option Period;
(ii) All the Company's representations and warranties
contained in this Agreement, the Registration Rights Agreement, the
Debentures and the Warrants shall be true and correct as of the Closing
Date, the date of the Put Option Notice and the relevant Put Option
Closing Date (except for representations and warranties as of an
earlier date, which shall be true and correct as of such date); and all
the Company's covenants contained in this Agreement, the Registration
Rights Agreement, the Debentures and the Warrants shall have been
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performed when and as required, all as certified in writing by the
chief financial officer of the Company;
(iii) A Material Adverse Effect (as defined in Section
2.1(a)) shall not have occurred as of the date of the Put Option Notice
and as of the relevant Put Option Closing Date with respect to the
business, operations, properties or financial condition of the Company
or its subsidiaries;
(iv) No Event of Default (as defined in the Debentures)
shall have occurred, be likely to occur or be threatened, as of the
date of the Put Option Notice and as of the relevant Put Option Closing
Date;
(v) The obligation hereunder of each Investor to acquire
and pay for the Put Option Shares on the Put Option Closing Date
(unless otherwise specified) shall be subject to the satisfaction at or
before the relevant Put Option Closing Date, of each of the applicable
conditions set forth in Section 4.2, except that all references to the
Closing or the Closing Date shall be deemed to refer to such Put Option
Closing Date;
(vi) The Company shall have received the shareholder
approval required under Section 3.14, if required.
(vii) The Registrable Securities (as defined in the
Registration Rights Agreement) have been and are subject to Effective
Registration from the exercise of the Company Put Option up to and
including the Put Option Closing Date, and such Investor is not named
as an underwriter in such registration statement.
(viii) The Market Price for Shares of Common Stock for each
of the ten (10) Trading Days immediately preceding the date of the
relevant Put Option Closing Date shall have been in excess of 125% of
the Initial Conversion Price as adjusted.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to each of the
Investors as of the date hereof and on the Closing Date:
(a) Organization and Qualification; Material Adverse Effect. The
Company is a corporation duly incorporated and existing in good standing under
the laws of the State of Delaware and has the requisite corporate power to own
its properties and to carry on its business as now being conducted. The Company
does not have any direct or indirect subsidiaries (defined as any entity of
which the Company owns, directly or indirectly, 50% or more of the equity or
voting power) other than the subsidiaries listed
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on SCHEDULE 2.1(a) attached hereto. Except where specifically indicated to the
contrary, all references in this Agreement to subsidiaries shall be deemed to
refer to all direct and indirect subsidiaries of the Company. Each of the
Company and its subsidiaries is duly qualified as a foreign corporation to do
business and is in good standing in every jurisdiction in which the nature of
the business conducted or property owned by it makes such qualification
necessary other than those in which the failure so to qualify would not have a
Material Adverse Effect. "MATERIAL ADVERSE EFFECT" means any adverse effect on
the business, operations, properties or financial condition of the entity with
respect to which such term is used and which is (either alone or together with
all other adverse effects) material to such entity and other entities
controlling or controlled by such entity taken as a whole, and any material
adverse effect on the transactions contemplated under this Agreement, the
Registration Rights Agreement or any other agreement or document contemplated
hereby or thereby.
(b) Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Warrants and the Registration Rights Agreement and to issue the Debentures and
the Warrants in accordance with the terms hereof and thereof, (ii) the execution
and delivery of this Agreement, the Debentures, the Initial Warrants and the
Registration Rights Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby, including the issuance of the
Option Warrants, Forced Conversion Warrants, Common Shares, the Option Shares
and the Warrant Shares, have been duly authorized by all necessary corporate
action, and no further consent or authorization of the Company or its Board of
Directors (or any committee or subcommittee thereof) or stockholders is
required, (iii) this Agreement, the Initial Warrants, the Debentures and the
Registration Rights Agreement have been duly executed and delivered by the
Company and, upon issuance, if any, the Option Warrants and the Forced
Conversion Warrants shall be duly executed and delivered by the Company, and
(iv) this Agreement, the Initial Warrants, the Debentures and the Registration
Rights Agreement constitute, and, if issued, the Option Warrants and Forced
Conversion Warrants shall constitute, valid and binding obligations of the
Company enforceable against the Company in accordance with their terms, except
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of creditors' rights and remedies or by
other equitable principles of general application.
(c) Capitalization. The authorized capital stock of the Company
consists of 90,000,000 shares of Common Stock and 1,000,000 shares of preferred
stock; as of June 4, 2000 there were 24,291,594 shares of Common Stock and no
shares of preferred stock issued and outstanding; and, except as set forth on
Schedule 2.1(c), no shares of Common Stock and no shares of preferred stock were
reserved for issuance to persons other than the Investors. All of the
outstanding shares of the Company's Common Stock and preferred stock have been
validly issued and are fully paid and nonassessable. No shares of capital stock
are entitled to preemptive rights and there are no outstanding options and
outstanding warrants for shares of Common Stock (excluding the Warrants and the
Options). Except as set forth on Schedule 2.1(c)(i), there are no other scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or
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securities or rights exchangeable for or convertible into, any shares of capital
stock of the Company, or contracts, commitments, understandings, or arrangements
by which the Company is or may become bound to issue additional shares of
capital stock of the Company or options, warrants, scrip, rights to subscribe
to, or commitments to purchase or acquire, any shares, or securities or rights
convertible or exchangeable into shares, of capital stock of the Company.
Attached hereto as EXHIBIT 2.1(c)(i) is a true and correct copy of the Company's
Certificate of Incorporation (the "CHARTER"), as in effect on the date hereof,
and attached hereto as EXHIBIT 2.1(c)(ii) is a true and correct copy of the
Company's By-Laws, as in effect on the date hereof (the "BY-LAWS").
(d) Issuance of Common Shares. The Common Shares, the Option
Shares, and the Warrant Shares are duly authorized and reserved for issuance
and, upon such conversion in accordance with the Debentures and/or exercise in
accordance with the Options and/or Warrants such Common Shares, Option Shares
and Warrant Shares, as the case may be, will be validly issued, fully paid and
non-assessable, free and clear of any and all liens, claims and encumbrances,
and (subject to the registration of such shares in accordance with the
applicable provisions of the Securities Act of 1933, as amended (the "SECURITIES
ACT" of the "ACT") and the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT") entitled to be traded on the Nasdaq National Market System (or
the American Stock Exchange or the New York Stock Exchange, collectively with
the Nasdaq National Market System, the "APPROVED MARKETS"), and the holders of
such Common Shares, Option Shares and Warrant Shares shall be entitled to all
rights and preferences accorded to a holder of Common Stock. The outstanding
shares of Common Stock are currently listed on the Nasdaq National Market
System.
(e) No Conflicts. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Warrants by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby and the issuance of the Debentures, the Options and the Warrants do not
and will not (i) result in a violation of the Company's Charter or By-Laws or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture, patent, patent license or instrument to which the Company
or any of its subsidiaries is a party (collectively, "COMPANY AGREEMENTS"), or
(iii) result in a violation of any federal, state, local or foreign law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations) applicable to the Company or any of its subsidiaries or by
which any property or asset of the Company or any of its subsidiaries is bound
or affected, except (other than in the case of clause (i) above) where such
violation would not reasonably be expected to have a Material Adverse Effect.
The business of the Company and its direct and indirect subsidiaries is being
conducted in material compliance with (i) its Charter and By-Laws, (ii) all
Company Agreements and (iii) all applicable laws, ordinances or regulations of
any governmental entity, except (other than in the case of clause (i) above)
where such violation would not reasonably be expected to have a Material Adverse
Effect. Except for filings, consents and approvals required under applicable
state and federal securities laws or the rules and regulations of the Approved
Markets and covered by the Registration Rights Agreement, the Company is not
required under federal, state,
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local or foreign law, rule or regulation to obtain any consent, authorization or
order of, or make any filing or registration with, any court or governmental
agency in order for it to execute, deliver or perform any of its obligations
under this Agreement, the Registration Rights Agreement, the Debentures and the
Warrants or to issue and sell the Securities or the Common Shares, Option Shares
and Warrants Shares upon conversion or exercise thereof or for the registration
provisions provided in the Registration Rights Agreement.
(f) SEC Documents; No Non-Public Information; Financial
Statements. The Common Stock of the Company is registered pursuant to Section
12(b) of the Exchange Act and the Company and its subsidiaries have filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the Securities and Exchange Commission ("SEC") pursuant to the
reporting requirements of the Exchange Act, including all such proxy
information, solicitation statement and registration statements, and any
amendments thereto required to have been filed (all of the foregoing including
filings incorporated by reference therein being referred to herein as the "SEC
DOCUMENTS"). The Company has not directly or indirectly provided, and will not
directly or indirectly provide, to the Investors any material non-public
information or any information which, according to applicable law, rule or
regulation, should have been disclosed publicly by the Company but which has not
been so disclosed. As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder and other federal, state and
local laws, rules and regulations applicable to such SEC Documents, and none of
the SEC Documents contained any untrue statement of a material fact or omitted
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. The SEC Documents contain all material information
concerning the Company and its subsidiaries, and no event or circumstance has
occurred prior to the date hereof or will have occurred on the Closing Date
which would require the Company to disclose such event or circumstance in order
to make the statements in the SEC Documents not misleading but which has not, or
will have not, been so disclosed.
(g) Financial Statements. The financial statements of the Company
and its subsidiaries included in the SEC Documents comply as to form and
substance in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with United States generally accepted accounting principles
applied on a consistent basis during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto or (ii) in
the case of unaudited interim statements, to the extent they may not include
footnotes, may be condensed or summary statements) and fairly present in all
material respects the financial position of the Company and its subsidiaries as
of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
year-end audit adjustments). The audited financial statements of each of the
Company and its subsidiaries for the fiscal year ending December 31, 1999 have
been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved
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(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the extent
they may not include footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company
and its subsidiaries, as the case may be, as of the dates thereof and the
results of operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments).
(h) Principal Exchange/Market. The principal market on which the
Common Stock is currently traded is the Nasdaq National Market System.
(i) No Material Adverse Change. Since March 31, 2000, no Material
Adverse Effect has occurred or exists, and no event or circumstance has occurred
that with notice or the passage of time or both is reasonably likely to result
in a Material Adverse Effect with respect to the Company or its subsidiaries,
except that, subsequent to March 31, 2000, the Company experienced negative cash
flow of approximately the same dollar amount per month that it experienced
during the calendar quarter ending March 31, 2000.
(j) No Undisclosed Liabilities. The Company and its subsidiaries
have no liabilities or obligations not disclosed in the Pre-Agreement SEC
Documents (as defined below), other than those liabilities incurred in the
ordinary course of the Company's or its subsidiaries' respective businesses
since December 31, 1999, which liabilities, individually or in the aggregate, do
not or would not have a Material Adverse Effect on the Company or its direct or
indirect subsidiaries.
(k) No Undisclosed Events or Circumstances. To the best knowledge
of the Company, no material event or circumstance has occurred or exists with
respect to the Company or its direct or indirect subsidiaries or their
respective businesses, properties, prospects, operations or financial condition,
which, under applicable law, rule or regulation, requires public disclosure or
announcement by the Company but which has not been so publicly announced or
disclosed.
(l) No General Solicitation. Neither the Company, nor any of its
affiliates, or, to its knowledge, any person acting on its or their behalf has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act in connection with the offer or
sale of the Debentures or Common Shares.
(m) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor to its knowledge any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that would require
registration of the Securities, the Common Shares, the Option Shares or Warrant
Shares under the Act.
The issuance of the Debentures, Warrants, Common Shares, Option Shares or
Warrant Shares to the Investors will not be integrated with any other issuance
of the
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Company's securities (past, current or future) which requires stockholder
approval under the rules of the NASDAQ National Market System.
(n) Form S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) on Form S-3 under
the Act and rules promulgated thereunder, and Form S-3 is permitted to be used
for the transactions contemplated hereby under the Act and rules promulgated
thereunder.
(o) Intellectual Property. The Company and/or its wholly-owned
subsidiaries owns or has licenses to use certain patents, copyrights and
trademarks ("INTELLECTUAL PROPERTY") associated with its business. The Company
and its subsidiaries have all intellectual property rights which are needed to
conduct the business of the Company and its subsidiaries as it is now being
conducted or as proposed to be conducted as disclosed in the SEC Documents. The
Company and its subsidiaries have no reason to believe that the material
intellectual property rights which it owns are invalid or unenforceable or that
the use of such intellectual property by the Company or its subsidiaries
infringes upon or conflicts with any right of any third party, and neither the
Company nor any of its subsidiaries has received notice of any such infringement
or conflict, which individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect. The Company and its subsidiaries
have no knowledge of any infringement of its intellectual property by any third
party.
(p) Poison Pill Provisions. Neither Company nor its wholly-owned
subsidiaries have a stockholder rights plan. None of the acquisition of
Debentures, Warrants, Common Shares, Option Shares or Warrant Shares nor the
deemed beneficial ownership of shares of Common Stock prior to, or the
acquisition of such shares pursuant to, the conversion of Debentures or the
exercise of the Options or the Warrants will in any event under any circumstance
trigger the poison pill provisions of any other or subsequently adopted plan or
agreement, or a substantially similar occurrence under any successor or similar
plan.
(q) No Litigation. Except as set forth in the reports or documents
filed at least 5 Trading Days prior to the Closing Date by the Company pursuant
to Section 13(a) or 15(c) of the Exchange Act (the "PRE-AGREEMENT SEC
DOCUMENTS"), no litigation or claim (including those for unpaid taxes) against
the Company or any of its subsidiaries is pending or, to the Company's
knowledge, threatened, and no other event has occurred, which if determined
adversely could reasonably be expected to have a Material Adverse Effect on the
Company or could reasonably be expected to materially and adversely affect the
transactions contemplated hereby. There is no legal proceeding described in the
Pre-Agreement SEC Documents that could reasonably be expected to have a Material
Adverse Effect on the Company.
(r) Brokers. Except as set forth on Schedule 2.1(v), the Company
has taken no action which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments by the Company or any
Investor relating to this Agreement or the transactions contemplated hereby. The
Company shall be responsible for any payments contemplated by Schedule 2.1(v).
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(s) Acknowledgement of Dilution. The number of shares of Common
Stock constituting Common Shares, Option Shares or Warrant Shares may increase
substantially in certain circumstances, including the circumstance where the
trading price of the Common Stock declines. The Company acknowledges that its
obligation to issue Common Shares upon conversion of Debentures, Option Warrants
upon the exercise of Options and shares of Common Stock upon exercise of the
Warrants is absolute and unconditional, regardless of the dilution that such
issuance may have on other shareholders of the Company.
(t) Other Investors. Except as set forth on Schedule 2.1(t)(i),
there are no outstanding securities issued by the Company that are entitled to
registration rights under the Act. Except as set forth on Schedule 2.1(t)(ii),
there are no outstanding securities issued by the Company that are directly or
indirectly convertible into, exercisable into, or exchangeable for, shares of
Common Stock of the Company, or that have anti-dilution or similar rights that
would be affected by the issuance of the Debentures, the Common Shares, the
Options, the Option Shares, the Warrants or the Warrant Shares.
(u) Certain Transactions. Except as disclosed in the Pre-Agreement
SEC Documents, none of the officers, directors, or key employees of the Company
is presently a party to any transaction with the Company or any of its
subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
(v) Permits; Compliance. The Company and each of its subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "COMPANY PERMITS"), except where
failure to possess such Company Permits would not have a Material Adverse Effect
on the Company and there is no action pending or, to the knowledge of the
Company, threatened regarding suspension or cancellation of any of the Company
Permits except for such Company Permits the failure of which to possess, or the
cancellation or suspension of which, would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. To the best of its
knowledge, neither the Company nor any of its subsidiaries is in material
conflict with, or in material default or material violation of, any of the
Company Permits. Since December 31, 1999, neither the Company nor any of its
subsidiaries has received any notification with respect to possible material
conflicts, material defaults or material violations of applicable laws.
(w) Insurance. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as management of the Company believes to be
prudent and customary in
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the businesses in which the Company and its direct and indirect subsidiaries are
engaged. Neither the Company nor any such subsidiary has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers as may
be necessary to continue its business without a significant increase in cost.
(x) Internal Accounting Controls. The Company and each of its
subsidiaries maintain a system of internal accounting controls sufficient, in
the judgment of the Company's management, to provide reasonable assurance that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(y) Environmental Matters. Except as otherwise disclosed in the
Pre-Agreement SEC Documents, the Company and each of its subsidiaries is in
compliance in all respects with all applicable state and federal environmental
laws except where any such non-compliance would not reasonably be expected to
have a Material Adverse Effect on the Company and no event or condition has
occurred that may interfere with the compliance by the Company or any of its
subsidiaries with any environmental law or that may give rise to any liability
under any environmental law that, individually or in the aggregate, would have a
Material Adverse Effect.
(z) Solvency.
(i) Based on the financial condition of the Company as of
the Closing Date, the Company's fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of
the Company's existing debts and other liabilities (including known
contingent liabilities) as they mature.
(ii) Based on the financial condition of the Company as of
the Closing Date, the Company's assets do not constitute unreasonably
small capital to carry out its business for the year 2000 as now
conducted and as proposed to be conducted including the Company's year
2000 capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected
capital requirements and capital availability thereof.
(iii) The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the
timing and amounts of cash to be payable on or in respect of its debt).
Based on the financial condition of the Company as of the Closing Date,
the current cash flow of the Company, together with the proceeds the
Company would
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receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay
all amounts on or in respect of its debt when such amounts are required
to be paid.
(iv) Neither the Company nor any of its subsidiaries is
subject to any bankruptcy, insolvency or similar proceeding.
(aa) Taxes. All federal, state, city and other tax returns, reports
and declarations required to be filed or extended by or on behalf of the Company
and each of its subsidiaries have been filed or extended and all such filed
returns are complete and accurate and disclose all taxes (whether based upon
income, operations, purchases, sales, payroll, licenses, compensation, business,
capital, properties or assets or otherwise) required to be paid in the periods
covered thereby. All taxes required to be withheld by or on behalf of the
Company or any such subsidiary in connection with amounts paid or owing to any
employees, independent contractor, creditor or other party have been withheld,
and such withheld taxes have either been duly and timely paid to the proper
governmental authorities or set aside in accounts for such purposes.
(bb) Title to Properties; Encumbrances. SCHEDULE 2.1(bb) contains a
complete and accurate list of all material real property, leaseholds, or other
interests therein owned by the Company and its subsidiaries. Each of the Company
and its subsidiaries owns (with good and marketable title in the case of real
property) all the properties and assets (whether real, personal, or mixed and
whether tangible or intangible ("Company Property")) that it purports to own.
All material Company Property is free and clear of all encumbrances and are not,
in the case of real property (which, for this purpose, shall not include the
Company's interest as tenant in leaseholds), subject to any rights of way,
building use restrictions, exceptions, variances, reservations or limitations of
any nature, except, with respect to all such properties and assets, (a)
mortgages, liens or security interests shown on SCHEDULE 2.1(bb) as securing
specified liabilities or obligations, with respect to which no default (or event
that, with notice or lapse of time or both, would constitute a default) exists,
(b) liens for current taxes not yet due, and (c) with respect to real property,
(i) minor imperfections of title, if any, none of which is substantial in
amount, materially detracts from the value or impairs the use of the property
subject thereto, or impairs the operations of the Company or any of its
subsidiaries, and (ii) zoning laws and other land use restrictions (including,
but not limited to, easements of records) that do not impair the present or
anticipated use of the property subject thereto. All buildings, plans, and
structures owned by the Company or any of its subsidiaries lie wholly within the
boundaries of the real property owned by the Company or such subsidiaries, and
do not encroach upon the property of, or otherwise conflict with the property
rights of, any other person.
(cc) No Reliance on Investors. The Company acknowledges and agrees
that each Investor is acting solely in the capacity of an arm's length purchaser
with respect to this Agreement and the Registration Rights Agreement and the
performance under the Debentures and the Warrants and the transactions
contemplated hereby and thereby. The Company further acknowledges that no
Investor is acting as a financial advisor or fiduciary of the Company (or in any
similar capacity) with respect to this
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Agreement and the Registration Rights Agreement and the performance under the
Debentures and the Warrants and the transactions contemplated hereby and
thereby. The Company further represents to the Investor that the Company's
decision to enter into this Agreement and the Registration Rights Agreement and
the performance under the Debentures and the Warrants has been based solely on
the independent evaluation by the Company and its representatives.
Section 2.2 Representations and Warranties of the Investors. Each of the
Investors, severally (as to itself) and not jointly hereby makes the following
representations and warranties to the Company as of the date hereof and on the
Closing Date:
(a) Organization and Qualification. Such Investor is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and is duly qualified to do business and in
good standing in each jurisdiction in which the nature of the business conducted
by it makes such qualification necessary except where the failure to be so
qualified or in good standing would not reasonably be expected to have a
Material Adverse Effect on such Investor.
(b) Authorization; Enforcement. (i) Such Investor has the
requisite power and authority to enter into and perform this Agreement and the
Registration Rights Agreement to purchase the Debentures and to acquire the
Warrants being sold to it hereunder and to acquire the Common Shares, the
Warrant Shares and the Option Shares, (ii) the execution and delivery of this
Agreement and the Registration Rights Agreement by such Investor and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate or partnership action, and (iii) this
Agreement and the Registration Rights Agreement constitute valid and binding
obligations of such Investor enforceable against such Investor in accordance
with their terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of creditors' rights and
remedies or by other equitable principles of general application.
(c) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the performance under the
Debentures and Warrants and the consummation by such Investor of the
transactions contemplated hereby and thereby do not and will not (i) result in a
violation of such Investor's organizational documents, or (ii) conflict with any
agreement, indenture or instrument to which such Investor is a party, or (iii)
result in a material violation of any law, rule, or regulation, or any order,
judgment or decree of any court or governmental agency applicable to such
Investor. Such Investor is not required to obtain any consent or authorization
of any governmental agency in order for it to perform its obligations under this
Agreement, the Registration Rights Agreement, the Warrants or the Debentures.
(d) Investment Representations.
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(i) Access to Other Information. Such Investor
acknowledges that the Company has made available to such Investor the
opportunity to examine such additional documents from the Company and
to ask questions of, and receive full answers from, the Company
concerning, among other things, the Company, its financial condition,
its management, its prior activities and any other information which
such Investor considers relevant or appropriate in connection with
entering into this Agreement.
(ii) Risks of Investment. Such Investor acknowledges that
the Securities and the Common Shares, Option Shares and Warrant Shares
issuable upon conversion and/or exercise of the Securities have not
been registered under the Act. Such Investor is familiar with the
provisions of Rule 144 and understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration
under the Act or some other exemption from the registration
requirements of the Act will be required in order to dispose of the
Securities and the Common Shares, Option Shares and Warrant Shares
issuable upon conversion and/or exercise of the rights granted in the
Securities, and that such Investor may be required to hold the
Securities and the Common Shares, Option Shares and Warrant Shares
issuable upon conversion and/or exercise of the Securities received
under this Agreement for a significant period of time prior to
reselling them, subject to the Company successfully registering the
Common Shares, Option Shares and Warrant Shares pursuant to the
Registration Rights Agreement. Such Investor is capable of assessing
the risks of an investment in the Securities and is fully aware of the
economic risks thereof.
(iii) Investment Representation. Such Investor is
purchasing the Debentures, Initial Warrants and Investor Call Option
and may purchase the Forced Conversion Warrants, Option Warrants,
Common Shares, Option Shares and Warrants Shares, in each case, for its
own account and not with a view to distribution in violation of any
securities laws. Such Investor has no present intention to sell the
Options, Debentures, Warrants, Common Shares, Option Shares or Warrant
Shares in violation of federal or state securities laws and such
Investor has no present arrangement (whether or not legally binding) to
sell the Debentures, Warrants, Options, Common Shares, Option Shares or
Warrant Shares to or through any person or entity; provided, however,
that by making the representations herein, such Investor does not agree
to hold the Debentures, Options, Warrants, Common Shares, Option Shares
or Warrant Shares for any minimum or other specific term and reserves
the right to dispose of the Debentures, Options, Warrants, Common
Shares, Option Shares or Warrant Shares at any time in accordance with
federal and state securities laws applicable to such disposition.
(iv) Restricted Securities. It acknowledges and
understands that the terms of issuance have not been reviewed by the
SEC or by any state
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securities authorities and that the Securities have been issued in
reliance on the certain exemptions for non-public offerings under the
Act, which exemptions depend upon, among other things, the
representations made and information furnished by such Investor,
including the bona fide nature of such Investor's investment intent as
expressed above.
(v) Ability to Bear Economic Risk. It is an "accredited"
investor as defined in Rule 501 of Regulation D, as amended, under the
Act, and that it (i) is able to bear the economic risk of its
investment in the Debentures, (ii) is able to hold the Debentures for
an indefinite period of time, (iii) can afford a complete loss of its
investment in the Debentures and (iv) has adequate means of providing
for its current needs.
(vi) No Public Solicitation. At no time was such Investor
presented with or solicited by any general mailing, leaflet, public
promotional meeting, newspaper or magazine article, radio or television
advertisement, or any other form of general advertising or general
solicitation in connection with the issuance.
(vii) Reliance by the Company. Such Investor understands
that the Debentures, Options and Warrants are being or will be, as the
case may be, offered and sold and that the Common Shares, Option Shares
or Warrant Shares, as the case may be, will be issued, in reliance on a
transactional exemptions from the registration requirements of federal
and state securities laws and that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Investor set forth herein in
order to determine the applicability of such exemptions and the
suitability of such Investor to acquire the Debentures, Options and
Warrants.
(e) Brokers. Except with respect to Schedule 2.1(v), such Investor
has taken no action which would give rise to any claim by any person for
brokerage commissions, finder's fees or similar payments by the Company relating
to this Agreement or the transactions contemplated hereby.
ARTICLE 3
COVENANTS
Section 3.1 Registration and Listing; Effective Registration. For so long
as the Securities are outstanding, the Company will cause the Common Stock
issuable upon the exercise of the Securities to continue at all times to be
registered under Section 12(b) or Section 12(g) of the Exchange Act, will comply
in all respects with its reporting and filing obligations under the Exchange
Act, and will not take any action or file any document (whether or not permitted
by the Exchange Act or the rules thereunder) to terminate or suspend such
reporting and filing obligations. Until such time as no Securities are
outstanding, the Company shall continue the listing or trading of the Common
Stock on the Nasdaq National Market System or one of the other Approved
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Markets and comply in all respects with the Company's reporting, filing and
other obligations under the bylaws or rules of the Approved Market on which the
Common Stock is listed. The Company shall cause the Common Stock to be listed on
the Nasdaq National Market System no later than the registration of the Common
Stock under the Act, and at all times shall continue such listing(s) on one of
the Approved Markets. As used herein and in the Registration Rights Agreement,
the Debenture and the Warrants, the term "EFFECTIVE REGISTRATION" shall mean:
(i) the Company is in compliance with this Agreement, the Registration Rights
Agreement, the Warrants and the Debentures; (ii) the resale of Registrable
Securities (as defined in the Registration Rights Agreement) is covered by an
effective registration statement and such registration statement is not subject
to any suspension or stop orders; (iii) the resale of such securities may be
effected pursuant to a current and deliverable prospectus that is not subject to
any blackout or similar circumstance; (iv) the securities are listed on an
Approved Market (as defined below) and are not subject to any trading
suspension; (v) no Interfering Event (as described in the Registration Rights
Agreement) then exists; and (vi) none of the Company or any direct or indirect
subsidiary of the Company is subject to any bankruptcy, insolvency or similar
proceeding.
Section 3.2 Debentures on Conversion and Warrants on Exercise.
(a) Upon any conversion by an Investor (or then holder of
Debentures) of the Debentures pursuant to the terms thereof, the Company shall
issue and deliver to such Investor (or holder) within three (3) Trading Days of
the Conversion Date, a new debenture for the principal amount of Debentures
which such Investor (or holder) has not yet elected to convert but which is
evidenced in part by the debenture(s) submitted to the Company in connection
with such conversion (with the number of and denomination of such new
debenture(s) designated by such Investor or holder).
(b) Upon any partial exercise by an Investor (or then holder of
the Warrants) of the Warrants, the Company shall issue and deliver to such
Investor (or holder) within three (3) days of the date on which such Warrants
are exercised, a new Warrant or Warrants representing the number of adjusted
Warrant Shares, Option Shares and/or Common Shares, as the case may be, in
accordance with the terms of Section 3 of such Warrants.
Section 3.3 Replacement Debentures and Warrants.
(a) The Debentures held by any Investor (or then holder) may be
exchanged by such Investor (or such holder) at any time and from time to time
for Debentures with different denominations representing an equal aggregate
number of Debentures or to reflect the actual Closing Price and the actual
Initial Conversion Price pursuant to Section 1(b) of the Debenture, as requested
by such Investor (or such holder) upon surrendering the same. No service charge
will be made for such registration or transfer or exchange.
(b) The Warrants will be exchangeable at the option of the
Investor (or then holder of the Warrants) at the office of the Company for other
Warrants of different
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denominations entitling the holder thereof to purchase in the aggregate the same
number of Warrant Shares, Option Shares and/or Common Shares, as the case may
be, as are purchasable under such Warrants. No service charge will be made for
such transfer or exchange.
Section 3.4 Expenses. The Company shall pay in immediately available
funds, at the Closing and promptly upon receipt of any further invoices relating
to same, all reasonable due diligence fees and expenses and reasonable
attorneys' fees and expenses of the Investors' Counsel, incurred by the
Investors in connection with the preparation, negotiation, execution and
delivery of this Agreement, the Registration Rights Agreement, the Debentures,
the Warrants and the related agreements and documents and the transactions
contemplated hereunder and thereunder; provided, however, that the Company shall
not be obligated to pay fees and expenses in excess of $40,000 unless the
Investors have obtained the prior written approval of the Company with respect
to any such excess. At Closing, the Company shall pay the amount estimated to be
due for such fees and expenses (which may include fees and expenses estimated to
be incurred for completion of the transaction including post-closing matters).
In the event such amount is ultimately less than the actual fees and expenses,
the Company shall promptly pay such deficiency upon receipt of an invoice
regarding same. In the event such amount is ultimately greater than the actual
fees and expenses, such excess shall promptly be returned to the Company.
Section 3.5 Securities Compliance. The Company shall notify the SEC, in
accordance with their requirements, of the transactions contemplated by this
Agreement, the Debenture, the Registration Rights Agreement and the Warrants,
and shall take all other necessary action and proceedings as may be required and
permitted by applicable law, rule and regulation, for the legal and valid
issuance of the Debentures hereunder, the Common Shares issuable upon conversion
thereof, the Warrants and the Warrant Shares, Option Shares and Common Shares,
as the case may be, issuable upon exercise of the Warrants.
Section 3.6 Dividends or Distributions; Purchases of Equity Securities.
Except as set forth in Schedule 3.6 hereof, and as provided in this Section 3.6
to the contrary, during the Option Period and for so long as any Debentures,
Options or Warrants remain outstanding, the Company agrees that it shall not (a)
declare or pay any dividends or make any distributions to any holder or holders
of Common Stock (other than dividends payable in Common Stock) in their capacity
as shareholders, or (b) purchase or otherwise acquire for value, directly or
indirectly, any shares of Common Stock or other equity security of the Company;
provided that the Company may purchase or acquire shares of Common Stock (x) so
long as the Company (i) purchases or acquires such shares on the open market or
pursuant to a tender offer directed to all of the Company's shareholders other
than during a Reset Pricing Period, and (ii) does not utilize the proceeds of
the issuances of the Debentures for such purpose or (y) that are hereafter
issued to employees pursuant to employment, stock repurchase or other similar
agreements.
Section 3.7 Notices. The Company agrees to provide all holders of
Debentures, Options and Warrants with copies of all notices and information,
including
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without limitation notices and proxy statements in connection with any meetings,
that are provided to the holders of shares of Common Stock, contemporaneously
with the delivery of such notices or information to such Common Stock holders.
Section 3.8 Use of Proceeds. The Company agrees that the proceeds received
by the Company from the sale of the Debentures hereunder shall be used for
working capital purposes.
Section 3.9 Notification of Additional Financings; Adjustments. The
Company agrees that until the three (3) month anniversary of the Closing Date,
the Investors shall have a right of first refusal with respect to all non-public
capital raising transactions as set forth in this Section 3.9. The Company shall
give advance written notice to the Investors prior to any offer or sale of any
of its equity securities or any securities convertible into or exchangeable or
exercisable for such securities in a non-public capital raising transaction
("FINANCING TRANSACTION"). The Investors shall have ten (10) Trading Days from
receipt of such notice to deliver a written notice to the Company that one or
more of such Investors elects to exercise its right of first refusal with
respect to the entire issuance. If, subsequent to the Company giving notice to
the Investors hereunder, the terms and conditions of the proposed Financing
Transaction are changed in any way, the Company shall be required to provide a
new notice to the Investors hereunder and the Investors shall have the right of
refusal again to purchase all of the securities in the offering on such changed
terms and conditions as provided hereunder. In such event, if such other
Financing Transaction provides for non-cash consideration, in whole or in part,
from such other potential investor(s), the Investors shall still have the right
to participate in the Financing Transaction as provided herein, provided that
cash or cash equivalents may be substituted by the Investors for such non-cash
consideration. This right of first refusal shall continue even if the Investors
elect not to participate in one or more Financing Transactions.
Section 3.10 Reservation of Stock Issuable Upon Conversion and Upon
Exercise of the Warrants. The Company shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the Debentures and the exercise of
the Options and the Warrants, such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
Debentures and the full exercise of the Options and the Warrants and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all the then outstanding Debentures and
the full exercise of the Options and the Warrants, the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including without limitation engaging in
best efforts to obtain the requisite shareholder approval. Without in any way
limiting the foregoing, the Company agrees to reserve and at all times keep
available solely for purposes of conversion of Debentures and the exercise of
the Options and the Warrants such number of authorized but unissued shares of
Common Stock that is at least equal to 200% of the aggregate shares issuable
upon conversion of Debentures, and 200% of the aggregate shares issuable on
exercise of the Warrants (whether or not such
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Warrants have been issued), which number shall be appropriately adjusted for any
stock split, reverse split, stock dividend or reclassification of the Common
Stock. If the Company falls below the reserves specified in the immediately
preceding sentence and does not cure such non-compliance within 30 days of its
start, then the Investors will be entitled to the discount adjustments specified
in Section 2(b)(i) of the Registration Rights Agreement. If at any time the
number of authorized but unissued shares of Common Stock is not sufficient to
effect the conversion of all the then outstanding Debentures or the full
exercise of the Options and the Warrants, the Investors shall be entitled to,
inter alia, the premium price redemption rights provided in the Registration
Rights Agreement.
Section 3.11 Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article 4 of this Agreement.
Section 3.12 Limitations on Issuance of Equity and Transfers
(a) So long as any Debentures remain outstanding, the Company
agrees that neither the Company nor any of its subsidiaries shall (i) create,
incur, assume, guarantee, secure or in any manner become liable in respect of
any debt financing that has an equity component associated therewith, including
but not limited to convertible securities and debt with warrants ("DEBT-EQUITY
FINANCING"), which is senior to the Debentures; or (ii) create, incur or permit
to exist any security interest, lien or other encumbrance on or with respect to
any of the assets of the Company or its subsidiaries in connection with any
Debt-Equity Financing. No subsidiary of the Company shall have any liability for
any obligations under any Debt-Equity Financing.
(b) The Company shall not contribute or transfer its assets to any
of its subsidiaries, other than a subsidiary that has delivered its guarantee to
the Investor in form and substance satisfactory to the Investors.
Section 3.13 Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Debentures, Warrants, Options, Common Shares, Option Shares
and Warrant Shares, as required under Regulation D and to provide a copy thereof
to each Investor promptly after such filing. The Company shall, on or before
each Closing Date, take such action as the Company shall have reasonably
determined is necessary to qualify the Debentures, Warrants, Options, Common
Shares, Option Shares and Warrant Shares for sale to the Investors at the
Closing pursuant to this Agreement under applicable securities or "blue sky"
laws of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to each
Investor on or prior to the Closing Date.
Section 3.14 Nasdaq Rule. The Investors shall, in the aggregate, be
entitled to convert Debentures into a total of 4,855,889 Common Shares (19.99%
of the Common Stock issued and outstanding on the date hereof, which number
shall be subject to readjustment for any stock split, stock dividend or
reclassification of the Common Stock) (the "20% CAP"). Each Investor shall be
entitled to convert that amount of its Debentures into such total number of
Common Shares equal to such Investor's pro rata share of the 20% Cap. Once an
Investor has received its total pro rata share upon
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conversion of its Debentures, it may request that the Company redeem its
remaining Debentures at a price equal to the greater of (a) the cash value that
the Investor would receive upon conversion of the Debenture at the Conversion
Price and subsequent sale of the Common Shares received thereupon at the Market
Price for Shares of Common Stock in existence on such date and (b) 130% of the
Outstanding Principal Amount (as defined in the Debentures) plus accrued but
unpaid interest and default payments in effect at that time. If an Investor has
converted all of its Debentures, but has not depleted the total number of pro
rata shares allocated to it, its remaining pro rata shares shall be reallocated
amongst the Investors still holding Debentures on a pro rata basis. The
restrictions and redemption obligations set forth in this Section 3.14 shall
cease to apply if (a) the Company obtains written shareholder approval to issue
Common Shares in excess of the 20% Cap pursuant to Nasdaq Rule 4460 or (b) the
Company provides the Investors with irrevocable written notice, based upon the
advice of its counsel, that any such issuance of Common Shares upon conversion
of the Debentures is not subject to the 20% Cap pursuant to Nasdaq Rule 4460.
The Company will use its best efforts promptly to obtain either the shareholder
approval or the irrevocable notice described in the preceding sentence and to
provide the Investors with a copy of same: without limiting the foregoing, the
Company shall solicit the aforementioned shareholder approval at the next
shareholders meeting (for whatever purpose it may be called) which, in any
event, shall not be later than May 31, 2001 in which the Company will solicit
the aforementioned shareholder approval, will solicit proxies in favor of
issuing Common Shares in excess of the 20% Cap and will use its best efforts to
have all affiliates of the Company which own or control shares of Common Stock
to vote their shares in favor of such resolution. For purposes of this Section
3.14 only, conversion of Debentures into Forced Conversion Warrants shall be
deemed to be conversion of Debentures into the Common Shares into which such
Forced Conversion Warrants are exercisable.
Section 3.15 Transactions With Affiliates. The Company agrees that any
transaction or arrangement between it or any of its subsidiaries and any
affiliate or employee of the Company shall be effected on an arms' length basis
in accordance with customary commercial practice and, except with respect to
grants of options and stock to service providers, including employees, shall be
approved by a majority of the Company's outside directors.
Section 3.16 Press Release. Immediately following the Closing, the Company
shall issue a press release in the form set forth in Schedule 3.16 hereto.
Investors shall have the opportunity to review such press release prior to its
issuance. No press release shall name the Investors except as shall be required
by law. If the Company fails to issue a press release within 1 business day of
the Closing, the Investors may issue a press release covering the Closing and
complying with any legal requirement applicable to the Investors.
Section 3.17 Trading. An Investor may not effect, on any day during any
Reset Pricing Period (as defined in the Debenture), sales of Common Stock
(including short sales) in excess of 10% of the trading volume on such day. The
foregoing restriction shall not apply (a) if an Event of Default (as defined in
the Debentures) shall have occurred and be continuing during any day during a
Reset Pricing Period (as defined in
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the Debenture) or (b) at any time after a Change in Control Transaction has
occurred pursuant to the Debentures.
Section 3.18 Form 8-K. Within 15 calendar days of the Closing, the Company
shall file a Form 8-K with the SEC which discloses the transactions contemplated
hereby and by the Registration Rights Agreement, Warrants and Debentures.
Investors shall have the opportunity to review such Form 8-K prior to its
filing.
ARTICLE 4
CONDITIONS TO CLOSINGS
Section 4.1 Conditions Precedent to the Obligation of the Company to Sell
the Debentures. The obligation hereunder of the Company to issue and/or sell the
Debentures to the Investors at the Closing (unless otherwise specified) is
subject to the satisfaction, at or before the Closing, of each of the applicable
conditions set forth below. These conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion.
(a) Accuracy of the Investors' Representations and Warranties. The
representations and warranties of each Investor will be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties as of an earlier
date, which will be true and correct as of such date).
(b) Performance by the Investors. Each Investor shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by such Investor at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement or the Debentures or the
Warrants.
(d) Purchase Price. The Company shall have received the aggregate
Purchase Price from the Investors.
Section 4.2 Conditions Precedent to the Obligation of the Investors to
Purchase the Debentures. The obligation hereunder of each Investor to acquire
and pay for the Debentures at the Closing (unless otherwise specified) is
subject to the satisfaction, at or before the Closing, of each of the applicable
conditions set forth below. These conditions are for each Investor's benefit and
may be waived by each Investor at any time in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time
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(except for representations and warranties as of an earlier date, which shall be
true and correct as of such date).
(b) Performance by the Company. The Company shall have performed
all agreements and satisfied all conditions required to be performed or
satisfied by the Company at or prior to the Closing.
(c) No Injunction. No statute, rule, regulation, executive,
judicial or administrative order, decree, ruling or injunction shall have been
enacted, entered, promulgated or endorsed by any court or governmental authority
of competent jurisdiction which prohibits the consummation of any of the
transactions contemplated by this Agreement or the Registration Rights Agreement
or the Debenture or the Warrants.
(d) Opinion of Counsel. At the Closing, the Investors shall have
received an opinion of the independent counsel of the Company, in the form
attached hereto as EXHIBIT 4.2(D) and such other opinions, certificates and
documents as the Investors or their counsel shall reasonably require incident to
the Closing.
(e) Registration Rights Agreement. The Company and the Investors
shall have executed and delivered the Registration Rights Agreement in the form
and substance of EXHIBIT 4.2(E) attached hereto.
(f) Adverse Changes. No event which had or is likely to have, in
the reasonable judgment of the Investors, a Material Adverse Effect on the
Company or any of its direct or indirect subsidiaries shall have occurred.
(g) Officer's Certificate. The Company shall have delivered to the
Investors a certificate in form and substance of EXHIBIT 4.2(G) attached hereto,
executed by an officer of the Company, certifying as to satisfaction of closing
conditions, incumbency of signing officers, and the true, correct and complete
nature of the Charter, By-Laws, good standing and authorizing resolutions of the
Company.
(h) Debentures and Initial Warrants. The Investors shall have
received certificates representing the Debentures and Initial Warrants in the
form and substance of EXHIBIT 1.1A and EXHIBIT 1.1B hereto.
(i) Due Diligence. Each Investor shall have completed its
financial, accounting, operational and legal due diligence in a manner
satisfactory to such Investor in its sole discretion.
ARTICLE 5
LEGEND AND STOCK
The Company will issue one or more certificates representing the Debentures
and the Initial Warrants in the name of the Investor and in such denominations
to be specified by the Investor prior to (or from time to time subsequent to)
Closing. Each certificate representing the Debentures and the Initial Warrants
and any shares of Common Stock
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issued upon conversion or exercise thereof initially shall be stamped or
otherwise imprinted with a legend substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
TRANSFERRED, ASSIGNED, SOLD OR OFFERED FOR SALE EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF
COUNSEL, IN FORM AND SUBSTANCE REASONABLY ACCEPTABLE TO THE
COMPANY, THAT REGISTRATION IS NOT REQUIRED BECAUSE OF AN
APPLICABLE EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue Debentures and reissue or issue Warrants, as
the case may be, without the legend set forth above at such time as (i) the
holder thereof is permitted to dispose of such Debentures and/or Warrants and
Common Stock issuable upon conversion or exercise thereof pursuant to Rule 144
under the Act, or (ii) such Debentures and/or Warrants are sold to a purchaser
or purchasers who (in the opinion of counsel to the seller or such purchaser(s),
in form and substance reasonably satisfactory to the Company and its counsel)
are able to dispose of such shares publicly pursuant to an Effective
Registration or exemption.
Prior to the Registration Statement (as defined in the Registration Rights
Agreement) being declared effective, any Common Shares issued pursuant to
conversion of Debentures or Warrant Shares, Option Shares or Common Shares
issued upon exercise of the Warrants shall bear a legend in the same form as the
legend indicated above. Upon such Registration Statement becoming effective, the
Company agrees to promptly, but no later than three (3) Trading Days thereafter,
issue new certificates representing such Common Shares, Option Shares and
Warrant Shares without such legend. Except as provided in Section 2(f) of the
Registration Rights Agreement, any Common Shares issued pursuant to conversion
of Debentures or shares of Common Stock issued upon exercise of the Warrants
after the Registration Statement has become effective shall be free and clear of
any legends, transfer restrictions and stop orders. Notwithstanding the removal
of such legend, each Investor agrees to sell the Common Shares, Option Shares
and Warrant Shares represented by the new certificates in accordance with the
applicable prospectus delivery requirements (if copies of a current prospectus
are provided to such Investor by the Company) or in accordance with an exemption
from the registration requirements of the Act.
Nothing herein shall limit the right of any holder to pledge these
securities pursuant to a bona fide margin account or lending arrangement.
ARTICLE 6
MISCELLANEOUS
Section 6.1 Stamp Taxes. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities and the
shares of Common Stock issued upon conversion or exercise thereof.
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Section 6.2 Specific Performance; Consent to Jurisdiction; Jury Trial.
(a) The Company and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement, the Debentures, the Registration Rights Agreement and the Warrants
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent or cure breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof, this
being in addition to any other remedy to which any of them may be entitled by
law or equity.
(b) THE COMPANY AND EACH OF THE INVESTORS (I) HEREBY IRREVOCABLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT, THE
NEW YORK STATE COURTS AND OTHER COURTS OF THE UNITED STATES SITTING IN NEW YORK
COUNTY, NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT AND (II) HEREBY WAIVES, AND AGREES NOT TO
ASSERT IN ANY SUCH SUIT ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURT, THAT THE SUIT, ACTION OR
PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER. TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE
COMPANY AND EACH OF THE INVESTORS CONSENTS TO PROCESS BEING SERVED IN ANY SUCH
SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO SUCH PARTY AT THE
ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT SUCH
SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING IN THIS PARAGRAPH SHALL AFFECT OR LIMIT ANY RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.
(c) THE COMPANY AND EACH INVESTOR HEREBY WAIVES ALL RIGHTS TO A
TRIAL BY JURY.
Section 6.3 Entire Agreement; Amendment. This Agreement, together with the
Registration Rights Agreement, the Warrants, the Debentures and the agreements
and documents executed in connection herewith and therewith, contains the entire
understanding of the parties with respect to the matters covered hereby and
thereby, supercedes any prior understanding, memoranda or other written or oral
agreements between or among any of them respecting the matters covered hereby
and thereby and, except as specifically set forth herein or therein, neither the
Company nor any Investor makes any representation, warranty, covenant or
undertaking with respect to such matters. No provision of this Agreement may be
waived or amended other than by a written instrument signed by the party against
whom enforcement of any such amendment or waiver is sought.
Section 6.4 Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing by mail, facsimile or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
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to the Company:
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: Chief Executive Officer
with copies to:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: General Counsel
to the Investors:
To each Investor at the address and/or fax
number set forth on SCHEDULE I of this
Agreement.
with copies to:
Kleinberg, Kaplan, ▇▇▇▇▇ & ▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
Section 6.5 Indemnity. Each party shall indemnify each other party against
any loss, cost or damages (including reasonable attorney's fees but excluding
consequential damages) incurred as a result of such parties' breach of any
representation, warranty, covenant or agreement in this Agreement; or incurred
as a result of the enforcement of this indemnity.
Section 6.6 Waivers. No waiver by any party of any default with respect to
any provision, condition or requirement of this Agreement shall be deemed to be
a continuing waiver in the future or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of any party to exercise
any right hereunder in any manner impair the exercise of any such right accruing
to it thereafter.
Section 6.7 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
Section 6.8 Successors and Assigns. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The parties hereto may amend this
Agreement without
26
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notice to or the consent of any third party. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of all Investors (which consent may be withheld for any reason in their
sole discretion), except that the Company may assign this Agreement in
connection with the sale of all or substantially all of its assets provided that
(a) the Company is not released from any of its obligations hereunder, (b) such
assignee assumes all obligations of the Company hereunder, (c) appropriate
adjustment of the provisions contained in this Agreement, the Registration
Rights Agreement, the Debentures and the Warrants is made, in form and substance
reasonably satisfactory to the Investors, to place the Investors in the same
position as they would have been but for such assignment, in accordance with the
terms of the Debentures and the Warrants, and (d) such transaction does not
constitute an Event of Default under the Debentures. No Investor may assign this
Agreement (in whole or in part) or any rights or obligations hereunder without
the consent of the Company (which shall not be unreasonably withheld), except
that an Investor may assign its rights hereunder in connection with an
assignment of Options, Debentures or Warrants.
Section 6.9 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
Section 6.10 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO AGREEMENTS EXECUTED AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE.
Section 6.11 Survival. The representations and warranties and the
agreements and covenants of the Company and each Investor contained herein shall
survive the Closing.
Section 6.12 Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
Section 6.13 Publicity. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of any Investor without
the express written agreement of such Investor, unless and until such disclosure
is required by law or applicable regulation, and then only to the extent of such
requirement. The Company agrees that it will deliver a copy of any public
announcement regarding the matters covered by this Agreement or any agreement
and document executed herewith to each Investor and any public announcement
including the name of an Investor to such Investor, reasonably in advance of the
release of such announcements.
Section 6.14 Severability. The parties acknowledge and agree that the
Investors are not agents, affiliates or partners of each other, that all
representations, warranties, covenants and agreements of the Investor hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warrants,
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agreements, acts or omissions of any other Investor, and that any rights granted
to "Investors" hereunder shall be enforceable by each Investor hereunder.
Section 6.15 Like Treatment of Holders; Redemption. Neither the Company nor
any of its affiliates shall, directly or indirectly, pay or cause to be paid any
consideration (immediate or contingent), whether by way of interest, fee,
payment for the redemption or conversion of Debentures or exercise of the
Options or Warrants, or otherwise, to any holder of Debentures, Options or
Warrants, for or as an inducement to, or in connection with the solicitation of,
any consent, waiver or amendment of any terms or provisions of the Debenture or
this Agreement or the Registration Rights Agreement or the Warrants, unless such
consideration is required to be paid to all holders of Debentures, Options and
Warrants bound by such consent, waiver or amendment whether or not such holders
so consent, waive or agree to amend and whether or not such holders tender their
Debentures, Options or Warrants for redemption, conversion or exercise. The
Company shall not, directly or indirectly, redeem any Debentures unless such
offer of redemption is made pro rata to all holders of Debentures on identical
terms.
Section 6.16 No Strict Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their mutual
intent, and no rules of strict construction will be applied against any party.
Signature Page Follows
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
COMPANY:
APPLIEDTHEORY CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Sr. VP/CFO
INVESTORS:
HALIFAX FUND, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
PALLADIN PARTNERS I, L.P.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
PALLADIN OVERSEAS FUND LTD.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
THE GLENEAGLES FUND COMPANY
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
SIGNATURE PAGE TO APPLIEDTHEORY CORPORATION DEBENTURE PURCHASE AGREEMENT
29
30
LANCER SECURITIES (CAYMAN) LTD.
By: THE PALLADIN GROUP, L.P.
Attorney-in-Fact
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Managing Director
▇▇▇▇▇▇▇ ASSOCIATES, L.P.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: General Partner
WESTGATE INTERNATIONAL, L.P.
By: ▇▇▇▇▇▇▇ INTERNATIONAL CAPITAL
ADVISORS INC.
Attorney-in-Fact
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: General Partner
SIGNATURE PAGE TO APPLIEDTHEORY CORPORATION DEBENTURE PURCHASE AGREEMENT
31
EXHIBITS AND SCHEDULES
Schedule 1 List of Investors
Exhibit 1.1A Form of Debenture
Exhibit 1.1B Form of Warrant
Exhibit 1.3 Form of Option Warrant
Schedule 2.1(a) List of Subsidiaries
Schedule 2.1(c) Authorization; Enforcement
Schedule 2.1(c)(i) Authorization; Enforcement
Exhibit 2.1(c)(i) Certificate of Incorporation of the Company
Exhibit 2.1(c)(ii) By-Laws of the Company
Schedule 2.1 (v) Brokers
Schedule 2.1 (t)(i) Outstanding securities entitled to registration rights
Schedule 2.1 (t)(ii) Outstanding securities affected by the issuance of Debentures, etc.
Schedule 2.1(bb) Real Property
Schedule 3.6 Dividends and distributions
Schedule 3.16 Press Release
Exhibit 4.2(d) Opinion of Company Counsel
Exhibit 4.2(e) Registration Rights Agreement
Schedule 4.2(f) Officer's Certificate
32
SCHEDULE I
OUTSTANDING NUMBER
PRINCIPAL AMOUNT OF
INVESTOR OF DEBENTURES INITIAL WARRANTS PURCHASE PRICE PRO RATA SHARE
-------- ------------- ---------------- -------------- --------------
HALIFAX FUND, L.P. $15,000,000 $5,000,000/ $15,000,000 50%
c/o The Palladin Group, L.P. Closing Price
Investment Manager
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tax I.D. No.:
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
PALLADIN PARTNERS I, L.P. $ 1,200,000 $400,000/ $ 1,200,000 4%
c/o The Palladin Group L.P. Closing Price
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Tax I.D. No.:
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
PALLADIN OVERSEAS FUND LTD. $ 1,500,000 $500,000/ $ 1,500,000 5%
c/o Citco Fund Services (Cayman Closing Price
Islands) Ltd.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇ SMB
Grand Cayman, Cayman Islands
Tax I.D. No.:
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
THE GLENEAGLES FUND COMPANY $ 2,700,000 $900,000/ $ 2,700,000 9%
c/o Citco Fund Services (Cayman Closing Price
Islands) Ltd.
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇▇ SMB
Grand Cayman, Cayman Islands
Tax I.D. No.:
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
LANCER SECURITIES (CAYMAN) LTD. $ 2,100,000 $700,000/ $ 2,100,000 7%
Closing Price
33
OUTSTANDING NUMBER
PRINCIPAL AMOUNT OF
INVESTOR OF DEBENTURES INITIAL WARRANTS PURCHASE PRICE PRO RATA SHARE
-------- ------------- ---------------- -------------- --------------
▇▇▇▇▇▇▇ ASSOCIATES, L.P. $ 3,750,000 $1,250,000/ $ 3,750,000 12.5%
c/o Stonington Management Corporation Closing Price
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
WESTGATE INTERNATIONAL, L.P. $ 3,750,000 $1,250,000/ $ 3,750,000 12.5%
c/o Stonington Management Corporation Closing Price
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention:
