EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of June 11, 2001
(this "Agreement"), is entered into by and between FLOUR CITY INTERNATIONAL,
INC., a Nevada corporation (the "Company"), and DIMENSIONAL PARTNERS, L.P.
and DIMENSIONAL PARTNERS, LTD. (together, the "Purchasers").
W I T N E S S E T H:
WHEREAS, the Company and the Purchasers are executing and
delivering this Agreement in reliance upon the exemptions from registration
provided by Regulation D ("Regulation D") promulgated by the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Securities Act"), and/or Section 4(2) of the Securities Act;
WHEREAS, the Purchasers wish to purchase, and the Company wishes
to issue and sell, for an aggregate purchase price of $2,500,000 (the
"Purchase Price"), upon the terms and conditions of this Agreement,
$2,500,000 aggregate principal amount of the Company's 8 1/2% Subordinated
Secured Convertible Debentures (the "Debentures"), which Debentures shall be
in the form attached as Exhibit A hereto, and warrants (the "Warrants") to
purchase an aggregate of 389,916 shares (as such number may be adjusted
pursuant to the terms of the Warrants) of the Company's Common Stock, par
value $.0001 per share (the "Common Stock"), which Warrants shall be in the
form attached as Exhibit B hereto; and
WHEREAS, the Debentures shall be convertible into shares of the
Company's Common Stock on the terms set forth therein and the Warrants may be
exercised for the purchase of Common Stock on the terms set forth therein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
1. AGREEMENT TO PURCHASE; CLOSING
a. PURCHASE OF DEBENTURES AND WARRANTS. Subject to the terms and
conditions set forth herein, the Company hereby agrees to issue and sell to
the Purchasers, and each Purchaser hereby agrees to purchase from the
Company, such number of Debentures and Warrants at the
Closing (as such term is defined in Section 1.b. hereof) as is listed on its
signature page hereto, for an aggregate purchase price of $2,500,000.
b. CLOSING. The closing (the "Closing") of the purchase and sale of the
Debentures and Warrants will take place at the offices of the Company on June
11, 2001, or at such other place and time as mutually agreed by the
Purchasers and the Company. The date of the Closing is referred to herein as
a "Closing Date." At the Closing, the Company will deliver to the Purchasers
the Debentures and Warrants purchased as set forth in Section 1.a. hereof,
against payment of the Purchase Price by wire transfer of immediately
available funds payable to the Company. The Debentures and Warrants shall be
registered in each Purchaser's name or the name of its nominee(s) in such
denominations as the Purchasers shall request pursuant to instructions
delivered to the Company not less than two days prior to the Closing Date.
c. PURCHASE PRICE ALLOCATION. The parties to this Agreement hereby
agree to allocate 80% of the Purchase Price to the Debentures and 20% of the
Purchase Price to the Warrants (the "Price Allocation") and to file all U.S.
federal, state and local income and franchise tax returns ("Tax Returns")
consistent with the Price Allocation (unless required otherwise by a
"determination" within the meaning of Section 1313(a) of the Internal Revenue
Code of 1986, as amended (the "Code"). The parties to the Agreement further
agree to file all Tax Returns consistent with such treatment (unless required
otherwise by a "determination" within the meaning of Section 1313(a) of the
Code).
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION
Each of the Purchasers severally represents and warrants to, and
covenants and agrees with, the Company as follows:
a. The Purchaser is: (i) experienced in making investments of the kind
contemplated by this Agreement; (ii) able, by reason of the business and
financial experience of its management, to protect its own interests in
connection with the transactions contemplated by this Agreement; (iii) able
to afford the entire loss of its investment in the Debentures and Warrants;
and (iv) an "accredited investor" as that term is defined in Rule 501(a) of
Regulation D.
b. The Purchaser is acquiring the Securities for its own account for
investment only and not with a present view towards the public sale or
distribution thereof, except pursuant to sales registered under the
Securities Act. The Purchaser has not been organized for the purpose of
investing in securities of the Company, although such investment is
consistent with its purposes.
c. All subsequent offers and sales of the Debentures and Warrants and
the Common Stock issuable upon conversion of the Debentures or exercise of
the Warrants by the Purchasers shall be made pursuant to an effective
registration statement under the Securities Act or pursuant to an applicable
exemption from such registration.
d. The Purchaser understands that the Debentures and the Warrants are
being offered and sold to it in reliance upon exemptions from the
registration requirements of the United States
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federal securities laws, and that the Company is relying upon the truth and
accuracy of the Purchaser's representations and warranties, and the
Purchaser's compliance with its agreements, each as set forth herein, in
order to determine the availability of such exemptions and the eligibility of
the Purchaser to acquire the Debentures and the Warrants.
e. The Purchaser: (i) has been provided with information with respect
to the business of the Company, including, without limitation, the Company's
Quarterly Report on Form 10-Q for the quarterly period ended January 31, 2001
(the "Quarterly Report") and Annual Report on Form 10-K for the period ended
October 31, 2000 (the "Annual Report"); and (ii) has had access to management
of the Company and the opportunity to ask questions of the management of the
Company.
f. The Purchaser has the requisite corporate or limited partnership
power and authority to enter into this Agreement, the registration rights
agreement (the "Registration Rights Agreement"), dated as of the date hereof,
between the Company and the Purchasers relating to the Debentures and the
Warrants and the Common Stock issuable upon the conversion of the Debentures
or exercise of the Warrants, and in the form attached hereto as Exhibit C,
the Junior Security Agreement, dated as of the date hereof, between the
Company and the Purchasers, securing the obligations of the Company under the
Debentures and in the form attached hereto as Exhibit D (the "Company
Security Agreement"), the Junior Security Agreement, dated as of the date
hereof, between Flour City Architectural Metals, Inc. (the "Domestic
Operating Sub") and the Purchasers, securing the obligations of the Domestic
Operating Sub under the Guaranty (as defined below) and in the form attached
hereto as Exhibit E (the "Domestic Sub Security Agreement"), and the
Guaranty, dated as of the date hereof, by the Domestic Operating Sub in favor
of the Purchasers, guaranteeing the obligations of the Company under the
Debentures and in the form attached hereto as Exhibit F (the "Guaranty" and,
together with the Company Security Agreement and the Domestic Sub Security
Agreement, the "Security Agreements").
g. This Agreement, the Registration Rights Agreement, each of the
Security Agreements and the transactions contemplated hereby and thereby have
been duly and validly authorized by the Purchaser and such agreements, when
executed and delivered by each of the other parties thereto will each be a
valid and binding agreement of the Purchaser, enforceable against the
Purchaser in accordance with their respective terms, except to the extent
that enforcement of such agreements may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now
or hereafter in effect relating to creditors' rights generally and to general
principles of equity.
3. REPRESENTATIONS OF THE COMPANY
The Company represents and warrants to the Purchasers that, other
than as set forth on the Company Schedule attached hereto as SCHEDULE 3:
a. ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. Each of
the Company's subsidiaries, if any, is a corporation duly organized, validly
existing and in good standing under the laws of its
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respective jurisdiction of incorporation. Each of the Company and its
subsidiaries, if any, is duly qualified as a foreign corporation in all
jurisdictions in which the failure to so qualify would have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
Schedule 3.a. lists all subsidiaries of the Company and, except as noted
therein, all of the outstanding capital stock of all such subsidiaries is
owned of record and beneficially by the Company. The Company and its
subsidiaries have all requisite corporate power and authority, and hold all
licenses, permits and other required authorizations from governmental
authorities, necessary to conduct their business as it is now being conducted
or proposed to be conducted and to own or lease their properties and assets
as they are now owned or held under lease.
b. CAPITALIZATION. On the date hereof, the authorized capital of the
Company consists of 50,000,000 shares of Common Stock, par value $.0001 per
share, and 5,000,000 shares of Preferred Stock, par value $.0001 per share
("Preferred Stock"). On the date hereof, 5,375,477 shares of Common Stock are
issued and outstanding and no shares of Preferred Stock are issued or
outstanding. Schedule 3.b. sets forth all of the options, warrants and
convertible securities of the Company, and any other rights to acquire
securities of the Company (collectively the "Derivative Securities") which
are outstanding on the date hereof, including in each case: (i) the name and
class of such Derivative Securities; (ii) the issue date of such Derivative
Securities; (iii) the number of shares of Common Stock or Preferred Stock of
the Company into which such Derivative Securities are convertible as of the
date hereof; (iv) the conversion or exercise price or prices of such
Derivative Securities as of the date hereof; (v) the expiration date of any
conversion or exercise rights held by the owners of such Derivative
Securities; and (vi) any registration rights associated with such Derivative
Securities. Schedule 3.b. also sets forth all registration rights associated
with or covering the Common Stock or Preferred Stock. All outstanding
securities of the Company are validly issued, fully paid and nonassessable.
No stockholder of the Company is entitled to any preemptive rights with
respect to the purchase of or sale of any securities by the Company. Except
as contemplated herein, none of the shares of capital stock of the Company is
reserved for any purpose, and the Company is neither subject to any
obligation (contingent or otherwise), nor has any option, to repurchase or
otherwise acquire or retire any shares of its capital stock. No antidilution
adjustments with respect to the outstanding securities of the Company will be
triggered by the issuance of the securities contemplated hereby.
c. CONCERNING THE DEBENTURES AND THE WARRANTS. The Debentures and
Warrants, and the Common Stock issuable upon conversion of the Debentures and
upon exercise of the Warrants (all of such securities, collectively, the
"Securities"), when issued, will be duly and validly issued, fully paid and
non-assessable, will be free and clear of any liens imposed by or through the
Company, will not be subject to preemptive rights and will not subject the
holder thereof to personal liability by reason of being such a holder. There
are currently no preemptive rights of any stockholder of the Company, as
such, to acquire the Debentures or the Warrants, or the Common Stock issuable
pursuant to the terms of the Debentures or the Warrants.
d. REPORTING COMPANY STATUS. The Company's Common Stock is registered
under Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The Company files reports with the Commission pursuant to
Section 12 and/or 15(d) of the Exchange Act. The Company has complied in all
material respects with the filing requirements under
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either Section 13(a) or 15(d) of the Exchange Act and the applicable rules
and regulations of the Commission promulgated thereunder. The Common Stock is
listed and traded on The Nasdaq Stock Market ("Nasdaq") and the Company is
not aware of any pending or contemplated action or proceeding of any kind to
suspend the trading of the Common Stock.
e. AUTHORIZED SHARES. The Company has available and has reserved a
sufficient number of authorized and unissued shares of Common Stock as may be
necessary to effect the conversion of the Debentures and the exercise of the
Warrants. The Company understands and acknowledges the potentially dilutive
effect to the Common Stock of the issuance of shares of Common Stock upon the
conversion of the Debentures and the exercise of the Warrants. The Company
further acknowledges that its obligation to issue shares of Common Stock upon
conversion of the Debentures and upon exercise of the Warrants is absolute
and unconditional regardless of the dilutive effect that such issuance may
have on the ownership interests of other stockholders of the Company and
notwithstanding the commencement of any case under 11 U.S.C. ss. 101 ET SEQ.
(the "Bankruptcy Code"). In the event the Company becomes a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted
any rights to relief it may have under 11 U.S.C. ss. 362 in respect of the
conversion of the Debentures and the exercise of the Warrants. At the
direction of the Purchaser, the Company agrees, without cost or expense to
the Purchaser, to take or consent to any and all action necessary to
effectuate relief under 11 U.S.C. ss. 362.
f. LEGALITY. The Company has the requisite corporate power and
authority to enter into this Agreement, the Registration Rights Agreement and
the Company Security Agreement and to issue and deliver the Debentures, the
Warrants and the Common Stock issuable upon conversion of the Debentures and
the exercise of the Warrants. The Domestic Operating Sub has the requisite
corporate power and authority to enter into the Domestic Sub Security
Agreement and the Guaranty.
g. TRANSACTION AGREEMENTS. This Agreement, the Debentures, the
Warrants, the Registration Rights Agreement and the Security Agreements
(collectively, the "Primary Documents") and the transactions contemplated
hereby and thereby have been duly and validly authorized by the Company and
any of its subsidiaries parties thereto; this Agreement and the other Primary
Documents have been duly executed and delivered by the Company and any of its
subsidiaries parties thereto and are each the legal, valid and binding
agreement of the Company and any of its subsidiaries parties thereto,
enforceable in accordance with their respective terms, except to the extent
that enforcement of each agreement may be limited by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws now
or hereafter in effect relating to creditors' rights generally and to general
principles of equity. All of the Collateral (as defined in the Security
Agreements) located in the United States belonging to the Company or any of
its subsidiaries is located in the State of Tennessee and is and will be
covered by the security interests of the Security Agreements.
h. NON-CONTRAVENTION. The execution and delivery of this Agreement and
each of the other Primary Documents, and the consummation by the Company of
the transactions contemplated by this Agreement and each of the other Primary
Documents, does not and will not (i) result in a violation of the Articles of
Incorporation or By-laws of the Company or its
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subsidiaries, or (ii) conflict with, or constitute a default (or an event
which with notice or lapse of time or both could become a default) under, or
give to others any rights of termination, amendment or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (foreign or domestic and including
federal and state securities laws and regulations) applicable to the Company
or any of its subsidiaries or by which any material property or asset of the
Company or any of its subsidiaries is bound or affected. Neither the filing
of the registration statement required to be filed by the Company pursuant to
the Registration Rights Agreement nor the offering or sale of the Securities
as contemplated by this Agreement gives rise to any rights, other than those
which have been waived or satisfied on or prior to the date hereof, for or
relating to the registration of any shares of the Common Stock.
i. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory organization, stock
exchange or market or the stockholders of the Company is required to be
obtained by the Company for the entry into or the performance of this
Agreement and the other Primary Documents.
j. SEC DOCUMENTS, FINANCIAL STATEMENTS. Since June 29, 1998 the Company
has filed all reports, schedules, forms and statements required to be filed
by it with the Commission pursuant to the reporting requirements of the
Exchange Act (the "SEC Documents"). As of their respective dates, 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 financial statements of the Company included
in the SEC Documents were prepared in accordance with U.S. generally accepted
accounting principles, consistently applied, 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 or may be condensed or summary
statements) and fairly present in all material respects the consolidated
financial position of the Company and its consolidated subsidiaries and
results of their operations and cash flows for the periods covered thereby
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
k. UNDISCLOSED LIABILITIES. The Company has no material obligation or
liability (whether accrued, absolute, contingent, unliquidated, or otherwise,
whether due or to become due) arising out of transactions entered into at or
prior to the Closing of this Agreement, or any action or inaction at or prior
to the Closing of this Agreement, or any state of facts existing at or prior
to the Closing of this Agreement, except (a) liabilities reflected on the
latest balance sheet included in the SEC Documents (the "Company Balance
Sheet"), (b) liabilities incurred in the ordinary course of business since
the date of the Company Balance Sheet (none of which is a liability for
breach of contract, breach of warranty, torts, infringements, claims or
lawsuits) and (c) liabilities or obligations disclosed on Schedule 3.k.
hereto.
l. STABILIZATION AND MANIPULATION. Neither the Company, nor, to the
knowledge of the Company, any of its affiliates or their respective agents,
officers, directors or employees has taken or may take, directly or
indirectly, any action designed to cause or result in, or which has
6
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of the shares of Common Stock.
m. ABSENCE OF CERTAIN CHANGES. Except as disclosed to the Purchasers
and in the Company's public filings with the Commission, since October 31,
2000 there has been no material adverse change nor any material adverse
development in the business, properties, operations, financial condition,
prospects, outstanding securities, employee relations, customer relations or
results of operations of the Company or its subsidiaries, taken as a whole
(each, a "Material Adverse Effect").
n. ENVIRONMENTAL. Except as disclosed in the SEC Documents, and except
for instances of noncompliance with or exceptions to the following that could
not have, individually or in the aggregate, a Material Adverse Effect: (i)
the Company and its subsidiaries are in full compliance with all
environmental laws; (ii) the Company is not aware of, nor has the Company
received notice of, any past, present, or future conditions, events,
activities, practices, or incidents which may interfere with or prevent the
compliance or continued compliance of the Company and its subsidiaries with
all environmental laws; (iii) the Company and its subsidiaries have obtained
all permits, licenses, and authorizations that are required under applicable
environmental laws, and all such permits, licenses, and authorizations are in
good standing and the Company is in compliance with all of the terms and
conditions thereof; and (iv) no hazardous materials exist on, about, or
within or have been used, generated, stored, transported, disposed of on, or
released from any of the properties of the Company or its subsidiaries,
except in compliance with applicable environmental laws. The Company and its
subsidiaries are not subject to any outstanding or, to the best of their
knowledge, threatened order from or agreement with any governmental authority
or other person or subject to any judicial or administrative proceeding with
respect to (A) failure to comply with environmental laws, (B) remedial
action, or (C) any environmental liabilities.
o. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company and its
subsidiaries have good and marketable title to all of their material
properties and assets, both real and personal, and have good title to all
their leasehold interests, in each case subject only to mortgages, pledges,
liens, security interests, conditional sale agreements, encumbrances or
charges (collectively, "Liens") created in the ordinary course of business.
The security interests which, simultaneously with the execution and delivery
of the Debentures, have been created and granted under the Security
Agreements constitute valid and, assuming appropriate filings are made,
perfected security interests on the properties and assets covered by the
Security Agreements, subject to no prior or equal Lien except as permitted
under the Security Agreements and listed on Schedule 3.o as being prior or
equal to such security interests so created and granted by the Security
Agreements. The only filing required to perfect the security interests under
the Company Security Agreement is a UCC-1 filing with the Secretary of State
of Tennessee. The only filing required to perfect the security interests
under the Domestic Sub Security Agreement is a UCC-1 filing with the
Secretary of State of Tennessee.
p. PROPRIETARY RIGHTS. The Company and its subsidiaries have sufficient
title and ownership of all trademarks, service marks, trade names, internet
domain names, copyrights, trade secrets, information, proprietary rights and
processes necessary for the conduct of their
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business as now conducted and as proposed to be conducted, and, to the
knowledge of the Company, such business does not conflict with or constitute
an infringement on the rights of others.
q. PERMITS. The Company and its subsidiaries have all franchises,
permits, licenses and any similar authority necessary for the conduct of
their business as now conducted, the lack of which could result in a Material
Adverse Effect. The Company and its subsidiaries are not in default in any
respect under any of such franchises, permits, licenses or similar authority.
r. ABSENCE OF LITIGATION. Except as disclosed in the Company's public
filings with the Commission, there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board or body pending or, to the
knowledge of the Company or any of its subsidiaries, threatened against or
affecting the Company or any of its subsidiaries, in which an unfavorable
decision, ruling or finding could have a Material Adverse Effect or adversely
affect the transactions contemplated by the Primary Documents or the validity
or enforceability of, or the authority or ability of the Company or the
Domestic Operating Sub to perform its obligations under, the Primary
Documents.
s. NO DEFAULT. Each of the Company and its subsidiaries is not in
default in the performance or observance of any obligation, covenant or
condition contained in any indenture, mortgage, deed of trust or other
instrument or agreement to which it is a party or by which it or its property
may be bound which default could reasonably be expected, individually or in
the aggregate, to result in a Material Adverse Effect.
t. TRANSACTIONS WITH AFFILIATES. Except as disclosed in the Company's
public filings with the Commission, there are no agreements, understandings
or proposed transactions between the Company or any of its subsidiaries and
any of their officers, directors or affiliates that, had they existed on
October 31, 2000, would have been required to be disclosed in the Company's
Annual Report or an amendment thereto.
u. EMPLOYMENT MATTERS. The Company and its subsidiaries are in material
compliance with all federal, state, local and foreign laws and regulations
respecting employment and employment practices, terms and conditions of
employment and wages and hours. There are no pending investigations involving
the Company or any of its subsidiaries by the U.S. Department of Labor or any
other governmental agency responsible for the enforcement of such federal,
state, local or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company or any of its subsidiaries
pending before the National Labor Relations Board or any strike, picketing,
boycott, dispute, slowdown or stoppage pending or threatened against or
involving the Company or any of its subsidiaries. No representation question
exists respecting the employees of the Company or any of its subsidiaries and
no collective bargaining agreement or modification thereof is currently being
negotiated by the Company or any of its subsidiaries. No grievance or
arbitration proceeding is pending under any expired or existing collective
bargaining agreements of the Company or any of its subsidiaries. No material
labor dispute with the employees of the Company or any of its subsidiaries
exists or, to the knowledge of the Company, is imminent.
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v. ERISA MATTERS. Except as set forth in the Company's public filings
with the Commission, neither the Company nor any ERISA Affiliate of the
Company (as defined below) maintains, administers, contributes to or is
obligated to contribute to any employee pension benefit plan (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), including, without limitation, any multiemployer plan as
defined in Section 3(37) of ERISA; employee welfare benefit plan (as defined
in Section 3(1) of ERISA); or bonus, deferred compensation, stock purchase,
stock option, severance plan, salary continuation, vacation, sick leave,
fringe benefit, incentive, insurance, welfare or similar arrangement (all of
the foregoing being hereafter referred to as a "Plan" and collectively as the
"Plans") with respect to any of its employees. The Company (i) has materially
complied with all of the provisions of each such Plan and all applicable
provisions of ERISA and the Internal Revenue Code of 1986, as amended (the
"Code"), (ii) has administered each such Plan (including the payment of
benefits thereunder) in accordance with the material provisions of each such
Plan and all applicable material provisions of ERISA and the Code, and (iii)
no penalties under ERISA or any other applicable law or regulation are owed
to any Plan participant, beneficiary and/or governmental authority with
respect to the failure to file any reports or other information required
under ERISA or any other applicable law or regulation or to distribute or
make available any such reports or other information. The Company has timely
made all required contributions to each such Plan. No such Plan is subject to
Title IV of ERISA or has at any time been subject to section 3(2) of ERISA or
a "multiemployer plan" within the meaning of Section 3(37) of ERISA or
Section 4001(a)(3) of ERISA. None of the Plans is under investigation or
audit by either the United States Department of Labor or the Internal Revenue
Service. For these purposes, "ERISA Affiliate" means all members of a
controlled group of corporations and all trades and businesses (whether or
not incorporated) under common control and all other entities which, together
with the Company, are treated as a single employer under any or all of
section 414(b), (c), (m) or (o) of the Code on either the date of this
Agreement or the Closing Date.
w. INSURANCE. The Company and its subsidiaries maintain property and
casualty, general liability, personal injury and other similar types of
insurance that are reasonably adequate, consistent with industry standards
and their historical claims experience. The Company and its subsidiaries have
not received notice from, and have no knowledge of any threat by, any insurer
(that has issued any insurance policy to the Company or its subsidiaries)
that such insurer intends to deny coverage under or cancel, discontinue or
not renew any insurance policy covering the Company or any of its
subsidiaries presently in force.
x. TAXES. All applicable tax returns required to be filed by the
Company and each of its subsidiaries have been prepared and filed in
compliance with all applicable laws and were true, correct and complete in
all material respects when filed, or if not yet filed have been granted
extensions of the filing dates which extensions have not expired, and all
taxes, assessments, fees and other governmental charges upon the Company, its
subsidiaries, or upon any of their respective properties, income or
franchises, required to be paid by the Company or its subsidiaries have been
paid, or adequate reserves therefor have been set up if any of such taxes are
being contested in good faith; or if any of such tax returns have not been
filed or if any such taxes have not been paid or so reserved for, the failure
to so file or to pay would not in the aggregate have a Material Adverse
Effect. All amounts required to be withheld by the Company or any of its
subsidiaries from employees for income, social security and other payroll
taxes have
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been collected and withheld and have either been paid to the appropriate
agency, set aside in accounts for such purpose or accrued and reserved upon
the books and records of the Company or the appropriate subsidiary. There
were no tax liens on any of the Company's or its subsidiaries' assets that
arose in connection with the failure, or alleged failure, to pay any taxes
except for liens for taxes not yet due and payable. No taxing authority is
asserting or threatening to assert against the Company or any of its
subsidiaries any deficiency or claim for additional taxes and no tax return
of Company or any of its subsidiaries is currently under audit by any tax
authority. The provision for taxes on the Company Balance Sheet adequately
reflects all tax liabilities in accordance with U.S. generally accepted
accounting principles.
y. FOREIGN CORRUPT PRACTICES ACT. Neither the Company, its subsidiaries
nor any of their respective directors, officers or other agents has: (i) used
any Company funds for any unlawful contribution, endorsement, gift,
entertainment or other unlawful expense relating to any political activity;
(ii) made any direct or indirect unlawful payment of company funds to any
foreign or domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act of 1977, as
amended; or (iv) made any bribe, rebate, payoff, influence payment, kickback
or other similar payment to any person.
z. COMPLIANCE WITH LAW. To the best of their knowledge, the Company and
its subsidiaries have complied in all material respects with all applicable
statutes and regulations of the United States and of all states,
municipalities and applicable agencies and foreign jurisdictions or bodies in
respect of the conduct of its business and operations, and the failure, if
any, by the Company or its subsidiaries to have fully complied with any such
statute or regulation has not and will not result in a Material Adverse
Effect.
aa. INTERNAL CONTROLS. The Company and its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that: (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (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 existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
bb. INVESTMENT COMPANY ACT. The Company and its subsidiaries are not
conducting, and will not conduct, their business in a manner which would
cause any of them to become an "investment company," as defined in Section
3(a) of the Investment Company Act of 1940, as amended.
cc. BROKERAGE FEES. The Company and its subsidiaries have not
incurred any liability for any consulting fees or agent's commissions in
connection with the offer and sale of the Debentures or the Warrants and the
transactions contemplated by this Agreement.
dd. PRIVATE OFFERING. Subject to the accuracy of the Purchasers'
representations and warranties set forth in Section 2 hereof, the offer, sale
and issuance of the Debentures and the Warrants and the conversion and/or
exercise of such securities into shares of Common Stock,
10
each as contemplated by this Agreement, are exempt from the registration
requirements of the Securities Act. The Company agrees that neither the
Company nor anyone acting on its behalf will offer any of the Debentures and
the Warrants, or any similar securities, for issuance or sale, or solicit any
offer to acquire any of the same from anyone so as to render the issuance and
sale of such securities subject to the registration requirements of the
Securities Act. The Company has not offered or sold the Debentures or the
Warrants by any form of general solicitation or general advertising, as such
terms are used in Rule 502(c) under the Securities Act.
ee. FULL DISCLOSURE. Neither this Agreement, the Primary Documents nor
any of the schedules, exhibits, written statements, documents or certificates
prepared or supplied by the Company with respect to the transactions
contemplated hereby contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained herein or therein
not misleading in light of the circumstances under which made. Except as
disclosed in the SEC Documents and except for matters affecting the industry
of the Company as a whole, there exists no fact or circumstance which, to the
knowledge of the Company upon due inquiry, could reasonably be anticipated to
have a Material Adverse Effect or could adversely affect the ability of the
Company to perform its obligations set forth in the Primary Documents.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
a. TRANSFER RESTRICTIONS. Each of the Purchasers acknowledges that,
except as provided in the Registration Rights Agreement, (i) none of the
Securities have been, or are being, registered under the Securities Act, and
such securities may not be transferred unless (A) subsequently registered
thereunder or (B) they are transferred pursuant to an exemption from such
registration; and (ii) any sale of the Securities made in reliance upon Rule
144 under the Securities Act may be made only in accordance with the terms of
said Rule. The provisions of Section 4.a. and 4.b. hereof, together with the
rights and obligations of the Purchasers under this Agreement and the other
Primary Documents, shall be binding upon any subsequent transferees of the
Securities. In no event shall the Purchasers knowingly make a transfer of any
of the Securities to a competitor of the Company in the business of the
design, engineering, manufacturing and installation of custom curtainwall
systems for the construction industry.
b. RESTRICTIVE LEGEND. Each of the Purchasers acknowledges and agrees
that, until such time as the Securities shall have been registered under the
Securities Act or such Purchaser demonstrates to the reasonable satisfaction
of the Company that such registration shall no longer be required, such
Securities shall bear a restrictive legend in substantially the following
form:
THESE SECURITIES (INCLUDING ANY UNDERLYING SECURITIES) HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
UNDER SAID ACT OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
REASONABLY
11
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION SHALL NO
LONGER BE REQUIRED.
c. FILINGS. The Company undertakes and agrees that it will make all
required filings in connection with the sale of the Securities to the
Purchasers as required by United States laws and regulations, or by any
domestic securities exchange or trading market, and if applicable, the filing
of a notice on Form D (at such time and in such manner as required by the
Rules and Regulations of the Commission), and to provide copies thereof to
the Purchasers promptly after such filing or filings.
d. NASDAQ LISTING. The Company shall use its best efforts to promptly
secure the listing of the shares of Common Stock issuable upon the conversion
of the Debentures and the exercise of the Warrants upon each national
securities exchange or automated quotation system, if any, upon which the
Common Stock is then listed. The Company further agrees and covenants that it
will not seek to have the trading of its Common Stock on Nasdaq suspended or
terminated, will use its best efforts to maintain its eligibility for trading
on Nasdaq and, if such trading of its Common Stock is suspended or
terminated, will use its best efforts to requalify its Common Stock or
otherwise cause such trading to resume.
e. REPORTING STATUS. The Company shall timely file all reports required
to be filed with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act and shall not terminate its status as an issuer required to file
reports under the Exchange Act even if the Exchange Act or the rules and
regulations thereunder would permit such termination.
f. STATE SECURITIES FILINGS. The Company shall from time to time
promptly take such action as either of the Purchasers or any of their
representatives, if applicable, may request to qualify the Securities for
offering and sale under the securities laws (other than United States federal
securities laws) of the jurisdictions in the United States as shall be so
identified to the Company, and to comply with such laws so as to permit the
continuance of sales therein.
g. USE OF PROCEEDS. The Company will use all of the net proceeds from
the sale of the Securities for the Company's working capital.
h. RESERVATION OF COMMON STOCK. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the conversion of the Debentures and
the exercise of the Warrants. The Company will use its best efforts at all
times to maintain a number of shares of Common Stock so reserved for issuance
that is sufficient to permit the conversion of the Debentures and the
exercise in full of the Warrants at such time.
i. LIMITATION ON CONVERSION AND STOCKHOLDER APPROVAL. In no event shall
the Purchaser be permitted to convert a Debenture for any shares of Common
Stock in excess of the number of such shares, upon the conversion of which,
the number of shares of Common Stock to be issued pursuant to the conversion
of any portion of the Debentures, when added to the number of shares of
Common Stock issued pursuant all prior conversions of the Debentures and any
other issuances of Common Stock required to be aggregated with such shares in
respect of the
12
stockholder vote requirements set forth in Nasdaq National Market Rule
4310(c)(25), would equal or exceed twenty percent (20%) of the Common Stock
or voting power outstanding on the date of issuance of the Debentures and
Warrants (adjusted for events of the type described in Sections 12(a), (b),
(c) or (d) of the Debenture) as determined pursuant to Nasdaq National Market
rules (the "Cap Amount"). If a Purchaser is prohibited as a result of this
provision from converting a Debenture into a total number of shares of Common
Stock for which it could otherwise be converted, the Purchaser shall,
notwithstanding any other provisions of this Agreement or the Debenture, be
entitled to partially convert the Debenture into the maximum number of shares
of Common Stock permissible in accordance with the provisions of this
Agreement and the Debenture, and this Agreement shall otherwise be
unaffected. Such limitation shall not apply to conversions if, prior to such
conversion the Company has obtained approval of the holders of a majority of
the Company's outstanding Common Stock for the issuance of such shares of
Common Stock in excess of the Cap Amount. The Company agrees to use its best
efforts to authorize and obtain such stockholder approval for the issuance of
the Common Stock issuable upon conversion of the Debentures and upon exercise
of the Warrants, if and to the extent such vote may become required, by
virtue of adjustments in the conversion price therein provided, in compliance
with Nasdaq National Market rules as set forth above.
j. RETURN OF DEBENTURES ON CONVERSION AND WARRANTS ON EXERCISE. (i)
Upon any conversion by a Purchaser of less than all of the aggregate
principal amount of Debentures then outstanding, the Company shall issue and
deliver to the Purchaser within three (3) days of the conversion date a new
certificate or certificates for, as applicable, the total principal amount of
Debentures which Purchaser has not yet elected to convert (with the number of
and denomination of such new certificate(s) designated by Purchasers).
(ii) Upon any partial exercise by a Purchaser of Warrants, the
Company shall issue and deliver to such Purchaser within three (3) days of
the date on which such Warrants are exercised a new Warrant or Warrants
representing the number of adjusted shares of Common Stock covered thereby,
in accordance with the terms thereof.
k. REPLACEMENT DEBENTURES AND WARRANTS. (i) The certificate(s)
representing the Debentures held by a Purchaser shall be exchangeable, at the
option of the Purchaser, at any time and from time to time at the office of
Company, for certificates with different denominations representing, as
applicable, an equal aggregate principal amount of Debentures, as requested
by such Purchaser upon surrendering the same. No service charge will be made
for such registration or transfer or exchange.
(ii) The Warrants will be exchangeable, at the option of a
Purchaser, at any time and from time to time at the office of the Company,
for other Warrants of different denominations entitling the holder thereof to
purchase in the aggregate the same number of shares of Common Stock as are
purchasable under such Warrants. No service charge will be made for such
transfer or exchange.
l. DIVIDENDS OR DISTRIBUTIONS; PURCHASES OF EQUITY SECURITIES. So long
as any portion of the Debentures remain outstanding, the Company agrees that
it shall not (i) declare or
13
pay any dividends or make any distributions to any holder or holders of its
capital stock, or (ii) purchase or otherwise acquire for value, directly or
indirectly, any shares of its capital stock.
m. SUBORDINATION. Purchasers agree that the payment of principal,
interest and all other charges with respect to the Debentures is expressly
subordinated in right of payment to the prior payment in cash and
satisfaction in full of all Senior Debt (as defined below) on the terms and
subject to the conditions set forth in the form of Subordination Agreement
attached hereto as Exhibit G ("Subordination Agreement"). As used herein,
"Senior Debt" and "Trade Debt" shall have the meanings attributed to them in
the Subordination Agreement. Purchasers shall execute Subordination
Agreements from time to time with any and all holders of Senior Debt as
requested by the Company; provided that the execution of such agreements
shall not be required to effect the subordination of the indebtedness
represented by the Debenture to any Senior Debt on the terms set forth in the
Subordination Agreement, if identified as such by the Company to the
Purchasers, such holders being intended beneficiaries of the Subordination
Agreement. The Debentures shall be senior to all other classes of equity of
the Company and shall rank PARI PASSU with or senior to Trade Debt of the
Company incurred in the ordinary course of business and all other
indebtedness of the Company other than Senior Debt.
n. LIMITATION ON FUTURE INDEBTEDNESS. The Company agrees, for so long
as the Debentures shall remain outstanding, unless the Purchasers have
expressly consented thereto in writing, neither the Company nor any direct or
indirect consolidated subsidiary of the Company shall incur, create, assume,
guarantee, secure or in any manner become liable in respect of any
indebtedness for borrowed money other than (i) Senior Debt (or indebtedness
which would be Senior Debt (A) but for the Company's failure to designate
such indebtedness as Senior Debt or (B) if the amount of indebtedness held by
a holder of Senior Debt under clause (b) of the definition of Senior Debt in
the Subordination Agreement does not equal or exceed the minimum amount set
forth in such clause (b)), (ii) "Trade Debt"; (iii) indebtedness which is
subordinate to the Debentures or (iv) indebtedness not otherwise permitted
but not exceeding $500,000 outstanding from time to time (other than debt
convertible by its terms into equity or with respect to which or in
connection with which the lender(s) or their affiliates received any equity
or right to receive equity). Nothing in this section shall in any way limit
the ability of the Company or its subsidiaries to incur create, assume,
guarantee or become liable for, in the ordinary course of business,
obligations incurred in connection with performance bonds, suretyships and
the like.
o. PUT RIGHTS. In addition to any other rights which such person may
have, upon the occurrence of a default by the Company under the Registration
Rights Agreement with respect to the registration rights of any holder of
Securities and for so long as such default shall continue (including a
default with respect the registration of any registrable securities by a
stated deadline, whether or not such obligation is limited to the Company's
"best efforts" or otherwise), each such holder shall have the right, but not
the obligation, to put back to the Company any or all of the Securities held
by such person in exchange for: (i) the principal amount of any Debentures
which it shall have put back to the Company, together with any accrued but
unpaid interest thereon, calculated at the rate of 10 1/2% per annum,
compounded quarterly, from the Closing Date through the date of payment by
the Company with respect to such put; (ii) the principal amount of Debentures
converted into shares of Common Stock which such person shall have put back
to the Company, together with interest thereon, calculated at the rate of
10 1/2% per annum,
14
compounded quarterly, from the Closing Date through the date of payment by
the Company with respect to such put; and (iii) any amounts paid by it
(including amounts deemed to be paid by it in connection with cashless
exercise) for shares of Common Stock issued in connection with the exercise
of Warrants which it shall have put back to the Company.
5. TRANSFER AGENT INSTRUCTIONS AND CONVERSION MECHANICS
a. The Company warrants that no instruction, other than the
instructions referred to in this Section 5 hereof, prior to the registration
and sale under the Securities Act of the Common Stock issuable upon
conversion of the Debentures or upon exercise of the Warrants will be given
by the Company to its transfer agent and that the shares of Common Stock
issuable upon conversion of the Debentures or upon exercise of the Warrants
shall otherwise be freely transferable on the books and records of the
Company as and to the extent provided in this Agreement, the Registration
Rights Agreement and applicable law. Nothing in this Section shall affect in
any way the Purchasers' obligations and agreement to comply with all
applicable securities laws upon resale of the Securities. If a Purchaser
provides the Company with an opinion of counsel reasonably satisfactory to
the Company that registration of a resale by the Purchaser of any of the
Securities in accordance with Section 4(a) of this Agreement is not required
under the Securities Act, the Company shall permit the transfer of the
Securities and, in the case of the Common Stock, promptly instruct the
Company's transfer agent to issue one or more certificates for Common Stock
without legend in such names and in such denominations as specified by the
Purchaser.
b. Each Purchaser shall exercise its right to convert the Debentures or
to exercise the Warrants in the manner set forth in the Debentures or the
Warrants, respectively. Each date on which Debentures are converted or
Warrants are exercisable in accordance with the provisions thereof shall be
deemed a "Conversion Date" with respect to such conversion or exercise. For
purposes of this Agreement, any conversion of the Debentures or exercise of
the Warrants shall be deemed to have been made immediately prior to the close
of business on the Conversion Date.
c. In lieu of delivering physical certificates representing the Common
Stock issuable upon the conversion of the Debentures or upon the exercise of
the Warrants, provided the Company's transfer agent is participating in the
Depositary Trust Company ("DTC") Fast Automated Securities Transfer program,
on the written request of the Purchaser, who shall have previously instructed
the Purchaser's prime broker to confirm such request to the Company's
transfer agent, the Company shall cause its transfer agent to electronically
transmit such Common Stock to the Purchaser by crediting the account of such
Purchaser's prime broker with DTC through its Deposit Withdrawal Agent
Commission ("DWAC") system no later than three (3) business days after the
applicable Conversion Date relating to Debentures or Warrants (each such
delivery date, a "Delivery Date").
d. Nothing herein shall limit the Purchasers' right to pursue actual
damages for the Company's failure to so issue and deliver Common Stock to the
Purchasers. Furthermore, in addition to any other remedies which may be
available to the affected Purchaser, in the event that the Company fails for
any reason to effect delivery of such Common Stock within five (5)
15
business days after the relevant Delivery Date, the Purchaser will be
entitled to revoke the relevant Notice of Conversion or Form of Election to
Purchase by delivering a notice to such effect to the Company, whereupon the
Company and the Purchaser shall each be restored to their respective
positions immediately prior to delivery of such Notice of Conversion or Form
of Election to Purchase. For purposes of this Section 5, "business day" shall
mean any day in which the financial markets of New York are officially open
for the conduct of business therein.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO
ISSUE THE DEBENTURES AND WARRANTS
Each Purchaser understands that the Company's obligation to issue
the Debentures and the Warrants on the Closing Date to the Purchasers
pursuant to this Agreement is conditioned upon the satisfaction or waiver by
the Company of each of the following conditions:
a. The accuracy on the Closing Date of the representations and
warranties of the Purchasers contained in this Agreement as if made on the
Closing Date and the performance by the Purchasers on or before the Closing
Date of all covenants and agreements of the Purchasers required to be
performed on or before the Closing Date.
b. The absence or inapplicability of any and all laws, rules or
regulations prohibiting or restricting the transactions contemplated hereby,
or requiring any consent or approval which shall not have been obtained.
c. The Purchasers shall have executed this Agreement, the Registration
Rights Agreement and the Security Agreements, and delivered the same to the
Company.
d. The Purchasers shall have delivered the full Purchase Price in
accordance with Section 1.a. above.
7. CONDITIONS TO THE PURCHASERS' OBLIGATION TO
PURCHASE THE DEBENTURES AND THE WARRANTS
The Company understands that the Purchasers' obligation to
purchase the Debentures and the Warrants on the Closing Date is conditioned
upon the satisfaction or waiver by the Purchasers of each of the following
conditions:
a. The accuracy on the Closing Date of the representations and
warranties of the Company contained in this Agreement as if made on the
Closing Date, and the performance by the Company on or before the Closing
Date of all covenants and agreements of the Company required to be performed
on or before the Closing Date.
b. The Company (and any of its subsidiaries parties thereto) shall have
executed and delivered to the Purchasers (i) the Registration Rights
Agreement, (ii) the Debentures (iii) the Warrants and (iv) the Security
Agreements.
16
c. On the Closing Date, the Purchasers shall have received an opinion
of counsel for the Company, dated the Closing Date, in the form attached as
Exhibit H hereto.
d. On the Closing Date, the Purchasers shall have received a
certificate executed by the President or the Chief Executive Officer of the
Company and by the Chief Financial Officer of the Company, stating that all
of the representations and warranties of the Company set forth in this
Agreement and the other Primary Documents are accurate as of the Closing Date
and that the Company has performed all of its covenants and agreements
required to be performed under this Agreement and the other Primary Documents
on or before the Closing Date.
e. The Purchasers shall have received an incumbency certificate, dated
the Closing Date, for the officers of the Company (and any of its
subsidiaries, as applicable) executing this Agreement, the Debentures, the
Warrants, the Security Agreements and any other documents or instruments
delivered in connection with this Agreement at the Closing.
f. The Purchasers shall have received a certificate of the Secretary or
Assistant Secretary of each of the Company and the Domestic Operating Sub,
dated the Closing Date, certifying the attached copy of the Articles of
Incorporation or Certificate of Incorporation of such entity, certifying the
attached copy of the By-laws of such entity, and the resolutions adopted by
the Board of Directors of such entity authorizing the actions to be taken by
such entity contemplated by this Agreement and the Primary Documents.
g. The Purchasers shall have received certificates of the Secretary of
State of the State of Nevada and Delaware, dated a recent date, to the effect
that the Company and the Domestic Operating Sub are in good standing in the
State of Nevada and Delaware, respectively, and that all annual reports, if
any, have been filed as required and that all taxes and fees have been paid
in connection therewith.
h. The Purchasers shall have received a certified copy of the Articles
of Incorporation of the Company as filed with the Secretary of State of the
State of Nevada and any amendments thereto through the Closing Date.
i. The Purchasers shall have received from the Company such other
certificates and documents as they or their representatives, if applicable,
shall reasonably request, and all proceedings taken by the Company and the
Domestic Operating Sub in connection with the Primary Documents contemplated
by this Agreement and the other Primary Documents and all documents and
papers relating to such Primary Documents shall be satisfactory to the
Purchasers.
j. The Company shall have delivered to the Purchasers reimbursement of
the Purchasers' out-of-pocket costs and expenses incurred in connection with
the transactions contemplated by this Agreement (including fees and
disbursements of the Purchasers' legal counsel) in an amount not to exceed
$50,000.
k. No injunction, order, investigation, claim, action or proceeding
before any court or governmental body shall be pending or threatened wherein
an unfavorable judgment, decree or order would restrain, impair or prevent
the carrying out of this Agreement or any of the
17
transactions contemplated hereby, declare unlawful the transactions
contemplated by this Agreement or cause any such transaction to be rescinded.
l. The Company shall have obtained in writing or made all consents,
waivers, approvals, orders, permits, licenses and authorizations of, any
registrations, declarations, notices to and filings and applications with,
any governmental authority or any other person or entity (including, without
limitation, securityholders and creditors of the Company) required to be
obtained or made in order to enable the Company to observe and comply with
all its obligations under this Agreement and to consummate the transactions
contemplated hereby.
m. The Company and the Domestic Operating Sub shall have taken all
actions necessary to perfect and preserve the security interests granted to
the Purchasers by them (including the prompt filing of any UCC-1 statements
contemplated by the Primary Documents or the Security Documents, but
excluding any routine ministerial procedures necessary to be performed by
government employees) pursuant to the Security Agreements and shall have
otherwise duly complied with all of the terms and conditions of the Security
Agreements; provided that any such filings shall be completed no later than
the next business day following the Closing Date. The Company and the
Domestic Operating Sub shall pay all costs and taxes associated with such
actions and filings.
8. INDEMNIFICATION
A. INDEMNIFICATION OF PURCHASERS BY THE COMPANY.
The Company hereby agrees to indemnify and hold harmless each of
the Purchasers, their affiliates and their respective officers, directors,
partners, shareholders, employees and members (collectively, the "Buyer
Indemnitees"), from and against any and all losses, claims, damages,
judgments, penalties, liabilities and deficiencies (collectively, "Losses"),
and agrees to reimburse the Buyer Indemnitees for all out-of-pocket expenses
(including the fees and expenses of legal counsel), in each case promptly as
incurred by the Buyer Indemnitees and to the extent arising out of or in
connection with:
1. any misrepresentation, omission of fact or breach of any of
the Company's or the Domestic Operating Sub's representations, warranties or
covenants contained in this Agreement, the annexes, schedules or exhibits
hereto or any instrument, agreement or certificate entered into or delivered
by the Company or the Domestic Operating Sub pursuant to this Agreement; or
2. any failure by the Company or the Domestic Operating Sub to
perform any of its covenants, agreements, undertakings or obligations set
forth in this Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by the Company
or the Domestic Operating Sub pursuant to this Agreement.
18
B. INDEMNIFICATION OF THE COMPANY BY PURCHASERS.
Each of the Purchasers hereby severally agrees to indemnify and
hold harmless the Company, its affiliates and their respective officers,
directors, partners and members (collectively, the "Company Indemnitees"),
from and against any and all Losses, and agrees to reimburse the Company
Indemnitees for all out-of-pocket expenses (including the fees and expenses
of legal counsel), to the extent arising out of or in connection with any
breach of any of such Purchaser's representations, warranties or covenants
contained in this Agreement, the annexes, schedules or exhibits hereto or any
instrument, agreement or certificate entered into or delivered by such
Purchaser pursuant to this Agreement.
C. THIRD PARTY CLAIMS.
Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section 8 (an "Indemnified Party") of
written notice of any investigation, claim, proceeding or other action in
respect of which indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section 8 is being sought (the "Indemnifying
Party") of the commencement thereof; but the omission to so notify the
Indemnifying Party shall not relieve it from any liability that it otherwise
may have to the Indemnified Party, except to the extent that the Indemnifying
Party is materially prejudiced and forfeits substantive rights and defenses
by reason of such failure. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying
Party shall be entitled to assume the defense thereof. Notwithstanding the
assumption of the defense of any Claim by the Indemnifying Party, the
Indemnified Party shall have the right to employ separate legal counsel and
to participate in the defense of such Claim, and the Indemnifying Party shall
bear the reasonable fees, out-of-pocket costs and expenses of such separate
legal counsel to the Indemnified Party if (and only if): (x) the Indemnifying
Party shall have agreed to pay such fees, out-of-pocket costs and expenses,
(y) the Indemnified Party and the Indemnifying Party reasonably shall have
concluded that representation of the Indemnified Party by the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of
such Claim, or if there may be legal defenses available to the Indemnified
Party that are in addition to or disparate from those available to the
Indemnifying Party, or (z) the Indemnifying Party shall have failed to employ
legal counsel reasonably satisfactory to the Indemnified Party within a
reasonable period of time after notice of the commencement of such Claim. If
the Indemnified Party employs separate legal counsel in circumstances other
than as described in clauses (x), (y) or (z) above, the fees, costs and
expenses of such legal counsel shall be borne exclusively by the Indemnified
Party. Except as provided above, the Indemnifying Party shall not, in
connection with any Claim in the same jurisdiction, be liable for the fees
and expenses of more than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnifying Party shall not,
without the prior written consent of the Indemnified Party (which consent
shall not unreasonably be withheld) settle or compromise any Claim or consent
to the entry of any judgment that does not include an unconditional release
of the Indemnified Party from all liabilities with respect to such Claim or
judgment.
19
D. RIGHT TO INDEMNIFICATION NOT AFFECTED BY KNOWLEDGE.
The right to indemnification, payment for Losses or other remedy
based on any representation, warranty, covenant or obligation of a party
hereunder shall not be affected by any investigation conducted with respect
to, or any knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance
with, any such representation, warranty, covenant or obligation.
9. EXPENSES
The Company covenants and agrees with the Purchasers that the
Company shall pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Purchasers' counsel in connection with the
issuance of the Securities (not to exceed $50,000), payable on the Closing
Date; (ii) all expenses in connection with registration or qualification of
the Securities for offering and sale under state securities laws as provided
in Section 4.f. hereof; and (iii) all other costs and expenses incident to
the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section, including the fees and
disbursements of the Company's counsel, accountants and other professional
advisors, if any.
10. SURVIVAL
The agreements, covenants, representations and warranties of the
Company and the Purchasers shall survive the execution and delivery of this
Agreement and the delivery of the Securities hereunder until all of the
Debentures and the Warrants are converted, exercised and satisfied in full
and the Company has satisfied in full its obligations under the terms of the
Registration Rights Agreement.
11. OBSERVATION RIGHTS
In the event of a default by the Company with respect to its
obligations under the Debentures to make payments of principal or interest,
or to register shares of Common Stock for resale under the Registration
Rights Agreement (whether or not the deadlines set forth therein are limited
by language that the Company use its "best efforts" or other such language),
which default shall remain uncured for a period of at least 30 days after the
Company receives a reasonably detailed notice of such default from a
Purchaser, then, in addition to any other remedies which the Purchasers may
have with respect to such default, the Purchasers shall have the right for so
long as such default continues and an additional 60 days after such default
is cured to have one representative attend all meetings of the board of
directors of the Company and any committees thereof in a nonvoting observer
capacity and, in this respect, the Company shall give such representative
copies of all notices, minutes, consents, and other material that it provides
to its directors; provided, however, that the Company reserves the right to
exclude such representative from access to any material or meeting or portion
thereof if the Company believes
20
upon advice of counsel that such exclusion is reasonably necessary to
preserve the attorney-client privilege or to protect highly confidential
proprietary information. Such representative may participate in discussions
of matters brought to the Board of Directors. The Purchasers agree, and any
representative of the Purchasers will agree, to hold in confidence and trust
and not use or disclose any confidential information provided to or learned
by it in connection with its rights under this Agreement. The rights granted
to the Purchasers under this Section 11 shall not be limited in any way by
Subordination Agreements entered into from time to time by the parties hereto.
12. MISCELLANEOUS
a. GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of New York.
Each of the parties submits to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state courts of
the State of New York sitting in the City of New York in connection with any
dispute arising under this Agreement or any of the transactions contemplated
hereby, and hereby waives, to the maximum extent permitted by law, any
objection, including any objections based on FORUM NON CONVENIENS, to the
bringing of any such proceeding in such jurisdictions.
b. COUNTERPARTS. This Agreement may be signed in two or more
counterparts, each of which shall be deemed an original.
c. HEADINGS. The headings of this Agreement are for convenience of
reference only and shall not form part of, or affect the interpretation of,
this Agreement.
d. INTERPRETATION. This Agreement and each of the Primary Documents
have been entered into freely by each of the parties, following consultation
with their respective counsel, and shall be interpreted fairly in accordance
with its respective terms, without any construction in favor of or against
either party.
e. SEVERABILITY. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or unenforceability of this Agreement in any other
jurisdiction.
f. SUCCESSORS. This Agreement shall inure to the benefit of, and be
binding upon the successors and assigns of each of the parties hereto,
including any transferees of the Warrants and the Debentures.
g. AMENDMENTS. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement.
h. MERGER. This Agreement, together with the other Primary Documents,
supersedes all prior agreements and understandings among the parties hereto
with respect to the subject matter hereof.
21
i. EQUITABLE RELIEF. The Company and the Purchasers each recognize that
in the event that any party fails to perform, observe, or discharge any or
all of its obligations under this Agreement or the other Primary Documents,
any remedy at law may prove to be inadequate relief to the aggrieved party.
The Company and the Purchasers therefore agree that an aggrieved party under
this Agreement or the other Primary Documents, if such party so requests,
shall be entitled to temporary and permanent injunctive relief in any such
case without the necessity of proving actual damages.
j. NOTICES. Any notice required or permitted hereunder shall be given
in writing (unless otherwise specified herein) and shall be effective upon
personal delivery, via facsimile (upon receipt of confirmation of error-free
transmission) or two business days following deposit of such notice with an
internationally recognized courier service, with postage prepaid and
addressed to each of the other parties thereunto entitled at the following
addresses, or at such other addresses as a party may designate by five days
advance written notice to each of the other parties hereto.
COMPANY: Flour City International, Inc.
0000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
ATTENTION: Mr. Xxxx Xxxx
Chief Executive Officer
and
Xx. Xxxxxxx Xxxx
Chief Financial Officer
Tel.: (000) 000-0000
Fax: (000) 000-0000
WITH A COPY TO:
Heller, Ehrman, White & XxXxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
ATTENTION: Xxxxxxx X. Xxxxx, Esq.
Tel.: (000) 000-0000
Fax: (000) 000-0000
PURCHASERS: Dimensional Partners, L.P. and
Dimensional Partners, Ltd.
c/o JDS Capital Management, Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
ATTENTION: Xx. Xxxxxx Xxxxxxx
President
Tel.: (000) 000-0000
Fax: (000) 000-0000
22
WITH A COPY TO:
Rosenman & Colin LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ATTENTION: Xxxxxxx X. Xxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
13. NON-DISCLOSURE.
The Purchasers acknowledge that the Company is a publicly-listed
company and, as such, is subject to strict regulation governing the
disclosure of information relating to corporate transactions. Except as
required by law, without the prior written consent of the Company, the
Purchasers will not directly or indirectly, make any public comment,
statement or communication to any individual or entity with respect to, or
otherwise disclose the existence of discussions regarding a possible
transaction between the parties or any of the terms, conditions, or other
aspects of this Agreement until such time as the transaction is completed, or
any confidential information provided by the Company to the Purchasers.
Further, the Purchasers acknowledge that they may not trade in the securities
of the Company when they are in possession of material, non-public
information and that they agree that they will not do so. The Purchasers will
not use any confidential information provided by Company to the Purchasers
for any purpose other than evaluating an investment by the Purchasers in the
Securities. Confidential Information shall include all non-public information
provided by the Company to the Purchasers, but shall not include information
that (a) is now or subsequently becomes generally available to the public
through no wrongful act or omission of the Purchasers, (b) the Purchasers can
demonstrate to have had rightfully in their possession prior to disclosure to
the Purchasers by the Company, and (c) the Purchasers rightfully obtain from
a third party who has the right to transfer or disclose it. If the Purchasers
are required by law to make any such disclosure, they shall first provide to
the Company the content of the proposed disclosure, the reasons that such
disclosure is required by law, and the time and place that the disclosure
will be made.
[SIGNATURE PAGE FOLLOWS]
23
IN WITNESS WHEREOF, this Securities Purchase Agreement has been
duly executed by each of the undersigned.
Dated: June 11, 2001
FLOUR CITY INTERNATIONAL, INC.
By: /s/ Xxxx X. Xxxx
--------------------------------
Name: Xxxx X. Xxxx
Title: CEO
PURCHASERS:
DIMENSIONAL PARTNERS, L.P.
By: JDS ASSET MANAGEMENT, LLC,
its general partner
By: /s/ Xxxxxx Xxxxxxx
---------------------------------
Name: Xxxxxx Xxxxxxx
Title: Managing Member
Principal Amount of Debentures: $833,333.33
Number of Warrants: 129,972 (subject to adjustment as set forth in the Warrants)
DIMENSIONAL PARTNERS, LTD.
By: /s/ Xxxxxx Xxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxx
Title: Director
Principal Amount of Debentures: $1,666,666.67
Number of Warrants: 259,944 (subject to adjustment as set forth in the Warrants)
24
