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EXHIBIT 10.51
SERIES D 7% CUMULATIVE CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
Dated as of August 27, 1999
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of August 27, 1999
by and between XXX.xxx, Inc., a Delaware corporation (the "Company"), and those
persons and entities listed on Exhibit A hereto (collectively, the "Purchasers"
and each, individually, a "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company desires to sell to the Purchasers and the
Purchasers desire to purchase from the Company up to the aggregate number of
shares set forth on Exhibit A hereto (as amended from time to time pursuant to
the terms of this Agreement) of its authorized but unissued Series D 7%
Cumulative Convertible Preferred Stock, par value $.01 per share (the "Series D
Preferred Stock"), upon the terms and provisions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1. SALE AND PURCHASE OF THE SERIES D PREFERRED STOCK
(a) Subject to the terms and conditions hereof and in reliance upon the
representations and warranties contained herein, the Company agrees to sell to
the Purchasers, and each Purchaser agrees to purchase from the Company on the
Closing Date specified in Section 2 hereof, the number of shares of Series D
Preferred Stock set forth opposite such Purchaser's name on Exhibit A hereto
(being an aggregate of up to a maximum of 3,000,000 shares of Series D Preferred
Stock) at a price of $10.50 per share for a maximum aggregate purchase price of
Thirty-one Million Five Hundred Thousand Dollars ($31,500,000.00). The sales of
the shares of Series D Preferred Stock to the Purchasers as aforesaid are
several and separate sales and none of the Purchasers shall be responsible for,
or obligated with respect to, any act or default by any other Purchaser. The
shares of Series D Preferred Stock being purchased pursuant to this Agreement
are collectively referred to herein as the "Shares", containing rights and
privileges as more fully set forth in the Certificate of Designation for the
Series D Preferred Stock (the "Series D Certificate of Designation") attached
hereto as Exhibit B.
(b) The aggregate purchase price to be paid to the Company by each
Purchaser for the Shares to be purchased by such Purchaser pursuant to this
Agreement shall be the amount set forth opposite that Purchaser's name on
Exhibit A hereto. No further payment shall be required from the Purchaser for
the Shares.
SECTION 2. THE CLOSING
Subject to the terms and conditions hereof, the initial closing
hereunder with respect to the purchase and sale of the Shares shall take place
at the offices of Xxxxxxxxxx Xxxxxxxx LLP,
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0000 Xxxx Xxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx Xxxxxxxx on or before September
30, 1999, or such other location, time and date as the parties hereto shall
mutually agree upon (the "Closing"). As soon as practicable following the
Closing, the Company will deliver to each Purchaser purchasing Shares a
certificate registered in the Purchaser's name (or the name of its nominee, if
any, as specified on Exhibit A hereto) evidencing the number of Shares set forth
opposite the Purchaser's name on Exhibit A dated as of the Closing Date.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Purchasers as
follows as of the date hereof and as of the Closing as follows:
3.1 Corporate Existence, Power and Authority
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. The Company is duly
qualified, licensed and authorized to do business and is in good standing in
each jurisdiction in which it owns or leases any material property or in which
the conduct of its business requires it to so qualify or be so licensed, except
where the failure to so qualify or be licensed would not have a material adverse
effect on the Company. The Company has all requisite corporate power, authority
and legal right to own or to hold under lease and to operate the properties it
owns or holds and to conduct its business as it is now being conducted and as it
is proposed to be conducted except where the failure to have such requisite
power, authority and legal right would not have a material adverse effect on the
Company.
(b) Subject to (x) obtaining the approval of the Company's existing
stockholders to the amendment of the Company's Amended Certificate of
Incorporation (the "Certificate of Amendment"), (y) the approval of the
Company's existing stockholders to and the filing of the Certificate of
Amendment, the Certificate of Amendment to the Certificate of Designation
relating to the Series A Preferred Stock, the Certificate of Amendment to the
Certificate of Designation relating to the Series B 7% Cumulative Convertible
Preferred Stock (the "Series B Preferred Stock"), the Certificate of Amendment
to the Certificate of Designation relating to the Series C 7% Cumulative
Convertible Preferred Stock (the "Series C Preferred Stock"), and the Series D
Certificate of Designation, and (z) obtaining all necessary waivers and consents
of stockholders of, and lenders to, the Company under other agreements, the
Company has all requisite power and authority to enter into this Agreement, the
Securities Restriction Agreement, dated as of November 13, 1996, as amended (the
"Securities Restriction Agreement"), the Amended and Restated Securityholders'
Agreement and Exchange Agreement, dated as of November 13, 1996, as amended (the
"Securityholders' Agreement"), and the Registration Rights Agreement, dated as
of November 13, 1996, as amended (as such agreement is defined in Section 3.18
below, together with this Agreement, the Securities Restriction Agreement, the
Securityholders' Agreement and the Series D Certificate of Designation,
collectively, the "Transaction Documents"), to sell the Series D Preferred Stock
hereunder and to carry out and perform its obligations under the terms of the
Transaction Documents. Each of the Transaction Documents has been duly executed
and delivered by the Company and constitutes the legal, valid
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and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
3.2 Capitalization
(a) Immediately prior to the Closing, the authorized capital stock of
the Company will consist of 58,750,000 shares of capital stock, of which
50,000,000 shares will be classified as common stock (the "Common Stock"), of
which 4,328,614 shares (as adjusted for the conversion of convertible preferred
stock and exercises of options and warrants to purchase shares of Common Stock
after the date of this Agreement) will be issued and outstanding, and 8,750,000
shares will be classified as preferred stock (the "Preferred Stock"), of which
(i) 627,630 shares will be designated as Series A Preferred Stock, of which
388,065 shares will be issued and outstanding, (ii) 1,372,370 shares will be
designated as Series B Preferred Stock, of which 1,372,370 shares will be issued
and outstanding (as adjusted for conversions after the date of this Agreement);
(iii) 3,750,000 shares will be designated as Series C Preferred Stock, of which
2,351,543 shares will be issued and outstanding (as adjusted for conversions
after the date of this Agreement); and (iv) 3,000,000 shares will be designated
as Series D Preferred Stock, none of which will be issued and oustanding. As of
the Closing, all outstanding shares of Common Stock and Preferred Stock will
have been duly authorized and validly issued, will be fully paid and
non-assessable, and will have been issued in compliance with all applicable
state and federal laws concerning the issuance of securities. Immediately prior
to the Closing (as adjusted for the conversion of convertible preferred stock
after the date of this Agreement), there will be reserved for issuance: (i)
1,875,000 shares of Common Stock which may be issued upon conversion of shares
of Series B Preferred Stock; (ii) 2,351,543 shares of Common Stock which may be
issued upon conversion of shares of Series C Preferred Stock; (iii) the
aggregate number of shares set forth on Exhibit A hereto (as amended from time
to time pursuant to the terms of this Agreement) of Common Stock which may be
used upon conversion of shares of Series D Preferred Stock; (iv) 1,759,396
shares of Common Stock which may be issued pursuant to the exercise of options
previously granted to present and former employees and consultants of the
Company (as adjusted for grants, exercises and terminations of options occurring
after the date of this Agreement); (v) 414,338 shares of Common Stock which are
available for future grants of options under the Company's Stock Option Plan (as
adjusted for grants, exercises and terminations of options occurring after the
date of this Agreement); (vi) 885,774 shares of Common Stock which may be issued
pursuant to the exercise of warrants previously issued by the Company (as
adjusted for the exercise of such warrants and the grant of up to 12,000 shares
of Common Stock which may be issued pursuant to the exercise of warrants that
may be issued by the Company after the date of this Agreement); and (vii) up to
75,000 shares of Common Stock which may be issued pursuant to the exercise of a
warrant or warrants to be granted to Xxxxx Xxxxx Xxxxxx & Company, LLC (the
"Agent") at the Closing (the "Agent's Warrant"). A complete list of all persons
who are registered owners of the capital stock of the Company as indicated in
the Company's stock ledger and similar records as of the date of this Agreement
is attached hereto as Schedule 3.2(a).
(b) Immediately after the Closing, the authorized capital stock of the
Company will consist of 58,750,000 shares of capital stock, comprised of
50,000,000 shares of Common Stock, of which 4,328,614 shares (as adjusted for
the conversion of convertible preferred stock and
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exercises of options and warrants to purchase shares of Common Stock after the
date of this Agreement) of Common Stock will be issued and outstanding and
8,750,000 shares of Preferred Stock, of which (i) 627,630 shares will be
designated as Series A Preferred Stock, of which 388,065 shares will be issued
and outstanding, (ii) 1,372,370 shares will be designated as Series B Preferred
Stock, of which 1,372,370 shares will be issued and outstanding (as adjusted for
conversions after the date of this Agreement); (iii) 3,750,000 shares will be
designated as Series C Preferred Stock, of which 2,351,543 shares will be issued
and outstanding (as adjusted for conversions after the date of this Agreement);
and (iv) 3,000,000 shares will be designated as Series D Preferred Stock, of
which the aggregate number of shares set forth on Exhibit A hereto (as amended
from time to time pursuant to the terms of this Agreement) will be issued and
outstanding. Immediately after the Closing (as adjusted for the conversion of
convertible preferred stock after the date of this Agreement), there will be
reserved for issuance: (i) 1,875,000 shares of Common Stock which may be issued
upon conversion of shares of Series B Preferred Stock; (ii) 2,351,543 shares of
Common Stock which may be issued upon conversion of shares of Series C Preferred
Stock; (iii) the aggregate number of shares set forth on Exhibit A hereto (as
amended from time to time pursuant to the terms of this Agreement) of Common
Stock which may be issued upon conversion of shares of Series D Preferred Stock;
(iv) 1,759,396 shares of Common Stock which may be issued pursuant to the
exercise of options previously granted to present and former employees and
consultants of the Company (as adjusted for grants, exercises and terminations
of options occurring after the date of this Agreement); (v) 414,338 shares of
Common Stock which are available for future grants of options under the
Company's Stock Option Plan (as adjusted for grants, exercises and terminations
of options occurring after the date of this Agreement); (vi) 885,774 shares of
Common Stock which may be issued pursuant to the exercise of warrants previously
issued by the Company (as adjusted for the exercise of such warrants and the
grant of up to 12,000 shares of Common Stock which may be issued pursuant to the
exercise of warrants that may be issued by the Company after the date of this
Agreement); and (vii) up to 75,000 shares of Common Stock which may be issued
pursuant to the exercise of the Agent's Warrant.
(c) Except as contemplated by (i) the Company's Stock Option Plan; (ii)
warrants to purchase up to 885,774 shares of Common Stock previously issued by
the Company (as adjusted for the exercise of such warrants and the grant of up
to 12,000 shares of Common Stock which may be issued pursuant to the exercise of
warrants that may be issued by the Company after the date of this Agreement);
(iii) the Securities Restriction Agreement; (iv) that certain Securities
Restriction Agreement dated November 2, 1995, as amended; (v) the
Securityholders' Agreement; and (vi) those certain Securities Purchase
Agreements dated November 2, 1995 and November 13, 1996, respectively, by and
among the Company and certain investors, there are no outstanding rights,
options, calls, warrants, conversion rights, antidilution protections or other
adjustment provisions, agreements or preemptive rights to purchase or other-wise
acquire shares of capital stock of the Company and/or obligations of the Company
to grant, extend or enter into any such right, option, call, warrant, conversion
right or agreement.
(d) Except as contemplated by (i) the Securities Restriction Agreement;
(ii) the Securities Restriction Agreement dated November 2, 1995, as amended;
(iii) the Securityholders' Agreement; and (iv) those certain Securities Purchase
Agreements dated November 2, 1995 and November 13, 1996, respectively, by and
among the Company and certain investors, there is no
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agreement, restriction or encumbrance (including, without limitation, any right
of first refusal, right of first offer or voting trust agreement) with respect
to the sale or voting of any shares of the Company's capital stock (whether
outstanding or issuable upon conversion or exercise of outstanding securities).
3.3 Subsidiary
The Company (i) does not control or own, directly or indirectly, any
shares or proprietary interest in any corporation or business entity, (ii) is
not under common control with, or controlled by, any other corporation or other
business entity and (iii) does not have any letter of intent, agreement in
principle or other binding or non-binding agreement to acquire any control of,
or equity interest in, any other corporation or other business entity.
3.4 No Defaults or Conflicts
(a) The Company is not in violation or default under any indenture,
agreement or instrument to which it is a party or by which it or its properties
may be bound, which violation or default would have a material adverse effect on
the Company. The Company is not in violation of or default under any law, rule,
regulation, order, writ, injunction, judgment, decree, award or other action of
any court or governmental authority or arbitrators, which violation or default
would have a material adverse effect on the Company. The Company is not
restricted from carrying out its business anywhere in the continental United
States by any agreement or administrative or judicial order, decree or process
in any action or proceeding in which the Company or any of its predecessors is a
party. The Company is not in violation of its Amended Certificate of
Incorporation or By-Laws.
(b) The execution, delivery and performance by the Company of the
Transaction Documents and any of the transactions contemplated hereby or thereby
does not and will not (i) violate or conflict with any provision of (A) the
Amended Certificate of Incorporation or By-Laws of the Company, subject to
obtaining the approval of the existing stockholders of the Company to the
Certificate of Amendment, or (B) any law, rule, regulation or order of any
federal, state, county, municipal or other governmental authority, or any
judgment, writ, injunction, decree, award or other action of any court or
governmental authority or arbitrators), or any or any agreement, indenture or
other instrument applicable to any of the properties or assets of the Company,
(ii) result in the creation of any lien, charge, security interest or
encumbrance upon any of the Company's properties, assets or revenues, (iii)
require the comment, waiver, approval, order or authorization of, or
declaration, registration, qualification or filing with any person or entity
(whether or not a governmental authority and including, without limitation, any
stockholder approval) except for required securities law filings, the filing of
a premerger notification and report form by the Company under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and board of director and stockholder approvals and certain consents
which approvals, consents and waivers have been obtained or (iv) cause
anti-dilution clauses of any outstanding securities to become operative or give
rise to any preemptive or similar rights of purchase which have not been waived
by the holders prior to the date hereof.
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3.5 Authorization of Securities
(a) All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the sale and issuance of the Series D
Preferred Stock and the performance by the Company of its obligations under the
Transaction Documents has been taken or will be taken prior to the Closing. The
Company has or will have prior to the Closing duly reserved an aggregate of up
to the aggregate number of shares set forth on Exhibit A hereto (as amended from
time to time pursuant to the terms of this Agreement) of Common Stock for
issuance upon conversion of the Series D Preferred Stock included in the
Closing.
(b) The Series D Preferred Stock, when issued, sold and delivered in
accordance herewith, will be duly authorized, validly issued and outstanding,
fully paid and non-assessable and will not be subject to any preemptive or other
preferential rights or similar statutory or contractual rights of others arising
pursuant to any statute, rule or regulation or agreement or instrument to which
the Company is a party, except as disclosed in Schedule 3.5 hereto. The issuance
and delivery of shares of Common Stock to be issued pursuant to the exercise of
the Agent's Warrant will have been duly authorized by all requisite corporate
action on the part of the Company, and, when so issued, such shares of Common
Stock will be duly authorized, validly issued and outstanding, fully paid and
non-accessible and will not be subject to any preemptive or other preferential
rights or similar statutory or contractual rights of others arising pursuant to
any statute, rule or regulation or agreement or instrument to which the Company
is a party or otherwise, except as disclosed in Schedule 3.5 hereto.
3.6 Securities Exemptions
Assuming the accuracy of the representations and warranties of the
Purchasers, the Shares will be issued in transactions exempt from registration
under Regulation D under the Securities Act of 1933, as amended (the "Securities
Act"), and will not require registration or qualification or filings under the
Securities Act or any state securities of "Blue Sky" law or any regulation
thereunder, except for such registration or qualification or filings under any
such state securities or "Blue Sky" laws or regulations thereunder which shall
have been obtained or made on or prior to the Closing or which the Company shall
obtain or make within the requisite time period following the Closing.
3.7 Disclosure Materials: Other Information
(a) The audited historical financial statements with respect to fiscal
years ended June 30, 1997 and June 30, 1998 previously furnished by the Company
to the Purchasers are true and correct, in accordance with the books and records
of the Company, fairly present the financial condition of the Company, as of the
respective dates thereof, and the results of operations of the Company for such
periods, and have been prepared in accordance with generally accepted accounting
principles consistently applied ("GAAP"), except that any unaudited statements
may omit footnotes and may be subject to normal year-end adjustments which in
the aggregate are not material. Certain financial projections and other
forward-looking statements, including, without limitation, those contained in
the Confidential Executive Summary delivered to the Purchasers by
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the Agent (the "Executive Summary"), were prepared by the Company in good faith
based upon assumptions which the Company believes to be reasonable in light of
facts known to the Company.
(b) Except as otherwise described in Schedule 3.7 hereto, since March
31, 1999 (i) the business of the Company has been conducted in the ordinary
course, and (ii) there has been no material adverse change in the assets,
properties, liabilities, business, affairs, results of operations, condition
(financial or otherwise) or prospects of the Company. As of the Closing and as
of the date hereof, there are no material liabilities of the Company which would
be required to be provided for in a balance sheet of the Company as of either
such date prepared in accordance with GAAP, other than liabilities provided for
in the financial statements referred to in Section 3.7(a) above and other than
liabilities incurred in the ordinary course of business.
(c) The Company is not aware of any material liabilities, contingent or
otherwise, of the Company that have not been disclosed in the financial
statements (including the footnotes thereto) referred to in Section 3.7(a) above
or other than liabilities incurred in the ordinary course of business.
(d) Nothing has come to the attention of the Company that would cause
it to believe that any information provided by or on behalf of the Company to
the Purchasers, including, without limitation, the information described in
Schedule 3.7(d) attached hereto, contained or contains a false or misleading
statement of a material fact or omits to state any material fact necessary in
order to make the statements made therein not misleading in light of the
circumstances under which they were made; provided that, with respect to
projections and other forward-looking statements, the Company represents only
that such portions of the information provided by or on behalf of the Company to
the Purchasers were prepared by the Company in good faith based upon assumptions
which the Company believes to be reasonable in light of facts known to the
Company.
3.8 Certain Events
Except as disclosed in Schedule 3.8 hereto, since March 31, 1999, to
the best of the Company's knowledge, there has been no material adverse
legislative or regulatory change relating to the Company's business, and the
Company has not to any material extent: (a) borrowed any funds or incurred or
become subject to any obligations or liabilities (absolute or contingent),
except as incurred in the ordinary course of business (in amounts consistent
with prior operations); (b) discharged or satisfied any lien or encumbrance or
paid any obligation or liability (absolute or contingent) other than current
liabilities reflected in or shown on the financial statements previously
furnished by or on behalf of the Company to the Purchasers; (c) declared or paid
any dividends or distributions to its stockholders of any kind whatsoever; (d)
entered into any agreements or arrangements granting any preferential rights to
purchase any of the assets, properties or rights of the Company, or requiring
the consent of any party-to a transfer or assignment of such assets, properties
or rights, or providing for the merger or consolidation of the Company into or
with another corporation or other business entity; (e) except in the ordinary
course of business, made or permitted any amendment or termination of any
material contract,
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agreement or license to which it is a party; (f) changed any accounting methods
or practice, including, without limitation, any change in depreciation or
amortization policies or rates; (g) made any loan to any person or entity,
including, without limitation, to any officer, director or employee of the
Company, or increased the compensation or benefits payable, or to become
payable, to any of the officers, directors or employees of the Company,
including, without limitation, in respect of any bonus payment or deferred
compensation; (h) entered into any transaction other than in the ordinary course
of business; or (i) entered into an agreement to do any of the foregoing
described in clauses (a) through (h) above.
3.9 Contracts, Agreements
Except as disclosed in Schedule 3.9 hereto, the Company is not a party
to any material written or oral (a) contract for employment which may not be
terminated by the Company, as the case may be, on not more than ninety (90)
days' notice without liability to the Company; (b) pension or profit-sharing
plans, retirement plans, bonus plans, stock purchase or stock option plans or
any similar plans, formal or informal, whether covering one or more directors,
officers or present or former employees; (c) contracts involving payment by or
to the Company of more than $100,000 in the aggregate or in any one year or the
performance of which may extend more than ninety (90) days from the date hereof,
or (d) other contracts, agreements or understandings material to the Company.
All such material contracts, agreements and understandings are in full force and
effect except as disclosed in Schedule 3.9 hereto, and the Company or any other
party thereto has not received any notice of default or is in default, and no
condition now exists which, with notice or the lapse of time or both, would
render the Company or, to the knowledge of the Company, any other party, in
default under any material contracts, understandings or agreements to which the
Company is or may be a party. Except as disclosed in Schedule 3.9 hereto, there
are no disputes or proceedings relating to any such material contract,
understanding or agreement and the Company has not received any notice or
indication that any party to any such material contract, understanding or
agreement intends to cancel or terminate such contract, understanding or
agreement or intends to exercise or not exercise any options under such material
contract, understanding or agreement.
3.10 Title to Properties: Leasehold Interests
The Company has good and marketable title to each of the properties and
assets owned by it. The Company does not own any real property. Certain real
property used by the Company in the conduct of its business is held under lease,
and the Company is not aware of any pending or threatened claim or action by any
lessor of any such property to terminate or materially alter any such lease.
Except as set forth on Schedule 3.10, none of the properties owned or leased by
the Company is subject to any security interest, mortgage, lien, encumbrance or
charge which could reasonably be expected to materially and adversely affect the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company. Each lease or
agreement to which the Company is a party and pursuant to which the Company
holds properties and assets is a valid and subsisting agreement without any
material default of the Company thereunder and, to the best of the Company's
knowledge, without any material default thereunder of any other party thereto.
No event has occurred and is continuing which, with due notice or lapse of time
or both, would constitute a default or event of default by
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the Company under any such lease or, to the best of the Company's knowledge, by
any party thereto, except for such defaults that would not individually or in
the aggregate have a material adverse effect on the Company. The Company's
possession of such property has not been disturbed and, to the best of the
Company's knowledge, no claim adverse to its rights in such leasehold interests
has been asserted against it.
3.11 Litigation
Except as disclosed in Schedule 3.11 hereto, there is no action, suit,
proceeding, investigation or claim pending against the Company or, to the
knowledge of the Company, threatened against the Company in law, equity or
otherwise before any federal, state, municipal or local court, administrative
agency, commission, board, bureau, instrumentality or arbitrator which (i)
questions the validity of any of the Transaction Documents or any action taken
or to be taken pursuant hereto or thereto, (ii) might reasonably be expected to
adversely affect the right, title or interest of any Purchaser to the Shares, or
(iii) might reasonably be expected to result in a material adverse change in the
assets, properties, liabilities, business, affairs, results of operations,
condition (financial or otherwise) or prospects of the Company. Except as
disclosed in Schedule 3.11 hereto, there is no action or suit by the Company
currently pending or that the Company intends to initiate against others.
3.12 Licenses, Permits and Approvals
The Company owns or possesses and holds free from restrictions or
conflicts with the rights of others all franchises, licenses, permits, consents,
approvals and other authority (governmental or otherwise), and all rights and
privileges with respect to the foregoing, as are necessary for the conduct of
its business as it is now being conducted, and as proposed to be conducted,
except where the failure to own or possess and hold such franchises, licenses,
permits, consents, approvals and other authority (governmental or otherwise)
would not have a material adverse effect upon the Company. The Company is not in
default in any material respects under any of such franchises, licenses,
permits, consents, approvals or other authority.
3.13 Taxes
Except as disclosed in Schedule 3.13 hereto, (a) the Company has filed
all federal, state, and local and other tax returns and reports, and any other
material returns and reports with any governmental authorities (federal, state
or local), required to be filed by it, (b) the Company has paid or caused to be
paid all taxes (including interest and penalties) that are due and payable,
except those which are being contested by it in good faith by appropriate
proceedings and in respect of which adequate reserves are being maintained on
its books in accordance with generally accepted accounting principles
consistently applied, and (c) the Company does not have any material liabilities
for taxes other than those incurred in the ordinary course of business and in
respect of which adequate reserves are being maintained by it in accordance with
generally accepted accounting principles consistently applied. Federal and state
income tax returns for the Company have not been audited by the Internal Revenue
Service or state authorities. No deficiency assessment with respect to, or
proposed adjustment of, the Company's federal, state, local or other tax returns
is pending or, to the best of the Company's knowledge, threatened.
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There is no tax lien, whether imposed by any federal, state, local or other tax
authority outstanding against the assets, properties or business of the Company.
There are no applicable taxes, fees or other governmental charges payable by the
Company in connection with the execution and delivery of this Agreement, except
for governmental fees paid in connection with state and federal securities law
filings.
3.14 Employees; ERISA
The Company has no knowledge of any pending or threatened work
stoppage, or union organizing effort involving the employees of the Company. The
Company has no knowledge as to any intention of any key employee or any group of
employees to leave the employ of the Company. Other than as disclosed in
Schedule 3.14 hereto, the Company has not established, sponsored, maintained,
made any contributions to or been obligated by law to establish, maintain,
sponsor or make any contributions to any "employee pension benefit plan" or
"employee welfare benefit plan" (as such terms are defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), including,
without limitation, any "multi-employer plan". Any such plans have been
established and are being operated in compliance with ERISA, and there exist no
unfunded obligations of the Company with respect to any such plan, except as
could not reasonably be expected to have a material adverse effect on the
Company. The Company has complied with all applicable laws relating to the
employment of labor, including provisions relating to wages, hours, equal
opportunity, collective bargaining and the payment of Social Security and other
taxes, and with ERISA except to the extent that noncompliance would not
reasonably be expected to have a material adverse effect on the Company, and the
Company is not aware of any pending or threatened claim against the Company with
respect to the foregoing.
3.15 Disaster
Neither the business nor the properties of the Company are currently
affected (or has been affected at any time since December 31, 1998) by any fire,
explosion, accident, strike, lockout or other dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), of a kind which (individually or in the
aggregate) has materially adversely affected, or could reasonably be expected to
materially adversely affect, the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company.
3.16 Books and Records
The books and records of the Company, including, without limitation,
all stock ledgers and minute books containing minutes of Board of Directors and
stockholders meetings, are complete and correct in all material respects. No
action has been taken which requires the approval of the Board of Directors or
the stockholders of the Company which has not been so approved and is not
accurately reflected in the Company's minute books.
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3.17 Material Changes
Except as disclosed in Schedule 3.17 hereto and except to the extent
described in this Agreement or as disclosed in the Exhibits and the Schedules
hereto, since March 31, 1999, there have been no material changes in the
employment of personnel or in the condition (financial or otherwise), operations
or prospects of the Company, except changes occurring in the ordinary course of
business which have not had (and are not reasonably anticipated to have) a
material adverse effect on the Company.
3.18 Registration Rights
Except as contemplated in the Registration Rights Agreement dated as of
November 13, 1996, as amended (and amended as of the date hereof) (the
"Registration Rights Agreement"), or pursuant to the terms of warrants to
purchase up to 280,000 shares of Common Stock previously issued by the Company
to TA Operating Corporation, or as disclosed in Schedule 3.18 hereto, no person,
other than the Purchasers and the Agent, as holder of the Agent's Warrant, has
the right to cause the Company to effect the registration under the Securities
Act of any shares of capital stock or any other securities (including debt
securities) of the Company.
3.19 Indebtedness
Schedule 3.19 hereto sets forth (i) the amount of all indebtedness of
the Company outstanding as of the Closing (excluding indebtedness in individual
amounts of less than $25,000, but not exceeding an aggregate excluded amount of
$100,000), (ii) any lien, charge, security interest or encumbrance with respect
to such indebtedness and (iii) a brief description of each instrument or
agreement governing such indebtedness. The Company has provided counsel to the
Purchasers a complete and correct copy of each such instrument or agreement
(including all amendments, supplements or modifications thereto). No default
exists with respect to or under any such indebtedness or any instrument or
agreement relating thereto which default would reasonably be expected to have a
material adverse effect on the Company.
3.20 Insurance
The Company holds valid policies with reputable insurers covering
insurance in the amounts and type that the Company reasonably believes is
appropriate and customary for entities in the same or similar businesses to that
of the Company or that are otherwise required to be maintained by it and with
such deductibles or coinsurance as is customary, and such policies are in full
force and effect. Schedule 3.20 lists all insurance policies presently in effect
for which the Company is a named beneficiary. The Company has timely filed
claims with its insurers with respect to all material matters and occurrences
for which it believes it has coverage.
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3.21 Brokers
Except for the Agent, the Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
3.22 Proprietary Rights
(a) The Company owns or possesses, or has adequate and enforceable
licenses or other rights to use and license for all purposes, all proprietary
rights necessary for its business (as now conducted and as proposed to be
conducted) without any conflict with or infringement of the rights of others.
Schedule 3.22 attached hereto contains an accurate and complete list of all
proprietary rights which the Company owns or is licensed or authorized to use by
others. The Company has the rights to use and/or own and/or develop and license
the proprietary rights as such rights are set forth on such Schedule 3.22, and,
except as set forth on such Schedule 3.22, (i) no other person has been granted,
by the Company or otherwise, any rights, or has any interest, in such
proprietary rights and (ii) to the knowledge of the Company, with respect to any
proprietary rights which have been assigned to the Company, the assigning party
is fully authorized to assign such rights to the Company without thereby
creating an obligation of the Company to any person. All proprietary rights held
by the Company under licenses have been duly licensed to the Company, and,
except as set forth in such Schedule 3.22, the Company has rights to its
proprietary rights free and clear of any liens or other encumbrances. No claim
has been asserted or, to the knowledge of the Company, threatened, by any Person
regarding the use or licensing of any of the Company's proprietary rights by the
Company or challenging or questioning the validity, enforceability or
effectiveness of any licenses or agreements (including, without limitation,
assignments) relating to proprietary rights or asserting any rights in such
proprietary rights. The use of its proprietary rights by the Company does not
violate or infringe, and has not in the past violated or infringed, the rights
of any person. No claims have been asserted by the Company against any other
person claiming infringement of the Company's proprietary rights. The Company
has not granted any licenses to the Company's proprietary rights (other than
those granted as a result of the sales of any proprietary product of the Company
in the ordinary course of business), and is not aware of the third parties who
are infringing or violating any of such proprietary rights. Neither the Company
nor, to the knowledge of the Company, any other person is in default under any
license or other agreement relating to the Company's proprietary rights
(including without limitation, assignments), and all such licenses and
agreements are valid, enforceable and in full force and effect.
(b) Except as set forth on Schedule 3.22 attached hereto, the Company
has not granted rights to manufacture, produce, assemble, license, market, or
sell its products to any other person and is not bound by any agreement that
affects the Company's exclusive right to develop, manufacture, assemble,
distribute, market, or sell its products. No supplier of components to the
Company is a sole source of such components, except for those components that
can be obtained from another supplier at substantially the same cost and
quantities in a similar time frame.
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3.23 Related Party Transactions
(a) Except as disclosed in Schedule 3.23 hereto, no holder of the
Company's Common Stock, Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock (an "Existing Investor"), employee, officer or director
of the Company, no affiliate of any Existing Investor, employee, officer or
director of the Company, and no member of the immediate family of any Existing
Investor, employee, officer or director of the Company (any of the foregoing, a
"Related Party") is indebted to the Company.
(b) The Company is not indebted and is not committed to make loans or
extend or guarantee credit, to any Related Party.
(c) No Related Party is interested, directly or indirectly, in any
contract with the company except by reason of their ownership interest in the
Company and/or their membership on the company's Board of Directors.
(d) No Existing Investor or party to this Agreement is presently,
directly or indirectly through such party's affiliation with any other person, a
party to any transaction with the Company providing for the furnishing of
services by, or rental of real or personal property from, or otherwise requiring
cash payments to, any such person pursuant to an agreement that is material.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser hereby severally represents and warrants to the Company
as follows as of the date hereof and as of the Closing:
4.1 Purchaser Authority; Accredited Investor Status
(a) The Purchaser has all requisite power, authority and legal right to
execute, deliver, enter into, consummate and perform this Agreement. The
execution, delivery and performance of this Agreement by the Purchaser have been
duly authorized by all required corporate, partnership or other actions on the
part of the Purchaser. The Purchaser has duly executed and delivered this
Agreement, and this Agreement constitutes the legal, valid and binding
obligation of the Purchaser enforceable against the Purchaser in accordance with
its terms.
(b) The Purchaser hereby represents to the Company that it has
substantial knowledge, skill and experience in making investment decisions of
this type, it is capable of evaluating the risk of its investment in the Shares
being purchased by it and is able to bear the economic risk of such investment,
including the risk of losing the entire investment, that (except as the
Purchaser has otherwise advised the Company and the Purchaser's counsel in
writing) it is purchasing the Shares to be purchased by it for its own account,
and that the Shares are being purchased by it for investment and not with a
present view to any distribution thereof in violation of applicable securities
laws. It is understood that the disposition of the Purchaser's property shall at
all times be within the Purchaser's control. If the Purchaser should in the
future decide to dispose of any of its Shares, it is understood that it may do
so only in compliance with the
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Securities Act, applicable state securities laws and this Agreement. The
Purchaser represents that it is an "accredited investor" as defined in Rule
501(a) under the Securities Act.
(c) The Purchaser has received unaudited financial statements for the
nine month period ending March 31, 1999 and has had an opportunity to discuss
the Company's business, management and financial affairs with the Company's
management.
(d) The Purchaser understands that (i) the Shares have not been
registered under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act pursuant to
Section 4(2) and Rule 506 promulgated under the Securities Act, (ii) the Shares
must be held indefinitely unless a subsequent disposition thereof is registered
under the Securities Act and any applicable state securities laws or is exempt
from such registration or registrations (and evidence satisfactory to the
Company is provided by such Purchaser of the availability of such exemptions,
including the delivery, upon request, to the Company of an opinion of counsel to
such Purchaser, which opinion and counsel are satisfactory to the Company), and
(iii) the Shares will bear a legend to such effect.
(e) The Purchaser represents that at no time was the Purchaser
presented with or solicited by or through any leaflet, public promotional
meeting, advertisement or any other form of general or public advertising or
solicitation. In addition, the Purchaser acknowledges that there has never been
any representation, guaranty or warranty made by the Company or any agent or
representative of the Company as to the amount of or type of consideration or
profit, if any, to be realized as a result of any investment by the Purchaser in
the Series D Preferred Stock or the Common Stock issuable upon conversion of the
Series D Preferred Stock.
(f) The Purchaser is a bona fide resident and domiciliary of, or legal
entity of, the state of address as set forth on Exhibit A hereto.
4.2 Reliance on Representations and Warranties by the Company and the
Agent
Each Purchaser hereby acknowledges that the Company and the Agent are
relying on the foregoing representations and warranties in connection with the
sale to such Purchaser of the Shares, and thereby agrees to indemnify and hold
harmless the Company and the Agent and their respective officers, directors,
control persons, agents, partners and affiliates harmless from and against any
and all liabilities, losses, claims, costs, damages, judgments, settlements and
expenses (including reasonable attorneys' fees and all expenses reasonably
incurred in investigating, preparing or defending against any litigation
commenced or threatened or any claim whatsoever) suffered or incurred by any of
them as a result of the breach by such Purchaser of any of such representation
and warranty. In no event, however, shall the liability of any Purchaser for
indemnification under this Section 4.2 exceed the purchase price paid by the
Purchaser to the Company in connection with such Purchaser's purchase of the
Shares.
SECTION 5. COVENANTS OF THE COMPANY
The Company covenants and agrees, so long as 20% or more of the Shares
issued hereunder are held of record by the Purchasers and have not been
converted into shares of the
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Common Stock, unless some other period is expressly provided in any subsections
of this Section 5, in which case such specific period will govern, as follows:
5.1 Financial Information
The Company will maintain a system of accounting established and
administered in accordance with sound business practices to permit preparation
of financial statements in accordance with generally accepted accounting
principles consistently applied. The Company will deliver the following to each
Purchaser thereof:
(i) as soon as practicable but in any event within 120 days after the
close of each fiscal year of the Company, (A) a balance sheet of the Company as
of the end of such fiscal year and (B) statements of operations and cash flows
of the Company for such fiscal year, in each case setting forth in comparative
form the corresponding financial information for the immediately preceding
fiscal year, all such balance sheets and statements to be audited by an
independent public accounting firm of recognized national standing selected by
the Company, and such statements shall be accompanied by management's discussion
and analysis of the differences between the results for such fiscal year and the
corresponding financial information for the preceding fiscal year and between
the budgeted amounts (as supplied pursuant to paragraph (ii) below) and the
results for such year and a narrative discussion of the Company's liquidity and
capital resources as of the end of such year conforming in all material respects
to the requirements contained in Item 303 of Regulation S-K under the Securities
Act. All financial statements provided under this Section 5.2(i) shall be
prepared in accordance with GAAP, consistently applied, and shall be certified
as to accuracy and completeness by the Chief Financial Officer or the Chief
Executive Officer of the Company.
(ii) as soon as reasonably practicable, and in any event within 60 days
after the close of each of the Company's first three (3) fiscal quarters, (A) an
unaudited balance sheet of the Company as of the end of such fiscal quarter and
(B) unaudited statements of operations and cash flows of the Company for the
quarter just ended and for the portion of the fiscal year ended with the end of
such quarter, in each case in reasonable detail, certified as to accuracy and
completeness by the Chief Financial Officer or the Chief Executive Officer of
the Company and setting forth in comparative form the corresponding amounts for
the comparable period one year prior thereto (subject to normal year-end
adjustments), together with a management's discussion and analysis of
differences between such results and the corresponding financial information for
the prior period; and
(iii) as soon as reasonably practicable, such other information as may
reasonably be requested by a holder of Shares (unless reasonably objected to by
the Company), regarding the assets, properties, liabilities, business, affairs,
results of operations or conditions (financial or otherwise) of the Company. As
a condition to receiving such information from the Company, each holder (other
than any parties that are (i) agencies, instrumentalities or entities affiliated
with any state government or (ii) a government sponsored retirement system) of
Shares requesting such information shall, if requested by the Company, execute
an appropriate confidentiality agreement.
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The obligation of the Company to furnish such financial information
shall terminate when the Company becomes subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended.
5.2 Notice of Events of Default: Litigation
Promptly, but in any event within ten (10) days after notice thereof is
received by the Company, the Company will deliver to each holder of Shares any
notice of (i) a default by the Company in the observance or performance of any
material contract or agreement to which the Company is a party, including,
without limitation, any Transaction Document, and (ii) the commencement of any
investigation, action or proceeding at law or in equity or before any federal or
state court or governmental agency to which the Company is a party an adverse
result of which would, either individually or in the aggregate, reasonably be
expected to have a material adverse effect on the business or financial
condition of the Company.
5.3 Access to Information
At the request of holders of 20% or more of the outstanding Shares, the
Company will permit such Purchasers and any authorized representative of such
Purchasers, subject to (if requested by the Company) execution by such
Purchasers of a reasonable confidentiality agreement, full and complete access
at the Company during normal business hours and in a manner that will not
unreasonably interfere with the conduct of the Company's business, to the
properties and books and records of the Company. The Purchasers requesting such
access shall bear all costs and expenses they or their representatives incur in
connection with such request and such access.
5.4 Maintenance of Existence, Properties and Franchises; Compliance
with Law; Taxes; Insurance
The Company will:
(a) maintain its corporate existence, rights and other franchises in
full force and effect; provided, that the Company may terminate or permit the
termination or abandonment of rights or other franchises, if in the opinion of
the Company it is no longer in the Company's best interests to maintain such
rights or other franchises and such termination or abandonment will not be
prejudicial in any material respect to the holders of the Shares;
(b) maintain its tangible assets in good repair, working order and
condition, ordinary wear and tear excepted, so far as necessary to the proper
carrying on of its business;
(c) comply with each provision of all leases to which it occupies real
or personal property if the breach of such provision would reasonably be
expected to have a material adverse effect on the condition, financial or
otherwise, or operations of the Company;
(d) comply with all applicable laws and with all applicable orders,
rules, rulings, certificates, licenses, regulations, demands, judgments, writs,
injunctions and decrees, the violation of which would reasonably be expected to
have a material adverse effect on the
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Company, provided, that such compliance shall not be necessary so long as the
applicability or validity of any such law, order, rule, ruling, certificate,
license, regulation, demand, judgment, writ, injunction or decree shall be
contested in good faith by appropriate proceedings;
(e) pay when due all taxes, fees, assessments and other government
charges imposed upon its properties, assets or income and all claims or
indebtedness (including, without limitation, materialmen's, vendor's, workmen's
and like claims) prior to such claims becoming a lien upon such properties or
assets; provided, that payment of any such tax, fee, assessment, charge, claim
or indebtedness shall not be necessary so long as (i) the applicability or
validity thereof shall be contested in good faith by appropriate proceedings and
a reserve, if appropriate, shall have been established with respect thereto and
(ii) failure to make such payment will not have a material adverse effect on the
business or financial condition of the Company; and
(f) keep adequately insured all of its respective properties of a
character customarily insured by entities in the same or similar business as
that of the Company, against loss or damage of the kinds and in amounts
customarily insured against by such entities and with such deductibles or
coinsurance as is customary.
5.5 No Change in Business.
The Company will not, without the prior written consent of the holders
owning a majority in interest of the Shares, engage in any business other than
the provision of certain advertising, entertainment, Internet access, and
communication services to long-haul professional truck drivers, truckstop
operators, fleets and constituent groups as described in the Executive Summary
or reasonable extensions or expansions thereof.
5.6 Restrictive Agreements Prohibited
The Company shall not become a party to any agreement which by its
terms restricts the Company's ability to comply with and perform its obligations
under the Transaction Documents and the Series D Certificate of Designation and
the By-Laws of the Company.
5.7 No Dividends: No Redemption
Subject to the provisions of the Transaction Documents, the Company's
Series D Certificate of Designation and the Company's existing debt instruments,
the Company will not (i) declare or make or permit to be declared or make any
payment of cash dividends on the Common Stock unless equal cash dividends are
declared and paid on the Series D Preferred Stock on the same date or (ii)
redeem or repurchase outstanding shares of Common Stock.
5.8 Consolidation, Merger and Sale
Without the consent of the holders of a majority of the outstanding
Shares, the Company will not do any of the following (or agree to do any of the
following): (a) wind up, liquidate or dissolve its affairs; (b) sell, lease,
transfer or otherwise dispose of 20% or more of its assets to any other person
other than in the ordinary course of business unless the proceeds of such
disposition are reinvested in assets of the general type used in the business of
the Company; (c)
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consolidate with, merge into or enter into a share exchange with any other
person; or (d) permit any other person (other than a wholly-owned subsidiary on
the date hereof) to merge into or sell, lease or transfer all or substantially
all of its property, assets or capital stock to the Company, unless:
(i) the surviving entity is an entity incorporated under the
laws of a State of the United States of America;
(ii) immediately after such purchase, merger or transfer, no
default with respect to any material contracts, understandings or agreements to
which the Company is or may be a party shall have occurred and be continuing;
(iii) the consolidated net worth of the surviving entity shall
be equal to or greater than the net worth of the Company immediately preceding
such purchase, merger or consolidation; and
(iv) either:
(A) the merger or consolidation is between two or
more wholly owned subsidiaries of the Company or between the
Company and one or more wholly-owned subsidiaries of the
Company; or
(B) following the merger or consolidation, the
stockholders immediately prior to the transaction hold as a
group the right to cast at least 20% of the votes of all
holders of voting securities of the resulting or surviving
entity.
5.9 Transactions with Affiliates
The Company will not, directly or indirectly, enter into any
transaction, series of transactions or agreement (including, without limitation,
the purchase, sale, distribution, lease or exchange of any property or the
rendering of any service) with any affiliate of the Company, other than a
wholly-owned subsidiary of the Company, unless such transaction, series of
transactions or agreement involves less than $100,000 per calendar year
individually or less than $500,000 per year in the aggregate and is on terms
that are no less favorable to the Company, as the case may be, than those which
might be obtained at the time of such transaction from a person who is not such
an affiliate; provided, however, that this Section 5.9 shall not limit, or be
applicable to, (i) contractual commitments of the Company that were entered into
prior to the date hereof, (ii) employment arrangements with any individual who
is an employee of the Company if such arrangements are approved by the Board of
Directors of the Company; (iii) the payment of reasonable and customary regular
fees to directors who are not employees of the Company and (iv) options
previously issued to present and former employees of the Company.
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5.10 Superior Classes or Series of Capital Stock: Amendment of Series D
Certificate of Designation, Certificate of Incorporation or
By-Laws
Without the consent of the holders of at least 60% of the then
outstanding Shares, the Company shall not (i) authorize, create, issue or sell
any class or series of equity security (other than Series A, Series B or Series
C Preferred Stock) having rights that are senior to, or pari passu with, the
Series D Preferred Stock except as authorized in the Series D Certificate of
Designation, or (ii) amend, waive or repeal any provisions of, or add any
provision to, the Series D Certificate of Designation, the Certificate of
Incorporation or any other certificate of designation filed with the Secretary
of State of Delaware by the Company with respect to its preferred stock, and/or
By-Laws of the Company.
5.11 No Dilution or Impairment: No Changes in Capital Stock
The Company will not, without the prior consent of holders owning a
majority of the outstanding Shares, by amendment of its Series D Certificate of
Designation or through any consolidation, merger, reorganization, transfer of
assets, dissolution, issuance or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
of the Transaction Documents or impair or reduce the rights of the holders of
the Shares as a class. The Company will at all times in good faith assist in the
carrying out of all such terms, and in the taking of all such action, as may be
necessary or appropriate in order to protect the rights of the holders of Shares
as such rights are set forth in the Transaction Documents and the Company's
Series D Certificate of Designation, against impairment. Without limiting the
generality of the foregoing, the Company: (a) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of the Company's Common Stock free
from all taxes, liens and charges with respect to the issue thereof, upon the
conversion of the Shares, from time to time, (b) will not take any action which
results in any adjustment of the basis of conversion of the shares described in
the Company's Series D Certificate of Designation if the total number of shares
of the Company's Common Stock issuable upon the conversion of all of the then
outstanding Shares would exceed the total number of shares of the Company's
Common Stock then designated under the Company's Series D Certificate of
Designation and authorized for the purpose of issuance upon such conversion, (c)
will not have any authorized Common Stock other than its existing authorized
class of Common Stock, (d) will not amend its Certificate of Incorporation to
change any terms of its Common Stock, (e) will not amend its Series D
Certificate of Designation in any manner to alter or change the powers,
privileges or preferences of the holders of the Series D Preferred Stock
(including without limitation amendments to its Series D Certificate of
Designation after any Shares have been called for redemption), (f) will not
create or authorize any obligation or security convertible into shares of Series
D Preferred Stock or into shares of any other class or series of stock unless
the same ranks pari passu to the Series D Preferred Stock as to the payment of
dividends and the distribution of assets on the liquidation, dissolution or
winding up of the Company, whether any such creation, authorization or increase
shall be by means of amendment to the Series D Certificate of Designation or by
merger, consolidation or otherwise and (g) after the date hereof, (i) will not
increase the number of shares of Common Stock covered under its Stock Option
Plan or any other option plan, and (ii) will not create or establish (or make
any grants or awards under) any stock, phantom stock, stock appreciation
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rights or other equity equivalent plan for employees, officers, directors,
agents or consultants of the Company whereby the Company agrees to pay any
person a percentage of, or an amount otherwise determined by reference to, the
earnings of the Company, the value of their stock or the proceeds from a sale of
their stock or upon their liquidation. Any of the foregoing may be amended or
waived with the consent of a majority in interest of the outstanding Shares.
5.12 Reservation of Shares
There have been reserved, and the Company shall at all times keep
reserved, free from preemptive rights, out of its authorized Common Stock, a
number of shares of Common Stock sufficient to provide for the exercise of (i)
the conversion rights of the Shares provided in the Company's Series D
Certificate of Designation and (ii) the Agent's Warrant. If at any time the
number of authorized but unissued shares of Common Stock of the Company shall
not be sufficient to effect the conversion of the Shares and the exercise of the
Agent's Warrant or otherwise to comply with the terms of this Agreement, the
Company will forthwith take such corporate and stockholder action as may be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose. The Company will
obtain any authorization, consent, approval or other action by or make any
filing with any court or administrative body that may be required under
applicable federal or state securities laws in connection with the issuance of
shares of Common Stock upon conversion of the Shares or exercise of the Agent's
Warrant.
5.13 Private Placement Status
Neither the Company nor any agent nor other person acting on the
Company's behalf will do or cause to be done (or will omit to do or to cause to
be done) any act which act (or which omission) would result in bringing the
issuance or sale of the Shares, and the issuance of Common Stock upon conversion
of the Shares, within the provisions of Section 5 of the Securities Act or the
filing, notification or reporting requirements of any state securities law,
except for filings, notices or reports pursuant to state securities laws which
have already been made or which are contemplated in connection with the private
offering and sale of the Shares.
5.14 Regulation D Filing
The Company will file on a timely basis a Form D "Notice of Sale of
Securities Pursuant to Regulation D" and any amendments thereto required to be
filed with the Securities and Exchange Commission pursuant to Regulation D under
the Securities Act, and all notices, filings and registrations, and amendments
to any thereof as shall be required under any state securities or "Blue Sky" law
or any regulation thereunder, and will simultaneously furnish copies of such
Form D or amendment thereto and each such notice, filing registration or
amendment thereof to the Agent and to the Purchasers.
5.15 Access to Information and Documents.
Prior to the Closing, the Company shall give the Purchasers and their
respective counsel, accountants, and other representatives, reasonable access,
during normal business hours and upon
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reasonable notice, to all the properties, documents, contracts, records and
appropriate personnel of the Company. Prior to the Closing, the Company shall
furnish the Purchasers with copies of such documents and with such information
with respect to the affairs of the Company as the Purchasers may from time to
time reasonably request.
5.16 Further Assurances
Subject to the terms and conditions of this Agreement, the parties
hereto shall use best efforts to take, or cause to be taken, all action, and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws-and regulations to consummate and make effective the sale of the
Series D Preferred Stock pursuant to this Agreement.
5.17 Fees
The Company and each of the Purchasers shall bear their own legal and
other expenses with respect to this transaction, except that upon the Closing,
the Company shall pay (i) the fees, expenses and disbursements of Xxxxxxxx &
Xxxxx, counsel to the Purchasers, (ii) the Agent's expenses and cash commission,
as provided in the engagement letter dated May 12, 1999, between the Company and
the Agent (the "Engagement Letter"), and (iii) the fees payable for the filing
of the premerger notification and report form pursuant to the HSR Act, if
necessary.
5.18 Notices
The Company will give to all holders of Shares copies of all notices
given by the Company to holders of its Common Stock concurrently with the giving
of such notices to the holders of Common Stock.
5.19 Redemption Obligations
The Company acknowledges its obligation to redeem for cash all of the
Shares on the date six (6) months immediately after the payment in full and the
satisfaction of all of the obligations of the Company to the lenders who
provided financing to the Company in the aggregate principal amount of
Seventy-five Million Dollars ($75,000,000) in accordance with the terms of the
Company's Series D Certificate of Designation. If, the Company has insufficient
capital resources to redeem all such Shares, the Company covenants to use its
reasonable best efforts to obtain the funds necessary to effect such redemption
in full as soon as practicable, including engaging a nationally-known investment
banking or financial advisory firm reasonably acceptable to the holders of the
Shares to assist the Board of Directors and management in either (i) a
recapitalization of the Company or (ii) the sale of all or a portion of the
Company's assets, in order to generate sufficient funds to fully redeem such
Shares.
SECTION 6. CONDITIONS TO PURCHASERS' OBLIGATIONS
The Purchasers' obligation to purchase Shares hereunder is subject to
satisfaction of the following conditions (any of which may be waived by the
Purchasers) as of the Closing:
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6.1 Series D Certificate of Designation; Certificate of Amendment and
Related Certificates of Designation.
(a) The Company's Series D Certificate of Designation, in form and
substance reasonably satisfactory to counsel to the Purchasers, shall have been
filed with the Delaware Secretary of State in substantially the form attached
hereto as Exhibit B and shall be in effect for the Company on and as of the date
of such Closing and the Purchasers shall have received evidence thereof
satisfactory to counsel to the Purchasers, and the Amendment to the Company's
Certificate of Incorporation to provide for an increased number of authorized
shares of the Company's capital stock shall have been duly approved in
accordance with Delaware law.
(b) The Company shall have: (i) obtained the approval of the Company's
existing stockholders to and filed with the Delaware Secretary of State the
Certificate of Amendment, the Certificate of Amendment to the Certificate of
Designation relating to the Series A Preferred Stock, the Certificate of
Amendment to the Certificate of Designation relating to the Series B Preferred
Stock, and the Certificate of Amendment to the Certificate of Designation
relating to the Series C Preferred Stock, and (ii) obtained all necessary
waivers and consents of stockholders of, and lenders to, the Company under other
agreements.
6.2 Accuracy of Representations and Warranties.
The representations and warranties of the Company in this Agreement or
in any certificate or document delivered pursuant hereto or thereto shall be
true and correct in all material respects on and as of the Closing with the same
effect as though made on and as of the Closing (after giving effect to
transactions contemplated by this Agreement).
6.3 Compliance with Agreements; Amendments to Registration Rights
Agreement, Securities Restriction Agreement, and Securityholders'
Agreement
(a) The Company shall have performed under, obtained all necessary
consents and/or waivers with respect to and complied with all agreements,
covenants and conditions contained in the Transaction Documents and any other
document contemplated hereby or thereby which are required to be performed or
complied with by the Company on or before the Closing.
(b) The Company and the requisite parties to each of the Registration
Rights Agreement, the Securityholders' Agreement and the Securities Restriction
Agreement each shall have entered into amendments to such agreements in form and
substance reasonably satisfactory to the Purchasers and their counsel.
6.4 Officers' Certificates
The Purchasers shall have received a certificate dated the Closing Date
and signed by the Chief Executive Officer and by the Chief Financial Officer of
the Company, to the effect that the conditions of this Section 6 have been
satisfied.
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6.5 Material Adverse Change
Except as disclosed in this Agreement or in any Schedule or Exhibit
hereto, there shall have been no material adverse change in the business or
financial condition or results of operations of the Company since March 31,
1999.
6.6 Proceedings
All corporate and other proceedings in connection with the transactions
contemplated by the Transaction Documents (including the issuance of the Agent's
Warrant), and all documents incident thereto, shall be in form and substance
reasonably satisfactory to the Purchasers and the Purchasers shall have received
all such originals or certified or other copies of such documents as the
Purchasers or their counsel may reasonably request.
6.7 Legality; Governmental and Other Authorization
The purchase of and payment for the Shares shall not be prohibited by
any law or governmental order, rule, ruling, regulation, release, interpretation
or opinion applicable to the Purchasers and shall not subject the Purchasers to
any penalty, tax, liability or other onerous condition. Any necessary consents,
approvals, licenses, permits, orders and authorizations of, and any filings,
registrations or qualifications with, any governmental or administrative agency
or other person with respect to the transactions contemplated by this Agreement,
including, without limitation, any such filings or approvals as may be required
pursuant to the HSR Act, shall have been obtained or made and shall be in full
force and effect. The Company shall have delivered to the Purchasers upon their
reasonable request factual certificates or other evidence, in form and substance
reasonably satisfactory to the Purchasers and their counsel, setting forth what
is required to enable the Purchasers to establish compliance with this
condition.
6.8 No Change in Law, etc.
No legislation, order, rule, ruling or regulation shall have been
proposed, enacted or made by or on behalf of any governmental body, department
(including, but not limited to, the U.S. Department of Transportation) or
agency, and no legislation shall have been introduced in either House of
Congress, and no investigation by any governmental authority shall have been
commenced or threatened, and no action, suit or proceeding shall have been
commenced before, and no decision shall have been rendered by, any court, other
governmental body or arbitrator, which, in any such case, in the reasonable
judgment of the Purchasers or their counsel could adversely affect, restrain,
prevent or change the transactions contemplated by this Agreement (including
without limitation the issuance of the Shares hereunder and thereunder) or
materially and adversely affect the assets, properties, liabilities, business,
affairs, results of operations, condition (financial or otherwise) or prospects
of the Company.
6.9 Opinion of Counsel
The Purchasers shall have received an opinion of Xxxxxxxxxx Xxxxxxxx
LLP, counsel for the Company, dated the Closing Date and addressed to the
Purchasers, which opinion shall be in form and substance reasonably satisfactory
to the Purchasers.
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6.10 Payment of Fees and Expenses
The Agent shall have received payment in cash via wire transfer of its
fees, commissions and expenses, as provided in the Engagement Letter.
6.11 Issuance of the Agent's Warrant (s)
The Company shall have issued to the Agent the Agent's Warrant, as
provided in the Engagement Letter.
SECTION 7. CONDITIONS TO COMPANY'S OBLIGATIONS
The Company's obligation to sell and issue the Shares at the Closing
is, at the option of the Company, subject to the fulfillment or waiver of the
following conditions:
7.1 Payment
Simultaneously with the Closing and as described in Section 2(b)
hereof, the Company shall receive payment of $10.50 per share of Series D
Preferred Stock being purchased at the Closing by certified or official bank
check(s) or wire transfers.
7.2 Representations and Warranties Correct
The representations and warranties made by the Purchasers in Section 5
hereof shall be true and correct in all material respects when made, and shall
be true and correct in all material respects on the Closing Date with the same
force and effect as if they had been made on and as of said date.
7.3 Legality.
Any necessary consents, approvals, licenses, permits, orders and
authorizations of, and any filings, registrations or qualifications with, any
governmental or administrative agency or other person with respect to the
transactions contemplated by this Agreement, including, without limitation, any
such filings or approvals as may be required pursuant to the HSR Act, shall have
been obtained or made and shall be in full force and effect.
SECTION 8. BROKERS
Except for certain fees payable to the Agent (all of which fees will be
paid by the Company subject to the terms of the Engagement Letter), the Company
represents and warrants to the Purchasers that there is no liability for (and
the Company will pay and indemnify the Purchasers against) any fees or expenses
(or claims therefor) of any investment banker, finder or broker retained by the
Company or its affiliates (or that claims it was retained by the Company or its
affiliates) in connection with this Agreement or sale of the Series D Preferred
Stock. The Company will indemnify the Purchasers against all such fees or
expenses payable to the enumerated persons in the preceding sentence and against
any other such fees, expenses or claims
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of any person, unless such person was engaged by the Purchasers in connection
with this Agreement or any of the transactions contemplated hereby.
SECTION 9. BREACH OF REPRESENTATIONS, WARRANTIES AND COVENANTS
(a) The representations and warranties (as of the date hereof and as of
the Closing), covenants and agreements of the Company and of the Purchasers
contained in this Agreement or in any document or certificate delivered pursuant
hereto or in connection herewith shall survive, and shall continue in effect
following (i) the execution and delivery of this Agreement, (ii) the Closing
hereunder, (iii) any investigation at any time made by the Purchasers or on
their behalf or by any other person, and (iv) the issuance, sale and delivery of
the Shares, any disposition thereof and any payment, conversion or cancellation
of the Shares except, that Sections 3 and 5 shall terminate upon the earlier of
(i) the consummation of a Qualifying Offering (as defined in the Series D
Certificate of Designation) or (ii) when less than 20% of the Shares remain
outstanding. All statements contained in any certificate delivered to the
Purchasers by or on behalf of the Company pursuant hereto shall constitute
representations and warranties by the Company hereunder.
(b) The Company agrees to indemnify and hold the Purchasers harmless
from and against, and will pay to the Purchasers the full amount of, any loss,
damage, liability or expense (including amounts paid in settlement and
reasonable attorneys' fees and expenses) incurred by the Purchaser resulting
directly or indirectly from any material breach of the representations,
warranties, covenants or agreements of the Company contained in this Agreement
or any certificate delivered to the Purchasers pursuant hereto or in connection
herewith; provided that the Company shall only be required to indemnify the
Purchasers for attorneys' fees of one counsel to the Purchasers and provided,
further, that in no event shall the Company be liable for any amount in excess
of the proceeds received by the Company from the sale of the Shares.
SECTION 10. SPECIFIC PERFORMANCE
The parties (other than any parties that are (i) agencies,
instrumentalities or entities affiliated with any state government or (ii) a
government sponsored retirement system) agree that irreparable damage will
result in the event that this Agreement is not specifically enforced, and the
parties agree that any damages available at law for a breach of this Agreement
would not be an adequate remedy. Therefore, the provisions hereof and the
obligations of the parties hereunder shall be enforceable in a court of equity,
or other tribunal with jurisdiction, by a decree of specific performance, and
appropriate injunctive relief may be applied for and granted in connection
therewith. Such remedies and all other remedies provided for in this Agreement
shall, however, be cumulative and not exclusive and shall be in addition to any
other remedies which a party may have under this Agreement or otherwise.
SECTION 11. EXPENSES
(a) Whether or not the transactions herein contemplated are
consummated, the Company will pay (i) the costs and expenses of the issuance of
the Shares and the furnishing of all opinions by counsel for the Company, (ii)
the fees of Xxxxxxxx & Xxxxx in connection with this
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Agreement and the transactions contemplated hereby (whether or not a closing
occurs hereunder, and if a closing occurs, the Company will make such payment on
the Closing Date), (iii) subject to the Engagement Letter, the fees and
out-of-pocket expenses of the Agent, (iv) the fees and expenses (including
reasonable attorneys' fees and expenses of one counsel for all Purchasers) of
any Purchaser in enforcing its rights against the Company if the Company
materially defaults in its obligations hereunder or under the Series D
Certificate of Designation, and (v) the fees payable for the filing of the
premerger notification and report form pursuant to the HSR Act, if necessary.
(b) The Company agrees to pay, or to cause to be paid, all documentary,
stamp and other similar taxes levied under the laws of the United States of
America or any state or local taxing authority thereof or therein in connection
with the issuance and sale of the Shares and the execution and delivery of this
Agreement and any other documents or instruments contemplated hereby or thereby
and any modification of the Series D Certificate of Designation or this
Agreement or any such other documents or instruments and will hold the
Purchasers harmless without limitation as to time against any and all
liabilities with respect to all such taxes.
(c) The obligations of the Company under this Section 11 shall survive
the Closing hereunder and any termination of this Agreement.
SECTION 12. AMENDMENTS AND WAIVERS
(a) The terms and provisions of this Agreement may be amended, waived,
modified or terminated only with the written consent of the holders of a
majority of the outstanding Shares; provided, however, that, notwithstanding any
other term or condition of this Agreement to the contrary, the Company may,
prior to the Closing, amend Exhibit A to reflect the names and addresses of the
Purchasers of up to an aggregate of 3,000,000 Shares as parties to this
Agreement, but (i) the Company will not amend any reference to a particular
Purchaser or the number of shares to be purchased by such Purchaser without such
Purchaser's prior written consent, and (ii) the Company will, prior to the
Closing, notify all Purchasers of any amendment to Exhibit A. Each Purchaser
acknowledges that by operation hereof, the holders of a majority of the
outstanding Shares (which may not include such Purchaser) will have the right
and power to diminish or eliminate certain rights of such Purchaser under this
Agreement.
(b) The Company agrees that it will make reasonable efforts to notify
all holders of Shares in advance of any proposed amendment, waiver, modification
or termination, but failure to give such notice shall not in any way affect the
validity of any such amendment, waiver, modification or termination. In
addition, promptly after obtaining the written consent of the holders as herein
provided, the Company shall transmit a copy of any amendment, waiver,
modification or termination which has been adopted to all holders of Shares then
outstanding, but failure to transmit copies shall not in any way affect the
validity of any such amendment, waiver, modification or termination.
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SECTION 13. EXCHANGE OF SHARES; CANCELLATION OF SURRENDERED SHARES; REPLACEMENT
(a) At any time at the request of any holder of Shares to the Company
at its address provided under Section 14 hereof, the Company at its expense
(except for any transfer tax arising out of the exchange) will issue and deliver
to or upon the order of the holder in exchange therefor a new certificate or
certificates therefor in such amount or amounts as such holder may request in
the aggregate representing the number of Shares represented by such surrendered
certificates, and registered in the name of such holder or otherwise as such
holder may direct.
(b) Any Share certificate which is converted into shares of Common
Stock in whole or in part shall be canceled by the Company, and no new Share
certificates shall be issued in lieu of any Shares which have been converted
into shares of Common Stock. The Company shall issue a new certificate with
respect to any Shares which were not converted into shares of Common Stock and
were represented by a certificate which was converted or exercised in part.
(c) Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any Share certificate and, in the case of
any such loss, theft or destruction, upon delivery of an indemnity agreement
reasonably satisfactory to the Company, or in the case of any such mutilation,
upon surrender of such Share certificate (which surrendered Share certificate
shall be canceled by the Company), the Company will issue a new Share
certificate of like tenor in lieu of such lost, stolen, destroyed or mutilated
Share certificate as if the lost, stolen, destroyed or mutilated Share
certificate were then surrendered for exchange.
SECTION 14. NOTICES
All notices, requests, demands, consents and other communications
hereunder shall be in writing and shall be delivered by hand or shall be sent by
telex or telecopy (confirmed by registered, certified or overnight mail or
courier, postage and delivery charges prepaid), if to the Company at the address
indicated below, or if to a Purchaser at the address indicated on Exhibit A
hereto, or at such other address as a party may from time to time designate as
its address in writing to the other party to this Agreement. Whenever any notice
is required to be given hereunder, such notice shall be deemed given and such
requirement satisfied only when such notice is delivered or, if sent by telex or
telecopier, when received.
(a) If to the Company:
XXX.xxx, Inc
00000 XX 00xx Xxxxxx
Xxxxx Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. May, Chief Executive Officer
Fax: 000-000-0000
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with a copy to:
Xxxxx X. X'Xxxxxxx
Xxxxxxxxxx Xxxxxxxx LLP
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Fax: 000-000-0000
(b) If to a Purchaser, at the address of such Purchaser set forth on
Exhibit A, with a copy to the address set forth below such Purchaser's name on
Exhibit A.
SECTION 15. MISCELLANEOUS
(a) This Agreement (including all schedules and exhibits hereto) and,
upon the closing hereunder, the Series D Certificate of Designation, together
with any further agreements entered into by the Purchasers and the Company at
the Closing hereunder, contain the entire agreement between the Purchasers and
the Company, and supersede any prior oral or written agreements, commitments,
terms or understandings regarding the subject matter hereof.
(b) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the parties
(other than any parties that are (i) agencies, instrumentalities or entities
affiliated with any state government or (ii) a government sponsored retirement
system) hereby waive any provision of law which may render any provision hereof
prohibited or unenforceable in any respect.
(c) Unless otherwise expressly provided herein, any provision of this
Agreement relating to the consent, determination, decision or waiver of a holder
or holders of Shares means such holder's consent, determination, decision or
waiver in such holder's sole discretion.
(d) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns, whether so
expressed or not; provided, that the Company may not assign any of its rights,
duties or obligations under this Agreement, except in connection with a
transaction permitted by Section 5.9 or with the Purchasers' written consent.
(e) In addition to any assignment by operation of law, a Purchaser may
assign, in whole or in part, any or all of its rights (and/or obligations) under
this Agreement to any permitted transferee of any or all of its Shares, except
as provided under the terms of the Registration Rights Agreement, and (unless
such assignment expressly provides otherwise) any such assignment shall not
diminish the rights the Purchaser would otherwise have under this Agreement or
with respect to any remaining Shares held by such Purchaser.
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(f) No course of dealing and no delay on the part of any party hereto
in exercising any right, power, or remedy conferred by this Agreement shall
operate as a waiver thereof or otherwise prejudice such party's rights, powers
and remedies. No single or partial exercise of any rights, powers or remedies
conferred by this Agreement shall preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(g) The headings and captions in this Agreement are for convenience of
reference only and shall not define, limit or otherwise affect any of the terms
or provisions hereof.
(h) The Company hereby agrees that the Agent may rely upon the
Company's representations and warranties made to the Purchasers in Section 3
hereof as if such representations and warranties were made directly to the
Agent.
(i) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware (other than any conflict of laws rule
which might result in the application of the laws of any other jurisdiction).
Each of the parties (other than any parties that are (i) agencies,
instrumentalities or entities affiliated with any state government or (ii) a
government sponsored retirement system) hereby irrevocably submits to the
jurisdiction of the state courts of the State of Delaware or any Federal court
sitting in the State of Delaware for purposes of any controversy, claim or
dispute arising out of or related to this Agreement.
(j) This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument,
and all signatures need not appear on any one counterpart. The authentic
signature of any party received by facsimile transmission shall constitute a
valid and binding signature of such party.
(The remainder of this page is intentionally left blank.)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
COMPANY: XXX.XXX, INC.
By: /s/
--------------------------------------
Xxxxxx X. May, Chief Executive Officer
PURCHASER: ABRY BROADCAST PARTNERS III, L.P.
By: /s/
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
List of Exhibits:
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Certificate of Designations of Series D Preferred Stock
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
COMPANY: XXX.XXX, INC.
By: /s/
--------------------------------------
Xxxxxx X. May, Chief Executive Officer
PURCHASER: XXXXXXX XXXXX FUND II, L.P.
By: /s/
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
List of Exhibits:
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Certificate of Designations of Series D Preferred Stock
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
COMPANY: XXX.XXX, INC.
By: /s/
--------------------------------------
Xxxxxx X. May, Chief Executive Officer
PURCHASER: CUMMINS ENGINE COMPANY, INC.
By: /s/
--------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
List of Exhibits:
Exhibit A - Schedule of Purchasers
Exhibit B - Form of Certificate of Designations of Series D Preferred Stock
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EXHIBIT A
Schedule of Purchasers
to
Stock Purchase Agreement, dated as of August 27, 1999
Number of Aggregate
Name and Address of Purchaser Shares Purchased Purchase Price
----------------------------- ---------------- --------------
ABRY Broadcast Partners III, L.P. 1,904,762 $20,000,001.00
c/o ABRY Partners Incorporated
00 Xxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Fax: (000) 000-0000
with a copy to:
Xxxx X. Xxxxx
Xxxxxxxx & Xxxxx
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Xxxxxxx Xxxxx Fund II, L.P. 619,048 $6,500,004.00
000 Xxxxxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (617) 536 -8535
with a copy to
Xxxxxx X. Xxxx
Xxxxxx Xxxx & Xxxxxxx
Exchange Place
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Cummins Engine Company, Inc. 476,190 $4,999,995.00
000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000
Atten: Xxxx Xxxxxxxxx
Fax: (000) 000-0000
with a copy to
Xxxx Xxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
TOTAL 3,000,000 $31,500,000
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EXHIBIT B
FORM OF SERIES D CERTIFICATE OF DESIGNATIONS
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES D 7% CUMULATIVE CONVERTIBLE
PREFERRED STOCK OF XXX.XXX, INC.
XXX.XXX, INC., a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), DOES
HEREBY CERTIFY THAT:
A. Pursuant to authority conferred upon the Board of Directors by the
Certificate of Incorporation of the Corporation (the "Certificate of
Incorporation") and pursuant to the provisions of ss. 151 of the Delaware
General Corporation Law, the Board of Directors, pursuant to unanimous written
consent dated August ___, 1999, adopted the following resolution providing for
the designations, preferences and relative, participating, optional and other
rights, and the qualifications, limitations and restrictions of the Series D 7%
Cumulative Convertible Preferred Stock.
WHEREAS, the Certificate of Incorporation of the Corporation
provides for two classes of shares known as common stock, $.001 par value per
share (the "Common Stock"), and preferred stock, $.01 par value per share
("Preferred Stock"); and
WHEREAS, the Board of Directors of the Corporation is
authorized by the Certificate of Incorporation to provide for the issuance of
the shares of Preferred Stock in series, and by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in such series and to fix the designations,
preferences and rights of the shares of each such series and the qualifications,
limitations and restrictions thereof.
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors
deems it advisable to, and hereby does, designate a Series D 7% Cumulative
Convertible Preferred Stock and fixes and determines the rights, preferences,
qualifications, limitations and restrictions relating to the Series D 7%
Cumulative Convertible Preferred Stock as follows:
1. Designation. The shares of such series of Preferred Stock shall be
designated "Series D 7% Cumulative Convertible Preferred Stock" (referred to
herein as the "Series D Stock").
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2. Authorized Number. The number of shares constituting the Series D
Stock shall be 3,000,000.
3. Dividends. The holders of shares of Series D Stock shall be entitled
to receive, when and as declared by the Board of Directors of the Corporation,
out of assets legally available for such purpose, dividends at the rate of
$0.735 (i.e., 7%) (as adjusted for stock splits, and other subdivisions and
combinations of Common Stock after the date of the Purchase Agreements
("Recapitalization Events")) per share per annum, which shall be payable when
and if declared by the Board of Directors or shall accrue quarterly on the last
day of January, April, July and October in each year, commencing on October 31,
1999; provided, however, that upon an Event of Default (as hereinafter defined)
and so long as it shall continue, such dividend rate shall be $0.945 (i.e., 9%)
(as adjusted for Recapitalization Events) per share per annum. Dividends on the
Series D Stock shall be cumulative so that if, for any dividend accrual period,
cash dividends at the rate hereinabove specified are not declared and paid or
set aside for payment, the amount of accrued but unpaid dividends shall
accumulate and shall be added to the dividends payable for subsequent dividend
accrual periods and upon any redemption or conversion of shares of Series D
Stock. If any shares of Series D Stock are issued on a date which does not
coincide with a dividend payment date, then the initial dividend accrual period
applicable to such shares shall be the period from the date of issuance thereof
through whichever of January 31, April 30, July 31, or October 31 next occurs
after the date of issuance. If the date fixed for payment of a final liquidating
distribution on any shares of Series D Stock, or the date on which any shares of
Series D Stock are redeemed or converted into Common Stock, does not coincide
with a dividend payment date, then subject to the provisions hereof relating to
such payment, redemption or conversion, the final dividend accrual period
applicable to such shares shall be the period from whichever of February 1, May
1, August 1 or November 1 most recently precedes the date of such payment,
conversion or redemption through the effective date of such payment, conversion
or redemption. Dividends paid in cash on the shares of Series D Stock (or Series
A Stock, Series B Stock or Series C Stock, which shall rank pari passu with the
Series D Stock) in an amount less than the total amount of such dividends shall
be allocated pro rata so that the total value of dividends paid on the Preferred
Stock shall in all cases bear to each other the same ratio that the total value
of accrued and unpaid dividends on the Series A Stock, the Series B Stock, the
Series C Stock and the Series D Stock bear to each other. Without the written
consent of the holders of at least 60 % of the then outstanding Series D Stock,
the Corporation shall not declare or pay any cash dividend on, or redeem or
repurchase or make any other cash distribution in respect of any other equity
Securities (as defined herein) of the Corporation unless at the time of such
declaration, payment or distribution all dividends on the Series D Stock accrued
for all past dividend accrual periods shall have been paid and the full
dividends thereon for the current dividend period shall be paid or declared and
set aside for payment. Notwithstanding any other term or condition of this
Section 3 to the contrary, upon the consummation of a Qualifying Offering (as
defined below) and in connection with the conversion of the Series D Stock
pursuant to Section 5(b) hereof, the Company may pay any and all accrued but
unpaid dividends on the Series D Stock with shares of
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Common Stock, each share of which shall, for the purposes of determining the
number of shares of Common Stock issuable in satisfaction of such accrued but
unpaid dividends pursuant to this Section 3, be deemed to have a value equal to
the price at which the Common Stock is sold in such Qualifying Offering.
4. Liquidation.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the
shares of Series D Stock shall be entitled, before any distribution or
payment is made upon any Common Stock or any other class or series of
stock ranking junior to the Series D Stock as to distribution of assets
upon liquidation (other than the Series A Preferred Stock, the Series B
Preferred Stock and the Series C Preferred Stock of the Corporation
which shall rank pari passu with the Series D Stock), to be paid an
amount equal to $10.50 per share (as adjusted for Recapitalization
Events) plus all accrued and unpaid dividends to such date
(collectively, the "Liquidation Payments"). If upon any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of Series D
Stock shall be insufficient to permit payment in full to the holders of
Series D Stock of the Liquidation Payments, then the entire assets of
the Corporation shall be distributed ratably among such holders and the
holders of any class of preferred stock ranking on a parity with the
Series D Stock in proportion to the full respective distributive
amounts to which they are entitled.
(b) Upon any liquidation, dissolution or winding up of the
Corporation, after the holders of Series D Stock shall have been paid
in full the Liquidation Payments, the remaining assets of the
Corporation may be distributed ratably per share in order of preference
to the holders of Common Stock and any other class or series of stock
ranking junior to the Series D Stock as to distribution of assets upon
liquidation.
(c) Written notice of a liquidation, dissolution or winding
up, stating a payment date, the amount of the Liquidation Payments, the
amounts to be paid to the holders of Common Stock (both per share and
in the aggregate) upon such a liquidation, dissolution or winding up,
and the place where said Liquidation Payments shall be payable, shall
be given by mail, postage prepaid, not less than 30 days prior to the
payment date stated therein, to each holder of record of Series D Stock
at its post office address as shown by the records of the Corporation.
5. Conversion.
The holders of the Series D Stock shall have the following
conversion rights:
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(a) Optional Conversion. Each share of Series D Stock shall be
convertible at any time, at the option of the holder of record thereof,
into fully paid and nonassessable shares of Common Stock at the
"conversion rate" (as defined in paragraph (c) below) then in effect
upon surrender to the Corporation or its transfer agent of the
certificate or certificates representing the Series D Stock to be
converted, as provided below, or if the holder notifies the Corporation
or its transfer agent that such certificate or certificates have been
lost, stolen or destroyed, upon the execution and delivery of an
agreement satisfactory to the Corporation to indemnify the Corporation
from any losses incurred by it in connection therewith.
(b) Conversion on Qualifying Offering. Upon the consummation
of a Qualifying Offering (as defined below), upon not less than ten
(10) days prior written notice by the Corporation of the anticipated
consummation of such offering, each share of Series D Stock shall be
converted into fully paid and nonassessable shares of Common Stock at
the conversion rate then in effect. A "Qualifying Offering" means (i)
the Corporation shall have consummated a firm commitment underwritten
public offering of its Common Stock by a nationally recognized
investment banking firm pursuant to an effective registration under the
Securities Act of 1933, as amended, covering the offering and sale of
Common Stock which results in gross proceeds of at least $20,000,000,
(ii) the Common Stock is quoted or listed by either The Nasdaq Stock
Market (National Market) ("Nasdaq"), the New York Stock Exchange or the
American Stock Exchange, (iii) the price at which the Common Stock is
sold in such offering is at least equal to the lesser of an amount
which (x) is 200% of the then effective conversion price or (y) would
represent, on an as converted basis, a compound annual rate of return
of 35% based upon the original issuance price of the Series D Stock,
and (iv) all outstanding shares of the Series B Preferred Stock and the
Series C Preferred Stock shall have been converted into shares of
common stock of the Company in accordance with the Certificate of
Designation relating to the Series B Preferred Stock and the Series C
Preferred Stock and all outstanding shares of the Series A Preferred
Stock shall have been redeemed in accordance with the Certificate of
Designation relating to the Series A Preferred Stock. Upon the
achievement of (i), (ii), (iii) and (iv) above and the giving of the
mandatory conversion notice by the Corporation, the outstanding shares
of Series D Stock to be converted shall be converted automatically
without any further action by the holders of such shares and whether or
not the certificates representing such shares are surrendered to the
Corporation or its transfer agent.
(c) Basis For Conversion; Converted Shares. The basis for any
conversion under this Section 5 shall be the "conversion rate" in
effect at the time of conversion, which for the purposes hereof shall
mean the number of shares of Common Stock issuable for each share of
Series D Stock surrendered for conversion under this Section 5.
Initially, the conversion rate shall be 1.0, i.e., 1.0 share of Common
Stock for each share of Series D Stock being converted. Such conversion
rate shall be subject to adjustment as provided in Section 6 below. As
used herein, the term
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"conversion price" shall be an amount computed by dividing $10.50 by
the conversion rate then in effect. Initially, the conversion price
shall be $10.50 per share of Common Stock. If any fractional interest
in a share of Common Stock would be deliverable upon conversion of
Series D Stock (taking into account all shares of Series D Stock being
converted by each holder), the Corporation shall pay in lieu of such
fractional share an amount in cash equal to the conversion price of
such fractional share (computed to the nearest one hundredth of a
share) in effect at the close of business on the date of conversion.
Any shares of Series D Stock which have been converted shall be
canceled and all dividends on converted shares shall cease to accrue
and the certificates representing shares of Series D Stock so converted
shall represent the right to receive (i) such number of shares of
Common Stock into which such shares of Series D Stock are convertible,
plus (ii) cash payable for any fractional share plus (iii) all accrued
but unpaid dividends relating to such shares through the immediately
preceding dividend payment date. Upon the conversion of shares of
Series D Stock as provided in this Section 5, the Corporation shall
promptly pay all then accrued but unpaid dividends to the holder of the
Series D Stock being converted. The Board of Directors of the
Corporation shall at all times reserve a sufficient number of
authorized but unissued shares of Common Stock to be issued in
satisfaction of the conversion rights and privileges aforesaid.
(d) Mechanics of Conversion. In the case of an optional
conversion, before any holder of Series D Stock shall be entitled to
convert the same into shares of Common Stock, it shall surrender the
certificate or certificates therefor, duly endorsed, at the office of
the Corporation or its transfer agent for the Series D Stock, and shall
give written notice to the Corporation of the election to convert the
same and shall state therein the name or names in which the certificate
of certificates for shares of Common Stock are to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver
at such office to such holder of Series D Stock, or to the nominee or
nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as
aforesaid. A certificate or certificates will be issued for the
remaining shares of Series D Stock in any case in which fewer than all
of the shares of Series D Stock represented by a certificate are
converted.
(e) Issue Taxes. The Corporation shall pay all issue taxes, if
any, incurred in respect of the issue of shares of Common Stock on
conversion. If a holder of shares surrendered for conversion specifies
that the shares of Common Stock to be issued on conversion are to be
issued in a name or names other than the name or names in which such
surrendered shares stand, the Corporation shall not be required to pay
any transfer or other taxes incurred by reason of the issuance of such
shares of Common Stock to the name of another, and if the appropriate
transfer taxes shall not have been paid to the Corporation or the
transfer agent for the Series D Stock at the time of surrender of the
shares involved, the shares of Common Stock issued upon
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conversion thereof may be registered in the name or names in which the
surrendered shares were registered, despite the instructions to the
contrary.
6. Adjustment of Conversion Price and Conversion Rate. The number and
kind of securities issuable upon the conversion of the Series D Stock, the
conversion price and the conversion rate shall be subject to adjustment from
time to time in accordance with the following provisions:
(a) Certain Definitions. For purposes of this Certificate:
(i) The term "Additional Shares of Common Stock"
shall mean all shares of Common Stock issued (including the
sale and issuance of any shares of Common Stock at any time
directly or indirectly owned or held by or for the account of
the Corporation), or deemed to be issued by the Corporation
pursuant to paragraph (g) of this Section 6, after the
Original Issue Date except:
(A) shares of Common Stock issuable upon
conversion of, or distributions with respect to, the
Series B Stock, the Series C Stock or the Series D
Stock now or hereafter issued by the Corporation;
(B) up to 2,184,166 shares of Common Stock
(as reduced by previously exercised options to
purchase 10,432 shares of Common Stock) issuable upon
the exercise of options issued to officers,
directors, employees, and consultants of the
Corporation under stock option plans maintained from
time to time by the Corporation and approved by the
Board of Directors, subject to adjustment for all
subdivisions and combinations;
(C) up to 186,750 shares of Common Stock
issuable upon the exercise of the Warrant held by
Alex. Xxxxx & Sons Incorporated;
(D) up to 505,375 shares of Common Stock
issuable upon the exercise of warrants granted to
lenders in connection with loans to the Corporation
or to guarantors or purchasers of such loans;
(E) up to 75,000 shares of Common Stock
issuable upon the exercise of the Warrant held by
Xxxxx Xxxxx Xxxxxx & Company, LLC;
(F) up to 12,000 shares of Common Stock
issuable upon the exercise of warrants to be issued
to customers in connection with contracts between the
Corporation and such customers; and
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(G) shares of Common Stock issued with
respect to adjustments of the conversion price
hereunder.
(ii) The term "Common Stock" shall be deemed to mean
(i) the Common Stock, $.001 par value, and (ii) the stock of
the Corporation of any class, or series within a class,
whether now or hereafter authorized, which has the right to
participate in the distribution of either earnings or assets
of the Corporation without limit as to the amount or
percentage.
(iii) The term "Convertible Securities" shall mean
any evidence of indebtedness, shares (other than Series B
Stock, Series C Stock and Series D Stock issued prior to the
Original Issue Date (as defined below)) or other securities
directly or indirectly convertible into or exercisable or
exchangeable for Common Stock.
(iv) The term "Options" shall mean rights, options or
warrants to subscribe for, purchase or otherwise acquire
directly or indirectly Common Stock or Convertible Securities.
(v) The term "Original Issue Date" shall mean the
date of the initial issuance of the Series D Stock.
(vi) The term "Fair Market Price" shall mean with
respect to a share of Common Stock (i) prior to the first
anniversary of the Original Issue Date, the conversion price
in effect on the Original Issue Date, and (ii) subsequent to
the first anniversary of the Original Issue Date, the average
closing bid price of the Common Stock as reported by Nasdaq
(or the last sale price if the Common Stock is traded on an
exchange) for a period of thirty (30) consecutive trading days
ending on the third day prior to the date of determination,
or, if the Common Stock is not listed on Nasdaq or an
exchange, the fair market value as determined by the vote of
66 2/3% of the Corporation's Board of Directors and approved
by the holders of not less than a majority of the then
outstanding shares of Series D Stock or if the Board of
Directors cannot reach such agreement (or if not so approved
by the holders of Series D Stock), as determined by a
qualified independent investment banker appointed by the vote
of 66 2/3% of the Corporation's Board of Directors, such
banker to be approved by the holders of not less than a
majority of the then outstanding shares of Series D Stock.
(b) Reorganization, Reclassification. In the event of a
reorganization, share exchange, or reclassification, other than a
change in par value, or from par value to no par value, or from no par
value to par value or a transaction described in subsection (c) or (d)
below, each share of Series D Stock shall, after such reorganization,
share exchange or reclassification (a "Reclassification Event"), be
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convertible at the option of the holder into the kind and number of
shares of stock or other securities or other property of the
Corporation which the holder of Series D Stock would have been entitled
to receive if the holder had held the Common Stock issuable upon
conversion of his Series D Stock immediately prior to such
reorganization, share exchange, or reclassification (subject to
adjustment as provided in this Section 6).
(c) Consolidation, Merger. In the event of a merger or
consolidation to which the Corporation is a party each share of Series
D Stock shall, after such merger or consolidation, be convertible at
the option of the holder into the kind and number of shares of stock
and/or other securities, cash or other property which the holder of
such share of Series D Stock would have been entitled to receive if the
holder had held the Common Stock issuable upon con version of such
share of Series D Stock immediately prior to such consolidation or
merger (subject to adjustment as provided in this Section 6).
(d) Subdivision or Combination of Shares. In case outstanding
shares of Common Stock shall be subdivided, the conversion price shall
be proportionately reduced as of the effective date of such
subdivision, or as of the date a record is taken of the holders of
Common Stock for the purpose of so subdividing, whichever is earlier.
In case outstanding shares of Common Stock shall be combined, the
conversion price shall be proportionately increased as of the effective
date of such combination, or as of the date a record is taken of the
holders of Common Stock for the purpose of so combining, whichever is
earlier.
(e) Stock Dividends. In case shares of Common Stock are issued
as a dividend or other distribution on the Common Stock (or such
dividend is declared), then the conversion price shall be adjusted, as
of the date a record is taken of the holders of Common Stock for the
purpose of receiving such dividend or other distribution (or if no such
record is taken, as at the earliest of the date of such declaration,
payment or other distribution), to that price determined by multiplying
the conversion price in effect immediately prior to such declaration,
payment or other distribution by a fraction (i) the numerator of which
shall be the number of shares of Common Stock outstanding immediately
prior to the declaration of such dividend or other distribution, and
(ii) the denominator of which shall be the total number of shares of
Common Stock outstanding as of the time of the declaration and giving
effect to such dividend or other distribution as if paid. In the event
that the Corporation shall declare or pay any dividend on the Common
Stock payable in any right to acquire Common Stock for no
consideration, then the Corporation shall be deemed to have made a
dividend payable in Common Stock in an amount of shares equal to the
maximum number of shares issuable upon exercise of such rights to
acquire Common Stock.
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(f) Issuance of Additional Shares of Common Stock. If the
Corporation shall issue any Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued
pursuant to paragraph (g) below) after the Original Issue Date (other
than as provided in the foregoing subsections (b) through (e)), for no
consideration or for a consideration per share less than the greater of
(i) the Fair Market Price in effect on the date of and immediately
prior to such issue or (ii) the conversion price in effect on the date
of and immediately prior to such issue, then in such event, the
conversion price shall be reduced (but not increased) as follows:
(i) For issuances of Additional Shares of Common
Stock on or before 9 months after the Original Issue Date, if
the issuance or sales price of the Additional Shares of Common
Stock is below $10.50, the conversion price shall be reduced
(but not increased) so as to equal such issuance or sales
price.
(ii) For issuances of Additional Shares of Common
Stock at any time after 9 months after the Original Issue
Date, the conversion price shall be reduced (but not
increased) concurrently with any such issuance to a price
equal to the quotient obtained by dividing:
(A) an amount equal to (x) the total number
of shares of Common Stock outstanding immediately
prior to such issuance or sale multiplied by the
conversion price in effect immediately prior to such
issuance or sale, plus (y) the aggregate
consideration received or deemed to be received by
the Corporation upon such issuance or sale, by
(B) the total number of shares of Common
Stock outstanding immediately after such issuance or
sale.
For purposes of the formulas expressed in
paragraph 6(e) and 6(f), all shares of Common Stock issuable upon the exercise
of outstanding Options with an exercise price less than the then current fair
market value of Common Stock or issuable upon the conversion of the Series B
Stock, the Series C Stock or the Series D Stock or other outstanding Convertible
Securities with an exercise or exchange price less than the then current fair
market value of Common Stock (including Convertible Securities issued upon the
exercise of outstanding Options), shall be deemed outstanding shares of Common
Stock both immediately before and after such issuance or sale.
(g) Deemed Issue of Additional Shares of Common Stock. In the
event the Corporation at any time or from time to time after the
Original Issue Date shall issue any Options or Convertible Securities
or shall fix a record date for the determination of holders of any
class of securities then entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth
in the instrument relating thereto without regard to any provisions
contained therein
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designed to protect against dilution) of Common Stock issuable upon the
exercise of such Options, or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue of Options or Convertible
Securities or, in case such a record date shall have been fixed, as of
the close of business on such record date, provided that in any such
case in which Additional Shares of Common Stock are deemed to be
issued:
(i) except as provided in Section 6(g)(ii) below, no
further adjustments in the conversion price shall be made upon
the subsequent issue of Convertible Securities or shares of
Common Stock upon the exercise of such Options, or the issue
of Common Stock upon the conversion or exchange of such
Convertible Securities, in accordance with their terms;
(ii) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise (or
the terms of such Options or Convertible Securities are
amended or modified to provide) for any increase or decrease
in the consideration payable to the Corporation, or increase
or decrease in the number of shares of Common Stock issuable,
upon the exercise, conversion or exchange thereof, the
conversion price computed upon the original issuance of such
Options or Convertible Securities (or upon the occurrence of a
record date with respect thereto), and any subsequent
adjustments based thereon, upon any such increase or decrease
becoming effective, shall be recomputed to reflect such
increase or decrease insofar as it affects such Options or the
rights of conversion or exchange under such Convertible
Securities (provided, however, that no such adjustment of the
conversion price shall affect Common Stock previously issued
upon conversion of the Series D Stock);
(iii) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities which shall not have been exercised, the conversion
price computed upon the original issue of such Options or
Convertible Securities (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments
based thereon, shall, upon such expiration, be recomputed as
if:
(A) in the case of Options or Convertible
Securities, the only Additional Shares of Common
Stock issued were the shares of Common Stock, if any,
actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities and the consideration received therefor
was the consideration actually received by the
Corporation (x) for the issue of all such Options,
whether or not exercised, plus the consideration
actually received by the Corporation upon exercise of
the Options or (y) for the issue of all such
Convertible Securities which were actually converted
or
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exchanged plus the additional consideration, if any,
actually received by the Corporation upon the
conversion or exchange of the Convertible Securities;
and
(B) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued
at the time of issue of such Options, and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received
by the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
deemed to have been received by the Corporation upon
the issue of the Convertible Securities with respect
to which such Options were actually exercised.
(iv) No readjustment pursuant to clause (ii) or (iii)
above shall have the effect of increasing the conversion price
to an amount which exceeds the lower of (x) the conversion
price on the original adjustment date or (y) the conversion
price that would have resulted from any issuance of Additional
Shares of Common Stock between the original adjustment date
and such readjustment date.
(v) In the case of any Options which expire by their
terms not more than 30 days after the date of issue thereof,
no adjustment of the conversion price shall be made until the
expiration or exercise of all such Options, whereupon such
adjustment shall be made in the same manner provided in clause
(iii) above.
(h) Determination of Consideration. For purposes of this
Section 6, the consideration received by the Corporation for the issue
of any Additional Shares of Common Stock shall be computed as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the
aggregate amount of cash received by the Corporation;
and
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at
the time of the issue, as determined by the vote of
66 2/3% of the Corporation's Board of Directors and
approved by holders of not less than a majority of
the then outstanding shares of Series D Stock or if
the Board of Directors cannot reach such agreement
(or if not so approved by the holders of Series D
Stock), by a qualified independent public accounting
firm, other than the accounting firm then engaged as
the Corporation's independent auditors, agreed upon
by the Corporation on the
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one hand and the holders of 60 % of the outstanding
shares of Series D Stock on the other hand.
(ii) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued
pursuant to paragraph (g) above, relating to Options and
Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or
receivable by the Corporation as consideration for
the issue of such Options or Convertible Securities,
plus the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein designed to protect against
dilution) payable to the Corporation upon the
exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the
case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible
Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein designed to protect against dilution)
issuable upon the exercise of such Options or
conversion or exchange of such Convertible
Securities.
(i) Adjustments Based Upon EBITDA for Fiscal Year Ending June
30, 2000. If the conversion price of the Series C Stock is adjusted
pursuant to the terms and conditions of Section 6(i) of the Certificate
of Designations providing for the rights, privileges and preferences of
the Series C Stock (the "EBITDA Adjustment), then the conversion price
of the Series D Stock shall be adjusted to an amount determined by
multiplying the conversion price of the Series D Stock by a ratio (x)
the numerator of which will equal the conversion price of the Series C
Stock, as adjusted pursuant to the EBITDA Adjustment, and (y) the
denominator of which will equal $8.00. If the conversion price of the
Series C Stock is subsequently adjusted pursuant to the terms and
conditions of Section 6(i)(iv) of the Certificate of Designations
providing for the rights, privileges and preferences of the Series C
Stock, then corresponding adjustments will be made to the conversion
price of the Series D Stock.
(j) Adjustment of Conversion Rate. Upon each adjustment of the
conversion price under the provisions of this Section 6, the conversion
rate shall be adjusted to an amount determined by dividing (x) the
conversion price in effect on the Original Issue Date, by (y) the
adjusted conversion price.
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(k) Other Provisions Applicable to Adjustment Under this
Section. The following provisions will be applicable to the adjustments
in conversion price and conversion rate as provided in this Section 6:
(i) Treasury Shares. The number of shares of Common
Stock at any time outstanding shall not include any shares
thereof then directly or indirectly owned or held by or for
the account of the Corporation.
(ii) Other Action Affecting Common Stock. In case the
Corporation shall take any action affecting the outstanding
number of shares of Common Stock other than an action
described in any of the foregoing subsections 6(b) to 6(g)
hereof, inclusive, which would have an inequitable effect on
the holders of Series D Stock, the conversion price shall be
adjusted in such manner and at such time as the Board of
Directors of the Corporation on the advice of the
Corporation's independent public accountants may in good faith
determine to be equitable in the circumstances.
(iii) Minimum Adjustment. No adjustment of the
conversion price shall be made if the amount of any such
adjustment would be an amount less than one percent (1%) of
the conversion price then in effect, but any such amount shall
be carried forward and an adjustment with respect thereof
shall be made at the time of and together with any subsequent
adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate an
increase or decrease of one percent (1%) or more.
(iv) Certain Adjustments. The conversion price shall
not be adjusted upward except in the event of a combination of
the outstanding shares of Common Stock into a smaller number
of shares of Common Stock or in the event of a readjustment of
the conversion price pursuant to Section 6(g)(ii) or (iii).
(l) Notices of Adjustments. Whenever the conversion rate and
conversion price is adjusted as herein provided, an officer of the
Corporation shall compute the adjusted conversion rate and conversion
price in accordance with the foregoing provisions and shall prepare a
written certificate setting forth such adjusted conversion rate and
conversion price and showing in detail the facts upon which such
adjustment is based, and such written instrument shall promptly be
delivered to the recordholders of the Series D Stock.
7. Redemption.
(a) Mandatory Redemption. On the date six (6) months
immediately after the payment in full and satisfaction of all of the
obligations of the Corporation to the lenders who provide financing to
the Corporation in the aggregate
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principal amount of Seventy-five Million Dollars ($75,000,000.00)
(referred to herein as the "Mandatory Redemption Date") the Corporation
shall redeem all the shares of Series D Stock originally issued
hereunder (or such lesser amount as shall then be outstanding) at the
"Redemption Price" per share defined in paragraph (c) below, payable in
each case in cash on the Mandatory Redemption Date. The Corporation
shall deliver written notice of the pending redemption to the holders
of the Series D Stock at least thirty (30) but no more than sixty (60)
days prior to the Mandatory Redemption Date.
(b) Redemption on Change of Control. Upon a "Change of
Control" of the Corporation, each holder of the then outstanding shares
of Series D Stock may elect to have the Corporation redeem all (but not
less than all) outstanding shares of Series D Stock owned by such
holder at the "Redemption Price" per share defined in paragraph (c)
below, payable in cash on any date within 100 days of the effective
date of the Change of Control (such date being herein referred to as
the "Change of Control Redemption Date"). The election shall be made by
delivering written notice to the Corporation at least thirty (30) but
no more than sixty (60) days prior to the Change of Control Redemption
Date. The Corporation will then be required to redeem all the shares of
Series D Stock owned by such holder on the Change of Control Redemption
Date. For purposes of this Section 7, "Change of Control" means any one
or more of the following events:
(i) The Corporation shall consolidate with or merge
into any other person or any person shall consolidate with or
merge into the Corporation (other than a consolidation or
merger of the Corporation and a wholly-owned subsidiary of the
Corporation in which all shares of the Corporation's Common
Stock outstanding immediately prior to the effectiveness
thereof are changed into or exchanged for the same
consideration), in either event pursuant to a transaction in
which any of the Corporation's common stock outstanding
immediately prior to the effectiveness thereof is changed into
or exchanged for cash, securities or other property; or
(ii) the Corporation shall directly or indirectly
convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any
person or "group" (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934 (the "1934
Act") (other than to a wholly-owned subsidiary of the
Corporation); or
(iii) there shall be a reorganization, share
exchange, or reclassification, other than a change in par
value, or from par value to no par value, or from no par value
to par value; or
(iv) any person (other than the Corporation, any
subsidiary of the Corporation or an Existing Investor (as
defined in the Purchase Agreement (as
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hereinafter defined))), including a "group" (within the
meaning of Section 13(d) and 14(D)(2) of the 0000 Xxx) that
includes such person, shall purchase or otherwise acquire,
directly or indirectly, beneficial ownership of securities of
the Corporation and, as a result of such purchase or
acquisition, such person (together with its associates and
affiliates) shall directly or indirectly beneficially own in
the aggregate (1) more than 50% of the Common Stock, or (2)
securities representing more than 50% of the combined voting
power of the Corporation's voting securities, in each case
under subclause (1) or (2), outstanding on the date
immediately prior to the date of such purchase or acquisition
(or, if there be more than one, the last such purchase or
acquisition).
(c) The Redemption Price per share of Series D Stock shall
equal the sum of (x) $10.50 (as adjusted for Recapitalization Events)
plus (y) all accrued and unpaid dividends on such share of Series D
Stock to the Mandatory Redemption Date or Change of Control Redemption
Date, as the case may be.
(d) The term "Redemption Date" as used in this paragraph (d)
shall refer to whichever of the Mandatory Redemption Date or the Change
of Control Redemption Date is applicable in a particular circumstance.
On or prior to the Redemption Date, the Corporation shall deposit the
Redemption Price of all outstanding shares of Series D Stock to be
redeemed with a bank or trust corporation having aggregate capital and
surplus in excess of $100,000,000 as a trust fund for the benefit of
the holders of the shares of Series D Stock, with irrevocable
instructions and authority to the bank or trust corporation to pay the
Redemption Price for such shares to their respective holders on or
after the Redemption Date upon receipt of the certificate or
certificates of the shares of Series D Stock to be redeemed. From and
after the Redemption Date, unless there shall have been a default in
payment of the Redemption Price, all rights of the holders of shares of
Series D Stock to be redeemed as holders of Series D Stock (except the
right to receive the Redemption Price upon surrender of their
certificate or certificates) shall cease as to those shares of Series D
Stock redeemed, and such shares shall not thereafter be transferred on
the books of the Corporation or be deemed to be outstanding for any
purpose whatsoever. If on the Redemption Date the funds of the
Corporation legally available for redemption of shares of Series D
Stock (or Series A Stock, Series B Stock and Series C Stock which shall
rank pari passu with the Series D Stock) are insufficient to redeem the
total number of shares of Preferred Stock to be redeemed on such date,
the Corporation will use those funds which are legally available
therefor to redeem the maximum possible number of shares of Preferred
Stock ratably among the holders of such shares to be redeemed based
upon the total amount payable by the Corporation pursuant to the
redemption of the Series D Stock, Series C Stock, Series B Stock and
Series A Stock if the Corporation had sufficient funds legally
available therefor. Payments shall first be applied against accrued and
unpaid dividends and thereafter against the remainder of the Redemption
Price. The shares of Series D Stock not redeemed shall remain
outstanding and entitled to all the
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rights and preferences provided herein. At any time thereafter when
additional funds of the Corporation are legally available for the
redemption of shares of Series D Stock such funds will immediately be
used to redeem the balance of the shares of Series D Stock to be
redeemed. No dividends or other distributions shall be declared or paid
on, nor shall the Corporation redeem, purchase or acquire any shares
of, the Common Stock or any other class or series of stock of the
Corporation unless the Redemption Price of all shares elected to be
redeemed shall have been paid in full. Until the Redemption Price for a
share of Series D Stock elected to be redeemed shall have been paid in
full, such share of Series D Stock shall remain outstanding for all
purposes and entitle the holder thereof to all the rights and
privileges provided herein, including, without limitation, that
dividends and interest thereon shall continue to accrue and, if unpaid
prior to the date such shares are redeemed, shall be included as part
of the Redemption Price as provided in paragraph (c) above.
Notwithstanding anything in this Section 7 to the contrary, even if a
notice of redemption was delivered under paragraph (a) or (b) of this
Section 7, all shares of Series D Stock shall be convertible pursuant
to Section 5 at all times prior to the Redemption Date.
(e) Notwithstanding any other term of this Certificate of
Designation, the Corporation shall not redeem (or have any obligation
to redeem) any shares of Series D Stock under any circumstances,
whether upon a Change of Control or otherwise, prior to the payment in
full and satisfaction of all of the obligations of the Corporation to
the lenders who provide financing to the Corporation in the aggregate
principal amount of $75,000,000.00. If the Corporation shall not have
paid in full or satisfied all of its obligations to such lenders on or
before any Redemption Date, upon such payment and satisfaction the
Corporation will immediately use any funds legally available therefor
to redeem the shares of Series D Stock to be redeemed.
8. Notices of Record Dates and Effective Dates. In case: (a) the
Corporation shall declare a dividend (or any other distribution) on the Common
Stock payable otherwise than in shares of Common Stock; or (b) the Corporation
shall authorize the granting to the holders of Common Stock of rights to
subscribe for or purchase any shares of capital stock of any class or any other
rights; or (c) of any reorganization, share exchange or reclassification of the
capital stock of the Corporation (other than a subdivision or combination of
outstanding shares of Common Stock), or of any consolidation or merger to which
the Corporation is party or of the sale, lease or exchange of all or
substantially all of the property of the Corporation; or (d) of the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation; or (e) of
a Change of Control, then the Corporation shall cause to be mailed to the
recordholders of the Series D Stock at least 20 days prior to the applicable
record date or effective date hereinafter specified, a notice stating (i) the
date on which a record is to be taken for the purpose of such dividend,
distribution or rights, or, if a record is not to be taken, the date as of which
the holders of record of Common Stock to be entitled to such dividend,
distribution or rights are to be determined or (ii) the date on which such
reclassification, reorganization, share exchange, consolidation, merger, sale,
lease, exchange, dissolution, liquidation, winding up or Change of Control is
expected to become effective,
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and the date as of which it is expected that holders of record of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reclassification, reorganization share
exchange, consolidation, liquidation, merger, sale, lease, exchange,
dissolution, liquidation, winding up or Change of Control.
9. Voting Rights.
(a) Holders of Series D Stock shall be entitled to notice of
any stockholder's meeting. Except as otherwise required by law or
provided herein, at any annual or special meeting of the Corporation's
stockholders, or in connection with any written consent in lieu of any
such meeting, each outstanding share of Series D Stock shall be
entitled to the number of votes equal to the number of full shares of
Common Stock into which such share of Series D Stock is then
convertible. Except as otherwise required by law or provided herein,
the Series B Stock, the Series C Stock, the Series D Stock and the
Common Stock shall vote together on each matter submitted to
stockholders, and not by class or series.
(b) Upon an Event of Default and so long as it shall continue,
the holders of the Series B Stock, the Series C Stock and the Series D
Stock, voting together as a class, shall be entitled at any annual
meeting of the stockholders or special meeting held in place thereof,
or at a special meeting of the holders of the Series B Stock, the
Series C Stock and the Series D Stock called as hereinafter provided,
to elect a majority of the Board of Directors and such right to elect a
majority of the Board of Directors shall be in lieu of the right of the
holders of the Series B Stock and the Series C Stock (and, as may be
provided pursuant to the terms of this Certificate of Designations,
Preferences and Rights of the Series D Stock, the Series D Stock) to
each elect one director. Such right of the holders of the Series B
Stock, the Series C Stock and the Series D Stock to elect a majority of
the Board of Directors may be exercised until an Event of Default shall
be cured, if curable, or waived, and when so cured or waived, the right
of the holders of Series B Stock, the Series C Stock and the Series D
Stock to elect a majority of the Board of Directors shall cease and the
right of the holders of the Series B Stock and the Series C Stock (and,
as may be provided pursuant to the terms of this Certificate of
Designations, Preferences and Rights of the Series D Stock, the Series
D Stock) to each elect one director shall resume, but subject always to
the same provisions for the vesting of such special voting rights in
the case of any such future Event of Default. At any time when such
special voting rights shall have so vested in the holders of the Series
B Stock, the Series C Stock and the Series D Stock, the Secretary of
the Corporation may, and upon the written request of the holders of 10%
or more of the number of shares of the Series B Stock, the Series C
Stock and the Series D Stock then outstanding addressed to him at the
principal office of the Corporation, shall, call a special meeting of
the holders of the Series B Stock, the Series C Stock and the Series D
Stock for the election of a majority of the Board of Directors to be
elected by them as provided herein, to be held in the case of such
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written request as soon as practicable after delivery of such request,
and in either case to be held at the place and upon the notice provided
by law and in the by-laws for the holding of meetings of stockholders.
If at any such annual or special meeting or adjournment thereof the
holders of at least a majority of the Series B Stock, the Series C
Stock and the Series D Stock then outstanding shall be present or
represented at such meeting, the then authorized number of directors of
the Corporation shall be increased to the extent necessary to provide a
majority of new directors to be elected and the holders of the Series B
Stock, the Series C Stock and the Series D Stock shall be entitled to
elect the additional directors so provided for. The directors so
elected shall serve until the next annual meeting or until their
successors shall be elected and qualified, provided, however, that
whenever the holders of the Preferred Stock shall be divested of the
special rights to elect a majority of the Board of Directors as above
provided, the term of office of the persons so elected as directors by
the holders of the Series B Stock, the Series C Stock and the Series D
Stock as a class, or elected to fill any vacancies resulting from the
death, resignation or removal of the directors so elected by the
holders of Series B Stock, the Series C Stock and the Series D Stock,
shall forthwith terminate and the authorized number of directors shall
be reduced accordingly.
If during any interval between any special meeting of the
holders of Series B Stock, the Series C Stock and the Series D Stock
for the election of directors to be elected by them as provided above
and the next ensuing annual meeting of stockholders, or between annual
meetings of stockholders for the election of directors, and while the
holders of the Series B Stock, the Series C Stock and the Series D
Stock shall be entitled to elect a majority of the Board of Directors,
any of the directors who have been elected by the holders of the Series
B Stock, the Series C Stock and the Series D Stock shall, by reason of
resignation, death or removal, have departed from the Board, the
Secretary of the Corporation shall call a special meeting of the
holders of the Series B Stock, the Series C Stock and the Series D
Stock and such vacancy or vacancies shall be filled at such special
meeting.
(c) In addition to any other vote or consent of stockholders
provided by law or by the Corporation's Certificate of Incorporation,
the Corporation shall not, without the approval by vote or written
consent of the holders of not less than 60 % of the then outstanding
shares of Series D Stock:
(i) amend, waive or repeal any provisions of, or add
any provision to, (i) this Certificate of Designation or (ii)
any provision of the Corporation's Certificate of
Incorporation or any other certificate of designation filed
with the Secretary of State of Delaware by the Corporation
with respect to its preferred stock;
(ii) amend, waive or repeal any provisions of, or add
any provision to, the Corporation's By-Laws;
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(iii) authorize, create, issue or sell any shares of
Equivalent Stock or Superior Stock, except as authorized in
this Certificate of Designation;
(iv) issue any shares of Series D Stock other than
pursuant to the Purchase Agreement or upon transfers of
outstanding shares of Series D Stock;
(v) enter into any agreement, indenture or other
instrument which contains any provisions restricting the
Corporation's obligation to pay dividends on or make
redemptions of the Series D Stock in accordance herewith;
(vi) dissolve the Corporation;
(vii) enter into any agreement(s) that would restrict
the Corporation's ability to perform its obligations pursuant
to the Purchase Agreements (as defined in Section 11(iv)
below);
(viii) (A) at any time prior to the second
anniversary of the Original Issue Date, sell, lease or
otherwise dispose of all or substantially all of the assets of
the Corporation, other than in the ordinary course of
business, or merge or consolidate with any other business
entity in a transaction in which the Corporation is not the
surviving corporation, unless (i) the aggregate consideration
received by the Corporation or its stockholders, divided by
(ii) the total number of shares of Common Stock (calculated on
a fully diluted basis) outstanding as of the date of such
transaction, equals or exceeds $25.00 (as adjusted for
Recapitalization Events); or (B) at any time after the second
anniversary of the Original Issue Date, sell, lease or
otherwise dispose of all or substantially all of the assets of
the Corporation, other than in the ordinary course of
business, or merge or consolidate with any other business
entity in a transaction in which the Corporation is not the
surviving corporation, unless such transaction provides
holders of Series D Stock with an IRR (as defined in the
Certificate of Designations of the Corporation's Series C
Stock, as in effect on the Original Issue Date) equal to at
least twenty-five one hundredths (25/100), calculated as if
the holder of Series D Stock purchased such shares of Series D
Stock on the date such holder purchased such shares at the
purchase price paid by such holder;
(ix) sell, lease or otherwise dispose of 20% or more
of the assets of the Corporation, other than in the ordinary
course of business, unless the proceeds of such sale, lease or
other disposition are reinvested in assets of the general type
used in the business of the Corporation;
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(x) issue more than 3,500,000 shares of Common Stock
(as adjusted for Recapitalization Events and excluding any
shares that the Corporation may issue pursuant to an
underwriters' overallotment option) in connection with any
public offering of the Corporation's Common Stock pursuant to
an effective registration under the Securities Act of 1933, as
amended, covering the offering and sale of Common Stock;
(xi) issue equity securities to employees, officers
or directors of the Corporation, except (a) securities
issuable upon the exercise of outstanding options and warrants
and pursuant to existing contractual commitments and (b)
options to purchase up to 2,184,166 shares of Common Stock,
together with the Common Stock issuable upon exercise thereof;
(xii) issue any securities for a price less than fair
market value, other than as may be required by existing
contractual commitments, as permitted by clause (xi) hereof or
pursuant to warrants to purchase shares of Common Stock
granted by the Corporation from time to time where the
exercise price of such warrants equals or exceeds the fair
market value of the Common Stock as of the date of grant of
such warrants;
(xiii) enter into any transactions (or series of
transactions), including loans, with any officer or director
of the Corporation or to or with their affiliates and family
members involving $100,000.00 or more per year individually or
$500,000.00 or more per year in the aggregate except (a) as
may be contemplated by existing contractual commitments, (b)
reasonable compensation payable to officers and directors, and
(c) for options and warrants issued in compliance with clause
(ix) hereof; or
(xiv) engage in any transaction (or series of
transactions) that would impair or reduce the rights and
preferences of the holders of the Series D Stock as a class
relative to the rights and preferences of the holders of any
other class of the Corporation's capital stock.
"Assets" shall mean an interest in any kind of property or
assets, whether real, personal or mixed, or tangible or intangible.
"Equivalent Stock" shall mean any shares of any class or
series of Stock of the Corporation having any preference or priority as to
dividends or Assets on a parity with any such preference or priority of the
Series D Stock and no preference or priority as to dividends or Assets superior
to any such preference or priority of the Series D Stock and any instrument or
Security directly or indirectly convertible into or exercisable or exchangeable
for Equivalent Stock. Without limiting the generality of the foregoing, a
dividend rate, mandatory or optional sinking fund payment amounts or schedules
or optional redemption provisions, the existence of a conversion right or the
existence of a liquidation preference of
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up to 100% of the original issue price plus unpaid accrued dividends plus a
premium of up to the dividend rate or up to the percentage of the equity of the
Corporation represented by such Stock, with respect to any class or series of
Stock, differing from that of the Series D Stock, shall not prevent such class
of Stock from being Equivalent Stock.
"Securities" shall mean any debt or equity securities of the
Corporation, whether now or hereafter authorized, and any instrument directly or
indirectly convertible into or exercisable or exchangeable for Securities or
Security. The term "Security" shall mean one of the Securities.
"Stock" shall include any and all shares, interests or other
equivalents (however designated) of, or participations in, corporate stock.
"Superior Stock" shall mean any shares of any class or series
of Stock of the Corporation having any preference or priority as to dividends or
Assets superior to any such preference or priority of the Series D Stock and any
instrument or security directly or indirectly convertible into or exercisable or
exchangeable for Superior Stock.
(d) Notwithstanding anything else contained herein, the
affirmative vote or written consent of the holders of not less than 90%
of the then outstanding shares of Series D Stock shall be necessary to
amend, alter or repeal any of the provisions of the Corporation's
Certificate of Incorporation or the Certificate of Designation creating
this Series D Stock which would alter or change (i) the dividend rate,
(ii) redemption provisions, (iii) anti-dilution provisions, (iv) the
place or currency of payments hereunder, (v) the right to institute
suit for the enforcement of any payment hereunder, (vi) the conversion
provisions, or (vii) provisions of this Section 9, so as to affect any
of the foregoing adversely.
10. Preemptive Rights.
(a) The Corporation shall not issue or sell any shares of
Common Stock, Preferred Stock or other securities directly or
indirectly convertible into or exercisable or exchangeable for shares
of Common Stock, other than any such issuance or sale (i) pursuant to a
Qualifying Offering, (ii) pursuant to a stock option plan approved by
the Board of Directors, (iii) as a form of consideration in connection
with mergers or acquisitions where the Corporation is the surviving
entity or (iv) where the aggregate gross proceeds are less than
$500,000 in any single transaction, provided that the sale price per
share is not less than the then applicable fair market value of such
shares, as determined in good faith by the Corporation's Board of
Directors, and, provided further, that the aggregate gross proceeds of
all such transactions shall not exceed $1,500,000 (the securities
issued in such transactions being referred to as the "Newly Issued
Securities"), unless prior to the issuance or sale of such Newly Issued
Securities each holder of Series D Stock shall have been given the
opportunity (such opportunity being herein referred to as the
"Preemptive Right") to purchase (on the
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same terms as such Newly Issued Securities are proposed to be sold) the
same proportion of such Newly Issued Securities being issued or offered
for sale by the Corporation as (x) the number of shares of Common Stock
(calculated solely on account of outstanding shares of Series D Stock
on an as converted basis) held by such holder on the day preceding the
date of the Preemptive Notice (as defined herein), as the case may be,
bears to (y) the total number of shares of Common Stock (calculated on
a fully diluted basis) outstanding on that day.
(b) Prior to the issuance or sale by the Corporation of any
Newly Issued Securities, the Corporation shall give written notice
thereof (the "Preemptive Notice") to each holder of Series D Stock. The
Preemptive Notice shall specify (i) the name and address of the bona
fide investor to whom the Corporation proposes to issue or sell Newly
Issued Securities, (ii) the total amount of capital to be raised by the
Corporation pursuant to the issuance or sale of Newly Issued
Securities, (iii) the number of Securities of such Newly Issued
Securities proposed to be issued or sold, (iv) the price and other
terms of their proposed issuance or sale, (v) the number of such Newly
Issued Securities which such holder is entitled to purchase (determined
as provided in subsection (a) above), and (vi) the period during which
such holder may elect to purchase such Newly Issued Securities, which
period shall extend for at least thirty (30) days following the receipt
by such holder of the Preemptive Notice (the "Preemptive Acceptance
Period"). Each holder of Series D Stock who desires to purchase Newly
Issued Securities shall notify the Corporation within the Preemptive
Acceptance Period of the number of Newly Issued Securities he wishes to
purchase, as well as the number, if any, of additional Newly Issued
Securities he would be willing to purchase in the event that all of the
Newly Issued Securities subject to the Preemptive Right are not
subscribed for by the other holders of Series D Stock.
(c) In the event a holder of Series D Stock declines to
subscribe for all or any part of its pro rata portion of any Newly
Issued Securities which are subject to the Preemptive Right (the
"Declining Preemptive Purchaser") during the Preemptive Acceptance
Period, then the other holders of Series D Stock shall have the right
to subscribe for all (or any declined part) of the Declining Preemptive
Purchaser's pro rata portion of such Newly Issued Securities (to be
divided among the other holders of Series D Stock desiring to exercise
such right on a ratable basis).
(d) Any such Newly Issued Securities which none of the holders
elect to purchase in accordance with the provisions of this Section 10,
may be sold by the Corporation, within a period of three (3) months
after the expiration of the Preemptive Acceptance Period, to any other
person or persons at not less than the price and upon other terms and
conditions not less favorable to the Corporation than those set forth
in the Preemptive Notice.
(e) The preemptive rights afforded by this Section 10, and any
obligation for the Corporation to offer such shares of Common Stock,
Preferred Stock or other
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securities convertible into or exchangeable for shares of Common Stock
may be waived by a written instrument signed by the holders of sixty
percent (60 %) of the Series D Stock.
11. Events of Default. An Event of Default shall mean any of the
following:
(i) Any failure by the Corporation to pay in cash any
dividend, if and when declared by the Board of Directors, on
the payment due dates and in the amounts provided pursuant to
Section 3 hereof, if such failure shall continue for any two
quarterly periods;
(ii) Any failure by the Corporation to satisfy its
redemption obligations pursuant to Section 7 hereof if any
such failure shall continue for a period of five days from the
appropriate redemption date;
(iii) Any failure by the Corporation to comply with
the provisions of Sections 4, 5, 6, 8, 9 or 10 hereof;
(iv) If any representation or warranty made by the
Corporation in the Stock Purchase Agreement dated as of August
27, 1999 or the exhibits or schedules thereto (the "Purchase
Agreements") is or shall be untrue in any material respect at
the time it was made, if such representation or warranty
remains untrue after 10 days' written notice, with such notice
delivered by hand or by first-class, certified or overnight
mail, postage prepaid, or by telecopier, from any holder of
Series D Stock, unless waived in writing by holders of not
less than 60 % of the outstanding shares of Series D Stock;
(v) Any failure by the Corporation to comply with, or
any breach by the Corporation of, any of the covenants,
agreements or obligations of the Corporation contained in the
Purchase Agreements which continues for a period of 10 days
after written notice, with such notice delivered by hand or by
first-class, certified or overnight mail, postage prepaid, or
by telecopier, from any holder of Series D Stock, unless
waived in writing by holders of not less than 60 % of the
outstanding shares of Series D Stock;
(vi) Default by the Corporation in the performance or
observance of any obligation or condition with respect to any
Indebtedness of the Corporation that is not cured or waived
within 90 days or if the effect of such default is to
accelerate the maturity of such Indebtedness or cause such
Indebtedness to be prepaid, purchased or redeemed or to permit
the holder or holders thereof, or any trustee or agent for
such holders, to cause such Indebtedness to become due and
payable prior to its expressed maturity or to cause such
Indebtedness to be prepaid, purchased or redeemed or to
realize upon any collateral or security for such Indebtedness,
unless such default shall
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have been waived by the appropriate person. Indebtedness of
any corporation shall mean the principal of (and premium, if
any) and unpaid interest on (i) indebtedness which is for
money borrowed from others; (ii) indebtedness guaranteed,
directly or indirectly, in any manner by such corporation, or
in effect guaranteed, directly or indirectly, by such
corporation through an agreement, contingent or otherwise, to
supply funds to or in any manner invest in the debtor or to
purchase indebtedness, or to purchase assets or services
primarily for the purpose of enabling the debtor to make
payment of the indebtedness or of assuring the owner of the
indebtedness against loss; (iii) all indebtedness secured by
any mortgage, lien, pledge, charge or other encumbrance upon
assets owned by such corporation, even if such corporation has
not in any manner become liable for the payment of such
indebtedness; (iv) all indebtedness of such corporation
created or arising under any conditional sale, lease or other
title retention agreement with respect to assets acquired by
such corporation even though the rights and remedies of the
seller, lessor or lender under such agreement or lease in the
event of default are limited to repossession or sale of such
assets and provided that obligations for the payment of rent
under a lease of premises from which the business of such
corporation will be conducted shall not constitute
indebtedness; and (v) renewals, extensions and refunding of
any such indebtedness; or
(vii) If the Corporation shall:
(a) become insolvent or generally fail to
pay, or admit in writing its inability to pay, its debts as they become
due;
(b) apply for, consent to, or acquiesce in,
the appointment of a trustee, receiver, sequestrator or other custodian
for the Corporation or any property thereof, or make a general
assignment for the benefit of creditors (any of which shall be referred
to herein as a "Receiver");
(c) in the absence of such application,
consent or acquiescence, permit or suffer to exist the appointment of a
Receiver, and such Receiver shall not be discharged within 60 calendar
days;
(d) commit any act of bankruptcy, permit or
suffer to exist the commencment of any bankruptcy reorganization, debt
arrangement or other case or proceeding under any bankruptcy or
insolvency law, or any dissolution, winding up or liquidation
proceeding in respect of the Corporation, and, if any such case or
proceeding is not commenced by the Corporation, such case or proceeding
shall be consented to or acquiesced in by the Corporation, or shall
result in the entry of an order for relief and shall remain for 30
calendar days undismissed; or
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(e) take any corporate or other action
authorizing, or in furtherance of, any of the foregoing.
B. The recitals and resolutions contained herein have not been
modified, altered or amended and are presently in full force and effect.
(The remainder of this page is intentionally left blank.)
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IN WITNESS WHEREOF, the undersigned has executed this Certificate this
___ day of September, 1999.
XXX.XXX, INC.
By:
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Xxxxxx X. May, Chief Executive Officer
ATTEST:
---------------------------------
Xxxxxxx Xxxxx, Secretary
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