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Exhibit 4.1
Execution Version
LOAN AND WARRANT AGREEMENT
This Loan and Warrant Agreement is entered into and dated as of
February 9, 2005 (as amended, supplemented
or otherwise modified from time
to time, together with the Disclosure
Schedule, this "AGREEMENT"), among
Zoltek Companies, Inc., a Missouri
corporation (the "BORROWER"), the Lenders
identified on the signature pages hereto
(each, a "LENDER" and collectively,
the "LENDERS"), and Omicron Master Trust, a
Bermuda business trust ("OMT"),
as administrative agent for the Lenders (in
such capacity, the
"ADMINISTRATIVE AGENT").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Borrower desires to borrow
certain sums from each of the
Lenders and, in consideration thereof issue
certain notes and warrants to
each of the Lenders, and each Lender,
severally and not jointly, desires to
make a loan to the Borrower and accept such
notes and warrants from the
Borrower, all pursuant to the terms set
forth herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants
contained
in this Agreement, and for other good and
valuable consideration the receipt
and adequacy of which are hereby
acknowledged, the Borrower and the Lenders
agree as follows:
ARTICLE I.
DEFINITIONS
1.1. Definitions. In addition to the terms defined elsewhere in
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this Agreement, when used herein the
following terms shall have the meanings
set forth in this Section 1.1:
"ACTION" means any action, suit, inquiry, notice of
violation, proceeding (including any partial proceeding such as
a
deposition) or investigation pending or threatened in writing
against or affecting the Borrower, any Subsidiary or any
property
of the Borrower or any Subsidiary before or by any court,
arbitrator, governmental or administrative agency, regulatory
authority (federal, state, county, local or foreign), stock
market,
stock exchange or trading facility.
"AFFILIATE" means, with respect to any Person, any other
Person that, directly or indirectly through one or more
intermediaries, controls or is controlled by or is under common
control with such Person, as such terms are used in and
construed
under Rule 144.
"BORROWER COUNSEL" means Thompson Coburn LLP.
"BUSINESS DAY" means any day except Saturday, Sunday and
any day that is a federal legal holiday or a day on which
banking
institutions in the State of New York are authorized or required
by
law or other governmental action to close.
"CAPITAL LEASE OBLIGATIONS" of any Person shall mean the
obligations of such Person to pay rent or other amounts under
any
lease of (or other arrangement conveying
the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and
accounted
for as capital leases on a balance sheet of such Person under
GAAP
and, for the purposes of this Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof
at
such time determined in accordance with GAAP.
"CASH
EQUIVALENTS" means:
(a) investments in Debt obligations maturing within one year
from the date of acquisition thereof to the
extent the principal thereof and
interest thereon is backed by the full
faith and credit of the United States
of America;
(b) investments in commercial paper maturing within 180 days
or less from the date of acquisition
thereof and having, at such date of
acquisition, the highest credit rating
obtainable from Standard & Poor's
Ratings Services, a division of The McGraw
Hill Companies, or any successor
thereto, or from Moody's Investors Service,
Inc. or any successor thereto;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing
within 180 days from the date of
acquisition thereof issued or guaranteed by
or placed with, and money market
deposit accounts issued or offered by, any
domestic office of any commercial
bank organized under the laws of the United
States of America or any State
thereof that has a combined capital and
surplus and undivided profits of not
less than $500,000,000, in each case
denominated in dollars; and
(d) money market mutual funds, at least 90% of the
investments of which are in cash or
investments contemplated by clauses (a),
(b) and (c) of this definition.
"CLOSING" means the closing of the loan and the purchase
and sale of Securities pursuant to Section 2.1.
"CLOSING DATE" means the Business Day immediately
following the date on which all the conditions set forth in
Sections 6.1 and 6.2 hereof are satisfied or waived by the
appropriate party.
"COMMISSION" means the U.S. Securities and Exchange
Commission.
"COMMON STOCK" means the common stock of the Borrower,
$0.01 par value per share, and any securities into which such
common stock may hereafter be reclassified.
"COMMON STOCK EQUIVALENTS" means any securities of the
Borrower or any Subsidiary which entitle the holder thereof to
acquire Common Stock at any time, including without limitation,
any
Debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exchangeable
for, or otherwise entitles the holder thereof to receive,
Common
Stock or other securities that entitle the holder to receive,
directly or indirectly, Common Stock.
"CONTINGENT OBLIGATION" with respect to any Person, any
obligation of such Person arising from any guaranty, indemnity
or
other assurance of payment or
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performance of any Debt, lease, dividend or other obligation
("primary
obligations") of any other Person (the "primary obligor") in
any
manner, whether directly or indirectly, including (i) the
direct
or indirect guaranty, endorsement (other than for collection or
deposit in the ordinary course of business), co-making,
discounting
with recourse or sale with recourse by such Person of the
obligation
of a primary obligor, (ii) the obligation to make take or pay
or
similar payments, if required, regardless of nonperformance by
any
other party or parties to an agreement, (iii) any obligation of
such
Person, whether or not contingent, (A) to purchase any such
primary
obligation or any property constituting direct or indirect
security
therefor, (B) to advance or supply funds (1) for the purchase
or
payment of any such primary obligations or (2) to maintain
working
capital or equity capital of the primary obligor or otherwise
to
maintain the net worth or solvency of the primary obligor, (C)
to
purchase property, securities or services primarily for the
purpose
of assuring the owner of any such primary obligation of the
ability
of the primary obligor to make payment of such primary
obligation
or (D) otherwise to assure or hold harmless the holder of such
primary obligation against loss in respect thereof; provided,
however, that the term "Contingent Obligation" shall not
include
(i) any product warranties extended in the ordinary course of
business, (ii) indemnities made to officers and directors of
any
such Person whether pursuant to the governing organizational
documents of such Person or otherwise and (iii) any
environmental
indemnities. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable
amount
of the primary obligation with respect to which such Contingent
Obligation is made (or, if less, the maximum amount of such
primary
obligation for which such Person may be liable pursuant to the
terms of the instrument evidencing such Contingent Obligation)
or,
if not stated or determinable, the maximum reasonably
anticipated
liability with respect thereto (assuming such Person is required
to
perform thereunder), as determined by such Person in good
faith.
"DEBT" as applied to a Person means, without duplication:
(i) all items which in accordance with GAAP would be included
in
determining total liabilities as shown on the liability side of
a
balance sheet of such Person as of the date as of which Debt is
to
be determined, including Capital Lease Obligations; (ii) all
Contingent Obligations of such Person; (iii) all reimbursement
obligations in connection with letters of credit or letter of
credit guaranties issued for the account of such Person; and
(iv)
in the case of a Borrower (without duplication), the Notes. The
Debt of a Person shall include any recourse Debt of any
partnership
or joint venture in which such Person is a general partner or
joint
venturer.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule
attached to this Agreement.
"DOLLARS" means U.S. dollars.
"EFFECTIVE DATE" means the date that a Registration
Statement is
first declared effective by the Commission.
"ELIGIBLE MARKET" means any of the New York Stock
Exchange, the American Stock Exchange, the Nasdaq National
Market
or the Nasdaq SmallCap Market.
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"EQUITY INTEREST" means (i) shares of corporate stock,
partnership interests, membership interests and any other
interest
that confers on a Person the right to receive a share of the
profits and
losses of, or a distribution of the assets of, the
issuing Person and (ii) all warrants, options or other rights
to
acquire any Equity Interest set forth in clause (i) of this
defined
term.
"EXCHANGE ACT" means the U.S. Securities Exchange Act of
1934, as amended.
"EVENT OF DEFAULT" has the meaning assigned to such term
in the Notes.
"GAAP" means U.S. generally accepted accounting principles
as in effect from time to time applied on a consistent basis
during
the periods involved.
"LENDER PERCENTAGE" means, with respect to any Lender as
of any date, the percentage equal to a fraction the numerator
of
which shall be the outstanding principal balance of such
Lender's
Notes and the denominator of which shall be the aggregate
outstanding principal balance of all Notes.
"LIEN" means (a) any lien, charge, claim, security
interest, encumbrance, right of first refusal or other
restriction,
wherever created or charged, (b) with respect to any property,
the
interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating
to
such property, and (c) in the case of securities, any purchase
option, call or similar right of a third party with respect to
such
securities.
"LOAN" has the meaning set forth in Section 2.1.
"LOAN AMOUNT" means, with respect to each Lender, the loan
amount indicated below such Lender's name on its signature page
of
this Agreement.
"MORTGAGE CONDITIONS ARE SATISFIED" means Borrower's
Subsidiary, Zoltek Properties, Inc. ("ZPI") has granted to the
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Lenders: (i) a first priority lien on ZPI's interest in the
real
estate owned by ZPI and commonly referred to as 3101 McKelvey
Road,
St. Louis, Missouri, (ii) a first priority lien on ZPI's
interest
in the leasehold estated owned by ZPI with respect to the real
estate commonly referred to as 11 Missouri Research Park, St.
Charles, Missouri and (iii) a second priority lien on ZPI's
interest in the real estate owned by ZPI and commonly referred
to
as 1221 Fulwiler Road, Abilene, Texas, in all such cases subject
to
all matters of record.
"NOTES" means, collectively, each of the senior
convertible promissory notes, due on the date that is 42 months
after the Closing Date, each issuable by the Borrower to one of
the
Lenders pursuant to the terms hereof, in the form of Exhibit A
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hereto.
"OPCO" means Zoltek Vegyipari Reszvenytarsasag, a
corporation formed under the laws of the Republic of Hungary,
whose
registered office is at H-2537 Nyergesujfalu, Varga Jozsef ter
1.,
registered by the Court of Komarom-Esztergom county acting as
Court
of Registration under registration No. 11-10-001447.
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"PERMITTED LIENS" means: (a) liens for taxes, assessments
or governmental charges not delinquent or being contested in
good
faith and by appropriate proceedings and for which adequate
reserves in accordance with GAAP are maintained on the books of
the
Borrower or the applicable Subsidiary; (b) liens arising out of
deposits in connection with workers' compensation, unemployment
insurance, old age pensions or other social security or
retirement
benefits legislation; (c) deposits or pledges to secure bids,
tenders, contracts (other than contracts for the payment of
money),
leases, statutory obligations, surety and appeal bonds, and
other
obligations of
like nature arising in the ordinary course of
business of the Borrower or a Subsidiary; (d) liens imposed by
law,
such as mechanics', workers', materialmens', carriers' or other
like liens arising in the ordinary course of business of the
Borrower or a Subsidiary which secure the payment of
obligations
which are not past due or which are being diligently contested
in
good faith by appropriate proceedings and for which adequate
reserves in accordance
with GAAP are maintained on the books of the
Borrower or the applicable Subsidiary; (e) liens existing on
the
Closing Date and disclosed in Section 1.1 of the Disclosure
Schedule, and any extensions, renewals or replacements thereof,
provided that no additional property shall be encumbered by
such
liens and the unpaid principal amount of the Debt secured
thereby
shall not be increased on or after the date of any such
extension,
renewal or replacement; (f) purchase money security interests
or
liens for the purchase of fixed assets to be used in the
business
of the Borrower or a Subsidiary, securing solely the fixed
assets
so purchased and the proceeds thereof; (g) capitalized leases
which
do not violate any provision of this Agreement; (h) liens of
commercial depository institutions, arising in the ordinary
course
of business, constituting a statutory or common law right of
setoff
against amounts on deposit with such institution; (i) liens in
favor of the Administrative Agent and the Lenders pursuant to
the
Transaction Documents; and (j) rights of way, zoning
restrictions,
easements and similar encumbrances affecting the Borrowers'
real
property which do not materially interfere with the use of such
property.
"PERSON" means an individual or corporation, partnership,
trust, incorporated or unincorporated association, joint
venture,
limited liability company, joint stock company, government (or
an
agency or subdivision thereof) or other entity of any kind.
"PROCEEDING" means an action, claim, suit, investigation
or proceeding (including, without limitation, an investigation
or
partial proceeding, such as a deposition), whether commenced or
threatened.
"REGISTRATION STATEMENT" means one or more registration
statements meeting the requirements of the Registration Rights
Agreement and covering the resale of Underlying Shares by the
Lenders who shall be named "selling shareholders" thereunder.
"REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement, dated as of the date of this Agreement, among
the
Borrower and the Lenders, in the form of Exhibit B hereto.
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"RELATED PARTIES" means, with respect to any specified
Person, such Person's Affiliates and the respective directors,
officers, employees, agents and advisors of such Person and
such
Person's Affiliates.
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"REQUIRED LENDERS" means collectively one or more Lenders
that made one or more Loans in an initial principal amount
representing greater than 50% of the aggregate initial
principal
amount of all Loans.
"REQUIRED MINIMUM" means, as of any date, the maximum
aggregate number of shares of Common Stock then issued or
potentially issuable in the future pursuant to the Transaction
Documents that the Borrower is obligated to issue, whether
contingently or otherwise, including, without limitation, any
Underlying Shares issuable upon exercise or conversion (as
applicable) in full of all Warrants and Notes and assuming that
any
previously unconverted Notes are held until the maturity date
thereof, and all interest on the Notes is paid with shares of
Common Stock.
"RESTRICTED PAYMENT" means, as to any Person, (a) any
dividend or other distribution by such Person (whether in cash,
securities or other property) with respect to any Equity
Interests
of such Person, (b) any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit,
on
account of the purchase, redemption, retirement, acquisition,
cancellation or termination of any such Equity Interest, (c)
the
acquisition for value by such Person of any Equity Interests
issued
by such Person or any other Person that controls such Person
and
(d) any payment by such Person to its officers or directors
other
than (i) in compliance with existing Borrower stock option
plans,
(ii) salaries in the ordinary course of business, and (iii)
payments required by the terms of the 2003 Debentures (as
defined
in the Notes), the 2004 Debentures (as defined in the Notes),
the
2004 Notes (as defined in the Notes) and the Notes, in each case
to
the extent held by such officers and directors.
"RULE 144" means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended
from
time to time, or any similar rule or regulation hereafter
adopted
by the Commission having substantially the same effect as such
Rule.
"SECURITIES" means the Notes, the Warrants and the
Underlying Shares issuable under the Notes and the Warrants.
"SECURITIES ACT" means the Securities Act of 1933, as
amended.
"SHAREHOLDER AGREEMENT" has the meaning set forth in
Section 2.2(a)(iv).
"STRATEGIC TRANSACTION" means a transaction or
relationship in which (1) the Borrower issues shares of Common
Stock to a Person which the Board of Directors of the Borrower
determines in good faith is, itself or through its Subsidiaries,
an
operating company in a business synergistic with the business
of
the Borrower and (2) the Borrower expects to receive benefits
in
addition to the investment of funds, but shall not include a
transaction in which the Borrower issues securities primarily
for
the purpose of raising capital or to an entity whose primary
business is investing in securities.
"SUBSIDIARY" means, with respect to any Person (the
"PARENT") at any date, any corporation, limited liability
company,
partnership, association or other entity the accounts of which
would be consolidated with those of the parent in the parent's
6
consolidated financial statements if such financial statements
were
prepared in accordance with GAAP as of such date, as well as
any
other corporation, limited liability company, partnership,
association or other entity of which securities or other
ownership
interests representing 50% or more of the equity or 50% or more
of
the ordinary voting power is or, in the case of a partnership,
50%
or more of the general partnership interests are, as of such
date,
owned, controlled or held by the parent or one or more
subsidiaries
of the parent. Unless otherwise expressly provided,
"Subsidiary"
shall mean a Subsidiary of the Borrower.
"TRADING DAY" means (i) a day on which the Common Stock is
traded on a Trading Market (other than the OTC Bulletin Board),
or
(ii) if the Common Stock is not traded on a Trading Market
(other
than the OTC Bulletin Board), a day on which the Common Stock
is
traded in the over the counter market, as reported by the OTC
Bulletin Board,
or (iii) if the Common Stock is not traded on any
Trading Market and not quoted on the OTC Bulletin Board, a day
on
which the Common Stock is quoted in the over the counter market
as
reported by the National Quotation Bureau Incorporated (or any
similar organization or agency succeeding to its functions of
reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i), (ii) and
(iii)
hereof, then Trading Day shall mean a Business Day.
"TRADING MARKET" means Nasdaq National Market or any
Eligible Market on which the Common Stock is then listed or
quoted.
"TRANSACTION DOCUMENTS" means this Agreement, the Notes,
the Warrants, the Registration Rights Agreement and any other
documents or agreements executed or delivered in connection
with
the transactions contemplated hereunder.
"UNDERLYING SHARES" means the shares of Common Stock
issuable upon conversion of the Notes, as payment of interest
thereunder, and upon exercise of the Warrants, and in
satisfaction
of any other obligation of the Borrower to issue shares of
Common
Stock pursuant to the Transaction Documents.
"WARRANTS" means the Common Stock purchase warrants in the
form of Exhibit C, issuable pursuant to Section 2.2(a)(ii).
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ARTICLE II.
LOAN; PURCHASE AND SALE
2.1. Closing. Subject to the terms and conditions set forth in
this
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Agreement, at the Closing each Lender shall
severally make a loan to the
Borrower in a principal amount equal to the
Loan Amount with respect to such
Lender (with respect to each Lender, a
"LOAN") and, in consideration
thereof, Borrower shall execute and deliver
to such Lender a Note evidencing
such Loan and a Warrant. The Closing shall
take place at the offices of
Proskauer Rose LLP, 1585 Broadway, New
York, NY 10036 on the date this
Agreement is executed and delivered by the
parties or at such other location
or time as the parties may agree.
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2.2. Closing Deliveries.
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(a) At the Closing, the Borrower shall deliver or cause to be
delivered to each Lender the following,
appropriately dated (the "BORROWER
DELIVERABLES"):
(i) a Note, in the aggregate
principal amount of the Loan
Amount indicated below such Lender's name on its signature page
of
this Agreement under the heading "Loan Amount", registered in the
name
of such Lender;
(ii) a Warrant,
duly executed by the Borrower and
registered in the name of such Lender, pursuant to which such
Lender
shall have the right to acquire the number of shares of Common
Stock
indicated below such Lender's name on its signature page of
this
Agreement under the heading "Warrant Shares";
(iii) the Registration
Rights Agreement, duly executed by
the Borrower;
(iv) a letter
agreement, duly executed by Zsolt Rumy,
Chief Executive Officer of the Borrower, in his individual
capacity,
and accepted and agreed to by the Borrower (as amended,
supplemented
or otherwise modified from time to time, the "SHAREHOLDER
AGREEMENT");
(v)
evidence of proper applications made to, and approvals
received from, each Trading Market with respect to the trading
of
Underlying Securities thereon;
(vi) the legal
opinion of Borrower Counsel, in agreed form,
addressed to the Administrative Agent and such Lender; and
(vii) any other
document reasonably requested by the
Administrative Agent or such Lender.
(b) At the Closing, each Lender shall deliver or cause to be
delivered to the Borrower the
following:
(i) the
Loan Amount indicated below such Lender's name on
the signature page of this Agreement, in United States dollars and
in
immediately available funds, by wire transfer to an account
designated
in writing by the Borrower for such purpose; and
(ii) the
Registration Rights Agreement, duly executed by
such Lender.
ARTICLE III.
REPRESENTATIONS AND
WARRANTIES
3.1. Representations and Warranties of the Borrower. Subject to
the
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qualifications and disclosures set forth
beside the specific reference to
this Agreement in the Disclosure Schedule
(the parties hereto agreeing that
a reference in the Disclosure Schedule to a
particular Section shall only
apply to the representation in such
Section), the Borrower hereby makes the
following representations and warranties to
the Administrative Agent and
each Lender:
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(a) Subsidiaries. The Borrower does not directly or indirectly
------------
control or own any Equity Interest in any
Subsidiary, other than as listed
in Section 3.1(a) of the Disclosure
Schedule. Except as disclosed in Section
3.1(a) of the Disclosure Schedule, the
Borrower owns, directly or
indirectly, all of the Equity Interests of
each Subsidiary free and clear of
any Lien, and all the issued and
outstanding Equity Interests of each
Subsidiary are validly issued and are fully
paid, non-assessable and free of
preemptive and similar rights.
(b) Organization and Qualification. Each of the Borrower and
------------------------------
each Subsidiary is an entity duly
incorporated or otherwise organized, validly
existing and in good standing under the
laws of the jurisdiction of its
incorporation or organization (as
applicable), with the requisite power and
authority to own and use its properties and
assets and to carry on its
business as currently conducted. Neither
the Borrower nor any Subsidiary is
in violation of any of the provisions of
its respective certificate or
articles of incorporation, bylaws or other
organizational or charter
documents. Each of the Borrower and each
Subsidiary is duly qualified to
conduct business and is in good standing as
a foreign corporation or other
entity in each jurisdiction in which the
nature of the business conducted or
property owned by it makes such
qualification necessary, except where the
failure to be so qualified or in good
standing, as the case may be, could
not, individually or in the aggregate, have
or reasonably be expected to
result in (i) an adverse effect on the
legality, validity or enforceability
of any Transaction Document, (ii) a
material and adverse effect on the
results of operations, assets, prospects,
business or condition (financial
or otherwise) of the Borrower and the
Subsidiaries, taken as a whole, or
(iii) an adverse impairment to the
Borrower's ability to perform on a timely
basis its obligations under any Transaction
Document (any of (i), (ii) or
(iii), a "MATERIAL ADVERSE EFFECT").
(c) Authorization; Enforcement. The Borrower and each
--------------------------
Subsidiary party to a Transaction Document
has the requisite power and
authority to enter into and to consummate
the transactions contemplated by
each of the Transaction Documents and
otherwise to carry out its obligations
thereunder. The execution and delivery by
the Borrower and each Subsidiary
party to a Transaction Document of each of
the Transaction Documents to
which it is a party and the consummation by
it of the transactions
contemplated thereunder have been duly
authorized by all necessary action on
the part of the Borrower or such
Subsidiary, as the case may be, and no
further consent or action is required by
the Borrower, such Subsidiary, or
their respective Boards of Directors,
members, partners, managers or
shareholders, as applicable. Each of the
Transaction Documents to which the
Borrower or any Subsidiary is a party has
been (or upon delivery will be)
duly executed by the Borrower or such
Subsidiary, as the case may be, and,
when delivered in accordance with the terms
hereof, will constitute the
valid and binding obligation of the
Borrower and such Subsidiary, to the
extent a party thereto, enforceable against
the Borrower or such Subsidiary,
as the case may be, in accordance with its
terms except as such
enforceability may be limited by applicable
bankruptcy, insolvency,
reorganization, moratorium, liquidation or
similar laws relating to, or
affecting generally the enforcement of,
creditors' rights and remedies or by
equitable principles of general
application.
(d) No Conflicts. The execution, delivery and performance
------------
of the Transaction Documents by the
Borrower and each Subsidiary party to a
Transaction Document and the consummation
by the Borrower and such
Subsidiaries of the transactions
contemplated thereby do not and will not
(i) conflict with or violate any provision
of the Borrower's or any
Subsidiary's certificate or articles of
incorporation, bylaws or other
organizational or charter
9
documents, or (ii) conflict with, or
constitute a default (or an event that
with notice or lapse of time or both would
become a default) under, or give
to others any rights of termination,
amendment, acceleration or cancellation
(with or without notice, lapse of time or
both) of, any agreement, contract,
credit facility, Debt or other instrument
(evidencing Debt of the Borrower
or a Subsidiary or otherwise) or other
understanding to which the Borrower
or any Subsidiary is a party or by which
any property or asset of the
Borrower or any Subsidiary is bound or
affected, or (iii) result in a
violation of any law, rule, regulation,
order, judgment, injunction, decree
or other restriction of any court or
governmental authority to which the
Borrower or any Subsidiary is subject
(including federal and state
securities laws and regulations) and the
rules and regulations of any
self-regulatory organization to which the
Borrower or its securities are
subject, or by which any property or asset
of the Borrower or a Subsidiary
is bound or affected; except in the case of
each of clauses (ii) and (iii),
such as could not, individually or in the
aggregate, have or reasonably be
expected to result in a Material Adverse
Effect. Payments of cash on account
of principal of or interest under the
Notes, upon any Event of Default under
the Notes, as a result of liquidated
damages under any Transaction Document
or upon a Buy-In under and as such term is
defined in a Warrant will not
require the consent of, any payment to, or
the springing of any Lien in
favor of any lender to or creditor of the
Borrower or any Subsidiary (under
a credit facility, loan agreement or
otherwise) and will not result in a
default under any such credit facilities,
loans or other agreements.
(e) Filings, Consents and Approvals. Neither the Borrower
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nor any Subsidiary is required to obtain
any consent, waiver, authorization
or order of, give any notice to, or make
any filing or registration with,
any court or other federal, state, local or
other governmental authority or
other Person in connection with the
execution, delivery and performance by
it of any Transaction Document to which it
is a party, other than (i) the
filing with the Commission of one or more
Registration Statements in
accordance with the requirements of the
Registration Rights Agreement, (ii)
the application(s) to the Trading Market on
which the Common Stock is listed
for trading for the listing of the
Underlying Shares for trading thereon in
the time and manner required thereby which
have been made and obtained prior
to the Closing Date, and (iii) the
requirements, disclosed in Section 3.1(e)
of the Disclosure Schedule, if any.
(f) Issuance of the Securities. Each of the Securities
--------------------------
have been duly authorized and, when issued
and paid for in accordance with
the Transaction Documents or otherwise,
have been or, when issued, will be
duly and validly issued, fully paid and
nonassessable, free and clear of all
Liens. The Borrower has reserved from its
duly authorized capital stock a
number of shares of Common Stock issuable
upon conversion of the Notes (as
may be issued on account of interest
thereunder) and exercise of the
Warrants, which number of reserved shares
is not less than the Required
Minimum calculated as of the date
hereof.
(g) Capitalization. The number of shares and type of all
--------------
authorized, issued and outstanding capital
stock of the Borrower, and all
shares of Common Stock reserved for
issuance under the Borrower's various
option and incentive plans and all
warrants, debentures and Common Stock
Equivalents (on a pro forma basis
immediately after giving effect to the
transactions contemplated by the
Transaction Documents), is set forth in
Section 3.1(g) of the Disclosure Schedule.
Except as set forth in Section
3.1(g) of the Disclosure Schedule, no
securities of the Borrower are
entitled to preemptive or similar rights,
and no Person has any
10
right of first refusal, preemptive right,
right of participation, or any
similar right to participate in the
transactions contemplated by the
Transaction Documents. Except as a result
of the purchase and sale of the
Securities and except as set forth in
Section 3.1(g) of the Disclosure
Schedule, there are no outstanding options,
warrants, scrip rights to
subscribe to, calls or commitments of any
character whatsoever relating to,
or securities, rights or obligations
convertible into or exchangeable for,
or giving any Person any right to subscribe
for or acquire, any shares of
Common Stock, or any contract, commitment,
understanding or arrangement by
which the Borrower is or may become bound
to issue additional shares of
Common Stock or Common Stock Equivalents.
The issue and sale of the
Securities will not, immediately or with
the passage of time, obligate the
Borrower to issue shares of Common Stock or
other securities to any Person
(other than the Lenders) and will not
result in a right of any holder of
Borrower securities to adjust the exercise,
conversion, exchange or reset
price under such securities.
(h) SEC Reports; Financial Statements. The Borrower has
---------------------------------
filed all reports required to be filed by
it under the Exchange Act,
including pursuant to Section 13(a) or
15(d) thereof, for the twelve months
preceding the date hereof (or such shorter
period as the Borrower was
required by law to file such material) (the
foregoing materials being
collectively referred to herein as the "SEC
REPORTS" and, together with this
Agreement and Section 3.1(h) of the
Disclosure Schedule to this Agreement,
the "DISCLOSURE MATERIALS") on a timely
basis or has timely filed a valid
extension of such time of filing and has
filed any such SEC Reports prior to
the expiration of any such extension. As of
their respective dates, the SEC
Reports complied in all material respects
with the requirements of the
Securities Act and the Exchange Act and the
rules and regulations of the
Commission promulgated thereunder, and none
of the SEC Reports, when filed,
contained any untrue statement of a
material fact or omitted to state a
material fact required to be stated therein
or necessary in order to make
the statements therein, in light of the
circumstances under which they were
made, not misleading. The financial
statements of the Borrower included in
the SEC Reports comply in all material
respects with applicable accounting
requirements and the rules and regulations
of the Commission with respect
thereto as in effect at the time of filing.
Such financial statements have
been prepared in accordance GAAP, except as
may be otherwise specified in
such financial statements or the notes
thereto, and fairly present in all
material respects the financial position of
the Borrower and its
consolidated Subsidiaries as of and for the
dates thereof and the results of
operations and cash flows for the periods
then ended, subject, in the case
of unaudited statements, to normal,
immaterial, year-end audit adjustments
and the absence of footnotes. All material
agreements to which the Borrower
or any Subsidiary is a party or to which
the property or assets of the
Borrower or any Subsidiary are subject are
included as part of or
specifically identified in the SEC
Reports.
(i) Press Releases. The press releases disseminated by the
--------------
Borrower during the two (2) years preceding
the date of this Agreement taken
as a whole do not contain any untrue
statement of a material fact or omit to
state a material fact required to be stated
therein or necessary in order to
make the statements therein, in light of
the circumstances under which they
were made, not misleading.
(j) Material Changes. Since the date of the latest audited
----------------
financial statements included within the
SEC Reports, except as specifically
disclosed in the SEC Reports, (i) there has
been no event, occurrence or
development that has had or that could
reasonably be expected
11
to result in a Material Adverse Effect,
(ii) the Borrower has not incurred
any liabilities (contingent or otherwise)
other than (A) trade payables and
accrued expenses incurred in the ordinary
course of business consistent with
past practice and (B) liabilities not
required to be reflected in the
Borrower's financial statements pursuant to
GAAP or not required to be
disclosed in filings made with the
Commission, (iii) the Borrower has not
altered its method of accounting or the
identity of its auditors, (iv) the
Borrower has not declared or made any
dividend or distribution of cash or
other property to its shareholders or
purchased, redeemed or made any
agreements to purchase or redeem any shares
of its capital stock, and (v)
the Borrower has not issued any equity
securities to any officer, director
or Affiliate, except pursuant to existing
Borrower stock incentive plans.
Except as noted in the Borrower's SEC
Reports, the Borrower does not have
pending before the Commission any request
for confidential treatment of
information.
(k) Litigation. Except as set forth in Section 3.1(k) of
----------
the Disclosure Schedule, there is no Action
which (i) adversely affects or
challenges the legality, validity or
enforceability of any of the
Transaction Documents or the Securities or
(ii) except as otherwise set
forth in the SEC Reports, would reasonably
be expected, individually or in
the aggregate, to result in a Material
Adverse Effect. Neither the Borrower
nor any Subsidiary, nor any director or
officer thereof, is or has been the
subject of any Action involving a claim of
violation of or liability under
federal or state securities laws or a claim
of breach of fiduciary duty.
There has not been, and to the knowledge of
the Borrower, there is not
pending or contemplated, any investigation
by the Commission involving the
Borrower or any current or former director
or officer of the Borrower. The
Commission has not issued any stop order or
other order suspending the
effectiveness of any registration statement
filed by the Borrower or any
Subsidiary under the Exchange Act or the
Securities Act.
(l) Labor Relations. No material labor dispute exists or,
---------------
to the knowledge of the Borrower, is
imminent with respect to any of the
employees of the Borrower or any
Subsidiary.
(m) Compliance. Except as set forth in Section 3.1(m) of
----------
the Disclosure Schedule, neither the
Borrower nor any Subsidiary (i) is in
default under or in violation of (and no
event has occurred that has not
been waived that, with notice or lapse of
time or both, would result in a
default by the Borrower or any Subsidiary
under), nor has the Borrower or
any Subsidiary received notice of a claim
that it is in default under or
that it is in violation of, any indenture,
loan or credit agreement or any
other agreement or instrument to which it
is a party or by which it or any
of its properties is bound (other than
defaults or violations that have been
cured or waived), (ii) is in violation of
any order of any court, arbitrator
or governmental body, or (iii) is or has
been in violation of any statute,
rule or regulation of any governmental
authority, including without
limitation all foreign, federal, state and
local laws relating to taxes,
environmental protection, occupational
health and safety, product quality
and safety and employment and labor
matters, except in each case as could
not, individually or in the aggregate, have
or could not reasonably be
expected to result in a Material Adverse
Effect. The Borrower is in
compliance with the applicable requirements
of the Sarbanes-Oxley Act of
2002, as amended, and the rules and
regulations thereunder promulgated by
the Commission, except where such
noncompliance could not have or reasonably
be expected to result in a Material Adverse
Effect. The Borrower is not, to
the best of its knowledge (after due
inquiry), in default in any material
12
respect with the terms, conditions or
covenants set forth in (i) the
Securities Purchase Agreement, or the
debentures or warrants issued pursuant
thereto, among the Borrower and the lenders
therein, dated as of December
19, 2003, (ii) the Securities Purchase
Agreement, or the debentures or
warrants issued pursuant thereto, among the
Borrower and the lenders
therein, dated as of March 11, 2004 or
(iii) the Loan and Warrant Agreement,
or the notes and warrants issued pursuant
thereto, among the Borrower and
the lenders therein dated as of October 14,
2004.
(n) Regulatory Permits. The Borrower and the Subsidiaries
------------------
possess all certificates, authorizations
and permits issued by the
appropriate federal, state, local or
foreign regulatory authorities
necessary to conduct their respective
businesses as described in the SEC
Reports, except where the failure to
possess such permits could not,
individually or in the aggregate, have or
reasonably be expected to result
in a Material Adverse Effect ("MATERIAL
PERMITS"), and neither the Borrower
nor any Subsidiary has received any notice
of proceedings relating to the
revocation or modification of any Material
Permit.
(o) Title to Assets. The Borrower and the Subsidiaries
---------------
have good and marketable title in fee
simple to all real property owned by
them that is material to the business of
the Borrower and the Subsidiaries
and good and marketable title in all
personal property owned by them that is
material to the business of the Borrower
and the Subsidiaries, in each case
free and clear of all Liens, except for
Permitted Liens, which are set forth
in Section 3.1(k) of the Disclosure
Schedule, and except for such Liens as
do not materially affect the value of such
property and do not materially
interfere with the use made and proposed to
be made of such property by the
Borrower and the Subsidiaries. Any real
property and facilities held under
lease by the Borrower and the Subsidiaries
that are material to the business
of the Borrower and the Subsidiaries are
held by them under valid,
subsisting and enforceable leases of which
the Borrower and the Subsidiaries
are in compliance.
(p) Patents and Trademarks. The Borrower and the
----------------------
Subsidiaries own, or have rights to use,
all patents, patent applications,
trademarks, trademark applications, service
marks, trade names, copyrights,
licenses and other similar rights that are
necessary or material for use in
connection with their respective businesses
as described in the SEC Reports
and which the failure to so have could not,
individually or in the
aggregate, have or reasonably be expected
to result in a Material Adverse
Effect (collectively, the "INTELLECTUAL
PROPERTY RIGHTS"). Neither the
Borrower nor any Subsidiary has received a
written notice that any
Intellectual Property Right violates or
infringes upon the rights of any
Person. Except as set forth in the SEC
Reports, to the knowledge of the
Borrower, all such Intellectual Property
Rights are enforceable and there is
no existing infringement by another Person
of any of the Intellectual
Property Rights.
(q) Insurance. The Borrower and the Subsidiaries are
---------
insured by insurers of recognized financial
responsibility against such
losses and risks and in such amounts as are
prudent and customary in the
businesses in which the Borrower and the
Subsidiaries are engaged. Neither
the Borrower nor any Subsidiary has any
reason to believe that it will not
be able to renew its existing insurance
coverage as and when such coverage
expires or to obtain similar coverage from
similar insurers as may be
necessary to continue its business without
a significant increase in cost.
13
(r) Transactions With Affiliates and Employees. Except as
------------------------------------------
set forth in the SEC Reports, none of the
officers or directors of the
Borrower or any Subsidiary and, to the
knowledge of the Borrower, none of
the employees of the Borrower or any
Subsidiary is presently a party to any
transaction with the Borrower or any
Subsidiary (other than for services as
employees, officers and directors),
including any contract, agreement or
other arrangement providing for the
furnishing of services to or by,
providing for rental of real or personal
property to or from, or otherwise
requiring payments to or from any officer,
director or such employee or, to
the knowledge of the Borrower, any entity
in which any officer, director, or
any such employee has a substantial
interest or is an officer, director,
trustee or partner.
(s) Internal Accounting Controls. The Borrower and the
----------------------------
Subsidiaries maintain a system of internal
accounting controls sufficient to
provide reasonable assurance that (i)
transactions are executed in
accordance with management's general or
specific authorizations, (ii)
transactions are recorded as necessary to
permit preparation of financial
statements in conformity with generally
accepted accounting principles and
to maintain asset accountability, (iii)
access to assets is permitted only
in accordance with management's general or
specific authorization, and (iv)
the recorded accountability for assets is
compared with the existing assets
at reasonable intervals and appropriate
action is taken with respect to any
differences. The Borrower has established
disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14
and 15d-14) for the Borrower and
designed such disclosure controls and
procedures to ensure that material
information relating to the Borrower,
including its Subsidiaries, is made
known to the certifying officers by others
within those entities,
particularly during the period in which the
Borrower's Form 10-K or 10-Q, as
the case may be, is being prepared. The
Borrower's certifying officers have
evaluated the effectiveness of the
Borrower's controls and procedures in
accordance with Item 307 of Regulation S-K
under the Exchange Act for the
Borrower's most recently ended fiscal
quarter or fiscal year-end (such date,
the "EVALUATION DATE"). The Borrower
presented in its most recently filed
Form 10-K or Form 10-Q the conclusions of
the certifying officers about the
effectiveness of the disclosure controls
and procedures based on their
evaluations as of the Evaluation Date.
Since the Evaluation Date, there have
been no significant changes in the
Borrower's internal controls (as such
term is defined in Item 308(c) of
Regulation S-K under the Exchange Act) or,
to the Borrower's knowledge, in other
factors that could significantly
affect the Borrower's internal
controls.
(t) Solvency. Based on the financial condition of the
--------
Borrower as of the Closing Date (and
assuming that the Closing shall have
occurred), (i) the Borrower's fair saleable
value of its assets exceeds the
amount that will be required to be paid on
or in respect of the Borrower's
existing Debts and other liabilities
(including known contingent
liabilities) as they mature; (ii) the
Borrower's assets do not constitute
unreasonably small capital to carry on its
business for the current fiscal
year as now conducted and as proposed to be
conducted including its capital
needs taking into account the particular
capital requirements of the
business conducted by the Borrower, and
projected capital requirements and
capital availability thereof; and (iii) the
current cash flow of the
Borrower, together with the proceeds the
Borrower would receive, were it to
liquidate all of its assets, after taking
into account all anticipated uses
of the cash, would be sufficient to pay all
amounts on or in respect of its
Debt when such amounts are required to be
paid. The Borrower does not intend
to incur Debts beyond its ability to pay
such Debts as they mature (taking
into account the timing and amounts of cash
to be payable on or in respect
of its Debt).
14
(u) Certain Fees. Except as set forth in Section 3.1(u) of
------------
the Disclosure Schedule, no brokerage or
finder's fees or commissions are or
will be payable by the Borrower to any
broker, financial advisor or
consultant, finder, placement agent,
investment banker, bank or other Person
with respect to the transactions
contemplated by this Agreement. Neither the
Administrative Agent nor any Lender shall
have any obligation with respect
to any fees or with respect to any claims
(other than such fees or
commissions owed by such Person pursuant to
written agreements executed by
such Person which fees or commissions shall
be the sole responsibility of
such Person) made by or on behalf of other
Persons for fees of a type
contemplated in this Section that may be
due in connection
