EXHIBIT 4.2
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of February 12,
1999, between DynamicWeb Enterprises, Inc., a New Jersey
corporation with principal executive offices located at Fairfield
Commons, 271 Route 00 Xxxx, Xxxxxxxx X, Xxxxx 000, Xxxxxxxxx, Xxx
Xxxxxx 00000 (the "Company"), and the undersigned ("Buyer").
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase from Company, and
the Company desires to issue and sell to the Buyer, upon the
terms and subject to the conditions of this Agreement, (i) 500
shares of the Company's Series B 6% Convertible Preferred Stock,
$.001 par value (the "Initially Issued Preferred Stock"), having
the rights, preferences and privileges set forth in the
Certificate of Amendment to the Certificate of Incorporation of
DynamicWeb Enterprises, Inc. (the "Certificate of
Designations") in the form attached hereto as Annex I and 45,000
warrants (the "Initially Issued Warrants") in the form attached
hereto as Annex II on the Initial Funding Date (as defined
herein) (the Initially Issued Preferred Stock and Initially
Issued Warrants are hereinafter defined as the "First Tranche");
and (ii) 1,000 shares of the Company's Series B 6% Convertible
Preferred Stock, par value $0.001 (the "Subsequently Issued
Preferred Stock" and together with the Initially Issued Preferred
Stock, collectively referred to as the "Preferred Stock") and
90,000 Warrants (the "Subsequently Issued Warrants" and together
with the Initially Issued Warrants, collectively referred to as
the "Warrants") on the Second Funding Date (as defined herein)
(the Subsequently Issued Preferred Stock and Subsequently Issued
Warrants are hereinafter defined as the "Second Tranche");
WHEREAS, upon the terms and subject to the conditions
set forth in the Certificate of Designations, the Preferred Stock
is convertible into shares of the Company's common stock, $.0001
par value ("Common Stock");
WHEREAS, the Initially Issued Warrants, upon the terms
and subject to the conditions therein, will for a period of five
(5) years from the Initial Funding Date be exercisable to
purchase 45,000 shares of Common Stock, and the Subsequently
Issued Warrants, upon the terms and subject to the conditions
therein, will for a period of five (5) years from the Second
Funding Date be exercisable to purchase 90,000 shares of Common
Stock;
NOW THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
I. PURCHASE AND SALE OF PREFERRED SHARES
A. Transaction. Buyer hereby agrees to purchase
(subject to the provisions of Section I(B)) from the Company, and
the Company has offered and hereby agrees to issue and sell to
the Buyer in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933,
as amended (the "Securities Act"), the Preferred Stock
(collectively, together with any Common Stock issued as a
dividend thereon or otherwise with respect thereto in accordance
with the terms thereof, the "Preferred Shares") and the Warrants.
B. Purchase Price; Form of Payment. The purchase
price for the Initially Issued Preferred Stock and the Initially
Issued Warrants to be purchased by Buyer hereunder shall be equal
to $500,000 (the "Initial Purchase Price"). If the Second
Funding Requirements (as defined herein) have been satisfied or
performed in full, as determined by Buyer, as the case may be,
then within fifteen (15) business days thereafter, the Company
shall sell and issue to Buyer and Buyer shall purchase the Second
Tranche from the Company on the same terms and pursuant to the
same conditions contained herein and in Certificate of
Designations, the Initially Issued Warrants and the Registration
Rights Agreement of even date herewith between the Company and
Buyer, a copy of which is annexed hereto as Annex III (the
"Registration Rights Agreement") (the date of the closing of such
purchase, issuance and sale of the Subsequently Issued Preferred
Stock and Subsequently Issued Warrants is referred to herein as
the "Second Funding Date"). The purchase price for the
Subsequently Issued Preferred Stock and the Subsequently Issued
Warrants to be purchased in the Second Tranche on the Second
Funding Date by the Buyer hereunder shall be $1,000,000 (the
"Second Purchase Price"). The Initially Issued Warrants and the
Subsequently Issued Warrants shall be exercisable at a purchase
price per share equal to $8.93.
For purposes of this Agreement, the term "Second
Funding Requirements" means that each of the following conditions
precedent have been satisfied and fulfilled:
(i) the Company has satisfied and performed each of its
obligations and covenants contained in this Agreement and
the Other Documents (for purposes of this Agreement, the
term "Other Documents" means, the Certificate of
Designations, the Warrants, the Escrow Instructions (as
defined herein) and the Registration Rights Agreement) that
are required to be performed by the Company up to and
including the Second Funding Date;
(ii) each of the conditions precedent set forth in
Article IX hereof shall have been satisfied and fulfilled in
all respects up to and including the Second Funding Date;
(iii) the Company shall have timely filed the
registration statement (the "Registration Statement"
required to be filed by the Company pursuant to Section 2 of
the Registration Rights Agreement (as defined herein);
(vi) a registration statement (the "Series A
Registration Statement") in connection with the Company's
Series A 6% Convertible Preferred Stock, $.001 par value
shall have been declared effective by the Commission within
60 days from the Initial Funding Date;
(v) on each Trading day during the 30 day period
immediately following the Effective Date (the "30 Day
Period"), the closing bid price of Common Stock, as reported
on the National Association of Securities Dealers, Inc. Over
the Counter Bulletin Board Service (the "NASD/BBS"), shall
have been at least equal to $6.00 per share (as adjusted for
any stock splits or stock dividends and like events);
(vi) during the 30 Day Period, the Common Stock shall
have had an average trading volume (as adjusted for any
stock splits or stock dividends and like events), as
reported on the NASD/BBS of at least 50,000 shares per
trading day.
Buyer shall pay the Initial Purchase Price or the
Second Purchase Price, as the case may be, by wire transfer of
immediately available funds to the escrow agent (the "Escrow
Agent") identified in those certain Escrow Instructions of even
date herewith, a copy of which is attached hereto as Annex IV
(the "Escrow Instructions"). Simultaneously against receipt by
the Escrow Agent of the Initial Purchase Price or the Second
Purchase Price, as the case may be, the Company shall deliver one
or more duly authorized, issued and executed certificates (I/N/O
Buyer or, if the Company otherwise has been notified, I/N/O
Buyer's nominee) evidencing the number of Preferred Stock and
Warrants which the Buyer is purchasing in the First Tranche and
Second Tranche, as the case may be, to the Escrow Agent or its
designated depository. By executing and delivering this
Agreement, Buyer and the Company each hereby agrees to observe
the terms and conditions of the Escrow Instructions, all of which
are incorporated herein by reference as if fully set forth
herein.
C. Buyer's Option. Notwithstanding the above, until
a date ninety (90) days following the date that the Series A
Registration Statement is declared effective by the Commission,
should the Company be unable to satisfy the Second Funding
Requirements, the Buyer the option to purchase, and the Buyer
shall have the right, but not the obligation to purchase, the
Second Tranche on the same terms and pursuant to the same
conditions contained in this Agreement and the Other Documents.
The purchase price for the Second Tranche shall be $1,000,000.
D. Method of Payment. Payment into escrow of the
Purchase Price shall be made by wire transfer of immediately
available funds to:
X.X. Xxxxxx Services, Inc.
000 Xxxxxxx Xxxxxxxxxx
Xxxxxx, Xxxxxxxx 00000-0000
ABA# 000000000
SWIFT# MGTCUS33
For the Account of: Weil, Gotshal & Xxxxxx LLP
Special Account
Account# 000-00-000
Reference# 73615.0018
Simultaneously with the execution of this Agreement, the Buyer
shall deposit with the Escrow Agent the Initial Purchase Price
and the Company shall deposit with the Escrow Agent the Initially
Issued Preferred Stock and the Initially Issued Warrants
representing the securities to be purchased, issued and sold in
the First Tranche. On the Second Funding Date, the Buyer shall
deposit with the Escrow Agent the Second Purchase Price and the
Company shall deposit with the Escrow Agent the Subsequently
Issued Preferred Shares and the Subsequently Issued Warrants
representing the securities to be purchased, issued and sold in
the Second Tranche.
II. BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
Buyer represents and warrants to and covenants and
agrees with the Company as follows:
A. Buyer is purchasing the Preferred Stock, the
Warrants, the Common Stock issuable upon exercise of the Warrants
(the "Warrant Shares") and the Shares of Common Stock issuable
upon conversion of the Preferred Stock (the "Conversion Shares"
and, collectively with the Preferred Shares, the Warrants and the
Warrant Shares, the "Securities") for its own account, for
investment purposes only and not with a view towards or in
connection with the public sale or distribution thereof in
violation of the Securities Act.
B. Buyer is (i) an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act,
(ii) experienced in making investments of the kind contemplated
by this Agreement, (iii) capable, by reason of its business and
financial experience, of evaluating the relative merits and risks
of an investment in the Securities, and (iv) able to afford the
loss of its investment in the Securities.
C. Buyer understands that the Securities are being
offered and sold by the Company in reliance on an exemption from
the registration requirements of the Securities Act and
equivalent state securities and "blue sky" laws, and that the
Company is relying upon the accuracy of, and Buyer's
compliance with, Buyer's representations, warranties and
covenants set forth in this Agreement to determine the
availability of such exemption and the eligibility of Buyer to
purchase the Securities;
D. Buyer acknowledges that in making its decision to
purchase the Securities it has been given an opportunity to ask
questions of and to receive answers from the Company's executive
officers, directors and management personnel concerning the terms
and conditions of the private placement of the Securities by the
Company.
E. Buyer understands that the Securities have not
been approved or disapproved by the Commission or any state
securities commission and that the foregoing authorities have not
reviewed any documents or instruments in connection with the
offer and sale to it of the Securities and have not confirmed or
determined the adequacy or accuracy of any such documents or
instruments.
F. This Agreement has been duly and validly
authorized, executed and delivered by Buyer and is a valid and
binding agreement of Buyer enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally.
G. Neither Buyer nor its affiliates nor any person
acting on its or their behalf has the intention of entering, or
will enter into, prior to the closing, any put option, short
position or other similar instrument or position with respect to
the Common Stock and neither Buyer nor any of its affiliates nor
any person acting on its or their behalf will use at any time
shares of Common Stock acquired pursuant to this Agreement to
settle any put option, short position or other similar instrument
or position that may have been entered into prior to the
execution of this Agreement.
III. COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. Capitalization.
1. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, of which 2,351,737
shares are outstanding on the date hereof and 5,000,000 shares of
preferred stock, of which 1500 shares of Series A 6% Convertible
Preferred Stock, par value $0.001 per share (the "Series A
Preferred Shares") are outstanding on the date hereof. All of
the issued and outstanding shares of Common Stock have been duly
authorized and validly issued and are fully paid and non-
assessable. As of the date hereof, the Company has outstanding
stock options and warrants to purchase 533,276 shares of
Common Stock. The Conversion Shares and the Warrant Shares have
been duly and validly authorized and reserved for issuance by the
Company, and when issued by the Company upon conversion of, or in
lieu of accrued dividends on, the Preferred Stock, or exercise of
the Warrants will be duly and validly issued, fully paid and non-
assessable and will not subject the holder thereof to personal
liability by reason of being such holder. There are no
preemptive, subscription, "call" or other similar rights to
acquire the Common Stock (including the Conversion Shares and the
Warrant Shares) that have been issued or granted to any person,
except as previously disclosed in writing to Buyer.
2. Except as disclosed in this paragraph, the
Company does not own or control, directly or indirectly, any
interest in any other corporation, partnership, limited liability
company, unincorporated business organization, association, trust
or other business entity. The Company does not have any
subsidiaries.
B. Organization; Reporting Company Status.
1. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State
of New Jersey and is duly qualified as a foreign corporation in
all jurisdictions in which the failure to so qualify would have a
material adverse effect on the business, properties, prospects,
condition (financial or otherwise) or results of operations of
the Company or on the consummation of any of the transactions
contemplated by this Agreement (a "Material Adverse Effect").
2. The Company has registered the Common Stock
pursuant to Section 12 of the Exchange Act and has timely filed
with the Commission all reports and information required to be
filed by it pursuant to all reporting obligations under
Section 13(a) or 15(d), as applicable, of the Exchange Act for
the 12-month period immediately preceding the date hereof. The
Common Stock is listed and traded on the NADS/BBS under the
symbol "DWEB" and the Company has not received any notice
regarding, and to its knowledge there is no threat, of the
termination or discontinuance of the eligibility of the Common
Stock for such listing.
C. Authorized Shares. The Company has duly and
validly authorized and reserved for issuance shares of Common
Stock sufficient in number for the conversion, of 1,500 shares of
Preferred Stock (assuming for purposes of this Section III(C) a
Conversion Price (as defined in the Certificate of
Designations) of $2.00) and the exercise of 135,000 Warrants.
The Company understands and acknowledges the potentially dilutive
effect to the Common Stock of the issuance of the Preferred
Shares and Warrant Shares upon conversion of the Preferred Stock
and exercise of the Warrants, respectively. The Company further
acknowledges that its obligation to issue Conversion Shares upon
conversion of the Preferred Stock and Warrant Shares
upon exercise of the Warrants in accordance with this Agreement,
the Certificate of Designations and the Warrants is absolute and
unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other
stockholders of the Company.
D. Authority; Validity and Enforceability. The
Company has the requisite corporate power and authority to file
and perform its obligations under the Certificate of Designations
and to enter into this Agreement, the Registration Rights
Agreement, the Warrants and the Escrow Instructions and to
perform all of its obligations hereunder and thereunder
(including the issuance, sale and delivery to Buyer of the
Securities). The execution, delivery and performance by the
Company of this Agreement, the Escrow Instructions, the Warrants
and the Registration Rights Agreement, and the consummation by
the Company of the transactions contemplated hereby and thereby
(including without limitation the filing of the Certificate of
Designations, the issuance of the Preferred Shares, the Warrants
and the issuance and reservation for issuance of the Conversion
Shares and Warrant Shares), has been duly authorized by all
necessary corporate action on the part of the Company. Each of
this Agreement, the Escrow Instructions, the Warrants and the
Registration Rights Agreement has been duly validly executed and
delivered by the Company and the Certificate of Designations has
been duly filed by the company and each instrument constitutes a
valid and binding obligation of the Company enforceable against
it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting creditors' rights and
remedies generally. The Securities have been duly and validly
authorized for issuance by the Company and, when executed and
delivered by the Company, will be valid and binding obligations
of the Company enforceable against it in accordance with their
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally.
E. Authorization of the Securities. The
authorization, issuance, sale and deliver of the Preferred Stock
and Warrants has been duly authorized by all requisite corporate
action on the part of the Company. As of the Initial Funding
Date, the Initially Issued Preferred Stock and the Initially
Issued Warrants, and the Conversion Shares and the Warrant Shares
upon their issuance in accordance with the Certificate of
Designations and the Initially Issued Warrants, respectively,
will be validly issued and outstanding, fully paid and
nonassessable, and not subject to any preemptive rights, rights
of first refusal or other similar rights. The Subsequently
Issued Preferred Stock and the Subsequently Issued Warrants, and
the Conversion Shares and the Warrant Shares upon their issuance
in accordance with the Certificate of Designation and the
Initially Issued Warrants, respectively, will be validly issued
and outstanding, fully paid and nonassessable, and not
subject to any preemptive rights, rights of first refusal or
other similar rights.
F. Non-contravention. The execution and delivery by
the Company of this Agreement, the Registration Rights Agreement,
the Warrants and the Escrow Instructions, the issuance of the
Securities, and the consummation by the Company of the other
transactions contemplated hereby and thereby, including, without
limitation, the filing of the Certificate of Designations with
the New Jersey Secretary of State's office, do not and will not
conflict with or result in a breach by the Company of any of the
terms or provisions of, or constitute a default (or an event
which, with notice, lapse of time or both, would constitute a
default) under (i) the articles of incorporation or by-laws of
the Company or (ii) any indenture, mortgage, deed of trust or
other material agreement or instrument to which the Company is a
party or by which its properties or assets are bound, or any law,
rule, regulation, decree, judgment or order of any court or
public or governmental authority having jurisdiction over the
Company or any of the Company's properties or assets, except as
to (ii) above such conflict, breach or default which would not
have a Material Adverse Effect.
G. Approvals. No authorization, approval or consent
of any court or public or governmental authority is required to
be obtained by the Company for the issuance and sale of the
Preferred Stock and the Warrants (and the Conversion Shares and
the Warrant Shares) to Buyer as contemplated by this Agreement,
except such authorizations, approvals and consents that have been
obtained by the Company prior to the date hereof.
H. Commission Filings. None of the Commission
Filings contained at the time they were filed any untrue
statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under
which they were made, not misleading.
I. Absence of Certain Changes. Since the Balance
Sheet Date (as defined in Section III(L)), there has not occurred
any change, event or development in the business, financial
condition, prospects or results of operations of the Company, and
there has not existed any condition having or reasonably likely
to have, a Material Adverse Effect.
J. Full Disclosure. There is no fact known to the
Company (other than general economic or industry conditions known
to the public generally) that has not been fully disclosed in
writing to the Buyer that (i) reasonably could be expected to
have a Material Adverse Effect or (ii) reasonably could be
expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement,
the Warrants, the Registration Rights Agreement, the
Escrow Instructions or the Certificate of Designations.
K. Absence of Litigation. Except as disclosed on
Schedule III.J., there is no action, suit, claim, proceeding,
inquiry or investigation pending or, to the Company's knowledge,
threatened, by or before any court or public or governmental
authority which, if determined adversely to the Company or any of
its subsidiaries, would have a Material Adverse Effect.
L. Absence of Events of Default. No "Event of
Default" (as defined in any agreement or instrument to which the
Company or any of its subsidiaries is a party) and no event
which, with notice, lapse of time or both, would constitute an
Event of Default (as so defined), has occurred and is continuing,
which could have a Material Adverse Effect.
M. Financial Statements; No Undisclosed Liabilities.
The Company has delivered to Buyer true and complete copies of
its audited balance sheet as at September 30, 1998 and the
related audited statements of operations and cash flows for the
fiscal years ended September 30, 1998 including the related notes
and schedules thereto (collectively, the "Financial Statements"),
and all management letters, if any, from the Company's
independent auditors relating to the dates and periods covered by
the Financial Statements. Each of the Financial Statements is
complete and correct in all material respects, has been prepared
in accordance with United States General Accepted Accounting
Principles ("GAAP") (subject, in the case of the interim
Financial Statements, to normal year end adjustments and the
absence of footnotes) and in conformity with the practices
consistently applied by the Company without modification of the
accounting principles used in the preparation thereof, and fairly
presents the financial position, results of operations and cash
flows of the Company as at the dates and for the periods
indicated. For purposes hereof, the audited balance sheet of the
Company as at September 30, 1998 is hereinafter referred to as
the "Balance Sheet" and September 30, 1998 is hereinafter
referred to as the "Balance Sheet Date". Neither the Company nor
any of its subsidiaries has any indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or
otherwise, and whether due or to become due) that would have been
required to be reflected in, reserved against or otherwise
described in the Balance Sheet or in the notes thereto in
accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes
thereto or was not incurred in the ordinary course of business
consistent with the Company's past practices since the Balance
Sheet Date.
N. Compliance with Laws; Permits. The Company is in
compliance with all laws, rules, regulations, codes, ordinances
and statutes (collectively "Laws") applicable to it or to the
conduct of its business, except for such non-compliance which
would not have a Material Adverse Effect. The Company
possesses all permits, approvals, authorizations, licenses,
certificates and consents from all public and governmental
authorities which are necessary to conduct its business, except
for those the absence of which would not have a Material Adverse
Effect.
O. Related Party Transactions. Except as set forth
in the Company's Commission Filings, neither the Company nor any
of its officers, directors or "Affiliates" (as such term is
defined in Rule 12b-2 under the Exchange Act) has borrowed any
moneys from or has outstanding any indebtedness or other similar
obligations to the Company. Except as set forth in the Company's
Commission Filings, neither the Company nor any of its officers,
directors or Affiliates (i) owns any direct or indirect interest
constituting more than a one percent equity (or similar profit
participation) interest in, or controls or is a director,
officer, partner, member or employee of, or consultant to or
lender to or borrower from, or has the right to participate in
the profits of, any person or entity which is (x) a competitor,
supplier, customer, landlord, tenant, creditor or debtor of the
Company or any of its subsidiaries, (y) engaged in a business
related to the business of the Company, or (z) a participant in
any transaction to which the Company is a party (other than in
the ordinary course of the Company's business) or (ii) is a party
to any contract, agreement, commitment or other arrangement with
the Company.
P. Insurance. The Company maintains property and
casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with
financially sound and reputable insurers that is adequate,
consistent with industry standards and the Company's historical
claims experience. The Company has not received notice from, and
has no knowledge of any threat by, any insurer (that has issued
any insurance policy to the Company) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any
insurance policy presently in force.
Q. Securities Law Matters. Based, in part, upon the
representations and warranties of Buyer set forth in Section III
hereof, the offer and sale by the Company of the Securities is
exempt from (i) the registration and prospectus delivery
requirements of the Securities Act and the rules and regulations
of the Commission thereunder and (ii) the registration and/or
qualification provisions of all applicable state securities and
"blue sky" laws. Other than pursuant to an effective
registration statement under the Securities Act, the Company has
not issued, offered or sold the Preferred Stock or any shares of
Common Stock (including for this purpose any securities of the
same or a similar class as the Preferred Stock or Common Stock,
or any securities convertible into or exchangeable or exercisable
for the Preferred Stock or Common Stock or any such other
securities) within the six-month period next preceding the date
hereof, except as disclosed on Schedule III.P. hereto
or otherwise previously disclosed in writing to Buyer, and the
Company shall not directly or indirectly take, and shall not
permit any of its directors, officers or Affiliates directly or
indirectly to take, any action (including, without limitation,
any offering or sale to any person or entity of the Preferred
Stock or shares of Common Stock), so as to make unavailable the
exemption from Securities Act registration being relied upon by
the Company for the offer and sale to Buyer of the Preferred
Shares (and the Conversion Shares) as contemplated by this
Agreement. No form of general solicitation or advertising has
been used or authorized by the Company or any of its officers,
directors or Affiliates in connection with the offer or sale of
the Preferred Stock (and the Conversion Shares) as contemplated
by this Agreement or any other agreement to which the Company is
a party.
R. Environmental Matters.
1. The operations of the Company are in material
compliance with all applicable Environmental Laws and all permits
issued pursuant to Environmental Laws or otherwise;
2. to its knowledge, the Company has obtained or
applied for all material permits required under all applicable
Environmental Laws necessary to operate its business;
3. the Company is not the subject of any
outstanding written order of or agreement with any governmental
authority or person respecting (i) Environmental Laws,
(ii) Remedial Action or (iii) any Release or threatened Release
of Hazardous Materials;
4. the Company has not received, since the
Balance Sheet Date, any written communication alleging that it
may be in violation of any Environmental Law or any permit issued
pursuant to any Environmental Law, or may have any liability
under any Environmental Law;
5. the Company has no current contingent
liability in connection with any Release of any Hazardous
Materials into the indoor or outdoor environment (whether on-site
or off-site);
6. to the Company's knowledge, there are no
investigations of the business, operations, or currently or
previously owned, operated or leased property of the Company
pending or threatened which could lead to the imposition of any
liability pursuant to any Environmental Law;
7. there is not located at any of the properties
of the Company any (A) underground storage tanks, (B) asbestos-
containing material or (C) equipment containing polychlorinated
biphenyls; and,
8. the Company has provided to Buyer all
environmentally related audits, studies, reports, analyses, and
results of investigations that have been performed with respect
to the currently or previously owned, leased or operated
properties of the Company.
For purposes of this Section III(Q):
"Environmental Law" means any foreign, federal, state
or local statute, regulation, ordinance, or rule of common law as
now or hereafter in effect in any way relating to the protection
of human health and safety or the environment including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. App. Section 1801 et
seq.), the Resource Conservation and Recovery Act (42 U.S.C.
Section 6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et seq.),
the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et
seq.), and the Occupational Safety and Health Act (29 U.S.C.
Section 651 et seq.), and the regulations promulgated pursuant thereto.
"Hazardous Material" means any substance, material or
waste which is regulated by the United States, Canada or any of
its provinces, or any state or local governmental authority
including, without limitation, petroleum and its by-products,
asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material,"
"restricted hazardous waste," "industrial waste," "solid waste,"
"contaminant," "pollutant," "toxic waste" or toxic substance"
under any provision of any Environmental Law;
"Release" means any release, spill, filtration,
emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, or leaching into the indoor or outdoor
environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean up,
remove, treat or in any other way address any Hazardous Material;
(y) prevent the Release of any Hazardous Material so it does not
endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
S. Labor Matters. The Company is not party to any
labor or collective bargaining agreement and there are no labor
or collective bargaining agreements which pertain to employees of
the Company. No employees of the Company are represented by any
labor organization and none of such employees has made a pending
demand for recognition, and there are no representation
proceedings or petitions seeking a representation proceeding
presently pending or, to the Company's knowledge, threatened to
be brought or filed, with the National Labor Relations Board or
other labor relations tribunal. There is no organizing
activity involving the Company pending or to the Company's
knowledge, threatened by any labor organization or group of
employees of the Company. There are no (i) strikes, work
stoppages, slowdowns, lockouts or arbitrations or (ii) material
grievances or other labor disputes pending or, to the knowledge
of the Company, threatened against or involving the Company.
There are no unfair labor practice charges, grievances or
complaints pending or, to the knowledge of the Company,
threatened by or on behalf of any employee or group of employees
of the Company.
T. ERISA Matters. The Company and its ERISA
Affiliates are in compliance in all material respects with all
provisions of ERISA applicable to it. No Reportable Event has
occurred, been waived or exists as to which the Company or any
ERISA Affiliate was required to file a report with the Pension
Benefits Guaranty Corporation, and the present value of all
liabilities under all Plans (based on those assumptions used to
fund such Plans) did not, as of the most recent annual valuation
date applicable thereto, exceed the value of the assets of all
such Plans in the aggregate. None of the Company or ERISA
Affiliates has incurred any Withdrawal Liability that could
result in a Material Adverse Effect. None of the Company or
ERISA Affiliates has received any notification that any
Multiemployer Plan is in reorganization or has been terminated
within the meaning of Title IV of ERISA, and no Multiemployer
Plan is reasonably expected to be in reorganization or
termination where such reorganization or termination has resulted
or could reasonably be expected to result in increases to the
contributions required to be made to such Plan or otherwise.
For purposes of this Section III(S):
"ERISA" means the Employee Retirement Income Security
Act of 1974, or any successor statute, together with the
regulations promulgated thereunder, as the same may be amended
from time to time.
"ERISA Affiliate" means any trade or business (whether
or not incorporated) that was, is or hereafter may become, a
member of a group of which the Company is a member and which is
treated as a single employer under Section 414 of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code").
"Multiemployer Plan" means a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which the Company or
any ERISA Affiliate (other than one considered an ERISA Affiliate
only pursuant to subsection (m) or (o) of Section 414 of the Internal
Revenue Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years
made or accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation
referred to and defined in ERISA or any successor thereto.
"Plan" means any pension plan (other than a
Multiemployer Plan) subject to the provision of Title IV of ERISA
or Section 412 of the Internal Revenue Code that is maintained for
employees of the Company or any ERISA Affiliate.
"Reportable Event" means any reportable event as
defined in Section 4043(b) of ERISA or the regulations issued
thereunder with respect to a Plan (other than a Plan maintained
by an ERISA Affiliate that is considered an ERISA Affiliate only
pursuant to subsection (m) or (o) of Section 414 of the Internal
Revenue Code.
"Withdrawal Liability" means liability to a
Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
U. Tax Matters.
1. The Company has filed all Tax Returns which it
is required to file under applicable Laws, except for such Tax
Returns in respect of which the failure to so file does not and
could not have a Material Adverse Effect; all such Tax Returns
are true and accurate in all material respects and have been
prepared in compliance with all applicable Laws; the Company has
paid all Taxes due and owing by it (whether or not such Taxes are
required to be shown on a Tax Return) and have withheld and paid
over to the appropriate taxing authorities all Taxes which it is
required to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third parties; and since the
Balance Sheet Date, the charges, accruals and reserves for Taxes
with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are
adequate to cover any Tax liabilities of the Company if its
current tax year were treated as ending on the date hereof.
2. No claim has been made by a taxing authority
in a jurisdiction where the Company does not file tax returns
that such corporation is or may be subject to taxation by that
jurisdiction. There are no foreign, federal, state or local tax
audits or administrative or judicial proceedings pending or being
conducted with respect to the Company; no information related to
Tax matters has been requested by any foreign, federal, state or
local taxing authority; and, except as disclosed above, no
written notice indicating an intent to open an audit or other
review has been received by the Company from any foreign,
federal, state or local taxing authority. There are no material
unresolved questions or claims concerning the Company's Tax
liability. The Company (A) has not executed or entered into a
closing agreement pursuant to Section 7121 of the Internal Revenue Code
or any predecessor provision thereof or any similar provision of
state, local or foreign law; or (B) has not agreed to
or is required to make any adjustments pursuant to Section 481 (a) of
the Internal Revenue Code or any similar provision of state,
local or foreign law by reason of a change in accounting method
initiated by the Company or any of its subsidiaries or has any
knowledge that the IRS has proposed any such adjustment or change
in accounting method, or has any application pending with any
taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of
the Internal Revenue Code during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Internal Revenue Code.
3. The Company has not made an election under
Section 341(f) of the Internal Revenue Code. The Company is not liable
for the Taxes of another person under (A) Treas. Reg. Section 1.1502-6
(or comparable provisions of state, local or foreign law), (B) as
a transferee or successor, (C) by contract or indemnity or
(D) otherwise. The Company is not a party to any tax sharing
agreement. The Company has not made any payments, is obligated
to make payments or is a party to an agreement that could
obligate it to make any payments that would not be deductible
under Section 280G of the Internal Revenue Code.
For purposes of this Section III(T):
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local,
foreign, or other income, gross receipts, ad valorem, franchise,
profits, sales or use, transfer, registration, excise, utility,
environmental, communications, real or personal property, capital
stock, license, payroll, wage or other withholding, employment,
social security, severance, stamp, occupation, alternative or
add-on minimum, estimated and other taxes of any kind whatsoever
(including, without limitation, deficiencies, penalties,
additions to tax, and interest attributable thereto) whether
disputed or not.
"Tax Return" means any return, information report or
filing with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.
V. Property. The Company does not own any real
property. The Company has good and marketable title to all
personal property owned by it, free and clear of all liens,
encumbrances and defects except such 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
Company; and any real property and buildings held under lease by
the Company are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be
made of such property and buildings by the Company.
W. Intellectual Property. The Company owns or
possesses adequate and enforceable rights to use all patents,
patent applications, trademarks, trademark applications, trade
names, service marks, copyrights, copyright applications,
licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information,
systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct
of its business as now being conducted including, but not limited
to, those described on Schedule III.V. hereto. To the best of
the Company's knowledge, the Company is not infringing upon or in
conflict with any right of any other person with respect to any
Intangibles. No claims have been asserted by any person to the
ownership or use of any Intangibles and the Company has no
knowledge of any basis for such claim.
X. Internal Controls and Procedures. The Company
maintains accurate books and records and internal accounting
controls which provide reasonable assurance that (i) all
transactions to which the Company is a party or by which its
properties are bound are executed with management's
authorization; (ii) the reported accountability of the Company's
assets is compared with existing assets at regular intervals;
(iii) access to the Company's assets is permitted only in
accordance with management's authorization; and (iv) all
transactions to which the Company is a party or by which its
properties are bound are recorded as necessary to permit
preparation of the financial statements of the Company in
accordance with U.S. generally accepted accounting principles.
Y. Payments and Contributions. Neither the Company
nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful
contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or
domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act
of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other similar payment to any
person with respect to Company matters.
Z. No Misrepresentation. No representation or
warranty of the Company contained in this Agreement, any
schedule, annex or exhibit hereto or any agreement, instrument or
certificate furnished by the Company to Buyer pursuant to this
Agreement, contains any untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein, not misleading.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. Restrictive Legend. Buyer acknowledges and agrees
that, upon issuance pursuant to this Agreement, the Securities
(and any shares of Common Stock issued in conversion of the
Preferred Stock or the exercise of the Warrants) shall have
endorsed thereon a legend in substantially the following form
(and a stop-transfer order may be placed against transfer of the
Preferred Stock and the Conversion Shares:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE, AND ARE
BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND SUCH LAWS. THESE SECURITIES May NOT BE SOLD OR
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR
PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR SUCH
OTHER LAWS."
B. Filings. The Company shall make all necessary SEC
and "blue sky" filings required to be made by the Company in
connection with the sale of the Securities to the Buyer as
required by all applicable Laws, and shall provide a copy thereof
to the Buyer promptly after such filing.
C. Reporting Status. So long as the Buyer
beneficially owns any of the Securities, the Company shall use
its best efforts to file all reports required to be filed by it
with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act.
D. Use of Proceeds. The Company shall use the
proceeds from the sale of the Securities (excluding amounts paid
by the Company for legal fees and finder's fees in connection
with such sale) solely for general corporate and working capital
purposes.
E. Listing. Except to the extent the Company lists
its Common Stock on The New York Stock Exchange, the Nasdaq
National Market, the Nasdaq Small Cap Market or The American
Stock Exchange, the Company shall use its best efforts to
maintain its listing of the Common Stock on the NASD/BBS.
F. Reserved Conversion Shares. The Company at all
times from and after the date hereof shall have a sufficient
number of shares of Common Stock duly and validly authorized and
reserved for issuance to satisfy the conversion (pursuant to the
Certificate of Designations), in full, of the 1,500 shares of
Preferred Stock (assuming for purposes of this Section IV(G), a
Conversion Price (as defined in the Certificate of
Designations) of $2.00) and upon the exercise of the 135,000
Warrants. In the event the Current Market Price (as
defined in the Certificate of Designations) declines to $4.00,
the Company shall, within 10 days of the occurrence of such
event, authorize and reserve for issuance such additional shares
of Common Stock sufficient in number for the conversion, in full,
of the Preferred Stock, assuming for purposes of this
Section IV(F) a Conversion Price (as defined in the Certificate
of Designations) of $.50 per share.
G. Right of First Refusal. If the Company should
propose (the "Proposal") to issue Common Stock or securities
convertible into Common Stock at a price less than the Current
Market Price (as defined in Certificate of Designations), or debt
at less than par value or having an effective annual interest
rate in excess of 9.9% (each a "Right of First Refusal Security"
and collectively, the "Right of First Refusal Securities"), in
each case on the date of issuance, during the period ending one
year after the Second Funding Date (the "Right of First Refusal
Period"), the Company shall be obligated to offer the Buyer on
the terms set forth in the Proposal (the "Offer") and the Buyer
shall have the right, but not the obligation, to accept such
Offer on such terms. If during the Right of First Refusal
Period, the Company provides written notice to the Buyer that it
proposes to issue any Right of First Refusal Securities on the
terms set forth in the Proposal, then the Buyer shall have ten
(10) business days to accept or reject such Offer in writing. If
the Company fails to: (i) deliver to Buyer a copy of any Proposal
that arises during the Right of First Refusal Period, (ii) offer
the Buyer the opportunity to complete the transaction as set
forth in the Proposal, or (iii) enter into an agreement with the
Buyer, at such terms after the Buyer has accepted the Offer, then
the Company shall pay to the Buyer, as liquidated damages, an
amount in total equal to ten percent (10%) of the amount paid to
the Company for the Right of First Refusal Securities. The
foregoing Right of First Refusal is and shall be senior in right
to any other right of first refusal issued by the Company to any
other Person (as defined in the Certificate of Designations).
Notwithstanding the foregoing, the Buyer shall have no rights
under this Section IV(H) in respect of Common Stock or any other
securities of the Company issuable (i) upon the exercise or
conversion of options, warrants or other rights to purchase
securities of the Company outstanding as of the date hereof or
(ii) to officers, directors or employees of the Company or any of
its subsidiaries.
H. Lock-Up. until a date one year from the Second
Funding Date, the Company shall not, without the prior written
consent of Buyer, issue, sell, offer or agree to sell, or
otherwise dispose of (a "Sale"), directly or indirectly, any
shares of its capital stock, or any securities convertible into,
exercisable for or exchangeable for shares of its capital stocks,
unless during the one year period following the Sale of such
securities, such securities may not be directly or indirectly,
converted, sold, offered or agreed to be sold, or
otherwise disposed of.
V. TRANSFER AGENT INSTRUCTIONS.
A. The Company undertakes and agrees that no
instruction other than the instructions referred to in this
Section V and customary stop transfer instructions prior to the
registration and sale of the Common Stock pursuant to an
effective Securities Act registration statement will be given to
its transfer agent for the Common Stock and that the Common Stock
issuable upon conversion of the Preferred Stock and exercise of
the Warrants otherwise shall be freely transferable on the books
and records of the Company as and to the extent provided in this
Agreement, the Registration Rights Agreement and applicable law.
Nothing contained in this Section V(A) shall affect in any way
Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of such Common Stock. If, at any
time, Buyer provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of the
resale by Buyer of such Common Stock is not required under the
Securities Act and that the removal of restrictive legends is
permitted under applicable law, the Company shall permit the
transfer of such Common Stock and, promptly instruct the
Company's transfer agent to issue one or more certificates for
Common Stock without any restrictive legends endorsed thereon.
B. The Company shall permit Buyer to exercise its
right to convert the Preferred Stock by telecopying an executed
and completed Notice of Conversion to the Company. Each date on
which a Notice of Conversion is telecopied to and received by the
Company in accordance with the provisions hereof shall be deemed
a Conversion Date. The Company shall transmit the certificates
evidencing the shares of Common Stock issuable upon conversion of
any shares of Preferred Stock (together with certificates
evidencing any shares of Preferred Stock not being so
converted) to Buyer via express courier, by electronic transfer
or otherwise, within seven (7) business days after receipt by the
Company of the Notice of Conversion (the "Delivery Date").
Within 30 days after Buyer delivers the Notice of Conversion to
the Company, Buyer shall deliver to the Company the shares of
Preferred Stock being converted.
C. The Company shall permit Buyer to exercise its
right to purchase shares of Common Stock pursuant to exercise of
the Warrants in accordance with its applicable terms of the
Warrants. The last date that the Company may deliver shares of
Common Stock issuable upon any exercise of Warrants is referred
to herein as the "Warrant Delivery Date."
D. The Company understands that a delay in the
issuance of the shares of Common Stock issuable in lieu of cash
dividends on the Preferred Stock, upon the conversion of the
Preferred Stock or exercise of the Warrants beyond the applicable
Dividend Payment Due Date (as defined in the
Certificate of Designations), Delivery Date or Warrant Delivery
Date could result in economic loss to Buyer. As compensation to
Buyer for such loss (and not as a penalty), the Company agrees to
pay to Buyer for late issuance of Common Stock issuable in lieu
of cash dividends on the Preferred Stock, upon conversion of the
Preferred Stock or exercise of the Warrants in accordance with
the following schedule (where "No. Business Days" is defined as
the number of business days beyond five (5) days from the
Dividend Payment Due Date or the Delivery Date, as applicable):
Compensation For Each
10 Shares of Preferred
Stock Not Converted
Timely or 1000 Shares of
Common Stock Issuable In
Lieu of Cash Dividends or
Shares of Common Stock
Issuable Upon Exercise of
Each 1,500 Warrants
No. Business Days Not Issued Timely
1 $25
2 $50
3 $75
4 $100
5 $125
6 $150
7 $175
8 $200
9 $225
10 $250
more than 10 $250 + $100 for each
Business Day Late
beyond 10 days
The Company shall pay to Buyer the compensation described above
by the transfer of immediately available funds upon Buyer's
demand. Nothing herein shall limit Buyer's right to pursue
actual damages for the Company's failure to issue and deliver
Common Stock to Buyer, and in addition to any other remedies
which may be available to Buyer, in the event the Company fails
for any reason to effect delivery of such shares of Common Stock
within five business days after the relevant Dividend Payment Due
Date, the Delivery Date or the Warrant Delivery Date, as
applicable, Buyer shall be entitled to rescind the relevant
Notice of Conversion or exercise of Warrants by delivering a
notice to such effect to the Company whereupon the Company and
Buyer shall each be restored to their respective original
positions immediately prior to delivery of such Notice of
Conversion on delivery.
VI. DELIVERY INSTRUCTIONS.
The Securities shall be delivered by the Company to the
Escrow Agent pursuant to Section I(B) hereof on a "delivery-
against-payment basis" at the Closing.
VII. FUNDING DATES.
The date and time of the issuance and sale of the
Initially Issued Preferred Stock and the Initially Issued
Warrants (the "Initial Funding Date", and together with the
Second Funding Date, each a "Closing Date", and together the
"Closing Dates") shall be the date hereof or such other as shall
be mutually agreed upon in writing. The issuance and sale of the
Subsequently Issued Preferred Stock and the Subsequently Issued
Warrants shall occur on their respective Closing Dates, at the
offices of the Escrow Agent. Notwithstanding anything to the
contrary contained herein, the Escrow Agent shall not be
authorized to release to the Company the Initial Purchase Price
or the Second Purchase Price and to Buyer the
certificate(s) (I/N/O Buyer) evidencing the Initially Issued
Preferred Stock and the Initially Issued Warrants and the
Subsequently Issued Preferred Stock and the Subsequently Issued
Warrants, respectively, being purchased by Buyer unless the
conditions set forth in VIII(C) and IX(G) hereof have been
satisfied.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The Buyer understands that the Company's obligation to
sell the Securities on the Closing Dates to Buyer pursuant to
this Agreement is conditioned upon:
A. Delivery by Buyer to the Escrow Agent of the
Initial Purchase Price on the Initial Funding Date and the Second
Purchase Price on the Second Funding Date;
B. The accuracy in all material respects on the
Closing Dates of the representations and warranties of Buyer
contained in this Agreement as if made on the Closing Dates
(except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in
which case such accuracy shall be measured as of such specified
date) and the performance by Buyer in all material respects on or
before the Closing Dates of all covenants and agreements of Buyer
required to be performed by it pursuant to this Agreement on or
before the Closing Dates;
C. There shall not be in effect any Law or order,
ruling, judgment or writ of any court or public or governmental
authority restraining, enjoining or otherwise prohibiting any of
the transactions contemplated by this Agreement.
IX. CONDITIONS TO BUYER'S OBLIGATIONS.
The Company understands that Buyer's obligation to
purchase the Securities on each of the Closing Dates pursuant to
this Agreement is conditioned upon:
A. Delivery by the Company to the Escrow Agent of one
or more certificates (I/N/O Buyer) evidencing the Securities to
be purchased by Buyer pursuant to this Agreement;
B. The accuracy in all material respects on the
Closing Date of the representations and warranties of the Company
contained in this Agreement as if made on the Closing Date
(except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in
which case such accuracy shall be measured as of such specified
date) and the performance by the Company in all material respects
on or before the Closing Date of all covenants and agreements of
the Company required to be performed by it pursuant to this
Agreement on or before the Closing Date;
C. Buyer having received an opinion of counsel for
the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer.
D. There not having occurred (i) any general
suspension of trading in, or limitation on prices listed for, the
Common Stock on the NASD/BBS, (ii) the declaration of a banking
moratorium or any suspension of payments in respect of banks in
the United States, (iii) the commencement of a war, armed
hostilities or other international or national calamity directly
or indirectly involving the United States or any of its
territories, protectorates or possessions, or (iv) in the case of
the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof.
E. There not having occurred any event or
development, and there being in existence no condition, having or
which reasonably and forseeably could have a Material Adverse
Effect.
F. The Company shall have delivered to Buyer (as
provided in the Escrow Instructions) reimbursement of Buyer's
costs and expenses, whether or not incurred, in the amount of
$50,000 in connection with the transactions contemplated by this
Agreement (including the fees and disbursements of Buyer's legal
counsel).
G. There shall not be in effect any Law or order,
ruling, judgment or writ of any court or public or governmental
authority restraining, enjoining or otherwise prohibiting any of
the transactions contemplated by this Agreement.
X. TERMINATION.
A. Termination by Mutual Written Consent. This
Agreement may be terminated and the transactions contemplated
hereby may be abandoned, for any reason and at any time prior to
the applicable Closing Date, by the mutual written consent of the
Company and Buyer.
B. Termination by the Company or Buyer. This
Agreement may be terminated and the transactions contemplated
hereby may be abandoned by action of the Company or Buyer if
(i) the Initial Funding Date shall not have occurred at or prior
to 5:00 p.m., New York City time, on February 19, 1999; provided,
however, that the right to terminate this Agreement pursuant to
this Section X(B)(i) shall not be available to any party whose
failure to fulfill any of its obligations under this Agreement
has been the cause of or resulted in the failure of the Initial
Funding Date to occur at or before such time and date or (ii) any
court or public or governmental authority shall have issued an
order, ruling, judgment or writ, or there shall be in effect any
Law, restraining, enjoining or otherwise prohibiting the
consummation of any of the transactions contemplated by this
Agreement.
C. Termination by Buyer. This Agreement may be
terminated and the transactions contemplated hereby may be
abandoned by Buyer at any time prior to the Initial Funding Date,
if (i) the Company shall have failed to comply in any material
respect with any of its covenants or agreements contained in this
Agreement, (ii) there shall have been a breach by the Company
with respect to any representation or warranty made by it in this
Agreement or (iii) there shall have occurred any event or
development, or there shall be in existence any condition, having
or reasonably and forseeably likely to have a Material Adverse
Effect.
D. Termination by the Company. This Agreement may be
terminated and the transactions contemplated hereby may be
abandoned by the Company at any time prior to the Initial Funding
Date (i) Buyer shall have failed to comply in any material
respect with any of its covenants or agreements contained in this
Agreement or (ii) there shall have been a breach by Buyer with
respect to any representation or warranty made by it in this
Agreement.
E. Fees and Expenses of Termination. If this
Agreement is terminated for any reason other than if terminated
by the Company pursuant to X(D), the Company shall reimburse
Buyer for all of Buyer's out-of-pocket costs and expenses
incurred in connection with the transactions contemplated by this
Agreement (including, but not limited to, the fees and
disbursements of Buyer's legal counsel) .
XI. SURVIVAL; INDEMNIFICATION.
A. The representations, warranties and covenants made
by each of the Company and Buyer in this Agreement, the annexes,
schedules and exhibits hereto and in each instrument, agreement
and certificate entered into and delivered by them pursuant to
this Agreement, shall survive each of the Closing Dates and the
consummation of the transactions contemplated hereby. In the
event of a breach or violation of any of such representations,
warranties or covenants, the party to whom such representations,
warranties or covenants have been made shall have all rights and
remedies for such breach or violation available to it under the
provisions of this Agreement or otherwise, whether at law or in
equity, irrespective of any investigation made by or on behalf of
such party on or prior to each of the Closing Dates.
B. The Company hereby agrees to indemnify and hold
harmless the Buyer, its Affiliates and their respective officers,
directors, partners and members (collectively, the "Buyer
Indemnitees"), from and against any and all losses, claims,
damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses"), and agrees to reimburse the Buyer
Indemnitees for all out-of-pocket expenses (including the fees
and expenses of legal counsel), in each case promptly as incurred
by the Buyer Indemnitees and to the extent arising out of or in
connection with:
1. any misrepresentation, omission of fact or
breach of any of the Company's representations or warranties
contained in this Agreement, the annexes, schedules or
exhibits hereto or any instrument, agreement or certificate
entered into or delivered by the Company pursuant to this
Agreement; or
2. any failure by the Company to perform in any
material respect any of its covenants, agreements,
undertakings or obligations set forth in this Agreement, the
annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the
Company pursuant to this Agreement.
C. Buyer hereby agrees to indemnify and hold harmless
the Company, its Affiliates and their respective officers,
directors, partners and members (collectively, the "Company
Indemnitees"), from and against any and all Losses, and agrees to
reimburse the Company Indemnitees for all out-of-pocket expenses
(including the fees and expenses of legal counsel), in each case
promptly as incurred by the Company Indemnitees and to the extent
arising out of or in connection with:
1. any misrepresentation, omission of fact, or
breach of any of Buyer's representations or warranties
contained in this Agreement, the annexes, schedules or
exhibits hereto or any instrument, agreement or certificate
entered into or delivered by Buyer pursuant to
this Agreement; or
2. any failure by Buyer to perform in any
material respect any of its covenants, agreements,
undertakings or obligations set forth in this Agreement or
any instrument, certificate or agreement entered into or
delivered by Buyer pursuant to this Agreement.
D. Promptly after receipt by either party hereto
seeking indemnification pursuant to this Section XI (an
"Indemnified Party") of written notice of any investigation,
claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section XI is being sought (the
"Indemnifying Party") of the commencement thereof; but the
omission to so notify the Indemnifying Party shall not relieve it
from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is
materially prejudiced and forfeits substantive rights and
defenses by reason of such failure. In connection with any Claim
as to which both the Indemnifying Party and the Indemnified Party
are parties, the Indemnifying Party shall be entitled to assume
the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the Indemnifying Party, the Indemnified
Party shall have the right to employ separate legal counsel and
to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and
expenses of such separate legal counsel to the Indemnified Party
if (and only if): (x) the Indemnifying Party shall have agreed to
pay such fees, out-of-pocket costs and expenses, (y) the
Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and
the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal
counsel to the Indemnified Party, potentially differing interests
between such parties in the conduct of the defense of such Claim,
or if there may be legal defenses available to the Indemnified
Party that are in addition to or disparate from those available
to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to
the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified
Party employs separate legal counsel in circumstances other than
as described in clauses (x), (y) or (z) above, the fees, costs
and expenses of such legal counsel shall be borne exclusively by
the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more
than one firm of legal counsel for the Indemnified Party
(together with appropriate local counsel). The Indemnifying
Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not unreasonably be
withheld), settle or compromise any Claim or consent to
the entry of any judgment that does not include an unconditional
release of the Indemnified Party from all liabilities with
respect to such Claim or judgment.
E. In the event one party hereunder should have a
claim for indemnification that does not involve a claim or demand
being asserted by a third party, the Indemnified Party promptly
shall deliver notice of such claim to the Indemnifying Party. If
the Indemnified Party disputes the claim, such dispute shall be
resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in
accordance with the procedures and rules of the American
Arbitration Association. Judgment upon any award rendered by any
arbitrators may be entered in any court having competent
jurisdiction thereof.
XII. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard
to the conflicts of law principles of such state. Each of the
parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York
in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens,
to the bringing of any such proceeding in such jurisdictions. A
facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed
in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other
jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement.
This Agreement supersedes all prior agreements and understandings
among the parties hereto with respect to the subject matter
hereof.
XIII. NOTICES. Except as may be otherwise provided
herein, any notice or other communication or delivery required or
permitted hereunder shall be in writing and shall be delivered
personally or sent by certified mail, postage prepaid, or by a
nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier
service, or, if mailed, three (3) days after the date of deposit
in the United States mails, as follows:
(1) if to the Company, to:
DynamicWeb Enterprises, Inc.
Fairfield Commons
271 Route 00 Xxxx
Xxxxxxxx X, Xxxxx 000
Xxxxxxxxx, Xxx Xxxxxx 00000
with a copy to:
Xxxxxxx & Xxx
0000 Xxxxxxxx Xxxx
X.X. Xxx 000
Xxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
(2) if to the Buyer, to
THE SHAAR FUND LTD.
c/x XXXXXXXX CAPITAL MANAGEMENT, LLC
0 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(3) if to the Escrow Agent, to:
WEIL, GOTSHAL & XXXXXX LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
The Company, the Buyer or the Escrow Agent may change the
foregoing address by notice given pursuant to this Section XIII.
XIV. CONFIDENTIALITY. Each of the Company and Buyer
agrees to keep confidential and not to disclose to or use for the
benefit of any third party the terms of this Agreement or any
other information which at any time is communicated by the other
party as being confidential without the prior written approval of
the other party; provided, however, that this provision shall not
apply to information which, at the time of disclosure, is already
part of the public domain (except by breach of this
Agreement) and information which is required to be disclosed by
law (including, without limitation, pursuant to Item 10 of Rule
601 of Regulation S-K under the Securities Act and the Exchange
Act).
XV. ASSIGNMENT. This Agreement shall not be
assignable by either of the parties hereto prior to the Closing
without the prior written consent of the other party, and any
attempted assignment contrary to the provisions hereby shall be
null and void; provided, however, that Buyer may assign its
rights and obligations hereunder, in whole or in part, to any
affiliate of Buyer who furnishes to the Company the
representations and warranties set forth in Section II hereof and
otherwise agrees to be bound by the terms of this Agreement.
[Remainder of page intentionally left blank]
PAGE 28
IN WITNESS WHEREOF, the parties hereto have duly
executed and delivered this Agreement on the date first above
written.
DYNAMICWEB ENTERPRISES, INC.
By:/s/ Xxxxxx X. Xxxxxxxxxx, Xx.
Name: Xxxxxx X. Xxxxxxxxxx, Xx.
Title: Chief Executive Officer
THE SHAAR FUND LTD.
By: _______________________________
Name:
Title:
