EXHIBIT 4.1
SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement dated as of August 4, 2000 (this "Agreement")
by and between Inforetech Wireless Technology Inc., a Nevada corporation, with
principal executive offices located at Suite 214, 5500 - 152/nd/ Street, Surrey,
British Columbia, Canada V3S 8E7 (the "Company"), and The Shaar Fund Ltd.
("Buyer").
WHEREAS, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to Buyer, upon the terms and subject to the conditions
of this Agreement, the (i) 8% Convertible Debenture of the Company in the
aggregate principal amount of $1,000,000 (U.S.), in the form attached hereto as
Exhibit A (the "Debenture"), and (ii) Common Stock Purchase Warrant in the form
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attached hereto as Exhibit B (the "Warrant") to purchase up to 100,000 shares of
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the Company's Class A Common Equity Voting Stock, par value $0.001 per share
("Common Stock");
WHEREAS, upon the terms and subject to the conditions set forth in the
Debenture, the Debenture is convertible into shares of Common Stock; and
WHEREAS, the Warrant, upon the terms and subject to the conditions
specified in the Warrant, will be exercisable for a period of five (5) years;
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 DEBENTURE AND WARRANT
A. Transaction. Buyer hereby agrees to purchase from the Company, and
the Company has offered and hereby agrees to issue and sell to Buyer in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the Debenture and
the Warrant.
B. Purchase Price; Form of Payment. The purchase price for the Debenture
and the Warrant to be purchased by Buyer hereunder shall be $1,000,000 (U.S.)
(the "Purchase Price"). Simultaneously with the execution of this Agreement,
Buyer shall pay the Purchase Price 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
Exhibit C (the "Escrow Instructions"). Simultaneously with the execution of
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this Agreement, the Company shall deliver the Debenture (which shall have been
duly authorized, issued and executed I/N/O Buyer or, if the Company otherwise
has been notified, I/N/O Buyer's nominee) and the Warrant to the Escrow Agent or
its designated depository. By executing and delivering this Agreement, Buyer
and the Company each hereby agree 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. Method of Payment. Payment into escrow of the Purchase Price shall be
made as set forth in the Escrow Instructions.
II. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to and covenants and agrees with the Company
as follows:
A. Buyer is purchasing the Debenture, the Warrant, the Common Stock
issuable upon exercise of the Warrant (the "Warrant Shares"), the Common Stock,
if any, issuable in payment of interest on the Debenture (the "Interest
Shares"), and the Common Stock issuable upon conversion or redemption of the
Debenture (the "Conversion Shares" and, collectively with the Debenture, the
Warrant, the Warrant Shares and the Interest 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 understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "Commission") or any
state securities commission.
E. 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 and except as rights to
indemnity and contribution may be limited by federal or state securities laws or
the public policy underlying such laws.
F. Neither Buyer nor its affiliates nor any person acting on its or their
behalf (i) has the intention of entering into, or will enter into, any put
option, short position or other similar instrument or position with respect to
the Common Stock while the Debenture is outstanding and (ii) will use at any
time shares of Common Stock acquired pursuant to this Agreement, the Debenture
or the Warrant 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. THE COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. Capitalization.
1. The authorized capital stock of the Company consists of (i)
100,000,000 shares of Common Stock, of which 10,989,522 shares are issued
and outstanding as of the date hereof and (ii) 10,000,000 shares of Class B
Special Voting Non-Equity Common Stock, par value $0.001 per share, of
which 7,002,030 shares are issued and outstanding as of the date hereof.
All of the issued and outstanding shares of capital stock of the Company
have been duly authorized and validly issued and are fully paid and
nonassessable. As of the date hereof, the Company has outstanding options
to purchase 2,305,000 shares of Common Stock, warrants to purchase
1,946,500 shares of Common Stock and other securities or agreements
entitling the holders thereof to purchase or convert into 7,752,283 shares
of Common Stock. The exercise, conversion or subscription price and expiry
date for each such outstanding option, warrant and other security or
agreement is accurately set forth on Schedule III.A.1.
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2. The Conversion Shares, the Interest 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
cash dividends on, the Debenture and on exercise of the Warrant will be
duly and validly issued, fully paid and nonassessable and will not subject
the holder thereof to personal liability by reason of being such holder.
3. Except as disclosed on Schedule III.A.3., there are no
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preemptive, subscription, "call," right of first refusal or other similar
rights to acquire any capital stock of the Company or any of its
Subsidiaries (as such term is hereinafter defined) or other voting
securities of the Company that have been issued or granted to any person
and no other obligations of the Company or any of its Subsidiaries to
issue, grant, extend or enter into any security, option, warrant, "call,"
right, commitment, agreement, arrangement or undertaking with respect to
any of their respective capital stock.
4. Schedule III.A.4. lists all the subsidiaries of the Company (the
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"Subsidiaries"). Except as disclosed on Schedule III.A.4., the Company does
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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.
5. The Company has delivered to Buyer complete and correct copies of
the Articles of Incorporation and the By-Laws of each of the Company and
the Subsidiaries, in each case as amended to the date of this Agreement.
Except as set forth on Schedule III.A.5., the Company has delivered to
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Buyer true and complete copies of all minutes of the Board of Directors of
the Company (the "Board of Directors") since January 1, 1999.
B. Organization; Reporting Company Status.
1. Each of the Company and the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
state or jurisdiction in which it is incorporated and is duly qualified as
a foreign corporation in all jurisdictions in which the failure so to
qualify would reasonably be expected to have a
material adverse effect on the business, properties, prospects, condition
(financial or otherwise) or results of operations of the Company and the
Subsidiaries taken as a whole 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 Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Common Stock is traded on the OTC Bulletin Board service of the
National Association of Securities Dealers, Inc. ("OTCBB") 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 trading.
C. Authorization. The Company (i) has duly and validly authorized and
reserved for issuance 16,007,218 shares of Common Stock, which is a number
sufficient for the conversion of and the payment of interest (in lieu of cash
payments) on the Debenture and the exercise of the Warrant in full and (ii) 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 of the Debenture, the payment of interest (in lieu of
cash payments) on the Debenture and the exercise of the Warrant in full. The
Company understands and acknowledges the potentially dilutive effect on the
Common Stock of the issuance of the Conversion Shares, the Interest Shares and
the Warrant Shares upon the conversion of, and payment of interest on, the
Debenture and the exercise of the Warrant, respectively. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Debenture and Warrant Shares upon exercise of the Warrant in accordance with
this Agreement, the Debenture and the Warrant is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company and notwithstanding the
commencement of any case under 11 U.S.C. (S) 101 et seq. (the "Bankruptcy
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Code"). In the event the Company is a debtor under the Bankruptcy Code, the
Company hereby waives to the fullest extent permitted any rights to relief it
may have under 11 U.S.C. (S)362 in respect of the conversion of the Debenture
and the exercise of the Warrant. The Company agrees, without cost or expense to
Buyer, to take or consent to any and all action necessary to effectuate relief
under 11 U.S.C. (S) 362. Schedule III.C. sets forth (i) all issuances and sales
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by the Company since December 31, 1999 of its capital stock and other securities
convertible into or exercisable or exchangeable for capital stock of the
Company, (ii) the amount of such securities sold, including the amount of any
underlying shares of capital stock, (iii) the purchaser(s) thereof, (iv) the
amount(s) paid therefor and (v) the material terms of all outstanding capital
stock of the Company (other than the Common Stock).
D. Authority; Validity and Enforceability. The Company has the requisite
corporate power and authority to enter into the Documents (as such term is
hereinafter defined) 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 the
Documents and the consummation by the Company of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Debenture
and the Warrant and the issuance and reservation for issuance of the Conversion
Shares, the Interest Shares and the Warrant Shares) have been duly and validly
authorized by all necessary corporate action on the part of the Company. Each
of the Documents has been duly and validly executed and delivered by the Company
and each Document 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
and except as rights to indemnity and contribution may be limited by federal or
state securities laws or the public policy underlying such laws. 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 respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally. For purposes of this Agreement, the term "Documents" means
(i) this Agreement; (ii) the Registration Rights Agreement dated as of even date
herewith between the Company and Buyer, a copy of which is annexed hereto as
Exhibit D (the "Registration Rights Agreement"); (iii) the Debenture; (iv) the
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Warrant; and (v) the Escrow Instructions.
E. Validity of Issuance of the Securities. The Debenture and the Warrant
as of the Closing Date (as such term is hereinafter defined), and the Conversion
Shares, the Interest Shares and the Warrant Shares upon their issuance in
accordance with the Debenture and the Warrant, respectively, will be validly
issued and outstanding, fully paid and nonassessable, and not subject to any
preemptive rights, rights of first refusal, tag-along rights, drag-along rights
or other similar rights.
F. Non-contravention. The execution and delivery by the Company of the
Documents, the issuance of the Securities, and the consummation by the Company
of the other transactions contemplated hereby and thereby do not, and compliance
with the provisions of this Agreement and other Documents will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
the creation of any Lien (as such term is hereinafter defined) upon any of the
properties or assets of the Company or any of its Subsidiaries under, or result
in the termination of, or require that any consent be obtained or any notice be
given with respect to (i) the Articles of Incorporation or By-Laws of the
Company or the comparable charter or organizational documents of any of its
Subsidiaries, in each case as amended to the date of this Agreement, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease, contract or
other agreement, instrument or permit applicable to the Company or any of its
Subsidiaries or their respective properties or assets or (iii) any Law (as such
term is hereinafter defined) applicable to, or any judgment, decree or order of
any court or government body having jurisdiction over, the Company or any of its
Subsidiaries or any of their respective properties or assets.
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 Debenture or the Warrant (or the Conversion Shares,
the Interest Shares or Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents as have been
obtained by the Company prior to the date hereof.
H. Commission Filings. The Company has properly and timely filed with
the Commission all reports, proxy statements, forms and other documents required
to be filed with the Commission under the Securities Act and the Exchange Act
since becoming subject to such Acts (the "Commission Filings"). As of their
respective dates, (i) the Commission Filings
complied in all material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the
Commission promulgated thereunder applicable to such Commission Filings and (ii)
none of the Commission Filings contained at the time of its filing any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the Commission Filings, as of the dates of
such documents, were true and complete in all material respects and complied
with applicable accounting requirements and the published rules and regulations
of the Commission with respect thereto, were prepared in accordance with
generally accepted accounting principles in the United States ("GAAP") (except
in the case of unaudited statements permitted by Form 10-Q under the Exchange
Act) applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly presented the consolidated financial
position of the Company and its Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments that in the aggregate are not material and to any other adjustment
described therein).
I. Absence of Certain Changes. Since the Balance Sheet Date (as such
term is hereinafter defined), there has not occurred any change, event or
development in the business, financial condition, prospects or results of
operations of the Company and the Subsidiaries, there has not existed any
condition having or reasonably likely to have a Material Adverse Effect, and the
Company and the Subsidiaries have conducted their respective businesses only in
the ordinary course.
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 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 performing its
obligations pursuant to the Documents.
K. Absence of Litigation. There are (i) no suits, actions or proceedings
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries, (ii) no complaints, lawsuits, charges or other
proceedings pending or, to the knowledge of the Company, threatened in any forum
by or on behalf of any present or former employee of the Company or any of its
Subsidiaries, any applicant for employment or classes of the foregoing alleging
breach of any express or implied contract of employment, any applicable law
governing employment or the termination thereof or other discriminatory,
wrongful or tortuous conduct in connection with the employment relationship and
(iii) no judgments, decrees, injunctions or orders of any court or other
governmental entity or arbitrator outstanding against the Company or any
Subsidiary.
L. Absence of Events of Default. No "Event of Default" (as defined in
any agreement or instrument to which the Company 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.
M. Financial Statements; No Undisclosed Liabilities. The Company has
delivered to Buyer true and complete copies of the (i) audited balance sheet of
the Company and the Subsidiaries as at December 31, 1999, 1998, and 1997,
respectively, and the related audited statements of income, changes in
stockholders' equity and cash flows for the three fiscal years ended December
31, 1999 including the related notes and schedules thereto and (ii) unaudited
balance sheets of the Company and the Subsidiaries and the statements of income,
changes in stockholders' equity and cash flows as at the end of and for each
fiscal quarter ended since December 31, 1999 including the related notes and
schedules thereto, all certified by the chief financial officer of the Company
(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 GAAP (subject, in the case of the interim Financial Statements, to normal
year end adjustments and the absence of footnotes) 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 December 31, 1999, is hereinafter referred to
as the "Balance Sheet" and December 31, 1999 is hereinafter referred to as the
"Balance Sheet Date". The Company has no indebtedness, obligations or
liabilities of any kind (whether acquired, absolute, contingent or otherwise,
and whether due or to become due), which was not fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto or
incurred in the ordinary course of business consistent with the Company's past
practices since the Balance Sheet Date.
N. Compliance with Laws; Permits. Each of the Company and its
Subsidiaries is in compliance with all laws, rules, regulations, codes,
ordinances and statutes (collectively, "Laws") applicable to it or to the
conduct of its business. The Company possesses all material permits, approvals,
authorizations, licenses, certificates and consents from all public and
governmental authorities which are necessary to conduct its business.
O. Related Party Transactions. Except as set forth on Schedule III.O.,
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neither the Company nor any of its officers, directors or "Affiliates" (as such
term is defined in Rule 12b-2 under the Exchange Act) nor any family member of
any officer, director or Affiliate of the Company has borrowed any moneys from
or has outstanding any indebtedness or other similar obligations to the Company
or any of the Subsidiaries. Except as set forth on Schedule III.O., neither the
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Company nor any of its officers, directors or Affiliates nor any family member
of any officer, director or Affiliate of the Company (i) owns any direct or
indirect interest constituting more than a one percent (1%) equity (or similar
profit participation) interest in, or controls or is a director, officer,
partner, member or employee of, or consultant 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 Subsidiary, (y) engaged in a business related to the business
of the Company or any Subsidiary or (z) a participant in any transaction to
which the Company or any Subsidiary is a party or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company or any
Subsidiary.
P. Insurance. Each of the Company and the Subsidiaries 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
and consistent with industry standards and the Company's historical claims
experience. None of the Company or the Subsidiaries has received notice from,
and none of them has knowledge of any threat by, any insurer (that has issued
any insurance policy to the Company or any Subsidiary) that such insurer intends
to deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
Q. Securities Law Matters. Assuming the accuracy of the representations
and warranties of Buyer set forth in Article II, 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 any security similar to the Debenture or the
Warrant, or any shares of Common Stock (including for this purpose any
securities of the same or a similar class as the Common Stock or any other
securities convertible into or exchangeable or exercisable for Common Stock or
any such other securities) within the one-year period next preceding the date
hereof, except as disclosed on Schedule III.Q., and the Company shall not
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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 any security
similar to the Debenture or the Warrant, shares of Common Stock) which will make
unavailable the exemption from Securities Act registration being relied upon by
the Company for the offer and sale to Buyer of the Debenture and the Warrant
(and the Conversion Shares, the Interest Shares and the Warrant 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 Debenture and the Warrant
(and the Conversion Shares, the Interest Shares and the Warrant Shares) as
contemplated by this Agreement or any other agreement to which the Company is a
party.
R. Environmental Matters.
With respect to environmental matters:
1. The Company, the Subsidiaries and their respective operations are
in compliance with all applicable Environmental Laws (as such term is
hereinafter defined) and all permits (including terms, conditions and
limitations therein) issued pursuant to Environmental Laws or otherwise;
2. Each of the Company and the Subsidiaries has all permits,
licenses, waivers, exceptions, and exemptions required under all applicable
Environmental Laws necessary to operate its business;
3. None of the Company or the Subsidiaries is the subject of any
outstanding written order of or agreement with any governmental authority
or person respecting (i) Environmental Laws or permits, (ii) Remedial
Action (as such term is hereinafter defined) or (iii) any Release (as such
term is hereinafter defined) or threatened Release of Hazardous Materials
(as such term is hereinafter defined);
4. None of the Company or the Subsidiaries has received 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. None of the Company or the Subsidiaries has any liability,
contingent or otherwise, in connection with any presence, treatment,
storage, disposal or Release of any Hazardous Materials whether on property
owned or operated by the Company or any Subsidiary or property of third
parties, and none of the Company or the Subsidiaries has transported, or
arranged for transportation of, any Hazardous Materials for treatment or
disposal on any property;
6. There are no investigations of the business, operations, or
currently or previously owned, operated or leased property of the Company
or any Subsidiary pending or threatened which could lead to the imposition
of any case or liability pursuant to any Environmental Law;
7. There is not located at any of the properties owned or operated
by the Company or any Subsidiary any (A) underground storage tanks, (B)
asbestos-containing material or (C) equipment containing polychlorinated
biphenyls;
8. Each of the Company and the Subsidiaries has provided to Buyer
all environmentally related assessments, audits, studies, reports,
analyses, and results of investigations that have been performed with
respect to the currently or previously owned, leased or operated properties
or activities of the Company and such Subsidiaries;
9. There are no liens arising under or pursuant to any Environmental
Law on any real property owned, operated, or leased by the Company or any
Subsidiary, and no action of any governmental authority has been taken or,
to the knowledge of the Company, is in process of being taken which could
subject any of such properties to such liens, and none of the Company or
the Subsidiaries has been or is expected to be required to place any notice
or restriction relating to the presence of Hazardous Material at any real
property owned, operated, or leased by it in any deed to such property;
10. Neither the Company nor any of the Subsidiaries owns, operates,
or leases any hazardous waste generation, treatment, storage, or disposal
facility, as such terms are used pursuant to RCRA (as such term is
hereinafter defined) and related or analogous state, local or foreign law.
None of the properties owned, operated or leased by the Company, any of the
Subsidiaries or any predecessor thereof are now, or were in the past, used
in any part as a dump, landfill, or disposal site, and neither the Company,
any of the Subsidiaries nor any predecessor of any of them has filled any
wetlands;
11. The purchase that is the subject of this Agreement will not
require any governmental approvals under Environmental Laws, including
those that are triggered by sales or transfers of businesses or real
property, including, as examples and without limitation, the New Jersey
Industrial Site Recovery Act, N.J. Stat. 13:1K-7 et seq., and the
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Connecticut Transfer of Establishments Act, Conn. Gen. Stat. (S) 22a-134 et
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seq.;
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12. There is no currently existing requirement or requirement to be
imposed in the future by any Environmental Law or Environmental Permit
which could result in the incurrence of a cost that could be reasonably
expected to have a Material Adverse Effect and
13. Each of the Company and each of the Subsidiaries has disclosed to
Buyer all other acts or conditions that could result in any costs or
liabilities under Environmental Laws.
For purposes of this Section III.R.:
"Environmental Law" means any foreign, federal, state or local
statute, regulation, ordinance, or common law as now or hereafter in effect in
any way relating to the protection of human health, safety or welfare, or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act ("RCRA"), the Clean Water Act,
the Clean Air Act, the Toxic Substances Control Act, the Federal Insecticide,
Fungicide, and Rodenticide Act and the Occupational Safety and Health Act, and
the regulations promulgated pursuant to any of them;
"Hazardous Material" means any substance that is listed, classified or
regulated pursuant to any Environmental Law, including petroleum, gasoline, and
any other petroleum product, by-product, fraction or derivative, asbestos or
asbestos-containing material, lead-containing paint, water or plumbing,
polychlorinated biphenyls, radioactive materials and radon;
"Release" means any placement, release, spill, filtration, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, migration,
or leaching to, through, or under the indoor or outdoor environment, or into,
through, under, or out of any property and
"Remedial Action" means any action to (x) clean up, remove, remediate,
treat or in any other way address any Hazardous Material; (y) prevent or contain
the Release of any Hazardous Material or (z) perform studies and investigations
or post-remedial monitoring and care in relation to clause (x) or (y) above.
S. Labor Matters. Neither the Company nor any of the Subsidiaries is
party to any labor or collective bargaining agreement, and there are no labor or
collective bargaining agreements which pertain to any employees of the Company
or any Subsidiary. No employees of the Company or any of the Subsidiaries 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 or any Subsidiary pending or to the Company's
knowledge, threatened by any labor organization or group of employees of the
Company or any of the Subsidiaries. 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 or any of the Subsidiaries. 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 or any of the Subsidiaries.
T. ERISA Matters. All Plans (as such term is hereinafter defined)
maintained by the Company or any of its Subsidiaries and ERISA Affiliates (as
such term is hereinafter defined) are listed in Schedule III.T. and copies of
---------------
all documentation relating to such Plans (including, but not limited to, copies
of written Plans, written descriptions of oral Plans, summary plan descriptions,
trust agreements, the three most recent annual returns, employee communications
and IRS (as such term is hereinafter defined) determination letters) have been
delivered to or made available for review by the Buyer. Each Plan has at all
times been maintained and administered in all material respects in accordance
with its terms and the requirements of applicable law, including ERISA (as such
term is hereinafter defined) and the Code (as such term is hereinafter defined),
and each Plan intended to qualify under Section 401 (a) of the Code has at all
times since its adoption been so qualified, and each trust which forms a part of
any such Plan has at all times since its adoption been tax-exempt under Section
501(a) of the Code. The Company and each of its Subsidiaries and ERISA
Affiliates are in compliance in all material respects with all provisions of
ERISA applicable to it. No Reportable Event (as such term is hereinafter
defined) has occurred, been waived or exists as to which the Company or any of
its Subsidiaries and ERISA Affiliates was required to file a report with the
PBGC, and the present value of all liabilities under each Pension Plan (as such
term is hereinafter defined) (based on those assumptions used to fund such
Pension Plans) listed in Schedule III.T. did not, as of the most recent annual
---------------
valuation date applicable thereto, exceed the value of the assets of such
Pension Plan. None of the Company, its Subsidiaries and ERISA Affiliates has
incurred, or reasonably expects to incur, any Withdrawal Liability (as such term
is hereinafter defined) with respect to any Multi-employer Plan (as such term is
hereinafter defined) that could result in a Material Adverse Effect. None of
the Company, its Subsidiaries and ERISA Affiliates has received any notification
that any Multi-employer Plan is in reorganization or has been terminated within
the meaning of Title IV of ERISA, and no Multi-employer 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 Multi-employer Plan or
otherwise. No direct, contingent or secondary liability has been incurred or is
expected to be incurred by the Company or any of its Subsidiaries under Title IV
of ERISA to any party with respect to any Plan, or with respect to any other
Plan presently or heretofore maintained or contributed to by any ERISA
Affiliate. Neither the Company nor any of its Subsidiaries and ERISA Affiliates
has incurred any liability for any tax imposed under Sections 4971 through 4980B
of the Code or civil liability under Section 502(i) or (l) of ERISA. No suit,
action or other litigation or any other claim which could reasonably be expected
to result in a material liability or expense to the Company or any of its
Subsidiaries or ERISA Affiliates (excluding claims for benefits incurred in the
ordinary course of plan activities) has been brought or, to the knowledge of the
Company, threatened against or with respect to any Plan and there are no facts
or circumstances known to the Company or any of its Subsidiaries or ERISA
Affiliates that could reasonably be expected to give rise to any such suit,
action or other litigation. All contributions to Plans that were required to be
made under such Plans have been made, and all benefits accrued under any
unfunded Plan have been paid, accrued or otherwise adequately reserved in
accordance with GAAP, all of which accruals under unfunded Plans are as
disclosed in Schedule III.T., and the Company, its Subsidiaries and ERISA
---------------
Affiliates have each performed all material obligations required to be performed
under all Plans. The execution, delivery and performance of this Agreement and
the other Documents and the consummation of
11
the transactions contemplated hereby and thereby (including, without limitation,
the offer, issue and sale by the Company, and the purchase by the Buyer, of the
Debenture, the Conversion Shares, the Warrant, the Warrant Shares and Interest
Shares) will not involve any "prohibited transaction" within the meaning of
ERISA or the Code with respect to any Plan.
As used in this Agreement:
"Code" means the Internal Revenue Code of 1986, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the regulations 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 Code.
"Multi-employer Plan" means a multi-employer 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 Code) is making or accruing an obligation to make
contributions, or has within any of the preceding six 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.
"Pension Plan" means any pension plan (other than a Multi-employer
Plan) subject to the provision of Title IV of ERISA or Section 412 of the Code
that is maintained for employees of the Company or any of its Subsidiaries, or
any ERISA Affiliate.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA, including
any Pension Plan.
"Reportable Event" means any reportable event as defined in Section
4043(b) of ERISA or the regulations issued thereunder with respect to a Plan.
"Withdrawal Liability" means liability to a Multi-employer Plan as a
result of a complete or partial withdrawal from such Multi-employer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
U. Tax Matters.
12
1. The Company has filed all material Tax Returns (as such term is
hereinafter defined) which it is required to file under applicable Laws; 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
(as such term is hereinafter defined) due and owing by it (whether or not such
Taxes are required to be shown on a Tax Return) and has 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 the Company is or may be subject to
taxation by such 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 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 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 Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
3. The Company has not made an election under Section 341(f) of the Code.
The Company is not liable for the Taxes of another person that is not a
subsidiary of the Company 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 not
obligated to make payments and is not a party to any agreement that could
obligate it to make any payments that would not be deductible under Section 280G
of the Code.
As used in this Agreement:
"IRS" means the United States Internal Revenue Service.
13
"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. Except as set forth on Schedule III.V., each of the Company
---------------
and the Subsidiaries has good and marketable title to all of its assets and
properties material to the conduct of its business, free and clear of any liens,
pledges, security interests, claims, encumbrances or other restrictions of any
kind (collectively, "Liens"). With respect to any assets or properties it
leases, each of the Company and its Subsidiaries holds a valid and subsisting
leasehold interest therein, free and clear of any Liens, is in compliance, in
all material respects, within the terms of the applicable lease, and enjoys
peaceful and undisturbed possession under such lease. All of the assets and
properties of the Company and its Subsidiaries that are material to the conduct
of business as presently conducted or as proposed to be conducted by it are in
good operating condition and repair. The inventory of each of the Company and
its Subsidiaries is in good and marketable condition, does not include any
material quantity of items which are obsolete, damaged or slow moving, and is
salable (or may be leased) in the normal course of business as currently
conducted by it.
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.W. Except as set
---------------
forth on Schedule III.W., the Company has all right, title and interest in all
---------------
of the Intangibles, free and clear of any and all Liens. The Company is not
infringing upon or in conflict with any right of any other person with respect
to any Intangibles. Except as disclosed on Schedule III.W., (i) no claims have
---------------
been asserted by any individual, partnership, corporation, unincorporated
organization or association, limited liability company, trust or other entity
(collectively, a "Person") contesting the validity, enforceability, use or
ownership of any Intangibles, and the Company has no knowledge of any basis for
such claim and (ii) neither the Company nor the Subsidiaries has any knowledge
of infringement or misappropriation of the Intangibles by any third party.
X. Contracts. All contracts, agreements, notes, instruments, franchises,
leases, licenses, commitments, arrangements or understandings, written or oral
(collectively, "Contracts") which are material to the business and operations of
the Company and the Subsidiaries are in full force and effect and constitute
legal, valid and binding obligations of the Company and the Subsidiaries and, to
the best knowledge of the Company, the other parties thereto; the Company and
the Subsidiaries and, to the best knowledge of the Company, each other party
thereto, have performed in all material respects all obligations required to be
14
performed by them under the Contracts, and no material violation or default
exists in respect thereof, nor any event that with notice or lapse of time, or
both, would constitute a default thereof, on the part of the Company and the
Subsidiaries or, to the best knowledge of the Company, any other party thereto;
none of the Contracts is currently being renegotiated; and the validity,
effectiveness and continuation of all Contracts will not be materially adversely
affected by the transactions contemplated by this Agreement.
Y. Registration Rights. Except as set forth on Schedule III.Y., no
---------------
Person has, and as of the Closing (as such term is hereinafter defined), no
Person shall have, any demand, "piggy-back" or other rights to cause the Company
to file any registration statement under the Securities Act relating to any of
its securities or to participate in any such registration statement.
Z. Interest. The timely payment of interest on the Debenture is not
prohibited by the Articles of Incorporation or By-Laws of the Company, in each
case as amended to the date of this Agreement, or any agreement, Contract,
document or other undertaking to which the Company or any of the Subsidiaries is
a party.
AA. Investment Company Act. Neither the Company nor any of the
Subsidiaries is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended (the "Investment Company Act"), nor is the
Company nor any of the Subsidiaries directly or indirectly controlled by or
acting on behalf of any Person which is an "investment company" within the
meaning of the Investment Company Act.
BB. Business Plan. Any business information of the Company previously
submitted to Buyer in any form, including the projections contained therein, was
prepared by the senior management of the Company in good faith and is based on
assumptions that the Company believes are reasonable. The Company is not aware
of any fact or condition that could reasonably be expected to result in the
Company not achieving the results described in such business plan.
CC. Year 2000 Compliance. The Company has reviewed its products,
business and operations that could be adversely affected by the risk that
computer applications used by the Company and the Subsidiaries may be unable to
recognize, and properly perform date-sensitive functions involving, dates prior
to and after December 31, 1999 (the "Year 2000 Problem"). The Company believes
its internal information and business systems will be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000. In
addition, the Company has surveyed those vendors, suppliers and other third
parties (collectively, the "Outside Parties") with which the Company or any of
the Subsidiaries do business and whose failure to adequately address the Year
2000 Problem could reasonably be expected to adversely affect the business and
operations of the Company or any of the Subsidiaries. Based upon the
aforementioned internal review and surveys of the Outside Parties as of the date
of this Agreement, the Year 2000 Problem has not resulted in, and is not
reasonably expected to have, a Material Adverse Effect.
DD. Internal Controls and Procedures. The Company maintains accurate
books and records and internal accounting controls that provide reasonable
assurance that (i) all transactions to which the Company or each of the
Subsidiaries is a party or by which its
15
properties are bound are executed with management's authorization; (ii) the
reported accountability of the Company's and the Subsidiaries' assets is
compared with existing assets at regular intervals; (iii) access to the
Company's and the Subsidiaries' assets is permitted only in accordance with
management's authorization and (iv) all transactions to which any of the Company
and the Subsidiaries 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 GAAP.
EE. Payments and Contributions. Neither the Company nor any of its
Subsidiaries nor any of their respective directors, officers or, to their
respective 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 United
States 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.
FF. No Misrepresentation. No representation or warranty of the Company
contained in this Agreement or any of the other Documents, any schedule, annex
or exhibit hereto or thereto 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.
GG. Finder's Fee. There is no finder's fee, brokerage commission or like
payment in connection with the transactions contemplated by this Agreement for
which Buyer is liable or responsible.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
A. Restrictive Legend. Buyer acknowledges and agrees that, upon issuance
pursuant to this Agreement, the Securities (including any Interest Shares,
Conversion Shares or the Warrant Shares) shall have endorsed thereon a legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Interest Shares, the Warrant Shares and the Conversion
Shares until such legend has been removed):
"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."
16
B. Filings. The Company shall make all necessary Commission Filings and
"blue sky" filings required to be made by the Company in connection with the
sale of the Securities to Buyer as required by all applicable Laws, and shall
provide a copy thereof to Buyer promptly after such filing.
C. Reporting Status. So long as Buyer beneficially owns any of the
Securities, the Company shall timely 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 (net of amounts paid by the Company for Buyer's out-of-pocket
costs and expenses, whether or not accounted for or incurred in connection with
the transactions contemplated by this Agreement (including the fees and
disbursements of Buyer's legal counsel), 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 American Stock Exchange or The Nasdaq Stock
Market, the Company shall use its best efforts to maintain its listing of the
Common Stock on OTCBB. If the Common Stock is delisted from OTCBB, the Company
will use its best efforts to list the Common Stock on the most liquid national
securities exchange or quotation system that the Common Stock is qualified to be
listed on.
F. Reserved Conversion Shares. The Company at all times from and after
the date hereof shall have such number of shares of Common Stock duly and
validly authorized and reserved for issuance as shall be sufficient for the
conversion in full of, and the payment of interest on, the Debenture and the
exercise in full of the Warrant.
G. Right of First Refusal. If, during the period commencing on the date
hereof and ending three years after the Closing Date (the "Right of First
Refusal Period"), the Company should propose (the "Proposal") to issue debt or
equity securities convertible into Common Stock at one or more floating,
variable or otherwise adjustable (including, without limitation, price reset
provisions) conversion or exercise prices (each a "Right of First Refusal
Security" and collectively, the "Right of First Refusal Securities"), then, in
each case, the Company shall be obligated to first offer such Right of First
Refusal Securities to Buyer on the terms set forth in the Proposal (the "Offer")
and Buyer shall have the right, but not the obligation, to accept the Offer on
such terms. The Company shall provide written notice to Buyer of any Proposal,
setting forth in full the terms and conditions thereof, and Buyer shall then
have five (5) business days to accept or reject the Offer in writing. If the
Company issues any Right of First Refusal Securities during the Right of First
Refusal Period but fails to: (i) notify Buyer of the Proposal, (ii) offer Buyer
the opportunity to complete the transaction as set forth in the Proposal or
(iii) enter into and consummate an agreement to issue such Right of First
Refusal Securities to Buyer on the terms and conditions set forth in the
Proposal, after Buyer has accepted the Offer, then the Company shall pay to
Buyer, as liquidated damages, an amount equal to ten percent (10%) of the amount
paid to the Company for such 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.
17
H. Information. Each of the parties hereto acknowledges and agrees that
Buyer shall not be provided with, nor be given access to, any material non-
public information relating to the Company or any of the Subsidiaries.
I. Exemption from Investment Company Act. The Company shall conduct its
business, and shall cause the Subsidiaries to conduct their businesses, in such
a manner that neither the Company nor any Subsidiary shall become an "investment
company" within the meaning of the Investment Company Act.
J. Accounting and Reserves. The Company shall maintain a standard and
uniform system of accounting and shall keep proper books and records and
accounts in which full, true, and correct entries shall be made of its
transactions, all in accordance with GAAP applied on consistent basis through
all periods, and shall set aside on such books for each fiscal year all such
reserves for depreciation, obsolescence, amortization, bad debts and other
purposes in connection with its operations as are required by such principles so
applied.
K. Transactions with Affiliates. Neither the Company nor any of its
Subsidiaries shall, directly or indirectly, enter into any transaction or
agreement with any stockholder, officer, director or Affiliate of the Company or
family member of any officer, director or Affiliate of the Company, unless the
transaction or agreement is (i) reviewed and approved by a majority of
Disinterested Directors (as such term is hereinafter defined) and (ii) on terms
no less favorable to the Company or the applicable Subsidiary than those
obtainable from a nonaffiliated person. A "Disinterested Director" shall mean a
director of the Company who is not and has not been an officer or employee of
the Company and who is not a member of the family of, controlled by or under
common control with, any such officer or employee.
L. [Intentionally omitted.]
M. Certain Restrictions. So long as the Debenture is outstanding, no
dividends shall be declared or paid or set apart for payment nor shall any other
distribution be declared or made upon any capital stock of the Company, nor
shall any capital stock of the Company be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of shares of
Common Stock made for purposes of an employee incentive or benefit plan
(including a stock option plan) of the Company or any Subsidiary or pursuant to
the Put and Call Agreements listed on Schedule III.A.I. to which family members
-----------------
and relatives of Xxxxxx X. Xxxxxx are a party), for any consideration by the
Company, directly or indirectly, nor shall any moneys be paid to or made
available for a sinking fund for the redemption of any shares of any such stock.
N. Transfer Agent. If requested by Buyer, the Company shall replace the
then Transfer Agent for the Common Stock with a Transfer Agent designated by
Buyer.
V. TRANSFER AGENT INSTRUCTIONS
A. The Company undertakes and agrees that no instruction other than the
instructions referred to in this Article V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration
18
statement shall be given to its transfer agent for the Common Stock and that the
Conversion Shares, the Interest Shares and the Warrant Shares shall otherwise be
freely transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing 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. Buyer shall have the right to convert the Debenture by telecopying an
executed and completed Conversion Notice (as such term is defined in the
Debenture) to the Company. Each date on which a Conversion Notice is telecopied
to and received by the Company in accordance with the provisions hereof shall be
deemed a Conversion Date (as such term is defined in the Debenture). The
Company shall transmit the certificates evidencing the shares of Common Stock
issuable upon conversion of the Debenture (together with a new debenture, if
any, representing the principal amount of the Debenture not being so converted)
to Buyer via express courier, by electronic transfer or otherwise, within three
(3) business days after receipt by the Company of the Conversion Notice (the
"Delivery Date"). Within thirty (30) days after Buyer delivers the Conversion
Notice to the Company, Buyer shall deliver to the Company the Debenture being
converted.
C. Buyer shall have the right to purchase shares of Common Stock pursuant
to exercise of the Warrant in accordance with its applicable terms. The last
date that the Company may deliver shares of Common Stock issuable upon any
exercise of Warrant is hereinafter referred to 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 interest on the Debenture or upon the
conversion of the Debenture or exercise of the Warrant beyond the applicable
Interest Payment Due Date (as such term is defined in the Debenture), 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
interest on the Debenture or upon conversion of the Debenture or exercise of the
Warrant in accordance with the following schedule (where "No. Business Days" is
defined as the number of business days beyond three (3) days from the Interest
Payment Due Date, the Delivery Date or the Warrant Delivery Date, as
applicable):
Compensation For Each 50 Shares of Common
Stock Issuable In Payment of
Interest on or Conversion of the
Debenture or Upon Exercise of
Warrant Not Issued Timely
No. Business Days
1 $ 2.50
19
2 5.00
3 7.50
4 10.00
5 12.50
6 15.00
7 17.50
8 20.00
9 22.50
10 25.00
more than 10 $25.00 + $10.00 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. In addition to any other remedies which may be
available to Buyer, in the event the Company fails for any reason to deliver
such shares of Common Stock within three (3) business days after the relevant
Interest Payment Due Date, Delivery Date or Warrant Delivery Date, as
applicable, Buyer shall be entitled to rescind the relevant Conversion Notice or
exercise of Warrant 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 Conversion Notice or
exercise 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. CLOSING DATE
The date and time (the "Closing Date") of the issuance and sale of the
Debenture and the Warrant (the "Closing") shall be the date hereof or such other
date as shall be mutually agreed upon in writing. The issuance and sale of the
Debenture and the Warrant shall occur on the Closing Date 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 Purchase
Price or to Buyer the certificate(s) (I/N/O Buyer or I/N/O Buyer's nominee)
evidencing the Debenture and the Warrant unless the conditions set forth in
Sections VIII.C. and IX.G. have been satisfied.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS
20
Buyer understands that the Company's obligation to sell the Debenture and
the Warrant on the Closing Date to Buyer pursuant to this Agreement is
conditioned upon:
A. Delivery by Buyer to the Escrow Agent of the Purchase Price;
B. The accuracy on the Closing Date of the representations and warranties
of Buyer 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 Buyer in all material respects on or
before the Closing Date of all covenants and agreements of Buyer required to be
performed by it pursuant to this Agreement on or before the Closing Date and
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 the Closing Date pursuant to this Agreement is conditioned upon:
A. Delivery by the Company to the Escrow Agent of the Debenture and the
Warrant (I/N/O Buyer or I/N/O Buyer's nominee);
B. The accuracy on the Closing Date of the representations and warranties
of the Company contained in this Agreement as if made on the Closing Date
(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
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, all of which shall be confined to Buyer by delivery of the
certificate of the chief executive officer of the Company to that effect;
C. Buyer having received an opinion of counsel for the Company, dated the
Closing Date, in form, scope and substance reasonably satisfactory to Buyer as
to the matters set forth in Annex A;
-------
D. There not having occurred (i) any general suspension of trading in, or
limitation on prices listed for, the Common Stock on the OTCBB, (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 foreseeably could have a
Material Adverse Effect;
21
F. The Company shall have delivered to Buyer (as provided in the Escrow
Instructions) reimbursement of Buyer's reasonable out-of-pocket costs and
expenses, whether or not accounted for or incurred 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, 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;
H. Delivery by the Company of irrevocable instructions to the Company's
transfer agent to reserve one million one hundred thousand (1,100,000) shares of
Common Stock for issuance of the Conversion Shares, the Interest Shares and the
Warrant Shares;
I. The Company shall have obtained all consents, approvals or waivers
from governmental authorities and third persons necessary for the execution,
delivery and performance of the Documents and the transactions contemplated
thereby, all without material cost to the Company and
J. Delivery by Xxxxxx X. Xxxxxx of (i) a pledge agreement, in form and
substance satisfactory to Buyer, pursuant to which Xx. Xxxxxx pledges and
otherwise grants to Buyer a security interest in all of his right, title and
interest in certain securities (the "Pledge Shares") beneficially owned solely
by Xx. Xxxxxx which are exchangeable for one million (1,000,000) shares of
Common Stock in the aggregate and (ii) the certificate(s) representing the
Pledge Shares together with duly executed stock powers other instruments of
transfer in form and substance satisfactory to Buyer.
K. Buyer shall have received such additional documents, certificates,
payment, assignments, transfers and other delivers as it or its legal counsel
may reasonably request and as are customary to effect a closing of the matters
herein contemplated.
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 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 Closing shall not have occurred at or prior to 5:00
p.m., New York City time, on September 13, 2000 (the "Latest Closing Date");
provided, however, that the right to terminate this Agreement pursuant to this
-------- -------
Section X.B. shall not be available to that party whose failure to fulfill any
of its obligations under this Agreement has been the cause of or has resulted in
the failure of the Closing to occur at or before such time and date; provided,
--------
further, however, that if the Closing shall not have occurred on or prior to the
------- -------
Latest Closing Date, the Closing may only occur after the Latest Closing Date
with the written consent of Buyer.
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 Closing Date, if (1) the
22
Company shall have failed to comply with any of its covenants or agreements
contained in this Agreement, (ii) there shall have been a breach by the Company
of any representation or warranty made by it in this Agreement, (iii) there
shall have occurred any event or development, or there shall be in existence any
condition, having or reasonably likely to have a Material Adverse Effect or (iv)
the Company shall have failed to satisfy the conditions provided in Article IX.
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 Closing Date, if (i) Buyer shall have failed to comply with any of
its covenants or agreements contained in this Agreement or (ii) there shall have
been a breach by Buyer of any representation or warranty made by it in this
Agreement.
E. Effect of Termination. In the event of the termination of this
Agreement pursuant to this Article X, this Agreement shall thereafter become
void and have no effect, and neither party hereto shall have any liability or
obligation to the other party hereto in respect of this Agreement, except that
the provisions of Article XI, this Section X.E and Section X.F shall survive any
such termination; provided, however, that neither party shall be released from
-------- -------
any liability hereunder if this Agreement is terminated and the transactions
contemplated hereby abandoned by reason of (i) willful failure of such party to
perform its obligations hereunder or (ii) any misrepresentation made by such
party of any matter set forth herein.
F. Fees and Expenses of Termination. If this Agreement is terminated for
any reason, the Company shall promptly reimburse Buyer for all of Buyer's
reasonable out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement and the other Documents (including,
without limitation, 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 the Closing 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 the Closing
Date.
B. The Company hereby agrees to indemnify and hold harmless 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 Buyer Indemnitees for all out
of-pocket expenses (including the fees and expenses of legal counsel), in each
case promptly as incurred by 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 or the
other Documents, or the
23
annexes, schedules or exhibits hereto or thereto or any instrument,
agreement or certificate entered into or delivered by the Company pursuant
to this Agreement or the other Documents;
2. any failure by the Company to perform any of its covenants,
agreements, undertakings or obligations set forth in this Agreement or the
other Documents or any instrument, certificate or agreement entered into or
delivered by the Company pursuant to this Agreement or the other Documents;
3. the purchase of the Debenture and the Warrant, the conversion of
the Debenture, the payment of interest on the Debenture, the exercise of
the Warrant, the consummation of the transactions contemplated by this
Agreement and the other Documents, the use of any of the proceeds of the
Purchase Price by the Company, the purchase or ownership of any or all of
the Securities, the performance by the parties hereto of their respective
obligations hereunder and under the Documents or any claim, litigation,
investigation, proceedings or governmental action relating to any of the
foregoing, whether or not Buyer is a party thereto or
4. resales of the Common Shares by Buyer in the manner and as
contemplated by this Agreement and the Registration Rights 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 or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or
any instrument, agreement or certificate entered into or delivered by Buyer
pursuant to this Agreement or the other Documents 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 the other Documents or any instrument, certificate or
agreement entered into or delivered by Buyer pursuant to this Agreement or
the other Documents.
D. Promptly after receipt by either party hereto seeking indemnification
pursuant to this Article 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
Article XI is being sought (the "Indemnifying Party") of the commencement
thereof, but the omission so to 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 or defenses by reason of such failure. In connection with any
Claim as to which both the
24
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
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.
XIII. SUBMISSION TO JURISDICTION
Each of the parties hereto consents to the exclusive 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 the other
Documents. Each party hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may effectively do so, any defense of an inconvenient
forum or improper venue to the maintenance of such action or
25
proceeding in such courts by the mailing of copies of such process by registered
or certified mail (return receipt requested), postage prepaid, at its address
specified in Article XIX. Each party hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
XIV. WAIVER OF JURY TRIAL
TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (i)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
XV. COUNTERPARTS; EXECUTION
This Agreement may be executed in two (2) counterparts, each of which when
so executed and delivered shall be an original, but both of which counterparts
shall together constitute one and the same instrument. A facsimile transmission
of this signed Agreement shall be legal and binding on both parties hereto.
XVI. HEADINGS
The headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this Agreement.
XVII. SEVERABILITY
In the event any one or more of the provisions contained in this Agreement
or in the other Documents should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein or therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
XVIII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS
This Agreement and the Documents constitute the entire agreement between
the parties hereto pertaining to the subject matter hereof and supersede all
prior agreements, understandings, negotiations and discussions, whether oral or
written, of such parties. No supplement,
26
modification or waiver of this Agreement shall be binding unless executed in
writing by both parties. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
XIX. 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 telecopier machine or by a
nationally recognized overnight courier service, and shall be deemed given when
so delivered personally, or by telecopier machine or overnight courier service
as follows:
A. if to the Company, to:
Inforetech Wireless Technology Inc.
Xxxxx 000
0000 - 000/xx/ Xxxxxx
Xxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X-0X0
Attention: Xxxxxx X. Xxxxxx
Telecopier: 000.000.0000
Telephone: 000.000.0000
with a copy to:
Xxxxxx Greenslade
0000-0000 Xxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X 0X0
Attention: Xxxx X. Xxxxxxxxxx
Telecopier: 000.000.0000
Telephone: 000.000.0000
B. if to Buyer, to:
The Shaar Fund Ltd.
c/x Xxxxxxxx Capital Management, LLC
Xxxxx 0000
0 Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx Xxxxxxxx
Telecopier: 000.000.0000
Telephone: 000.000.0000
with a copy to:
Xxxxxxx, Xxxxxxxxx LLP
27
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telecopier: 000.000.0000
Telephone: 000.000.0000
C. if to the Escrow Agent, to:
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telecopier: 000.000.0000
Telephone: 000.000.0000
The Company, Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Article XIX.
XX. 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 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).
XXI. 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.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
NEXT PAGE IS SIGNATURE PAGE.]
28
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement to
be executed and delivered on the date first above written.
Inforetech Wireless Technology Inc.
By: ________________________________
Name:
Title:
The Shaar Fund Ltd.
By: Shaar Advisory Services N.V.
By: ________________________________
Name: Xxx Xxxxxxxxx
Title: Managing Director
29
EXHIBIT A
DEBENTURE
30
EXHIBIT B
WARRANT
-31-
EXHIBIT C
ESCROW INSTRUCTIONS
-32-
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
-33-
SCHEDULE III.A.l.
EXERCISE, CONVERSION OR SUBSCRIPTION PRICES
OF OPTIONS, WARRANTS, OTHER SECURITIES AND AGREEMENTS
Type of Security Exercise, Conversion or Number of Shares Expiry
or Agreement Subscription Price ($U.S.) of Common Stock Date
------------ -------------------------- --------------- ----
Option 1.00 1,710,000 02.01.05
Option 3.00 150,000 02.01.05
Option 7.00 285,000 02.01.05
Option 5.00 60,000 07.12.02
Warrant 2.00 100,000 04.30.01
Warrant 2.00 200,000 05.01.01
Warrant 2.00 175,000 06.24.01
Warrant 2.00 50,000 07.19.01
Warrant 2.00 200,000 09.02.01
Warrant 2.00 100,000 10.18.01
Warrant 2.00 75,000 11.26.01
Warrant 2.00 10,000 11.30.01
Warrant 2.00 10,000 12.24.01
Warrant 2.00 300,000 12.31.01
Warrant 2.00 174,000 01.24.02
Warrant 2.00 330,000 01.31.02
Warrant 4.00 62,500 01.31.02
Convertible Debenture 5.00 * 11.08.00
Convertible Debenture 1.00 161,000 11.08.00
Convertible Debenture 1.00 136,280 11.08.00
Convertible Debenture 1.00 **
_____________________
/1/ Convertible into 60,000 units, each unit consisting of a share of
Common Stock and a warrant to acquire a share of Common Stock at an exercise
price of $5.00 expiring on May 9, 2002.
-34-
Convertible Note *** Variable 08.04.03
Put and Call Agreements N/A 6,902,030 N/A
Subscription Agreements 4.50 222,223 N/A
Consulting Agreements N/A 170,750 N/A
_____________________
/2/ Convertible into 100,000 units, each unit consisting of a share of
Common Stock and a warrant to acquire a share of Common Stock at an exercise
price of $2.00 expiring on the second anniversary of the date of its issuance.
/3/ Conversion price is equal to the lesser of (i) $5.25 and (ii) 75% of
the average closing bid prices of a share of Common Stock on the OTC Bulletin
Board for the three (3) trading days included within the ten (10) trading day
period immediately preceding the date of conversion.
-35-
SCHEDULE III.A.3.
PREEMPTIVE, SUBSCRIPTION, "CALL," RIGHT OF
FIRST REFUSAL OR SIMILAR RIGHTS
The Put and Call Agreements, Subscription Agreements and Consulting
Agreements set forth on Schedule III.A.1. are hereby incorporated herein by
-----------------
reference.
-36-
SCHEDULE III.A.4.
SUBSIDIARIES
Name Type of Entity
---- --------------
Inforetech Golf Technology 2000 Inc. Canadian federal company
The Company is in the process of forming a Jersey, Channel Island company
("Newco") as a wholly-owned subsidiary of Inforetech Golf Technology 2000 Inc.
Newco will be granted certain international intellectual property rights by
Inforetech Golf Technology 2000 Inc.
-37-
SCHEDULE III.A.5.
MINUTES
Date Description
---- -----------
02.01.00 Share exchange from Inforetech 2000 to Inforetech Wireless
07.12.00 Loan to Inforetech 2000 from Boffo Investment Corp. for
$200,000 (Cdn.)
06.13.00 Issuance of shares of X'Xxxxxxx Sports Consultants Inc.
pursuant to a Consulting Agreement with Inforetech 2000
05.10.00 Xxxxxxx Xxxxxxxxx exercise of option to purchase 100,000
Class A Voting Common Shares
01.24.00 Allotment and issuance of shares to Xxxxxx family
03.27.00 Verification resolution of Signature Stock Transfer, Inc.
being appointed transfer agent for Inforetech Wireless
-38-
SCHEDULE III.C.
ISSUANCES AND SALES OF SECURITIES
SINCE DECEMBER 31, 1999
-----------------------------------------------------------------------------------------------------------------
Name Number Type of Value or nature Total Class Issued Capital
Security of transaction A shares
issuable on
exercise of
warrants
-----------------------------------------------------------------------------------------------------------------
December 31, 1999
6,156,000
Class A
-----------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxx, Xx. 4,470,750 Class B
-----------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxx 525,000 Class B
-----------------------------------------------------------------------------------------------------------------
Xxxxxx X Xxxxxx, Xx. 525,000 Class B
-----------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 525,000 Class B
-----------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 525,000 Class B
-----------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 525,000 Class B
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 16,250 Class A Consulting 6,172,250
Agreement -
nominal
consideration
-----------------------------------------------------------------------------------------------------------------
X'Xxxxxxx Sports Consultants 13,000 Class A Consulting 6,185,250
Agreement -
nominal
consideration
-----------------------------------------------------------------------------------------------------------------
-39-
-----------------------------------------------------------------------------------------------------------------------
Name Number Type of Value or nature Total Class Issued Capital
Security of transaction A shares
issuable on
exercise of
warrants
-----------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxx 375,000 Class A Originally 6,560,250
Transfer from
Xxxxxx X. Xxxxxx
-----------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxxx 50,000 Class A $ 50,000 75,000 6,610,250
75,000 Warrant
-----------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxxx 125,000 Class A $175,000 6,735,250
-----------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxxx 100,000 Class A $100,000 175,000 6,835,250
100,000 Warrant
-----------------------------------------------------------------------------------------------------------------------
Sphere Solid Waste II, Inc 200,000 Class A $200,000 375,000 7,035,250
200,000 Warrant
-----------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 25,000 Class A $ 25,000 400,000 7,060,250
25,000 Warrant
-----------------------------------------------------------------------------------------------------------------------
The Xxxx Family Trust 25,000 Class A $ 25,000 425,000 7,085,250
25,000 Warrant
-----------------------------------------------------------------------------------------------------------------------
Kelila Family LP 50,000 Class A $ 50,000 475,000 7,135,250
50,000 Warrant
-----------------------------------------------------------------------------------------------------------------------
Xxxxxxxx Xxxx 25,000 Class A $ 25,000 500,000 7,160250
25,000 Warrant
-----------------------------------------------------------------------------------------------------------------------
Xxxxxx Xxxxxxx 50,000 Class A $ 50,000 550,000 7,210,250
50,000 Warrant
-----------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 50,000 Class A $ 50,000 600,000 7,260,250
50,000 Warrant
-----------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxx 10,000 Class A $ 10,000 610,000 7,270,250
10,000 Warrant Placement fee
Inforetech 2000
-----------------------------------------------------------------------------------------------------------------
-40-
-----------------------------------------------------------------------------------------------------------------
Name Number Type of Value or nature Total Class Issued Capital
Security of transaction A Shares
issuable on
exercise of
warrants
-----------------------------------------------------------------------------------------------------------------
Abacus 20,000 Class A $20,000 7,290,250
Capital Loan fee
Inforetech 2000
-----------------------------------------------------------------------------------------------------------------
Base Capital 100,000 Class A $100,000 710,000 7,390,250
100,000 Warrant Loan
conversion
Inforetech 2000
-----------------------------------------------------------------------------------------------------------------
Base Capital 10,000 Class A $10,000 720,000 7,400,250
10,000 Warrant Loan fee
-----------------------------------------------------------------------------------------------------------------
Cameron 100,000 Class A $100,000 7,500,250
Xxxxxxxxx
-----------------------------------------------------------------------------------------------------------------
Cameron 166,667 Class A $125,000 7,666,917
Xxxxxxxxx
-----------------------------------------------------------------------------------------------------------------
Xxxxx 67,666 Class A $50,000 7,734,583
Abalini Inforetech 2000
-----------------------------------------------------------------------------------------------------------------
Xxxx Xxxxx 825,000 Class A $250,000 8,559,583
Inforetech 2000
-----------------------------------------------------------------------------------------------------------------
Bruno 67,666 Class A $50,000 8,627,249
Bennedet Inforetech 2000
-----------------------------------------------------------------------------------------------------------------
Xxxxx Dear 150,000 Class A $45,000 870,000 8,777,249
150,000 Warrant Inforetech 2000
-----------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxx 24,000 Class A $24,000 894,000 8,801,249
24,000 Warrants
-----------------------------------------------------------------------------------------------------------------
SDA List 133,333 Class A $99,750 8,934,582
Brokers
-----------------------------------------------------------------------------------------------------------------
TMR 300,000 Class A $300,000 1,194,000 9,234,582
Investments 2 300,000 Warrant Inforetech 2000
LLC Debt conversion
-----------------------------------------------------------------------------------------------------------------
-41-
-----------------------------------------------------------------------------------------------------------------
Name Number Type of Value or nature Total Class Issued Capital
Security of transaction A Shares
issuable on
exercise of
warrants
-----------------------------------------------------------------------------------------------------------------
TMR 230,000 Class A $230,000 1,624,000 9,464,582
Investments 1 430,000 Warrant Inforetech 2000
LLC Debt
Conversion
-----------------------------------------------------------------------------------------------------------------
Xxxxxx 100,000 Class A $100,000 1,724,000 9,564,582
Greenslade 100,000 Warrant Inforetech 2000
Debt
Conversion
-----------------------------------------------------------------------------------------------------------------
Xxxxxx 62,500 Class A $125,000 1,786,500 9,627,082
Greenslade 62,500 Warrant Inforetech 2000
Debt
Conversion
-----------------------------------------------------------------------------------------------------------------
Private 375,000 Class A $4.00 10,002,082
Placement 400,000 Class A $4.13 10,402,082
-----------------------------------------------------------------------------------------------------------------
Placement fee 100,000 Class A $4.00 10,502,082
-----------------------------------------------------------------------------------------------------------------
100,000 Class A $100,000 10,602,082
Warrant
exercise
-----------------------------------------------------------------------------------------------------------------
Vindemiola 193,720 Class A Debt conversion 10,795,802
-----------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 193,720 Class A Put 10,989,522
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Current Total 1,786,500 10,989,522
Issued
-----------------------------------------------------------------------------------------------------------------
Xxxxx 222,223 Class A Subscription
Xxxxxxxx Agreement
-----------------------------------------------------------------------------------------------------------------
Notes:
1. With the exception of the debt settlement with Xxxxxx Greenslade and the
subscription agreements, all of the above transactions were provided for in
the original Share Exchange and Finance Agreement among the Xxxxxx Family,
Xxxxxx Capital and
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Inforetech Wireless. The dollar value was based upon the historic
agreements in Inforetech 2000.
2. The table does not include grants of Options that are described in Schedule
--------
III.A.1.
--------
3. The shares under the subscription agreement with Xxxxx Xxxxxxx have not yet
been issued.
4. With the exception of warrants for 62,500 Class A shares @ $4.00 issued to
Xxxxxx Greenslade, all warrants for Class A shares are exercisable at
$2.00.
5. In addition to the above, Inforetech Wireless issued a Convertible Loan
Agreement: $300,000 at 12% due November 8, 2000. Convertible until due date
into units at $5.00. Each unit consists of Class A share and warrant to buy
Class A share until May 9, 2002 at $5.00.
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SCHEDULE III.O.
RELATED PARTY TRANSACTIONS
1. Put and Call Agreements with the Xxxxxx Family.
2. The Company entered into an Amendment and Assumption Agreement with
Inforetech Golf Technology 2000 Inc. and RCS Financial Group Inc. pursuant
to which the Company assumed the liability of Inforetech Golf Technology
2000 Inc. to RCS Financial Group Inc. and agreed to replace the conversion
right into Inforetech Golf Technology 2000 Inc. shares with a conversion
right into shares of Common Stock. RCS Financial Group Inc. is owned and
controlled by Xxxxxx X. Xxxxxx.
3. Loan agreements with Xxxxxx X. Xxxxxx and Xxxxx Xxxxxx, individually,
pursuant to which they have individually advanced loans to the Company or
Inforetech Golf Technology 2000 Inc..
-44-
SCHEDULE III.Q.
SECURITIES LAW MATTERS
1. Augustine Fund, L.P. - $1,000,000 8% Convertible Note
2. Swordfish Capital Corp. - $300,000 Convertible Note
3. Xxxx Xxxxxxx and Xxxxx Xxxxx Xxxxxxx - $100,000 10% Convertible Note
4. In addition to the above, Inforetech Golf Technology 2000 Inc. issued
certain convertible notes during 1999 prior to the merger with the Company.
-45-
SCHEDULE III.T.
ERISA MATTERS
None.
-46-
SCHEDULE III.V.
PROPERTY
The Company and Inforetech Golf Technology 2000 Inc. have granted certain
security interests under the Personal Property Security Act of British Columbia,
Canada in respect of the indebtedness described below:
--------------------------------------------------------------------------------------------------------------------------------
REG. EXPIRY SECURED PARTY BASE DEBTOR GENERAL
DATE DATE COLLATERAL
--------------------------------------------------------------------------------------------------------------------------------
Nov 6/98 Nov 6/03 Bank of Montreal Inforetech Golf All presently owned and
Cloverdale 0000 000X Xxxxxx Technology 2000 Inc. after acquired personal
Xxxxxx, X.X. X0X 0X0 property (other than
consumer goods).
--------------------------------------------------------------------------------------------------------------------------------
Jan 28/99 Jan 28/03 National Leasing Group Inc. Inforetech Golf 1-Comdial 816 telephone
0000 Xxxxxxx Xxxxx Technology 2000 Inc. system & tesin of AT&T
Xxxxxxxx, XX X0X 0X0 (Ind. Debtor: Xxxxxx, system; 1-red oak reception
Xxxxxx) desk, traditional desk,
credenza & hutch;
1-traditional arm tilter
chair, blue; 1-arm chairs,
blue
--------------------------------------------------------------------------------------------------------------------------------
Feb 10/99 Feb 10/03 National Leasing Group Inc. Inforetech Golf 1-3 piece star work;
0000 Xxxxxxx Xxxxx Technology 2000 Inc. 1-matching hutch; 1-leather
Xxxxxxxx, XX X0X 0X0 (Ind. Debtor: Xxxxxx, chair; 1-corner unit
Xxxxxx) w/keyboard-gry mat; 1-66"
bullet top w/xxxxx gry mat;
1-325 series B/F ped -
storm grey; 1-global 3 drw
lateral file blk; 1-2dr
lateral file cabinet; 2-star
executive desk 72' x 20',
72" x 36"
--------------------------------------------------------------------------------------------------------------------------------
Mar 4/99 Mar 4/03 North Shore Credit Union Inforetech Golf All debtors present and
0000 Xxxxxx Xxxxx Technology 2000 Inc. after acquired computer
West Vancuover, B.C. equipment together with all
V7V 1Y9 attachments, accessories,
accessions, replacements,
substitutions, additions
and improvements thereto
and all proceeds that are
goods, intangibles,
securities, documents of
title, chattel paper,
instruments, or money (and
terms used herein that are
defined in the Personal
Property Security Act of
British Columbia have those
defined meanings).
--------------------------------------------------------------------------------------------------------------------------------
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--------------------------------------------------------------------------------------------------------------------------------
Sep 20/99 Sep 20/02 Copelco Capital Ltd. Inforetech Golf 1-Pentium II 400 MHZ
P.O. Box 37 Station A Technology 2000 Inc. computer; 1-HP Kayak XA6
Xxxxxxxxxxx, XX X0X 0X0 PII 400 Computer c/w V-90
internal modem; 64MD PC 100
SD RAM; 1-HP 2100TN Laser
printers c/w 2/nd/ tray;
3-tatung 19" monitors;
3-intel celeron 400MHZ
computer c/w 128MB PC-100
SD RAM; 1-acer 56K V-90
external modem with all
attachments, accessories
and proceeds thereof.
--------------------------------------------------------------------------------------------------------------------------------
Oct 18/99 Oct 18/06 Newcourt Financial Ltd. Inforetech Golf 1-Canon NP6030 photocopier
0000 Xxxxx Xxxxxxx Xxxx Technology 2000 Inc. system SN: NRD29289;
Xxxxxxxxxx, XX X0X 0X0 1-Canon NP6025 photocopier
system SN: NBV11332
together with all
attachments, accessories,
accessions, replacements,
substitutions, additions
and improvements thereto
and all proceeds in any
form derived directly or
indirectly from any dealing
with the collateral.
--------------------------------------------------------------------------------------------------------------------------------
Feb 28/00 Feb 28/03 Dell Financial Services Canada Inforetech Golf All dell computer equipment
Limited Technology 2000 Inc. and peripherals wherever
000 Xxxxxx Xxxxx Xxxx, Xxxxx 0 located heretofore or
Xxxxx Xxxx, XX X0X 0X0 hereafter leased to debtor
by secured party pursuant
to an equipment lease
together with all
substitutions, additions,
accessions and replacements
thereto and thereof now and
hereafter installed in,
affixed to, or used in
conjunction with such
equipment and proceeds
thereof together with all
rental or instalment
payments, insurance
proceeds, other proceeds
and payments due or to
become due and arising from
or relating to such
equipment. Proceeds: all
present and after-acquired
personal property
--------------------------------------------------------------------------------------------------------------------------------
Mar 5/00 May 3/03 Copelco Capital Ltd. Inforetech Golf 1-FXCBX main cabinet,
--------------------------------------------------------------------------------------------------------------------------------
-48-
--------------------------------------------------------------------------------------------------------------------------------
X.X. Xxx 00 Station A Technology 2000 Inc. XXXXX-0 Xxxxxxx Xxxx. Xxxx
Xxxxxxxxxxx, XX X0X 0X0 card FXSRV-1 services card;
1-FXSW-1 systems software;
2-FXSDS-16 16 Port digital
stn cards; FXLDS-16 Port
analog stn card; 1-FXLDS-16
Port analog trunk card;
IB64X impact 64 line
console 10-8312S impact SCS
12 line LCD speakerphones;
1-NTD4H-S04 port SML office
NT voice processing system
with all attachments,
accessories and proceeds
thereof.
--------------------------------------------------------------------------------------------------------------------------------
May 29/00 May 29/2002 Swordfish Capital Corp. Inforetech Golf All present and after
X.X. Xxx 00, Xxxx Xxxxxxxx Technology acquired property.
Road Town, Tortola BVI
--------------------------------------------------------------------------------------------------------------------------------
Jun 5/00 Jun 5/04 Xxxxxx Financial Canada Ltd. Inforetech Golf All goods supplied before
0000 Xxxxx Xxxxxxx Xx. X. Xxxxx 00 Technology Inc. or hereafter by secured
Xxxxxxxx, XX X0X 0X0 (Ind. Debtor: Xxxxxx, party, all parts and
Xxxxxx) accessories therefore and
accessions thereto and all
proceeds thereof.
--------------------------------------------------------------------------------------------------------------------------------
Jul 18/00 Jul 18/01 Boffo Investment Corp. Inforetech Golf All moneys, up to an
201 - 4695 East Hastings St. Technology 2000 Inc. aggregate of principal and
Xxxxxxx, X.X. X0X 0X0 interest outstanding under
a loan made by the secured
party to the debtor, owing
and payable or hereafter
owing and payable by the
Federal Government of
Canada, including any
agency thereof, in regard
to a rebate of moneys that
were expended by the debtor
on scientific research and
development.
--------------------------------------------------------------------------------------------------------------------------------
-00-
XXXXXXXX XXX.X.
INTELLECTUAL PROPERTY
Vindemiola Limited has transferred to Inforetech Golf Technology 2000 Inc.
certain intellectual property rights owned by Vindemiola Limited which are
utilized in the inFOREmer 2000 technology. Vindemiola Limited is entitled to a
royalty on the sale of the handsets utilized for golf and has retained a license
to such intellectual property rights for non-golf applications.
Optimal Recreation Solutions, LLP and its affiliates hold domestic and
international patents for a "Golf Distance Measuring Systems and Method" which
are currently the subject of a litigation not involving the Company regarding
the validity of such patents. If the validity of the aforesaid patents is
upheld, the Company may be required to become a licensee of Optimal Recreation
Solutions, LLP. In such event, the Company will be able to obtain a license from
Optimal Recreation Solutions, LLP on commercially reasonable terms.
-50-
SCHEDULE III.Y.
REGISTRATION RIGHTS
Type of Number of Shares
Name Registration Right of Common Stock
---- ------------------ ---------------
Abacus Capital LLC "Piggy-back" 20,000
TMR Investments 1 LLC "Piggy-back" 460,000*
Augustine Fund, L.P. Demand and "Piggy-back" 1,100,000
TMR Investments 1 LLC "Piggy-back" 200,000
________________
/4/ Issuable upon exercise of certain warrants.
-51-
ANNEX A
FORM OF OPINION
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Nevada, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties or conducts business,
except for jurisdictions in which the failure to so qualify would not have a
Material Adverse Effect, and has all requisite corporate power and authority to
own its properties and conduct its business as described in the Commission
Filings.
2. The authorized capital stock of the Company consists of (i)
100,000,000 shares of Common Stock and (ii) 10,000,000 shares of Class B Special
Voting Non-Equity Common Stock, par value $0.001 per share.
3. When delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Documents, the
Securities will be duly authorized and validly issued, fully paid and
nonassessable.
4. The Company has the requisite corporate power and authority to enter
into the Documents and to sell and deliver the Securities as described in the
Documents; each of the Documents has been duly and validly authorized by all
necessary corporate action by the Company; each of the Documents has been duly
and validly executed and delivered by and on behalf of the Company, and is a
valid and binding agreement of the Company, enforceable in accordance with its
terms, except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws affecting creditors rights generally.
5. Except as set forth on the Schedules to the Securities Purchase
Agreement, the execution and delivery by the Company of the Documents, the
issuance of the Securities and the consummation by the Company of the other
transactions contemplated thereby do not, and compliance with the provisions of
the Documents will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or loss of
a material benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, or result
in the termination of, or require that any consent be obtained or any notice be
given with respect to, (i) the Articles of Incorporation or By-Laws of the
Company, in each case as amended to the date of the Securities Purchase
Agreement, or the comparable charter or organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, contract or other agreement, instrument or permit known to us
and applicable to the Company or any of its Subsidiaries or their respective
properties or assets or (iii) any Law applicable to, or, to the best of our
knowledge, any judgment, decree or order of any court or government body having
jurisdiction over, the Company or any of its Subsidiaries or any of their
respective properties or assets. To the best of
-52-
our knowledge, no consent, approval, authorization, order, registration, filing,
qualification, license or permit of or with any court or any public,
governmental or regulatory agency or body having jurisdiction over the Company
or any of its properties or assets is required for the execution, delivery and
performance by the Company of the Documents or the consummation by the Company
of the transactions contemplated thereby.
6. When issued, the Debenture and the Warrant shall be duly authorized,
validly issued, fully paid and nonassessable, and free and clear of all
encumbrances and restrictions, except for restrictions on transfer imposed by
applicable securities laws. The Conversion Shares, Interest Shares and Warrant
Shares issuable upon conversion, payment of interest or exercise, respectively,
of the Debenture and the Warrant, respectively, will be duly authorized, validly
issued, fully paid and nonassessable, and free and clear of all encumbrances and
restrictions, except for restrictions on transfer imposed by applicable
securities laws.
7. Based on Buyer's representations contained in the Securities Purchase
Agreement, the offer and sale of the Debenture and the Warrant are exempt from
the registration requirements of the Securities Act.
8. To the best of our knowledge, other than as described in the
Commission Filings, there are no outstanding options, warrants or other
securities exercisable or convertible into Common Stock of the Company.
9. There is no action, suit, claim, inquiry or investigation pending or,
to the best of our knowledge, threatened by or before any court or public or
governmental authority which, if determined adversely to the Company, would have
a Material Adverse Effect.
10. Neither the Company nor any of its Subsidiaries is, or will be after
the consummation of the transactions contemplated by the Securities Purchase
Agreement and the other Documents and the use of the proceeds from the sale of
the Securities, an "investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
11. The securities, instruments and other documents listed on Schedule 2.1
and Schedule 2.3 to the Pledge Agreement dated as of August 4, 2000 (the "Pledge
------
Agreement") made by Xxxxxx X. Xxxxxx to Buyer are the only securities,
---------
instruments and documents required in order to exchange or otherwise convert the
Units (as such term is defined in the Pledge Agreement) covered by the Pledge
Agreement into shares of Common Stock.
-53-
