EXHIBIT 10.27
SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement dated as of October 30, 2002 (this
"Agreement") by and between PayStar Corporation, a Nevada corporation, with
principal executive offices located at 0000 X. Xxxxxxxxx Xxxx, Xxxxx 00,
Xxxx, Xxxxxxxxxx 00000 (the "Company"), and La Jolla Cove Investors, Inc.
("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 8 3/4% Convertible Debenture of the
Company in the aggregate principal amount of $150,000 (the "Debenture"); and
WHEREAS, in conjunction with the Debenture, the Company has issued a
Warrant to Purchase Common Stock to the Buyer (the "Warrant or Conversion
Warrant"); and
WHEREAS, upon the terms and subject to the conditions set forth in the
Debenture and the Warrant, the Debenture and Warrant are convertible and
exercisable, respectively, into shares of the Company's Common Stock (the
"Common Stock");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally
bound, hereby agree as follows:
I. PURCHASE AND SALE OF DEBENTURE
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.
B. Purchase Price; Form of Payment. The purchase price for the
Debenture to be purchased by Buyer hereunder shall be $150,000 (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 Company. Simultaneously with the execution of this
Agreement, the Company shall deliver the Convertible Debenture and the
Conversion Warrants (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).
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 and the Common Stock issuable
upon conversion or redemption of the Debenture (the "Conversion Shares"
and, collectively with the Debenture and the Warrant Shares, the
"Securities") for its own account, for investment purposes only and not
with a view towards or in connection with the public sale or distribution
thereof in violation of the Securities Act.
B. Buyer is (i) an "accredited investor" within the meaning of Rule
501 of Regulation D under the Securities Act, (ii) experienced in making
investments of the kind contemplated by this Agreement, (iii) capable, by
reason of its business and financial experience, of evaluating the relative
merits and risks of an investment in the Securities, and (iv) able to
afford the loss of its investment in the Securities.
C. Buyer understands that the Securities are being offered and sold
by the Company in reliance on an exemption from the registration
requirements of the Securities Act and equivalent state securities and
"blue sky" laws, and that the Company is relying upon the accuracy of, and
Buyer's compliance with, Buyer's representations, warranties and covenants
set forth in this Agreement to determine the availability of such exemption
and the eligibility of Buyer to purchase the Securities;
D. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "Commission") or
any state or provincial 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.
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
__________ shares of Common Stock and _________ shares of Series A
Preferred Stock of which __________ shares and __________ shares,
respectively, are issued and outstanding as of the date hereof and are
fully paid and nonassessable. The amount, exercise, conversion or
subscription price and expiration date for each outstanding option and
other security or agreement to purchase shares of Common Stock is
accurately set forth on Schedule III.A.1.
2. The Conversion Shares and the Warrant Shares have been duly
and validly authorized and reserved for issuance by the Company, and, when
issued by the Company upon conversion of the Debenture, 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
preemptive, subscription, "call," right of first refusal or other similar
rights to acquire any capital stock of the Company or other voting
securities of the Company that have been issued or granted to any person
and no other obligations of the Company s 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.
B. Organization; Reporting Company Status.
1. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state 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 or on the consummation of any of the transactions contemplated
by this Agreement (a "Material Adverse Effect").
2. The Company is subject to the reporting requirements 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 shares of Common Stock, which is a number
sufficient for the conversion of the Debenture and the exercise of the
Conversion Warrant 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 in full and the exercise of the Conversion Warrant. The Company
understands and acknowledges the potentially dilutive effect on the Common
Stock of the issuance of the Conversion Shares and the Warrant Shares. The
Company further acknowledges that its obligation to issue Conversion Shares
upon conversion of the Debenture and the exercise of the Conversion Warrant
and the Initial Warrant in accordance with this Agreement 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. section 101 et
seq. (the "Bankruptcy 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. section 362 in respect of the
conversion of the Debenture. 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. section 362.
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 issuance and reservation
for issuance of the Conversion 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, (iii) the Debenture;
and (iv) the Conversion Warrant.
E. Validity of Issuance of the Securities. The Debenture, the
Conversion Shares upon their issuance in accordance with the Debenture, and
the Warrant Shares 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 or Certificate 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, Debenture, 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 Securities 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 Debentures
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. 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 the Commission Filings 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.
J. 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.
K. 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 and
provincial securities and "blue sky" laws. The Company shall not directly
or indirectly take, and shall not permit any of its directors, officers or
Affiliates directly or indirectly to take, any action (including, without
limitation, any offering or sale to any person or entity of any security
similar to the Debenture) 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, the Conversion 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 Conversion Shares) as contemplated by this Agreement
or any other agreement to which the Company is a party.
L. Registration Rights. Except as set forth on Schedule III.L., 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.
M. Interest. The timely payment of interest on the Debenture is not
prohibited by the Articles or Certificate 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 is
a party.
N. 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.
O. 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. 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.
B. 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.
C. 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.
D. Reserved Conversion Common Stock. 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 the Debenture and the exercise of
the Conversion Warrant.
E. 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.
F. 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.
G. Transactions with Affiliates. So long as the Debenture is
outstanding, neither the Company nor any of its Subsidiaries shall,
directly or indirectly, enter into any material 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.
H. 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
pursuant to any of the security agreements listed on Schedule III.A, 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 Common Stock of any such stock.
J. Short Selling. So long as the Debenture is outstanding, Buyer
agrees and covenants on its behalf and on behalf of its affiliates that
neither Buyer nor its affiliates shall at any time engage in any short
sales with respect to the Company's Common Stock, or sell put options or
similar instruments with respect to the Company's Common Stock.
V. ISSUANCE OF COMMON STOCK
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 statement shall be
given to its transfer agent for the Conversion Shares and the Warrant
Shares and that the Conversion 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.
B. Buyer shall have the right to convert the Debenture and exercise
the Warrant by telecopying an executed and completed Conversion Notice (as
such term is defined in the Debenture) or Warrant Notice of Exercise (as
such term is defined in the Warrant) to the Company. Each date on which a
Conversion Notice or Warrant Notice of Exercise 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 cause the transfer agent to transmit the certificates
evidencing the 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) or exercise of the Warrant
(together with a new Warrant, if any, representing the amount of the
Warrant not being so exercised) to Buyer via express courier, or if a
Registration Statement covering the Common Stock has been declared
effective by the SEC by electronic transfer, within three (3) business days
after receipt by the Company of the Conversion Notice or Warrant Notice of
Exercise (the "Delivery Date").
C. Upon the conversion of the Debenture or exercise of the Warrant
or part thereof, the Company shall, at its own cost and expense, take all
necessary action (including the issuance of an opinion of counsel) to
assure that the Company's transfer agent shall issue stock certificates in
the name of Buyer (or its nominee) or such other persons as designated by
Buyer and in such denominations to be specified at conversion representing
the number of Common Stock of common stock issuable upon such conversion or
exercise. The Company warrants that the Conversion Shares and Warrant
Shares will be unlegended, free-trading, and freely transferable, and will
not contain a legend restricting the resale or transferability of the
Company Common Stock provided the Conversion Shares and Warrant Shares are
being sold pursuant to an effective registration statement covering the
Common Stock to be sold or is otherwise exempt from registration when sold.
D. The Company understands that a delay in the delivery of the
Common Stock in the form required pursuant to this section, or the
Mandatory Redemption Amount described in Section E hereof, beyond the
Delivery Date or Mandatory Redemption Payment Date (as hereinafter defined)
could result in economic loss to the Buyer. As compensation to the Buyer
for such loss, the Company agrees to pay late payments to the Buyer for
late issuance of Common Stock in the form required pursuant to Section C
hereof upon Conversion of the Debenture or late payment of the Mandatory
Redemption Amount, in the amount of $100 per business day after the
Delivery Date or Mandatory Redemption Payment Date, as the case may be, for
each $10,000 of Debenture principal amount being converted or redeemed. The
Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Furthermore, in addition to any other remedies
which may be available to the Buyer, in the event that the Company fails
for any reason to effect delivery of the Common Stock by the Delivery Date
or make payment by the Mandatory Redemption Payment Date, the Buyer will be
entitled to revoke all or part of the relevant Notice of Conversion or
rescind all or part of the notice of Mandatory Redemption by delivery of a
notice to such effect to the Company whereupon the Company and the Buyer
shall each be restored to their respective positions immediately prior to
the delivery of such notice, except that late payment charges described
above shall be payable through the date notice of revocation or rescission
is given to the Company.
E. Mandatory Redemption. In the event the Company is prohibited from
issuing Common Stock, or fails to timely deliver Common Stock on a Delivery
Date, or upon the occurrence of an Event of Default (as defined in the
Debenture) or for any reason other than pursuant to the limitations set
forth herein, or upon the occurrence of an Event of Default as defined in
the Debenture, then at the Buyer's election, the Company must pay to the
Buyer ten (10) business days after request by the Buyer or on the Delivery
Date (if requested by the Buyer) a sum of money determined by multiplying
up to the outstanding principal amount of the Debenture designated by the
Buyer by 130%, together with accrued but unpaid interest thereon
("Mandatory Redemption Payment"). The Mandatory Redemption Payment must be
received by the Buyer on the same date as the Company Common Stock
otherwise deliverable or within ten (10) business days after request,
whichever is sooner ("Mandatory Redemption Payment Date"). Upon receipt of
the Mandatory Redemption Payment, the corresponding Debenture principal and
interest will be deemed paid and no longer outstanding.
F. Buy-In. In addition to any other rights available to the Buyer,
if the Company fails to deliver to the Buyer such Common Stock issuable
upon conversion of a Debenture or exercise of a Warrant by the Delivery
Date and if ten (10) days after the Delivery Date the Buyer purchases (in
an open market transaction or otherwise) shares of Common Stock to deliver
in satisfaction of a sale by the Buyer of the Common Stock which the Buyer
anticipated receiving upon such conversion (a "Buy-In"), then the Company
shall pay in cash to the Buyer (in addition to any remedies available to or
elected by the Buyer) the amount by which (A) the Buyer's total purchase
price (including brokerage commissions, if any) for the shares of Common
Stock so purchased exceeds (B) the aggregate principal and/or interest
amount of the Debenture or Warrant for which such conversion or exercise
was not timely honored, together with interest thereon at a rate of 15% per
annum, accruing until such amount and any accrued interest thereon is paid
in full (which amount shall be paid as liquidated damages and not as a
penalty). For example, if the Buyer purchases shares of Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to an
attempted conversion of $10,000 of Debenture or Warrant principal and/or
interest, the Company shall be required to pay the Buyer $1,000, plus
interest. The Buyer shall provide the Company written notice indicating
the amounts payable to the Buyer in respect of the Buy-In.
G. The Securities shall be delivered by the Company to the Buyer
pursuant to Section I.B. hereof on a "delivery-against-payment basis" at
the Closing.
VI. CLOSING DATE
The Closing shall occur by the delivery to the Buyer of the
certificate evidencing the Debenture and all other Agreements and to the
Company the Purchase Price.
VII. CONDITIONS TO THE COMPANY'S OBLIGATIONS
Buyer understands that the Company's obligation to sell the Debenture
on the Closing Date to Buyer pursuant to this Agreement is conditioned
upon:
A. Delivery by Buyer of the Initial 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.
VIII. 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 of the Debenture, the Conversion Warrant
and the other Agreements (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. There not having occurred (i) any general suspension of trading
in, or limitation on prices listed for, the Common Stock on the OTCBB/Pink
Sheet, (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,
D. 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;
E. The Company shall have delivered to Buyer (as provided in the
Escrow Instructions) reimbursement of Buyer's reasonable out-of-pocket
costs and expenses incurred in connection with the transactions
contemplated by this Agreement
F. 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;
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;.
G. 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.
H. Delivery by the Company of an enforceability opinion from its
outside counsel in form and substance satisfactory to Buyer.
I. Reimbursement of Buyer's legal fees in the amount of $5,000.
IX. 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 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, the conversion of the
Debenture, the payment of interest on the Debenture, the issuance of
the Warrant Shares, 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 Stock 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 IX (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 IX 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 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.
X. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of California, without regard to the conflicts of law
principles of such state.
XI. 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 San
Diego or the state courts of the State of California sitting in the City of
San Diego 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 proceeding in any such court and any night of jurisdiction
on account of its place of residence or domicile. Each party hereto
irrevocably and unconditionally consents to the service of any and all
process in any such action or 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 XVII.
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.
XII. 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.
XIII. COUNTERPARTS; EXECUTION
This Agreement may be executed in 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.
XIV. HEADINGS
The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
XV. 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.
XVI. 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,
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.
XVII. 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:
PayStar Corporation
0000 Xxxxxxxxx Xxxx, Xxxxx 00
Xxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
B. if to Buyer, to:
La Jolla Cove Investors, Inc.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
The Company or Buyer may change the foregoing address by notice given
pursuant to this Article XVII.
XVIII. 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; provide, 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).
XIX. 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; provide, however, that Buyer may assign its rights and
obligations hereunder, in whole or in part, to any affiliate of Buyer.
IN WITNESS WHEREOF, the parties hereto have duly caused this Agreement
to be executed and delivered on the date first above written.
PayStar Corporation La Jolla Cove Investors, Inc.
By: /s/ Xxxxxxx Xxxxx By: /s/ Xxxxxx Xxxx
Title: CEO Title: Portfolio Mgr.
SCHEDULE III.L.
REGISTRATION RIGHTS
Name Shares
California Phones Ltd 4,499,736
Partnerships 0-12 and 14-16
Intermountain Marketing Associates, LLC 500,000
NIBG, LLC 550,000
Digital Access Communications 500,000
X Source Corporation 5,277,778
Xxxx XxXxx 1,000,000
Payload LLC 1,000,000
La Jolla Cover Investors, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
October 30, 2002
Xx. Xxxxxxx Xxxxx
PayStar Corporation
0000 X. Xxxxxxxxx Xxxx
Xxxx, XX 00000
Dear Xxxxxxx:
This letter shall serve as an addendum to the following documents: 8 3/4%
Convertible Debenture, Registration Rights Agreement, Securities Purchase
Agreement and the Warrant to Purchase Common Stock. Capitalized terms
shall have the meaning set forth in the respective documents. The
following changes and additions are hereby made and agreed upon:
1. The Principal Amount of the Convertible Debenture shall be $100,000,
rather than $150,000.
Sincerely,
/s/ Xxxxxx X. Xxxx
Xxxxxx X. Xxxx
Portfolio Manager
Agreed to:
PayStar Corporation
For: Xxxxxxx Xxxxx
By: /s/ Xxxxx X. Xxxxxx
Title: CFO
