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EXHIBIT 4.8
CONVERTIBLE DEBENTURE AND WARRANTS PURCHASE AGREEMENT
BETWEEN
AFFINITY TECHNOLOGY GROUP, INC.
AND
THE INVESTORS SIGNATORY HERETO
CONVERTIBLE DEBENTURE AND WARRANTS PURCHASE AGREEMENT dated as of
September 22, 2000 (the "Agreement"), between the Investors signatory hereto
(each an "Investor" and together the "Investors"), and Affinity Technology
Group, Inc., a corporation organized and existing under the laws of the State
of Delaware (the "Company").
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Investors,
and the Investors shall purchase in the aggregate (i) $1,000,000 principal
amount of Convertible Debentures (as defined below) and (ii) Warrants (as
defined below) to purchase shares of the Common Stock (as defined below); and
WHEREAS, such investments will be made in reliance upon the provisions
of Section 4(2) ("Section 4(2)") and/or 4(6) ("Section 4(6)") of the United
States Securities Act of 1933, as amended (the "Securities Act") and/or
Regulation D ("Regulation D") and the other rules and regulations promulgated
thereunder, and/or upon such other exemption from the registration requirements
of the Securities Act as may be available with respect to any or all of the
investments in securities to be made hereunder.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1 "Capital Shares" shall mean the Common Stock and any
shares of any other class of common stock whether now or hereafter authorized,
having the right to participate in the distribution of earnings and assets of
the Company.
Section 1.2 "Capital Shares Equivalents" shall mean any
securities, rights, or obligations that are convertible into or exchangeable
for or give any right to subscribe for any Capital Shares of the Company or any
warrants, options or other rights to subscribe for or purchase Capital Shares
or any such convertible or exchangeable securities.
Section 1.3 "Closing" shall mean the closing of the purchase and
sale of the Convertible Debentures and Warrants pursuant to Section 2.1.
Section 1.4 "Closing Date" shall mean the date on which all
conditions to the Closing have been satisfied (as set forth in Section 2.1 (b)
hereto) and such Closing shall have occurred.
Section 1.5 "Common Stock" shall mean the Company's common stock,
$0.0001 par value per share.
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Section 1.6 "Conversion Shares" shall mean the shares of Common
Stock issuable upon conversion of the Convertible Debenture.
Section 1.7 "Convertible Debenture(s)" shall mean the 8%
convertible debenture(s) due 18 months from their date of issuance, in the form
of Exhibit A hereto.
Section 1.8 "Damages" shall mean any loss, claim, damage,
judgment, penalty, deficiency, liability, costs and expenses (including,
without limitation, reasonable attorney's fees and disbursements and reasonable
costs and expenses of expert witnesses and investigation).
Section 1.9 "Effective Date" shall mean the date on which the SEC
first declares effective a Registration Statement registering the resale of the
Registrable Securities as set forth in the Registration Rights Agreement.
Section 1.10 "Escrow Agent" shall have the meaning set forth in
the Escrow Agreement.
Section 1.11 "Escrow Agreement" shall mean the Escrow Agreement in
substantially the form of Exhibit C hereto executed and delivered
contemporaneously with this Agreement.
Section 1.12 "Exchange Act" shall mean the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder.
Section 1.13 "Legend" shall mean the legend set forth in Section
9.1.
Section 1.14 "Market Price" on any given date shall mean the
average of the three (3) lowest closing bid prices on the Principal Market (as
reported by Bloomberg L.P.) of the Common Stock during the twenty-two (22)
Trading Days immediately preceding the date for which the Market Price is to be
determined.
Section 1.15 "Material Adverse Effect" shall mean any effect on
the business, operations, properties, prospects or financial condition of the
Company that is material and adverse to the Company and its subsidiaries and
affiliates, taken as a whole, and/or any condition, circumstance, or situation
that would prohibit or otherwise interfere with the ability of the Company to
enter into and perform any of its obligations under this Agreement, the
Registration Rights Agreement, the Convertible Debentures, the Warrants or the
Escrow Agreement in any material respect.
Section 1.16 "Outstanding" when used with reference to shares of
Common Stock or Capital Shares (collectively the "Shares") shall mean, at any
date as of which the number of such Shares is to be determined, all issued and
outstanding Shares, and shall include all such Shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in such
Shares; provided, however, that "Outstanding" shall not mean any such Shares
then directly or indirectly owned or held by or for the account of the Company.
Section 1.17 "Person" shall mean an individual, a corporation, a
partnership, a limited liability company, an association, a trust or other
entity or organization, including a government or political subdivision or an
agency or instrumentality thereof.
Section 1.18 "Principal Market" shall mean the American Stock
Exchange, the New York Stock Exchange, the NASDAQ National Market, NASDAQ
SmallCap Market or the OTC Bulletin Board, whichever is at the time the
principal trading exchange or market for the Common Stock, based upon share
volume.
Section 1.19 "Purchase Price" shall mean the principal amount of
the Convertible Debentures.
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Section 1.20 "Registrable Securities" shall mean the Conversion
Shares and the Warrant Shares until (i) the Registration Statement has been
declared effective by the SEC, and all Conversion Shares and Warrant Shares
have been disposed of pursuant to the Registration Statement, (ii) all
Conversion Shares and Warrant Shares have been sold under circumstances under
which all of the applicable conditions of Rule 144 (or any similar provision
then in force) under the Securities Act ("Rule 144") are met, (iii) all
Conversion Shares and Warrant Shares have been otherwise transferred to holders
who may trade such shares without restriction under the Securities Act, and the
Company has delivered a new certificate or other evidence of ownership for such
securities not bearing a restrictive legend or (iv) such time as, in the
opinion of counsel to the Company, all Conversion Shares and Warrant Shares may
be sold without any time, volume or manner limitations pursuant to Rule 144(k)
(or any similar provision then in effect) under the Securities Act.
Section 1.21 "Registration Rights Agreement" shall mean the
agreement regarding the filing of the Registration Statement for the resale of
the Registrable Securities, entered into between the Company and the Investors
in the form annexed hereto as Exhibit B entered into between the Company and
the Investors on the date hereof.
Section 1.22 "Registration Statement" shall mean a registration
statement on Form S-3 (if use of such form is then available to the Company
pursuant to the rules of the SEC and, if not, on such other form promulgated by
the SEC for which the Company then qualifies and which counsel for the Company
shall deem appropriate, and which form shall be available for the resale by the
Investors of the Registrable Securities to be registered thereunder in
accordance with the provisions of this Agreement, the Registration Rights
Agreement and in accordance with the intended method of distribution of such
securities), for the registration of the resale by the Investor of the
Registrable Securities under the Securities Act.
Section 1.23 "Regulation D" shall have the meaning set forth in
the recitals of this Agreement.
Section 1.24 "SEC" shall mean the Securities and Exchange
Commission.
Section 1.25 "SEC Documents" shall mean the Company's latest Form
10-K or 10-KSB as of the time in question, all Forms 10-Q or 10-QSB and 8-K
filed thereafter, and the Proxy Statement for its latest fiscal year as of the
time in question until such time as the Company no longer has an obligation to
maintain the effectiveness of a Registration Statement as set forth in the
Registration Rights Agreement.
Section 1.26 "Section 4(2)" and "Section 4(6)" shall have the
meanings set forth in the recitals of this Agreement.
Section 1.27 "Securities Act" shall have the meaning set forth in
the recitals of this Agreement.
Section 1.28 "Shares" shall have the meaning set forth in Section
1.16.
Section 1.29 "Trading Day" shall mean any day during which the
Principal Market shall be open for business.
Section 1.30 "Warrants" shall mean the Warrants to purchase up to
200,000 shares of Common Stock, in the aggregate, and at an exercise price of
120% of the Market Price on the Trading Day immediately prior to the Closing
Date, with a term of 3 years from its date of issuance, substantially in the
form of Exhibit E, to be issued to the Investors pro-rata hereunder.
Section 1.31 "Warrant Shares" shall mean all shares of Common
Stock or other securities issued or issuable pursuant to exercise of the
Warrants.
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ARTICLE II
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES AND WARRANTS
Section 2.1 Investment.
(a) Upon the terms and subject to the conditions set forth herein,
the Company agrees to sell, and the Investors, severally and not jointly, agree
to purchase $1,000,000 principal amount of Convertible Debentures together with
the Warrants at the Purchase Price upon the earlier of (i) the Effective Date
or (ii) 30 calendar days after the Company files the Registration Statement
(the "Funding Date"). Within three (3) Trading Days of the Funding Date, each
Investor shall deliver to the Escrow Agent immediately available funds in their
proportionate amount of the Purchase Price as set forth on the signature pages
hereto; provided, however, prior to the Closing Date, the Company shall have
delivered the Convertible Debentures evidencing said principal sum to the
Escrow Agent, in each case to be held by the Escrow Agent pursuant to the
Escrow Agreement. Upon satisfaction of the conditions set forth in Section
2.1(b) relating to the Closing, the closing ("Closing") shall occur at the
offices of the Escrow Agent at which time the Escrow Agent (x) shall release
the applicable Convertible Debentures and the Warrants to the Investors and (y)
shall release the Purchase Price (after all fees have been paid as set forth in
the Escrow Agreement), pursuant to the terms of the Escrow Agreement.
(b) The Closing is subject to the satisfaction or waiver by the
party to be benefited thereby of the following conditions:
(i) delivery into escrow by each Investor of immediately
available funds in the amount of the Purchase Price
of the Convertible Debenture and the Warrants, as
more fully set forth in the Escrow Agreement;
(ii) all representations and warranties of the Company
contained herein shall remain true and correct in
all material respects as of the Closing Date and as
of the Closing Date (as a condition to the
Investors' obligations);
(iii) all representations and warranties of the Investors
contained herein shall remain true and correct in
all material respects as of the Closing Date and as
of the Closing Date (as a condition to the Company's
obligations);
(iv) the Company shall have obtained all permits and
qualifications required by any state for the offer
and sale of the Convertible Debentures and Warrants,
or shall have the availability of exemptions
therefrom;
(v) the sale and issuance of the Convertible Debentures
and the Warrants hereunder, and the proposed
issuance by the Company to the Investors of the
Common Stock underlying the Convertible Debentures
and the Warrants upon the conversion or exercise
thereof shall be legally permitted by all laws and
regulations to which the Investors and the Company
are subject and there shall be no ruling, judgment
or writ of any court prohibiting the transactions
contemplated by this Agreement;
(vi) the Company shall have delivered the applicable
original fully executed Convertible Debentures;
(vii) the Company shall have delivered the Warrants to the
Escrow Agent;
(viii) delivery to the Escrow Agent of an opinion of
Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A., counsel to the
Company, in the form of Exhibit D hereto; and
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(ix) delivery to the Escrow Agent of the Irrevocable
Instructions to Transfer Agent in the form attached
hereto as Exhibit F.
Section 2.2 Liquidated Damages. The parties hereto acknowledge
and agree that the sum payable pursuant to the Registration Rights Agreement for
late registration and the sum payable pursuant to the Convertible Debentures for
late delivery of Common Stock certificates shall constitute liquidated damages
and not penalties. The parties further acknowledge that (a) the amount of loss
or damages likely to be incurred is incapable or is difficult to precisely
estimate, (b) the amount specified in such provisions bear a reasonable
proportion and are not plainly or grossly disproportionate to the probable loss
likely to be incurred by the Investors in connection with the failure of the
Company to timely cause the registration of the Registrable Securities or to
deliver stock certificates upon any conversion, and (c) the parties are
sophisticated businesses and have been represented by sophisticated and able
legal and financial counsel and negotiated this Agreement at arm's length.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF INVESTOR
Each Investor, severally and not jointly, represents and warrants to the
Company that:
Section 3.1 Intent. The Investor is entering into this Agreement
and acquiring the securities issued hereunder for its own account and not with
a view to or for sale in connection with any distribution of the Common Stock.
The Investor has no present arrangement (whether or not legally binding) at any
time to sell the Convertible Debenture or the Warrants or any Conversion Shares
and Warrant Shares to or through any person or entity; provided, however, that
by making the representations herein, the Investor does not agree to hold such
securities for any minimum or other specific term and reserves the right to
dispose of the Conversion Shares and Warrant Shares at any time in accordance
with federal and state securities laws applicable to such disposition. The
Investor acknowledges that the Company has not registered the Convertible
Debentures, the Warrants, the Conversion Shares or the Warrant Shares under the
Securities Act, that such securities are "restricted securities" as defined
under Rule 144 and that such securities may not be disposed of except as
permitted by the Securities Act.
Section 3.2 Sophisticated Investor. The Investor is a
sophisticated investor (as described in Rule 506(b)(2)(ii) of Regulation D) and
an accredited investor (as defined in Rule 501 of Regulation D), and the
Investor has such experience in business and financial matters that it has the
capacity to protect its own interests in connection with this transaction and
is capable of evaluating the merits and risks of an investment in the
Convertible Debentures, the Warrants and the underlying Common Stock. The
Investor has been represented by counsel of its choice. The Investor
acknowledges that an investment in the Convertible Debentures and the Warrants
and the underlying Common Stock is speculative and involves a high degree of
risk.
Section 3.3 Authority. This Agreement and each agreement attached
as an exhibit hereto which is required to be executed by Investor has been duly
authorized and validly executed and delivered by the Investor and is a valid
and binding agreement of the Investor enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, or similar laws
relating to, or affecting generally the enforcement of, creditors' rights and
remedies or by other equitable principles of general application.
Section 3.4 Not an Affiliate. The Investor is not an officer,
director or "affiliate" (as that term is defined in Rule 405 of the Securities
Act) of the Company.
Section 3.5 Absence of Conflicts. The execution and delivery of
this Agreement and each agreement which is attached as an exhibit hereto and
executed by the Investor in connection herewith, and the consummation of the
transactions contemplated hereby and thereby, and compliance with the
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requirements hereof and thereof by the Investor, will not violate any law,
rule, regulation, order, writ, judgment, injunction, decree or award binding on
Investor or (a) violate any provision of any indenture, instrument or agreement
to which Investor is a party or is subject, or by which Investor or any of its
assets is bound; (b) conflict with or constitute a material default thereunder;
(c) result in the creation or imposition of any lien pursuant to the terms of
any such indenture, instrument or agreement, or constitute a breach of any
fiduciary duty owed by Investor to any third party; or (d) require the approval
of any third-party (which has not been obtained) pursuant to any material
contract, agreement, instrument, relationship or legal obligation to which
Investor is subject or to which any of its assets, operations or management may
be subject.
Section 3.6 Disclosure; Access to Information. The Investor has
received all documents, records, books and other information pertaining to
Investor's investment in the Company that have been requested by the Investor.
Section 3.7 Manner of Sale. At no time was Investor presented
with or solicited by or through any leaflet, public promotional meeting,
television, radio or newspaper advertisement or any other form of general
solicitation or advertising, as prohibited by Rule 502(c) of Regulation D.
Section 3.8 Other. The Investor hereby represents and covenants
to the Company that it is not affiliated or associated with AMRO International,
S.A. The parties hereby agree that the offer and sale of the securities
hereunder has occurred in South Carolina.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors that, except as set forth
in the SEC Documents or on the Disclosure Schedule prepared by the Company and
attached hereto:
Section 4.1 Organization of the Company. The Company is a
corporation duly incorporated and existing in good standing under the laws of
the State of Delaware and has all requisite corporate authority to own its
properties and to carry on its business as now being conducted. The Company
does not have any subsidiaries and does not own more that fifty percent (50%)
of or control any other business entity. The Company is duly qualified and is
in good standing as a foreign corporation to do business in every jurisdiction
in which the nature of the business conducted or property owned by it makes
such qualification necessary, other than those in which the failure so to
qualify would not have a Material Adverse Effect.
Section 4.2 Authority. (i) The Company has the requisite
corporate power and corporate authority to conduct its business as now
conducted, to enter into and perform its obligations under this Agreement, the
Registration Rights Agreement, the Escrow Agreement and the Warrants, and to
issue the Convertible Debentures and the Conversion Shares, the Warrants and
the Warrant Shares pursuant to their respective terms, (ii) the execution,
issuance and delivery of this Agreement, the Registration Rights Agreement, the
Escrow Agreement and the Convertible Debentures and the Warrants by the Company
and the consummation by it of the transactions contemplated hereby have been
duly authorized by all necessary corporate action and no further consent or
authorization of the Company or its Board of Directors or stockholders is
required, and (iii) this Agreement, the Registration Rights Agreement, the
Escrow Agreement, the Warrants and the Convertible Debentures have been duly
executed and delivered by the Company and at the Closing shall constitute valid
and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws relating to, or affecting
generally the enforcement of, creditors' rights and remedies or by other
equitable principles of general application. The Company has duly and validly
authorized and reserved for issuance shares of Common Stock sufficient in
number for the conversion of the Convertible Debentures and the exercise of the
Warrants. The Company understands and acknowledges the potentially dilutive
effect to the Common Stock of the issuance of the Conversion Shares and Warrant
Shares. The Company further
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acknowledges that its obligation to issue Conversion Shares and Warrant Shares
upon conversion of the Convertible Debentures and upon exercise of the Warrants
in accordance with this Agreement and the Convertible Debentures 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. ss. 101 et seq.
(the "Bankruptcy Code"). The Company shall not seek judicial relief from its
obligations hereunder except pursuant to 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. ss.
362 in respect of the conversion of the Convertible Debentures and the exercise
of the Warrants. The Company agrees, without cost or expense to the Investors,
to take or consent to any and all action necessary to effectuate relief under
11 U.S.C. ss. 362.
Section 4.3 Capitalization. The authorized capital stock of the
Company consists of 60,000,000 shares of Common Stock, $0.0001 par value per
share, of which 30,527,135 shares are issued and outstanding, and 5,000,000
shares of preferred stock, $0.0001 par value per share, none of which are
outstanding. There are no outstanding Capital Shares Equivalents nor any
agreements or understandings pursuant to which any Capital Shares Equivalents
may become outstanding. The Company is not a party to any agreement granting
registration or anti-dilution rights to any person with respect to any of its
equity or debt securities. All of the outstanding shares of Common Stock of the
Company have been duly and validly authorized and issued and are fully paid and
non-assessable and have been issued pursuant to valid exemptions from
registration under the Securities Act and all applicable state "blue sky" laws.
Section 4.4 Common Stock. The Company has registered its Common
Stock pursuant to Section 12(b) or (g) of the Exchange Act and is in full
compliance with all reporting requirements of the Exchange Act, and the Company
is in compliance with all requirements for the continued listing or quotation
of its Common Stock, and such Common Stock is currently listed or quoted on,
the Principal Market. As of the date hereof, the Principal Market is the
Nasdaq SmallCap Market and the Company has not received any notice regarding,
and to its knowledge there is no threat, of the termination or discontinuance
of the eligibility of the Common Stock for such listing.
Section 4.5 SEC Documents. The Company has made available to the
Investors true and complete copies of the SEC Documents. The Company has not
provided to the Investors any information that, under the Securities Act or the
Exchange Act, the Company was required to publicly disclose prior to the date
hereof by the Company, but which has not been so disclosed. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the Exchange Act, and the SEC Documents did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Documents complied in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto at the time of such inclusion. Such financial statements have
been prepared in all material respects in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except (i) as may be otherwise indicated in such financial statements or the
notes thereto or (ii) in the case of unaudited interim statements, to the
extent they exclude footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the Company
as of the dates thereof and the results of operations and cash flows for the
periods then ended (subject, in the case of unaudited interim statements, to
normal year-end audit adjustments). Neither the Company nor any of its
subsidiaries has any material indebtedness, obligations or liabilities of any
kind (whether accrued, absolute, contingent or otherwise, and whether due or to
become due) that would have been required to be reflected in, reserved against
or otherwise described in the financial statements or in the notes thereto in
accordance with GAAP, which was not fully reflected in, reserved against or
otherwise described in the financial statements or the notes thereto included
in the SEC Documents or was not incurred in the ordinary course of business
consistent with the Company's past practices since the last date of such
financial statements.
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Section 4.6 Exemption from Registration; Valid Issuances. Subject
to the accuracy of the Investors' representations in Article III, the sale of
the Convertible Debentures and the Conversion Shares, the Warrants and Warrant
Shares will not require registration under the Securities Act and/or any
applicable state securities law. When validly converted in accordance with the
terms of the Convertible Debentures, the Conversion Shares, the Warrants and
Warrant Shares will be duly and validly issued, fully paid, and non-assessable.
Neither the sales of the Convertible Debentures, the Conversion Shares, the
Warrants and Warrant Shares pursuant to, nor the Company's performance of its
obligations under, this Agreement, the Registration Rights Agreement, the
Escrow Agreement or the Convertible Debentures and the Warrants will (i) result
in the creation or imposition by the Company of any liens, charges, claims or
other encumbrances upon the Convertible Debentures, the Warrants or the
Conversion Shares and Warrant Shares or, except as contemplated herein, any of
the assets of the Company, or (ii) entitle the holders of Outstanding Capital
Shares to preemptive or other rights to subscribe for or acquire the Capital
Shares or other securities of the Company. The Convertible Debentures, the
Warrants and the Conversion Shares and Warrant Shares, shall not subject the
Investors to personal liability to the Company or its creditors by reason of
the possession thereof.
Section 4.7 No General Solicitation or Advertising in Regard to
this Transaction. Neither the Company nor any of its affiliates nor, to the
knowledge of the Company, any person acting on its or their behalf (i) has
conducted any general solicitation (as that term is used in Rule 502(c) of
Regulation D) or general advertising with respect to the sale of the
Convertible Debentures or the Warrants, or (ii) made any offers or sales of any
security or solicited any offers to buy any security under any circumstances
that would require registration of the Convertible Debentures or Warrants under
the Securities Act.
Section 4.8 No Conflicts. The execution, delivery and performance
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby, including without limitation the issuance of
and payment of interest upon the Convertible Debentures, Warrants and the
Conversion Shares and Warrant Shares, do not and will not (i) result in a
violation of the Company's Certificate of Incorporation or By-Laws or (ii)
conflict with, or constitute a material default (or an event that with notice
or lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any material
agreement, indenture or instrument, or any "lock-up" or similar provision of
any underwriting or similar agreement to which the Company is a party, or (iii)
result in a violation of any federal, state or local law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) applicable to the Company or by which any material property or
asset of the Company is bound or affected, nor is the Company otherwise in
violation of, conflict with or default under any of the foregoing (except in
each case for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not have, individually or
in the aggregate, a Material Adverse Effect). The business of the Company is
not being conducted in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations that either singly or in
the aggregate would not have a Material Adverse Effect. The Company is not
required under any Federal, state or local law, rule or regulation to obtain
any consent, authorization or order of, or make any filing or registration
with, any court or governmental agency in order for it to execute, deliver or
perform any of its obligations under this Agreement or issue and sell the
Convertible Debentures or the Warrants in accordance with the terms hereof
(other than any SEC or state securities filings that may be required to be made
by the Company subsequent to Closing, and any registration statement that may
be filed pursuant hereto); provided that, for purposes of the representation
made in this sentence, the Company is assuming and relying upon the accuracy of
the relevant representations and agreements of the Investor herein.
Section 4.9 No Material Adverse Change. Since June 30, 2000, no
Material Adverse Effect has occurred or exists with respect to the Company. No
material supplier has given notice, oral or written, that it intends to cease
or reduce the volume of its business with the Company from historical levels.
Section 4.10 No Undisclosed Events or Circumstances. Since June
30, 2000, no event or circumstance has occurred or exists with respect to the
Company or its businesses, properties, prospects, operations or financial
condition, that, under the Securities Act or the Exchange Act requires public
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disclosure or announcement prior to the date hereof by the Company but which
has not been so publicly announced or disclosed in writing to the Investors.
Section 4.11 No Integrated Offering. Other than pursuant to an
effective registration statement under the Securities Act, or pursuant to the
issuance or exercise of employee stock options or in connection with certain
acquisitions, or pursuant to its discussion with the Investor in connection
with the transactions contemplated hereby, the Company has not issued, offered
or sold the Convertible Debentures, the Warrants or any shares of Common Stock
(including for this purpose any securities of the same or a similar class as
the Convertible Debentures, Warrants or Common Stock, or any securities
convertible into a exchangeable or exercisable for the Convertible Debentures
or Common Stock or any such other securities) within the six-month period next
preceding the date hereof, and the Company 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 of the
Convertible Debentures or shares of Common Stock), so as to make unavailable
the exemption from Securities Act registration being relied upon by the Company
for the offer and sale to Investors of the Convertible Debentures (and the
Conversion Shares and Warrant Shares) as contemplated by this Agreement.
Section 4.12 Litigation and Other Proceedings. There are no
lawsuits or proceedings pending or, to the knowledge of the Company,
threatened, against the Company or any subsidiary, nor has the Company received
any written or oral notice of any such action, suit, proceeding or
investigation, which could reasonably be expected to have a Material Adverse
Effect. No judgment, order, writ, injunction or decree or award has been issued
by or, to the knowledge of the Company, requested of any court, arbitrator or
governmental agency which could result in a Material Adverse Effect.
Section 4.13 No Misleading or Untrue Communication. The Company
and, to the knowledge of the Company, any person representing the Company have
not made, at any time, any oral communication in connection with the offer or
sale of the same which contained any untrue statement of a material fact or
omitted to state any material fact necessary in order to make the statements,
in the light of the circumstances under which they were made, not misleading.
Section 4.14 Material Non-Public Information. The Company has not
disclosed to the Investors any material non-public information that (i) if
disclosed, would reasonably be expected to have a material effect on the price
of the Common Stock or (ii) in accordance with the Securities Act or the
Exchange Act, the Company was required to disclose publicly by the Company
prior to the date hereof but which has not been so disclosed.
Section 4.15 Insurance. The Company and each subsidiary maintains
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards and the Company's historical claims experience. The Company has not
received notice from, and has no knowledge of any threat by, any insurer (that
has issued any insurance policy to the Company) that such insurer intends to
deny coverage under or cancel, discontinue or not renew any insurance policy
presently in force.
Section 4.16 Tax Matters.
(a) The Company and each subsidiary has filed all Tax Returns which it
is required to file under applicable laws; all such Tax Returns are true and
accurate and have been prepared in compliance with all applicable laws; the
Company has paid all Taxes due and owing by it or any subsidiary (whether or
not such Taxes are required to be shown on a Tax Return) and have withheld and
paid over to the appropriate taxing authorities all Taxes which it is required
to withhold from amounts paid or owing to any employee, stockholder, creditor
or other third parties; and since December 31, 1999, 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.
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(b) No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that the Company or any subsidiary
is or may be subject to taxation by that jurisdiction. There are no foreign,
federal, state or local tax audits or administrative or judicial proceedings
pending or being conducted with respect to the Company or any subsidiary; 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 or any subsidiary 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 ss. 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar provision of state,
local or foreign law; or (B) has not agreed to or is required to make any
adjustments pursuant to ss. 481 (a) of the Internal Revenue Code or any similar
provision of state, local or foreign law by reason of a change in accounting
method initiated by the Company or any of its subsidiaries or has any knowledge
that the IRS has proposed any such adjustment or change in accounting method, or
has any application pending with any taxing authority requesting permission for
any changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c)(2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c)(1)(A)(ii) of the Internal
Revenue Code.
(c) The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another
person that is not a subsidiary of the Company under (A) Treas. Reg. ss.
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. Except as set forth on the
Disclosure Schedules attached hereto, the Company has not made any payments, is
not obligated to make payments nor is it a party to an agreement that could
obligate it to make any payments that would not be deductible under ss. 280G of
the Internal Revenue Code.
(d) For purposes of this Section 4.16:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local,
foreign, or other income, gross receipts, ad valorem,
franchise, profits, sales or use, transfer, registration,
excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or
other withholding, employment, social security, severance,
stamp, occupation, alternative or add-on minimum, estimated
and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and
interest attributable thereto) whether disputed or not.
"Tax Return" means any return, information report or filing
with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.
Section 4.17 Property. Neither the Company nor any of its
subsidiaries owns any real property. Each of the Company and its subsidiaries
has good and marketable title to all personal property owned by it, free and
clear of all liens, encumbrances and defects except such as do not materially
affect the value of such property and do not materially interfere with the use
made and proposed to be made of such property by the Company; and to the
Company's knowledge any real property and buildings held under lease by the
Company as tenant are held by it under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and intended to be made of such property and buildings by the Company. The
Company's present facilities are adequate for the Company's reasonably
foreseeable needs.
Section 4.18 Intellectual Property. Each of the Company and its
subsidiaries 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
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(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. To the Company's knowledge,
neither the Company nor any of its subsidiaries is infringing upon or in
conflict with any right of any other person with respect to any Intangibles. No
adverse claims have been asserted by any person to the ownership or use of any
Intangibles and the Company has no knowledge of any basis for such claim.
Section 4.19 Internal Controls and Procedures. The Company
maintains books and records and internal accounting controls which provide
reasonable assurance that (i) all transactions to which the Company or any
subsidiary is a party or by which its properties are bound are executed with
management's authorization; (ii) the recorded accounting of the Company's
consolidated assets is compared with existing assets at regular intervals;
(iii) access to the Company's consolidated assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
the Company or any subsidiary is a party or by which its properties are bound
are recorded as necessary to permit preparation of the financial statements of
the Company in accordance with U.S. generally accepted accounting principles.
Section 4.20 Payments and Contributions. Neither the Company, any
subsidiary, nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful contribution,
endorsement, gift, entertainment or other unlawful expense relating to
political activity; (ii) made any direct or indirect unlawful payment of
Company funds to any foreign or domestic government official or employee; (iii)
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977, as amended; or (iv) made any bribe, rebate, payoff, influence
payment, kickback or other similar payment to any person with respect to
Company matters.
Section 4.21 Permits and Licenses. The Company holds all necessary
permits and licenses to conduct its business as presently conducted. All of
such permits and licenses are in full force and effect and the Company is not
in material violation of any thereof.
Section 4.22 No Misrepresentation. The representations and
warranties of the Company contained in this Agreement, any schedule, annex or
exhibit hereto and any agreement, instrument or certificate furnished by the
Company to the Investors pursuant to this Agreement, do not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE V
COVENANTS OF THE INVESTORS
Each Investor, severally and not jointly, covenants with the Company
that:
Section 5.1 Compliance with Law. The Investor's trading
activities with respect to shares of the Company's Common Stock will be in
compliance with all applicable state and federal securities laws, rules and
regulations and rules and regulations of the Principal Market on which the
Company's Common Stock is listed.
Section 5.2 No Short Sales. From the date hereof until the
Investor no longer holds any unconverted Convertible Debentures, the Investor
and its affiliates shall not engage in short sales of the Company's Common
Stock (as defined in applicable SEC and NASD rules).
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ARTICLE VI
COVENANTS OF THE COMPANY
Section 6.1 Registration Rights. The Company shall cause the
Registration Rights Agreement to remain in full force and effect and the
Company shall comply in all material respects with the terms thereof.
Section 6.2 Reservation of Common Stock. As of the date hereof,
the Company has reserved and the Company shall continue to reserve and keep
available at all times, free of preemptive rights, 200% of the shares of Common
Stock required for the purpose of enabling the Company to issue the Conversion
Shares and Warrant Shares pursuant to any conversion of the Convertible
Debentures or exercise of the Warrants at the then prevailing market price (the
"Trigger Amount"). The number of shares so reserved from time to time, as
theretofore increased or reduced as hereinafter provided, may be reduced by the
number of shares actually delivered pursuant to any conversion of the
Convertible Debentures or exercise of the Warrants and the number of shares so
reserved shall be increased or decreased to reflect potential increases or
decreases in the Common Stock that the Company may thereafter be obligated to
issue by reason of adjustments to the Warrants. In the event that the number of
shares of Common Stock so reserved is less than the Trigger Amount, then the
Company shall have 90 days from such date to increase the number of shares
reserved above the Trigger Amount.
Section 6.3 Listing of Common Stock. The Company hereby agrees to
maintain the listing of the Common Stock on a Principal Market, and as soon as
reasonably practicable following the Closing to list the Conversion Shares and
the Warrant Shares on the Principal Market. The Company further agrees, if the
Company applies to have the Common Stock traded on any other Principal Market,
it will include in such application the Conversion Shares and the Warrant
Shares, and will take such other action as is necessary or desirable in the
opinion of the Investor to cause the Conversion Shares and Warrant Shares to be
listed on such other Principal Market as promptly as possible. The Company will
take all action to continue the listing and trading of its Common Stock on a
Principal Market (including, without limitation, maintaining sufficient net
tangible assets) and will comply in all respects with the Company's reporting,
filing and other obligations under the bylaws or rules of the Principal Market
and shall provide Investors with copies of any correspondence to or from such
Principal Market which questions or threatens delisting of the Common Stock,
within three (3) Trading Days of the Company's receipt thereof, until the
Investors have disposed of all of their Registrable Securities.
Section 6.4 Exchange Act Registration. The Company will cause its
Common Stock to continue to be registered under Section 12(b) or (g) of the
Exchange Act, will use its best efforts to comply in all respects with its
reporting and filing obligations under the Exchange Act, and will not take any
action or file any document (whether or not permitted by the Exchange Act or
the rules thereunder) to terminate or suspend such registration or to terminate
or suspend its reporting and filing obligations under said Act until the
Investors have disposed of all of their Registrable Securities.
Section 6.5 Legends. The certificates evidencing the Shares shall
be free of legends, except as set forth in Article IX. If the Transfer Agent
requires an opinion of counsel from the Company's counsel pursuant to the
Instructions to Transfer Agent attached hereto to issue new certificates free
of a legend to an Investor and Company's counsel fails to deliver such opinion
within five (5) days from such a request from the Transfer Agent, then the
Company will pay such Investor (pro rated on a daily basis), as liquidated
damages for such failure and not as a penalty, five percent (5%) per month of
the market value of Common Stock which would be issuable upon conversion of
such Investor's Convertible Debenture until such opinion is provided or such
Securities are issued without legends, notwithstanding the fact that the
Company has instructed the Transfer Agent to accept such an opinion from such
Investor's counsel.
Section 6.6 Corporate Existence; Conflicting Agreements. The
Company will take all steps necessary to preserve and continue the corporate
existence of the Company. The Company shall not enter into any agreement, the
terms of which agreement would restrict or impair the right or ability of the
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Company to perform any of its obligations under this Agreement or any of the
other agreements attached as exhibits hereto.
Section 6.7 Consolidation; Merger. The Company shall not, at any
time after the date hereof, effect any merger or consolidation of the Company
with or into, or a transfer of all or substantially all of the assets of the
Company to, another entity (a "Consolidation Event") unless the resulting
successor or acquiring entity (if not the Company) assumes by written
instrument or by operation of law the obligation to deliver to the Investors
such shares of stock and/or securities as the Investors are entitled to receive
pursuant to this Agreement and the Convertible Debentures.
Section 6.8 Issuance of Convertible Debentures and Warrants. The
sale of the Convertible Debentures, the Warrants and the issuance of the
Conversion Shares upon conversion and Warrant Shares upon the exercise of the
Warrants of the Convertible Debentures shall be made in accordance with the
provisions and requirements of Section 4(2), Section 4(6) or Regulation D (or
Section 3(a)(9) of the Securities Act) and any applicable state securities law.
The Company shall make any necessary SEC and "blue sky" filings as may be
required to be made by the Company in connection with the sale of the shares to
the Investors, and shall provide a copy thereof to the Investors promptly after
such filing.
Section 6.9 Limitation on Future Financing. The Investors
acknowledge and consent to the Company entering into an equity line financing
arranged through Cardinal Capital, L.L.C., with terms acceptable to the
Company. The Company agrees that it will not enter into any sale of its equity
securities or any Capital Shares Equivalents at a discount to the then-current
bid price until the earlier of (i) 180 days after the effective date of the
Registration Statement or (ii) three years (3) years from the date hereof. The
foregoing shall not prevent or limit the Company from engaging in any sale of
securities (i) in a registered public offering by the Company which is
underwritten by one or more established investment banks (not including an
equity line type arrangement), (ii) in one or more private placements where the
purchasers do not have registration rights, (iii) pursuant to any presently
existing or future employee or director benefit plan which plan has been or is
approved by the Company's stockholders, (iv) pursuant to any compensatory plan
for a full-time employee, key consultant, or director, (v) in connection with a
strategic partnership or other business transaction, the principal purpose of
which is not simply to raise money, (vi) to which the Investors give their
written approval, which will not be unreasonably withheld, or (vii) pursuant to
any agreement to which the Company is currently a party. In the event the
Company proposes to enter into a sale of its securities pursuant to the
aforementioned exceptions to the general prohibition on future financing in
clauses (ii) and (vi) in this Section 6.9 (the "Subsequent Placement"), the
Company shall deliver to the Investors a written notice (the "Subsequent
Placement Notice") of its intention to effect such Subsequent Placement, which
Subsequent Placement Notice shall describe in reasonable detail the proposed
terms of such Subsequent Placement, the amount of proceeds intended to be
raised thereunder, and the persons and/or entities with whom such Subsequent
Placement shall be effected, and attached to which shall be a term sheet or
similar document relating thereto. If an Investor shall not have notified the
Company by 6:30 p.m. (New York City time) on the third (3rd) Trading Day after
its receipt of the Subsequent Placement Notice of their willingness to provide
(or to cause their sole designee to provide), subject to completion of mutually
acceptable documentation, financing to the Company on conversion, reset and
pricing terms (including original issue discount, if any) and substantially on
such other terms as set forth in the Subsequent Placement Notices, the Company
may effect the Subsequent Placement substantially upon the terms and to the
persons and/or entities (or affiliates of such persons and/or entities) set
forth in the Subsequent Placement Notice and such Investor shall not have any
further rights with regard to the sale, conversion or exercise of the Company's
securities pursuant to the Subsequent Placement; provided, however, that the
Company shall provide each such Investor with a second Subsequent Placement
Notice, and the Investors shall again have the right of first refusal set forth
above in this Section, if the Subsequent Placement subject to the initial
Subsequent Placement Notice shall not have been consummated for any reason on
conversion, reset and pricing terms (including original issue discount, if any)
and substantially on such other terms set forth in such Subsequent Placement
Notice within sixty (60) Trading Days after the date of the initial Subsequent
Placement Notice with the persons and/or entities (or an affiliate of such
persons and/or entities) identified in the Subsequent Placement Notice.
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Section 6.10 Pro-Rata Redemption. The Company agrees that if it
shall redeem any of the Convertible Debenture, that it shall offer such
redemption pro-rata among all Investors in proportion their respective initial
purchases of such securities pursuant to this Agreement.
ARTICLE VII
SURVIVAL; INDEMNIFICATION
Section 7.1 Survival. The representations, warranties and
covenants made by each of the Company and each Investor 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 and shall continue until the Investors no longer hold any of the
Convertible Debentures or Warrants. 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, irrespective of any investigation made by or on behalf of
such party on or prior to the Closing Date, unless such party had actual
knowledge of such breach or violation prior to the Closing Date.
Section 7.2 Indemnity. (a) The Company hereby agrees to indemnify
and hold harmless the Investors, their respective affiliates (as that term is
defined in Rule 405 of the Securities Act) and their respective officers,
directors, partners and members (collectively, the "Investor Indemnitees"),
from and against any and all Damages, and agrees to reimburse the Investor
Indemnitees for all reasonable out-of-pocket expenses (including the reasonable
fees and expenses of legal counsel), in each case promptly as incurred by the
Investor Indemnitees and to the extent arising out of or in connection with:
(i) any material misrepresentation, omission of fact or
breach of any of the Company's representations or
warranties contained in this Agreement, the annexes,
schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered
by the Company pursuant to this Agreement; or
(ii) any failure by the Company to perform in any
material respect any of its material covenants,
agreements, undertakings or obligations set forth in
this Agreement, the annexes, schedules or exhibits
hereto or any instrument, agreement or certificate
entered into or delivered by the Company pursuant to
this Agreement; or
(iii) any action instituted against the Investors, or any
of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate
of an Investor, with respect to any of the
transactions contemplated by this Agreement.
(b) Each Investor, severally and not jointly, 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 Damages, and agrees to reimburse
the Company Indemnitees for all reasonable out-of-pocket expenses (including
the reasonable 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 any misrepresentation, omission of fact, or breach of any of
the Investor's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Investor pursuant to this
Agreement.
Section 7.3 Notice. Promptly after receipt by either party hereto
seeking indemnification pursuant to Section 7.2 (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 from whom indemnification
pursuant to Section 7.2 is being sought (the
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"Indemnifying Party") of the commencement thereof; but the omission to so
notify the Indemnifying Party shall not relieve it from any liability that it
otherwise may have to the Indemnified Party, except to the extent that the
Indemnifying Party is actually prejudiced by such omission or delay. 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 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 material interests between such parties in the conduct of
the defense of such Claim, or if there may be material 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.
Section 7.4 Direct Claims. 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 as set forth in Article X. Judgment upon any award
rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
ARTICLE VIII
DUE DILIGENCE REVIEW
Section 8.1 Due Diligence Review. Prior to the Effective Date,
subject to Section 8.2, the Company shall make available for inspection and
review by the Investors, advisors to and representatives of the Investors (who
may or may not be affiliated with the Investors and who are reasonably
acceptable to the Company), any underwriter participating in any disposition of
the Registrable Securities on behalf of the Investors pursuant to the
Registration Statement, the Registration Statement or amendment or supplement
thereto or any blue sky, Nasdaq or other filing, all proposed filings with the
SEC, and all other corporate documents and properties of the Company as may be
reasonably necessary for the purpose of such review of the foregoing, and cause
the Company's officers, directors and employees to supply all such information
reasonably requested by the Investors or any such representative, advisor or
underwriter in connection with such Registration Statement (including, without
limitation, in response to all questions and other inquiries reasonably made or
submitted by any of them), prior to and from time to time after the filing and
effectiveness of the Registration Statement for the sole purpose of enabling
the Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of the Registration
Statement. The Investors agree to maintain in confidence and not disclose to
any other person (other than Investors' employees, attorneys and accountants on
a need-to-know basis) during the term hereof and for a period of at least one
(1) year following termination of this Agreement any non-public and proprietary
information disclosed by the Company to Investors at any time prior to the
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execution of this Agreement or during the term hereof. Non-public information
shall include all information which is (i) not actually and demonstrably known
by Investors before being obtained from Company and (ii) not generally
available to the public at any time before acquired by the Investors.
Section 8.2 Non-Disclosure of Non-Public Information.
(a) From and after the filing of the Registration Statement, the
Company shall not disclose material non-public information to the Investors,
advisors to or representatives of the Investors unless prior to disclosure of
such information the Company identifies such information as being non-public
information and provides the Investors, such advisors and representatives with
the opportunity to accept or refuse to accept such non-public information for
review. Other than disclosure of any comment letters received from the SEC
staff with respect to the Registration Statement, the Company may, as a
condition to disclosing any non-public information hereunder, require the
Investors' advisors and representatives to enter into a confidentiality
agreement in form and content reasonably satisfactory to the Company and the
Investors.
(b) The Company will promptly notify the legal counsel of the
Investors and, if any, underwriters, of any event or the existence of any
circumstance of which it becomes aware, constituting material information
(whether or not requested of the Company specifically or generally during the
course of due diligence by such persons or entities), which, if not disclosed
in the prospectus included in the Registration Statement, would cause such
prospectus to include a material misstatement or to omit a material fact
required to be stated therein in order to make the statements, therein in light
of the circumstances in which they were made, not misleading.
ARTICLE IX
LEGENDS; TRANSFER AGENT INSTRUCTIONS
Section 9.1 Legends. Unless otherwise provided below, each
certificate representing Registrable Securities will bear the following legend
or equivalent (the "Legend"):
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY OTHER
APPLICABLE SECURITIES LAWS AND HAVE BEEN ISSUED IN RELIANCE UPON AN EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN
MAY BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED, OR OTHERWISE DISPOSED
OF, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO A TRANSACTION THAT IS EXEMPT FROM SUCH REGISTRATION.
Section 9.2 Transfer Agent Instructions. Upon the execution and
delivery hereof, the Company is issuing to the transfer agent for its Common
Stock (and to any substitute or replacement transfer agent for its Common Stock
upon the Company's appointment of any such substitute or replacement transfer
agent) instructions substantially in the form of Exhibit F hereto. Such
instructions shall be irrevocable by the Company from and after the date hereof
or from and after the issuance thereof to any such substitute or replacement
transfer agent, as the case may be.
Section 9.3 No Other Legend or Stock Transfer Restrictions. No
legend other than the one specified in Section 9.1 has been or shall be placed
on the share certificates representing the Convertible Debenture, the Warrant
and any Registrable Securities and no instructions or "stop transfer orders,"
"stock transfer restrictions," or other restrictions have been or shall be
given to the Company's transfer agent with respect thereto other than as
expressly set forth in this Article IX.
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Section 9.4 Investors' Compliance. Nothing in this Article shall
affect in any way the Investor's obligations to comply with all applicable
securities laws upon resale of any securities of the Company.
ARTICLE X
CHOICE OF LAW; ARBITRATION
Section 10.1 Governing Law/Arbitration. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made in New York by persons domiciled in New York City
and without regard to its principles of conflicts of laws. Any dispute under
this Agreement shall be submitted to arbitration under the American Arbitration
Association (the "AAA") in New York City, New York, and shall be finally and
conclusively determined by the decision of a board of arbitration consisting of
three (3) members (hereinafter referred to as the "Board of Arbitration")
selected according to the rules governing the AAA. The Board of Arbitration
shall meet on consecutive business days in New York City, New York, and shall
reach and render a decision in writing (concurred in by a majority of the
members of the Board of Arbitration) with respect to the amount, if any, which
the losing party is required to pay to the other party in respect of a claim
filed. In connection with rendering its decisions, the Board of Arbitration
shall adopt and follow the laws of the State of New York unless the matter at
issue is the corporation law of the company's state of incorporation, in which
event the corporation law of such jurisdiction shall govern such issue. To the
extent practical, decisions of the Board of Arbitration shall be rendered no
more than thirty (30) calendar days following commencement of proceedings with
respect thereto. The Board of Arbitration shall cause its written decision to
be delivered to all parties involved in the dispute. Any decision made by the
Board of Arbitration (either prior to or after the expiration of such thirty
(30) calendar day period) shall be final, binding and conclusive on the parties
to the dispute, and entitled to be enforced to the fullest extent permitted by
law and entered in any court of competent jurisdiction. The Board of
Arbitration shall be authorized and is hereby directed to enter a default
judgment against any party failing to participate in any proceeding hereunder
within the time periods set forth in the AAA rules. The non-prevailing party to
any arbitration (as determined by the Board of Arbitration) shall pay the
expenses of the prevailing party, including reasonable attorney's fees, in
connection with such arbitration. Any party shall be entitled to obtain
injunctive relief from a court in any case where such relief is available, and
the prevailing party in such injunctive action shall be entitled to its
reasonable attorneys' fees in connection therewith.
ARTICLE XI
ASSIGNMENT
Section 11.1 Assignment. Neither this Agreement nor any rights of
the Investors or the Company hereunder may be assigned by either party to any
other person. Notwithstanding the foregoing, (a) the provisions of this
Agreement shall inure to the benefit of, and be enforceable by, any permitted
transferee of at least $200,000 principal amount of the Convertible Debentures
and the Warrants covering no less than 50,000 shares of Common Stock purchased
or acquired by any Investor hereunder with respect to the Convertible
Debentures and Warrants held by such person, and (b) upon the prior written
consent of the Company, which consent shall not unreasonably be withheld or
delayed, each Investor's interest in this Agreement may be assigned at any
time, in whole or in part, to any other person or entity (including any
Affiliate of the Investor) who agrees to make the representations and
warranties contained in Article III and who agrees to be bound by the terms of
this Agreement.
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ARTICLE XII
NOTICES
Section 12.1 Notices. All notices, demands, requests, consents,
approvals, and other communications required or permitted hereunder shall be in
writing and, unless otherwise specified herein, shall be (i) hand delivered,
(ii) deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by facsimile, addressed as set forth below or to
such other address as such party shall have specified most recently by written
notice. Any notice or other communication required or permitted to be given
hereunder shall be deemed effective (a) upon hand delivery or delivery by
facsimile, with accurate confirmation generated by the transmitting facsimile
machine, at the address or number designated below (if delivered on a business
day during normal business hours where such notice is to be received), or the
first business day following such delivery (if delivered other than on a
business day during normal business hours where such notice is to be received)
or (b) on the first business day following the date of sending by reputable
courier service, fully prepaid, addressed to such address, or (c) upon actual
receipt of such mailing, if mailed. The addresses for such communications shall
be:
If to the Company: 0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxx, President & CEO
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to (shall not constitute Xxxxxxxx, Xxxxxxxx & Xxxxxx, P.A.
notice): 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
if to the Investor: As set forth on the signature pages
hereto
with a copy to: Xxxxxx Xxxxxxx, Esq.
(shall not constitute notice) Xxxxxxx Xxxxxx & Green, P.C.
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Either party hereto may from time to time change its address or facsimile
number for notices under this Section 12.1 by giving written notice of such
changed address or facsimile number to the other party hereto as provided in
this Section 12.1.
ARTICLE XIII
MISCELLANEOUS
Section 13.1 Counterparts/ Facsimile/ Amendments. This Agreement
may be executed in multiple counterparts, each of which may be executed by less
than all of the parties and shall be deemed to be an original instrument which
shall be enforceable against the parties actually executing such counterparts
and all of which together shall constitute one and the same instrument. Except
as otherwise stated herein, in lieu of the original documents, a facsimile
transmission or copy of the original documents
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shall be as effective and enforceable as the original. This Agreement may be
amended only by a writing executed by all parties.
Section 13.2 Entire Agreement. This Agreement, the agreements
attached as Exhibits hereto, which include, but are not limited to the
Convertible Debentures, and Warrants the Escrow Agreement, and the Registration
Rights Agreement, set forth the entire agreement and understanding of the
parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations and understandings between the
parties, both oral and written relating to the subject matter hereof. The terms
and conditions of all Exhibits to this Agreement are incorporated herein by
this reference and shall constitute part of this Agreement as is fully set
forth herein.
Section 13.3 Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement to
any party.
Section 13.4 Headings. The headings used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
Section 13.5 Number and Gender. There may be one or more Investors
parties to this Agreement, which Investors may be natural persons or entities.
All references to plural Investors shall apply equally to a single Investor if
there is only one Investor, and all references to an Investor as "it" shall
apply equally to a natural person.
Section 13.6 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading volume
of the Common Stock on any given Trading Day for the purposes of this Agreement
shall be Bloomberg, L.P. or any successor thereto. The written mutual consent
of the Investors and the Company shall be required to employ any other
reporting entity.
Section 13.7 Replacement of Certificates. Upon (i) receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction
or mutilation of a certificate representing the Convertible Debentures or any
Conversion Shares and Warrant Shares and (ii) in the case of any such loss,
theft or destruction of such certificate, upon delivery of an indemnity
agreement or security reasonably satisfactory in form to the Company or as may
be required by the Company's Transfer Agent or (iii) in the case of any such
mutilation, on surrender and cancellation of such certificate, the Company at
its expense will execute and deliver, in lieu thereof, a new certificate of
like tenor.
Section 13.8 Fees and Expenses. Each of the Company and the
Investors agrees to pay its own expenses incident to the performance of its
obligations hereunder, except that the Company shall pay the fees, expenses and
disbursements of Xxxxxxx Xxxxxx & Green, P.C., counsel to the Investors, in an
amount equal to $15,000, all as set forth in the Escrow Agreement.
Section 13.9 Brokerage. Each of the parties hereto represents that
it has had no dealings in connection with this transaction with any finder or
broker who will demand payment of any fee or commission from the other party
except for Cardinal Capital, L.L.C., whose fee shall be paid by the Company.
The Company on the one hand, and the Investors, on the other hand, agree to
indemnify the other against and hold the other harmless from any and all
liabilities to any person claiming brokerage commissions or finder's fees on
account of services purported to have been rendered on behalf of the
indemnifying party in connection with this Agreement or the transactions
contemplated hereby.
Section 13.10 Publicity. The Company agrees that it will not issue
any press release or other public announcement, except as required by law, of
the transactions contemplated by this Agreement without the prior consent of
the Investors, which shall not be unreasonably withheld nor delayed by more
than two (2) Trading Days from their receipt of such proposed release. No
release shall name the Investors without their express consent.
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IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be executed by the undersigned, thereunto duly authorized, as this
22nd day of September, 2000.
AFFINITY TECHNOLOGY GROUP, INC.
By: /s/Xxxxxx X. Xxxxx
--------------------------
Xxxxxx X. Xxxxx, President & CEO
INVESTORS:
Address: x/x Xxxx Xxxxxxx
Xxxxxxxxxxxx Xxxxx 00 AMRO INTERNATIONAL, S.A.
Xxxxxx XX 0000
Xxxxxxxxxxx
By: /s/X.X. Xxxxxxxx
--------------------------
Fax: 000-000-000-0000 X.X. Xxxxxxxx, Director
Total Purchase Price
$1,000,000
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