Exhibit 10.8
CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "Agreement"), dated as
of October 22, 2001, among Composite Industries of America, Inc., a Nevada
corporation (formerly known as World Homes, Inc.) (the "Company") and the
investors signatory hereto (each such investor is a "Purchaser" and all such
investors are, collectively, the "Purchasers").
WHEREAS, subject to the terms and conditions set forth in this
Agreement and in accordance with Sec.4(2) under the Securities Act of 1933, as
amended (the "Securities Act"), and Rule 506 promulgated thereunder, the
Company desires to issue and sell to the Purchasers and the Purchasers,
severally and not jointly, desire to purchase from the Company: (i) an
aggregate principal amount of $750,000 of the Company's 6% Convertible
Debentures due November 13, 2002, which shall be in the form of Exhibit A (the
"Debentures"), and which are convertible into shares of the Company's common
stock, $.001 par value per share (the "Common Stock"), and (ii) certain
Warrants (as defined herein). All references in this Agreement to $ (dollars)
shall be to US$ (United States Dollars) unless otherwise specified.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing
(a) (i) The Closing. Subject to the terms and
conditions set forth in this Agreement the Company shall issue and sell to the
Purchasers and the Purchasers shall severally purchase from the Company the
Debentures and Warrants for an aggregate purchase price of $750,000. The
closing of the purchase and sale of the Debentures (the "Closing") shall take
place at the offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
("Xxxxxxxx Xxxxxxxxx"), 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
immediately following the execution hereof or such later date as the parties
shall agree. The date of the Closing is hereinafter referred to as the
"Closing Date."
(ii) At the Closing, the parties shall deliver or
shall cause to be delivered the following: (A) the Company shall deliver to
each Purchaser: (1) Debentures registered in the name of such Purchaser in the
aggregate principal amount equal to 66 2/3% of the principal amount indicated
below such Purchaser's name on the signature page to this Agreement, (2) the
legal opinion of Xxxxx X. Xxxxx, Esq., outside counsel to the Company, in the
form of Exhibit B, (3) an executed Registration Rights Agreement, dated the
date hereof, among the Company and the Purchasers, in the form of Exhibit C
(the "Registration Rights Agreement"), (4) Transfer Agent Instructions, in the
form of Exhibit D, delivered to and acknowledged by the Company's transfer
agent (the "Transfer Agent Instructions"), (5) a Common Stock purchase
warrant, in the form of Exhibit E, registered in the name of such Purchaser,
pursuant to which such Purchaser shall have the right to acquire a number of
shares of Common Stock equal to 15% of the principal amount of Debentures to
be acquired by such Purchaser on the Closing Date (the "Closing Warrant"), (6)
a Common Stock purchase warrant, in the form of Exhibit G, registered in the
name of such Purchaser, pursuant to which the Purchaser shall have the right
to acquire shares of Common Stock upon the terms set forth therein (the
"Callable Warrant"), (7) an executed Guaranty and Stock Pledge Agreement,
dated the date hereof, in the Form of Exhibit F, (the "Pledge Agreement");
and (B) each Purchaser will deliver to the Company: (1) 66 2/3% of the
purchase price indicated below such Purchaser's name on the signature page to
this Agreement in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such purpose,
and (2) executed originals of this Agreement, the Registration Rights
Agreement and the Pledge Agreement.
1.2 Settlement Date; Subsequent Debentures and Warrants.
On the Business Day following the day the Registration Statement (as defined
in the Registration Rights Agreement) is filed in accordance with the terms
and conditions of the Registration Rights Agreement ("Settlement Date"), the
Company will issue and deliver to each Purchaser: (a) Debentures in the
principal amount equal to 33 1/3% of the principal amount set forth below such
Purchaser's name on the signature page to this Agreement and (b) a Common
Stock purchase warrant, in the form of Exhibit E, registered in the name of
such Purchaser (such warrant, together with the Closing Warrant and Callable
Warrant, the "Warrants"), pursuant to which such Purchaser shall have the
right to acquire a number of shares of Common Stock equal to 15% of the
principal amount of Debentures to be acquired by such Purchaser on the
Settlement Date. The Purchaser's obligation to pay for and acquire shares
under this Section 1.2 is conditioned upon the Company filing the Registration
Statement meeting the requirements of the Registration Rights Agreement on or
prior to the Filing Date (as defined in the Registration Rights Agreement).
1.3 Certain Defined Terms. For purposes of this
Agreement, "Conversion Price," "Original Issue Date," "Trading Day" and "Per
Share Market Value" shall have the meanings set forth in the Debentures;
"Business Day" shall mean any day except Saturday, Sunday and any day which
shall be a federal legal holiday in the United States or a day on which
banking institutions in the State of New York or State of Nevada are
authorized or required by law or other governmental action to close; A
"Person" means an individual or corporation, partnership, trust, incorporated
or unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or subdivision thereof) or other
entity of any kind.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to the Purchasers:
(a) Organization and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Nevada with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set forth
in Schedule 2.1(a) (collectively the "Subsidiaries"). Each of the
Subsidiaries is an entity, duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Each of the Company and the Subsidiaries is
duly qualified to do business and is in good standing as a foreign corporation
or other entity in each jurisdiction in which the nature of the business
conducted or property owned by it makes such qualification necessary, except
where the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, (x) adversely affect the
legality, validity or enforceability of the Securities (as defined below) or
any of this Agreement, the Registration Rights Agreement, the Transfer Agent
Instructions, the Pledge Agreement or the Warrants (collectively, the
"Transaction Documents"), (y) have or result in a material adverse effect on
the results of operations, assets, prospects, or condition (financial or
otherwise) of the Company and the Subsidiaries, taken as a whole, or (z)
adversely impair the Company's ability to perform fully on a timely basis its
obligations under any of the Transaction Documents (any of (x), (y) or (z), a
"Material Adverse Effect").
(b) Authorization; Enforcement. The Company has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and otherwise
to carry out its obligations thereunder. The execution and delivery of each
of the Transaction Documents by the Company and the consummation by it of the
transactions contemplated thereby have been duly authorized by all necessary
action on the part of the Company and no further action is required by the
Company. Each of the Transaction Documents has been duly executed by the
Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate or articles of incorporation, by-laws or other organizational or
charter documents.
(c) Capitalization. The number of authorized, issued and
outstanding capital stock of the Company is set forth in Schedule 2.1(c).
Except as disclosed in Schedule 2.1(c), the Company owns all of the Capital
Stock of each Subsidiary. No shares of Common Stock are entitled to
preemptive or similar rights, nor is any holder of the securities of the
Company entitled to preemptive or similar rights arising out of any agreement
or understanding with the Company by virtue of any of the Transaction
Documents. Except as a result of the purchase and sale of the Debentures and
Warrants and except as disclosed in Schedule 2.1(c), there are no outstanding
options, warrants, script rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities, rights or obligations
convertible into or exchangeable for, or giving any Person any right to
subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings, or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock,
or securities or rights convertible or exchangeable into shares of Common
Stock. The issuance and sale of the Warrants or Underlying Shares (as
hereinafter defined) will not obligate the Company to issue shares of Common
Stock or other securities to any Person other than the Purchaser and will not
result in a right of any holder of Company securities to adjust the exercise
or conversion or reset price under such securities.
(d) Issuance of the Debentures and the Warrants. The
Debentures will be duly and validly issued, free and clear of all liens,
encumbrances and rights of first refusal of any kind (collectively, "Liens").
On the date hereof, the Company will have (and will, at all times while
Debentures are outstanding, maintain) an adequate reserve of duly authorized
shares of Common Stock, reserved for issuance to the holders of such
Debentures and Warrants, to enable it to perform its conversion, exercise and
other obligations under this Agreement. Such number of reserved and
available shares of Common Stock shall not be less than the sum of 200% of the
number of shares of Common Stock which would be issuable upon (i) conversion
in full of the Debentures assuming such conversion occurred on the Original
Issue Date, and the Debentures remain outstanding for one year and all
interest is paid in shares of Common Stock and (ii) exercise in full of the
Warrants (the "Initial Minimum"). All such authorized shares of Common Stock
shall be duly reserved for issuance to the holders of the Debentures and
Warrants. The shares of Common Stock issuable upon conversion of the
Debentures and upon exercise of the Warrants are collectively referred to
herein as the "Underlying Shares." The Debentures, Warrants and the
Underlying Shares are collectively referred to herein as, the "Securities."
When issued to the Purchasers in accordance with the Debentures and the
Warrants, the Underlying Shares will be duly authorized, validly issued, fully
paid and nonassessable, free and clear of all Liens.
(e) No Conflicts. The execution, delivery and performance
of the Transaction Documents by the Company and the consummation by the
Company of the transactions contemplated thereby do not and will not (i)
conflict with or violate any provision of the Company's or any Subsidiary's
certificate or articles of incorporation, bylaws or other charter documents
(each as amended through the date hereof), or (ii) subject to obtaining the
Required Approvals (as defined below), conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or both)
of, any agreement, credit facility, debt or other instrument (evidencing a
Company or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of the
Company or any Subsidiary is bound or affected, or (iii) result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), as
could not, individually or in the aggregate, have or result in a Material
Adverse Effect. The business of the Company is not being conducted in
violation of any law, ordinance or regulation of any governmental authority,
except for violations which, individually or in the aggregate, could not have
or result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company
nor any Subsidiary is required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or other
Person in connection with the execution, delivery and performance by the
Company of the Transaction Documents, other than: (i) the filings required
pursuant to Section 3.10, (ii) the filing with the Commission of a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale of the Underlying Shares by the
Purchasers (the "Underlying Shares Registration Statement"), (iii) applicable
Blue Sky filings, and (iv) in all other cases where the failure to obtain such
consent, waiver, authorization or order, or to give such notice or make such
filing or registration could not have or result in, individually or in the
aggregate, a Material Adverse Effect (collectively, the "Required Approvals").
(g) Litigation; Proceedings. There is no action, suit,
inquiry, notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or any
of its Subsidiaries or any of their respective properties before or by any
court, arbitrator, governmental or administrative agency or regulatory
authority (federal, state, county, local or foreign) (collectively, an
"Action") which (i) adversely affects or challenges the legality, validity or
enforceability of any of the Transaction Documents or the Securities or (ii)
could, if there were an unfavorable decision, individually or in the
aggregate, have or result in a Material Adverse Effect. Except as set forth
in Schedule 2.1(g), neither the Company nor any Subsidiary, nor any director
or officer thereof, is or has been the subject of any Action involving (A) a
claim of violation of or liability under federal or state securities laws or
(B) a claim of breach of fiduciary duty; (iii) the Company does not have
pending before the Commission any request for confidential treatment of
information and the Company has no knowledge of any expected such request that
would be made prior to the Effectiveness Date (as defined in the Registration
Rights Agreement); and (iv) there has not been, and to the best of the
Company's knowledge there is not pending or contemplated, any investigation by
the Commission involving the Company or any current or former director or
officer of the Company.
(h) No Default or Violation. Neither the Company nor any
Subsidiary (i) is in default under or in violation of (and no event has
occurred which has not been waived which, with notice or lapse of time or
both, would result in a default by the Company or any Subsidiary under), nor
has the Company or any Subsidiary received notice of a claim that it is in
default under or that it is in violation of, any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or by
which it or any of its properties is bound, (ii) is in violation of any order
of any court, arbitrator or governmental body, or (iii) is in violation of any
statute, rule or regulation of any governmental authority, in each case of
clauses (i), (ii) or (iii) above, except as could not individually or in the
aggregate, have or result in a Material Adverse Effect.
(i) Private Offering. Assuming the accuracy of the
representations and warranties of the Purchasers set forth in Sections
2.2(b)-(g), the offer, issuance and sale of the Securities to the Purchasers
as contemplated hereby are exempt from the registration requirements of the
Securities Act. Neither the Company nor any Person acting on its behalf has
taken or is, to the knowledge of the Company, contemplating taking any action
which could subject the offering, issuance or sale of the Securities to the
registration requirements of the Securities Act including soliciting any offer
to buy or sell the Securities by means of any form of general solicitation or
advertising.
(j) SEC Reports; Financial Statements. The Company has
filed all reports required to be filed by it under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), including, without limitation, all
filings required pursuant to Sections 13(a) or 15(d) thereof, for the two
years preceding the date hereof (or such shorter period as the Company was
required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Reports" and, together with the
Schedules to this Agreement, the "Disclosure Materials") on a timely basis or
has received a valid extension of such time of filing and has filed any such
SEC Reports prior to the expiration of any such extension. As of their
respective dates, the SEC Reports complied in all material respects with the
requirements of the Securities Act and the Exchange Act and the rules and
regulations of the Commission promulgated thereunder, and none of the SEC
Reports, when filed, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. All material agreements to which the
Company is a party or to which the property or assets of the Company are
subject have been filed as exhibits to the SEC Reports as required under the
Exchange Act. The financial statements of the Company included in the SEC
Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved ("GAAP"), except as
may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject,
in the case of unaudited statements, to normal, immaterial, year-end audit
adjustments. Since January 1, 2000, except as specifically disclosed in the
SEC Reports, (a) there has been no event, occurrence or development that has
or that could result in a Material Adverse Effect, (b) the Company has not
incurred any liabilities (contingent or otherwise) other than (x) liabilities
incurred in the ordinary course of business consistent with past practice and
(y) liabilities not required to be reflected in the Company's financial
statements pursuant to GAAP or required to be disclosed in filings made with
the Commission, (c) the Company has not altered its method of accounting or
the identity of its auditors and (d) the Company has not declared or made any
payment or distribution of cash or other property to its stockholders or
officers or directors (other than in compliance with existing Company stock
option plans or employee benefit plans (as defined n Rule 405 of Regulation
C)) with respect to its capital stock, or purchased, redeemed (or made any
agreements to purchase or redeem) any shares of its capital stock.
(k) Investment Company. The Company is not, and is not an
Affiliate (as defined in Rule 405 under the Securities Act) of, an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. Except for certain fees payable to
Hyperion Partners Corp., no fees or commissions will be payable by the Company
to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of
other Persons for fees of a type contemplated in this Section that may be due
in connection with the transactions contemplated by this Agreement. The
Company shall indemnify and hold harmless the Purchasers, their employees,
officers, directors, agents, and partners, and their respective Affiliates,
from and against all claims, losses, damages, costs (including the costs of
preparation and attorney's fees) and expenses suffered in respect of any such
claimed or existing fees, as such fees and expenses are incurred.
(m) Seniority. No indebtedness of the Company is senior
to the Debentures in right of payment, whether with respect to interest or
upon liquidation or dissolution, or otherwise.
(n) Listing and Maintenance Requirements. Except as set
forth in the SEC Reports, the Company has not, in the two years preceding the
date hereof, received notice (written or oral) from any stock exchange,
market or trading facility on which the Common Stock is or has been listed (or
on which it has been quoted) to the effect that the Company is not in
compliance with the listing or maintenance requirements of such exchange,
market or trading facility. The Company is, and has no reason to believe that
it will not in the foreseeable future continue to be, in compliance with the
listing and maintenance requirements for continued trading of the Common Stock
on the OTC Bulletin Board.
(o) Patents and Trademarks. The Company and its
Subsidiaries have, or have rights to use, all patents, patent applications,
trademarks, trademark applications, service marks, trade names, copyrights,
licenses and rights which are necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have would have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary has
received a written notice that the Intellectual Property Rights used by the
Company or its Subsidiaries violates or infringes upon the rights of any
Person. To the best knowledge of the Company, all such Intellectual Property
Rights are enforceable and there is no existing infringement by another Person
of any of the Intellectual Property Rights.
(p) Registration Rights; Rights of Participation. Except
as set forth on Schedule 6(b) to the Registration Rights Agreement, the
Company has not granted or agreed to grant to any Person any rights (including
"piggy-back" registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority which has
not been satisfied. Except as set forth on Schedule 6(b) to the Registration
Rights Agreement, no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the
transactions contemplated by the Transaction Documents.
(q) Regulatory Permits. The Company and its Subsidiaries
possess all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("Material Permits"), and neither
the Company nor any such Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(r) Title. The Company and the Subsidiaries have good and
marketable title in fee simple to all real property owned by them which is
material to the business of the Company and its Subsidiaries and good and
marketable title in all personal property owned by them which is material to
the business of the Company and its Subsidiaries, in each case free and clear
of all Liens, except for Liens as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of
such property by the Company and its Subsidiaries. Any real property and
facilities held under lease by the Company and its Subsidiaries are held by
them under valid, subsisting and enforceable leases of which the Company and
its Subsidiaries are in compliance and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
Subsidiaries.
(u) Labor Relations. No material labor problem
exists or, to the knowledge of the Company, is imminent with respect to any of
the employees of the Company.
(v) Disclosure. The Company confirms that neither it
nor any other Person acting on its behalf has provided any of the Purchasers
or its agents or counsel with any information that constitutes or might
constitute material non-public information. The Company understands and
confirms that the Purchasers shall be relying on the foregoing representations
in effecting transactions in securities of the Company. All disclosure
provided to the Purchasers regarding the Company, its business and the
transactions contemplated hereby, including the Schedules to this Agreement,
furnished by or on behalf of the Company are true and correct and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(w) Solvency. Based on the financial condition of the
Company as of the Closing Date, (i) the Company's fair saleable value of its
assets exceeds the amount that will be required to be paid on or in respect of
the Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal
year as now conducted and as proposed to be conducted including its capital
needs taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts
are required to be paid. The Company does not intend to incur debts beyond
its ability to pay such debts as they mature (taking into account the timing
and amounts of cash to be payable on or in respect of its debt).
(x) Application of Takeover Protections. The Company
and its Board of Directors have taken all necessary action, if any, in order
to render inapplicable any control share acquisition, business combination,
poison pill (including any distribution under a rights agreement) or other
similar anti-takeover provision under the Company's Certificate of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation the
Company's issuance of the Securities and the Purchasers' ownership of the
Securities.
2.2 Representations and Warranties of the Purchasers. Each
Purchaser hereby for itself and for no other Purchaser represents and warrants
to the Company as follows:
(a) Organization; Authority. Such Purchaser is an entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement and the Registration Rights Agreement has
been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in accordance
with its terms.
(b) Investment Intent. Such Purchaser is acquiring the
Securities as principal for its own account for investment purposes only and
not with a view to or for distributing or reselling such Securities or any
part thereof, without prejudice, however, to such Purchaser's right, subject
to the provisions of this Agreement, the Registration Rights Agreement, and
the Warrants, at all times to sell or otherwise dispose of all or any part of
such Securities pursuant to an effective registration statement under the
Securities Act or under an exemption from such registration and in compliance
with applicable federal and state securities laws. Nothing contained herein
shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time. Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business. Such Purchaser does not
have any agreement or understanding, directly or indirectly, with any Person
to distribute the Securities.
(c) Purchaser Status. At the time such Purchaser was
offered the Securities, it was, and at the date hereof it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Such Purchaser
is not a registered broker-dealer under the Exchange Act nor is such Purchaser
an Affiliate of a registered broker-dealer.
(d) Experience of such Purchaser. Such Purchaser, either
alone or together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such investment.
(e) Ability of such Purchaser to Bear Risk of Investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.
(f) Access to Information. Such Purchaser acknowledges
that it has reviewed the Disclosure Materials and has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to
receive answers from, representatives of the Company concerning the terms and
conditions of the offering of the Securities and the merits and risks of
investing in the Securities; (ii) access to information about the Company and
the Company's financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information
which the Company possesses or can acquire without unreasonable effort or
expense that is necessary to make an informed investment decision with respect
to the investment and to verify the accuracy and completeness of the
information contained in the Disclosure Materials. Neither such inquiries nor
any other investigation conducted by or on behalf of such Purchaser or its
representatives or counsel shall modify, amend or affect such Purchaser's
right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company's representations and warranties contained in the
Transaction Documents.
(g) General Solicitation. Such Purchaser is not
purchasing the Securities as a result of or subsequent to any advertisement,
article, notice or other communication regarding the Securities published in
any newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or any other general solicitation or general
advertisement.
(h) Reliance. Such Purchaser understands and acknowledges
that (i) the Securities are being offered and sold to it without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act and (ii) the availability of
such exemption, depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and such Purchaser
hereby consents to such reliance.
The Company acknowledges and agrees that no Purchaser makes or
has made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
2.2 and Section 4(a)(ii) of the Debentures.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of
pursuant to an effective registration statement under the Securities Act, to
the Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In
connection with any transfer of Securities other than pursuant to an effective
registration statement or to the Company, except as otherwise set forth
herein, the Company may require the transferor thereof to provide to the
Company an opinion of counsel selected by the transferor, the substance of
which opinion shall be reasonably satisfactory to the Company, to the effect
that such transfer does not require registration of such transferred
Securities under the Securities Act. Any such transferee shall agree in
writing to be bound by the terms of this Agreement and shall have the rights
of a Purchaser under this Agreement and the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] OR [EXERCISABLE]] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.
Underlying Shares shall not contain the legend set forth above
nor any other legend if the conversion of Debentures or the exercise of the
Warrants, as the case may be, occurs at any time while an Underlying Shares
Registration Statement is effective under the Securities Act or the holder is
relying on Rule 144 promulgated under the Securities Act ("Rule 144") in
connection with the resale of such Underlying Shares, or in the event there is
not an effective Underlying Shares Registration Statement, and Rule 144 is not
then available for resale of the Underlying Shares, at such time as such
legend is not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the staff of
the Commission). Concurrently with the Closing, the Company will deliver the
Transfer Agent Instructions to the Purchasers and to the transfer agent for
its Common Stock, and shall redeliver such opinions and instructions to each
new transfer agent for the Common Stock, including the transfer agent
contemplated in section 3.17, and shall instruct its counsel to deliver to
such transfer agent the legal opinions included in the Transfer Agent
Instructions. The Company understands that such deliveries are conditions
precedent to the Purchasers obligations to perform any action at the Closing.
In addition, on each of (x) the date that an Underlying Shares Registration
Statement is declared effective by the Commission (such date, the "Effective
Date"), (y) any date on which a Purchaser shall declare an event of default
under the Pledge Agreement ("Default Date"), notifying the Company and
Pledgors thereunder of its intentions to use pledge shares thereunder to
satisfy Obligations (as defined therein), and (z) each date of conversion or
exercise under the Debentures and Warrants following the Effective Date; the
Company will instruct the transfer agent and cause to be promptly provided
such opinions as requested by the transfer agent in order to have issued and
delivered Underlying Shares and pledged shares (as the case may be),
registered in such Purchasers names free of all restrictive legends. The
Company agrees that following the Effective Date and Default Date (as the case
may be), it will, no later than three Trading Days following the delivery by a
Purchaser to the Company of a certificate or certificates representing such
Underlying Shares issued with a restrictive legend, or pledged shares (as the
case may be), deliver to such Purchaser certificates representing such
securities which shall be free from all restrictive and other legends. The
Company may not make any notation on its records or give instructions to any
transfer agent of the Company which enlarge the restrictions of transfer set
forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
issuance of Underlying Shares upon the conversion of the Debentures or
exercise of the Warrants will result in dilution of the outstanding shares of
Common Stock, which dilution may be substantial under certain market
conditions. The Company further acknowledges that its obligation to issue
Underlying Shares upon conversion of the Debentures or exercise of the
Warrants is unconditional and absolute, subject to the limitations set forth
in the Debentures and Warrants, regardless of the effect of any such
dilution.
3.3 Furnishing of Information. As long as the Purchasers own
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to Section
13(a) or 15(d) of the Exchange Act. As long as the Purchasers own
Securities, if the Company is not required to file reports pursuant to such
sections, it will prepare and furnish to the Purchasers and make publicly
available in accordance with Rule 144(c) promulgated under the Securities Act
such information as is required for the Purchasers to sell the Securities
under Rule 144 promulgated under the Securities Act. The Company further
covenants that it will take such further action as any holder of Securities
may reasonably request, all to the extent required from time to time to enable
such Person to sell Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act, including causing its attorneys to
render and deliver any legal opinion required in order to permit a Purchaser
to receive Underlying Shares free of all restrictive legends and to
subsequently sell Underlying Shares under Rule 144 upon receipt of a notice of
an intention to sell or other form of notice having a similar effect. Upon
the request of any such Person, the Company shall deliver to such Person a
written certification of a duly authorized officer as to whether it has
complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best
efforts to ensure that, no Affiliate of the Company shall, sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
security (as defined in Section 2 of the Securities Act) that would be
integrated with the offer or sale of the Securities in a manner that would
require the registration under the Securities Act of the sale of the
Securities to the Purchasers.
3.5 Increase in Authorized Shares. If on any date the Company
would be, if a notice of conversion or exercise (as the case may be) were to
be delivered on such date, precluded from issuing the sum of (i) 200% of the
number of Underlying Shares as would then be issuable upon a conversion in
full of the Debentures and (ii) the number of Underlying Shares issuable upon
exercise in full of the Warrants (the "Current Required Minimum"), in either
case, due to the unavailability of a sufficient number of authorized but
unissued or reserved shares of Common Stock, then the Board of Directors of
the Company shall promptly prepare and mail to the stockholders of the Company
proxy materials requesting authorization to amend the Company's certificate or
articles of incorporation to increase the number of shares of Common Stock
which the Company is authorized to issue to at least such number of shares as
reasonably requested by the Purchasers in order to provide for such number of
authorized and unissued shares of Common Stock to enable the Company to comply
with its issuance, conversion, exercise and reservation of shares obligations
as set forth in this Agreement, the Debentures and the Warrants (the sum of
(x) the number of shares of Common Stock then outstanding plus all shares of
Common Stock issuable upon exercise of all outstanding options, warrants and
convertible instruments other than the Warrants and (y) the Current Required
Minimum, shall be a reasonable number). In connection therewith, the Board of
Directors shall (a) adopt proper resolutions authorizing such increase, (b)
recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the earlier to occur of the 60th day after
delivery of the proxy materials relating to such meeting and the 90th day
after request by a holder of Securities to issue the number of Underlying
Shares in accordance with the terms hereof) and (c) within five (5) Business
Days of obtaining such stockholder authorization, file an appropriate
amendment to the Company's certificate or articles of incorporation to
evidence such increase.
3.6 Reservation and Listing of Underlying Shares.
(a) The Company shall (i) in the time and manner required
by any national securities exchange, market, trading or quotation facility on
which the Common Stock is then traded, prepare and file with such national
securities exchange, market, trading or quotation facility on which the Common
Stock is then traded an additional shares listing application covering a
number of shares of Common Stock which is not less than the Initial Minimum,
(ii) take all steps necessary to cause such shares of Common Stock to be
approved for listing on any such national securities exchange, market or
trading or quotation facility on which the Common Stock is then listed as soon
as possible thereafter, and (iii) provide to the Purchasers evidence of such
listing, and the Company shall maintain the listing of its Common Stock
thereon.
(b) The Company shall maintain a reserve of shares of
Common Stock for issuance upon conversion of the Debentures in full and upon
exercise in full of the Warrants in accordance with this Agreement, in such
amount as may be required to fulfill its obligations in full under the
Transaction Documents, which reserve shall equal no less than the then Current
Required Minimum.
3.7 Conversion and Exercise Procedures. The Transfer Agent
Instructions, the Conversion Notice (as defined in the Debentures) and the
Form of Election to Purchase (as defined in the Warrants) sets forth the
totality of the procedures with respect to the conversion of the Debentures or
exercise of the Warrants, including the form of legal opinion, if necessary,
that shall be rendered to the Company's transfer agent and such other
information and instructions as may be reasonably necessary to enable the
Purchasers to convert their Debentures or exercise their Warrants.
3.8 Conversion and Exercise Obligations of the Company. The
Company shall honor conversions of the Debentures and exercises of the
Warrants and shall deliver Underlying Shares in accordance with the respective
terms, conditions and time periods set forth in the Debentures and Warrants.
3.9 Subsequent Financing; Limitation on Registrations.
(a) Other than to the Purchasers, prior to the 90th Trading
Day after the Effective Date, the Company shall not offer, sell, grant any
option to purchase or offer, sell or grant any right to reprice its
securities, or otherwise dispose of or issue (or announce any offer, sale,
grant or any option to purchase or other disposition) any Common Stock or any
equity or equity equivalent securities (including any equity, debt or other
instrument that is at any time over the life thereof convertible into or
exchangeable for Common Stock), and the Company will cause its Subsidiaries
not to offer, sell or issue during such period any of such Subsidiary's
securities which provide the holder thereof the right to receive any Common
Stock (collectively, "Common Stock Equivalents"), unless otherwise agreed to
in writing by the Company and the Purchasers.
(b) From the date of this Agreement through the 270th
Trading Day following the Effective Date, the Company shall not, directly or
indirectly, offer, sell, grant any option to purchase, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any Common Stock or Common Stock Equivalents (collectively, a
"Subsequent Placement") unless (A) the Company delivers to each of the
Purchasers 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,
the Person with whom such Subsequent Placement shall be effected, and attached
to which shall be a term sheet or similar document relating thereto and (B)
such Purchaser shall not have notified the Company by 6:30 p.m. (New York City
time) on the tenth Trading Day after its receipt of the Subsequent Placement
Notice of its willingness to provide (or to cause its sole designee to
provide), subject to completion of mutually acceptable documentation,
financing to the Company on the same terms set forth in the Subsequent
Placement Notice. If the Purchasers shall fail to notify the Company of their
intention to enter into such negotiations within such time period, the Company
may effect the Subsequent Placement substantially upon the terms and to the
Persons (or Affiliates of such Persons) set forth in the Subsequent Placement
Notice; provided, that the Company shall provide the Purchasers with a second
Subsequent Placement Notice, and the Purchasers shall again have the right of
first refusal set forth above in this paragraph (a), if the Subsequent
Placement subject to the initial Subsequent Placement Notice shall not have
been consummated for any reason on the terms set forth in such Subsequent
Placement Notice within 30 Trading Days after the date of the initial
Subsequent Placement Notice with the Person (or an Affiliate of such Person)
identified in the Subsequent Placement Notice. If the Purchasers shall
indicate a willingness to provide financing in excess of the amount set forth
in the Subsequent Placement Notice, then each Purchaser shall be entitled to
provide financing pursuant to such Subsequent Placement Notice up to an amount
equal to such Purchaser's pro-rata portion of the aggregate number of Shares
purchased by such Purchaser under this Agreement, but the Company shall not be
required to accept financing from the Purchasers in an amount in excess of the
amount set forth in the Subsequent Placement Notice. In furtherance of this
restriction, other than to the Purchasers or Affiliates thereof, prior to the
180th Trading Day following the Effective Date, the Company may not enter into
any equity line or similar financing arrangement or issue or agree to issue
any shares of its Common Stock or any Common Stock Equivalents pursuant to any
equity line or similar type of financing, unless otherwise agreed to in
writing by the Company and the Purchasers.
(c) Except to register (x) the Registrable Securities (as
defined in the Registration Rights Agreement), (y) securities of the Company
permitted pursuant to Section 6(c) of the Registration Rights Agreement to be
registered in the Underlying Shares Registration Statement, and (z) Common
Stock permitted to be issued pursuant to Section 3.9(e), the Company may not
until the 180th day after the Effective Date file a registration statement to
register any of its securities.
(d) The restrictive periods set forth in Sections 3.9
(a)-(c) shall be extended for the number of days during such periods (A) in
which trading in the Common Stock is suspended by any securities exchange or
market or quotation system on which the Common Stock is then listed, or (B)
following the Effective Date that the Registration Statement is not effective,
or (C) following the Effective Date, that the prospectus included in the
Registration Statement may not be used by the holders thereof for the resale
of Registrable Securities.
(e) The restrictions contained in Section 3.9 (a)-(c)
shall not apply to: (i) the issuance of Common Stock to a bona fide bank,
landlord, or other lending institution whose primary business is lending money
or leasing real property and not the trading or investment of securities under
the terms of any loan, credit or lease facility, (ii) the issuance of any
Common Stock or Common Stock Equivalents to a merger partner as consideration
in connection with a merger and/or acquisition or consolidation with another
entity in which the Company is the surviving entity, (iii) a bona fide
underwritten public offering of the Common Stock that is not at any actual or
implied discount (other than the customary underwriter's discount) to the then
market price of the Common Stock resulting in net proceeds to the Company in
excess of $10,000,000 (it being understood that equity line transactions,
including any on-going warrant financing, or any similar arrangements shall
not constitute a bona fide underwritten public offering of the Common Stock
for the purposes hereof), (iv)the granting of options or warrants to
employees, officers and directors of the Company, and the issuance of Common
Stock upon exercise of such options or warrants granted under any stock option
plan or employee benefit plan (as defined in Rule 405 of Regulation C)
heretofore or hereinafter duly adopted by the Company, (v) the issuance of
shares of Common Stock issuable upon exercise of any currently outstanding
warrants and other outstanding convertible securities of the Company, in each
case as and to the extent disclosed in Schedule 2.1(c) (but not as to any
amendments or modifications of the terms of such securities after the date of
this Agreement, including "back-dated" agreements) and (vi) shares of Common
Stock issuable in connection with a Strategic Transaction (as defined below).
For purposes of this Section 3.9, a "Strategic Transaction" shall mean a
transaction or relationship in which the Company issues shares of Common Stock
to an entity which is, itself or through its subsidiaries, an operating
company in a business related to the business of the Company and in which the
Company receives material benefits in addition to the investment of funds, but
shall not include a transaction in which the Company is issuing securities
primarily for the purpose of raising capital or to an entity whose primary
business is investing in securities.
3.10 Certain Securities Laws Disclosures; Publicity. The Company
shall: (i) on the Closing Date, issue a press release reasonably acceptable to
the Purchasers disclosing the transactions contemplated hereby, (ii) file with
the Commission a Report on Form 8-K disclosing the transactions contemplated
hereby within ten Business Days after the Closing Date, and (iii) timely file
with the Commission a Form D promulgated under the Securities Act. The
Company shall, no less than two Business Days prior to the filing of any
disclosure required by clauses (ii) and (iii) above, provide a copy thereof
to the Purchasers for their review. The Company and the Purchasers shall
consult with each other in issuing any other press releases or otherwise
making public statements or filings and other communications with the
Commission or any regulatory agency or stock market or trading facility with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement, filings or
other communications without the prior written consent of the other, except
that if such disclosure is required by law or stock market regulation, in
which such case the disclosing party shall promptly provide the other party
with prior notice of such public statement, filing or other communication.
Notwithstanding the foregoing, the Company shall not publicly disclose the
names of the Purchasers, or include the names of the Purchasers in any filing
with the Commission, or any regulatory agency, trading facility or stock
market without the prior written consent of the Purchasers, except to the
extent such disclosure (but not any disclosure as to the controlling Persons
thereof) is required by law or stock market regulations, in which case the
Company shall provide the Purchasers with prior notice of such disclosure.
3.11 Transfer of Intellectual Property Rights. Except in
connection with the sale of all or substantially all of the assets of the
Company or licensing arrangements in the ordinary course of the Company's
business, the Company shall not transfer, sell or otherwise dispose of any
Intellectual Property Rights, or allow any of the Intellectual Property Rights
to become subject to any Liens, or fail to renew such Intellectual Property
Rights (if renewable and it would otherwise lapse if not renewed), without the
prior written consent of the Purchasers.
3.12 Use of Proceeds. The Company will use the net proceeds from
the sale of the Securities for working capital purposes; however, the Company
will not use any of the proceeds from the sale of Securities to fund the
businesses or finances of M.J.B. Towers or Tribal Electric Association - 2000,
both of which the Company represents as "self-funded" as of the date of this
Agreement. The Company may not use any of the proceeds from the sale of
Securities hereunder to repay or otherwise satisfy any portion of the
Company's debt, except the payment of trade payables in the ordinary course of
the Company's business and prior practices. In furtherance of the foregoing,
the Company agrees that it will not use any proceeds from the sale of
Securities hereunder to repay amounts owed by the Company to any management
member of the Company. The Company may not use any of the proceeds from the
sale of Securities hereunder to redeem any securities of the Company, other
than securities held by the Investor, or to settle any outstanding litigation.
3.13 Indemnification.
(a) (1) The Company agrees to indemnify and hold harmless
each Purchaser, its shareholders, partners, officers, directors, employees,
agents and representatives and their respective Affiliates against any and all
damages, claims, losses, liabilities, costs and expenses (including reasonable
counsel fees and expenses) which may be suffered or incurred by any of them as
a result of or relating to any misrepresentation, breach or inaccuracy, or any
allegation by a third party that, if true, would constitute a breach or
inaccuracy, of any of the representations, warranties or covenants made by the
Company in this Agreement or any other Transaction Document.
(2) Each Purchaser severally and not jointly,
agrees to indemnify the Company, its shareholders, partners, officers,
directors, employees, agents and representatives and their respective
Affiliates against any and all damages, claims, losses, liabilities, costs and
expenses (including reasonable counsel fees and expenses) which may be
suffered or incurred by any of them as a result of or relating to any
misrepresentation, breach or inaccuracy, or any allegation by a third party
that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties or covenants made by such Purchaser in this
Agreement or any other Transaction Document.
(3) In case any action, litigation, proceeding or
investigation (a "Proceeding"), shall be instituted involving any Person in
respect of which indemnity may be sought pursuant to this Section, such Person
(the "indemnified party") shall promptly notify the Person against whom such
indemnity may be sought (the "indemnifying party") in writing of the
occurrence of the facts and circumstances giving rise to such claim. The
failure of any Person to deliver the notice required by this Section3.13 shall
not in any way affect the indemnifying party's indemnification obligation
hereunder except and only to the extent that it shall be finally determined by
a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have proximately and
materially adversely prejudiced the indemnifying party. In case any such
Proceeding shall be brought against any indemnified party and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party and shall pay as incurred the fees and expenses of such counsel related
to such proceeding. In any such Proceeding, any indemnified party shall have
the right to retain its own counsel or pay its own expenses. Notwithstanding
the foregoing, the indemnifying party shall pay as incurred the fees and
expenses of the counsel retained by the indemnified party in the event (i)the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii)the named parties to any such proceedings
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any
Proceeding effected without its written consent (which consent may not be
unreasonably withheld) but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment and the indemnifying party shall obtain a full release
of the indemnified party.
(b) If (i) a Purchaser becomes involved in any capacity in
any Proceeding brought by any stockholder of the Company in connection with or
as a result of the consummation of the transactions contemplated by any
Transaction Document (including any Proceeding in which it is alleged that
such Purchaser or others on behalf of or in concert with such Purchaser
improperly traded any of the Company's securities or manipulated the price of
any of the Company's securities), or if a Purchaser is impleaded in any such
Proceeding by any Person, or (ii) a Purchaser becomes involved in any capacity
in any Proceeding brought by the Commission or any stock market, trading
facility, any other self-regulatory organization or other body having
jurisdiction, against or involving the Company or in connection with or as a
result of the consummation of the transactions contemplated by any Transaction
Document, or if a Purchaser is impleaded in any such Proceeding by any Person,
then in any and each such case, the Company agrees to indemnify, defend and
hold harmless such Purchaser from and against and in respect of all losses,
claims, liabilities, damages and expenses (including the cost of any
investigation and preparation and all reasonable legal fees and expenses)
resulting from, imposed upon or incurred by such Purchaser, directly or
indirectly, in connection therewith, as such expenses are incurred. The
indemnification and reimbursement obligations of the Company under this
paragraph shall be in addition to any liability which the Company may
otherwise have (other than matters specifically addressed in the Registration
Rights Agreement, which shall be governed solely by that agreement), shall
extend upon the same terms and conditions to any Affiliates of the Purchaser
who are actually named in such Proceeding and the partners, directors, agents,
employees and representatives and controlling persons (if any), as the case
may be, of the Purchaser and any such Affiliates, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers, any such Affiliate and any
such Persons. The Company also agrees that neither any Purchaser nor any such
Affiliate, partner, director, agent, representative, employee or controlling
person shall have any liability to the Company or any other Person asserting
claims on behalf of or in right of the Company in connection with or as a
result of the consummation of any Transaction Document, except as provided in
or contemplated by the Transaction Documents. If, in connection with a
Proceeding in which it is alleged that a Purchaser or others on behalf of or
in concert with such Purchaser improperly traded any of the Company's
securities or manipulated the price of any of the Company's securities, a
court of competent jurisdiction determines in a final judgment, not subject to
appeal or review, that a Purchaser who has been, or is seeking to be,
indemnified or reimbursed under this Section is liable for any manipulation,
then the indemnity and reimbursement obligations of the Company under this
Section 3.13(b) will not be available to the Purchaser and the other
indemnitees hereunder with respect to such Proceeding.
3.14 Non-Disclosure of Non-Public Information. The Company shall
not disclose non-public information to the Purchasers or their advisors or
representatives unless prior to disclosure of such information the Company
identifies such information as being non-public information and the Purchasers
enter into a non-disclosure agreement in form mutually acceptable to the
Company and the Purchasers.
3.15 Shareholder Rights Plan. No claim will be made or enforced by
the Company or any other Person that any Purchaser is an "Acquiring Person"
under any shareholders rights plan or similar plan or arrangement in effect or
hereafter adopted by the Company, or that any Purchaser could be deemed to
trigger the provisions of any such plan or arrangement, by virtue of receiving
Securities or shares of Common Stock under the Transaction Documents.
3.16 Release. Effective as of and from the Closing and based on
the good and valuable consideration exchanged between the Company and
Purchasers, each of the Company and the Purchasers (as such, a "Releasor")
hereby releases and discharges the other and its predecessors, successors, and
affiliates, employees, officers, directors, agents, advisors, shareholders,
representatives, and assigns (collectively, "Releasees"), from all claims,
actions, causes of action, suits, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages, judgments, executions,
obligations, duties, claims, matters, liabilities, violations of law, fines,
penalties, responsibilities, attorneys' fees, maintenance charges, and demands
whatsoever, in law, admiralty or equity, which against the Releasees (or any
of them) the Releasors, Releasor's successors or assigns ever had, now have or
hereafter can shall or may have, for, upon or by reason of any matter, cause
or thing whatsoever from the beginning of time to the Closing Date, provided,
however, that the release set forth in this Section 3.16 shall have no effect
upon and shall not impair the Company's or any other parties obligations to
the Purchasers under the Convertible Debenture Purchase Agreement dated as of
April 5, 2001 and the "Transaction Documents" entered into in accordance
therewith to the Closing Date or any matter pertaining thereto which such
party may have from and after April 5, 2001.
3.17 Transfer Agent. By December 7, 2001 the Company shall have
retained American Stock Transfer or another mutually acceptable nationally
recognized transfer agent, as the transfer agent for the Common Stock.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing, the Company shall
reimburse the Purchasers for their legal fees and expenses incurred in
connection with the preparation and negotiation of the Transaction Documents
by paying to Xxxxxxxx Xxxxxxxxx $,000 for the preparation and negotiation of
the Transaction Documents. The amount contemplated by the immediately
preceding sentence shall be retained by the Purchasers and shall not be
delivered to the Company at the Closing. Other than the amount contemplated
herein, and except as otherwise specified in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers,
counsel, accountants and other experts, if any, and all other expenses
incurred by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement. The Company shall pay all stamp
and other taxes and duties levied in connection with the issuance of the
Securities.
4.2 Entire Agreement; Amendments. The Transaction Documents,
together with the Exhibits and Schedules thereto and Transfer Agent
Instructions, contain the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the
parties acknowledge have been merged into such documents, exhibits and
schedules.
4.3 Notices. Any and all notices or other communications or
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Section prior to 5:30 p.m.
(New York City time) on a Business Day, (ii) the Business Day after the date
of transmission, if such notice or communication is delivered via facsimile at
the facsimile telephone number specified in this Agreement later than 5:30
p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York
City time) on such date, (iii) the Business Day following the date of mailing,
if sent by U.S. nationally recognized overnight courier service, or (iv) upon
actual receipt by the party to whom such notice is required to be given. The
address for such notices and communications shall be as follows:
If to the Company: Composite Industries of America, Inc.
0000 X. Xxxxxxxx Xxx, Xxxx X-0
Xxx Xxxxx, Xxxxxx 00000
Facsimile No.: (702) 579- 4833
Attn: Xxxxx Xxxxxxxx
With copies to: Xxxxx X. Xxxxx, Esq.
000 Xxxxxxx Xxxx
Xxxxxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
If to a Purchaser: To the address set forth under such
Purchaser's name on the signature pages hereto or such other address as may be
designated in writing hereafter, in the same manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case of an
amendment, by both the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or
requirement of this Agreement shall be deemed to be a continuing waiver in the
future or a waiver of any other provision, condition or requirement hereof,
nor shall any delay or omission of either party to exercise any right
hereunder in any manner impair the exercise of any such right accruing to it
thereafter.
4.5 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
4.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and permitted
assigns. The Company may not assign this Agreement or any rights or
obligations hereunder without the prior written consent of the Purchasers.
The Purchasers may not assign this Agreement or any of the rights or
obligations hereunder without the consent of the Company; however, this
provision shall not limit any Purchaser's right to transfer Securities
acquired hereunder or transfer or assign rights under the Registration Rights
Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective successors and
permitted assigns and is not for the benefit of, nor may any provision hereof
be enforced by, any other Person.
4.8 Governing Law. All questions concerning the construction,
validity, enforcement and interpretation of this Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the
State of New York, without regard to the principles of conflicts of law
thereof. Each party agrees that all legal proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
any of the Transaction Documents (whether brought against a party hereto or
its respective Affiliates, directors, officers, shareholders, employees or
agents) shall be commenced in the state and federal courts sitting in the City
of New York, Borough of Manhattan (the "New York Courts"). Each party hereto
hereby irrevocably submits to the exclusive jurisdiction of the New York
Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including
with respect to the enforcement of any of the Transaction Documents), and
hereby irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction of
any such court, or such New York Courts are improper or inconvenient venue for
such proceeding. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to
serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating
to this Agreement or the transactions contemplated hereby. If either party
shall commence an action or proceeding to enforce any provisions of this
Agreement, then the prevailing party in such action or proceeding shall be
reimbursed by the other party for its attorneys fees and other costs and
expenses incurred with the investigation, preparation and prosecution of such
action or proceeding.
4.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive the Closing and the delivery and
conversion of the Debentures and exercise of the Warrants.
4.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature
is delivered by facsimile transmission, such signature shall create a valid
and binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
4.11 Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Agreement
shall not in any way be affected or impaired thereby and the parties will
attempt to agree upon a valid and enforceable provision which shall be a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
4.12 Remedies. In addition to being entitled to exercise all
rights provided herein or granted by law, including recovery of damages, each
of the Purchasers will be entitled to specific performance of the obligations
of the Company under the Transaction Documents. The parties hereto agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing sentence
and hereby agrees to waive in any action for specific performance of any such
obligation the defense that a remedy at law would be adequate.
4.13 Independent Nature of Purchasers' Obligations and Rights. The
obligations of each Purchaser under any Transaction Document is several and
not joint with the obligations of any other Purchaser and no Purchaser shall
be responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association,
a joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations
or the transactions contemplated by the Transaction Document. Each Purchaser
shall be entitled to independently protect and enforce its rights, including
without limitation the rights arising out of this Agreement or out of the
other Transaction Documents, and it shall not be necessary for any other
Purchaser to be joined as an additional party in any proceeding for such
purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGES FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this
Convertible Debenture Purchase Agreement to be duly executed by their
respective authorized signatories as of the date first indicated above.
COMPOSITE INDUSTRIES OF AMERICA, INC.
By:_____________________________________
Name: Xxxxx Xxxxxxxx
Title: President
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
XXXXXX AVENUE LLC
By:_____________________________________
Name:
Title:
Purchase Price for Debentures: $750,000
Address for Notice:
Xxxxxx Avenue LLC
x/x Xxxxx Xxxxxxxx (Xxxxxx) Limited
Commercial Centre
P.O. Box 31106 SMB
Grand Cayman
Cayman Islands
British West Indies
Facsimile No.: (000) 000-0000
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 and (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
