CONVERTIBLE DEBENTURE PURCHASE AND EXCHANGE AGREEMENT
Among
XXXXXXXXX.XXX
GLOBAL CAPITAL PARTNERS, INC.
and
THE INVESTORS SIGNATORY HERETO
Dated as of September 15, 2000
CONVERTIBLE DEBENTURE PURCHASE AND EXCHANGE AGREEMENT (this
"AGREEMENT"), dated as of September 15, 2000, among XxxxxXxxx.xxx, a Nevada
corporation (the "COMPANY"), Global Capital Partners, Inc., a Delaware
corporation ("GCAP"), 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 pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "SECURITIES ACT"), the Company desires to issue and sell to the Purchasers
and the Purchasers, severally and not jointly, desire to purchase from the
Company, up to an aggregate principal amount of $2,500,000 of the Company's 6%
Convertible and Exchangeable Debentures, due September 15, 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 certain Common Stock purchase warrants entitling the Purchasers to
acquire shares of the Common Stock.
WHEREAS, GCAP owns approximately 31% of the Company's outstanding
Common Stock and as such will benefit from the Purchasers investment in the
Company.
WHEREAS, to induce the Purchasers to acquire the securities of the
Company under this Agreement, GCAP desires to grant a right to the Purchasers to
exchange their Debentures and Warrants (as defined below) for certain securities
of GCAP as further described in this Agreement.
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, GCAP and the Purchasers
agree as follows:
ARTICLE I
PURCHASE AND SALE
1.1 THE CLOSING
(a) THE CLOSING. (i) 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 and not jointly, purchase from the Company, the
Debentures and the Warrants for an aggregate purchase price of $2,500,000. The
closing of the purchase and sale of the Debentures and the Warrants (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 indicated below such Purchaser's name on the signature page to
this Agreement, (2) a Common Stock purchase warrant, in the form of EXHIBIT B,
registered in the name of such Purchaser, pursuant to which such Purchaser shall
have the right to acquire shares of Common Stock upon the terms and in such
number as indicated below such Purchaser's name of the signature pages to this
Agreement (each a "WARRANT" and collectively, the "WARRANTS"), (3) the legal
opinion of Berlack, Israels & Xxxxxxxx LLP, outside counsel to the Company, in
agreed form, (4) 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"), (5) Transfer Agent Instructions, in the form
of EXHIBIT B, delivered to and acknowledged by the Company's transfer agent (the
"TRANSFER AGENT INSTRUCTIONS"), and (6) a stock certificate registered in the
name of such Purchaser, representing an aggregate of 30,000 shares of Common
Stock in such number as indicated below such Purchaser's name of the signature
pages to this Agreement (the "ADDITIONAL SHARES"), and (7) the letter, dated
September 15, 2000, from GCAP to Cortlandt Investors LLC regarding the
Additional Shares (the "SHARES Letter"), (B) each Purchaser shall deliver (i) to
the Company: (1) 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) an executed Registration Rights Agreement and
(ii) to GCAP, an executed Securities Exchange Agreement, in the form of EXHIBIT
D (the "EXCHANGE AGREEMENT"); and (C) GCAP shall deliver to each Purchaser an
executed Exchange Agreement.
1.2 CERTAIN DEFINED TERMS. For purposes of this Agreement, "CONVERSION
PRICE," "ORIGINAL ISSUE DATE" and "TRADING DAY" 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 or a day on which
banking institutions in the State of New York and North Carolina 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 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 in the State of North Carolina and 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 Shares Letter or the
Warrants (collectively, the "TRANSACTION DOCUMENTS"), (y) have or result in a
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material adverse effect on the results of operations, assets, or condition
(financial or otherwise) of the Company 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"). The Company has no subsidiaries.
(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. The Company is not 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). No
shares of Common Stock are entitled to preemptive or similar rights, nor is any
holder of 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 the 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 from the Company, or
contracts, commitments, understandings, or arrangements by which the Company is
or may become bound to issue additional shares of Common Stock, or securities or
rights convertible or exchangeable into shares of Common Stock from the Company.
The issue and sale of the Debentures, Warrant 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. The information contained in
SCHEDULE 2.1(C), shall also state the number of shares of the Company's
securities that may be resold under Rule 144 promulgated under the Securities
Act ("RULE 144"), within twelve months from the date of this Agreement and the
dates on which such shares may commence to be resold under Rule 144 and the date
of the original issuance of such securities for purposes of determining the
commencement of the holding period for such securities under Rule 144.
(d) ISSUANCE OF THE DEBENTURES AND THE WARRANTS. The Company will
have (and will, at all times while the Debentures and the Warrants 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 and other obligations under this Agreement
and the Debentures. Such number of reserved and available shares of Common Stock
shall not be less than the sum of (i) 200% of the number of shares of Common
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Stock which would be issuable upon conversion in full of the Debentures assuming
such conversion occurred on the Original Issue Date, the Debentures remain
outstanding for two years and all interest is paid in shares of Common Stock and
(ii) the number of shares of Common Stock issuable upon exercise of the Warrants
(such number of shares of Common Stock as contemplated in clauses (i)-(ii), the
"INITIAL MINIMUM"). All such authorized shares of Common Stock shall be duly
reserved for issuance to the holders of the Debentures and the 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, the Warrants and the Underlying Shares are collectively
referred to herein as, the "SECURITIES." When issued in accordance with the
Debentures, and the Warrants, the Underlying Shares will be duly authorized,
validly issued, fully paid and nonassessable.
(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 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 debt or otherwise) or other understanding to which the
Company is a party or by which any property or asset of the Company 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 is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company 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. The Company is not 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
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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.
Neither the Company nor any director or officer thereof, is or has been the
subject of any Action involving a claim of violation of or liability under
federal or state securities laws or a claim of breach of fiduciary duty. 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). 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. The Company is not (i) 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), nor has the Company 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) in violation of any judgment or order of any
court, arbitrator or governmental body, or (iii) 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) and 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
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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 June 30, 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) 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. 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 similar 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) SOLICITATION MATERIALS. Neither the Company nor any Person
acting on the Company's behalf has solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
(n) FORM SB-2 ELIGIBILITY. The Company is eligible to register
securities for resale under Form SB-2 promulgated under the Securities Act.
(o) EXCLUSIVITY. The Company shall not issue and sell the
Debentures to any Person other than the Purchasers without the specific prior
written consent of the Purchasers.
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(p) 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.
(q) LISTING AND MAINTENANCE REQUIREMENTS COMPLIANCE. 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 all such listing and
maintenance requirements.
(r) PATENTS AND TRADEMARKS. The Company has, or has 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"). The Company has not
received a written notice that the Intellectual Property Rights used by the
Company 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.
(s) 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.
(t) REGULATORY PERMITS. The Company possesses 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 the Company has not received any notice
of proceedings relating to the revocation or modification of any Material
Permit.
(u) TITLE. The Company has good and marketable title in fee simple
to all real property owned by them which is material to the business of the
Company and good and marketable title in all personal property owned by them
which is material to the business of the Company, 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. Any real property and facilities held under lease by the Company are
held by them under valid, subsisting and enforceable leases of which the Company
are in compliance and do not interfere with the use made and proposed to be made
of such property and buildings by the Company.
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(v) 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.
(w) 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.
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 Debentures, 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 the 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.
(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.
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(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.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 TRANSFER RESTRICTIONS. (a) The Securities may only be disposed of
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 compliance with any
applicable federal and state securities laws. A Purchaser shall notify the
Company of any intended transfer of Debentures by it and the identity of the
intended transferee. 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 (if
it is not an affiliate of the Purchaser) to provide to the Company an opinion of
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counsel selected by the transferor, the form and 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 and on any
securities issued in connection with any exchange of securities contemplated in
this Agreement:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [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.
The Underlying Shares shall not contain the legend set forth above
nor any other legend if the conversion of Debentures or exercise of the Warrants
occurs at any time while an Underlying Shares Registration Statement is
effective under the Securities Act or if the holder is relying on 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). The Company shall cause its counsel to issue the legal opinion
included in the Transfer Agent Instructions to the Company's transfer agent on
the date that an Underlying Shares Registration Statement is declared effective
by the Commission (such date, the "EFFECTIVE DATE"). The Company agrees that
following the Effective Date, it will, no later than three Trading Days
following the delivery by a Purchaser to the Company of a certificate or
certificates representing Underlying Shares issued with a restrictive legend,
deliver to such Purchaser certificates representing such Underlying Shares 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 and 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 and exercise of the Warrants is unconditional and
absolute, subject to the limitations set forth in the Debentures or in the
Warrants regardless of the effect of any such dilution.
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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 (a) 200% of the number of Underlying Shares
as would then be issuable upon a conversion in full of the Debentures and (b)
the number of Underlying Shares issuable upon exercise in full of the Warrants
(the "CURRENT REQUIRED MINIMUM"), 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, and the Debentures (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, 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 sixtieth (60th) day after delivery of the
proxy materials relating to such meeting and the ninetieth (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.
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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. If the number of Underlying Shares issuable upon
conversion in full of the then outstanding Debentures and upon exercise of the
then unexercised portion of the Warrants exceeds eighty-five percent (85%) of
the number of Underlying Shares previously listed on account thereof with any
such required exchanges, then the Company shall take the necessary actions to
immediately list a number of Underlying Shares as equals no less than the then
Current Required Minimum.
(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, the Debentures and the
Warrants, respectively, 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
and Conversion Notice (as defined in the Debentures) and Form of Election to
Purchase under the Warrants set forth the totality of the procedures with
respect to the conversion of the Debentures and 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 and
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 the Warrants.
3.9 SUBSEQUENT FINANCINGS; LIMITATION ON REGISTRATIONS.
(a) From the date of this Agreement through the 270th day following
the Effective Date, neither the Company nor GCAP will offer, sell, grant any
option to purchase or any right to reprice securities, or otherwise dispose of
(or announce any offer, sale, grant or any option to purchase or other
disposition) any of its respective common shares or equity or equity equivalent
securities (including the issuance of any debt or other instrument that is at
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any time over the life thereof convertible into or exchangeable for Common Stock
or GCAP Common Stock (as hereinafter defined)), and each of GCAP and the Company
will cause their respective Affiliates not to offer, sell or issue during such
period any of such Affiliate's securities which provide the holder thereof the
right to receive any Common Stock or GCAP Common Stock (collectively, "COMMON
STOCK EQUIVALENTS" and, with respect to GCAP, "GCAP COMMON STOCK EQUIVALENTS")).
The restriction contained in this Section 3.9(a) shall not limit (x) the right
of the Company to offer and sell shares of Common Stock or Common Stock
Equivalents at a price per share that is not less than $3.00 (subject to
equitable adjustment for stock splits and reverse stock splits) and (y) the
right of GCAP to offer and sell shares of GCAP Common Stock and GCAP Common
Stock Equivalents at a price per share that is not less than $6.00 (subject to
equitable adjustment for stock splits and reverse stock splits), PROVIDED, that,
in each case (i) the respective securities are not at any time entitled to any
reset, repricing, or other purchase price adjustment or other purchase price
protection (including, in the case of Common Stock Equivalents and GCAP Common
Stock Equivalents, variable or reset rate conversion or exchange pricing), in
each case, whether contractually or through one or more ancillary securities
such as a repricing warrant or purchase right that could result in the issuance
of Common Stock at less than $3.00 (in the case of the Company) and $6.00 (in
the case of GCAP), and (ii) the respective securities carry no registration
rights and will not be registered prior to the second anniversary of the
issuance of such share. The restrictions contained in this Section 3.9(a) shall
cease to apply to the Company from and after the date no principal amount of
Debentures remain outstanding. The restrictions contained in this Section 3.9(a)
shall cease to apply to GCAP from and after (1) if the Purchaser shall have
exercised its Exchange Right (as defined below), the date no principal amount of
GCAP Debentures remains outstanding, or (2) the date that the Purchaser shall no
longer have the right hereunder or under the Exchange Agreement to exercise its
Exchange Right.
(b) Neither the Company nor GCAP will, 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 of
its respective equity or equity-equivalent securities or securities of any of
its Affiliates that are exchangeable or convertible (directly or indirectly) for
shares of Common Stock or GCAP Common Stock, including the issuance of any debt
or other instrument at any time over the life thereof convertible into or
exchangeable for Common Stock or GCAP Common Stock (collectively, a "SUBSEQUENT
PLACEMENT") from the date of this Agreement through the 540th day after the
Effective Date, unless (A) the Company or GCAP (as applicable) delivers to each
Purchaser 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) no Purchaser shall have
notified the Company or GCAP (as applicable) by 6:30 p.m. (New York City time)
on the fifth 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 or
GCAP (as applicable) on the same terms set forth in the Subsequent Placement
Notice. If the Purchasers shall fail to notify the entity delivering the
Subsequent Placement Notice of their intention to enter into such negotiations
within such time period, the entity delivering the Subsequent Placement Notice
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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 entity delivering the Subsequent Placement Notice
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 thirty (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
principal amount of Debentures purchased by such Purchaser under this Agreement;
provided, that any portion of such financing that a Purchaser does not indicate
a willingness to provide may be provided by other Purchaser and, provided,
further that the entity delivering the Subsequent Placement Notice 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.
(c) Except for (x) Underlying Shares (including GCAP Common Stock
issuable upon the conversion of GCAP Debentures and upon the exercise of GCAP
Warrants (as defined below) following an Exchange Date (as defined below)), (y)
other "Registrable Securities" (as such term is defined in the Registration
Rights Agreement) to be registered, and securities of the Company permitted
pursuant to Section 6(c) of the Registration Rights Agreement to be registered,
in the Underlying Shares Registration Statement in accordance with the
Registration Rights Agreement (or, with respect to the GCAP Registration
Statement (as defined below), as permitted pursuant to Section 6(c) of the GCAP
Registration Rights Agreement (as defined below) to be registered in the GCAP
Registration Statement), and (z) Common Stock permitted to be issued pursuant to
Section 3.9 (e), neither the Company nor GCAP shall, until the 180th day after
the Effective Date (i) issue or sell any of its or any of its respective
Affiliates' equity or equity-equivalent securities pursuant to Regulation S
promulgated under the Securities Act, or (ii) file a registration statement to
register any of its respective securities.
(d) With respect to Section 3.9(a), (b) and (c), the 270, 540 and
180 day periods shall be extended for the number of Trading Days during such
period (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) that the Underlying Shares Registration Statement is not effective
following the Effective Date, or (C) that the prospectus included in the
Underlying Shares Registration Statement may not be used by the holders thereof
for the resale of Underlying Shares following the Effective Date.
(e) The restrictions contained in Section 3.9(a) and (b) above and,
with respect to clause (i) below, Section 3.9(c), shall not apply to (i) the
granting of options or warrants to employees, officers and directors of the
Company or GCAP, and the issuance of Common Stock or GCAP Common Stock (as
applicable) upon exercise of such options or warrants granted under any stock
option plan heretofore or hereinafter duly adopted by the Company or GCAP (as
the case may be), (ii) the issuance of shares of Common Stock or GCAP Common
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Stock (as applicable) pursuant to a bona fide underwritten public offering of
the Common Stock or GCAP Common Stock (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) and
(iii) issuances of Common Stock or GCAP Common Stock pursuant to a Strategic
Transaction (as defined herein). A "STRATEGIC TRANSACTION" shall mean a
transaction or relationship in which the Company or GCAP issues shares of Common
Stock or GCAP Common Stock or Common Stock Equivalents or GCAP Common Stock
Equivalents, as applicable, to a Person which is, itself or through its
subsidiaries, an operating company in a business related to the business of the
Company or GCAP and in which the Company or GCAP receives material benefits in
addition to the investment of funds, but shall not include a transaction in
which the Company or GCAP is issuing securities primarily for the purpose of
raising capital or to an entity whose primary business is investing in
securities, (iv) the issuance of up to 450,000 shares of GCAP Common Stock to
Xxxxxx Online at a price per share of not less than $6.00 (subject to equitable
adjustment for stock splits and reverse stock splits), and (v) the issuance and
sale to Guntard Metall Bank AG of 600,000 shares of GCAP Common Stock and
warrants to acquire 600,000 shares of GCAP's Common Stock (including the shares
of GCAP Common Stock issuable upon exercise thereof) at a price per share of not
less than $6.00 (subject to equitable adjustment for stock splits and reverse
stock splits), PROVIDED, that, in the case of (iv) and (v) (1) the respective
securities are not at any time entitled to any reset, repricing, or other
purchase price adjustment or other purchase price protection, whether
contractually or through one or more ancillary securities such as a repricing
warrant or purchase right that could result in the issuance of GCAP Common Stock
at a price per share of less than $6.00, and (2) the respective securities carry
no registration rights and will not be registered prior to the second
anniversary of the issuance of such share.
(f) The obligations of GCAP set forth in this Section 3.9 shall be
extended (i) in the case of 3.9(a), to the 270th day following the date that the
registration statement required to be filed by GCAP following an exchange
pursuant to Section 3.14 to register for resale by the holders thereof the GCAP
Common Stock issuable upon conversion of the GCAP Debentures and exercise of the
GCAP Warrants (the "GCAP REGISTRATION STATEMENT") is first declared effective by
the Commission (the "GCAP EFFECTIVE DATE"), in the case of 3.9(b), to the 540th
day following the GCAP Effective Date and, in the case of 3.9(c), to the 180th
day following the GCAP Effective Date, each of which periods shall be extended
for the number of Trading Days during such period (A) in which trading in the
GCAP Common Stock is suspended by any securities exchange or market or quotation
system on which the GCAP Common Stock is then listed, or (B) during which the
GCAP Registration Statement is not effective, or (C) during which the prospectus
included in the GCAP Registration Statement may not be used by the holders
thereof for the resale of GCAP Common Stock.
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
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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 regulations, 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 shall use the net proceeds from the
sale of the Securities hereunder for working capital purposes and/or for the
acquisitions of of Xxxxxxxxx Xxxxx & Co. Inc., Carolina Securities, Inc., and/or
CrossBridge Capital Partners, LLC, and not for the satisfaction of any portion
of the Company's debt (other than payment of trade payables in the ordinary
course of the Company's business and prior practices), to redeem any Company
equity or equity-equivalent securities or to settle any outstanding litigation.
3.13 REIMBURSEMENT. If any Purchaser becomes involved in any capacity
in any action, proceeding or investigation brought by or against any Person,
including stockholders of the Company, solely as a result of acquiring the
Securities under this Agreement, the Company will reimburse such Purchaser for
its reasonable legal and other expenses (including, the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred. The reimbursement in this
Section does not cover suits or actions brought by a Purchaser or an affiliate
of a Purchaser against any Purchaser or the Company, GCAP or their respective
affiliates or agents other than as a result of cross action or joinder following
institution of an action against a Purchaser as contemplated by this Section.
The reimbursement obligations of the Company under this paragraph shall be in
addition to any liability which the Company may otherwise have, shall extend
upon the same terms and conditions to any Affiliates of the Purchasers who are
actually named in such action, proceeding or investigation, and partners,
directors, agents, employees and controlling persons (if any), as the case may
be, of the Purchasers and any such Affiliate, and shall be binding upon and
inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchasers and any such Affiliate and any
such Person. The Company also agrees that neither the Purchasers nor any such
Affiliates, partners, directors, agents, employees or controlling persons shall
have any liability to the Company or any Person asserting claims on behalf of or
in right of the Company solely as a result of acquiring the Securities under
this Agreement.
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3.14 EXCHANGE RIGHT
(a) Each Purchaser shall have the right (the "EXCHANGE Right") on
any Business Day between January 16, 2001 and 5:30 p.m. (New York City time) on
March 14, 2001, to exchange any portion of their Debentures and Warrants not
previously converted or exercised for GCAP Debentures and GCAP Warrants (each,
as defined below). Upon exercise of the Exchange Right, each dollar of then
outstanding principal amount of the exchanging Purchaser's Debentures will be
exchanged for GCAP Debentures in a principal amount equal to 120% of such
Debenture principal amount, plus all accrued and unpaid interest thereon that is
not paid on the Exchange Date (as defined below) by delivery of registered or
freely tradeable shares of GCAP Common Stock equal in value to such interest.
Upon exercise of the Exchange Right by a Purchaser, each remaining "Warrant
Share" under such Purchaser's Warrants will be exchanged for an equal number of
GCAP Warrants.
(b) A Purchaser shall exercise its Exchange Right by delivering to
each of the Company and GCAP a written notice of its election to exercise the
Exchange Right ("EXCHANGE NOTICE"). The exchange will be effected on the fifth
Trading Day following the delivery of the Exchange Notice (such fifth Trading
Day, the "EXCHANGE DATE").
(c) On the Exchange Date, GCAP shall issue and deliver to the
Purchaser who delivered the Exchange Notice, at its address for notice set forth
herein, executed copies of the following: (1) a Registration Rights Agreement,
among GCAP and the Purchasers, in the form attached to the Exchange Agreement
(the "GCAP REGISTRATION RIGHTS AGREEMENT"), (2) convertible debentures of GCAP
in an aggregate principal amount as contemplated in Section 3.14(a), each in the
form attached to the Exchange Agreement (the "GCAP DEBENTURES"), (3) warrants to
acquire such shares of GCAP common stock (the "GCAP COMMON STOCK") as
contemplated in Section 3.14(a), each in the form attached to the Exchange
Agreement (the "GCAP WARRANTS") and (4) Transfer Agent Instructions, in the form
attached to the Exchange Agreement as, delivered to and acknowledged by GCAP's
transfer agent (the "GCAP TRANSFER AGENT INSTRUCTIONS"). The Exchange Agreement
and the documents specified in clauses (1)-(4) of the immediately preceding
sentence are collectively referred to herein as "GCAP EXCHANGE DOCUMENTS." Upon
its receipt of the GCAP Exchange Documents, the exchanging Purchaser shall
deliver to the Company the Debentures and the Warrants subject to such exchange.
The failure by GCAP to execute and deliver to the exchanging Purchaser any GCAP
Exchange Documents by the Exchange Date shall constitute an Event of Default (as
defined in the Debentures), and in such event the Purchaser may also avail
itself of all rights under the Transaction Documents, the GCAP Exchange
Documents and applicable law, including the right to rescind such Exercise Right
and Exercise Notice, ab initio.
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 $40,000 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 set
forth 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
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4.2 ENTIRE AGREEMENT; AMENDMENTS. The Transaction Documents, together
with the Exhibits and Schedules thereto, contain the entire understanding (other
than with respect to any exchange of securities as contemplated herein) 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 6:30 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 6:30 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. 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:
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If to the Company: XxxxxXxxx.xxx
0000 Xxx Xxx Xxxx., Xxxxx 000
Xxxxxxxxx, XX, 00000
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Berlack, Israels & Xxxxxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxxx, Esq.
If to GCAP: Global Capital Partners, Inc.
0000 Xxxxxxxx Xxxx, Xxxxx
0000 Xxxxxxxxx, XX, 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxxx Xxxxxxxxxx
With copies to: Berlack, Israels & Xxxxxxxx LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxxx, Esq.
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 amended
except in a written instrument signed, (i) with respect to all sections hereof
other than Article I, Article IV, Section 3.9 (as it pertains to GCAP) and
Section 3.14, by the Company and each of the Purchasers, (ii) with respect to
Article I and Article IV, by each party hereto, and (iii) with respect to
Section 3.9 (as it pertains to GCAP) and Section 3.14, each of the Purchasers
and GCAP. No provision of this Agreement may be waived except in a written
instrument signed 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.
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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.
Neither the Company nor GCAP may assign this Agreement or the Exchange Agreement
or any rights or obligations hereunder or thereunder without the prior written
consent of the Purchasers. Except as set forth in Section 3.1(a), the Purchasers
may not assign this Agreement or any of the rights or obligations hereunder
without the consent of the Company.
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. The corporate laws of Nevada shall govern all issues
concerning the relative rights of the Company and its stockholders. 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 hereby irrevocably submits to
the exclusive jurisdiction of the state and federal courts sitting in the City
of New York, borough of Manhattan, 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 the 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, that such suit, action or proceeding is
improper. 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.
4.9 SURVIVAL. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery, exercise,
conversion and exchange (as the case may be) of the Warrants and the Debentures.
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 affecting 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.
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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 and of GCAP under Section 3.9, Section
3.14, Article I and Article IV of this Agreement . The parties hereto agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of 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]
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Debenture Purchase and Exchange Agreement to be duly executed by their
respective authorized signatories as of the date first indicated above.
XXXXXXXXX.XXX
By: /s/ XXXXX XxXXXX
-------------------------------------
Name: Xxxxx XxXxxx
Title: Vice President
GLOBAL CAPITAL PARTNERS, INC.
By: /s/ XXXXXX XXXXXXXXXX
-------------------------------------
Name: Xxxxxx Xxxxxxxxxx
Title: Chairman and CEO
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
[Purchaser Signature Page]
CORTLANDT INVESTORS LLC
By: /s/ XXXXX XXXX
-------------------------------------
Name: Xxxxx Xxxx
Title:
Purchase Price: $2,500,000
Warrant Shares: 250,000
Common Shares at Closing 30,000
Address for Notice:
c/o WEC Asset Management LLC
000 Xxxxxxxxx Xxxx Xxxx
Xxxxxx-xx-Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxx
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.
