EXHIBIT 10.51
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of November 5, 1999 (this
"Agreement"), by and between Compositech Ltd., a Delaware corporation, with
principal executive offices located at 000 Xxxxxxxxx Xxxx, Xxxxxxxxx, Xxx Xxxx
00000 (the "Company"), and The Shaar Fund Ltd. ("Buyer").
WHEREAS, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to Buyer, upon the terms and subject to the conditions
of this Agreement, (i) 54,000 shares of the Company's Series C 8% Convertible
Preferred Stock, par value $0.01 per share (collectively, the "Preferred
Shares"), and (ii) Common Stock Purchase Warrants in the form attached hereto as
Exhibit A to purchase 75,000 shares of Common Stock (as defined below)
(collectively, the "Warrants");
WHEREAS, upon the terms and subject to the designations, preferences and
rights set forth in the Company's Certificate of Designation of Series C 8%
Convertible Preferred Stock in the form attached hereto as Exhibit B (the
"Certificate of Designation"), the Preferred Shares are convertible into shares
of the Company's common stock, par value $0.01 per share (the "Common Stock");
and
WHEREAS, the Warrants, upon the terms and subject to the conditions
specified in the Warrants, will be exercisable for a period of five years
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
I. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS
A. Transaction. Buyer hereby agrees to purchase from the Company, and the
Company has offered and hereby agrees to issue and sell to Buyer in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "Securities Act"), the Preferred
Shares and the Warrants.
B. Purchase Price; Form of Payment. The total purchase price for the
Preferred Shares and the Warrants to be purchased by Buyer hereunder shall be
$540,000 (the "Purchase Price"). Subject to the terms and conditions of this
Agreement and those certain Escrow Instructions of even date herewith, a copy of
which is attached hereto as Exhibit C (the "Escrow Instructions"), Buyer shall
pay to the Company $540,000 minus the deductions as set forth in the Escrow
Instructions (the "Purchase Price") at the date and time of the issuance and
sale by the Company of the Preferred Shares and the Warrants (the "Closing") by
wire transfer of immediately available funds to the escrow agent (the "Escrow
Agent") identified in the Escrow Instructions. Simultaneously with the execution
of this Agreement, the Company shall deliver to the Escrow Agent or its
designated depository one or more duly authorized, issued and executed
certificates (I/N/O Buyer or, if the Company otherwise has been notified, I/N/O
Buyer's nominee) evidencing the Preferred Shares and the Warrants. By executing
and delivering this Agreement, Buyer and the Company each hereby agrees to
observe the terms and conditions of the Escrow Instructions, all of which are
incorporated herein by reference as if fully set forth herein.
C. Method of Payment. Payment into escrow of the Purchase Price shall be
made by wire transfer of immediately available funds to:
The Bank of New York
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
ABA No.: 000000000
For the Account of: Cadwalader, Xxxxxxxxxx & Xxxx
Trust Account XXXX Fund
Account No.: 0902061070
II. BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION
Buyer represents and warrants to and covenants and agrees with the Company
as follows:
A. Buyer is purchasing the Preferred Shares, the Warrants, the Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares"), the Common Stock,
if any, issuable in payment of dividends on the Preferred Shares (the "Dividend
Shares"), and the Common Stock issuable upon conversion or redemption of the
Preferred Shares (the "Conversion Shares" and, collectively with the Preferred
Shares, the Warrants, the Warrant Shares and the Dividend Shares, the
"Securities") for its own account, for investment purposes only and not with a
view towards or in connection with the public sale or distribution thereof in
violation of the Securities Act.
B. Buyer is (i) an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act, (ii) experienced in making investments of
the kind contemplated by this Agreement, (iii) capable, by reason of its
business and financial experience, of evaluating the relative merits and risks
of an investment in the Securities, and (iv) able to afford the loss of its
investment in the Securities.
C. Buyer understands that the Securities are being offered and sold by the
Company in reliance on an exemption from the registration requirements of the
Securities Act and equivalent state securities and "blue sky" laws, and that the
Company is relying upon the accuracy of, and Buyer's compliance with, Buyer's
representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities;
-2-
D. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "Commission") or any
state securities commission.
E. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and except as rights to
indemnity and contribution may be limited by federal or state securities laws or
the public policy underlying such laws.
F. Neither Buyer nor its affiliates nor any person acting on its or their
behalf has the intention of entering, or will enter into, prior to the closing,
any put option, short position or other similar instrument or position with
respect to the Common Stock and neither Buyer nor any of its affiliates nor any
person acting on its or their behalf will use at any time shares of Common Stock
acquired pursuant to this Agreement to settle any put option, short position or
other similar instrument or position that may have been entered into prior to
the execution of this Agreement.
III. THE COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. Capitalization.
1. The authorized capital stock of the Company consists solely of
54,714,161 shares of capital stock: (i) 50,000,000 shares of Common Stock,
of which 16,711,056 shares are issued and outstanding on the date hereof;
(ii) 714,161 shares of Series A Convertible Preferred Stock, $3.00 par
value per share, of which 442,662 shares are issued and outstanding on the
date hereof; (iii) 220 shares of 7% Series B Convertible Preferred Stock,
$0.01 par value per share, stated value $10,000 per share, of which no
shares are issued and outstanding on the date hereof; (iv) 200,000 shares
of Series C Convertible Preferred Stock, $0.01 par value per share, of
which no shares are issued and outstanding on the date hereof; and (v)
3,799,780 shares of undesignated preferred stock, of which no shares are
issued and outstanding. As of the date hereof, the Company has outstanding
stock options to purchase 1,981,879 shares of Common Stock and warrants to
purchase 7,089,867 shares of Common Stock. Schedule III.A.1. hereto
specifies the exercise prices for each of such outstanding options and
warrants.
2. The Preferred Shares have been duly and validly authorized and
reserved for issuance by the Company, and, when issued by the Company, will
be duly and validly issued, fully paid and nonassessable and will not
subject the holder thereof to personal liability by reason of being such
holder. The Conversion Shares, the Dividend Shares and the Warrant Shares
have been duly and validly authorized and reserved for issuance by the
Company, and, when issued by the Company upon conversion of, or in lieu of
accrued dividends on, the Preferred Shares and on exercise of the Warrants
will be
-3-
duly and validly issued, fully paid and nonassessable and will not subject
the holder thereof to personal liability by reason of being such holder.
3. Except as disclosed on Schedule III.A.3 there are no preemptive,
subscription, "call," right of first refusal or other similar rights to
acquire any capital stock of the Company or any of its Subsidiaries or
other voting securities of the Company that have been issued or granted to
any person or any other obligations of the Company or any of the
subsidiaries of the Company (the "Subsidiaries") to issue, grant, extend or
enter into any security, option, warrant, "call," right, commitment,
agreement, arrangement or undertaking with respect to any of their
respective capital stock.
4. Schedule III.A.4. hereto lists all the Subsidiaries. Except as
disclosed on Schedule III.A.4. hereto, the Company does not own or control,
directly or indirectly, any interest in any other corporation, partnership,
limited liability company, unincorporated business organization,
association, trust or other business entity.
5. The Company has delivered to Buyer complete and correct copies of
the Restated Certificate of Incorporation, as amended to date (the
"Certificate of Incorporation"), and the By-Laws of the Company and the
Subsidiaries, in each case as amended to the date of this Agreement. Except
as set forth on Schedule III.A.4, the Company has delivered to Buyer true
and complete copies of all minutes of the Board of Directors of the Company
(the "Board of Directors") since October 1, 1996.
B. Organization; Reporting Company Status.
1. Each of the Company and each of the Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
state of jurisdiction in which it is incorporated and is duly qualified as
a foreign corporation in all jurisdictions in which the failure to so
qualify would reasonably be expected to have a material adverse effect on
the business, properties, prospects, condition (financial or otherwise) or
results of operations of the Company and the Subsidiaries taken as a whole
or on the consummation of any of the transactions contemplated by this
Agreement (a "Material Adverse Effect").
2. The Company has registered the Common Stock pursuant to Section 12
of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
The Common Stock is listed and traded on the Nasdaq SmallCap Market
("Nasdaq") and the Company has not received any notice regarding, and to
its knowledge there is no threat of, the termination or discontinuance of
the eligibility of the Common Stock for such listing.
C. Authorization. The Company (i) has duly and validly authorized and
reserved for issuance 2,000,000 shares of Common Stock, sufficient in number for
the conversion of and the payment of dividends (in lieu of cash payments) on the
Preferred Shares and the exercise of the Warrants, and (ii) at all times from
and after the date hereof shall have a sufficient number of shares of Common
Stock duly and validly authorized and reserved for issuance to
-4-
satisfy the conversion of Preferred Shares, the payment of dividends (in lieu of
cash payments) on the Preferred Shares and the exercise of the Warrants. The
Company understands and acknowledges the potentially dilutive effect on the
Common Stock of the issuance of the Preferred Shares, the Conversion Shares, the
Dividend Shares and the Warrant Shares upon the conversion of, and payment of
dividends on, the Preferred Shares and the exercise of the Warrants,
respectively. The Company further acknowledges that its obligation to issue
Conversion Shares upon conversion of the Preferred Shares and Warrant Shares
upon exercise of the Warrants in accordance with this Agreement, the Certificate
of Designation and the Warrants is absolute and unconditional regardless of the
dilutive effect that such issuance may have on the ownership interests of other
stockholders of the Company and notwithstanding the commencement of any case
under 11 U.S.C. ss. 101 et seq. (the "Bankruptcy Code"). In the event the
Company is a debtor under the Bankruptcy Code, the Company hereby waives to the
fullest extent permitted any rights to relief it may have under 11 U.S.C. ss.
362 in respect of the conversion of the Preferred Shares and the exercise of the
Warrants. The Company agrees, without cost or expense to Buyer, to take or
consent to any and all action necessary to effectuate relief under 11 U.S.C. ss.
362. Schedule III.C. hereto sets forth (i) all issuances and sales by the
Company since December 31, 1998 of its capital stock, and other securities
convertible, exercisable or exchangeable for capital stock of the Company, (ii)
the amount of such securities sold, including any underlying shares of capital
stock, (iii) the purchaser thereof, (iv) the amount paid therefor, and (v) the
material terms of all outstanding capital stock of the Company (other than the
Common Stock).
D. Authority; Validity and Enforceability. The Company has the requisite
corporate power and authority to file and perform its obligations under the
Certificate of Designation and to enter into the Documents (as hereinafter
defined), and to perform all of its obligations hereunder and thereunder
(including the issuance, sale and delivery to Buyer of the Securities). The
execution, delivery and performance by the Company of the Documents, and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the filing of the Certificate of Designation
with the Delaware Secretary of State's office, the issuance of the Preferred
Shares and the Warrants and the issuance and reservation for issuance of the
Conversion Shares, the Dividend Shares and the Warrant Shares), have been duly
authorized by all necessary corporate action on the part of the Company. Each of
the Documents has been duly and validly executed and delivered by the Company
and the Certificate of Designation has been duly filed with the Delaware
Secretary of State's office by the Company and each Document constitutes a valid
and binding obligation of the Company enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and except as rights to indemnity and contribution may be
limited by federal or state securities laws or the public policy underlying such
laws. The Securities have been duly and validly authorized for issuance by the
Company and, when executed and delivered by the Company, will be valid and
binding obligations of the Company enforceable against it in accordance with
their terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally. For purposes of this Agreement, the term
"Documents" means (i) this Agreement; (ii) the Registration Rights Agreement of
even date herewith between the Company and Buyer, a copy of
-5-
which is annexed hereto as Exhibit D (the "Registration Rights Agreement");
(iii) the Certificate of Designation; (iv) the Warrants; and (v) the Escrow
Instructions.
E. Validity of Issuance of the Securities. The Preferred Shares as of the
Closing Date (as defined below), the Conversion Shares and the Dividend Shares
upon their issuance in accordance with the Certificate of Designation, and the
Warrant Shares upon exercise of the Warrants, respectively, are or will be
validly issued and outstanding, fully paid and nonassessable, and not subject to
any preemptive rights, rights of first refusal, tag-along rights, drag-along
rights or other similar rights. The Warrants as of the Closing Date are or will
be validly issued.
F. Non-contravention. Except as set forth on Schedule III.F. hereto, the
execution and delivery by the Company of the Documents, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated hereby and thereby, including, without limitation, the filing of
the Certificate of Designation with the Delaware Secretary of State's office, do
not, and compliance with the provisions of this Agreement and other Documents
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of a
material benefit under, or result in the creation of any Lien (as defined below)
upon any of the properties or assets of the Company or any of its Subsidiaries
under, or result in the termination of, or require that any consent be obtained
or any notice be given with respect to, (i) the Certificate of Incorporation or
By-Laws of the Company or the comparable charter or organizational documents of
any of its Subsidiaries, (ii) any loan or credit agreement, note, bond,
mortgage, indenture, lease, contract or other agreement, instrument or permit
applicable to the Company or any of its Subsidiaries or their respective
properties or assets, or (iii) any Law (as defined below) applicable to the
Company or any of its Subsidiaries or their respective properties or assets.
G. Approvals. No authorization, approval or consent of any court or public
or governmental authority is required to be obtained by the Company for the
issuance and sale of the Preferred Shares or the Warrants (and the Conversion
Shares, the Dividend Shares or Warrant Shares) to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained by the Company prior to the date hereof.
H. Commission Filings. The Company has properly and timely filed with the
Commission all reports, proxy statements, forms and other documents required to
be filed with the Commission under the Securities Act and the Exchange Act since
August 1, 1996 (the "Commission Filings"). As of their respective dates, (i) the
Commission Filings complied in all material respects with the requirements of
the Securities Act, or the Exchange Act, as the case may be, and the rules and
regulations of the Commission promulgated thereunder applicable to such
Commission Filings, and (ii) none of the Commission Filings contained at the
time of their filing any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the
Commission Filings, as of the dates of such documents, were true and complete in
all material respects and complied with applicable accounting requirements and
the published rules
-6-
and regulations of the Commission with respect thereto, have been prepared in
accordance with generally accepted accounting principles in the United States
("GAAP") (except in the case of the unaudited statements, as permitted by Form
10-QSB under the Exchange Act) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly presented
the consolidated financial position of the Company and its Subsidiaries as of
the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments that in the aggregate are not material and
to any other adjustment described therein).
I. Absence of Certain Changes. Since the Balance Sheet Date (as defined in
Section III.M.), there has not occurred any change, event or development in the
business, financial condition, prospects or results of operations of the Company
and the Subsidiaries, there has not existed any condition having or reasonably
likely to have a Material Adverse Effect, and the Company and the Subsidiaries
have conducted their respective businesses only in the ordinary course.
J. Full Disclosure. There is no fact known to the Company (other than
general economic or industry conditions known to the public generally) that has
not been fully disclosed in writing to Buyer that (i) reasonably could be
expected to have a Material Adverse Effect or (ii) reasonably could be expected
to materially and adversely affect the ability of the Company to perform its
obligations pursuant to the Documents.
K. Absence of Litigation. Except as set forth on Schedule III.K, there are
(i) no suits, actions or proceedings pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, (ii) no
complaints, lawsuits, charges or other proceedings pending or, to the knowledge
of the Company, threatened in any forum by or on behalf of any present or former
employee of the Company or any of its Subsidiaries, any applicant for employment
or classes of the foregoing alleging breach of any express or implied contract
of employment, any applicable law governing employment or the termination
thereof or other discriminatory, wrongful or tortuous conduct in connection with
the employment relationship, or (iii) no judgments, decrees, injunctions or
orders of any court or other governmental entity or arbitrator outstanding
against the Company or any Subsidiary.
L. Absence of Events of Default. Except as set forth in Schedule III.L, no
"Event of Default" (as defined in any agreement or instrument to which the
Company is a party) and no event which, with notice, lapse of time or both,
would constitute an Event of Default (as so defined), has occurred and is
continuing.
M. Financial Statements; No Undisclosed Liabilities. The Company has
delivered to Buyer true and complete copies of the (i) audited balance sheet of
the Company and the Subsidiaries as at December 31, 1997 and December 31, 1998,
respectively, and the related audited statements of income, changes in
stockholders' equity and cash flows for the three fiscal years ended December
31, 1996, 1997 and 1998 including the related notes and schedules thereto and
(ii) unaudited balance sheets of the Company and the Subsidiaries and the
statements of income, changes in stockholders' equity and cash flows for each
fiscal quarter ended since December 31, 1998 including the related notes and
schedules, all certified by the chief financial
-7-
officer of the Company (collectively, the "Financial Statements"), and all
management letters, if any, from the Company's independent auditors relating to
the dates and periods covered by the Financial Statements. Each of the Financial
Statements is complete and correct in all material respects, has been prepared
in accordance with GAAP (subject, in the case of the interim Financial
Statements, to normal year end adjustments and the absence of footnotes), and
fairly presents the financial position, results of operations and cash flows of
the Company as at the dates and for the periods indicated. For purposes hereof,
the audited balance sheet of the Company as at December 31, 1998 is hereinafter
referred to as the "Balance Sheet" and December 31, 1998 is hereinafter referred
to as the "Balance Sheet Date". The Company has no indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due), which was not fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto or was
not incurred in the ordinary course of business consistent with the Company's
past practices since the Balance Sheet Date.
N. Compliance with Laws; Permits. Each of the Company and each of its
Subsidiaries is in compliance and has complied with all laws, rules,
regulations, codes, ordinances and statutes (collectively, "Laws") applicable to
it or to the conduct of its business. The Company possesses all material
permits, approvals, authorizations, licenses, certificates and consents from all
public and governmental authorities which are necessary to conduct its business.
O. Related Party Transactions. Except as set forth on Schedule III.O.
hereto, neither the Company nor any of its officers, directors or "Affiliates"
(as such term is defined in Rule 12b-2 under the Exchange Act) nor any family
member of any officer, director or Affiliate of the Company has borrowed any
moneys from or has outstanding any indebtedness or other similar obligations to
the Company or any of the Subsidiaries. Except as set forth on Schedule III.O.
hereto, neither the Company nor any of its officers, directors or Affiliates nor
any family member of any officer, director or Affiliate of the Company (i) owns
any direct or indirect interest constituting more than a 1% equity (or similar
profit participation) interest in, or controls or is a director, officer,
partner, member or employee of, or consultant to or lender to or borrower from,
or has the right to participate in the profits of, any person or entity which is
(x) a competitor, supplier, customer, landlord, tenant, creditor or debtor of
the Company or any Subsidiary, (y) engaged in a business related to the business
of the Company or any Subsidiary, or (z) a participant in any transaction to
which the Company or any Subsidiary is a party or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company or any
Subsidiary with a total purchase price above $25,000.
P. Insurance. Each of the Company and each of the Subsidiaries maintains
property and casualty, general liability, workers' compensation, environmental
hazard, personal injury and other similar types of insurance with financially
sound and reputable insurers that is adequate, consistent with industry
standards and the Company's historical claims experience. Each of the Company
and each of the Subsidiaries has not received notice from, and has no knowledge
of any threat by, any insurer (that has issued any insurance policy to the
Company or the Subsidiaries) that such insurer intends to deny coverage under or
cancel, discontinue or not renew any insurance policy presently in force.
-8-
Q. Securities Law Matters. Assuming the accuracy of the representations and
warranties of Buyer set forth in Section II hereof, the offer and sale by the
Company of the Securities is exempt from (i) the registration and prospectus
delivery requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification provisions
of all applicable state securities and "blue sky" laws. Other than pursuant to
an effective registration statement under the Securities Act, the Company has
not issued, offered or sold the Preferred Shares or any shares of Common Stock
(including for this purpose any securities of the same or a similar class as the
Preferred Shares or Common Stock, or any securities convertible into or
exchangeable or exercisable for the Preferred Shares or Common Stock or any such
other securities) within the one-year next preceding the date hereof, except as
disclosed on Schedule III.Q. hereto, and the Company shall not directly or
indirectly take, and shall not permit any of its directors, officers or
Affiliates directly or indirectly to take, any action (including, without
limitation, any offering or sale to any person or entity of the Preferred Shares
or shares of Common Stock), so as to make unavailable the exemption from
Securities Act registration being relied upon by the Company for the offer and
sale to Buyer of the Preferred Shares and the Warrants (and the Conversion
Shares, the Dividend Shares and the Warrant Shares) as contemplated by this
Agreement. No form of general solicitation or advertising has been used or
authorized by the Company or any of its officers, directors or Affiliates in
connection with the offer or sale of the Preferred Shares and the Warrants (and
the Conversion Shares, the Dividend Shares and the Warrant Shares) as
contemplated by this Agreement or any other agreement to which the Company is a
party.
R. Environmental Matters.
Except as set forth on Schedule III.R. hereto:
1. The Company, the Subsidiaries and their respective operations are
in compliance with all applicable Environmental Laws and all permits
(including terms, conditions, and limitations therein) issued pursuant to
Environmental Laws or otherwise.
2. Each of the Company and the Subsidiaries has all permits, licenses,
waivers, exceptions, and exemptions required under all applicable
Environmental Laws necessary to operate its business.
3. None of the Company or the Subsidiaries is the subject of any
outstanding written order of or agreement with any governmental authority
or person respecting (i) Environmental Laws or permits, (ii) Remedial
Action or (iii) any Release or threatened Release of Hazardous Materials.
4. None of the Company or the Subsidiaries has received any written
communication alleging that it is or may be in violation of any
Environmental Law or any permit issued pursuant to any Environmental Law,
or may have any liability under any Environmental Law.
5. None of the Company or the Subsidiaries has any liability,
contingent or otherwise, in connection with any presence, treatment,
storage, disposal or
-9-
Release of any Hazardous Materials whether on property owned or operated by
the Company and the Subsidiaries or property of third parties, and none of
the Company or the Subsidiaries has transported, or arranged for
transportation of, any Hazardous Materials for treatment or disposal of any
property.
6. There are no investigations of the business, operations, or
currently or previously owned, operated or leased property of the Company
or any of the Subsidiaries pending or threatened which could lead to the
imposition of any case or liability pursuant to any Environmental Law.
7. There is not located at any of the properties owned or operated by
the Company or any of the Subsidiaries any (A) underground storage tank,
(B) asbestos-containing material or (C) equipment containing
polychlorinated biphenyls.
8. Each of the Company and the Subsidiaries has provided to Buyer all
environmentally related assessments, audits, studies, reports, analyses,
and results of investigations that have been performed with respect to the
currently or previously owned, leased or operated properties or activities
of the Company and the Subsidiaries.
9. There are no liens arising under or pursuant to any Environmental
Law on any real property owned, operated, or leased by the Company or any
of the Subsidiaries, and no action of any governmental authority has been
taken or, to the knowledge of the Company, is in process of being taken
which could subject any of such properties to such liens, and none of the
Company or any of the Subsidiaries is or has been expected to be required
to place any notice or restriction relating to the presence of Hazardous
Material at any real property owned, operated, or leased by it in any deed
to such property.
10. Neither the Company nor any of the Subsidiaries owns, operates or
leases any hazardous waste generation, treatment, storage, or disposal
facility, as such terms are used pursuant to the RCRA and related or
analogous state, local, or foreign law. None of the properties owned,
operated, or leased by the Company, the Subsidiaries or any predecessor of
any of them is now, or to the knowledge of the Company, was in the past,
used in any part as a dump, landfill, or disposal site, and neither
Company, the Subsidiaries nor any predecessor of them has filled any
wetlands.
11. The purchase that is the subject of this Agreement will not
require any governmental approvals under Environmental Laws, including
those that are triggered by sales or transfers of businesses or real
property, including, as examples and without limitation, the New Jersey
Industrial Site Recovery Act, N.J. Stat. 13:1K-7 et seq., and the
Connecticut Transfer of Establishments Act, Conn. Gen. Stat. ss. 22a-134 et
seq.
12. There is no currently existing requirement or, to the knowledge of
the Company, requirement to be imposed in the future by any Environmental
Law or Environmental Permit which could result in the incurrence of a cost
that could be reasonably expected to have a Material Adverse Effect.
-10-
13. Each of the Company and each of the Subsidiaries has disclosed to
Buyer all other acts or conditions that could result in any costs or
liabilities under Environmental Laws.
For purposes of this Section III.R.:
"Environmental Law" means any foreign, federal, state or local statute,
regulation, ordinance, or common law as now or hereafter in effect in any way
relating to the protection of human health, safety or welfare, or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act ("RCRA"), the Clean Water Act,
the Clean Air Act, the Toxic Substances Control Act, the Federal Insecticide,
Fungicide, and Rodenticide Act, and the Occupational Safety and Health Act, and
the regulations promulgated pursuant thereto.
"Hazardous Material" means any substance that is listed, classified or
regulated pursuant to any Environmental Law, including petroleum, gasoline, and
any other petroleum product, by-product, fraction or derivative, asbestos or
asbestos-containing material, lead-containing paint, water, or plumbing,
polychlorinated biphenyls, radioactive materials and radon.
"Release" means any placement, release, spill, filtration, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, migration,
or leaching to, through, or under the indoor or outdoor environment, or into,
through, under, or out of any property.
"Remedial Action" means all actions to (x) clean up, remove, remediate,
treat or in any other way address any Hazardous Material; (y) prevent or contain
the Release of any Hazardous Material; or (z) perform studies and investigations
or post-remedial monitoring and care in relation to (x) and (y) above.
S. Labor Matters. Neither the Company nor any of the Subsidiaries is party
to any labor or collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of the Company. No
employees of the Company or the Subsidiaries are represented by any labor
organization and none of such employees has made a pending demand for
recognition, and there are no representation proceedings or petitions seeking a
representation proceeding presently pending or, to the Company's knowledge,
threatened to be brought or filed, with the National Labor Relations Board or
other labor relations tribunal. There is no organizing activity involving the
Company or the Subsidiaries pending or to the Company's knowledge, threatened by
any labor organization or group of employees of the Company or the Subsidiaries.
There are no (i) strikes, work stoppages, slowdowns, lockouts or arbitrations or
(ii) material grievances or other labor disputes pending or, to the knowledge of
the Company, threatened against or involving the Company or the Subsidiaries.
There are no unfair labor practice charges, grievances or complaints pending or,
to the knowledge of the Company, threatened by or on behalf of any employee or
group of employees of the Company or the Subsidiaries.
-11-
T. ERISA Matters. All Plans maintained by the Company, its Subsidiaries and
ERISA Affiliates are listed in Schedule III.T. and copies of all documentation
relating to such Plans (including, but not limited to, copies of written Plans,
written descriptions of oral Plans, summary plan descriptions, trust agreements,
the three most recent annual returns, employee communications and IRS
determination letters) have been delivered or made available for review by the
Buyer. Each Plan has at all times been maintained and administered in all
material respects in accordance with its terms and the requirements of
applicable law, including ERISA and the Code, and each Plan intended to qualify
under Section 401(a) of the Code has at all times since its adoption been so
qualified, and each trust which forms a part of any such plan has at all times
since its adoption been tax-exempt under Section 501(a) of the Code. The
Company, its Subsidiaries and its ERISA Affiliates are in compliance in all
material respects with all provisions of ERISA applicable to it. No Reportable
Event has occurred, been waived or exists as to which the Company, its
Subsidiaries or any ERISA Affiliate was required to file a report with the PBGC,
and the present value of all liabilities under each Pension Plan (based on those
assumptions used to fund such Plans) listed in Schedule III.T. did not, as of
the most recent annual valuation date applicable thereto, exceed the value of
the assets of such Pension Plan. None of the Company, its Subsidiaries or ERISA
Affiliates has incurred, or reasonably expects to incur, any Withdrawal
Liability with respect to any Multi-employer Plan that could result in a
Material Adverse Effect. None of the Company, its Subsidiaries or ERISA
Affiliates has received any notification that any Multi-employer Plan is in
reorganization or has been terminated within the meaning of Title IV of ERISA,
and no Multi-employer Plan is reasonably expected to be in reorganization or
termination where such reorganization or termination has resulted or could
reasonably be expected to result in increases to the contributions required to
be made to such Plan or otherwise. No direct, contingent or secondary liability
has been incurred or is expected to be incurred by the Company or its
Subsidiaries under Title IV of ERISA to any party with respect to any Plan, or
with respect to any other Plan presently or heretofore maintained or contributed
to by any ERISA Affiliate. Neither the Company, its Subsidiaries, or ERISA
Affiliate has incurred any liability for any tax imposed under section 4971
through 4980B of the Code or civil liability under section 502(i) or (l) of
ERISA. No suit, action or other litigation (excluding claims for benefits
incurred in the ordinary course of plan activities and any other claim which
could reasonably be expected to result in a material liability or expense to the
Company, its Subsidiaries or ERISA Affiliates) has been brought or, to the
knowledge of the Company, threatened against or with respect to any Plan and
there are no facts or circumstances known to the Company, its Subsidiaries or
ERISA Affiliates that could reasonably be expected to give rise to any such
suit, action or other litigation. All contributions to Plans that were required
to be made under such Plans have been made, and all benefits accrued under any
unfunded Plan have been paid, accrued or otherwise adequately reserved in
accordance with GAAP, all of which accruals under unfunded Plans are as
disclosed in Schedule III.T., and the Company, its Subsidiaries and ERISA
Affiliates have each performed all material obligations required to be performed
under all Plans. The execution, delivery and performance of this Agreement and
other Documents and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the offer, issue and sale by the Company
and its Subsidiaries, and the purchase by the Buyer, of the Preferred Shares,
the Conversion Shares, the Warrants, the Warrant Shares and Dividend Shares)
will not involve any "prohibited transaction" within the meaning of ERISA or the
Code with respect to any Plan.
-12-
For purposes of this Section III.T.:
"ERISA" means the Employee Retirement Income Security Act of 1974, or any
successor statute, together with the regulations thereunder, as the same may be
amended from time to time.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
that was, is or hereafter may become, a member of a group of which the Company
is a member and which is treated as a single employer under Section 414 of the
Internal Revenue Code of 1986, as amended (the "Code").
"Multi-employer Plan" means a multi-employer plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Code) is making or accruing an obligation to make contributions, or
has within any of the preceding six plan years made or accrued an obligation to
make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Plan" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights, phantom stock, leave of absence, layoff,
vacation, day or dependent care, legal services, cafeteria, life, health,
accident, disability, workmen's compensation or other insurance, severance,
separation or other employee benefit plan, practice, policy or arrangement of
any kind, whether written or oral, or whether for the benefit of a single
individual or more than one individual including, but not limited to, any
"employee benefit plan" within the meaning of Section 3(3) of ERISA, including
any Pension Plan.
"Pension Plan" means any pension plan (other than a Multi-employer Plan)
subject to the provision of Title IV of ERISA or Section 412 of the Code that is
maintained for employees of the Company, its Subsidiaries, or any ERISA
Affiliate.
"Reportable Event" means any reportable event as defined in Section 4043(b)
of ERISA or the regulations issued thereunder with respect to a Plan
"Withdrawal Liability" means liability to a Multi-employer Plan as a result
of a complete or partial withdrawal from such Multi-employer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
U. Tax Matters.
1. The Company has filed all material Tax Returns which it is required
to file under applicable Laws; all such Tax Returns are true and accurate
in all material respects and have been prepared in compliance with all
applicable Laws; the Company has paid all Taxes due and owing by it
(whether or not such Taxes are required to be shown on a Tax Return) and
has withheld and paid over to the appropriate taxing authorities all
-13-
Taxes which it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third parties; and since the
Balance Sheet Date, the charges, accruals and reserves for Taxes with
respect to the Company (including any provisions for deferred income taxes)
reflected on the books of the Company are adequate to cover any Tax
liabilities of the Company if its current tax year were treated as ending
on the date hereof.
2. No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that such corporation is or may
be subject to taxation by that jurisdiction. There are no foreign, federal,
state or local tax audits or administrative or judicial proceedings pending
or being conducted with respect to the Company; no information related to
Tax matters has been requested by any foreign, federal, state or local
taxing authority; and, except as disclosed above, no written notice
indicating an intent to open an audit or other review has been received by
the Company from any foreign, federal, state or local taxing authority.
There are no material unresolved questions or claims concerning the
Company's Tax liability. The Company (A) has not executed or entered into a
closing agreement pursuant to Section 7121 of the Code or any predecessor
provision thereof or any similar provision of state, local or foreign law;
or (B) has not agreed to or is required to make any adjustments pursuant to
Section 481(a) of the Code or any similar provision of state, local or
foreign law by reason of a change in accounting method initiated by the
Company or any of its subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
3. The Company has not made an election under Section 341(f) of the
Code. The Company is not liable for the Taxes of another person that is not
a subsidiary of the Company under (A) Treas. Reg. Section 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee
or successor, (C) by contract or indemnity or (D) otherwise. The Company is
not a party to any tax sharing agreement. The Company has not made any
payments, is not obligated to make payments and is not a party to an
agreement that could obligate it to make any payments that would not be
deductible under Section 280G of the Code.
For purposes of this Section III.U.:
"IRS" means the United States Internal Revenue Service.
"Tax" or "Taxes" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-
-14-
on minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"Tax Return" means any return, information report or filing with respect to
Taxes, including any schedules attached thereto and including any amendment
thereof.
V. Property. Except as set forth on Schedule III.V, each of the Company and
each of the Subsidiaries has good and marketable title to all of its assets and
properties material to the conduct of its business, free and clear of any liens,
pledges, security interests, claims, encumbrances or other restrictions of any
kind (collectively, "Liens"). With respect to any assets or properties it
leases, each of the Company and its Subsidiaries holds a valid and subsisting
leasehold interest therein, free and clear of any Liens, is in compliance, in
all material respects, with the terms of the applicable lease, and enjoys
peaceful and undisturbed possession under such lease. All of the assets and
properties of the Company and its Subsidiaries that are material to the conduct
of business as presently conducted or as proposed to be conducted by it are in
good operating condition and repair. The inventory of the Company and its
Subsidiaries is in good and marketable condition, does not include any material
quantity of items which are obsolete, damaged or slow moving, and is salable (or
may be leased) in the normal course of business as currently conducted by it.
W. Intellectual Property. The Company and the Subsidiaries own or possess
adequate and enforceable rights to use all patents, patent applications,
trademarks, trademark applications, trade names, service marks, copyrights,
copyright applications, licenses, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of their businesses as now being
conducted including, but not limited to, those described on Schedule III.W.
hereto. Except as set forth on Schedule III.W, the Company and the Subsidiaries
have all right, title and interest in all of the Intangibles, free and clear of
any and all Liens. The Company and the Subsidiaries are not infringing upon or
in conflict with any right of any other person with respect to any Intangibles.
Except as disclosed on Schedule III.W. hereto, (i) no claims have been asserted
by any individual, partnership, corporation, unincorporated organization or
association, limited liability company, trust or other entity (collectively, a
"Person") contesting the validity, enforceability, use or ownership of any
Intangibles, and the Company and the Subsidiaries have no knowledge of any basis
for such claim, and (ii) neither the Company nor any of the Subsidiaries has any
knowledge of infringement or misappropriation of the Intangibles by any third
party.
X. Contracts. All contracts, agreements, notes, instruments, franchises,
leases, licenses, commitments, arrangements or understanding, written or oral
(collectively, "Contracts") which are material to the business and operations of
the Company and the Subsidiaries are in full force and effect and constitute
legal, valid and binding obligations of the Company and the Subsidiaries and, to
the best knowledge of the Company, the other parties thereto; the Company and
the Subsidiaries and, to the best knowledge of the Company, each other party
thereto, have performed in all material respects all obligations required to be
performed by them under the Contracts, and no material violation or default
exists in respect thereof, nor any event that with notice or lapse of time, or
both, would constitute a default
-15-
thereof, on the part of the Company and the Subsidiaries or, to the best
knowledge of the Company, any other party thereto; except as set forth on
Schedule III.X., none of the Contracts is currently being renegotiated; and the
validity, effectiveness and continuation of all Contracts will not be materially
adversely affected by the transactions contemplated by this Agreement.
Y. Registration Rights. Except as set forth on Schedule III.Y, no Person
has, and as of the Closing, no Person shall have, demand, "piggy-back" or other
rights to cause the Company to file any registration statement under the
Securities Act, relating to any of its securities or to participate in any such
registration statement.
Z. Dividends. The timely payment of dividends on the Preferred Shares as
specified in the Certificate of Designation is not prohibited by the Certificate
of Incorporation or By-Laws of the Company or any agreement, contract, documents
or other undertaking to which the Company or any of the Subsidiaries is a party.
AA. Investment Company Act. Neither the Company nor any of the Subsidiaries
is an "investment company" within the meaning of the Investment Company Act of
1940, as amended (the "Investment Company Act"), nor is the Company nor any of
the Subsidiaries directly or indirectly controlled by or acting on behalf of any
Person which is an "investment company" within the meaning of the Investment
Company Act.
BB. Business Plan. Any business information of the Company previously
submitted to Buyer in any form, including the projections contained therein, was
prepared by the senior management of the Company in good faith and is based on
assumptions that the Company believes are reasonable. The Company is not aware
of any fact or condition that could reasonably be expected to result in the
Company not achieving the results described in such business plan.
CC. Year 2000 Compliance. The Company is currently reviewing its products,
business and operations that could be adversely affected by the risk that
computer applications used by the Company and the Subsidiaries may be unable to
recognize and properly perform date-sensitive functions involving dates prior to
and after December 31, 1999 (the "Year 2000 Problem"). The Company believes its
internal information and business systems will be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000. In
addition, the Company is currently surveying those vendors, suppliers and other
third parties (collectively, the "Outside Parties") with which the Company and
the Subsidiaries do business and whose failure to adequately address the Year
2000 Problem could reasonably be expected to adversely affect the business and
operations of the Company and the Subsidiaries. Based upon the aforementioned
internal review and surveys of the Outside Parties as of the date of this
Agreement, the Year 2000 Problem has not resulted in, and is not reasonably
expected to have, a Material Adverse Effect.
DD. Internal Controls and Procedures. The Company maintains accurate books
and records and internal accounting controls that provide reasonable assurance
that (i) all transactions to which the Company or each of the Subsidiaries is a
party or by which its properties are bound are executed with management's
authorization; (ii) the reported accountability of the Company's and the
Subsidiaries' assets is compared with existing assets at regular intervals;
(iii)
-16-
access to the Company's and the Subsidiaries' assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
each of the Company and the Subsidiaries is a party or by which its properties
are bound are recorded as necessary to permit preparation of the financial
statements of the Company in accordance with GAAP.
EE. Payments and Contributions. Neither the Company nor any of its
Subsidiaries nor any of their respective directors, officers or, to their
respective knowledge, other employees has (i) used any company funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment of company funds to any foreign or domestic government official
or employee, (iii) violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or (iv) made any bribe, rebate,
payoff, influence payment, kickback or other similar payment to any person with
respect to the company matters.
FF. No Misrepresentation. No representation or warranty of the Company
contained in this Agreement, any schedule, annex or exhibit hereto or any
agreement, instrument or certificate furnished by the Company to Buyer pursuant
to this Agreement, contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein, not misleading.
GG. Finder's Fee. There are no finder's fee, brokerage commission or like
payment in connection with the transactions contemplated by this Agreement for
which Buyer is liable or responsible.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
A. Restrictive Legend. Buyer acknowledges and agrees that, upon issuance
pursuant to this Agreement, the Securities (including any Dividends Shares,
Conversion Shares or the Warrant Shares) shall have endorsed thereon a legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Preferred Shares, the Warrant Shares and the Conversion
Shares until such legend has been removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR SUCH OTHER LAWS."
B. Filings. The Company shall make all necessary Commission Filings and
"blue sky" filings required to be made by the Company in connection with the
sale of the
-17-
Securities to Buyer as required by all applicable Laws, and shall provide a copy
thereof to Buyer promptly after such filing.
C. Reporting Status. So long as Buyer beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed by it
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
D. Use of Proceeds. The Company shall use the net proceeds from the sale of
the Preferred Shares and the Warrants (excluding amounts paid by the Company for
Buyer's out-of-pocket costs and expenses whether or not accounted for or
incurred in connection with the transactions contemplated by this Agreement
(including the fees and disbursements of Buyer's legal counsel)) solely for
working capital purposes.
E. Listing. Except to the extent the Company lists its Common Stock on The
New York Stock Exchange or the Nasdaq National Market, the Company shall use its
best efforts to maintain its listing of the Common Stock on Nasdaq. If the
Common Stock is delisted from Nasdaq, the Company will use its best efforts to
list the Common Stock as promptly as possible on the most liquid national
securities exchange or quotation system that the Common Stock is qualified to be
listed on.
F. Reserved Conversion Shares. The Company at all times from and after the
date hereof shall have such number of shares of Common Stock duly and validly
authorized and reserved for issuance as shall be sufficient for the conversion
in full of, and the payment of dividends on, the Preferred Shares and the
exercise in full of the Warrants.
G. Right of First Refusal. If, during the period commencing on the date
hereof and ending three years after the Closing Date (the "Right of First
Refusal Period"), the Company should propose (the "Proposal") to issue Common
Stock or securities convertible into Common Stock at a price less than the
Current Market Price (as defined in the Certificate of Designation), or debt at
less than par value or having an effective annual interest rate in excess of
9.9% (each a "Right of First Refusal Security" and collectively, the "Right of
First Refusal Securities"), in each case the Company shall be obligated to offer
such Right of First Refusal Securities to Buyer on the terms set forth in the
Proposal (the "Offer") and Buyer shall have the right, but not the obligation,
to accept such Offer on such terms. At least 15 business days prior to the
issuance of any Right of First Refusal Securities, the Company shall provide
written notice to Buyer of any Proposal, setting forth in full the terms and
conditions thereof, and Buyer shall then have 10 business days to accept or
reject the Offer in writing. If the Company issues any Right of First Refusal
Securities during the Right of First Refusal Period but fails to: (i) notify
Buyer of the Proposal, (ii) offer Buyer the opportunity to complete the
transaction as set forth in the Proposal, or (iii) enter into and consummate an
agreement to issue such Right of First Refusal Securities to Buyer on the terms
and conditions set forth in the Proposal, after Buyer has accepted the Offer,
then the Company shall pay to Buyer, as liquidated damages, an amount equal to
10% of the amount paid to the Company for the Right of First Refusal Securities.
The foregoing Right of First Refusal is and shall be senior in right to any
other right of first refusal issued by the Company to any other Person.
-18-
H. Information. Each of the parties hereto acknowledges and agrees that
Buyer shall not be provided with, nor be given access to, any material
non-public information relating to the Company and the Subsidiaries.
I. Exemption from Investment Company Act. The Company shall conduct its
business, and shall cause the Subsidiaries to conduct their businesses, in a
manner so that neither the Company nor any Subsidiary shall become an
"investment company" within the meaning of the Investment Company Act.
J. Accounting and Reserves. The Company shall maintain a standard and
uniform system of accounting and shall keep proper books and records and
accounts in which full, true and correct entries shall be made of its
transactions, all in accordance with GAAP applied on a consistent basis through
all periods, and shall set aside on such books for each fiscal year all such
proper reserves for depreciation, obsolescence, amortization, bad debts and
other purposes in connection with its operations as are required by such
principles so applied.
K. Transactions with Affiliates. Neither the Company nor any of its
Subsidiaries shall, directly or indirectly, enter into any transaction or
agreement with any stockholder, officer director or Affiliate of the Company or
family member of any officer, director or Affiliate of the Company, unless the
transaction or agreement is (i) reviewed and approved by a majority of
Disinterested Directors (as defined below) and (ii) on terms no less favorable
to the Company or the applicable Subsidiary than those obtainable from a
non-affiliated person. A "Disinterested Director" shall mean an individual who
is not and who has not been an officer or employee of the Company and who is not
a member of the family of, controlled by or under common control with, any such
officer or employee.
L. Issuances of Additional Convertible Preferred Shares or Convertible
Debentures. So long as Buyer beneficially owns any of the Preferred Shares, the
Company shall not issue any additional convertible preferred stock or
convertible debt securities, in each case, convertible into Common Stock at a
floating conversion price, without the prior written consent of Buyer.
M. Certain Restriction. So long as any Preferred Shares are outstanding, no
dividends shall be declared or paid or set apart for payment or other
distribution declared or made upon Junior Securities (as defined in the
Certificate of Designation), nor shall any Junior Securities be redeemed,
purchased or otherwise acquired (other than a redemption, purchase or other
acquisition of shares of Common Stock made for purposes of an employee incentive
or benefit plan (including a stock option plan) of the Company or any
Subsidiary, for any consideration (or any moneys be paid to or made available
for a sinking fund for the redemption of any shares of any such stock) by the
Company, directly or indirectly.
N. Restrictions on the Sale of Preferred Shares. The Company covenants and
agrees not to issue and sell/or transfer any shares of Series C 8% Convertible
Preferred Stock to any person other than Buyer.
-19-
V. TRANSFER AGENT INSTRUCTIONS
A. The Company undertakes and agrees that no instruction other than the
instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Conversion Shares, the Dividend Shares
and the Warrant Shares otherwise shall be freely transferable on the books and
records of the Company as and to the extent provided in this Agreement, the
Registration Rights Agreement and applicable law. Nothing contained in this
Section V.A. shall affect in any way Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of such Common Stock. If, at any
time, Buyer provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of the resale by Buyer of such
Common Stock is not required under the Securities Act and that the removal of
restrictive legends is permitted under applicable law, the Company shall permit
the transfer of such Common Stock and, promptly instruct the Company's transfer
agent to issue one or more certificates for Common Stock without any restrictive
legends endorsed thereon.
B. Buyer shall have the right to convert the Preferred Shares by
telecopying an executed and completed Notice of Conversion (as defined in the
Certificate of Designation) to the Company. Each date on which a Notice of
Conversion is telecopied to and received by the Company in accordance with the
provisions hereof shall be deemed a Conversion Date (as defined in the
Certificate of Designation). The Company shall transmit the certificates
evidencing the shares of Common Stock issuable upon conversion of any Preferred
Shares (together with certificates evidencing any Preferred Shares not being so
converted) to Buyer via express courier, by electronic transfer or otherwise,
within five business days after receipt by the Company of the Notice of
Conversion (the "Delivery Date"). Within 30 days after Buyer delivers the Notice
of Conversion to the Company, Buyer shall deliver to the Company the Preferred
Shares being converted.
C. Buyer shall have the right to purchase shares of Common Stock pursuant
to exercise of the Warrants in accordance with its applicable terms of the
Warrants. The last date that the Company may deliver shares of Common Stock
issuable upon any exercise of Warrants is referred to herein as the "Warrant
Delivery Date."
D. The Company understands that a delay in the issuance of the shares of
Common Stock issuable in lieu of cash dividends on the Preferred Shares, upon
the conversion of the Preferred Shares or exercise of the Warrants beyond the
applicable Dividend Payment Due Date (as defined in the Certificate of
Designation), Delivery Date or Warrant Delivery Date could result in economic
loss to Buyer. As compensation to Buyer for such loss (and not as a penalty),
the Company agrees to pay to Buyer for late issuance of Common Stock issuable in
lieu of cash dividends on the Preferred Shares, upon conversion of the Preferred
Shares or exercise of the Warrants in accordance with the following schedule
(where "No. Business Days" is defined as the number of business days beyond five
days from the Dividend Payment Due Date, the Delivery Date or the Warrant
Delivery Date, as applicable):
-20-
No. Business Days Compensation For Each 10 Shares
----------------- of Preferred Shares Not Converted
Timely or 500 Shares of Common
Stock Issuable In Payment of
Dividends or Upon Exercise of
Warrants Not Issued Timely
--------------------------
1 $ 25
2 50
3 75
4 100
5 125
6 150
7 175
8 200
9 225
10 250
more than 10 $250 + $100 for each Business Day
Late beyond 10 days
The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer, and in addition to any other remedies which may
be available to Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within five business days after the
relevant Dividend Payment Due Date, the Delivery Date or the Warrant Delivery
Date, as applicable, Buyer shall be entitled to rescind the relevant Notice of
Conversion or exercise of Warrants by delivering a notice to such effect to the
Company whereupon the Company and Buyer shall each be restored to their
respective original positions immediately prior to delivery of such Notice of
Conversion on delivery.
VI. DELIVERY INSTRUCTIONS
The Preferred Shares and the Warrants shall be delivered by the Company to
the Escrow Agent pursuant to Section I.B. hereof at the Closing.
VII. CLOSING AND CLOSING DATES
A. Closing. The date and time (the "Closing Date") of the Closing shall be
the date hereof or such other date as shall be mutually agreed upon in writing.
B. Place of the Closing. The Closing shall occur on the Closing Date at the
offices of the Escrow Agent.
C. Obligations of the Escrow Agent. Notwithstanding anything to the
contrary contained herein, the Escrow Agent shall not be authorized to release
to the Company the
-21-
Purchase Price and to Buyer the certificate(s) (I/N/O Buyer or I/N/O Buyer's
nominee) evidencing the Securities being purchased by Buyer unless the
conditions set forth herein have been satisfied.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT THE CLOSING
Buyer understands that the Company's obligation to sell to Buyer the
Preferred Shares and the Warrants on the Closing Date is conditioned upon:
A. Delivery by Buyer to the Escrow Agent of the Purchase Price;
B. The accuracy on the Closing Date of the representations and warranties
of Buyer contained in this Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms, speak as of and
relate to a specified date, in which case such accuracy shall be measured as of
such specified date) and the performance by Buyer in all material respects on or
before the Closing Date of all covenants and agreements of Buyer required to be
performed by it pursuant to this Agreement on or before the Closing Date; and
C. There shall not be in effect any Law or order, ruling, judgment or writ
of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
IX. CONDITIONS TO BUYER'S OBLIGATIONS AT THE CLOSING
The Company understands that Buyer's obligation to purchase the Preferred
Shares and the Warrants on the Closing Date is conditioned upon:
A. Delivery by the Company to Buyer of evidence that the Certificate of
Designation has been filed and is effective.
B. Delivery by the Company to the Escrow Agent of one or more certificates
(I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Preferred Shares and the
Warrants to be purchased by Buyer pursuant to this Agreement;
C. The accuracy on the Closing Date of the representations and warranties
of the Company contained in this Agreement as if made on the Closing Date
(except for representations and warranties which, by their express terms, speak
as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by the Company in all
respects on or before the Closing Date of all covenants and agreements of the
Company required to be performed by it pursuant to this Agreement on or before
the Closing Date, all of which shall be confirmed to Buyer by the chief
executive officer of the Company by delivery of the certificate to that effect;
D. Buyer having received an opinion of counsel for the Company, dated the
Closing Date, in form, scope and substance reasonably satisfactory to Buyer as
to the matters set forth in Annex A;
-22-
E. There not having occurred (i) any general suspension of trading in, or
limitation on prices listed for, the Common Stock on Nasdaq, (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) the commencement of a war, armed hostilities
or other international or national calamity directly or indirectly involving the
United States or any of its territories, protectorates or possessions, or (iv)
in the case of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof;
F. There not having occurred any event or development, and there being in
existence no condition, having or which reasonably and foreseeable could have a
Material Adverse Effect;
G. The Company shall have delivered to Buyer (as provided in the Escrow
Instructions) reimbursement of Buyer's out-of-pocket costs and expenses whether
or not accounted for or incurred in connection with the transactions
contemplated by this Agreement (including the fees and disbursements of Buyer's
legal counsel) of $40,000;
H. There shall not be in effect any Law or order, ruling, judgment or writ
of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement;
I. Delivery by the Company of irrevocable instructions to the Company's
transfer agent to reserve 2,000,000 shares of Common Stock for issuance of the
Conversion Shares, the Dividend Shares and the Warrant Shares;
J. The Company shall have obtained all consents, approvals or waivers from
governmental authorities and third persons necessary for the execution, delivery
and performance of the Documents and the transactions contemplated thereby, all
without material cost to the Company; and
K. Buyer shall have received such additional documents, certificates,
payment, assignments, transfers and other delivers, as it or its legal counsel
may reasonably request and as are customary to effect a closing of the matters
herein contemplated.
X. TERMINATION
A. Termination by Mutual Written Consent. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned, for any reason and at
any time prior to the Closing Date, by the mutual written consent of the Company
and Buyer.
B. Termination by the Company or Buyer. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned by action of the
Company or Buyer if (i) the Closing shall not have occurred at or prior to 5:00
p.m., New York City time, on November 8, 1999 (the "Latest Closing Date");
provided, however, that the right to terminate this Agreement pursuant to this
Section X.B. shall not be available to any party whose failure to fulfill any of
its obligations under this Agreement has been the cause of or has resulted in
-23-
the failure of the Closing to occur at or before such time and date; provided,
further, however, that if the Closing shall not have occurred on or prior to the
Latest Closing Date, the Closing may only occur after the Latest Closing Date
with the written consent of Buyer.
C. Termination by Buyer. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply with any of its
covenants or agreements contained in this Agreement, (ii) there shall have been
a breach by the Company with respect to any representation or warranty made by
it in this Agreement, (iii) there shall have occurred any event or development,
or there shall be in existence any condition, having or reasonably likely to
have a Material Adverse Effect or (iv) the Company shall have failed to satisfy
the conditions provided in Section IX hereof.
D. Termination by the Company. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) Buyer shall have failed to comply with any of
its covenants or agreements contained in this Agreement or (ii) there shall have
been a breach by Buyer with respect to any representation or warranty made by it
in this Agreement.
E. Effect of Termination. In the event of the termination of this Agreement
pursuant to this Section X, this Agreement shall thereafter become void and have
no effect, and no party hereto shall have any liability or obligation to any
other party hereto in respect of this Agreement, except that the provisions of
Article XI and this Section X.E. shall survive any such termination; provided,
however, that no party shall be released from any liability hereunder if this
Agreement is terminated and the transactions contemplated hereby abandoned by
reason of (i) willful failure of such party to perform its obligations hereunder
or (ii) any misrepresentation made by such party of any matter set forth herein.
XI. SURVIVAL; INDEMNIFICATION
A. The representations, warranties and covenants made by each of the
Company and Buyer in this Agreement, the annexes, schedules and exhibits hereto
and in each instrument, agreement and certificate entered into and delivered by
them pursuant to this Agreement, shall survive the Closing and the consummation
of the transactions contemplated hereby. In the event of a breach or violation
of any of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
B. The Company hereby agrees to indemnify and hold harmless Buyer, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Buyer Indemnitees"), from and against any and all losses
(except for losses relating to the economic value of the investment of Buyer in
the Company), claims, damages, judgments, penalties, liabilities and
deficiencies (collectively, "Losses"), and agrees to reimburse Buyer Indemnitees
for
-24-
all out of-pocket expenses (including the fees and expenses of legal counsel),
in each case promptly as incurred by Buyer Indemnitees and to the extent arising
out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of the
Company's representations or warranties contained in this Agreement or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or
any instrument, agreement or certificate entered into or delivered by the
Company pursuant to this Agreement or the other Documents;
2. the purchase of the Preferred Shares and the Warrants, the
conversion of the Preferred Shares, the exercise of the Warrants, the
consummation of the transactions contemplated by this Agreement and the
other Documents, the use of any of the proceeds of the Purchase Price by
the Company, the purchase or ownership of any or all of the Securities, the
performance by the parties hereto of their respective obligations hereunder
and under the Documents or any claim, litigation, investigation,
proceedings or governmental action relating to any of the foregoing,
whether or not Buyer is a party thereto; and
3. resales of the Common Shares by Buyer in the manner and as
contemplated by this Agreement and the Registration Rights Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the Company, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for all out-of-pocket expenses
(including the fees and expenses of legal counsel), in each case promptly as
incurred by the Company Indemnitees and to the extent arising out of or in
connection with:
1. any misrepresentation, omission of fact, or breach of any of
Buyer's representations or warranties contained in this Agreement or the
other Documents, or the annexes, schedules or exhibits hereto or thereto or
any instrument, agreement or certificate entered into or delivered by Buyer
pursuant to this Agreement or the other Documents; and
2. any failure by Buyer to perform in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this
Agreement or the other Documents or any instrument, certificate or
agreement entered into or delivered by Buyer pursuant to this Agreement or
the other Documents.
D. Promptly after receipt by either party hereto seeking indemnification
pursuant to this Section XI (an "Indemnified Party") of written notice of any
investigation, claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section XI is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying
-25-
Party is materially prejudiced and forfeits substantive rights and defenses by
reason of such failure. In connection with any Claim as to which both the
Indemnifying Party and the Indemnified Party are parties, the Indemnifying Party
shall be entitled to assume the defense thereof. Notwithstanding the assumption
of the defense of any Claim by the Indemnifying Party, the Indemnified Party
shall have the right to employ separate legal counsel and to participate in the
defense of such Claim, and the Indemnifying Party shall bear the reasonable
fees, out-of-pocket costs and expenses of such separate legal counsel to the
Indemnified Party if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, out-of-pocket costs and expenses, (y) the Indemnified Party
and the Indemnifying Party reasonably shall have concluded that representation
of the Indemnified Party and the Indemnifying Party by the same legal counsel
would not be appropriate due to actual or, as reasonably determined by legal
counsel to the Indemnified Party, potentially differing interests between such
parties in the conduct of the defense of such Claim, or if there may be legal
defenses available to the Indemnified Party that are in addition to or disparate
from those available to the Indemnifying Party, or (z) the Indemnifying Party
shall have failed to employ legal counsel reasonably satisfactory to the
Indemnified Party within a reasonable period of time after notice of the
commencement of such Claim. If the Indemnified Party employs separate legal
counsel in circumstances other than as described in clauses (x), (y) or (z)
above, the fees, costs and expenses of such legal counsel shall be borne
exclusively by the Indemnified Party. Except as provided above, the Indemnifying
Party shall not, in connection with any Claim in the same jurisdiction, be
liable for the fees and expenses of more than one firm of legal counsel for the
Indemnified Party (together with appropriate local counsel). The Indemnifying
Party shall not, without the prior written consent of the Indemnified Party
(which consent shall not unreasonably be withheld), settle or compromise any
Claim or consent to the entry of any judgment that does not include an
unconditional release of the Indemnified Party from all liabilities with respect
to such Claim or judgment.
E. In the event one party hereunder should have a claim for indemnification
that does not involve a claim or demand being asserted by a third party, the
Indemnified Party promptly shall deliver notice of such claim to the
Indemnifying Party. If the Indemnified Party disputes the claim, such dispute
shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
XII. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York, without regard to the conflicts of law principles
of such state.
XIII. SUBMISSION TO JURISDICTION
Each of the parties hereto consents to the exclusive jurisdiction of the
federal courts whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and the other
Documents. Each party hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may effectively do so, any defense of an
-26-
inconvenient forum or improper venue to the maintenance of such action or
proceeding in any such court and any right of jurisdiction on account of its
place of residence or domicile. Each party hereto irrevocably and
unconditionally consents to the service of any and all process in any such
action or proceeding in such courts by the mailing of copies of such process by
certified or registered airmail at its address specified in Section XIX. Each
party hereto agrees that a final judgment in any such action or proceeding shall
be conclusive and may be enforced in other jurisdictions by suit on the judgment
or in any other manner provided by law.
XIV. WAIVER OF JURY TRIAL
TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (i)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
XV. COUNTERPARTS; EXECUTION
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument. A facsimile transmission of
this signed Agreement shall be legal and binding on all parties hereto.
XVI. HEADINGS
The headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this Agreement.
XVII. SEVERABILITY
In the event any one or more of the provisions contained in this Agreement
or in the other Documents should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein or therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
-27-
XVIII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS
This Agreement and the Documents constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by all parties. No waiver of any of
the provisions of this Agreement shall be deemed or shall constitute a waiver of
any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
XIX. NOTICES
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:
A. if to the Company, to:
Compositech Ltd.
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx
(000) 000-0000
(000) 000-0000 (Fax)
with a copy to:
Patterson, Belknap, Xxxx & Tyler LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxx, Esq.
(000) 000-0000
(000) 000-0000 (Fax)
B. if to Buyer, to:
The Shaar Fund Ltd.
c/x Xxxxxxxx Capital Management
0 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
(000) 000-0000
(000) 000-0000 (Fax)
-28-
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Block, Esq.
(000) 000-0000
(000) 000-0000 (Fax)
C. if to the Escrow Agent, to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Block, Esq.
(000) 000-0000
(000) 000-0000 (Fax)
The Company, Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Section XIX.
XX. CONFIDENTIALITY
Each of the Company and Buyer agrees to keep confidential and not to
disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).
XXI. ASSIGNMENT
This Agreement shall not be assignable by either of the parties hereto
prior to the Closing without the prior written consent of the other party, and
any attempted assignment contrary to the provisions hereby shall be null and
void; provided, however, that Buyer may assign its rights and obligations
hereunder, in whole or in part, to any affiliate of Buyer.
-29-
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the date first above written.
COMPOSITECH LTD.
By: /s/ Xxxxxxxxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxxxxxxxx X. Xxxxxxx
Title: President and CEO
THE SHAAR FUND LTD.
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Managing Director
[SEE TAB 2]
COMMON STOCK PURCHASE WARRANTS
[SEE TAB 3]
CERTIFICATE OF DESIGNATION
[SEE TAB 6]
ESCROW INSTRUCTIONS
[SEE TAB 5]
REGISTRATION RIGHTS AGREEMENT
SCHEDULE III.A.1.
OPTIONS AND WARRANTS
SCHEDULE III.A.3.
PREEMPTIVE, SUBSCRIPTION, "CALL" OR SIMILAR RIGHTS
SCHEDULE III.A.4.
SUBSIDIARIES
SCHEDULE III.C.
ISSUANCES AND SALES OF SECURITIES
SCHEDULE III.E.
NON-CONTRAVENTION
SCHEDULE III.K.
LITIGATION
SCHEDULE III.L.
EVENTS OF DEFAULT
SCHEDULE III.O.
RELATED PARTY TRANSACTIONS
SCHEDULE III.Q.
SECURITIES LAW MATTERS
SCHEDULE III.R.
ENVIRONMENTAL MATTERS
SCHEDULE III.T.
ERISA MATTERS
SCHEDULE III.V.
PROPERTY
SCHEDULE III.W.
INTELLECTUAL PROPERTY
SCHEDULE III.X.
CONTRACTS
SCHEDULE III.Y.
REGISTRATION RIGHTS
ANNEX A
FORM OF OPINION
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of __________, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties or conducts business,
except for jurisdictions in which the failure to so qualify would not have a
Material Adverse Effect, and has all requisite corporate power and authority to
own its properties and conduct its business as described in the Commission
Filings.
2. The authorized capital stock of the Company consists of __________
shares of Common Stock, par value $_____ per share (the "Common Stock"), and
__________ shares of Preferred Stock, par value $_____ per share.
3. When delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Documents, the
Securities will be duly authorized and validly issued, fully paid and
nonassessable.
4. The Company has the requisite corporate power and authority to enter
into the Documents and to sell and deliver the Securities as described in the
Documents; each of the Documents has been duly and validly authorized by all
necessary corporate action by the Company; each of the Documents has been duly
and validly executed and delivered by and on behalf of the Company, and is valid
and binding agreement of the Company, enforceable in accordance with its terms,
except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws affecting creditors rights generally.
5. The executive, delivery and performance of the Documents by the Company
and the performance of its obligations thereunder do not and will not constitute
a breach or violation of any of the terms and provisions of, or constitute a
default (or with notice, lapse of time or both would constitute a default) under
or conflict with or violate any provision of (i) the Company's certificate of
incorporation or bylaws, (ii) any indenture, mortgage, deed of trust, agreement
or other instrument known to us to which the Company is a party or by which it
or any of its property is bound, (iii) or, to the best of our knowledge, any
judgment, decree or order of any court or governmental body having jurisdiction
over the Company or any of its property. To the best of our knowledge, no
consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of its properties or
assets is required for the execution, delivery and performance by the Company of
the Documents or the consummation by the Company of the transactions
contemplated thereby.
6. When issued, the Preferred Shares and the Warrants shall be duly
authorized, validly issued, fully paid and nonassessable, and free and clear of
all encumbrances and restrictions, except for restrictions on transfer imposed
by applicable securities laws. The Conversion Shares and Warrant Shares issuable
upon conversion or exercise, respectively, of the Preferred Shares and the
Warrants, respectively, will be duly authorized, validly issued, fully paid and
nonassessable, and free and clear of all encumbrances and restrictions, except
for restrictions on transfer imposed by applicable securities laws.
7. Based on Buyer's representations contained in this Agreement, the offer
and sale of the Preferred Shares and the Warrants are exempt from the
registration requirements of the Securities Act.
8. To the best of our knowledge, other than as described in the Commission
Filings, there are no outstanding options, warrants or other securities
exercisable or convertible into Common Stock of the Company.
9. There is no action, suit, claim, inquiry or investigation pending or, to
the best of our knowledge, threatened by or before any court or public or
governmental authority which, if determined adversely to the Company, would have
a Material Adverse Effect.
10. Neither the Company nor any of its subsidiaries is, or will be after
the consummation of the transactions contemplated by this Agreement and the
other Documents and the use of the proceeds from the sale of the Securities, an
"investment company" or an entity "controlled" by an "investment company," as
such terms are defined in the Investment Company Act of 1940, as amended.
-2-
