SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the date of acceptance set
forth below, is entered into by and between XXXXX XXXXXX MULTIMEDIA COMPANY,
INC., a New York corporation, with headquarters located at 00 X. 00xx Xx., Xxx
Xxxx, XX 00000 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and delivering this
Agreement in accordance with and in reliance upon the exemption from securities
registration afforded, inter alia, by Rule 506 under Regulation D ("Regulation
D") as promulgated by the United States Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "1933 Act"), and/or
Section 4(2) of the 1933 Act; and
WHEREAS, the Buyer wishes to purchase, upon the terms and subject to the
conditions of this Agreement, 6% Convertible Debentures (the "Debentures"), of
the Company which which will be convertible into shares of Common Stock, $.001
par value per share of the Company (the "Common Stock"), upon the terms and
subject to the conditions of the such Convertible Debentures, together with the
Warrants (as defined below) exercisable for the purchase of shares of Common
Stock (the "Warrant Shares"), and subject to acceptance of this Agreement by the
Company;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. Purchase; Certain Definitions. (i) The undersigned hereby agrees to
purchase from the Company the Debentures in the principal amount set forth
on the signature page of this Agreement (the "Initial Debentures"), out of
a total offering of $2,800,000 of such Debentures, and having the terms and
conditions and being in the form attached hereto as Annex I. The purchase
price for the Initial Debentures shall be as set forth on the signature
page hereto and shall be payable in United States Dollars.
(ii) As used herein, the term "Debentures" means the Initial
Debentures and the Additional Debentures (as defined below), unless the
context otherwise requires.
(iii) As used herein, the term "Securities" means the Debentures, the
Warrants
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and the Common Stock issuable upon conversion of the Debentures or the
exercise of the Warrants.
b. Form of Payment. The Buyer shall pay the purchase price for the
Initial Debenture by delivering immediately available good funds in United
States Dollars to the escrow agent (the "Escrow Agent") identified in the
Joint Escrow Instructions attached hereto as Annex II (the "Joint Escrow
Instructions"). No later than the Closing Date or each Additional Closing
Date (as those terms are defined below), as the case may be, but in any
event promptly following payment by the Buyer to the Escrow Agent of the
purchase price of the relevant Debentures, the Company shall deliver the
relevant Debentures duly executed on behalf of the Company to the Escrow
Agent. By signing this Agreement, the Buyer and the Company, and subject to
acceptance by the Escrow Agent, each agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all
of the provisions of which are incorporated herein by this reference as if
set forth in full.
c. Method of Payment. Payment into escrow of the purchase price for
the Initial Debentures shall be made by wire transfer of funds to:
Bank of New York
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
ABA# 000000000
For credit to the account of Xxxxxxx & Prager, Esqs.
Account No.: 637 - 0000000
Not later than 1:00 p.m., New York time, on the date which is two (2) New
York Stock Exchange trading days after the Company shall have accepted this
Agreement and returned a signed counterpart of this Agreement to the Escrow
Agent by facsimile, the Buyer shall deposit with the Escrow Agent the
aggregate purchase price for the Initial Debentures, in currently available
funds. Time is of the essence with respect to such payment, and failure by
the Buyer to make such payment, shall allow the Company to cancel this
Agreement.
d. Escrow Property. The purchase price and the Debentures delivered to
the Escrow Agent as contemplated by Sections 1(b) and (c) hereof are
referred to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with, the
Company as follows:
2
a. Without limiting Buyer's right to sell the Common Stock pursuant to
the Registration Statement (as that term is defined in the Registration
Rights Agreement defined below), the Buyer is purchasing the Debentures and
the Warrants and will be acquiring the shares of Common Stock issuable upon
conversion of the Debentures (the "Converted Shares") and the Warrant
Shares for its own account for investment only and not with a view towards
the public sale or distribution thereof and not with a view to or for sale
in connection with any distribution thereof.
b. The Buyer is (i) an "accredited investor" as that term is defined
in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the
kind described in this Agreement and the related documents, (iii) able, by
reason of the business and financial experience of its officers (if an
entity) and professional advisors (who are not affiliated with or
compensated in any way by the Company or any of its affiliates or selling
agents), to protect its own interests in connection with the transactions
described in this Agreement, and the related documents, and (iv) able to
afford the entire loss of its investment in the Securities.
c. All subsequent offers and sales of the Debenture and the shares of
Common Stock representing the Converted Shares and the Warrant Shares (such
Common Stock sometimes referred to as the "Shares") by the Buyer shall be
made pursuant to registration of the Shares under the 1933 Act or pursuant
to an exemption from registration.
d. The Buyer understands that the Debentures are being offered and
sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that
the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order
to determine the availability of such exemptions and the eligibility of the
Buyer to acquire the Debentures.
e. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Debentures and the
offer of the Shares which have been requested by the Buyer, including Annex
V hereto. The Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality
of the foregoing, the Buyer has also had the opportunity to obtain and to
review the Company's (1) Annual Report on Form 10-K SB for the fiscal year
ended December 31, 1996, (2) Quarterly Reports on Form 10-QSB for the
fiscal quarters ended March 31, 1997, June 30, 1997 and September 30, 1997,
and (3) Forms 8-K, dated February 5, 1997, April 4, 1997, November 3, 1997
and November 18, 1997 (the "Company's SEC Documents").
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
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g. The Buyer understands that no United States federal or state agency
or any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities.
h. This Agreement has been duly and validly authorized, executed and
delivered on behalf of the Buyer and is a valid and binding agreement of
the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium and other similar laws affecting the enforcement of
creditors' rights generally.
i. Notwithstanding the provisions hereof or of the Debenture, in no
event (except (i) with respect to an automatic conversion, if any, of a
Debenture as provided in the Debentures and (ii) if the Company is in
default under any Debenture or any of the Transaction Agreements, as
defined below) shall the holder be entitled to convert any Debenture to the
extent that, after such conversion, the sum of (1) the number of shares of
Common Stock beneficially owned by the Buyer and its affiliates (other than
shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Debenture), and (2) the number
of shares of Common Stock issuable upon the conversion of the Debenture
with respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Buyer and its affiliates of
more than 4.99% of the outstanding shares of Common Stock. For purposes of
the proviso to the immediately preceding sentence, beneficial ownership
shall be determined in accordance with Section 13(d) of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), except as otherwise
provided in clause (1) of such proviso.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. Concerning the Debentures and the Shares. There are no preemptive
rights of any stockholder of the Company, as such, to acquire the
Debentures, the Warrants or the Shares.
b. Reporting Company Status. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of New York and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The Company
is duly qualified as a foreign corporation to do business and is in good
standing in each jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary, other than those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the business, operations or condition (financial or
otherwise) of the Company. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act, and the Common Stock is listed and
traded on The
4
NASDAQ/SmallCap Market and The Boston Stock Exchange. The Company has
received no notice, either oral or written, with respect to the continued
eligibility of the Common Stock for such listing, and the Company has
maintained all requirements for the continuation of such listing.
c. Authorized Shares. The Company has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the conversion of
the Debenture and to issue the Warrant Shares. The Converted Shares and the
Warrant Shares have been duly authorized and, when issued upon conversion
of, or as interest on, the Debenture or upon exercise of the Warrants, each
in accordance with its respective terms, will be duly and validly issued,
fully paid and non-assessable and will not subject the holder thereof to
personal liability by reason of being such holder.
d. Securities Purchase Agreement; Registration Rights Agreement and
Stock. This Agreement and the Registration Rights Agreement, the form of
which is attached hereto as Annex IV (the "Registration Rights Agreement"),
and the transactions contemplated thereby, have been duly and validly
authorized by the Company, this Agreement has been duly executed and
delivered by the Company and this Agreement is, and the Debentures, the
Warrants and the Registration Rights Agreement, when executed and delivered
by the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject as to
enforceability to general principles of equity and to bankruptcy,
insolvency, moratorium, and other similar laws affecting the enforcement of
creditors' rights generally.
e. Non-contravention. Except as provided in Annex V hereto, the
execution and delivery of this Agreement and the Registration Rights
Agreement by the Company, the issuance of the Securities, and the
consummation by the Company of the other transactions contemplated by this
Agreement, the Registration Rights Agreement, and the Debenture do not and
will not conflict with or result in a breach by the Company of any of the
terms or provisions of, or constitute a default under (i) the articles of
incorporation or by-laws of the Company, each as currently in effect, (ii)
any indenture, mortgage, deed of trust, or other material agreement or
instrument to which the Company is a party or by which it or any of its
properties or assets are bound, including any listing agreement for the
Common Stock except as herein set forth, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree,
judgment, or order of any court, United States federal or state regulatory
body, administrative agency, or other governmental body having jurisdiction
over the Company or any of its properties or assets, or (iv) the Company's
listing agreement for its Common Stock, except such conflict, breach or
default which would not have a material adverse effect on the Company or on
the transactions contemplated herein.
f. Approvals. Except as provided in Annex V hereto, no authorization,
approval or consent of any court, governmental body, regulatory agency,
self-regulatory organization, or stock exchange or market or the
Stockholders of the Company is required to be obtained by the Company for
the issuance and sale of the Securities to the Buyer as contemplated by
this Agreement, except such authorizations, approvals and consents that
have been obtained.
5
g. SEC Filings. None of the Company's SEC Documents contained, at the
time they were filed, any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary to make
the statements made therein in light of the circumstances under which they
were made, not misleading. Except as set forth on Annex V hereto, the
Company has since September 1, 1996 timely filed all requisite forms,
reports and exhibits thereto with the SEC.
h. Absence of Certain Changes. Since January 1, 1997, there has been
no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise), or
results of operations of the Company, except as disclosed in Annex V or in
the Company's SEC Documents. Since January 1, 1997, except as provided in
the Company's SEC Documents, the Company has not (i) incurred or become
subject to any material liabilities (absolute or contingent) except
liabilities incurred in the ordinary course of business consistent with
past practices; (ii) discharged or satisfied any material lien or
encumbrance or paid any material obligation or liability (absolute or
contingent), other than current liabilities paid in the ordinary course of
business consistent with past practices; (iii) declared or made any payment
or distribution of cash or other property to stockholders with respect to
its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims,
except in the ordinary course of business consistent with past practices;
(v) suffered any substantial losses or waived any rights of material value,
whether or not in the ordinary course of business, or suffered the loss of
any material amount of existing business; (vi) made any changes in employee
compensation, except in the ordinary course of business consistent with
past practices; or (vii) experienced any material problems with labor or
management in connection with the terms and conditions of their employment.
i. Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally or as disclosed
in the Company's SEC Documents), that has not been disclosed in writing to
the Buyer that (i) would reasonably be expected to have a material adverse
effect on the business or financial condition of the Company or (ii) would
reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement or any of
the agreements contemplated hereby (collectively, including this Agreement,
the "Transaction Agreements").
j. Absence of Litigation. Except as set forth in Annex V hereto, and
in the Company's SEC Documents, which the Buyer has reviewed, there is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company,
threatened against or affecting the Company, wherein an unfavorable
decision, ruling or finding would have a material adverse effect on the
properties, business or financial condition, or results of operation of the
Company and its subsidiaries taken as a whole or the transactions
contemplated by any of the Transaction Agreements or which would adversely
affect the validity or enforceability of, or the authority or ability of
the Company to perform its obligations under, any of the Transaction
Agreements.
6
k. Absence of Events of Default. Except as set forth in Annex V hereto
and Section 3(e) hereof, no Event of Default (or its equivalent term), as
defined in the respective agreement to which the Company is a party, and no
event which, with the giving of notice or the passage of time or both,
would become an Event of Default (or its equivalent term) (as so defined in
such agreement), has occurred and is continuing, which would have a
material adverse effect on the Company's financial condition or results of
operations.
l. Prior Issues. Except as set forth in Annex V, during the twelve
(12) months preceding the date hereof, the Company has not issued any
convertible securities. The presently outstanding unconverted principal
amount of each such issuance as at November 25, 1997 are set forth in Annex
V.
m. No Undisclosed Liabilities or Events. Except as set forth in Annex
V hereto, the Company has no liabilities or obligations other than those
disclosed in the Company's SEC Documents or those incurred in the ordinary
course of the Company's business since January 1, 1997, and which
individually or in the aggregate, do not or would not have a material
adverse effect on the properties, business, condition (financial or
otherwise), or results of operations of the Company. No event or
circumstances has occurred or exists with respect to the Company or its
properties, business, condition (financial or otherwise), or results of
operations, which, under applicable law, rule or regulation, requires
public disclosure or announcement prior to the date hereof by the Company
but which has not been so publicly announced or disclosed.
n. No Default. The Company is not in default in the performance or
observance of any material obligation, agreement, covenant or condition
contained in any material indenture, mortgage, deed of trust or other
material instrument or agreement to which it is a party or by which it or
its property is bound.
o. No Integrated Offering. Neither the Company nor any of its
affiliates nor any person acting on its or their behalf has, directly or
indirectly, at any time since September 1, 1996, made any offer or sales of
any security or solicited any offers to buy any security under
circumstances that would eliminate the availability of the exemption from
registration under Rule 506 of Regulation D in connection with the offer
and sale of the Securities as contemplated hereby.
p. Dilution. The number of Shares issuable upon conversion of the
Debentures and the exercise of the Warrants may increase substantially in
certain circumstances, including, but not necessarily limited to, the
circumstance wherein the trading price of the Common Stock declines prior
to the conversion of the Debentures. The Company's executive officers and
directors have studied and fully understand the nature of the Securities
being sold hereby and recognize that they have a potential dilutive effect.
The board of directors of the Company has concluded, in its good faith
business judgment, that such issuance is in the best interests of the
Company. The Company specifically acknowledges that
7
its obligation to issue the Shares upon conversion of the Debentures and
upon exercise of the Warrants is binding upon the Company and enforceable
regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. Transfer Restrictions. The Buyer acknowledges that (1) the Debentures
have not been and are not being registered under the provisions of the 1933 Act
and, except as provided in the Registration Rights Agreement, the Shares have
not been and are not being registered under the 1933 Act, and may not be
transferred unless (A) subsequently registered thereunder or (B) the Buyer shall
have delivered to the Company and opinion of counsel, reasonably satisfactory in
form, scope and substance to the Company, to the effect that the Securities to
be sold or transferred may be sold or transferred pursuant to an exemption from
such registration; (2) any sale of the Securities made in reliance on Rule 144
promulgated under the 1933 Act may be made only in accordance with the terms of
said Rule and further, if said Rule is not applicable, any resale of such
Securities under circumstances in which the seller, or the person through whom
the sale is made, may be deemed to be an underwriter, as that term is used in
the 1933 Act, may require compliance with some other exemption under the 1933
Act or the rules and regulations of the SEC thereunder; and (3) neither the
Company nor any other person is under any obligation to register the Securities
(other than pursuant to the Registration Rights Agreement) under the 1933 Act or
to comply with the terms and conditions of any exemption thereunder.
b. Restrictive Legend. The Buyer acknowledges and agrees that the
Debentures and the Warrants, and, until such time as the Common Stock has been
registered under the 1933 Act as contemplated by the Registration Rights
Agreement and sold in accordance with an effective Registration Statement,
certificates and other instruments representing any of the Securities shall bear
a restrictive legend in substantially the following form (and a stop-transfer
order may be placed against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD
OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
c. Registration Rights Agreement. The parties hereto agree to enter into
the Registration Rights Agreement on or before the Closing Date.
d. Filings. The Company undertakes and agrees to make all necessary
8
filings in connection with the sale of the Debentures to the Buyer under any
United States laws and regulations applicable to the Company, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
e. Reporting Status. So long as the Buyer beneficially owns any of the
Debentures, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination. The Company will take all reasonable action under its control to
continue the listing and trading of its Common Stock on The NASDAQ SmallCap
Market and will comply in all material respects with the Company's reporting,
filing and other obligations under the by-laws or rules of the National
Association of Securities Dealers, Inc. ("NASD") or The NASDAQ SmallCap Market.
f. Use of Proceeds. The Company will use the proceeds from the sale of the
Debenture (excluding amounts paid by the Company for legal fees, finder's fees
and escrow fees in connection with the sale of the Debentures) for internal
working capital purposes and for acquisitions of independent third parties, and
shall not, directly or indirectly, use such proceeds for any loan to or in any
other corporation, partnership, enterprise or other person, for redemption of
any previously issued securities of the Company or for investment in or
repayment of any obligation to any corporation, partnership, enterprise or other
person affiliated with the Company immediately prior to the execution and
delivery of this Agreement.
g. Future Purchases. (i) The Company unconditionally and irrevocably
agrees, at the option of the Buyer, to issue up to an additional $1,500,000
principal amount of Debentures (the "Additional Debentures") in one tranche (the
"Additional Tranche"), on the terms and subject to the conditions hereinafter
provided.
(ii) The closing for the Additional Tranche shall occur on a date (the
"Additional Closing Date"), which date shall not be later than the forty-five
(45) days after the Effective Date (as defined below) or as otherwise mutually
agreed upon by the Company and the Buyer. The closing of the Additional Tranche
shall be conducted upon the same terms and conditions as those applicable to the
Initial Debentures.
(iii) On the Additional Closing Date, (A) the Registration Statement
required to be filed under the Registration Rights Agreement shall continue to
be effective, (B) the representations and warranties of the Company contained in
Section 3 hereof shall be true and correct in all material respects (and the
Company's issuance of the Additional Debenture shall constitute the Company's
making each such representation and warranty as of such date), and (C) the
Market Price of the Common Stock (as defined below) for the five (5) trading
days immediately preceding the Additional Closing Date shall exceed $2.30 per
share, (D) the dollar volume for trading for the Common Stock for each of the
ten (10) trading days preceding the Additional Closing Date shall have equaled
or exceeded $120,000.00, and (E)
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there shall have been no material adverse changes (financial or otherwise) in
the business or conditions of the Company from the Closing Date through and
including the Additional Closing Date (and the Company's issuance of the
Additional Debentures shall constitute the Company's making such representation
and warranty as of such date).
(iv) The term "Market Price of the Common Stock" means, the closing bid
price of the Common Stock as reported, at the option of the Buyer, by Bloomberg,
LP or the National Association of Securities Dealers.
h. Certain Agreements. (i) The Company covenants and agrees that it will
not, without the prior written consent of the Buyer, enter into any subsequent
or further offer or sale of Common Stock or securities convertible into Common
Stock with any third party until the date which is the later of (i) one hundred
eighty (180) days after the Closing Date or (ii) sixty (60) days after the
Additional Closing Date.
(ii) The provisions of subparagraph (h)(i) will not apply to (x) the
issuance of securities (other than for cash) in connection with a merger,
consolidation, sale of assets, disposition, (y) the exchange of the capital
stock for assets, stock or other joint venture interests, or (z) the issuance of
securities specified in item 4(h) of Annex V hereto; provided, however, that any
action contemplated under clauses (x) and (y) of this subparagraph (h)(ii) is
subject to the condition that registration rights, if any, in connection with
such action shall not require the filing of a Registration Statement in respect
of such stock prior to sixty (60) days after the Effective Date.
(iii) The term "Effective Date" means the effective date of the
Registration Statement covering the Registrable Securities (as defined in the
Registration Rights Agreement).
i. Available Shares. The Company shall have at all times authorized and
reserved for issuance, free from preemptive rights, shares of Common Stock
sufficient to yield one hundred fifty percent (150%) of the number of shares of
Common Stock issuable (i) at conversion as may be required to satisfy the
conversion rights of the Buyer pursuant to the terms and conditions of the
Debenture and (ii)upon exercise as may be required to satisfy the exercise
rights of the Buyer pursuant to the terms and conditions of the Warrants
j. Warrants. The Company agrees to issue to the Buyer on each of the
Closing Date and the Additional Closing Date transferable, divisible warrants
with cashless exercise rights (the "Warrants") for the purchase of 100,000
shares of Common Stock for each $1,000,000 principal amount of the Debentures
funded on such date (pro rata for amounts less than $1,000,000) . The Warrants
shall bear an exercise price equal to a percentage of the closing bid price of
the Common Stock on the Closing Date in accordance with the following schedule:
At Price (as Percentage of
Amount of Warrants Exercisable Closing Date Closing Bid Price)
------------------------------ -------------------------------
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25% of the Warrants 100%
25% of the Warrants 115%
25% of the Warrants 120%
25% of the Warrants 135%
The Warrants shall be exercisable immediately and for a period of five (5) years
thereafter and shall be in the form annexed hereto as Annex VI, together with
registration rights as provided in the Registration Rights Agreement.
k. Limitation on Issuance of Shares. The Company may be limited in the
number of shares of Common Stock it may issue by the applicable rules and
regulations of the principal securities market on which the Common Stock is
listed or traded ("Cap Regulations"). Without limiting the other provisions
thereof, the Debentures shall provide that (i) the Company will take all steps
reasonably necessary to be in a position to issue shares of Common Stock on
conversion of the Debentures without violating the Cap Regulations and (ii) if,
despite taking such steps, the Company still can not issue such shares of Common
Stock without violating the Cap Regulations, the holder of a Debenture which can
not be converted as result of the Cap Regulations (each such share, an
"Unconverted Debenture") shall have the option, exercisable in such holders'
sole and absolute discretion, to elect either of the following remedies:
(x) require the Company to issue shares of Common Stock in
accordance with such holder's notice of conversion at a
conversion purchase price equal to the average of the closing bid
price per share of Common Stock for any five (5) consecutive
trading days (subject to certain equitable adjustments for
certain events occurring during such period) during the sixty
(60) trading days immediately preceding the date of notice of
conversion; or
(y) require the Company to redeem each Unconverted Debenture
for an amount (the "Redemption Amount") equal to:
V x M
-----
CP
where:
"V" means the principal of an Unconverted Debenture plus any
accrued but unpaid interest thereon;
"CP" means the conversion price in effect on the date of
redemption (the "Redemption Date") specified in the notice from
the holder of the Unconverted Debentures electing this remedy;
and
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"M" means the highest closing bid price per share of the
Common Stock during the period beginning on the Redemption Date
and ending on the date of payment of the Redemption Amount.
The Debentures shall contain provisions substantially consistent with the above
terms, with such additional provisions as may be consented to by the Buyer. The
provisions of this paragraph are not intended to limit the scope of the
provisions otherwise included in the Debentures.
l. Hedging Transactions. The Company understands that the Buyer may be a
so-called "hedge" fund, and the Company hereby expressly agrees that the Buyer
shall not in any way be prohibited or restricted from any purchases or sales of
any securities or other instruments of, or related to, the Company or any of its
securities, including, but not necessarily limited to, puts, calls, futures
contracts, short sales and hedging and arbitrage transactions. The Buyer
acknowledges that such purchases, sales and other transactions may be subject to
various federal and state securities laws and agrees to comply with all such
applicable securities laws.
5. TRANSFER AGENT INSTRUCTIONS.
Promptly following the delivery by the Buyer of the aggregate purchase
price for the Initial Debentures in accordance with Section 1(c) hereof, the
Company will irrevocably instruct its transfer agent to issue Common Stock from
time to time upon conversion of the Debentures in such amounts as specified from
time to time by the Company to the transfer agent, bearing the restrictive
legend specified in Section 4(b) of this Agreement prior to registration of the
Shares under the 1933 Act, registered in the name of the Buyer or its nominee
and in such denominations to be specified by the Buyer in connection with each
conversion of the Debenture. The Company warrants that no instruction other than
such instructions referred to in this Section 5 and stop transfer instructions
to give effect to Section 4(a) hereof prior to registration and sale of the
Shares under the 1933 Act will be given by the Company to the transfer agent and
that the Shares shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement, the Registration
Rights Agreement, and applicable law. Nothing in this Section shall affect in
any way the Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of the Securities. If the Buyer provides the Company
with an opinion of counsel reasonably satisfactory to the Company that
registration of a resale by the Buyer of any of the Securities in accordance
with clause (1)(B) of Section 4(a) of this Agreement is not required under the
1933 Act, the Company shall (except as provided in clause (2) of Section 4(a) of
this Agreement) permit the transfer of the Securities and, in the case of the
Converted Shares or the Warrant Shares, as the case may be, promptly instruct
the Company's transfer agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the Buyer.
c. (i) The Company will permit the Buyer to exercise its right to convert
the
12
Debenture by telecopying an executed and completed Notice of Conversion to the
Company and delivering within five (5) business days thereafter, the original
Notice of Conversion and the Debentures being converted to the Company by
express courier, with a copy to the transfer agent.
(ii) The term "Conversion Date" means, with respect to any conversion
elected by the holder of the Debentures, the date specified in the Notice of
Conversion, provided the copy of the Notice of Conversion is telecopied to or
otherwise delivered to the Company in accordance with the provisions hereof so
that is received by the Company on or before such specified date. The Conversion
Date for the mandatory conversion at maturity shall be the Maturity Date of the
Debenture.
(iii) The Company will transmit the certificates representing the Converted
Shares issuable upon conversion of any Debentures (together with Debentures not
being so converted) to the Buyer via express courier, by electronic transfer or
otherwise, within three (3) business days after receipt by the Company of the
original Notice of Conversion and the Debentures being converted (the "Delivery
Date").
d. The Company understands that a delay in the issuance of the Shares of
Common Stock beyond the Delivery Date could result in economic loss to the
Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer for late issuance of Shares upon Conversion in
accordance with the following schedule (where "No. Business Days Late" is
defined as the number of business days beyond five (5) business days from
Delivery Date:
Late Payment For Each $10,000
of Debenture Principal
No. Business Days Late Amount Being Converted
---------------------- -----------------------------
1 $100
2 $200
3 $300
4 $400
5 $500
6 $600
7 $700
8 $800
9 $900
10 $1,000
>10 $1,000 +$200 for each Business
Day Late beyond 10 days
The Company shall pay any payments incurred under this Section in immediately
available funds upon demand. Nothing herein shall limit the Buyer's right to
pursue actual damages for
13
the Company's failure to issue and deliver the Common Stock to the Buyer.
Furthermore, in addition to any other remedies which may be available to the
Buyer, in the event that the Company fails for any reason to effect delivery of
such shares of Common Stock within five (5) business days after the Delivery
Date, the Buyer will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company whereupon the Company and the
Buyer shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion.
e. If, by the relevant Delivery Date, the Company fails for any reason to
deliver the Shares to be issued upon conversion of a Debenture and after such
Delivery Date, the holder of the Debenture being converted (a "Converting
Holder") purchases, in an open market transaction or otherwise, shares of Common
Stock (the "Covering Shares") in order to make delivery in satisfaction of a
sale of Common Stock by the Converting Holder (the "Sold Shares"), which
delivery such Converting Holder anticipated to make using the Shares to be
issued upon such conversion (a "Buy-In"), the Company shall pay to the
Converting Holder, in addition to all other amounts contemplated in other
provisions of the Transaction Agreements, and not in lieu thereof, the Buy-In
Adjustment Amount (as defined below). The "Buy-In Adjustment Amount" is the
amount equal to the excess, if any, of (x) the Converting Holder's total
purchase price (including brokerage commissions, if any) for the Covering Shares
over (y) the net proceeds (after brokerage commissions, if any) received by the
Converting Holder from the sale of the Sold Shares. The Company shall pay the
Buy-In Adjustment Amount to the Company in immediately available funds
immediately upon demand by the Converting Holder. By way of illustration and not
in limitation of the foregoing, if the Converting Holder purchases shares of
Common Stock having a total purchase price (including brokerage commissions) of
$11,000 to cover a Buy-In with respect to shares of Common Stock it sold for net
proceeds of $10,000, the Buy-In Adjustment Amount which Company will be required
to pay to the Converting Holder will be $1,000.
f. In lieu of delivering physical certificates representing the Common
Stock issuable upon conversion, provided the Company's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer program, upon request of the Buyer and its compliance with the
provisions contained in this paragraph, so long as the certificates therefor do
not bear a legend and the Buyer thereof is not obligated to return such
certificate for the placement of a legend thereon, the Company shall use its
best efforts to cause its transfer agent to electronically transmit the Common
Stock issuable upon conversion to the Buyer by crediting the account of Buyer's
Prime Broker with DTC through its Deposit Withdrawal Agent Commission system.
6. DELIVERY INSTRUCTIONS.
The Initial Debenture or the Additional Debenture, as the case may be,
shall be delivered by the Company to the Escrow Agent pursuant to Section 1(b)
hereof, on a delivery against payment basis, no later than on the Closing Date
and on the Additional Closing Date, respectively.
14
7. CLOSING DATE.
(i) The closing of the issuance and sale of the Initial Debenture shall
occur on the date (the "Closing Date") which is the first NYSE trading day after
the fulfillment or waiver of all closing conditions pursuant to Sections 8 and 9
hereof or such other date and time as is mutually agreed upon by the Company and
the Buyer. The date of the Additional Closing Date shall be the date specified
by either party upon at least five (5) business days' advance notice to the
other party; provided, however, that it shall be a condition of the Additional
Closing Date that (i) the conditions of Section 4(g) be satisfied, and (ii) each
of the conditions contemplated by Sections 8 and 9 hereof shall have been
satisfied or waived on or before such date.
(ii) Each closing of the purchase and issuance of Debenture shall occur on
the Closing Date or the Additional Closing Date, as the case may be, at the
offices of the Escrow Agent and shall take place no later than 12:00 Noon, New
York time, on such day or such other time as is mutually agreed upon by the
Company and the Buyer.
(iii) Notwithstanding anything to the contrary contained herein, the Escrow
Agent will be authorized to release the Escrow Property only upon satisfaction
of the conditions set forth in Sections 8 and 9 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell the Debentures
to the Buyer pursuant to this Agreement on the Closing Date and on the
Additional Closing Date is conditioned upon:
a. The execution and delivery of this Agreement by the Buyer;
b. Delivery by the Buyer to the Escrow Agent of good funds as payment
in full of an amount equal to the purchase price for the relevant
Debentures in accordance with this Agreement;
c. The accuracy on the Closing Date or the Additional Closing Date, as
the case may be, of the representations and warranties of the Buyer
contained in this Agreement, each as if made on such date, and the
performance by the Buyer on or before such date of all covenants and
agreements of the Buyer required to be performed on or before such date;
and
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or
requiring any consent or approval which shall not have been obtained.
15
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to purchase the
Debentures on the Closing Date and, subject to the other provisions of this
Agreement, on the Additional Closing Date is conditioned upon:
a. The execution and delivery of this Agreement and the Registration
Rights Agreement by the Company;
b. Delivery by the Company to the Escrow Agent of the relevant
Debentures in accordance with this Agreement;
c. The accuracy in all material respects on the Closing Date or the
Additional Closing Date, as the case may be, of the representations and
warranties of the Company contained in this Agreement. each as if made on
such date, and the performance by the Company on or before such date of all
covenants and agreements of the Company required to be performed on or
before such date;
d. On the Closing Date or Additional Closing Date, as the case may be,
the Registration Rights Agreement shall be in full force and effect and the
Company shall not be in default thereunder; and
e. On the Closing Date or the Additional Closing Date, as the case may
be, the Buyer shall have received an opinion of counsel for the Company,
dated the Closing Date or the Additional Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer, substantially to the effect
set forth in Annex III attached hereto.
10. GOVERNING LAW: MISCELLANEOUS.
a. This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Each of the parties consents to the 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 hereby waives, to the maximum extent
permitted by law, any objection, including any objection based on forum non
conveniens, to the bringing of any such proceeding in such jurisdictions.
b. A facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto.
c. This Agreement may be signed in one or more counterparts, each of which
shall be deemed an original.
d. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement.
16
e. If any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect the
validity or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction.
f. This Agreement may be amended only by an instrument in writing signed by
the party to be charged with enforcement thereof.
g. This Agreement supersedes all prior agreements and understandings among
the parties hereto with respect to the subject matter hereof.
11. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed effectively
given on the earliest of
(i) the date delivered, if delivered by personal delivery as
against written receipt therefor or by confirmed facsimile
transmission,
(ii) the seventh business day after deposit, postage prepaid, in
the United States Postal Service by registered or certified mail,
or
(iii) the third business day after mailing by international
express courier, with delivery costs and fees prepaid,
in each case, addressed to each of the other parties thereunto entitled at the
following addresses (or at such other addresses as such party may designate by
ten (10) days' advance written notice similarly given to each of the other
parties hereto):
COMPANY: XXXXX XXXXXX MULTIMEDIA COMPANY, INC.
00 X. 00xx Xx.
Xxx Xxxx, XX 00000
ATTN: Xxxxx Xxxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxx Xxxxxxx, PC
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
ATTN: Xxxxxx X. Xxxxxxxx, Esq.
17
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
BUYER: At the address set forth on the signature page of this Agreement.
ESCROW AGENT: Xxxxxxx & Xxxxxx, Esqs.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier No. (000) 000-0000
Telephone No.: (000) 000-0000
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's and the
Buyer's representations and warranties herein shall survive the execution and
delivery of this Agreement and the delivery of the Debentures and the Purchase
Price, and shall inure to the benefit of the Buyer and the Company and their
respective successors and assigns.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK.]
18
IN WITNESS WHEREOF, this Agreement has been duly executed by the Buyer or
one of its officers thereunto duly authorized as of the date set forth below.
AGGREGATE INITIAL PURCHASE PRICE OF SUCH DEBENTURES: $ 1,300,000
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf this 8th day of December, 1997.
Bushinghall Limited
-------------------------------- ------------------------------------
Address Printed Name of Subscriber
--------------------------------
By: /s/ Xxxxx Xxxx
--------------------------------
Telecopier No. _________________ (Signature of Authorized Person)
------------------------------------
-------------------------------- Printed Name and Title
Jurisdiction of Incorporation
or Organization
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
XXXXX XXXXXX MULTIMEDIA COMPANY, INC.
By: /s/ Xxxxx Xxxxxxx
----------------------------
Title: Chief Financial Officer
-------------------------
Date: December 8, 1997
-------------------------
