SECURITIES PURCHASE AGREEMENT
BETWEEN
XXXXXXXXXXX.XXX INCORPORATED
("ISSUER")
AND
X-XXXX.XXX, INC. D/B/A HOMEMARK
("INVESTOR")
INITIAL CLOSING:
---------------
July 11, 2001
SUBSEQUENT CLOSINGS:
-------------------
August 27, 2001
September 28, 2001
October 29, 2001
November 28, 2001
December 28, 2001
January 29, 2002
February 28, 2002
March 28, 2002
1
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (the "Agreement") is made as of June
6, 2001, by and among Xxxxxxxxxxx.xxx Incorporated, a Nevada corporation (the
"Company"), with its principal office at 0000 X. XxXxxxxx Xxxx., Xxxxx X-00,
Xxxx, Xxxxxx 00000, and X-Xxxx.xxx, Inc. d/b/a Homemark, a Texas corporation,
with its principal office at 00000 Xxxxxxxxx Xxxx, Xxxxx X, Xxxxxx, Xxxxx 00000
(the "Investor").
SECTION 1
AUTHORIZATION AND SALE OF STOCK
1.1 AUTHORIZATION. The Company has authorized the sale and issuance of
up to 5,000,000 shares of its Series A Preferred Stock ("Series A Preferred"),
each to have the rights, restrictions, privileges and preferences described as
follows: the Series A Preferred will pay a cumulative annual dividend of 15% in
cash or common stock based on $4.00 per share as declared by the board of
directors; a conversion ratio of 20 shares of HomeSeekers Rule 144 restricted
common stock for each share of Series A Preferred; each share of Series A
Preferred shall be entitled to the current voting rights of 20 shares of
HomeSeekers common stock; that Homemark will contractually agree not to convert
the Series A Preferred to common stock for a period of 24 months following
closing; that upon conversion to common stock Homemark will honor the resale
limitations imposed by Rule 144; and that HomeSeekers may redeem the Series A
Preferred at any time prior to conversion by Homemark at a price of $4.00 per
share in cash. The Certificate of Designation for the Series A Preferred Stock
will provide that conversion is conditioned upon the availability of authorized
shares of Common Stock.
1.2 SALE OF STOCK. Subject to the terms and conditions hereof, the
Company will issue and sell to the Investor in nine (9) separate and distinct
transactions, and the Investor will buy from the Company an aggregate of
5,000,000 shares (the "Shares") of Series A Preferred at a cash purchase price
of $4.00 per share for an aggregate price of $20,000,000.
1.3 ADDITIONAL CONSIDERATION. In addition to the cash purchase price
outlined in 1.2 above, Investor will also assign to and contribute to the
capital of HomeSeekers, Eighty Million And No/100s Dollars ($80,000,000.00) of a
monetary equivalent of prepaid advertising owned by Homemark in Xxxxxx Homes
publications that translates into an additional $16.00 per share for each share
of Series A Preferred.
2
1.4 NON-CONTINGENT BRIDGE LOAN. Upon the execution of this Agreement,
Homemark agrees to enter into a Loan Agreement providing for a non-contingent
loan of up to $1,000,000 to be advanced to Homeseekers prior to Closing (as
defined below) in two (2) separate advances of $500,000.00 each on June 6, 2001
and June 19, 2001; with maturity dates of September 30, 2001 and December 31,
2001 respectively. Other terms and conditions of this Loan Agreement, including
collateral requirements and loan documentation will be set forth in more detail
in the Loan Agreement of even date, the terms of which are hereby incorporated
herein by reference in their entirety.
1.5 CONTINGENT LOAN. Contemporaneously with and contingent upon
Closing, Homemark agrees to enter into a Second Loan Agreement providing for a
loan of up to $1,000,000 to be advanced to Homeseekers on or about July 11, 2001
or shortly after the annual shareholders meeting to be called for that month.
The maturity date of this loan will be December 31, 2001. Other terms and
conditions of this Second Loan Agreement, including collateral requirements and
loan documentation will be set forth in more detail in a Second Loan Agreement,
the terms of which are hereby incorporated herein by reference in their
entirety.
SECTION 2
CLOSING DATE; DELIVERY
2.1 CLOSING DATE. The initial closing of the purchase and sale of
500,000 shares of the Series A Preferred hereunder (the "Closing") shall be held
at 3:00 p.m. on July 11, 2001 or on such later date or dates as the Company and
the Investor may agree to (the date of such Closing being referred to as the
"Closing Date"). The place of the Closing (including the place of delivery to
the Investor by the Company of the certificates evidencing all shares of Series
A Preferred being purchased and the place of payment to the Company by the
Investor of the purchase price therefor) shall be at the offices of the Company
at 0000 X. XxXxxxxx Xxxx., Xxxxx X-00, Xxxx, Xxxxxx 00000, or such other place
as the Investors and the Company may mutually agree. The date of any closing of
the transactions contemplated by this Agreement is sometimes also referred to
herein as the "Closing Date."
2.2 SUBSEQUENT CLOSINGS. The Company and Investor have agreed to
provide for deferred closings hereunder (the "Subsequent Closings"), to be
held at the offices of the Company, on August 27, 2001 for 750,000 shares of
Series A Preferred at a purchase price of $3,000,000 at $4.00 per share;
September 28, 2001 for 1,000,000 shares of Series A Preferred at a purchase
price of $4,000,000 at $4.00 per share; October 29, 2001 for 1,000,000 shares
of Series A Preferred at a purchase price of $4,000,000 at $4.00 per share;
November 28, 2001 for 350,000 shares of Series A Preferred at a purchase
price of $1,400,000 at $4.00 per share; December 28, 2001 for 350,000 shares
of Series A Preferred at a purchase price of $1,400,000 at $4.00 per share;
January 29, 2002 for 350,000 shares of Series A Preferred at a purchase price
of $1,400,000 at $4.00
3
per share share; February 28, 2002 for 350,000 shares of Series A Preferred
at a purchase price of $1,400,000 at $4.00 per share; and March 28, 2002 for
350,000 shares of Series A Preferred at a purchase price of $1,400,000 at
$4.00 per share, or at such time and dates as the Company and Investor may
mutually determine (the date of such Subsequent Closings being referred to as
the "Subsequent Closing Dates"). The entities or persons entitled to purchase
shares of Series A Preferred pursuant to this Agreement will be limited to
those individuals and entities who, based on their reputations, experience
and contacts within the Company's business, the Board of Directors
unanimously believes can contribute to the success of the Company (the
"Friends of the Company"). The Closing(s) for the Friends of the Company will
take place as promptly as possible following the initial Closing hereunder,
and according to the schedule outlined herein. The number of shares of Series
A Preferred which each such Friend of the Company shall be entitled to
purchase shall be determined by this Agreement, but in no event shall the
total number of shares of Series A Preferred sold pursuant to this Agreement
be more than 5,000,000. Upon completion of each Subsequent Closing, if any,
all additional purchasers of shares of Series A Preferred shall be considered
"Investor(s)" within the meaning of this Agreement.
2.3 DELIVERY. At the Closing and any Subsequent Closing, the Company
will deliver to each Investor a certificate or certificates representing the
number of Shares to be purchased by each Investor, against payment of the
purchase price therefor, by check or wire transfer payable to the Company, or by
cancellation of outstanding indebtedness from the Company to such Investor, or
by a combination thereof, in the amount of the purchase price. Investor will not
be entitled to delivery of or voting rights shares for which the purchase price
has not been paid, it being anticipated that shares will be released as
subscribed for by Investor.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise set forth in this Agreement or in writing to
Investor, the Company hereby represents and warrants to the Investor as follows:
3.1 ORGANIZATION AND STANDING; CERTIFICATE AND BYLAWS. Each of the
Company and each of its Subsidiaries (as hereinafter defined), if any, is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and corporate authority to own, lease and operate its properties and to carry on
its business as it is now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not have a Company Material Adverse Effect (as hereinafter defined). Each
of the Company and each of its Subsidiaries, if any, is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing would not
have
4
a Company Material Adverse Effect. True, accurate and complete copies of the
Company's Certificate of Incorporation and By-laws, as in effect on the date
hereof, including all amendments thereto, have heretofore been made available to
Investor. All such organizational documents are in full force and effect and
neither the Company nor any of its Subsidiaries is in violation of such
organizational documents. As used in this Agreement, any reference to any event,
change or effect having a "Company Material Adverse Effect" means such event,
change or effect is, or is likely to be, materially adverse to (a) the business,
properties, financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole, or (b) the ability of the Company to consummate
the transactions contemplated hereby. As used in this Agreement, "Subsidiary"
shall mean, with respect to any party, any corporation or other organization,
whether incorporated or unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any Subsidiary of
such party do not have a majority of the voting interest in such partnership) or
(ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its Subsidiaries, or by such party and one or more of its
Subsidiaries.
3.2 CAPITALIZATION. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, par value $.001, 47,041,597
shares of which are issued and outstanding prior to the Closing, and 5,000,000
shares of Series A Preferred Stock, none of which shares are issued and
outstanding prior to the Closing; 200,000 of Series B Preferred Stock, par value
$10.00 per share, none of which has been or will be issued or outstanding prior
to the Closing; and 4,800,000 of an Undesignated Series of Preferred Stock, par
value $.001 per share, none of which has been or will be issued or outstanding
prior to the Closing. The Company has reserved (i) 5,000,000 shares of Series A
Preferred Stock for issuance hereunder, (ii) and simultaneously with the Closing
sufficient shares of Common Stock for issuance upon conversion of the Series A
Preferred; (iii) and adequate shares of Common Stock for issuance of all
outstanding options and warrants. The Series A Preferred shall have the rights,
preferences, privileges and restrictions set forth by the board of directors and
filed in a Certificate of Designation with the Secretary of State of Nevada.
There are no other options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of capital stock or other securities of the Company. Assuming
the accuracy of each Investor's representations in Section 4 below, upon
issuance, the Shares will have been issued in compliance with all federal and
state securities laws. Except as set forth in Section 3.2(a) of the Company
Disclosure Schedule, there are no voting trusts, proxies or other agreements or
understandings to which the Company or any Stockholder is a party or is bound
with respect to voting any shares of capital stock of the Company.
(b) SUBSIDIARIES OF THE COMPANY. Section 3.2(b) of the Company
Disclosure Schedule sets forth the name of each Subsidiary of the Company and
any other
5
corporation, partnership, joint venture or other entity in which the Company
directly or indirectly owns any equity or other ownership interest (an "Other
Entity"), the number of authorized, issued and outstanding shares of each
Subsidiary of the Company and Other Entity, the name of the record and
beneficial owner of such shares and the jurisdiction of organization for each
Subsidiary of the Company and Other Entity. All the outstanding shares of
capital stock of each such Subsidiary are validly issued, fully paid and
nonassessable and free of any preemptive rights in respect thereto. Except as
set forth in Section 3.2(b) of the Company Disclosure Schedule, all outstanding
shares of capital stock of each such Subsidiary and Other Entity are owned
beneficially and of record by the Company or one of its other Subsidiaries free
and clear of all Liens. Except as set forth in Section 3.2(b) of the Company
Disclosure Schedule, there are no outstanding options, warrants, calls, rights
or commitments, or any other agreements of any character relating to the sale,
issuance or voting of, or the granting of rights to acquire, any shares of the
capital stock of any such Subsidiary, or any securities or other instruments
convertible into, exchangeable for or evidencing the right to purchase any
shares of capital stock of any such Subsidiary.
3.3 AUTHORITY. The Company has the requisite corporate power and
corporate authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by the Company and the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
and no other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or the transactions contemplated hereby. This Agreement
has been duly executed and delivered by the Company and, assuming that this
Agreement constitutes a valid and binding obligation of the other parties
hereto, constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and
general equitable principles (whether considered in a proceeding in equity or at
law). Upon execution of this Agreement, Homeseekers shall deliver to Investor a
copy of a Unanimous Consent executed by the members of the board of directors of
Homeseekers, approving the transactions contemplated by this Agreement.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for filings, permits,
authorizations, consents and approvals as may be required under applicable laws,
and other applicable requirements of, the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act, The Nasdaq Stock
Market-National Market ("Nasdaq"), and filings under state securities or "blue
sky" laws and except as set forth in Section 3.4 of the Company Disclosure
Schedule, the execution, delivery or performance of this Agreement by the
Company, the consummation by the Company of the transactions contemplated hereby
and compliance by the Company with any of the provisions hereof shall not (a)
conflict with or result in any breach of any provisions of the organizational
documents of the Company or of any of its Subsidiaries, (b) require any filing
by the Company or any of its Subsidiaries with, or any permit, authorization,
consent or approval to be obtained by the Company or any of its Subsidiaries of,
any
6
court, arbitral tribunal, administrative agency or commission or other
governmental or other regulatory authority or agency (a "Governmental Entity")
(except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings would not have a Company Material Adverse
Effect), (c) result in a material violation or breach of, or constitute (with or
without due notice or lapse of time, or both) a material default (or give rise
to any right of termination, cancellation or acceleration) under, any of the
terms, conditions or provisions of any material note, bond, mortgage, indenture,
lease, license, contract, agreement, franchise, permit, concession or other
instrument, obligation, understanding, commitment or other arrangement
(collectively, "Contracts") to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound
or affected or (d) violate any order, writ, injunction or decree, or any
material statute, ordinance, rule or regulation, applicable to the Company or
any of its Subsidiaries, except for violations of such orders, writs,
injunctions or decrees which would not have a Company Material Adverse Effect.
3.5 FINANCIAL STATEMENTS. Section 3.5 of the Company Disclosure
Schedule contains a copy of the unaudited consolidated balance sheet of the
Company as of April 30, 2001 and the related consolidated statements of income,
changes in stockholders' equity, and cash flows for the prior fiscal year, and
the notes and schedules thereto, certified by the chief financial officer of the
Company (the "Annual Financial Statements" or "Balance Sheet"). The Annual
Financial Statements fairly present in all material respects the consolidated
financial condition of the Company and its Subsidiaries as of their respective
dates and the consolidated results of their operations and their consolidated
cash flows for the periods then ended, and have all been prepared in accordance
with generally accepted accounting principles ("GAAP") applied consistently
throughout the periods involved, except as disclosed therein.
3.6 LEGAL PROCEEDINGS. Except as described in Section 3.6 of the
Company Disclosure Schedule, no material litigation, investigation of which the
Company has knowledge or proceeding of or before any arbitrator or Governmental
Entity has been commenced and is pending or, to the knowledge of the Company, is
threatened by or against the Company or any of its Subsidiaries or against any
of their respective properties or assets. Section 3.6 of the Company Disclosure
Schedule sets forth a brief description of each material judgment, injunction,
decree, order or other determination of an arbitrator or Governmental Entity
currently applicable to the Company or any of its Subsidiaries or any of their
respective properties or assets.
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. There are no liabilities of the
Company or any of its Subsidiaries (absolute, accrued, contingent or otherwise)
which are of the type required by GAAP to be reflected or reserved against on
the Balance Sheet, other than (a) liabilities (i) fully reflected or reserved
against on the Balance Sheet or (ii) incurred since the date of the Balance
Sheet in the ordinary course of business consistent with past practice and (b)
liabilities disclosed in Section 3.7 of the Company Disclosure Schedule.
7
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as expressly permitted
by this Agreement or as set forth in Section 3.8 of the Company Disclosure
Schedule, since the date of the Balance Sheet to the date hereof, the Company
and each of its Subsidiaries have conducted their respective businesses only in
the ordinary and usual course consistent with past practice, and there has not
been any change or development, or combination of changes or developments, which
has had a Company Material Adverse Effect. Without limiting the generality of
the foregoing, except as described in Section 3.8 of the Company Disclosure
Schedule, except for those actions after the date of this Agreement permitted by
this Agreement and except as entered into or effected in the ordinary course
consistent with past practice, neither the Company nor any of its Subsidiaries
has since the date of the Balance Sheet:
(i) incurred any material damage, destruction or loss;
(ii) made any material changes in its customary methods of
operations, including, without limitation, its marketing;
(iii) increased the compensation or benefits payable by it to
its employees generally except for increases in compensation or
benefits in the ordinary course of business consistent with past
practice which are not, individually or in the aggregate, material to
the Company or such Subsidiary;
(iv) made any payment or distribution to any affiliate,
including, without limitation, any repayment of any Indebtedness (as
hereinafter defined), except for (A) payments or distributions by a
wholly owned Subsidiary of the Company (defined to include any
Subsidiary all of whose shares are owned directly or indirectly by the
Company other than nominee, director qualifying or similar shares) to
the Company or another wholly owned Subsidiary of the Company, (B)
payments of cash dividends on the Company Common Stock quarterly and
immediately prior to the Closing and otherwise in accordance with the
terms thereof and (C) salary payments to officers, directors and
consultants;
(v) merged or consolidated with, or acquired an interest
having a value in excess of $10,000 in, any person;
(vi) entered into any material joint venture, partnership or
other similar arrangement with any person;
(vii) terminated, discontinued, closed or disposed of any
material facility or any material business operation;
(viii) issued, sold or redeemed any capital stock, notes,
bonds or other securities, or any option, warrant, stock appreciation
right or other right to acquire the same;
8
(ix) declared or paid any dividends or other distributions in
respect of its capital stock (except for declarations and payments of
dividends or other distributions by a wholly owned Subsidiary of the
Company to the Company or another wholly owned Subsidiary of the
Company;
(x) amended, terminated, cancelled or compromised any
undisputed material claims;
(xi) allowed any of its material Permits (as hereinafter
defined) to lapse or terminate or failed to renew any of its material
Permits;
(xii) amended or modified, in any material respect, or
consented to the early termination of, any material Contract;
(xiii) amended its Certificate of Incorporation or By-laws;
(xiv) made any change in the financial or accounting practices
or policies customarily followed by it (other than changes required by
GAAP) or made any material election with respect to Taxes (as
hereinafter defined);
(xv) entered into any material Contract or other material
transaction; or
(xvi) agreed in writing or otherwise to do any of the
foregoing.
3.9 CONTRACTS.
(a) Section 3.9(a) of the Company Disclosure Schedule lists (without
duplication) each of the following Contracts to which the Company or any of its
Subsidiaries is a party or by or to which the Company or any of its Subsidiaries
or any of their respective assets or properties is bound or subject, in each
case as of the date hereof:
(i) agreements, other than corporate customer agreements,
involving at least $10,000 of obligations or benefits;
(ii) customer agreements with the ten (10) largest customers;
(iii) material agreements between the Company or any of its
Subsidiaries, on the one hand, and a customer, vendor or supplier, on
the other hand;
(iv) agreements (including written settlement agreements)
currently in effect pursuant to which the Company or any of its
Subsidiaries licenses the right to use any Intellectual Property (as
hereinafter defined) to any person or from any person (indicating which
of the Company or its Subsidiaries is currently party to such
agreement);
9
(v) agreements with any committee or organization of, or
representing, customers;
(vi) employment, severance and consulting agreements with any
current or former director, officer or employee which provide for
continuing obligations on the part of the Company or any of its
Subsidiaries;
(vii) agreements with any labor union or similar association
representing any employee;
(viii) agreements for the sale or lease (as lessor) by the
Company or any of its Subsidiaries of any assets or properties (other
than automobiles) in excess of $10,000 per agreement;
(ix) agreements relating to the acquisition or lease (as
lessee) by the Company or any of its Subsidiaries of any assets or
properties in excess of $10,000 per agreement;
(x) agreements relating to the disposition or acquisition of
any ownership interest in any person with a book value of $10,000 or
more;
(xi) joint venture, partnership or similar agreements;
(xii) agreements that materially limit or purport to
materially limit the ability of the Company or any of its Subsidiaries
to compete in any line of business or with any person or in any
geographical area or during any period of time;
(xiii) agreements relating to the incurrence of more than
$10,000 of Indebtedness by the Company or any of its Subsidiaries or
restricting the ability of the Company or any of its Subsidiaries to
incur Indebtedness;
(xiv) agreements relating to any Guarantee Obligations (as
hereinafter defined) of the Company or any of its Subsidiaries
involving more than $10,000 (other than indemnities made in the
ordinary course of business which are not material to the Company and
its Subsidiaries taken as a whole);
(xv) agreements relating to the making of any loan or advance
by the Company or any of its Subsidiaries other than (x) intercompany
loans among the Company and its wholly owned Subsidiaries and (y) those
made in the ordinary course of business which are not in excess of
$10,000;
(xvi) agreements providing for the indemnification by the
Company or any of its Subsidiaries to any person except those entered
into in the ordinary course of business which are not material to the
Company and its Subsidiaries taken as a whole;
10
(xvii) agreements with any Governmental Entity except those
entered into in the ordinary course of business which are not material
to the Company and its Subsidiaries taken as a whole and other than tax
audit agreements; and
(xviii) other material Contracts.
(b) There have been delivered or made available, or will be made
available to Investors true and complete copies of all of the written agreements
listed in Section 3.9 of the Company Disclosure Schedule and a written summary
of all of the oral agreements, if any, listed in Section 3.9 of the Company
Disclosure Schedule. Each material Contract to which the Company or any of its
Subsidiaries is a party or by or to which the Company or any of its Subsidiaries
or any of their respective assets or properties is bound or subject is in full
force and effect and constitutes a legal, valid and binding obligation of the
Company or one of its Subsidiaries, as the case may be, and, to the knowledge of
the Company, of each other party thereto, enforceable against the Company or one
of its Subsidiaries, as the case may be, in accordance with its terms, subject
to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
generally and general equitable principles (whether considered in a proceeding
in equity or at law). Neither the Company nor any of its Subsidiaries has
received any written notice (x) that any such material Contract is not
enforceable against any party thereto or (y) of early termination or intention
to early terminate from any other party to any such material Contract. Except as
set forth in Section 3.9(b) of the Company Disclosure Schedule, neither the
Company or any of its Subsidiaries nor, to the knowledge of the Company, any
other party to any such material Contract is in material breach of or material
default under any such material Contract.
(c) As used in this Agreement, "Indebtedness" means, as to any person
(a) all indebtedness of such person for borrowed money or for the deferred
purchase price of property or services (other than current trade liabilities
incurred in the ordinary course of business and payable in accordance with
customary practices), (b) any other indebtedness of such person which is
evidenced by a note, bond, debenture or similar instrument, (c) all obligations
of such person in respect of acceptances issued or created for the account of
such person and (d) all liabilities secured by any Lien on any property owned by
such person even though such person has not assumed or otherwise become liable
for the payment thereof. As used in this Agreement, "Guarantee Obligation" means
any obligation of (a) the guaranteeing person or (b) another person (including,
without limitation, any bank under any letter of credit) to induce the creation
of which the guaranteeing person has issued a reimbursement, counterindemnity or
similar obligation, in either case guaranteeing or in effect guaranteeing any
debt, leases, dividends or other obligations (the "primary obligations") of any
other third person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of the guaranteeing
person, whether or not contingent, (i) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (A) for the purchase or payment of any such primary
obligation or (B) to maintain working capital or equity capital of the primary
obligor or otherwise to
11
maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of securing the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the owner of such primary obligation against loss in respect thereof, provided,
however, that the term Guarantee Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business.
3.10 PROPERTIES.
(a) Section 3.10 of the Company Disclosure Schedule contains a list of
all real estate owned, and all material real estate leased, by the Company or
any of its Subsidiaries (except any thereof first acquired or leased after the
date hereof as permitted by Section 6.1 hereof). Each of the Company and its
Subsidiaries has good record and marketable title in fee simple to all material
real estate owned by it, and has valid leasehold interests in all material real
estate leased by it, in each case, free and clear of all Liens except for
Permitted Liens (as hereinafter defined) or as otherwise disclosed in Section
3.10 of the Company Disclosure Schedule. The current use of such material owned
and leased real estate by the Company or any of its Subsidiaries does not
violate in any material respect the certificate of occupancy thereof or any
material local zoning or similar land use or government regulations.
(b) The Company and its Subsidiaries have good and valid title to all
material assets (other than the real property which is represented and warranted
in paragraph (a) above) shown on the Balance Sheet or acquired since the date of
the Balance Sheet in the ordinary course of business, in each case free and
clear of all Liens except for Permitted Liens or as otherwise disclosed in
Section 3.10 of the Company Disclosure Schedule. There is no material defect in
the normal operating condition and repair of the equipment owned or leased by
the Company and its Subsidiaries.
(c) As used in this Agreement, "Permitted Liens" means (i) Liens shown
on the Balance Sheet as securing specified liabilities or obligations as to
which no default exists, (ii) mechanics', carriers', workmen's, repairmen's or
other like Liens arising or incurred in the ordinary course of business with
respect to liabilities that are not yet due or delinquent, or which are being
contested in good faith by appropriate proceedings, (iii) Liens for Taxes,
assessments and other governmental charges which are not due and payable or
which may hereafter be paid without penalty or which are being contested in good
faith by appropriate proceedings (for which adequate reserves have been made in
the Balance Sheet), (iv) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance,
social security, retirement and other similar legislation for sums not yet due
and payable, (v) Liens permitted to be incurred on and after the date hereof in
accordance with Section 6.1 hereof, (vi) leases to third parties, and (vii)
other imperfections of title or encumbrances, which, individually or in the
aggregate, would not materially detract from the value of the property or asset
to which it relates or materially impair the ability of Investors or the
12
Company to use the property or asset to which it relates in substantially the
same manner as it was used by the Company prior to the Closing Date.
3.11 INTELLECTUAL PROPERTY.
(a) Except as set forth in Section 3.11 of the Company Disclosure
Schedule, the Company or one of its Subsidiaries owns or has the right to use,
sell or license the Intellectual Property (as hereinafter defined), free and
clear of all Liens. Section 3.11 of the Company Disclosure Schedule sets forth a
complete and accurate list of all material federal, state and foreign patents
and patent applications, trademark or service xxxx applications and
registrations and copyright registrations and applications, each as owned by the
Company or one of its Subsidiaries (indicating which of the Company and its
Subsidiaries owns such rights). Except as set forth in Section 3.11 of the
Company Disclosure Schedule, either the Company or one of its Subsidiaries
currently is listed in the records of the appropriate United States, state or
foreign agency as the sole owner of record for each application and registration
listed on Section 3.11 of the Company Disclosure Schedule. As used in this
Agreement, "Intellectual Property" means all material intellectual property
rights used in the business of the Company or any of its Subsidiaries as
currently conducted, including, without limitation, all patents and patent
applications; trademarks, trademark registrations and applications; trade names;
service marks and service xxxx registrations and applications; copyrights and
copyright registrations and applications; computer programs; technology,
know-how, trade secrets, proprietary processes and formulae.
(b) The material registrations listed on Section 3.11 of the Company
Disclosure Schedule are valid, subsisting, in proper form and enforceable, and
have been duly maintained, including the submission of all necessary filings in
accordance with the legal and administrative requirements of the appropriate
jurisdictions. Unless otherwise indicated on Section 3.11 of the Company
Disclosure Schedule, the material registrations and applications listed on
Section 3.11 of the Company Disclosure Schedule have not lapsed, expired or been
abandoned, and no material application or registration therefor is the subject
of any pending, existing or, to the knowledge of the Company, threatened
opposition, interference or cancellation proceeding before any registration
authority in any jurisdiction.
(c) Except as set forth on Section 3.11 of the Company Disclosure
Schedule, (i) the conduct of the businesses of the Company and its Subsidiaries
does not infringe upon any proprietary right owned or controlled by any third
party in a manner likely to result in a material liability to the Company or any
of its Subsidiaries and (ii) there are no claims or suits pending or, to the
knowledge of the Company, threatened, and neither the Company nor any of its
Subsidiaries has received any notice of a claim or suit (A) alleging that the
Company's or any of its Subsidiaries' activities or the conduct of their
business infringes upon or constitutes the unauthorized use of the proprietary
rights of any third party or (B) challenging the ownership, use, validity or
enforceability of the Intellectual Property.
13
(d) Except as set forth on Section 3.11 of the Company Disclosure
Schedule, to the knowledge of the Company, no third party is infringing upon any
Intellectual Property owned or controlled by the Company or any of its
Subsidiaries and no such claims have been made by the Company or any of its
Subsidiaries.
(e) Except as set forth on Section 3.11 of the Company Disclosure
Schedule, to the knowledge of the Company, there are no judgments or orders
which restrict the Company's or any of its Subsidiaries' rights to use any
Intellectual Property, and no concurrent use or other agreements (aside from
license and other like agreements) which restrict the Company's or any of its
Subsidiaries' rights to use any Intellectual Property owned by the Company and
its Subsidiaries.
(f) The consummation of the transactions contemplated hereby will not
result in the loss or impairment of the Company's or any of its Subsidiaries'
right to own or use any of the Intellectual Property nor will it require the
consent of any Governmental Entity or third party in respect of any such
Intellectual Property.
3.12 EMPLOYEE BENEFITS; ERISA
(a) Section 3.12(a) of the Company Disclosure Schedule contains a true
and complete list of each material bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance, change-in-control,
termination pay, hospitalization or other medical, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement, and each other material employee benefit
plan, program, agreement or arrangement, if any, sponsored, maintained or
contributed to or required to be contributed to by the Company, any of its
Subsidiaries or by any trade or business, whether or not incorporated (an "ERISA
Affiliate"), that together with the Company would be deemed a "single employer"
within the meaning of Section 4001(b)(1) of ERISA, for the benefit of any
employee or former employee of the Company, any of its Subsidiaries or any ERISA
Affiliate (the "Plans"). The Plans that are "employee welfare benefit plans," or
"employee pension benefit plans" as such terms are defined in Sections 3(1) and
3(2) of ERISA are hereinafter referred to collectively as the "ERISA Plans".
None of the Company, any of its Subsidiaries, or any ERISA Affiliate has any
commitment to create any additional Plan or, except as contemplated by Section
6.12(b) hereof, modify or change any existing Plan that would affect any
employee or former employee of the Company, any of its Subsidiaries or any ERISA
Affiliate except to the extent that any such creation, modification or change
is, individually or in the aggregate, not likely to result in a material
liability of the Company or any of its Subsidiaries.
(b) With respect to each of the Plans, the Company has heretofore
delivered or made available, or will make available to Investors true, correct
and complete copies of each of the following documents:
(i) the Plan documents (including all amendments thereto) for
each written Plan;
14
(ii) the annual report or Internal Revenue Service Form 5500
Series, if required under ERISA, with respect to each such Plan for the
last Plan year ending prior to the date of this Agreement for which
such a report was filed; and
(iii) the actuarial report, if required under ERISA, with
respect to each such Plan for the last Plan year ending prior to the
date of this Agreement.
(c) No liability under Title IV of ERISA has been incurred by the
Company, any of its Subsidiaries or any ERISA Affiliate since its inception that
has not been satisfied in full, and no condition exists that presents a material
risk to the Company, any of its Subsidiaries or any ERISA Affiliate of incurring
a material liability under such Title.
(d) None of the Company, any of its Subsidiaries, any ERISA Affiliate,
any of the ERISA Plans, any trust created thereunder, nor, to the knowledge of
the Company, any trustee or administrator thereof, has engaged in a transaction
or has taken or failed to take any action in connection with which the Company,
any of its Subsidiaries or any ERISA Affiliate could reasonably be expected to
be subject to any material liability for either a civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section
4975(a) or (b), 4976 or 4980B of the Code.
(e) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including, but not limited
to, ERISA and the Code.
(f) Each of the ERISA Plans that is intended to be "qualified" within
the meaning of Section 401(a) of the Code has received a determination letter
from the Internal Revenue Service (the "IRS") stating that it is so qualified or
has applied to the IRS for such a determination and, to the knowledge of the
Company, no event has occurred that will or is likely to give rise to
disqualification of any such Plan or trust created thereunder.
(g) Except as set forth in Section 3.12(h) of the Company Disclosure
Schedule, no amounts payable under the Plans or any other contract, agreement or
arrangement to which the Company, any of its Subsidiaries or any ERISA Affiliate
is likely, as a result of the transactions contemplated hereby, to fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code.
(h) Except as set forth in Section 3.12(i) of the Company Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not (i) entitle any current or former employee or officer of the Company,
any of its Subsidiaries or any ERISA Affiliate to severance pay, unemployment
compensation or any other similar termination payment or (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due any such
employee or officer.
15
(i) All Plans covering foreign employees of the Company or the
Subsidiaries comply in all material respects with applicable local law. The
Company and the Subsidiaries have no material unfunded liabilities with respect
to any pension plan which covers foreign employees.
3.13 TAXES. Except as set forth in Section 3.13 of the Company
Disclosure Schedule: (a) Giving effect to all extensions obtained, each of the
Company and its Subsidiaries has (i) duly and timely filed (or there has been
filed on its behalf) with the appropriate Governmental Entities all Tax Returns
(as hereinafter defined) required to be filed by it, and all such Tax Returns
are true, correct and complete in all respects and (ii) timely paid (or there
has been paid on its behalf) all Taxes, due or claimed to be due from it by any
taxing authority, except for Taxes which are being contested in good faith by
appropriate proceedings (for which adequate reserves determined in accordance
with GAAP have been made in the Balance Sheet);
(b) The reserves for Taxes (determined in accordance with GAAP), if
any, reflected in the Annual Financial Statements are adequate for the payment
of all Taxes incurred or which may be incurred by the Company and its
Subsidiaries through the date thereof. Since the date of the Annual Financial
Statements, none of the Company or any of its Subsidiaries has incurred any
liability for Taxes other than in the ordinary course of business;
(c) None of the Company or any of its Subsidiaries is a party to, is
bound by, or has any obligation under, any Tax sharing or allocation agreement,
Tax indemnification agreement or similar contract or arrangement;
(d) No power of attorney has been granted by or with respect to the
Company or any of its Subsidiaries with respect to any matter relating to Taxes;
(e) None of the Company or any of its Subsidiaries has filed a consent
pursuant to Section 341(f) of the Code (or any predecessor provision) or agreed
to have Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code) owned by
the Company or any of its Subsidiaries;
(f) For purposes of this Agreement, (i) "Taxes" (including, with
correlative meaning, the term "Tax") means all taxes, charges, fees, levies,
penalties or other assessments imposed by any federal, state, local or foreign
taxing authority, including, but not limited to, income, gross receipts, excise,
property, sales, use, transfer, franchise, payroll, withholding, social security
or other taxes, including any interest, penalties or additions attributable
thereto, and (ii) "Tax Return" means any return, report, information return or
other document (including any related or supporting information) with respect to
Taxes.
3.14 ENVIRONMENTAL LAWS.
16
(a) Except as disclosed in Section 3.14 of the Company Disclosure
Schedule, (i) the Company and its Subsidiaries have complied with, and are
currently in compliance with, all applicable Environmental Laws (as hereinafter
defined); (ii) the properties presently or, to the knowledge of the Company,
formerly owned or operated by the Company or its Subsidiaries (including,
without limitation, soil, groundwater or surface water on or under the
properties, and buildings thereon) (the "Real Properties") do not contain any
Hazardous Substance (as hereinafter defined), other than, to the knowledge of
the Company, as would not require investigation or remediation under applicable
Environmental Law (provided, however, that with respect to Real Properties
formerly owned or operated by the Company, such representation is limited to the
period prior to the disposition of such Real Properties by the Company or one of
its Subsidiaries); (iii) neither the Company nor any of its Subsidiaries has
received any notices, demand letters or requests for information from any
Governmental Entity or any third party alleging that the Company is in violation
of, or liable under, any Environmental Law and none of the Company, its
Subsidiaries or the Real Properties are subject to any court order,
administrative order or decree arising under any Environmental Law and (iv) no
Hazardous Substance has been disposed of, transferred, released or transported
from any of the Real Properties during the time such Real Property was owned or
operated by the Company or one of its Subsidiaries in violation of applicable
Environmental Law or, to the knowledge of the Company, to a site that is listed
or proposed for listing on the National Priorities List or the CERCLIS List
compiled pursuant to the federal Comprehensive Environmental Response,
Compensation and Liability Act or to a site that is listed or proposed for
listing pursuant to a state environmental remediation statute or that otherwise
requires remediation under such laws.
(b) As used in this Agreement, "Environmental Law" means any applicable
Federal, state, foreign or local law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, order, judgment,
decree, injunction or agreement with any Governmental Entity, (i) relating to
the protection, preservation or restoration of the environment (including,
without limitation, air, water vapor, surface water, groundwater, drinking water
supply, surface land, subsurface land, plant and animal life or any other
natural resource), or to human health or safety, or (ii) the exposure to, or the
use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, release or disposal of Hazardous Substances, in each case as
now in effect, but excluding in any case the Occupational Safety & Health Act
and any other applicable law regulating workplace health or safety. As used in
this Agreement, "Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, under any Environmental Law, whether by type or by
quantity, including, without limitation, petroleum products or fractions or
derivatives thereof, or any substance containing any such substance as a
component.
(c) Notwithstanding the generality of any other representation and
warranty in this Agreement, with respect to the matters covered by this Section
3.14, (i) the representations and warranties contained in Sections 3.4, 3.6 and
3.7 hereof and this Section 3.14 shall be deemed to be the sole and exclusive
representations and warranties
17
made by the Company concerning Environmental Matters, (ii) no other
representation or warranty contained in this Agreement shall apply to any
Environmental Matters (as hereinafter defined) and (iii) no other representation
or warranty, express or implied, is being made with respect to Environmental
Matters. As used in this Agreement, "Environmental Matters" shall mean any
matter arising out of, relating to or resulting from contamination, protection
of the environment, health or safety of humans, releases of Hazardous Substances
into air, water vapor, surface water, groundwater, surface land, subsurface
land, plant and animal life and any other natural resources, or resulting from
the use, storage, recycling, treatment, generation, transportation, processing,
handling, labeling, release, or disposal of Hazardous Substances.
3.15 LABOR AND EMPLOYMENT MATTERS.
(a) Except to the extent set forth in Section 3.15(a) of the Company
Disclosure Schedule: (i) there is no material labor strike, dispute, slowdown,
stoppage or lockout actually pending, or to the knowledge of the Company,
threatened, against or affecting the Company or any of its Subsidiaries, and
since inception there has not been any such action; (ii) no union claims to
represent the employees of the Company or any of its Subsidiaries; (iii) neither
the Company nor any of its Subsidiaries is a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association
applicable to employees of the Company or any of its Subsidiaries; (iv) none of
the employees of the Company or any of its Subsidiaries is represented by any
labor organization and the Company does not have any knowledge of any material
current union organizing activities among the employees of the Company or any of
its Subsidiaries, nor does any question concerning representation exist
concerning such employees; (v) there are no material written personnel policies,
rules or procedures generally applicable to the employees of the Company or any
of its Subsidiaries, other than those set forth in Section 3.15(a) of the
Company Disclosure Schedule, true and correct copies of which have heretofore
been delivered or made available or will be made available to Investors; (vi)
the Company and each of its Subsidiaries are, and have at all times been, in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions of employment, wages,
hours of work and occupational safety and health, and the Company and each of
its Subsidiaries are not engaged in any unfair labor practices as defined in the
National Labor Relations Act or other applicable law, ordinance or regulation;
(vii) there is no unfair labor practice charge or complaint against the Company
or any of its Subsidiaries pending or, to the knowledge of the Company,
threatened before the National Labor Relations Board or any similar state or
foreign agency; (viii) there is no material grievance arising out of any
collective bargaining agreement or other grievance procedure against the Company
or any of its Subsidiaries pending or, to the knowledge of the Company,
threatened; (ix) to the knowledge of the Company, no material charges with
respect to or relating to the Company or any of its Subsidiaries are pending
before the Equal Employment Opportunity Commission or any other federal, state,
local or foreign agency responsible for the prevention of unlawful employment
practices; (x) neither the Company nor any of its Subsidiaries has received
notice of the intent of any
18
federal, state, local or foreign agency responsible for the enforcement of labor
or employment laws to conduct an investigation with respect to or relating to
the Company or any of its Subsidiaries and, to the knowledge of the Company, no
such investigation is in progress; and (xi) there are no material complaints,
lawsuits 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 or employment,
any law or regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship.
(b) Since inception neither the Company nor any of its Subsidiaries has
effectuated (i) a "plant closing" (as defined in the Worker Adjustment and
Retraining Notification Act (the "WARN Act")) affecting any site of employment
or one or more facilities or operating units within any site of employment or
facility of the Company or any of its Subsidiaries; or (ii) a "mass layoff" (as
defined in the WARN Act) affecting any site of employment or facility of the
Company or any of its Subsidiaries; nor has the Company or any of its
Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of any
similar state or local law. Except as set forth in Section 3.15(b) of the
Company Disclosure Schedule, none of the Company's or any of its Subsidiaries'
employees has suffered an "employment loss" (as defined in the WARN Act) since
six (6) months prior to the date of this Agreement.
3.16 COMPLIANCE WITH LAWS.
(a) Each of the Company and its Subsidiaries is in compliance in all
material respects with all material laws, statutes, orders, rules, regulations,
ordinances and judgments of any Governmental Entity, holds all material Permits
(as hereinafter defined) that are necessary to the conduct of its business or
the ownership of its properties, and is in compliance in all material respects
with each such Permit. As used in this Agreement, "Permits" means, as to any
person, all licenses, permits, franchises, orders, approvals, concessions,
registrations, authorizations and qualifications with and under all federal,
state, local or foreign laws and Governmental Entities and all industry or other
nongovernmental self-regulatory organizations that are issued to such person.
(b) Except as disclosed in Section 3.16 of the Company Disclosure
Schedule, since inception, none of the Company or any of its Subsidiaries has
received any written or any other communication from any Governmental Entity
asserting that the Company or any of its Subsidiaries is not in compliance in
any material respect with any applicable material law or Permit.
3.17 AFFILIATE TRANSACTIONS. Section 3.17 of the Company Disclosure
Schedule contains a summary of all material transactions since inception and all
currently proposed material transactions between the Company or any of its
Subsidiaries, on the one hand, and any current or former director or officer of
the Company or any of its
19
Subsidiaries or any such director's or officer's affiliates known as such to
the Company, or any entity known as such to the Company, in which any such
director, officer or affiliate has a direct or indirect material interest,
other than standard employment agreements or arrangements and employee
benefit plans.
3.18 BROKERS OR FINDERS. Neither the Company nor any of its
Subsidiaries has any liability to any agent, broker, investment banker,
financial advisor or other firm or person for any broker's or finder's fee or
any other commission or similar fee in connection with any of the transactions
contemplated by this Agreement.
3.19 REGISTRATION RIGHTS. Except as otherwise disclosed to Investor in
writing, the Company is not currently under any obligation to register under the
Securities Act of 1933, as amended (the "Act") any of its presently outstanding
securities or any of its securities which may hereafter be issued.
3.20 DISCLOSURES. No representation, warranty or statement by the
Company in this Agreement, or in any written statement or certificate furnished
to the Investors pursuant to this Agreement, contains any untrue statement of a
material fact or, when taken together, omits to state a material fact necessary
to make the statements made herein, in light of the circumstances under which
they were made, not misleading. However, as to any projections furnished to the
Investors, such projections were prepared in good faith by the Company, but the
Company makes no representation or warranty that it will be able to achieve such
projections. The Company has fully provided each Investor with all the
information that such Investor has requested for deciding whether to purchase
the Shares.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby represents and warrants to the Company with
respect to its purchase of the Shares as follows:
4.1 AUTHORIZATION. This Agreement, when executed and delivered by the
Investor, will constitute the Investor's valid and legally binding obligation,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting enforcement of creditors' rights generally, and (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.
4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with the
Investor in reliance upon the Investor's representation to the Company, which by
the Investor's execution of this Agreement the Investor hereby confirms, that
the Series A Preferred to be received by the Investor and the Common Stock
issuable upon conversion of the Series A Preferred (collectively, the
"Securities") will be
20
acquired for investment for the Investor's own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that the Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, the Investor further represents that the Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participations to such person or to any third person, with
respect to any of the Securities. The Investor represents that it has the full
power and authority to enter into this Agreement.
4.3 INVESTMENT EXPERIENCE. The Investor is an investor that
acknowledges that it is able to fend for itself, can bear the economic risk of
its investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Common Stock or Series A Preferred. If other than an individual, the
Investor also represents it has not been organized solely for the purpose of
acquiring the Common Stock or Series A Preferred, or if the Investor has been
organized solely for the purpose of acquiring the Common Stock or Series A
Preferred, that all of the equity owners of the Investor are "accredited
investors" as defined below.
4.4 ACCREDITED INVESTOR. The Investor is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
4.5 NO PUBLIC MARKET. Each Investor understands that no public market
now exists for any of the securities issued by the Company (except for the
Common Stock) and that it is unlikely that a public market will ever exist for
the Shares.
4.6 RECEIPT OF INFORMATION. Each Investor has received and reviewed
this Agreement and all Exhibits thereto; it, its attorney and its accountant
have had access to, and an opportunity to review all documents and other
materials requested of, the Company; it and they have been given an opportunity
to ask any and all questions of, and receive answers from, the Company
concerning the terms and conditions of the offering and to obtain all
information it or they believe necessary or appropriate to evaluate the
suitability of an investment in the Common Stock or Series A Preferred; and, in
evaluating the suitability of an investment in the Common Stock or Series A
Preferred, it and they have not relied upon any representations or other
information (whether oral or written) other than as set forth in the documents
and answers referred to above.
4.7 RESTRICTED SECURITIES. The Investor understands that the Securities
it is purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances. In addition, the Investor
represents that it is familiar with Rule 144 promulgated under the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
21
4.8 FURTHER LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Securities unless:
(a) There is then in effect a Registration Statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such Registration Statement;
(b) The Investor shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
circumstances surrounding the proposed disposition, and if requested by the
Company, the Investor shall have furnished the Company with either (i) an
unqualified written opinion of counsel who shall be reasonably satisfactory to
the Company addressed to the Company and reasonably satisfactory in form and
substance to the Company's counsel to the effect that the proposed transfer may
be effected without registration under the Act or (ii) a "No Action" letter from
the Securities and Exchange Commission to the effect that the transfer of such
securities without registration will not result in a recommendation by the staff
of the Securities and Exchange Commission that action be taken with respect
thereto, whereupon the holder of such Securities shall be entitled to transfer
such Securities in accordance with the terms of the notice delivered by the
Holder to the Company; or
(c) The Investor shall have sold, assigned, transferred, pledged or
otherwise disposed of the Securities in a transaction involving the distribution
without consideration of the Securities by the Investor to any of its partners
or retired partners, or to the estate of any of its partners or retired
partners, or in a transaction involving the transfer or distribution of the
Securities by a corporation to any subsidiary, parent or affiliated corporation
of such corporation; provided in each case that the Investor shall give written
notice to the Company of such Investor's intention to effect such transfer,
sale, assignment, pledge or other disposition. The Investor will cause any such
proposed purchaser, assignee, transferee or pledgee of any Securities held by
the Investor to agree to take and hold such Securities subject to the provisions
and upon the conditions specified in this Agreement.
4.9 LEGENDS. It is understood that the certificates evidencing the
Securities may bear one or all of the following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A OF SUCH ACT."
22
(b) Any legend required by the laws of the State of Nevada, including
any legend required by the Nevada Department of Corporations.
4.10 GOVERNMENT CONSENTS. Other than securities law filings required to
be made by the Company, no consent, approval or authorization of or designation,
declaration or filing with any state, federal or foreign governmental authority
on the part of the Investor is required in connection with the valid execution
and delivery of this Agreement by the Investor and the consummation by the
Investor of the transactions contemplated hereby and thereby.
4.11 FINANCIAL STATEMENTS. Investor will provide to the Company its
unaudited balance sheet as of April 30, 2001 and the related statements of
income, changes in stockholders' equity, and cash flows for the prior fiscal
year, and the notes and schedules thereto, ceritfied by the chief financial
officer of the Company (the "Annual Financial Statements" or "Balance Sheet").
The Annual Financial Statements fairly present in all material respects the
financial condition of the Company and its Subsidiaries as of their respective
dates and the results of their operations and their cash flows for the periods
then ended, and have all been prepared in accordance with generally accepted
accounting principles ("GAAP") applied consistently throughout the periods
involved, except as disclosed therein.
4.12 AGREEMENTS. Investor has provided true and correct copies of its
agreements with Xxxxxxx Information Services Corporation and United Advertising
Publications, Inc. and will provide copies of any amendments to such agreements
that are made prior to Closing.
4.13 ACCESS TO INFORMATION. From the date of this Agreement until the
Closing Date (or the termination of this Agreement), Investors will provide
reasonable access, upon reasonable notice during normal business hours, to its
properties, books, contracts and commitments and shall furnish to Company all
information concerning its business, properties and personnel as may reasonably
be requested. All such information as may be furnished by or on behalf of the
Investors or any of its Subsidiaries to Company or its Representatives pursuant
to this Section 4.13 shall be and remain confidential. No investigation pursuant
to this Section 4.13 shall affect any representation or warranty in this
Agreement of any party hereto or any condition to the obligations of the parties
hereto.
4.14 TRANSFERABILITY OF XXXXXX HOMES ADVERTISING CREDITS. Investor's
current agreement with Xxxxxx Homes for prepaid advertising credits provides for
the assignability of such credits under the circumstances of the transactions
contemplated by this Agreement.
SECTION 5
CONDITIONS TO CLOSING OF INVESTORS
The Investors' obligations to purchase the Shares at the Closing or at
any Subsequent Closing are, at the option of each Investor, subject to the
fulfillment on or prior to the Closing Date or at any Subsequent Closing Date of
the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all
23
material respects when made, and shall be true and correct in all material
respects on the Closing Date, or the Subsequent Closing Date, as the case may
be, with the same force and effect as if they had been made on and as of said
date.
5.2 COVENANTS. All covenants, agreements and conditions contained in
this Agreement to be performed by the Company on or prior to the Closing Date or
the Subsequent Closing Date, as the case may be, shall have been performed or
complied with in all material respects.
5.3 COMPLIANCE CERTIFICATE. The Company shall have delivered to the
Investors a certificate executed by the President of the Company, dated the
Closing Date or the Subsequent Closing Date, as the case may be, and certifying
to the fulfillment of the conditions specified in Sections 5.1, 5.2, and 5.7 of
this Agreement, and that he has made, or caused to be made, such investigations
as he deemed necessary in order to permit him to verify the accuracy of the
information set forth in such certificate.
5.4 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured an exemption therefrom, required by
any state for the offer and sale of the Shares and the Conversion Stock.
5.5 BOARD OF DIRECTORS. On or before the Closing, the Bylaws of the
Company shall provide for a flexible number of directors from three to twelve
and fixing the current number of directors at nine. The composition of the Board
of Directors at the Closing shall at least consist of Xxx X. Xxxxx, Xxxxx
Xxxxxx, Xxxxxx Xxxxxxx, and Xxxxxx Xxxxxx. On or before the close of business on
June 6, 2001, the Bylaws of the Company shall have been amended to increase the
current number of directors from five to nine, and Xxx X. Xxxxx, Xxxxx Xxxxxx,
Xxxxxx Xxxxxxx, and Xxxxxx Xxxxxx shall be added to the Board of Directors by
unanimous written consent of the existing five directors of the Company.
Contemporaneously with the Closing, Investor will submit its request in writing
identifying those current directors from whom the Company agrees to deliver
written resignations, and the Company and such directors shall so comply.
5.6 RESTATED CERTIFICATE. The Restated Certificate shall have been
filed with the Secretary of State of the State of Nevada.
5.7 NO MATERIAL ADVERSE CHANGE. There shall have been no material
adverse change in the Company's business or financial condition.
5.8 SHAREHOLDER RATIFICATION. The Company shall deliver to Investors a
certificate certifying that a majority of shareholders of Common Stock have
ratified and approved the transactions contemplated by this Agreement.
5.9 PARTICIPATION IN PREPARATION OF PROXY MATERIALS. Company shall
include Investor and/or its representative and counsel in the process of
preparing and formulating the Company's proxy materials for submission to
shareholders in connection with the proposed annual meeting of shareholders
tentatively scheduled for July 10, 2001.
24
SECTION 6
COMPANY COVENANTS AND OTHER AGREEMENTS
6.1 CONDUCT OF BUSINESS. Except as contemplated by this Agreement or
with the prior written consent of Investors (which consent shall not be
unreasonably withheld or delayed) during the period from the date of this
Agreement to the Closing Date, the Company shall, and shall cause each of its
Subsidiaries to, conduct its operations only in the ordinary course of business
consistent with past practice and shall use all reasonable efforts, and shall
cause each of its Subsidiaries to use all reasonable efforts, to preserve intact
its present business organization, keep available the services of its present
officers and employees and preserve its material relationships with licensors,
licensees, franchisors, franchisees, customers, suppliers, employees and any
others having business dealings with it. Without limiting the generality of the
foregoing, and except as otherwise expressly provided in this Agreement, or as
disclosed in Section 6.1 of the Company Disclosure Schedule, the Company shall
not, and shall not permit any of its Subsidiaries to, prior to the Closing Date,
without the prior written consent of Investors (which consent shall not be
unreasonably withheld or delayed) to:
(a) adopt any amendment to its certificate of incorporation or by-laws
or comparable organizational documents;
(b) except for issuances of capital stock of the Company's Subsidiaries
to the Company or a wholly owned Subsidiary of the Company, issue, reissue,
sell, deliver or pledge or authorize or propose the issuance, reissuance, sale,
delivery or pledge of additional shares of capital stock of any class, or any
securities convertible into capital stock of any class, or any rights, warrants
or options to acquire any convertible securities, or capital stock;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock, except that any wholly owned
Subsidiary of the Company may pay dividends to the Company or any of the
Company's other wholly owned Subsidiaries;
(d) adjust, split, combine, subdivide, reclassify or redeem, purchase
or otherwise acquire, or propose to redeem or purchase or otherwise acquire, any
shares of its capital stock, or any of its other securities (other than as
permitted by Section 6.1(f) hereof);
(e) (i) sell, lease, transfer or dispose of any material assets or
rights, (ii) permit any asset to suffer any Lien thereupon, except for any such
Liens existing on the date hereof and for Permitted Liens, or (iii) acquire any
material assets or rights, unless in the case of clauses (i), (ii) and (iii) of
this Section 6.1(e), (A) in the ordinary course of business consistent with past
practice or (B) pursuant to obligations in effect on the date hereof;
25
(f) (i) incur, assume or refinance any Indebtedness, (ii) assume,
guarantee, endorse or otherwise become liable (whether directly, contingently
or otherwise) for any Guarantee Obligations of any other person or (iii) make
any loans, advances or capital contributions to, or investments in, any other
person, unless in the case of clauses (i), (ii) and (iii) of this Section
6.1(f), (A) in the ordinary course of business consistent with past practice
or (B) pursuant to obligations in effect on the date hereof;
(g) pay, discharge or satisfy any liability, obligation, or Lien
(absolute, accrued, asserted or unasserted, contingent or otherwise) of the
Company or any of its Subsidiaries, other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past practice,
or in accordance with their terms, of claims, liabilities or obligations of the
Company or its Subsidiaries (i) reflected or reserved against the Balance Sheet
or (ii) incurred in the ordinary course of business since the date of the
Balance Sheet;
(h) change any of the accounting or tax principles, practices or
methods used by the Company (except as required by GAAP or applicable law);
(i) make any change in the compensation payable or to become payable to
any of its officers, directors, employees, agents or consultants (other than
normal salary or wage increases in the ordinary course of business and
consistent with past practice), enter into or amend any employment, severance,
termination or other agreement or employee benefit plan or make any loans to any
of its officers, directors, employees, agents or consultants (other than routine
advances in the ordinary course of business and consistent with past practice),
whether contingent on consummation of the transactions contemplated hereby or
otherwise;
(j) pay, agree to pay or make any accrual or arrangement for payment of
any pension, retirement allowance or other employee benefit pursuant to any
existing plan, agreement or arrangement to any officer, director or employee or
pay or agree to pay or make any accrual or arrangement for payment to any
employees of the Company or any of its Subsidiaries of any amount relating to
unused vacation days, except in the ordinary course of business and consistent
with past practice or as permitted by this Agreement;
(k) make or authorize any capital expenditures except in the ordinary
course consistent with past practice;
(l) settle or compromise any material Tax liability;
(m) (i) enter into, amend or terminate early any material Contract,
except in the ordinary course of business consistent with past practice, or (ii)
knowingly take any action or fail to take any action that, with or without
either notice or lapse of time, would constitute a material default under any
material contract;
(n) make any payments, loans, advances or other distributions to, or
enter into any transaction, agreement or arrangement with, the Stockholders,
their affiliates,
26
associates or family members (other than compensation payable and routine
advances in the ordinary course of business and consistent with past practice to
Stockholders who are also employees or consultants);
(o) make any change in its accounts payable practices generally;
(p) terminate or amend or fail to perform any of its obligations or
permit any material default to exist or cause any material breach under, or
enter into (except for renewals in the ordinary course of business consistent
with past practice), any material policy of insurance;
(q) dispose of or permit to lapse any Intellectual Property;
(r) modify, amend or enter into any collective bargaining agreement;
(s) file any income Tax Return or pay any income Tax shown to be due
thereon or make any material elections with respect to Taxes with respect to
such Tax Returns; or
(t) take, or agree in writing or otherwise to take, any of the
foregoing actions.
6.2 NO SOLICITATION. Unless and until this Agreement is terminated in
accordance with its terms, the Company shall not, directly or indirectly,
solicit or initiate discussions with, enter into negotiations or agreements
with, or furnish any information about the Company that is not publicly
available to, or otherwise assist, facilitate or encourage, any entity, person
or group (other than Investors, an affiliate of Investors or their authorized
representatives) concerning any proposal for a merger, sale of substantial
assets, sale of any shares of capital stock or rights to acquire any shares of
capital stock, recapitalization or other business combination transaction
involving the Company or any of its Subsidiaries (a "Competing Transaction").
The Company and the Stockholders shall instruct the respective officers,
directors, employees, advisors, affiliates, counsel and agents (collectively,
"Representatives") of the Company and its Subsidiaries not to take any action
contrary to the provisions of the previous sentence. The Company shall notify
Investors immediately in writing if the Company becomes aware that any inquiries
or proposals are received by, any information is requested from, or any
negotiations or discussions are sought to be initiated with, the Company or its
Subsidiaries with respect to a Competing Transaction.
6.3 ACCESS. From the date of this Agreement until the Closing Date (or
the termination of this Agreement), the Company shall (and shall cause each of
its Subsidiaries to) afford to Investors and its Representatives reasonable
access, upon reasonable notice during normal business hours, to all its
properties, books, contracts, commitments, personnel and records and shall (and
shall cause each of its Subsidiaries to) furnish promptly to Investors all
information concerning its business, properties and personnel as may reasonably
be requested. All such information as may be furnished by or on behalf of the
Company or any of its Subsidiaries to Investors or its Representatives pursuant
to this Section 6.3 shall be and remain confidential. No investigation pursuant
27
to this Section 6.3 shall affect any representation or warranty in this
Agreement of any party hereto or any condition to the obligations of the parties
hereto.
6.4 NOTIFICATION OF CERTAIN MATTERS. Each of the Company and Investors
shall promptly advise the other party orally and in writing of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect or (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or (iii) any event or
change or impending occurrence of any event or change of which it has knowledge
and which has resulted, or which, insofar as can reasonably be foreseen, is
likely to result, in any of the conditions to the transactions contemplated
hereby set forth in this Agreement not being satisfied; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
6.5 FURTHER ASSURANCES. In the event that at any time after the Closing
Date any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and/or directors of the Company and
Investors shall take such necessary action.
6.6 REASONABLE EFFORTS.
(a) Subject to the terms and conditions of this Agreement, each of the
parties hereto agrees to use its commercially reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, (i) the preparation and filing of all applicable
forms under applicable laws or creation of additional documents and agreements,
(ii) such actions as may be required to be taken under applicable state
securities or "blue sky" laws in connection with the issuance of the Shares to
Investors contemplated hereby, (iii) the preparation and filing of all other
forms, registrations and notices required to be filed to consummate the
transactions contemplated by this Agreement and the taking of such actions as
are necessary to obtain any requisite consents, approvals, authorizations or
orders of any Governmental Entity or third party and (iv) the satisfaction of
all conditions to the Closing.
(b) Each party shall promptly consult with the other with respect to
and provide any necessary information not subject to legal privilege with
respect to and provide the other (or its counsel) copies of, all filings made by
such party with any Governmental Entity or any other information supplied by
such party to a Governmental Entity in connection with this Agreement and the
transactions contemplated by this Agreement (except personal information with
respect to officers and directors). Each party hereto shall promptly inform the
other of any material communication from any Governmental Entity regarding any
of the transactions contemplated by this Agreement. If any party or
28
affiliate thereof receives a request for additional information or documentary
material from any such Governmental Entity with respect to the transactions
contemplated by this Agreement, then such party will endeavor in good faith to
make, or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance with
such request.
(c) Notwithstanding the foregoing, nothing in this Agreement shall be
deemed to require Investors to enter into any agreement with any Governmental
Entity or to consent to any order, decree or judgment requiring Investors to
hold separate or divest, or to restrict the dominion or control of Investors or
any of its affiliates over any other business of Investors, its affiliates or
the Company and its Subsidiaries. In addition, no party hereto shall take any
action after the date hereof that could reasonably be expected to materially
delay the obtaining of, or result in not obtaining, any permission, approval or
consent from any Governmental Entity necessary to be obtained prior to the
Closing.
6.7 DISCLOSURE SUPPLEMENTS. Prior to the Closing, the Company shall
supplement or amend the Company Disclosure Schedules with respect to any matter
hereafter arising or any information obtained after the date hereof which, if
existing, occurring or known at or prior to the date of this Agreement, would
have been required to be set forth or described in such schedule or which is
necessary to complete or correct any information in such schedule or in any
representation and warranty which has been rendered inaccurate thereby;
provided, however, that no such supplement or amendment shall affect the
representations, warranties, covenants or agreements of the parties hereto or
the conditions to the obligations of the parties under this Agreement. It is
agreed that the Company may submit the disclosure schedules following the
execution of this Agreement but in no event later than June 16, 2001.
6.8 PUBLICITY. The initial press release relating to this Agreement
shall be a joint press release and, thereafter, the Company and Investors shall
consult with each other prior to issuing any press releases or otherwise making
public statements with respect to the transactions contemplated by this
Agreement.
6.9 TAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the transactions contemplated by this Agreement, each of the
Company and Investors and their respective Boards of Directors shall grant such
approvals and take such actions as are necessary so that the transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated thereby and otherwise to act to eliminate or minimize the
effects of any such Takeover Statute on any of the transactions contemplated by
this Agreement.
6.10 CERTAIN ACTIONS. Each of the parties hereto shall not take any
action that would, or that could reasonably be expected to, result in any of the
conditions to their respective obligations to consummate the transactions
contemplated hereby set forth in this Agreement not being satisfied.
29
SECTION 7
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE ACQUISITION.
The respective obligation of each party hereto to consummate the transactions
contemplated hereby are subject to the satisfaction or waiver, on or prior to
the Closing Date, of each of the following conditions:
(a) NO INJUNCTIONS OR RESTRAINTS. (i) No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing or
materially restricting the consummation of the transactions contemplated hereby
shall be in effect (each party agreeing to use all reasonable efforts to have
any such order reversed or injunction lifted) and (ii) no action by any
Governmental Entity shall be pending seeking to prevent or materially restrict
the consummation of the transactions contemplated hereby; provided, however,
that the conditions set forth in the preceding clause (ii) shall not be a
condition to Investors' obligations unless Investors has complied in all
material respects with their obligations hereunder.
(b) REGULATORY APPROVALS. (i) All authorizations, consents, orders or
approvals of those Governmental Entities listed in any Company Disclosure
Schedule shall have been obtained and (ii) all other authorizations, consents,
orders or approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any Governmental Entity, the failure of which to be
obtained, made or occurred would have a Company Material Adverse Effect or a
Investors Material Adverse Effect, shall have been obtained, made or occurred;
provided, however, that the condition set forth in the preceding clause (ii)
shall not be a condition to Investors' obligations unless Investors has complied
in all material respects with their obligations hereunder. Investors shall have
received all state securities or "blue sky" permits and other authorizations
necessary to issue or cause the issuance of the Series A Preferred Stock and
Common Stock pursuant to this Agreement.
(c) THIRD-PARTY CONSENTS. All consents of those third parties listed in
the Company Disclosure Schedule shall have been obtained on terms reasonably
acceptable to Investors.
7.2 CONDITIONS TO OBLIGATIONS OF INVESTORS. The obligation of Investors
to effect the transactions contemplated hereby are also subject to the
satisfaction, on or prior to the Closing Date, of the following additional
conditions unless waived by Investors:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company and the Stockholders set forth in this Agreement (i) that are
qualified as to materiality shall be true, complete and correct in all respects
and (ii) that are not so
30
qualified shall be true, complete and correct in all material respects, in each
case as of the date of this Agreement and as of the Closing Date as though made
on and as of the Closing Date (except that the accuracy of the representations
and warranties that by their terms speak as of the date of this Agreement or
some other date shall be determined as of such date) and, in each case except
for changes expressly permitted by this Agreement.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) CERTIFICATE. Investors shall have received a certificate, dated the
Closing Date, signed on behalf of the Company by its chief executive officer and
its chief financial officer to the effect that the conditions set forth in
Sections 7.1(a), 7.2 (a); 7.2(b) and 7.2(e) have been satisfied.
(d) NO MATERIAL ADVERSE CHANGE. No change or development, or
combination of changes or developments, shall have occurred which would have a
Company Material Adverse Effect.
(e) CORPORATE ACTION. Investors shall have received from the Company
(i) copies of resolutions of the Company's Board of Directors approving this
Agreement and the transactions contemplated hereby, certified on behalf of the
Company by its corporate secretary, and (ii) a certificate of existence and of
good standing from the Secretary of State of the State of Nevada for the Company
dated as of a date not more than ten (10) days prior to the Closing Date.
(f) NO MATERIAL JUDGMENTS OR CLAIMS. (i) No judgment shall have been
entered against the Company or any of its Subsidiaries in respect of a claim for
personal injury and/or property damage the uninsured portion of which exceeds by
more than $10,000 and (ii) no claim for personal injury and/or property damage
shall have been asserted against the Company or any of its Subsidiaries which is
not frivolous and with respect to which the uninsured portion of any damages
which can reasonably be expected to be recovered exceeds $10,000.
(g) SATISFACTORY DUE DILIGENCE. Investors shall be satisfied with the
results of its due diligence examination of the Company, including but not
limited to the results of any and all financial, technical, and legal audits of
the Company, and such due diligence period shall last, at Investors's discretion
for a period of thirty (30) days following the execution of this Agreement.
7.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of the
Company to consummate the transactions contemplated hereby is also subject to
the satisfaction of the following additional conditions, on or prior to the
Closing Date, unless waived by the Company (as hereinafter defined):
31
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Investors set forth in this Agreement (i) that are qualified as to
materiality shall be true, complete and correct in all respects and (ii) that
are not so qualified shall be true, complete and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date (except that the accuracy of
the representations and warranties that by their terms speak as of the date of
this Agreement or some other date shall be determined as of such date).
(b) PERFORMANCE OF OBLIGATIONS OF INVESTORS. Investors shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) CERTIFICATES. The Stockholders shall have received a certificate,
dated the Closing Date, signed on behalf of Investors by its chief executive
officer and its chief financial officer to the effect that the conditions set
forth in Sections 7.3(a), 7.3(b) and 7.3(d) have been satisfied.
(d) NO MATERIAL ADVERSE CHANGE. No change or development, or
combination of changes or developments, shall have occurred which would have a
Investors Material Adverse Effect.
(e) CORPORATE ACTION. The Stockholders shall have received from
Investors (i) copies of resolutions of Investors's Board of Directors approving
and adopting this Agreement and the transactions contemplated hereby, certified
on behalf of Investors by its corporate secretary, and (ii) a certificate of
existence and of good standing from the Secretary of State of the State of Texas
for Investors dated as of a date not more than ten (10) days prior to the
Closing Date.
SECTION 8
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Shares at the Closing or
at any Subsequent Closing, is at the option of the Company, subject to the
fulfillment of the following conditions:
8.1 REPRESENTATIONS. The representations made by the Investors in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date or the Subsequent Closing Date, as the case may be.
8.2 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or secured an exemption therefrom, required by
any state for the offer and sale of the Shares and the Conversion Stock.
32
8.3 RESTATED CERTIFICATE. The Certificate of Designation for the
Series A Preferred and any amendment to the articles of incorporation consistent
with the transactions contemplated by this Agreement shall have been filed with
the Secretary of State of the State of Nevada.
SECTION 9
MISCELLANEOUS
9.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Nevada, without giving effect to the conflicts of laws
principles thereof.
9.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Investor and
the closing of the transactions contemplated hereby.
9.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto,
provided, however, that the rights of a Investor to purchase Shares shall not be
assignable without the written consent of the Company, except that no consent
shall be required if such assignment is made to a subsidiary, affiliate, or
entity controlled by or in common control by Investor.
9.4 ENTIRE AGREEMENT; AMENDMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement (including the documents and the instruments referred to herein) (a)
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and thereof, and (b) except as otherwise provided herein,
are not intended to confer upon any person other than the parties hereto and
thereto any rights or remedies hereunder or thereunder.
9.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person or by courier service or
five days after deposit with the United States mail, by registered or certified
mail, postage prepaid, addressed (a) if to a Investor, at such Investor's
address as such Investor shall have furnished to the Company in writing, or (b)
if to any other holder of any Shares, at such address as such holder shall have
furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Shares who has so furnished an address to the Company, or (c) if to the Company,
one copy should be sent to its address set forth on the cover page of this
Agreement and addressed to the attention of the Corporate Secretary, or at such
other address as the Company shall have furnished to the Investors.
33
9.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any holder of any Shares, upon any breach or default
of the Company under this Agreement, shall impair any such right, power or
remedy of such holder nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
9.7 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS AN EXEMPTION FROM SUCH
QUALIFICATION IS AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, OR SUCH EXEMPTION
BEING AVAILABLE.
9.8 EXPENSES. The Company and the Investors shall each bear their own
expenses and legal fees with respect to this Agreement and the transactions
contemplated hereby except that, assuming a successful completion of the
offering the Company will pay at the initial Closing the reasonable legal fees
and reasonable expenses upon receipt of a xxxx therefor, incurred by one counsel
to the Investors.
9.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
9.10 SEVERABILITY. If any provision of this Agreement or the
application thereof to any person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, so long as the economic or legal
substance of the transactions contemplated thereby is not affected in any manner
adverse to any party. Upon any such determination, the parties shall negotiate
in good faith in an effort to agree upon a suitable and equitable substitute
provision to effect original intent of the parties.
34
9.11 GENDER. The use of the neuter gender herein shall be deemed to
include the masculine and the feminine gender, if the context so requires.
9.12 SPECIFIC PERFORMANCE. The parties hereto agree that if any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof (without the requirement of the posting of any bond or other security),
in addition to any other remedy at law or equity.
9.13 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
9.14 COMPANY DISCLOSURE SCHEDULE. Matters reflected on the Company
Disclosure Schedule are not necessarily limited to matters required by this
Agreement to be reflected therein and the inclusion of such matters shall not be
deemed an admission that such matters were required to be reflected the Company
Disclosure Schedule. Such additional matters are set forth for informational
purposes only and do not necessarily include other matters of a similar nature.
Capitalized terms used in the Company Disclosure Schedule but not otherwise
defined therein shall have the respective meanings assigned to such terms in
this Agreement.
9.15 JURISDICTION. The Company and Investors hereby (i) consents to be
subject to jurisdiction of the United States District Court for the District of
Nevada and the jurisdiction of the courts of the State of Nevada in any suit,
action or proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
(iii) agrees that it will not bring any action relating to this Agreement or the
transactions contemplated hereby in any court other than the United States
District Court for the District of Nevada or the courts of the State of Nevada,
(iv) irrevocably waives (A) any objection that it may have or hereafter have to
the laying of venue of any such suit, action or proceeding in such court and (B)
any claim that any such suit, action or proceeding in any such court has been
brought in an inconvenient forum and (v) irrevocably consents to the service of
any and all process in any such suit, action or proceeding by the delivery of
such process to such party at the address and in the manner provided in the
notice provisions hereof.
35
SIGNATURE PAGE
TO
SECURITIES PURCHASE AGREEMENT
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its officer duly authorized as of the date first written above.
XXXXXXXXXXX.XXX, INCORPORATED
A Nevada corporation
By: /s/ Xxxx Xxxxxx
------------------------------------
Xxxx Xxxxxx, Chief Executive Officer
Date Signed: June 6, 2001
------------------------
/s/ Xxxxxx Xxxxxx
------------------------------------
Witness
36
SIGNATURE PAGE
TO
SECURITIES PURCHASE AGREEMENT
The undersigned hereby executes and delivers the Securities Purchase
Agreement (the "Agreement") to which this Signature Page is attached effective
as of the date of the Agreement, which Agreement and Signature Page, together
with all counterparts of said Agreement and Signature Pages of the other parties
named in said Agreement, shall constitute one and the same document in
accordance with the terms of said Agreement.
X-XXXX.XXX, INC. D/B/A HOMEMARK,
A Texas corporation
/s/ Xxxxxx Xxxxx By: /s/ Xxxxxx Xxxxxx
------------------------- -----------------------------
Witness Xxxxxx Xxxxxx
Its CEO and President
37
