SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of June 10, 2003, is
entered into by and between THE CLASSICA GROUP, INC., a New York corporation,
with headquarters located at 0000 Xxxx Xxxxxx, Xxxxx #00 Xxxxxxxxxx, Xxx Xxxxxx
00000 (the "Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Buyer wishes to purchase from the Company, upon the terms
and subject to the conditions of this Agreement, one (1) unit (herein, the
"Securities"), consisting of a $325,000.00senior subordinated note in the form
attached hereto (the "Note") and 35,000 shares of common stock, $.001 par value,
of the Company (the "Common Stock");
WHEREAS, the Company has agreed to deliver 770,000 shares of the Common
Stock to, and place in escrow with the Buyer's counsel, Xxxxxx & Xxxxx LLP,
which Common Stock is subject to the terms and conditions of that certain Pledge
and Security Agreement, dated as of the date hereof, by and between the Company
and the Buyer;
WHEREAS, in order to induce the Buyer to purchase the Securities, the
Company desires to enter into this Agreement and make the representations,
warranties and covenants contained herein.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows: 1. AGREEMENT TO PURCHASE. (a) Purchase. The undersigned hereby agrees
to purchase from the Company the Securities for an aggregate purchase price of
$325,000.
(b) Form of Payment. The Buyer shall pay the purchase price for the Securities
by wiring (net of applicable fees) immediately available good funds in United
States Dollars as directed by the Company. 2. BUYER REPRESENTATIONS, WARRANTIES,
ETC.; ACCESS TO INFORMATION; INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
(a) Without limiting the Buyer's right to sell Common Stock pursuant to the
Registration Statement (as defined below), the Buyer is purchasing the
Securities for its own account for investment only and not with a view towards
the public sale or distribution thereof and not with a view to or for sale in
connection with any distribution thereof; (b) The Buyer is (i) an "accredited
investor" as that term is defined in Rule 501 of the General Rules and
Regulations under the 1933 Act by reason of Rule 501(a)(3), and (ii) experienced
in making investments of the kind described in this Agreement and the related
documents, (iii) able, by reason of the business and financial experience of its
officers (if an entity) and professional advisors (who are not affiliated with
or compensated in any way by the Company or any of its affiliates or selling
agents), to protect its own interests in connection with the transactions
described in this Agreement, and the related documents, and (iv) able to afford
the entire loss of its investment in the Shares (as that term is defined below);
(c) All subsequent offers and sales of the Shares by the Buyer shall be made
pursuant to registration of the Shares under the 1933 Act or pursuant to an
exemption from registration. (d) The Buyer understands that the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying upon the truth and accuracy of, and the Buyer's
compliance with, the representations, warranties, agreements, acknowledgements
and understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Securities; (e) The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
requested by the Buyer. The Buyer and its advisors, if any, have been afforded
the opportunity to ask questions of the Company and have received complete and
satisfactory answers to any such inquiries. Without limiting the generality of
the foregoing, the Buyer has also had the opportunity to obtain and to review
the Company's (1) Quarterly Reports on Form 10-QSB for the three fiscal quarters
ended March 31, 2003; and (2) Annual Report on Form 10-KSB for the fiscal year
ended December 31, 2002 (the "Company's SEC Documents"). (f) The Buyer
understands that its investment in the Securities involves a high degree of
risk; (g) The Buyer understands that no United States federal or state agency or
any other government or governmental agency has passed on or made any
recommendation or endorsement of the Securities; (h) This Agreement has been
duly and validly authorized, executed and delivered on behalf of the Buyer and
is a valid and binding agreement of the Buyer enforceable in accordance with its
terms, subject as to enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium and other similar laws affecting the
enforcement of creditors' rights generally. 3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
(a) Concerning the Common Stock. There are no preemptive rights of any
stockholder of the Company, as such, to acquire the Company's Common Stock. (b)
Reporting Company Status. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York, and has
the requisite corporate power to own its properties and to carry on its business
as now being conducted. The Company is duly qualified as a foreign corporation
to do business and is in good standing in each jurisdiction where the nature of
the business conducted or property owned by it makes such qualification
necessary other than those jurisdictions in which the failure to so qualify
would not have a material and adverse effect on the business, operations,
properties, prospects or condition (financial or otherwise) of the Company. The
Company has registered its Common Stock pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and the Common Stock is
listed and traded on the NASDAQ/OTC Bulletin Board.
(c) Authorized Shares. The Securities and the shares of common stock of the
Company issued in connection therewith and collateralizing the Note (the
"Shares") have been duly authorized and, when issued to Buyer, will be duly and
validly issued, fully paid and non-assessable and will not subject the holder
thereof to personal liability by reason of being such holder. (d) Securities
Purchase Agreement. This Agreement and the transactions contemplated hereby,
have been duly and validly authorized by the Company, this Agreement has been
duly executed and delivered by the Company and this Agreement, the Note and the
related Pledge and Security Agreement, when executed and delivered by the
Company, will each be, a valid and binding agreement of the Company enforceable
in accordance with their terms.
(e) Non-contravention. The execution and delivery of this Agreement by the
Company, the issuance of the Securities, and the consummation by the Company of
the other transactions contemplated by this Agreement do not and will not
conflict with or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under (i) the articles of incorporation
or by-laws of the Company, (ii) any indenture, mortgage, deed of trust, or other
material agreement or instrument to which the Company is a party or by which it
or any of its properties or assets are bound, (iii) to its knowledge, any
existing applicable law, rule, or regulation or any applicable decree, judgment,
or (iv) to its knowledge, order of any court, United States federal or state
regulatory body, administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or assets, except such
conflict, breach or default which would not have a material adverse effect on
the transactions contemplated herein. The Company is not in violation of any
material laws, governmental orders, rules, regulations or ordinances to which
its property, real, personal, mixed, tangible or intangible, or its businesses
related to such properties, are subject. (f) Approvals. No authorization,
approval or consent of any court, governmental body, regulatory agency,
self-regulatory organization, or stock exchange or market is required to be
obtained by the Company for the issuance and sale of the Securities to the Buyer
as contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained. (g) SEC Documents, Financial Statements. The
Common Stock of the Company is registered pursuant to Section 12(g) of the
Exchange Act and the Company has filed on a timely basis all reports, schedules,
forms, statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act, including material
filed pursuant to Section 13(a) or 15(d), in addition to one or more
registration statements and amendments thereto heretofore filed by the Company
with the SEC under the Act (all of the foregoing including filings incorporated
by reference therein being referred to herein as the "SEC Documents"). The
Company, through its agent, has delivered to the Buyer true and complete copies
of the SEC Documents (except for exhibits and incorporated documents). The
Company has not provided to the Buyer any information which, according to
applicable law, rule or regulation, should have been disclosed publicly by the
Company but which has not been so disclosed, other than with respect to the
transactions contemplated by this Agreement.
As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Act or the Exchange Act as the
case may be and the rules and regulations of the SEC promulgated thereunder and
other federal, state and local laws, rules and regulations applicable to such
SEC Documents, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents comply as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC or other applicable rules and regulations with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(h) Absence of Certain Changes. Since To Be Determined, 2003, there has been no
material adverse change and no material adverse development in the business,
properties, operations, financial condition, or results of operations of the
Company. (i) Full Disclosure. There is no fact known to the Company (other than
general economic conditions known to the public generally) or as disclosed in
the documents referred to in Section 2(g), that has not been disclosed in
writing to the Buyer that (i) would reasonably be expected to have a material
adverse effect on the business or financial condition of the Company or (ii)
would reasonably be expected to materially and adversely affect the ability of
the Company to perform its obligations pursuant to this Agreement.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
(a) Filings. The Company undertakes and agrees to make all necessary filings in
connection with the sale of the Securities to the Buyer under any United States
laws and regulations, or by any domestic securities exchange or trading market,
and to provide a copy thereof to the Buyer promptly after such filing.
(b) Reporting Status. So long as the Buyer beneficially owns any of the
Securities, the Company shall file all reports required to be filed with the SEC
pursuant to Section 13 or 15(d) of the 1934 Act, and the Company shall not
terminate its status as an issuer required to file reports under the 1934 Act
even if the 1934 Act or the rules and regulations thereunder would permit such
termination.
(c) Restrictive Legend. The Buyer acknowledges and agrees that until such time
as the Shares have been registered under the 1933 Act as contemplated hereby and
sold in accordance with an effective registration statement ("Registration
Statement"), the Shares shall bear a restrictive legend in substantially the
following form (and a stop-transfer order may be placed against transfer of such
securities):
THESE SHARES (THE "SHARES") HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR SALE IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES OR AN
OPINION OF COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE CORPORATION THAT
SUCH REGISTRATION IS NOT REQUIRED.
5. COVENANT TO REGISTER.
(a) For purposes of this Section, the following definitions shall apply:
(i) The terms "register," "registered," and "registration" refer to a
registration under the 1933 Act, effected by preparing and filing a registration
statement or similar document in compliance with the 1933 Act, and the
declaration or ordering of effectiveness of such registration statement,
document or amendment thereto.
(ii) The term "Registrable Securities" means the Shares, and any securities of
the Company or securities of any successor corporation issued as or issuable
upon the conversion or exercise of any warrant, right or other security that is
issued as a dividend or other distribution with respect to, or in exchange for,
or in replacement of, the Shares. (iii) The term "holder of Registrable
Securities" means the Buyer and any permitted assignee of registration rights
pursuant to Section 5(g).
(b) (i) The Company shall within ten (10) days from the date hereof amend the
registration statement on Form SB-2 currently on file with the Securities and
Exchange Commission ("SEC") to include the Registrable Securities and use its
best efforts to cause such registration statement to become effective prior to
the stated maturity date of the Note (the "Target Date"). In the event that the
Company does not so amend its registration statement with the above-specified
time period, the Company shall pay Purchaser, as liquidated damages, cash in an
amount equal to 2% of the purchase price for the Securities and 10,000 shares of
its common stock, for each thirty (30) day period following the date hereof
until such time as the registration statement is so amended. In the event that
the Company is unable to cause the registration statement to become effective by
the Target Date, the Company shall pay Purchaser, as liquidated damages, cash in
an amount equal to 2% of the purchase price for the Securities and 10,000 shares
of its common stock, for each thirty (30) day period following the Target Date
until such time as the registration statement is declared effective. All
payments due hereunder shall be made to the Purchaser by cashier's check or wire
transfer in immediately available funds to such account as shall be designated
in writing by the Purchaser. Notwithstanding the foregoing, if the registration
statement is declared effective within six months of the date of this Agreement,
the Buyer will agree to refund the above penalties upon receipt of 70,000
additional shares of the Company's common stock; provided, that, such shares
shall have been duly registered under the registration statement referred to
above.
(ii) The Company may suspend the effectiveness of any registration effected
pursuant to this Subsection (b) in the event and for such period of time as,
such a suspension is required by the rules and regulations of the SEC. The
Company will use its best efforts to cause such suspension to terminate at the
earliest possible date.
(c) Whenever required under this Section 5 to effect the registration of any
Registrable Securities, the Company shall, as expeditiously as reasonably
possible: (i) Prepare and file with the SEC a registration statement or
amendment thereto with respect to such Registrable Securities and use its best
efforts to cause such registration to become effective as provided in Section
5(b)(i) hereof, and keep such registration statement effective for so long as
any holder of Registrable Securities desires to dispose of the securities
covered by such registration statement; provided, however, that in no event
shall the Company be required to keep the Registration statement effective for a
period greater than three (3) years from the Closing Date; (ii) Prepare and file
with the SEC such amendments and supplements to such registration statement and
the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the 1933 Act with respect to the
disposition of all securities covered by such registration statement and notify
the holders of the filing and effectiveness of such Registration statement and
any amendments or supplements; (iii) Furnish to each holder of Registrable
Securities such numbers of copies of a current prospectus, including a
preliminary prospectus, conforming with the requirements of the 1933 Act, copies
of the registration statement any amendment or supplement to any thereof and any
documents incorporated by reference therein, and such other documents as such
holder of Registrable Securities may reasonably require in order to facilitate
the disposition of Registrable Securities owned by such holder of Registrable
Securities; (iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or "Blue Sky"
laws of such jurisdictions as shall be reasonably requested by the holder of
Registrable Securities; (v) Notify each holder of Registrable Securities
immediately of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing, and use its best efforts to promptly
update and/or correct such prospectus. (d) Upon request of the Company, each
holder of Registrable Securities will furnish to the Company in connection with
any registration under this Section such information regarding itself, the
Registrable Securities and other securities of the Company held by it, and the
intended method of disposition of such securities as shall be reasonably
required to effect the registration of the Registrable Securities held by such
holder of Registrable Securities. (e) (i) To the fullest extent permitted by
law, the Company shall indemnify, defend and hold harmless each holder of
Registrable Securities which are included in a registration statement and each
of its officers, directors, employees, agents, partners or controlling persons
(within the meaning of the 0000 Xxx) (each, an "indemnified party") from and
against, and shall reimburse such indemnified party with respect to, any and all
claims, suits, demands, causes of action, losses, damages, liabilities, costs or
expenses ("Liabilities") to which such indemnified party may become subject
under the 1933 Act or otherwise, arising from or relating to (A) any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or (B) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading;
provided, however, that the Company shall not be liable in any such case to the
extent that any such Liability arises out of or is based upon an untrue
statement or omission so made in strict conformity with information furnished by
such indemnified party in writing specifically for use in the registration
statement.
(ii) In the event of any registration under the 1933 Act of
Registrable Securities, each holder of such Registrable Securities hereby
severally agrees to indemnity, defend and hold harmless the Company, and its
officers, directors, employees, agents, partners, or controlling persons (within
the meaning of the 0000 Xxx) (each, an "indemnified party") from and against,
and shall reimburse such indemnified party with respect to, any and all
Liabilities to which such indemnified party may become subject under the 1933
Act or otherwise, arising from or relating to (A) any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading; provided,
that such holders will be liable in any such case to the extent and only to the
extent, that any such Liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, prospectus or amendment or supplement thereto in
reliance upon and in conformity with written information furnished by such
holder specifically for use in the preparation thereof, and such Liability may
in no event exceed the value of the Registrable Securities so registered.
(iii) Promptly after receipt by any indemnified party of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against another party (the "indemnifying party")
hereunder, notify such party in writing thereof, but the omission so to notify
such party shall not relieve such party from any Liability which it may have to
the indemnified party other than under this Section and shall only relieve it
from any Liability which it may have to the indemnified party under this Section
if and to the extent an indemnifying party is materially prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and such indemnified party shall notify an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate in
and, to the extent it shall wish, to assume and undertake the defense thereof
with counsel reasonably satisfactory to such indemnified party, and, after
notice from the indemnifying party to the indemnified party of its election so
to assume and undertake the defense thereof, the indemnifying party shall not be
liable to the indemnified party under this Section for any legal expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of liaison with counsel
so selected; provided, however, that if the defendants in any such action
include both parties and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to them which are different from
or additional to those available to the indemnifying party or if the interests
of the indemnified party reasonably may be deemed to conflict with the interests
of the indemnifying party, the indemnified party shall have the right to select
a separate counsel and to assume such legal defenses and otherwise to
participate in the defense of such action, with the reasonable expenses and fees
of one such separate counsel and other reasonable expenses related to such
participation to be reimbursed by the indemnifying party as incurred. (f) (i)
With respect to the inclusion of Registrable Securities in a registration
statement, all fees, costs and expenses of and incidental to such registration,
inclusion and public offering shall be borne by the Company; provided, however,
that any security holders participating in such registration shall bear their
pro-rata share of the underwriting discounts and commissions, if any, incurred
by them in connection with such registration.
(ii) The fees, costs and expenses of registration to be borne
by the Company as provided in this Subsection (f) shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or Blue Sky
laws of any jurisdiction or jurisdictions in which securities to be offered are
to be registered and qualified. Subject to appropriate agreements as to
confidentiality, the Company shall make available to the holders of Registrable
Securities and their counsel its documents and personnel for due diligence
purposes, provided that the fees and disbursements of counsel and accountants
for the selling security holders shall be borne by the respective selling
security holders.
(g) The rights to cause the Company to register all or any portion of
Registrable Securities pursuant to this Section 5 may be assigned by Buyer to a
proper transferee or assignee as described herein. Within a reasonable time
after such transfer, the Buyer shall notify the Company of the name and address
of such transferee or assignee, and the securities with respect to which such
registration rights are being assigned. Such assignment shall be effective only
if, (i) the Buyer agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company within a
reasonable time after such transfer or assignment (subject to the purchase price
of the shares being kept confidential by the Buyer and such transferee or
assignee, (ii) the Company is, within a reasonable time after such transfer or
assignment, furnished with written notice of (A) the name and address of such
transferee or assignee, (B) the Registrable Securities with respect to which
such registration rights are being assigned, (iii) following such transfer or
assignment, the further disposition of the Registrable Securities by the
transferee or assignee is restricted under the 1933 Act and applicable state
securities laws, (iv) at or before the time that the Company receives the
written notice contemplated by clause (ii) of this sentence the transferee or
assignee agrees in writing with the Company to be bound by all of the provisions
contained herein, (v) such transfer shall have been made in accordance with the
applicable requirements of the purchase agreement covering the transaction and
(vi) such transferee shall be an "accredited investor", as that term is defined
in Rule 501 of Regulation D, promulgated under the 1933 Act. 6. GOVERNING LAW:
MISCELLANEOUS. This Agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. A facsimile transmission of this signed
Agreement shall be legal and binding on all parties hereto. This Agreement may
be signed in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of reference and
shall not form part of, or affect the interpretation of, this Agreement. If any
provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the validity or
enforceability of this Agreement in any other jurisdiction. This Agreement may
be amended only by an instrument in writing signed by the party to be charged
with enforcement. This Agreement, and the related agreements referred to herein,
contain the entire agreement of the parties with respect to the subject matter
hereto, superceding all prior agreements, understandings or discussions.
7. NOTICES. Any notice required or permitted hereunder shall be given in writing
(unless otherwise specified herein) and shall be deemed effectively given, (i)
on the date delivered, (a) by personal delivery, or (b) if advance copy is given
by fax, (ii) seven business days after deposit in the United States Postal
Service by regular or certified mail, or (iii) three business days mailing by
international express courier, with postage and fees prepaid, addressed to each
of the other parties thereunto entitled at the following addresses, or at such
other addresses as a party may designate by ten days advance written notice to
each of the other parties hereto.
COMPANY: THE CLASSICA GROUP, INC.
0000 Xxxx Xxxxxx, Xxxxx 00
Xxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopier No.: (000) 000-0000
BUYER: PINNACLE INVESTMENT PARTNERS, L.P.
c/o Delta Asset Management, Inc.
00 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxx
Telecopier No.: (000) 000-0000
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
IN WITNESS WHEREOF, the Company and Buyer have caused this Agreement to
be executed by their duly authorized representatives on the date as first
written above.
THE CLASSICA GROUP, INC. PINNACLE INVESTMENT PARTNERS, L.P.
By: PIP Management, Inc., General Partner
By: ______________________ By: _______________________
Xxxxx X. Xxxxxxxx, CEO Xxxxx Xxxxxx, President
