Exhibit 4.5
SECURITIES PURCHASE AGREEMENT
AGREEMENT, dated as of July 24, 2003, between Dial-Thru International
Corporation (the " Company") and GCA Strategic Investment Fund Limited
("Purchaser").
R E C I T A L S:
WHEREAS, the Company desires to sell and issue to Purchaser, and
Purchaser desires to purchase from the Company $550,000 principal amount of
the 10% Promissory Note due December 23, 2003, (the "Note") in accordance
with the terms and conditions as set forth in the form of Note attached
hereto as Exhibit A;
WHEREAS, in order to induce the Purchaser to enter into the
transactions described in this Agreement, the Company desires to issue to
the Purchaser a Warrant to purchase 100,000 shares of Common Stock upon the
Closing (as defined herein) on the terms and conditions described in the
form of the common stock purchase warrant attached hereto as Exhibit E (the
"Warrant"); and
WHEREAS, Purchaser will have certain registration rights with respect
to such shares of Common Stock issuable upon exercise of the Warrant (the
"Warrant Shares") following a Payment Default (as such term is defined in
the Note) of the Note, in which case the Note will be exchanged for one of
the Company's 6% Secured Convertible Debentures due November 8, 2004 (the
"2004 Debentures") in the aggregate principal amount plus accrued and unpaid
interest due thereon;
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1. DEFINITIONS
ARTICLE 1.1 Definitions . The following terms, as used herein, have
the following meanings:
"Additional Shares of Common Stock" has the meaning set forth in
Section 11.6.
"Affiliate" means, with respect to any Person (the " Subject Person"),
(i) any other Person (a " Controlling Person") that directly, or indirectly
through one or more intermediaries, Controls the Subject Person or (ii) any
other Person (other than the Subject Person or a Consolidated Subsidiary of
the Subject Person) which is Controlled by or is under common Control with
a Controlling Person.
"Agreement" means this Securities Purchase Agreement, as amended,
supplemented or otherwise modified from time to time in accordance with
its terms.
"Asset Sale" has the meaning set forth in Section 8.4.
"Benefit Arrangement" means at any time an employee benefit plan within
the meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer
Plan and which is maintained or otherwise contributed to by the Company.
"Benefit Plans" has the meaning set forth in Section 4.9(b).
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by
law to close.
"Capital Reorganization" has the meaning set forth in Section 11.5.
"Change in Control" means (i) after the date of this Agreement, any
person or group of persons (within the meaning of Sections 13 and 14 of the
Exchange Act and the rules and regulations of the Commission relating to
such sections) other than Purchaser and other than pursuant to any Xxxxxxx
Conversion shall have acquired beneficial ownership (within the meaning of
Rules 13d-3 and 13d-5 promulgated by the Commission pursuant to the Exchange
Act) of 33% or more of the outstanding shares of Common Stock without the
prior written consent of Purchaser; (ii) any sale or other disposition
(other than by reason of death or disability) to any Person of more than
75,000 shares of Common Stock by any executive officers and/or employee
directors of the Company without the prior written consent of Purchaser;
(iii) individuals constituting the Board of Directors of the Company on the
date hereof (together with any new Directors whose election by such Board
of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of at least 50.1% of the Directors still in
office who are either Directors as of the date hereof or whose election or
nomination for election was previously so approved), cease for any reason to
constitute at least two-thirds of the Board of Directors of the Company then
in office.
"Closing Bid Price" shall mean for any security as of any date, the
lowest closing bid price as reported by Bloomberg, L.P. (" Bloomberg") on
the principal securities exchange or trading market where such security is
listed or traded or, if the foregoing does not apply, the lowest closing
bid price of such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg, or, if no lowest
trading price is reported for such security by Bloomberg, then the average
of the bid prices of any market makers for such securities as reported in
the "Pink Sheets" by the National Quotation Bureau, Inc. If the lowest
closing bid price cannot be calculated for such security on such date on
any of the foregoing bases, the lowest closing bid price of such security on
such date shall be the fair market value as mutually determined by Purchaser
and the Company for which the calculation of the closing bid price requires,
and in the absence of such mutual determination, as determined by the Board
of Directors of the Company in good faith.
"Closing Date" means the date on which all of the conditions set forth
in Sections 6.1 and 6.2 shall have been satisfied and the Note is issued by
the Company to Purchaser.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission or any entity
succeeding to all of its material functions.
"Common Stock" means the common stock, $.001 par value per share, of
the Company.
"Company" means Dial-Thru International Corporation, a Delaware
corporation, and its successors.
"Company Corporate Documents" means the certificate of incorporation
and bylaws of the Company.
"Consolidated Subsidiary" means at any date with respect to any Person
or Subsidiary or other entity, the accounts of which would be consolidated
with those of such Person in its consolidated financial statements if such
statements were prepared as of such date.
"Control" (including, with correlative meanings, the terms
"Controlling," "Controlled by" and under "common Control with"), as used
with respect to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
that Person, whether through the ownership of voting securities, by contract
or otherwise.
"Deadline" has the meaning set forth in Section 10.1.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments
issued by such Person, (iii) all obligations of such Person as lessee which
(y) are capitalized in accordance with GAAP or (z) arise pursuant to sale-
leaseback transactions, (iv) all reimbursement obligations of such Person in
respect of letters of credit or other similar instruments, (v) all Debt of
others secured by a Lien on any asset of such Person, whether or not such
Debt is otherwise an obligation of such Person and (vi) all Debt of others
Guaranteed by such Person.
"Default" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivative Securities" has the meaning set forth in Section 8.6.
"Discounted Equity Offerings" has the meaning set forth in Section 8.6.
"Directors" means the individuals then serving on the Board of
Directors or similar such management council of the Company.
"Environmental Laws" means any and all federal, state and local
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes
into the environment, including, without limitation, ambient air, surface
water, ground water, or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or hazardous substances or wastes or the
cleanup or other remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company and each Subsidiary and all members of
a controlled group of corporation and all trades or businesses (whether or
not incorporated) under common control which, together with the Company or
any Subsidiary, are treated as a single employer under the Code.
"Event of Default" has the meaning set forth in Article XII hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financing" means a public or private financing consummated (meaning
closing and funding) through the issuance of debt or equity securities (or
securities convertible into or exchangeable for debt or equity securities)
of the Company, other than Permitted Financings.
"Fixed Price" has the meaning set forth in Section 11.1.
"GAAP" has the meaning set forth in Section 1.2.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing (whether by
virtue of partnership arrangements, by agreement to keep well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain a
minimum net worth, financial ratio or similar requirements, or otherwise)
any Debt of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or (ii) entered into for the purpose of
assuring in any other manner the holder of such Debt of the payment thereof
or to protect such holder against loss in respect thereof (in whole or in
part); provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The term
Guarantee used as a verb has a corresponding meaning.
"Intellectual Property" has the meaning set forth in Section 4.20.
"Investment" means any investment in any Person, whether by means of
share purchase, partnership interest, capital contribution, loan, time
deposit or otherwise.
"Xxxxxxx Conversion" means the conversion at any time and from time to
time by Xxxx Xxxxxxx of all or any portion of one or more promissory notes
issued on or after October 25, 2001 by the Company to Xx. Xxxxxxx.
"Lien" means any lien, mechanic's lien, materialmen's lien, lease,
easement, charge, encumbrance, mortgage, conditional sale agreement, title
retention agreement, agreement to sell or convey, option, claim, title
imperfection, encroachment or other survey defect, pledge, restriction,
security interest or other adverse claim, whether arising by contract or
under law or otherwise (including, without limitation, any financing lease
having substantially the same economic effect as any of the foregoing, and
the filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction in respect of any of the foregoing).
"Majority Holders" means (i) as of the Closing Date, Purchaser and
(ii) at any time thereafter, the holders of more than 50% in aggregate
principal amount of the Note.
"Market Price" shall mean the Closing Bid Price of the Common Stock on
the date immediately preceding the date on which a determination of Market
Price is required to be made in accordance with any section of this
Agreement or any other Transaction Agreement.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $500,000.
"Maturity Date" shall mean the date of maturity of the Note.
"Maximum Number of Shares" shall mean that percentage that the Company
may issue without shareholder approval under the applicable rules of the
National Market or the applicable OTC Bulletin Board or equivalent entity,
of the then issued and outstanding shares of Common Stock of the Company as
of the applicable date of determination, or such greater number of shares as
the stockholders of the Company may have previously approved.
"NASD" has the meaning set forth in Section 7.10.
"Nasdaq Market" means the Nasdaq Stock Market's National Market System.
"National Market" means the Nasdaq Market, the Nasdaq Small Cap Market,
the New York Stock Exchange, Inc. or the American Stock Exchange, Inc.
"Net Cash Proceeds" means, with respect to any transaction, the total
amount of cash proceeds received by the Company or any Subsidiary less
(i) reasonable underwriters' fees, brokerage commissions, reasonable
professional fees and other customary out-of-pocket expenses payable in
connection with such transaction, and (ii) in the case of dispositions
of assets, (A) actual transfer taxes (but not income taxes) payable with
respect to such dispositions, and (B) the amount of Debt, if any, secured by
a Lien on the asset or assets disposed of and required to be, and actually
repaid by the Company or any Subsidiary in connection therewith, and any
trade payables specifically relating to such asset or assets sold by the
Company or any Subsidiary that are not assumed by the purchaser of such
asset or assets.
"Note" means the Company's 10% Promissory Note substantially in the
form set forth as Exhibit A hereto.
"Notice of Exercise" means the form to be delivered by a holder of
a Warrant upon exercise of all or a portion thereof to the Company
substantially in the form of Exhibit A to the Warrant.
"Officer's Certificate" shall mean a certificate executed by the
president, chief executive officer or chief financial officer of the Company
in the form of Exhibit D attached hereto.
"OTC Bulletin Board" means the over-the-counter bulletin board operated
by the NASD.
"Out of Pocket Expense Fee" has the meaning set forth in Section 13.4.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permits" means all domestic and foreign licenses, franchises, grants,
authorizations, permits, easements, variances, exemptions, consents,
certificates, orders and approvals necessary to own, lease and operate
the properties of, and to carry on the business of the Company and the
Subsidiaries.
"Permitted Financings" has the meaning set forth in Section 10.5.
"Person" means an individual, corporation, partnership, trust,
incorporated or unincorporated association, joint venture, joint stock
Company, government (or any agency or political subdivision thereof) or
other entity of any kind.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards
under the Code and either (i) is maintained, or contributed to, by any
member of the ERISA group for employees of any member of the ERISA group or
(ii) has at any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of the ERISA
group for employees of the Person which was at such time a member of the
ERISA Group.
"Purchase Price" means the purchase price for the Securities set forth
in Section 2.2 hereof.
"Purchaser" means the entity listed on the signature page hereto and
its successors and assigns, including holders from time to time of the Note.
"Reserved Amount" has the meaning set forth in Section 7.10(a).
"Sale Event" has the meaning set forth in Section 3.4.
"SEC Reports" has the meaning set forth in Section 7.1(a).
"Securities" means the Note and the Warrant.
"Securities Act" means the Securities Act of 1933, as amended.
"Share Reorganization" has the meaning set forth in Section 11.2.
"Solvency Certificate" shall mean a certificate executed by the chief
financial officer or treasurer of the Company as to the solvency of the
Company, the adequacy of its capital and its ability to pay its debts, all
after giving effect to the issuance and sale of the Note and the completion
of the offering (including without limitation the payment of any fees or
expenses in connection therewith), which such Solvency Certificate shall
be in the form of Exhibit C attached hereto.
"Subsidiary" means, with respect to any Person, any corporation or
other entity of which (x) a majority of the capital stock or other ownership
interests having ordinary voting power to elect a majority of the Board of
Directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person or (y) the results of
operations, the assets and the liabilities of which are consolidated with
such Person under GAAP.
"Subsidiary Corporate Documents" means the certificates of
incorporation and bylaws of each Subsidiary.
"Taxes" has the meaning set forth in Section 3.6.
"Trading Day" shall mean any Business Day in which the OTC Bulletin
Board, National Market or other automated quotation system or exchange on
which the Common Stock is then traded is open for trading for at least four
(4) hours.
"Transaction Agreements" means this Agreement, the Note, the Warrant
and the other agreements contemplated by this Agreement.
"Transfer" means any disposition of Securities that would constitute a
sale thereof under the Securities Act.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the present value of all benefits under Plan
exceeds (ii) the fair market value of all Plan assets allocable to such
benefits (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
"Warrant" means the Common Stock Purchase Warrant substantially in the
form set forth in Exhibit E hereto.
ARTICLE 1.2 Accounting Terms and Determinations . Unless otherwise
specified herein, all accounting terms used herein shall be interpreted,
all accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared, in
accordance with generally accepted accounting principles as in effect from
time to time, applied on a consistent basis (except for changes concurred in
by the Company's independent public accountants) (" GAAP") and Regulation S-
X promulgated under the Securities Act ("Regulation S-X"). All references
to "dollars," "Dollars" or "$" are to United States dollars unless otherwise
indicated.
ARTICLE 2. PURCHASE AND SALE OF SECURITIES
ARTICLE 2.1 Purchase and Sale of Note .
(a) Subject to the terms and conditions set forth herein, the
Company agrees to issue and sell to Purchaser, and Purchaser agrees to
purchase from the Company, the Note.
(b) Purchaser shall acquire the Note on the Closing Date in an
aggregate principal amount of Five Hundred and Fifty Thousand Dollars
($550,000.00).
(c) In connection with the Purchaser's agreement to purchase the
Note specified in this Article II, the Company shall issue and deliver the
Warrant to the Purchaser on the Closing Date.
ARTICLE 2.2 Purchase Price . The purchase price (the " Purchase
Price") for the Note and the Warrant on the Closing Date shall be
$550,000.00.
ARTICLE 2.3 Closing and Mechanics of Payment .
(a) The Purchase Price shall be paid on the Closing Date by wire
transfer of immediately available funds less any fees owed by the Company to
Purchaser or its affiliates.
(b) The Note and Warrant issued on the Closing Date shall be
dated the date thereof.
ARTICLE 3. PAYMENT TERMS OF NOTE
ARTICLE 3.1 Payment of Principal and Interest; Payment Mechanics . The
Company will pay all amounts due on each Note by the method and at the
address specified for such purpose by Purchaser in writing, without the
presentation or surrender of the Note or the making of any notation thereon,
except that upon written request of the Company made concurrently with or
reasonably promptly after payment or prepayment in full of the Note, the
holder shall surrender the Note for cancellation, reasonably promptly after
any such request, to the Company at its principal executive office. Prior
to any sale or other disposition of the Note, the holder thereof will, at
its election, either endorse thereon the amount of principal paid thereon
and the last date to which interest has been paid thereon or surrender the
Note to the Company in exchange for a new Note or Note. The Company will
afford the benefits of this Section 3.1 to any direct or indirect transferee
of the Note and that has made the same agreement relating to the Note as
Purchaser has in this Section 3.1; provided that such transferee is an
"accredited investor" as defined under Rule 501 of the Securities Act and
has delivered to the Company such representation, warranties and covenants
as may be reasonably requested thereby and such transfer has otherwise been
made in compliance with applicable securities laws.
ARTICLE 3.2 Payment of Interest . Interest shall accrue on the
outstanding principal amount of the Note as of the date of issuance and
shall be payable as specified therein.
ARTICLE 3.3 Intentionally Omitted .
ARTICLE 3.4 Mandatory Redemption . Upon (i) the occurrence of a Change
in Control, (ii) a transfer of all or substantially all of the assets of
the Company to any Person in a single transaction or series of related
transactions, or (iii) a consolidation, merger or amalgamation of the
Company with or into another Person in which the Company is not the
surviving entity (other than a merger which is effected solely to change
the jurisdiction of incorporation of the Company and results in a
reclassification, conversion or exchange of outstanding shares of Common
Stock solely into shares of Common Stock) (each of items (i), (ii) and
(iii) being referred to as a " Sale Event"), then, in each case, the Company
shall, upon request of the Majority Holders, redeem the Note and Warrant.
The redemption price payable upon any such redemption shall be (x) for the
Note, the outstanding principal amount, plus all accrued and unpaid interest
and (y) for the Warrant, the Redemption Price in Section 14 of the Warrant,
(each referred to herein as the "Formula Price").
ARTICLE 3.5 Redemption Procedures .
(a) Any permitted redemption of the Note and Warrant, as
applicable pursuant to Section 3.4 above shall be deemed to be
effective and consummated (for purposes of determining the Formula
Price) on the date of consummation of the applicable Sale Event.
(b) On the Maturity Date and on the effective date of a
redemption of the Note and Warrant as specified in Section 3.5(a)
above, the Company shall deliver by wire transfer of funds the
redemption price to Purchaser of the Note and Warrant subject to
redemption. Should Purchaser not receive payment of any amounts due on
redemption of its Note and Warrant by reason of the Company's failure
to make payment at the times prescribed above for any reason, the
Company shall pay to the applicable holder on demand (x) interest on
the sums not paid when due at an annual rate equal to 14%, until the
applicable holder is paid in full and (y) all costs of collection,
including, but not limited to, reasonable attorneys' fees and costs,
whether or not suit or other formal proceedings are instituted.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to Purchaser, as of the Closing
Date, the following:
ARTICLE 4.1 Organization and Qualification . The Company and each
Subsidiary is a corporation (or other legal entity) duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, with full power and authority to own, lease, use and operate
its properties and to carry on its business as and where now owned, leased,
used, operated and conducted. The Company is qualified to conduct business
as a foreign corporation and is in good standing in every jurisdiction in
which the nature of the business conducted by it makes such qualification
necessary, except where such failure would not have a Material Adverse
Effect. A " Material Adverse Effect" means any material adverse effect
on the operations, results of operations, properties, assets or condition
(financial or otherwise) of the Company or the Company and its Subsidiaries,
taken as a whole, or on the transactions contemplated hereby or by the
agreements or instruments to be entered into in connection herewith.
ARTICLE 4.2 Authorization and Execution .
(a) The Company has all requisite corporate power and authority
to enter into and perform each Transaction Agreement and to consummate
the transactions contemplated hereby and thereby and to issue the
Securities in accordance with the terms hereof and thereof.
(b) The execution, delivery and performance by the Company of
each Transaction Agreement and the issuance by the Company of the
Securities have been duly and validly authorized and no further
consent or authorization of the Company, its Board of Directors
or its shareholders is required.
(c) This Agreement has been duly executed and delivered by the
Company.
(d) This Agreement constitutes, and upon execution and delivery
thereof by the Company, each of the Transaction Agreements will
constitute, a valid and binding agreement of the Company, in each case
enforceable against the Company in accordance with its respective terms
subject to (i) applicable bankruptcy, insolvency or similar laws
affecting the enforceability of creditor's rights generally and (ii)
equitable principles of general applicability.
ARTICLE 4.3 Capitalization . As of the date hereof, the authorized,
issued and outstanding capital stock of the Company is as set forth on
Schedule 4.3 hereto and except as set forth on Schedule 4.3 no other shares
of capital stock of the Company will be outstanding as of the Closing Date.
All of such outstanding shares of capital stock are, or upon issuance will
be, duly authorized, validly issued, fully paid and nonassessable. No
shares of capital stock of the Company are subject to preemptive rights
or similar rights of the stockholders of the Company or any liens or
encumbrances imposed through the actions or failure to act of the Company.
Other than as set forth on Schedule 4.3 hereto, as of the date hereof,
(i) there are no outstanding options, warrants, scrip, rights to subscribe
for, puts, calls, rights of first refusal, agreements, understandings,
claims or other commitments or rights of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for any shares
of capital stock of the Company or any of its Subsidiaries, or arrangements
by which the Company or any of its Subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of its
Subsidiaries, and (ii) there are no agreements or arrangements under which
the Company or any of its Subsidiaries are obligated to register the sale of
any of its or their securities under the Securities Act (except as set forth
in that certain Registration Rights Agreement dated as of November 8, 2002
between the Company and Purchaser) and (iii) there are no anti-dilution or
price adjustment provisions contained in any security issued by the Company
(or in any agreement providing rights to security holders) that will be
triggered by the issuance of the Note. The Company has made available to
Purchaser true and correct copies of the Company's Corporate Documents, and
the terms of all securities convertible into or exercisable for Common Stock
and the material rights of the holders thereof in respect thereto.
ARTICLE 4.4 Governmental Authorization . The execution and delivery by
the Company of the Transaction Agreements does not and will not, the
issuance and sale by the Company of the Securities does not and will not,
and the consummation of the transactions contemplated hereby and by the
other Transaction Agreements will not, require any action by or in respect
of, or filing with, any governmental body, agency or governmental official
except (a) such actions or filings that have been undertaken or made prior
to the date hereof and that will be in full force and effect (or as to
which all applicable waiting periods have expired) on and as of the date
hereof or which are not required to be filed on or prior to the Closing
Date, (b) such actions or filings that, if not obtained, would not result
in a Material Adverse Effect, (c) the filing of a "Form D" as described in
Section 7.13 below, (d) the filing of one or more registration statements
covering the Securities and such registration statement being declared
effective and (e) compliance with applicable state securities laws
provisions.
ARTICLE 4.5 Issuance of Warrant Shares . Upon exercise of the Warrant
(assuming payment of the exercise price thereof), the Warrant Shares shall
be duly and validly issued and outstanding, fully paid and nonassessable,
free and clear of any Taxes, Liens and charges with respect to issuance and
shall not be subject to preemptive rights or similar rights of any other
stockholders of the Company. Assuming the representations and warranties of
Purchaser herein are true and correct in all material respects, each of the
Securities will have been issued in material compliance with all applicable
U.S. federal and state securities laws.
ARTICLE 4.6 No Conflicts . The execution and delivery by the Company
of the Transaction Agreements to which it is a party did not and will not,
the issuance and sale by the Company of the Securities did not and will not
and the consummation of the transactions contemplated hereby and by the
other Transaction Agreements will not, contravene or constitute a default
under or violation of (i) any provision of applicable law or regulation,
(ii) the Company Corporate Documents, (iii) any agreement, judgment,
injunction, order, decree or other instrument binding upon the Company or
any Subsidiary or any of their respective assets, or result in the creation
or imposition of any Lien on any asset of the Company or any Subsidiary.
Except as set forth on Schedule 4.6, the Company and each Subsidiary is
in compliance with and conforms to all statutes, laws, ordinances, rules,
regulations, orders, restrictions and all other legal requirements of any
domestic or foreign government or any instrumentality thereof having
jurisdiction over the conduct of its businesses or the ownership of its
properties, except where such failure would not have a Material Adverse
Effect.
ARTICLE 4.7 Financial Information . Since January 31, 2003, except as
disclosed in Schedule 4.7, there has been (x) no material adverse change
in the assets or liabilities, or in the business or condition, financial or
otherwise, or in the results of operations or prospects, of the Company and
its Subsidiaries and (y) no material adverse change in the assets or
liabilities, or in the business or condition, financial or otherwise, or in
the results of operations or prospects, of the Company and its subsidiaries
except in the ordinary course of business; and no fact or condition exists
or is contemplated or threatened which might cause such a change in the
future. The unaudited consolidated balance sheets of the Company and its
Subsidiaries for the periods ending January 31, 2003 and April 30, 2003,
respectively, and the related unaudited consolidated statements of income,
changes in stockholders' equity and changes in cash flows for the periods
then ended, including the footnotes thereto, except as indicated therein,
(i) complied in all material respects with applicable accounting
requirements and (ii) have been prepared in accordance with GAAP
consistently applied throughout the periods indicated, except that such
financial statements do not contain notes and may be subject to normal audit
adjustments and normal annual adjustments. Such financial statements fairly
present in all material respects the financial condition of the Company and
its Subsidiaries at the dates indicated and the consolidated results of
their operations and cash flows for the periods then ended and, except as
indicated therein, reflect all claims against and all Debts and liabilities
of the Company and its Subsidiaries, fixed or contingent.
ARTICLE 4.8 Litigation . Except as set forth on Schedule 4.8, there is
no action, suit or proceeding pending or, to the knowledge of the Company,
threatened against the Company or any Subsidiary, before any court or
arbitrator or any governmental body, agency or official in which there is
a reasonable possibility of an adverse decision which could be reasonably
expected to have a Material Adverse Effect or which challenges the validity
of any of the Transaction Agreements.
ARTICLE 4.9 Compliance with ERISA and other Benefit Plans .
(a) Each member of the ERISA Group has fulfilled its obligations under
the minimum funding standards of ERISA and the Code with respect to each
Plan and is in compliance in all material respects with the presently
applicable provisions of ERISA and the Code with respect to each Plan. No
member of the ERISA Group has (i) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (ii) failed
to make any required contribution or payment to any Plan or Multiemployer
Plan or in respect of any Benefit Arrangement, or made any amendment to any
Plan or Benefit Arrangement, which has resulted or could be reasonably
expected to result in the imposition of a Lien or the posting of a bond or
other security under ERISA or the Code or (iii) incurred any liability under
Title IV of ERISA other than a liability to the PBGC for premiums under
Section 4007 of ERISA.
(b) The benefit plans not covered under clause (a) above (including
profit sharing, deferred compensation, stock option, employee stock
purchase, bonus, retirement, health or insurance plans, collectively the"
Benefit Plans") relating to the employees of the Company are duly registered
where required by, and are in good standing in all material respects under,
all applicable laws. All required employer and employee contributions and
premiums under the Benefit Plans to the date hereof have been made, the
respective fund or funds established under the Benefit Plans are funded in
accordance with applicable laws, and no past service funding liabilities
exist thereunder.
(c) No Benefit Plans have any unfunded liabilities, either on a
"going concern" or "winding up" basis and determined in accordance with all
applicable laws and actuarial practices and using actuarial assumptions and
methods that are reasonable in the circumstances. No event has occurred and
no condition exists with respect to any Benefit Plans that has resulted or
could reasonably be expected to result in any pension plan having its
registration revoked or wound up (in whole or in part) or refused for the
purposes of any applicable laws or being placed under the administration of
any relevant pension benefits regulatory authority or being required to pay
any taxes or penalties (in any material amounts) under any applicable laws.
ARTICLE 4.10 Environmental Matters . The costs and liabilities
associated with Environmental Laws (including the cost of compliance
therewith) are unlikely to have a material adverse effect on the business,
condition (financial or otherwise), operations, performance, properties or
prospects of the Company or any Subsidiary. Each of the Company and the
Subsidiaries conducts its businesses in compliance in all material respects
with all applicable Environmental Laws.
ARTICLE 4.11 Taxes . Except at set forth on Schedule 4.11, all United
States federal, state, county, municipality, local or foreign income tax
returns and all other material tax returns (including foreign tax returns)
which are required to be filed by or on behalf of the Company and each
Subsidiary have been filed and all material taxes due pursuant to such
returns or pursuant to any assessment received by the Company and each
Subsidiary have been paid except those being disputed in good faith and for
which adequate reserves have been established. The charges, accruals and
reserves on the books of the Company and each Subsidiary in respect of taxes
and other governmental charges have been established in accordance with GAAP
and Regulation S-X.
ARTICLE 4.12 Investments, Joint Ventures . Other than as set forth in
Schedule 4.12, the Company has no Subsidiaries or other direct or indirect
Investment in any Person, and the Company is not a party to any partnership,
management, shareholders' or joint venture or similar agreement.
ARTICLE 4.13 Not an Investment Company . Neither the Company nor any
Subsidiary is an "Investment Company" within the meaning of Investment
Company Act of 1940, as amended.
ARTICLE 4.14 Full Disclosure . The information heretofore furnished
by the Company to Purchaser for purposes of or in connection with this
Agreement or any transaction contemplated hereby does not, and all such
information hereafter furnished by the Company or any Subsidiary to
Purchaser will not (in each case taken together and on the date as of which
such information is furnished), contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements contained therein, in the light of the circumstances under which
they are made, not misleading.
ARTICLE 4.15 No Solicitation; No Integration with Other Offerings . No
form of general solicitation or general advertising (as such terms are
defined by the Securities Act) was used by the Company or, to the best of
its actual knowledge, any other Person acting on behalf of the Company, in
connection with the offer and sale of the Securities. Except as set forth
on Schedule 4.15, neither the Company, nor, to its knowledge, any Person
acting on behalf of the Company, has, either directly or indirectly, sold or
offered for sale to any Person (other than Purchaser) any of the Securities
or, within the six months prior to the date hereof, any other similar
security of the Company except as contemplated by this Agreement, and the
Company represents that neither itself nor any Person authorized to act on
its behalf (except that the Company makes no representation as to Purchaser
and any of its Affiliates) will sell or offer for sale any such security to,
or solicit any offers to buy any such security from, or otherwise approach
or negotiate in respect thereof with, any Person or Persons so as thereby to
cause the issuance or sale of any of the Securities to be in violation of
any of the provisions of Section 5 of the Securities Act. To the best
knowledge of the Company, the issuance of the Securities to Purchaser will
not be integrated with any other issuance of the Company's securities (past,
current or future) which requires stockholder approval under the rules of
the OTC Bulletin Board.
ARTICLE 4.16 Permits . (a) Each of the Company and its Subsidiaries has
all material Permits; (b) all such Permits are in full force and effect, and
each of the Company and its Subsidiaries has fulfilled and performed all
material obligations with respect to such Permits; (c) to the knowledge of
the Company, no event has occurred which allows, or after notice of lapse of
time would allow, revocation or termination by the issuer thereof or which
results in any other material impairment of the rights of the holder of
any such Permit; and (d) the Company has no reason to believe that any
governmental body or agency is considering limiting, suspending or revoking
any such Permit.
ARTICLE 4.17 Leases . Except as otherwise set forth in the Company's
Consolidated balance sheet for the period ending April 30, 2003, neither the
Company nor any Subsidiary is a party to any capital lease obligation with
a value greater than $250,000 or to any operating lease with an aggregate
annual rental greater than $250,000 during the life of such lease.
ARTICLE 4.18 Absence of Any Undisclosed Liabilities . There are no
liabilities of the Company or any Subsidiary of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, and
there is no existing condition, situation or set of circumstances which
would reasonably be expected to result in such a liability, other than
(i) those liabilities provided for in the financial statements delivered
pursuant to Section 4.7 and (ii) other undisclosed liabilities which,
individually or in the aggregate, would not have a Material Adverse Effect.
ARTICLE 4.19 Public Utility Holding Company . Neither the Company nor
any Subsidiary is, or will be upon issuance and sale of the Securities and
the use of the proceeds described herein, subject to regulation under the
Public Utility Holding Company Act of 1935, as amended, the Federal Power
Act, the Interstate Commerce Act or to any federal or state statute or
regulation limiting its ability to issue and perform its obligations under
any Transaction Agreement.
ARTICLE 4.20 Intellectual Property Rights . Each of the Company and its
Subsidiaries owns, or is licensed under, and has the rights to use, all
material patents, trademarks, trade names, copyrights, technology, know-how
and processes (collectively, " Intellectual Property") used in, or necessary
for the conduct of its business; except as set forth on Schedule 4.20, no
claims have been asserted by any Person to the use of any such Intellectual
Property or challenging or questioning the validity or effectiveness of any
license or agreement related thereto. To the best of Company's and its
Subsidiaries' knowledge, there is no valid basis for any such claim and the
use of such Intellectual Property by the Company and its Subsidiaries will
not infringe upon the rights of any Person.
ARTICLE 4.21 Insurance . Except as set forth on Schedule 4.21, the
Company and its Subsidiaries maintain, with financially sound and reputable
insurance companies, insurance in at least such amounts and against such
risks such that any uninsured loss would not have a Material Adverse Effect.
All insurance coverages of the Company and its Subsidiaries are in full
force and effect and there are no past due premiums in respect of any such
insurance.
ARTICLE 4.22 Title to Properties . Except as set forth on Schedule
4.22, the Company and its Subsidiaries have good and marketable title to
all their respective properties free and clear of all Liens.
ARTICLE 4.23 Internal Accounting Controls . The Company and each of its
Subsidiaries maintain a system of internal accounting controls sufficient,
in the judgment of the Company's Board of Directors, to provide reasonable
assurance that (i) transactions are executed in accordance with managements'
general or specific authorizations, (ii) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with GAAP and to maintain asset accountability, (iii) access to assets
is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
ARTICLE 4.24 Foreign Practices . Neither the Company nor any of its
Subsidiaries nor, to the Company's knowledge, any employee or agent of the
Company or any Subsidiary has made any payments of funds of the Company or
Subsidiary, or received or retained any funds, in each case in violation of
any law, rule or regulation.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PURCHASER
ARTICLE 5.1 Purchaser . Purchaser hereby represents and warrants to
the Company that:
(a) Purchaser is an "accredited investor" within the meaning of
Rule 501(a) under the Securities Act and the Securities to be acquired
by it pursuant to this Agreement are being acquired for its own account
and, not with a view toward, or for sale in connection with, any
distribution thereof except in compliance with applicable United States
federal and state securities law;
(b) the execution, delivery and performance of this Agreement and
the purchase of the Securities pursuant thereto are within Purchaser's
corporate or partnership powers, as applicable, and have been duly and
validly authorized by all requisite corporate or partnership action;
and no further consent or authorization by the Purchaser, or its
partners is required;
(c) this Agreement has been duly executed and delivered by
Purchaser;
(d) the execution and delivery by Purchaser of the Transaction
Agreements to which it is a party does not, and the consummation of the
transactions contemplated hereby and thereby will not, contravene or
constitute a default under or violation of (i) any provision of
applicable law or regulation, or (ii) any agreement, judgment,
injunction, order, decree or other instrument binding upon Purchaser;
(e) Purchaser understands that the Securities have not been
registered under the Securities Act and may not be transferred or sold
except as specified in this Agreement or the remaining Transaction
Agreements;
(f) this Agreement constitutes a valid and binding agreement of
Purchaser enforceable in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency or similar laws affecting the
enforceability of creditors rights generally and (ii) equitable
principles of general applicability;
(g) Purchaser has such knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks
of its investment in the Securities and Purchaser is capable of bearing
the economic risks of such investment;
(h) Purchaser is knowledgeable, sophisticated and experienced
in business and financial matters; Purchaser fully understands the
limitations on transfer described herein; Purchaser has been afforded
access to information about the Company and the financial condition,
results of operations, property, management and prospects of the
Company sufficient to enable it to evaluate its investment in the
Securities; Purchaser has been afforded the opportunity to ask such
questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of
the offering of the Securities and the merits and the risks of
investing in the Securities; and Purchaser has been afforded the
opportunity to obtain such additional information which the Company
possesses or can acquire that is necessary to verify the accuracy and
completeness of the information given to Purchaser concerning the
Company. The foregoing does not in any way relieve the Company of its
representations and other undertakings hereunder, and shall not limit
Purchaser's ability to rely thereon;
(i) no part of the source of funds used by Purchaser to acquire
the Securities constitutes assets allocated to any separate account
maintained by Purchaser in which any employee benefit plan (or its
related trust) has any interest;
(j) Purchaser is not a U.S. Person as such term is defined in
Rule 902 of the Securities Act and is not acquiring the Securities for
the account or benefit of any such U.S. Person;
(k) Purchaser agrees to resell such Securities in accordance with
the provisions of Regulation S (Rule 901 through 905; and Preliminary
Notes) of the Securities Act, pursuant to registration under the
Securities Act, or pursuant to an available exemption; and agrees that
the Company must refuse to register any transfer of the Securities not
made in accordance with the foregoing requirements; and
(l) Purchaser agrees not to engage in hedging transactions with
regard to such Securities unless in compliance with the Securities Act.
ARTICLE 6. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES
ARTICLE 6.1 Conditions Precedent to Purchaser's Obligations to Purchase
. The obligation of Purchaser hereunder to purchase the Note at the Closing
is subject to the satisfaction, on or before the Closing Date, of each of
the following conditions, provided that these conditions are for Purchaser's
sole benefit and may be waived by Purchaser at any time in its sole
discretion:
(a) The Company shall have duly executed this Agreement, the Note
and the Warrant, and delivered the same to Purchaser;
(b) The Company shall have delivered to Purchaser duly executed
certificates representing the Note and Warrant in accordance with
Section 2.3 hereof;
(c) The Company shall have delivered the Solvency Certificate;
(d) The representations and warranties of the Company contained
in each Transaction Agreement shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though
made at such time (except for representations and warranties that speak
as of a specified date) and the Company shall have performed, satisfied
and complied with all covenants, agreements and conditions required by
such Transaction Agreements to be performed, satisfied or complied with
by it at or prior to the Closing Date. Purchaser shall have received
an Officer's Certificate executed by the chief executive officer of the
Company, dated as of the Closing Date, to the foregoing effect and as
to such other matters as may be reasonably requested by Purchaser,
including but not limited to certificates with respect to the Company
Corporate Documents, resolutions relating to the transactions
contemplated hereby and the incumbencies of certain officers and
directors of the Company. The form of such certificate is attached
hereto as Exhibit D;
(e) Except as set forth in Section 4.4 of this Agreement, the
Company shall have received all governmental, Board of Directors,
shareholders and third party consents and approvals necessary or
desirable in connection with the issuance and sale of the Securities
and the consummation of the transactions contemplated by the
Transaction Agreements;
(f) All applicable waiting periods in respect to the issuance and
sale of the Securities shall have expired without any action having
been taken by any competent authority that could restrain, prevent or
impose any materially adverse conditions thereon or that could seek or
threaten any of the foregoing;
(g) No law or regulation shall have been imposed or enacted that,
in the judgment of Purchaser, could adversely affect the transactions
set forth herein or in the other Transaction Agreements, and no law or
regulation shall have been proposed that in the reasonable judgment of
Purchaser could reasonably have any such effect;
(h) Purchaser shall have received an opinion, dated the Closing
Date, of counsel to the Company, in form and substance reasonably
satisfactory to Purchaser;
(i) All fees and expenses due and payable by the Company prior
to the Closing Date shall have been paid; provided that, all fees and
expenses due and payable on the Closing Date to Purchaser shall be
subtracted from the payment of the Purchase Price;
(j) The Company Corporate Documents and the Subsidiary Corporate
Documents, if any, shall be in full force and effect and no term or
condition thereof shall have been amended, waived or otherwise modified
without the prior written consent of Purchaser;
(k) There shall have occurred no material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Company or any Subsidiary (other than
with respect to the Company's German subsidiary) since January 31,
2003;
(l) There shall exist no action, suit, investigation, litigation
or proceeding pending or threatened in any court or before any
arbitrator or governmental instrumentality that challenges the validity
of or purports to affect this Agreement or any other Transaction
Agreement, or other transaction contemplated hereby or thereby or that
could reasonably be expected to have a Material Adverse Effect, or any
material adverse effect on the enforceability of the Transaction
Agreements or the Securities or the rights of the holders of the
Securities or Purchaser hereunder;
(m) There shall not have occurred any disruption or adverse
change in the financial or capital markets generally, or in the market
for the Common Stock (including but not limited to any suspension or
delisting), which Purchaser reasonably deems material in connection
with the purchase of the Securities;
(n) Immediately before and on the Closing Date, no Default or
Event of Default shall have occurred and be continuing;
(o) Purchaser shall have received all other opinions,
resolutions, certificates, instruments, agreements or other documents
as they shall reasonably request; and
(p) Company shall have delivered to Purchaser the Use of Proceeds
Schedule 7.8.
ARTICLE 6.2 Conditions to the Company's Obligations . The obligations
of the Company to issue and sell the Securities to Purchaser pursuant to
this Agreement are subject to the satisfaction, at or prior to the Closing
Date, of the following conditions:
(a) The representations and warranties of Purchaser contained
herein shall be true and correct in all material respects on the
Closing Date and Purchaser shall have performed and complied in all
material respects with all agreements required by this Agreement to
be performed or complied with by Purchaser at or prior to the Closing
Date;
(b) The issue and sale of the Securities by the Company shall
not be prohibited by any applicable law, court order or governmental
regulation;
(c) Receipt by the Company of duly executed counterparts of this
Agreement signed by Purchaser;
(d) The Company shall have received payment of Purchase Price,
less the Put of Pocket Expense Fee.
ARTICLE 7. AFFIRMATIVE COVENANTS
The Company hereby agrees that, from and after the date hereof for so
long as the Note remains outstanding and for the benefit of Purchaser:
ARTICLE 7.1 Information . The Company will deliver to each holder of
the Note:
(a) promptly upon the filing thereof, copies of (i) all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent), and (ii) all
reports of Forms 10-K, 10-Q and 8-K (or other equivalents) which the
Company or any Subsidiary files with the Commission following the date
of this Agreement (collectively, "SEC Reports");
(b) simultaneously with the delivery of each item referred to in
clause (a) above, a certificate from the chief financial officer of the
Company stating that no Default or Event of Default has occurred and is
continuing, or, if as of the date of such delivery a Default shall have
occurred and be continuing, a certificate from the Company setting
forth the details of such Default or Event of Default and the action
which the Company is taking or proposes to take with respect thereto;
(c) within two (2) days after any officer of the Company obtains
knowledge of a Default or Event of Default, or that any Person has
given any notice or taken any action with respect to a claimed Default
hereunder, a certificate of the chief financial officer of the Company
setting forth the details thereof and the action which the Company is
taking or proposed to take with respect thereto;
(d) promptly upon the mailing thereof to the shareholders of
the Company generally, copies of all financial statements, reports and
proxy statements so mailed and any other document generally distributed
to shareholders;
(e) at least two (2) Business Days prior to the consummation of
any Financing or other event requiring a repayment of the Note under
Section 3.4, notice thereof together with a summary of all material
terms thereof and copies of all documents and instruments associated
therewith; and
(f) promptly following the commencement thereof, notice and a
description in reasonable detail of any litigation or proceeding to
which the Company or any Subsidiary is a party in which the amount
involved is $250,000 or more and not covered by insurance or in which
injunctive or similar relief is sought.
ARTICLE 7.2 Payment of Obligations . The Company will, and except as
set forth on Schedule 7.2, will cause each Subsidiary to, pay and discharge,
at or before maturity, all their respective material obligations, including,
without limitation, tax liabilities, except where the same may be contested
in good faith by appropriate proceedings and will maintain, in accordance
with GAAP, appropriate reserves for the accrual of any of the same.
ARTICLE 7.3 Maintenance of Property; Insurance . The Company will, and
will cause each Subsidiary to, keep all property useful and necessary in
its business in good working order and condition, ordinary wear and tear
excepted. In addition, the Company and each Subsidiary will maintain
insurance in at least such amounts and against such risks as it has insured
against as of the Closing Date.
ARTICLE 7.4 Maintenance of Existence . The Company will, and except as
set forth on Schedule 7.4, the will cause each Subsidiary to, continue to
engage in business of the same general type as now conducted by the Company
and such Subsidiaries, and will preserve, renew and keep in full force and
effect its respective corporate existence and their respective material
rights, privileges and franchises necessary or desirable in the normal
conduct of business.
ARTICLE 7.5 Compliance with Laws . The Company will, and will cause
each Subsidiary to, comply, in all material respects, with all federal,
state, municipal, local or foreign applicable laws, ordinances, rules,
regulations, municipal by-laws, codes and requirements of governmental
authorities (including, without limitation, Environmental Laws and ERISA and
the rules and regulations thereunder) except (i) where compliance therewith
is contested in good faith by appropriate proceedings or (ii) where non-
compliance therewith could not reasonably be expected, in the aggregate,
to have a material adverse effect on the business, condition (financial or
otherwise), operations, performance, properties or prospects of the Company
or such Subsidiary.
ARTICLE 7.6 Inspection of Property, Books and Records . The Company
will, and will cause each Subsidiary to, keep proper books of record
and account in which full, true and correct entries shall be made of all
dealings and transactions in relation to their respective businesses and
activities; and will permit, during normal business hours, Purchaser or
its designated representative to visit and inspect any of their respective
properties, upon reasonable prior notice, to examine and make abstracts from
any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective executive officers and
independent public accountants (and by this provision the Company authorizes
its independent public accountants to disclose and discuss with Purchaser
the affairs, finances and accounts of the Company and its Subsidiaries in
the presence of a representative of the Company; provided, however, that
such discussions will not result in any unreasonable expense to the Company,
without Company consent), all at such reasonable times.
ARTICLE 7.7 Investment Company Act . The Company will not be or become
an open-end investment trust, unit investment trust or face-amount
certificate company that is or is required to be registered under Section 8
of the Investment Company Act of 1940, as amended.
ARTICLE 7.8 Use of Proceeds . The proceeds from the issuance and sale
of the Note by the Company shall be used in accordance with Schedule 7.8
attached hereto. None of the proceeds from the issuance and sale of the
Note by the Company pursuant to this Agreement will be used directly or
indirectly for the purpose, whether immediate, incidental or ultimate, of
purchasing or carrying any "margin stock" within the meaning of Regulation G
of the Board of Governors of the Federal Reserve System.
ARTICLE 7.9 Compliance with Terms and Conditions of Material Contracts.
The Company will, and except as set forth on Schedule 7.9, will cause
each Subsidiary to, comply, in all respects, with all terms and conditions
of all material contracts to which it is subject.
ARTICLE 7.10 Reserved Shares and Listings .
(a) The Company shall at all times have authorized, and reserved for
the purpose of issuance, a sufficient number of shares of Common Stock to
provide for the full exercise of the Warrant (the "Reserved Amount"). The
Company shall not reduce the Reserved Amount without the prior written
consent of Purchaser. If at any time the number of shares of Common Stock
authorized and reserved for issuance is below the Reserved Amount, the
Company will promptly take all corporate action necessary to authorize and
reserve a sufficient number of shares.
(b) The Company will maintain the listing and trading of its Common
Stock on the OTC Bulletin Board. The Company will comply in all material
respects with the Company's reporting, filing and other obligations under
the bylaws or rules of the National Association of Securities Dealers, Inc.
(the "NASD") and such exchanges, as applicable. The Company shall promptly
provide to Purchaser copies of any notices it receives regarding the
continued eligibility of the Common Stock for listing on the OTC Bulletin
Board.
ARTICLE 7.11 Transfer Agent Instructions . Upon receipt of Notice of
Exercise, the Company shall immediately direct the Company's transfer agent
to issue certificates, registered in the name of Purchaser or its nominee,
for the Warrant Shares, in such amounts as specified from time to time by
Purchaser to the Company upon proper exercise of the Warrant. Upon exercise
of the Warrant in accordance with its terms, the Company will, and will use
its best lawful efforts to cause its transfer agent to, issue one or more
certificates representing shares of Common Stock in such name or names and
in such denominations specified by a Purchaser in a Notice of Exercise. The
Company further warrants and agrees that no instructions other than these
instructions have been or will be given to its transfer agent. Nothing in
this Section 7.11 shall affect in any way a Purchaser's obligation to comply
with all securities laws applicable to Purchaser upon resale of such shares
of Common Stock, including any prospectus delivery requirements.
ARTICLE 7.12 Maintenance of Reporting Status; Supplemental Information .
So long as any of the Securities are outstanding, the Company shall timely
file all reports required to be filed with the Commission pursuant to the
Exchange Act. The Company shall not terminate its status as an issuer
required to file reports under the Exchange Act, even if the Exchange Act or
the rules and regulations thereunder would permit such termination. If at
anytime the Company is not subject to the requirements of Section 13 or
15(d) of the Exchange Act, the Company will promptly furnish at its expense,
upon request, for the benefit of the holders from time to time of
Securities, and prospective purchasers of Securities, information satisfying
the information requirements of Rule 144 under the Securities Act.
ARTICLE 8. NEGATIVE COVENANTS
The Company hereby agrees that after the date hereof for so long as the
Note remains outstanding and for the benefit of Purchaser:
ARTICLE 8.1 Limitations on Debt or Other Liabilities . Neither the
Company nor any Subsidiary will create, incur, assume or suffer to exist (at
any time after the Closing Date, after giving effect to the application of
the proceeds of the issuance of the Securities), without the prior written
consent of Purchaser, any Debt except (x) Debt incurred in a Permitted
Financing, (y) Debt incurred in connection with equipment leases to which
the Company or its Subsidiaries are a party incurred in the ordinary course
of business; and (z) Debt incurred in connection with trade accounts
payable, imbalances and refunds arising in the ordinary course of business.
ARTICLE 8.2 Transactions with Affiliates . The Company and each
Subsidiary will not, directly or indirectly, pay any funds to or for the
account of, make any investment (whether by acquisition or stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, and Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect any transaction in
connection with any joint enterprise or other joint arrangement with, any
Affiliate, except, (1) pursuant to those agreements specifically identified
on Schedule 8.2 attached hereto (with a copy of such agreements annexed to
such Schedule 8.2) and (2) on terms to the Company or such Subsidiary no
less favorable than terms that could be obtained by the Company or such
Subsidiary from a Person that is not an Affiliate of the Company upon
negotiation at arms' length, as determined in good faith by the Board of
Directors of the Company; provided that no determination of the Board of
Directors shall be required with respect to any such transactions entered
into in the ordinary course of business.
ARTICLE 8.3 Merger or Consolidation . The Company will not, in a
single transaction or a series of related transactions (i) consolidate with
or merge with or into any other Person, or (ii) permit any other Person to
consolidate with or merge into it, unless the Company shall be the survivor
of such merger or consolidation and (x) immediately before and immediately
after given effect to such transaction (including any indebtedness incurred
or anticipated to be incurred in connection with the transaction), no
Default or Event of Default shall have occurred and be continuing; and (y)
the Company has delivered to Purchaser an Officer's Certificate stating that
such consolidation, merger or transfer complies with this Agreement, and
that all conditions precedent in this Agreement relating to such transaction
have been satisfied.
ARTICLE 8.4 Limitation on Asset Sales . Neither the Company nor any
Subsidiary will consummate an Asset Sale of material assets of the Company
or any Subsidiary without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld. As used herein, "Asset Sale"
means any sale, lease, transfer or other disposition (or series of related
sales, leases, transfers or dispositions) or sales of capital stock of a
Subsidiary (other than directors' qualifying shares), property or other
assets (each referred to for the purpose of this definition as a
"disposition"), including any disposition by means of a merger,
consolidation or similar transaction other than a disposition of property
or assets at fair market value in the ordinary course of business.
ARTICLE 8.5 Restrictions on Certain Amendments . Neither the Company
nor any Subsidiary will waive any provision of, amend, or suffer to be
amended, any provision of such entity's existing Debt, any material contract
or agreement previously or hereafter filed by the Company with the
Commission as part of its SEC Reports, any Company Corporate Document or
Subsidiary Corporate Document if such amendment, in the Company's reasonable
judgment, would materially adversely affect Purchaser or the holders of the
Securities without the prior written consent of Purchaser.
ARTICLE 8.6 Limitation on Stock Repurchases . Except as otherwise set
forth in the Note and the Warrant, the Company shall not, without the
written consent of the Majority Holders, redeem, repurchase or otherwise
acquire (whether for cash or in exchange for property or other securities or
otherwise) any shares of capital stock of the Company or any Warrant, rights
or options to purchase or acquire any such shares.
ARTICLE 9. RESTRICTIVE LEGENDS
ARTICLE 9.1 Restrictions on Transfer . From and after their respective
dates of issuance, none of the Securities shall be transferable except upon
the conditions specified in this Article IX, which conditions are intended
to ensure compliance with the provisions of the Securities Act in respect of
the Transfer of any of such Securities or any interest therein. Purchaser
will use its best efforts to cause any proposed transferee of any Securities
held by it to agree to take and hold such Securities subject to the
provisions and upon the conditions specified in this Article IX.
ARTICLE 9.2 Legends. The Note and Warrant shall bear restrictive
legends in accordance with applicable securities laws. The Conversion
Shares, upon resale by the Purchaser pursuant to the Registration Statement,
shall be freely tradeable and unrestricted.
ARTICLE 9.3 Notice of Proposed Transfers . Prior to any proposed
Transfer of the Securities (other than a Transfer (i) registered or exempt
from registration under the Securities Act, (ii) to an affiliate of a
Purchaser which is an "accredited investor" within the meaning of Rule
501(a) under the Securities Act, provided that any such transferee shall
agree to be bound by the terms of this Agreement and the Registration Rights
Agreement, or (iii) to be made in reliance on Rule 144 under the Securities
Act), the holder thereof shall give written notice to the Company of such
holder's intention to effect such Transfer, setting forth the manner and
circumstances of the proposed Transfer, which shall be accompanied by (a) an
opinion of counsel reasonably acceptable to the Company, confirming that
such transfer does not give rise to a violation of the Securities Act, (B)
representation letters in form and substance reasonably satisfactory to the
Company to ensure compliance with the provisions of the Securities Act and
(C) letters in form and substance reasonably satisfactory to the Company
from each such transferee stating such transferee's agreement to be bound
by the terms of this Agreement and the Registration Rights Agreement. Such
proposed Transfer may be effected only if the Company shall have received
such notice of transfer, opinion of counsel, representation letters and
other letters referred to in the immediately preceding sentence, 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.
ARTICLE 10. ADDITIONAL AGREEMENTS AMONG THE PARTIES
ARTICLE 10.1 Liquidated Damages .
(a) The Company shall cause its transfer agent to, issue and
deliver shares of Common Stock consistent with Section 7.11 hereof
within three (3) New York Stock Exchange Trading Days of delivery of
Notice of Exercise, (the "Deadline") to Purchaser (or any party
receiving Securities by transfer from Purchaser) at the address of
Purchaser set forth in the Notice of Exercise. The Company understands
that a delay in the issuance of such certificates after the Deadline
could result in economic loss to Purchaser.
(b) Without in any way limiting Purchaser's right to pursue other
remedies, including actual damages and/or equitable relief, the Company
agrees that if delivery of the Conversion Shares is more than one (1)
Business Day after the Deadline the Company shall pay to Purchaser, as
liquidated damages and not as a penalty, $500 for each day that the
Company fails to deliver such Common Stock. Such cash amount shall be
paid to Purchaser upon demand.
ARTICLE 10.2 Intentionally Omitted .
ARTICLE 10.3 Intentionally Omitted .
ARTICLE 10.4 Registration Rights . Upon a Payment Default on the Note,
the Warrant Shares and any shares issuable upon conversion of the 2004 6%
Debentures into which the Note is exchanged shall have the registration
rights set forth in that certain Registration Rights Agreement dated as
of November 8, 2002 between the Company and Purchaser.
ARTICLE 11. ADJUSTMENT OF FIXED PRICE
ARTICLE 11.1 Reorganization . The exercise price of the Warrant
(collectively, the "Fixed Price") shall be adjusted, as applicable, as
hereafter provided.
ARTICLE 11.2 Share Reorganization . If and whenever the Company shall:
(i) subdivide the outstanding shares of Common Stock into a
greater number of shares;
(ii) consolidate the outstanding shares of Common Stock into a
smaller number of shares;
(iii) issue Common Stock or securities convertible into or
exchangeable for shares of Common Stock as a stock dividend to all or
substantially all the holders of Common Stock; or
(iv) make a distribution on the outstanding Common Stock to all or
substantially all the holders of Common Stock payable in Common Stock
or securities convertible into or exchangeable for Common Stock;
any of such events being herein called a "Share Reorganization," then in
each such case the applicable Fixed Price shall be adjusted, effective
immediately after the record date at which the holders of Common Stock are
determined for the purposes of the Share Reorganization or, if no record
date is fixed, the effective date of the Share Reorganization, by
multiplying the applicable Fixed Price in effect on such record or
effective date, as the case may be, by a fraction of which:
(i) the numerator shall be the number of shares of Common Stock
outstanding on such record or effective date (without giving effect to
the transaction); and
(II) the denominator shall be the number of shares of Common Stock
outstanding after giving effect to such Share Reorganization,
including, in the case of a distribution of securities convertible into
or exchangeable for shares of Common Stock, the number of shares of
Common Stock that would have been outstanding if such securities had
been converted into or exchanged for Common Stock on such record or
effective date.
ARTICLE 11.3 Capital Reorganization . If and whenever there shall occur:
(i) a reclassification or redesignation of the shares of Common
Stock or any change of the shares of Common Stock into other shares,
other than in a Share Reorganization;
(ii) a consolidation, merger or amalgamation of the Company with,
or into another body corporate; or
(iii) the transfer of all or substantially all of the assets
of the Company to another body corporate;
(any such event being herein called a "Capital Reorganization"), then in
each such case the holder who exercises the right to convert Note after the
effective date of such Capital Reorganization shall be entitled to receive
and shall accept, upon the exercise of such right, in lieu of the number of
shares of Common Stock to which such holder was theretofore entitled upon
the exercise of the conversion privilege, the aggregate number of shares
or other securities or property of the Company or of the body corporate
resulting from such Capital Reorganization that such holder would have been
entitled to receive as a result of such Capital Reorganization if, on the
effective date thereof, such holders had been the holder of the number of
shares of Common Stock to which such holder was theretofore entitled upon
conversion; provided, however, that no such Capital Reorganization shall be
consummated in effect unless all necessary steps shall have been taken so
that such holders shall thereafter be entitled to receive such number of
shares or other securities of the Company or of the body corporate resulting
from such Capital Reorganization, subject to adjustment thereafter in
accordance with provisions the same, as nearly as may be possible, as those
contained above.
ARTICLE 11.4 Adjustment Rules . The following rules and procedures shall
be applicable to adjustments made in this Article XI:
(a) no adjustment in the applicable Fixed Price shall be required
unless such adjustment would result in a change of at least 1% in the
applicable Fixed Price then in effect, provided, however, that any
adjustments which, but for the provisions of this clause would
otherwise have been required to be made, shall be carried forward and
taken into account in any subsequent adjustment;
(b) if any event occurs of the type contemplated by the
adjustment provisions of this Article XI but not expressly provided
for by such provisions, the Company will give notice of such event as
provided herein, and the Company's board of directors will make an
appropriate adjustment in the Fixed Price so that the rights of the
holders of the applicable Security shall not be diminished by such
event; and
(c) if a dispute shall at any time arise with respect to any
adjustment of the applicable Fixed Price, such dispute shall be
conclusively determined by the auditors of the Company or, if they
are unable or unwilling to act, by a firm of independent chartered
accountants selected by the Directors and any such determination shall
be binding upon the Company and Purchaser.
ARTICLE 11.5 Certificate as to Adjustment . The Company shall from time
to time promptly after the occurrence of any event which requires an
adjustment in the applicable Fixed Price deliver to Purchaser a certificate
specifying the nature of the event requiring the adjustment, the amount of
the adjustment necessitated thereby, the applicable Fixed Price after giving
effect to such adjustment and setting forth, in reasonable detail, the
method of calculation and the facts upon which such calculation is based.
ARTICLE 11.6 Notice to Holders . If the Company shall fix a record date
for:
(a) any Share Reorganization (other than the subdivision of
outstanding Common Stock into a greater number of shares or the
consolidation of outstanding Common Stock into a smaller number of
shares),
(b) any Capital Reorganization (other than a reclassification or
redesignation of the Common Stock into other shares),
(c) Sale Event; or
(d) any cash dividend,
the Company shall, not less than 10 days prior to such record date or, if
no record date is fixed, prior to the effective date of such event, give to
Purchaser notice of the particulars of the proposed event or the extent that
such particulars have been determined at the time of giving the notice.
ARTICLE 12. EVENTS OF DEFAULT
ARTICLE 12.1 Events of Default. If one or more of the following events
(each an "Event of Default") shall have occurred and be continuing:
(a) failure by the Company to pay or repay when due, all or any
part of the principal on the Note (whether by virtue of the agreements
specified in this Agreement or the Note);
(b) failure by the Company to pay (i) within five (5) Business
Days of the due date thereof any interest on the Note;
(c) failure on the part of the Company to observe or perform any
covenant contained in Article VIII of this Agreement;
(d) failure on the part of the Company to observe or perform any
covenant or agreement contained in any Transaction Agreement (other
than those covered by clauses (a), (b), (c), or (d) above) for 30 days
from the date of such occurrence;
(e) following the 152nd day of this Agreement, the trading in the
Common Stock shall have been suspended by the Commission, OTC Bulletin
Board or any National Market (except for any suspension of trading of
limited duration solely to permit dissemination of material information
regarding the Company and except if, at the time there is any
suspension on any National Market, the Common Stock is then listed
and approved for trading on another National Market within ten (10)
Trading Days thereof);
(f) following the 152nd day of this Agreement, the Company shall
have its Common Stock delisted from the OTC Bulletin Board or a
National Market for at least ten (10) consecutive Trading Days and is
unable to obtain a listing on a National Market within such ten (10)
Trading Days;
(g) the Company or, except with regard to the Company's German
subsidiary, any Subsidiary has commenced a voluntary case or other
proceeding seeking liquidation, winding-up, reorganization or other
relief with respect to itself or its debts under any bankruptcy,
insolvency, moratorium or other similar law now or hereafter in
effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of
its property, or has consented to any such relief or to the appointment
of or taking possession by any such official in an involuntary case or
other proceeding commenced against it, or has made a general assignment
for the benefit of creditors, or has taken any corporate action to
authorize any of the foregoing;
(h) an involuntary case or other proceeding has been commenced
against the Company or any Subsidiary seeking liquidation, winding-up,
reorganization or other relief with respect to it or its debts under
any bankruptcy, insolvency, moratorium or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days, or an order for relief has been entered against the Company or
any Subsidiary under the federal bankruptcy laws as now or hereafter
in effect;
(i) default in any payment provision or any agreement governing
the terms of any Debt of the Company or any Subsidiary (except with
respect to the Company's German subsidiary) in excess of $1,000,000,
which has not been cured within any applicable period of grace
associated therewith;
(j) judgments or orders for the payment of money which in the
aggregate at any one time exceed $1,000,000 and are not covered by
insurance have been rendered against the Company or any Subsidiary by
a court of competent jurisdiction and such judgments or orders shall
continue unsatisfied and unstayed for a period of 60 days; or
(k) any representation, warranty, certification or statement made
by the Company in any Transaction Agreement or which is contained in
any certificate, document or financial or other statement furnished at
any time under or in connection with any Transaction Agreement shall
prove to have been untrue in any material respect when made, resulting
in a Material Adverse Effect.
then, and in every such occurrence, Purchaser may, with respect to an Event
of Default specified in paragraphs (a) or (b), and the Majority Holders may,
with respect to any other Event of Default, by notice to the Company,
declare the Note to be, and the Note shall thereon become immediately due
and payable; provided that in the case of any of the Events of Default
specified in paragraph (j) or (k) above with respect to the Company or any
Subsidiary, then, without any notice to the Company or any other act by
Purchaser, the entire amount of the Note shall become immediately due and
payable, provided, further, if any Event of Default has occurred and is
continuing, and irrespective of whether any Note has been declared
immediately due and payable hereunder, any Purchaser of Note may proceed
to protect and enforce the rights of Purchaser by an action at law, suit in
equity or other appropriate proceeding, whether for the specific performance
of any agreement contained herein or in any Note, or for an injunction
against a violation of any of the terms hereof or thereof, or in aid of the
exercise of any power granted hereby or thereby or by law or otherwise, and
provided further, in the case of any Event of Default, the amount declared
due and payable on the Note shall be the Formula Price.
ARTICLE 12.2 Powers and Remedies Cumulative . No right or remedy herein
conferred upon or reserved to Purchaser is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy. Every power and remedy given by the Note
or by law may be exercised from time to time, and as often as shall be
deemed expedient, by Purchaser.
ARTICLE 13. MISCELLANEOUS
ARTICLE 13.1 Notices . All notices, demands and other communications to
any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party at its address set forth on the
signature pages hereof, or such other address as such party may hereafter
specify for the purpose to the other parties. Each such notice, demand or
other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified on the signature
page hereof, (ii) if given by mail, four days after such communication
is deposited in the mail with first class postage prepaid, addressed as
aforesaid or (iii) if given by any other means, when delivered at the
address specified in or pursuant to this Section.
ARTICLE 13.2 No Waivers; Amendments .
(a) No failure or delay on the part of any party in exercising
any right, power or remedy hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.
(b) Any provision of this Agreement may be amended, supplemented
or waived if, but only if, such amendment, supplement or waiver is in
writing and is signed by the Company and the Majority Holders;
provided, that without the consent of each holder of any Note affected
thereby, an amendment or waiver may not (a) reduce the aggregate
principal amount of Note whose holders must consent to an amendment or
waiver, (b) reduce the rate or extend the time for payment of interest
on any Note, (c) reduce the principal amount of or extend the stated
maturity of any Note or (d) make any Note payable in money or property
other than as stated in such Note. In determining whether the holders
of the requisite principal amount of Note have concurred in any
direction, consent, or waiver as provided in any Transaction Agreement,
Note which are owned by the Company or any other obligor on or
guarantor of the Note, or by any Person Controlling, Controlled by, or
under common Control with any of the foregoing, shall be disregarded
and deemed not to be outstanding for the purpose of any such
determination; and provided further that no such amendment, supplement
or waiver which affects the rights of Purchaser and their affiliates
otherwise than solely in their capacities as holders of Note shall be
effective with respect to them without their prior written consent.
ARTICLE 13.3 Indemnification .
(a) The Company agrees to indemnify and hold harmless Purchaser,
its Affiliates, and each Person, if any, who controls Purchaser, or
any of its Affiliates, within the meaning of the Securities Act or
the Exchange Act (each, a "Controlling Person"), and the respective
partners, agents, employees, officers and Directors of Purchaser,
their Affiliates and any such Controlling Person (each an "Indemnified
Party") and collectively, the "Indemnified Parties"), from and against
any and all losses, claims, damages, liabilities and expenses
(including, without limitation and as incurred, reasonable costs of
investigating, preparing or defending any such claim or action, whether
or not such Indemnified Party is a party thereto, provided that the
Company shall not be obligated to advance such costs to any Indemnified
Party other than Purchaser unless it has received from such Indemnified
Party an undertaking to repay to the Company the costs so advanced if
it should be determined by final judgment of a court of competent
jurisdiction that such Indemnified Party was not entitled to
indemnification hereunder with respect to such costs) which may be
incurred by such Indemnified Party in connection with any
investigative, administrative or judicial proceeding brought or
threatened that relates to or arises out of, or is in connection with
any activities contemplated by any Transaction Agreement or any other
services rendered in connection herewith; provided that the Company
will not be responsible for any claims, liabilities, losses, damages or
expenses that are determined by final judgment of a court of competent
jurisdiction to result from such Indemnified Party's gross negligence,
willful misconduct or bad faith.
(b) If any action shall be brought against an Indemnified Party
with respect to which indemnity may be sought against the Company under
this Agreement, such Indemnified Party shall promptly notify the
Company in writing and the Company, at its option, may, assume the
defense thereof, including the employment of counsel reasonably
satisfactory to such Indemnified Party and payment of all reasonable
fees and expenses. The failure to so notify the Company shall not
affect any obligations the Company may have to such Indemnified Party
under this Agreement or otherwise unless the Company is materially
adversely affected by such failure. Such Indemnified Party shall have
the right to employ separate counsel in such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Party, unless (i) the Company has
failed to assume the defense and employ counsel or (ii) the named
parties to any such action (including any impleaded parties) include
such Indemnified Party and the Company, and such Indemnified Party
shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to
those available to the Company, in which case, if such Indemnified
Party notifies the Company in writing that it elects to employ separate
counsel at the expense of the Company, the Company shall not have the
right to assume the defense of such action or proceeding on behalf of
such Indemnified Party, provided, however, that the Company shall not,
in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or
circumstances, be responsible hereunder for the reasonable fees and
expenses of more than one such firm of separate counsel, in addition
to any local counsel, which counsel shall be designated by Purchaser.
The Company shall not be liable for any settlement of any such action
effected without the written consent of the Company (which shall not
be unreasonably withheld) and the Company agrees to indemnify and hold
harmless each Indemnified Party from and against any loss or liability
by reason of settlement of any action effected with the consent of the
Company. In addition, the Company will not, without the prior written
consent of Purchaser, settle or compromise or consent to the entry of
any judgment in or otherwise seek to terminate any pending or
threatened action, claim, suit or proceeding in respect to which
indemnification or contribution may be sought hereunder (whether or
not any Indemnified Party is a party thereto) unless such settlement,
compromise, consent or termination includes an express unconditional
release of Purchaser and the other Indemnified Parties, satisfactory in
form and substance to Purchaser, from all liability arising out of such
action, claim, suit or proceeding.
(c) If for any reason the foregoing indemnity is unavailable
(otherwise than pursuant to the express terms of such indemnity) to
an Indemnified Party or insufficient to hold an Indemnified Party
harmless, then in lieu of indemnifying such Indemnified Party, the
Company shall contribute to the amount paid or payable by such
Indemnified Party as a result of such claims, liabilities, losses,
damages, or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company on the one hand
and by Purchaser on the other from the transactions contemplated by
this Agreement or (ii) if the allocation provided by clause (i) is not
permitted under applicable law, in such proportion as is appropriate to
reflect not only the relative benefits received by the Company on the
one hand and Purchaser on the other, but also the relative fault of
the Company and Purchaser as well as any other relevant equitable
considerations. Notwithstanding the provisions of this Section 13.3,
the aggregate contribution of all Indemnified Parties shall not exceed
the amount of interest and fees actually received by Purchaser pursuant
to this Agreement. It is hereby further agreed that the relative
benefits to the Company on the one hand and Purchaser on the other with
respect to the transactions contemplated hereby shall be determined by
reference to, among other things, whether any untrue or alleged untrue
statement of material fact or the omission or alleged omission to state
a material fact related to information supplied by the Company or by
Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(d) The indemnification, contribution and expense reimbursement
obligations set forth in this Section 13.3 (i) shall be in addition to
any liability the Company may have to any Indemnified Party at common
law or otherwise; (ii) shall survive the termination of this Agreement
and the other Transaction Agreements and the payment in full of the
Note and (iii) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of Purchaser or
any other Indemnified Party.
ARTICLE 13.4 Expenses: Documentary Taxes . The Company agrees to pay to
Global Capital Advisors, LLC, on the Closing Date, a fee of $12,000.00 (the
"Out of Pocket Expense Fee") in full satisfaction of all obligations of the
Company to Purchaser and its agents in connection with the negotiation and
preparation of the Transaction Agreements, relevant due diligence, and other
out of pocket expenses. In addition, the Company agrees to pay any and all
stamp, transfer and other similar taxes, assessments or charges payable in
connection with the execution and delivery of any Transaction Agreement or
the issuance of the Securities to Purchaser, excluding their assigns.
ARTICLE 13.5 Payment . The Company agrees that, so long as Purchaser
shall own any Note purchased by it from the Company hereunder, the Company
will make payments to Purchaser of all amounts due thereon by wire transfer
by 4:00 P.M. (E.S.T.).
ARTICLE 13.6 Successors and Assigns . This Agreement shall be binding
upon the Company and upon Purchaser and its respective successors and
assigns; provided that the Company shall not assign or otherwise transfer
its rights or obligations under this Agreement to any other Person without
the prior written consent of the Majority Holders. All provisions hereunder
purporting to give rights to Purchaser and its affiliates or to holders of
Securities are for the express benefit of such Persons and their successors
and assigns.
ARTICLE 13.7 Brokers . Except for the cash fee owed to Colony Park
Financial Services, LLC in the amount of $23,000, the Company represents and
Warrant that it has not employed any broker, finder, financial advisor or
investment banker who would be entitled to any brokerage, finder's or other
fee or commission payable by the Company or Purchaser in connection with the
sale of the Securities.
ARTICLE 13.8 Delaware Law; Submission to Jurisdiction; Waiver of Jury
Trial; Appointment of Agent . THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF DELAWARE. EACH
PARTY HERETO HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR DELAWARE AND OF ANY FEDERAL DISTRICT COURT SITTING
IN DELAWARE FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY
HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. EACH PARTY TO THIS AGREEMENT IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS IN ANY SUCH PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS
SET FORTH HEREIN. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH PARTY WAIVES ITS
RIGHT TO A TRIAL BY JURY.
ARTICLE 13.9 Entire Agreement . This Agreement, the Exhibits or
Schedules hereto, which include, but are not limited to the Note and the
Warrant, set forth the entire agreement and understanding of the parties
relating to the subject matter hereof and supercedes all prior and
contemporaneous agreements, negotiations and understandings between the
parties, both oral and written relating to the subject matter hereof. The
terms and conditions of all Exhibits and Schedules to this Agreement are
incorporated herein by this reference and shall constitute part of this
Agreement as is fully set forth herein.
ARTICLE 13.10 Survival; Severability. The representations,
warranties, covenants and agreements of the parties hereto shall survive
the Closing hereunder. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that such severability shall be
ineffective if it materially changes the economic benefit of this Agreement
to any party.
ARTICLE 13.11 Title and Subtitles . The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement.
ARTICLE 13.12 Reporting Entity for the Common Stock. The reporting
entity relied upon for the determination of the trading price or trading
volume of the Common Stock on any given Trading Day for the purposes of
this Agreement and all Exhibits shall be Bloomberg, L.P. or any successor
thereto. The written mutual consent of the Purchaser and the Company shall
be required to employ any other reporting entity.
ARTICLE 13.13 Publicity. The Company and the Purchaser shall consult
with each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and no
party shall issue any such press release or otherwise make any such public
statement without the prior written consent of the other parties, which
consent shall not be unreasonably withheld or delayed, except that no prior
consent shall be required if such disclosure is required by law, in which
such case the disclosing party shall provide the other parties with prior
notice of such public statement. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of Purchaser without the prior written
consent of Purchaser, except to the extent required by law, in which case
the Company shall provide Purchaser with prior written notice of such public
disclosure.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers, as of the date first
above written.
DIAL-THRU INTERNATIONAL CORPORATION
By: ________________________________
Name: ________________________________
Title: ________________________________
Address: Dial-Thru International Corporation
00000 Xxxxxx Xxxx.
Xxxxx 000
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
GCA STRATEGIC INVESTMENT FUND LIMITED
By: ________________________________
Name: Xxxxx X. Xxxxxx
Title: Director
Address: c\o Prime Management
Mechanics Xxxxxxxx
00 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxx XX00
Fax: 000-000-0000
Tel.: 000-000-0000
Securities Purchase Agreement
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS................................ 1
Section 1.1 Definitions ........................ 1
Section 1.2 Accounting Terms and Determinations. 8
ARTICLE II. PURCHASE AND SALE OF SECURITIES........... 8
Section 2.1 Purchase and Sale of Note .......... 8
Section 2.2 Purchase Price ..................... 8
Section 2.3 Closing and Mechanics of Payment ... 8
ARTICLE III. PAYMENT TERMS OF NOTE.................... 9
Section 3.1 Payment of Principal and Interest;
Payment Mechanics ............................. 9
Section 3.2 Payment of Interest ................ 9
Section 3.3 Intentionally Omitted .............. 9
Section 3.4 Mandatory Redemption ............... 9
Section 3.5 Redemption Procedures .............. 9
ARTICLE IV. REPRESENTATIONS AND WARRANTIES............ 10
Section 4.1 Organization and Qualification ..... 10
Section 4.2 Authorization and Execution ........ 10
Section 4.3 Capitalization .................... 11
Section 4.4 Governmental Authorization ......... 11
Section 4.5 Issuance of Warrant Shares ......... 11
Section 4.6 No Conflicts ....................... 12
Section 4.7 Financial Information .............. 12
Section 4.8 Litigation ......................... 12
Section 4.9 Compliance with ERISA and other
Benefit Plans.................................. 13
Section 4.10 Environmental Matters ............. 13
Section 4.11 Taxes ............................. 13
Section 4.12 Investments, Joint Ventures ....... 14
Section 4.13 Not an Investment Company ......... 14
Section 4.14 Full Disclosure ................... 14
Section 4.15 No Solicitation; No Integration
with Other Offerings .......................... 14
Section 4.16 Permits ........................... 14
Section 4.17 Leases ............................ 15
Section 4.18 Absence of Any Undisclosed
Liabilities.................................... 15
Section 4.19 Public Utility Holding Company .... 15
Section 4.20 Intellectual Property Rights ...... 15
Section 4.21 Insurance ......................... 15
Section 4.22 Title to Properties ............... 15
Section 4.23 Internal Accounting Controls ...... 15
Section 4.24 Foreign Practices ................. 16
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PURCHASER 16
Section 5.1 Purchaser .......................... 16
ARTICLE VI. CONDITIONS PRECEDENT TO PURCHASE OF SECURITIES 17
Section 6.1 Conditions Precedent to Purchaser's
Obligations to Purchase ....................... 17
Section 6.2 Conditions to the Company's
Obligations.................................... 19
ARTICLE VII. AFFIRMATIVE COVENANTS.................... 20
Section 7.1 Information ......................... 20
Section 7.2 Payment of Obligations .............. 21
Section 7.3 Maintenance of Property; Insurance .. 21
Section 7.4 Maintenance of Existence ............ 21
Section 7.5 Compliance with Laws ................ 21
Section 7.6 Inspection of Property, Books and
Records........................................ 21
Section 7.7 Investment Company Act .............. 22
Section 7.8 Use of Proceeds ..................... 22
Section 7.9 Compliance with Terms and Conditions
of Material Contracts ......................... 22
Section 7.10 Reserved Shares and Listings ...... 22
Section 7.11 Transfer Agent Instructions ....... 22
Section 7.12 Maintenance of Reporting Status;
Supplemental Information ...................... 23
ARTICLE VIII. NEGATIVE COVENANTS...................... 23
Section 8.1 Limitations on Debt or Other
Liabilities.................................... 23
Section 8.2 Transactions with Affiliates ....... 23
Section 8.3 Merger or Consolidation ............ 23
Section 8.4 Limitation on Asset Sales .......... 24
Section 8.5 Restrictions on Certain Amendments.. 24
Section 8.6 Limitation on Stock Repurchases .... 24
ARTICLE IX. RESTRICTIVE LEGENDS....................... 24
Section 9.1 Restrictions on Transfer ........... 24
Section 9.2 Legends. ........................... 25
Section 9.3 Notice of Proposed Transfers ....... 25
ARTICLE X. ADDITIONAL AGREEMENTS AMONG THE PARTIES.... 25
Section 10.1 Liquidated Damages ................ 25
Section 10.2 Intentionally Omitted ............. 25
Section 10.3 Intentionally Omitted ............. 26
Section 10.4 Registration Rights ............... 26
ARTICLE XI. ADJUSTMENT OF FIXED PRICE................. 26
Section 11.1 Reorganization .................... 26
Section 11.2 Share Reorganization .............. 26
Section 11.3 Capital Reorganization ............ 27
Section 11.4 Adjustment Rules .................. 27
Section 11.5 Certificate as to Adjustment ...... 28
Section 11.6 Notice to Holders ................. 28
ARTICLE XII. EVENTS OF DEFAULT........................ 28
Section 12.1 Events of Default. ................ 28
Section 12.2 Powers and Remedies Cumulative .... 30
ARTICLE XIII. MISCELLANEOUS........................... 30
Section 13.1 Notices ........................... 30
Section 13.2 No Waivers; Amendments ............ 31
Section 13.3 Indemnification ................... 31
Section 13.4 Expenses: Documentary Taxes ...... 33
Section 13.5 Payment ........................... 33
Section 13.6 Successors and Assigns ............ 34
Section 13.7 Brokers ........................... 34
Section 13.8 Delaware Law; Submission to
Jurisdiction; Waiver of Jury Trial; Appointment
of Agent ...................................... 34
Section 13.9 Entire Agreement................... 34
Section 13.10 Survival; Severability............. 34
Section 13.11 Title and Subtitles................ 35
Section 13.12 Reporting Entity for the Common
Stock.......................................... 35
Section 13.13 Publicity.......................... 35
LIST OF SCHEDULES
Schedule 4.3
Schedule 4.7
Schedule 4.8
Schedule 4.11
Schedule 4.12
Schedule 4.15
Schedule 4.17
Schedule 4.20
Schedule 4.21
Schedule 4.22
Schedule 7.2
Schedule 7.4
Schedule 7.8
Schedule 7.9
Schedule 8.2
LIST OF EXHIBITS
Exhibit A
Exhibit C
Exhibit D
Exhibit E
SECURITIES PURCHASE AGREEMENT
dated as of
July 24, 2003
by and between
Dial-Thru International Corporation
as the Issuer,
and
GCA Strategic Investment Fund Limited
