EXHIBIT 10.2
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AGREEMENT FOR PURCHASE AND SALE OF PREFERRED SHARES
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This AGREEMENT FOR PURCHASE AND SALE OF PREFERRED SHARES (the "Agreement") is
made and entered into as of the 30th day of August, 1996 by Global Equity
Corporation, a corporation incorporated under the laws of Ontario, Canada and
having its principal place of business at 00X Xxxxxxxx Xxxxxx, 0xx Xxxxx,
Xxxxxxx, Xxxxxxx, XXXXXX X0X 0X0 (the "Purchaser"); and Satellite Information
Systems Company, a corporation formed under the laws of the state of Colorado
and having its principal place of business at 0000 Xxxxxxxx Xxxxxx, Xxxxx X-00,
Xxxxxxx, Xxxxxxxx 00000 (the "Seller").
WHEREAS, Seller desires to sell, and Purchaser desires to purchase, 4,000,000
authorized and newly-issued preferred shares (the "Preferred Shares") for an
aggregate purchase price of $1,000,000 subject to the terms and conditions set
forth in this Agreement;
NOW THEREFORE, in consideration of the mutual covenants, conditions,
representations, warranties, and agreements contained herein, and intending to
be legally bound hereby, Purchaser and Seller hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF
PREFERRED SHARES
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1.01 Subject to the terms and conditions of this Agreement, Seller agrees to
issue and sell 4,000,000 validly authorized and newly-issued Preferred
Shares of Seller to Purchaser on the Closing Date (as defined in Section
1.03 below).
1.02 Subject to the terms and conditions of this Agreement, Purchaser agrees
to purchase the Preferred Shares and to pay Seller in full and complete
consideration the aggregate amount of one million dollars (U.S.
$1,000,000).
1.03 The purchase and sale of the Preferred Shares shall take place at
Purchaser's offices at 000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xx Xxxxx,
Xxxxxxxxxx 00000 on September 9, 1996 or at such other place or at such
other date as may be agreed upon by the parties (the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE SELLER
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Seller represents and warrants to Purchaser as follows:
2.01 The Seller and its 80%-owned subsidiary, Event Marketing Systems
International, Inc. ("Subsidiary") are duly organized, validly existing,
and in good standing under the laws of their state of incorporation and
are duly qualified to do business in such state.
2.02 The execution and delivery of this Agreement and the performance of the
transactions contemplated herein including the creation, issuance, and
sale of the Preferred Shares, have been duly approved by all necessary
action on the part of the Seller and do not and will not violate any
provision of law, any order of any court to the best of Seller's and its
shareholders' and directors' knowledge or other agency of government,
the governing documents of the Seller, or any provisions of any
indenture, agreement or other instrument to which the Seller or any of
its properties is bound, or conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under
any such indenture agreement or instrument, or result in the creation or
imposition of any lien, charge, restriction, claim or encumbrance of any
nature whatsoever upon any of the properties or assets of the Seller.
This Agreement has been duly authorized, executed, and delivered by the
Seller and constitutes the legal, valid, and binding obligations of the
Seller, enforceable in accord with its terms.
2.03 The Preferred Shares have been duly and validly created, authorized, and
allotted for issuance to Purchaser and when issued shall be validly,
issued and outstanding, fully paid and non-assessable, and free and
clear of all liens, charges, encumbrances, and adverse claims.
2.04 The Preferred Shares to be issued to Purchaser by Seller have the
following terms:
The Preferred Shares shall pay quarterly non-cumulative dividends at the
rate of 7% per annum;
- Each Preferred Share shall be entitled to one vote on a combined
basis with the Common Shares on all matters properly submitted to
the shareholders for their vote;
- The Preferred Shares shall not be redeemable; and
- Each Preferred Share shall be convertible into one Common Share of
Seller at any time in accord with Section 2.16 within three years of
the Closing Date. When and if Purchaser converts any of its
Preferred Shares to Common Shares, all of Purchaser's Preferred
Shares shall be converted at that time to Common Shares.
2.05 The Common Shares issuable to Purchaser upon conversion of the Preferred
Shares shall be validly issued and outstanding, fully paid and non-
assessable, and free and clear of all liens, charges, encumbrances, and
adverse claims.
2.06 There is no consent, approval, authorization, order or agreement of any
governmental agency or body or any court or any other person, including
without limiting the generality of the foregoing, any securities
commission, stock exchange or similar authority not obtained and not in
effect which may be required for the valid issuance and delivery of the
Preferred Shares to the Purchaser.
2.07 The Seller has furnished to Purchaser audited consolidated financial
statements of the Seller for the fiscal year ended June 30, 1995 and
unaudited financial statements of the Seller for the quarters ending
September 30, 1995, December 31, 1995, and March 31, 1996. Each of said
financial statements has been prepared in accord with GAAP accounting
principles consistently applied and fairly presents Seller's financial
position as of its respective date. Since March 31, 1996, there have
been no material adverse changes in the business, condition, or
prospects, financial or otherwise, of Seller.
2.08 There is no action, suit, investigation, or proceeding pending or to the
Seller's knowledge, threatened against the Seller or Subsidiary which,
if adversely determined, would have a material adverse effect on the
financial condition or business of the Seller or its subsidiary.
2.09 The Seller and Subsidiary have good title to all of their properties and
assets, free and clear of all liens except as set forth in the financial
statements specified in Section 2.07 above.
2.10 The Seller and Subsidiary have filed all federal, state, and other tax
returns required to be filed and have paid all taxes due.
2.11 Each pension plan maintained by the Seller, now or in the past, is fully
funded and no accumulated funding deficiency exists. Each such pension
plan is in material compliance with ERISA.
2.12 The Seller and Subsidiary are not in default on any loan and no
condition exists which currently, or upon notice or the passage of time,
would permit a lender to accelerate the maturity of any debt except as
disclosed in the Form 10-KSB as of June 30, 1995 and the Form 10-QSB as
of March 31, 1996 filed by Seller with the SEC.
2.13 The Seller and Subsidiary are not in violation of any applicable law,
rule, or regulation or in default under any indenture, lease,
instrument, or other agreement to which the Seller or Subsidiary is a
party.
2.14 The Seller and Subsidiary have full corporate power and legal right to
carry on their businesses. All material approvals, permits, licenses,
authorizations, consents and permits, if any, required, by federal,
state, or local law, rule or ordinance have been obtained and are valid
and in full force and effect.
2.15 The authorized capital stock of Seller as of the date hereof consists of
100,000,000 Common Shares of which 5,142,687 are validly issued and
outstanding, and 100,000,000 Preferred Shares, of which 4,000,000 will
be validly issued and outstanding when issued to Purchaser on Closing
Date.
2.16 The Certificate of Designations of Rights and Preferences of the
Preferred Stock shall provide, inter alia, that the Preferred Stock
shall be convertible into Common Stock at any time on or after the
period of time commencing the earlier of (i) one year from the date of
issue or (ii) the effective date of a Registration Statement registering
for sale under the Securities Act of 1933, as amended (the "Securities
Act"), the shares of the Seller's Common Stock, no par value
("Conversion Stock"), issuable upon such conversion. The holder of the
Preferred Stock shall also be granted a one-time demand registration
right to have registered under the Securities Act the Conversion Stock
on a Registration Statement on Form S-3 (the "Registration Statement"),
pursuant to which the Seller shall agree to cause to be filed with the
Securities and Exchange Commission a Registration Statement within
ninety (90) days following the date of such demand and to keep such
Registration Statement effective for a period of not less than sixty
(60) days. All costs of preparing, filing and maintaining the
effectiveness of the Registration Statement shall be borne by the
Seller.
2.17 Except as disclosed on Schedule 2.17 attached hereto, there are no other
agreements relative to registration rights of Seller's stock.
2.18 Except as disclosed on Schedule 2.18 attached hereto, there are no
agreements with any shareholder(s) of Seller relative to election of
Directors to Seller's Board of Directors.
2.19 Seller owns all licenses, patents, trade secrets, copyrights,
trademarks, service marks, trade secrets, trade names and other
intellectual property (collectively "Intellectual property") necessary
to carry on its business as presently conducted and as presently
proposed to be conducted. Set forth in Schedule 2.19 attached hereto is
a true and complete list of:
a. all Intellectual Property for which registrations have been issued
or applications filed therefor, by the Seller or any Subsidiary; and
b. all material licenses related to Intellectual Property to which
Seller or any Subsidiary is a party (including, as to each such
license, the name of the licensor or licensee, as applicable, a
description of the subject matter of the license, basic royalty
rate, termination date, renewal option, and whether any advance
royalty payments are required.)
Seller or a Subsidiary owns all of the Intellectual Property
registrations and applications therefor listed in the Disclosure
Schedule, free and clear of all liens, encumbrances or rights to any
other person, corporation or other entity, and the Seller or a
Subsidiary has the unqualified right to bring actions for the
infringement thereof. All Intellectual Property applications and
registrations are duly authorized, issued, valid, and have not been
canceled, and the Seller is not aware of any facts which would
invalidate or render any of them unenforceable. No person has asserted
any royalty claim or other claim whatsoever, including but not limited
to claims of ownership, direct or indirect, in respect of any
Intellectual Property owned by, used by, or useful to the Seller or any
Subsidiary in respect of which or by reason of which the Seller or any
Subsidiary is, or may become, indebted in any respect whatsoever to any
such person, his heirs or assigns. Neither the Seller nor any
Subsidiary is, nor have any of them received, any notice alleging that
the Seller or any Subsidiary is, infringing upon, likely to infringe
upon, or otherwise acting adversely to any known right or claimed right
of any person under or with respect to any Intellectual Property.
2.20 Seller agrees that no proceeds, with the exception of $200,000, from the
sale of Preferred Shares to Purchaser shall be used in any manner by
Seller, until Seller's budget has been approved in accordance with
Section 5.07.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE PURCHASER
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3.01 The Purchaser is duly organized, validly existing, and in good standing
under the laws of Ontario, Canada.
3.02 The Purchaser has the legal capacity to execute this Agreement and all
necessary approvals have been given to authorize Purchaser to execute
this Agreement.
3.03 This Agreement constitutes a legal, valid, binding, and enforceable,
obligation of Purchaser.
3.04 Purchaser is an "accredited investor" within the meaning of Rule 501
under the Securities Act and was not organized for the specific purpose
of acquiring the Preferred Shares. The Purchaser has sufficient
knowledge and experience in investing in companies to enable it to
evaluate the risks and merits of purchasing the Preferred Shares, and is
able financially to bear the risk of said purchase. Purchaser is
purchasing the Preferred Shares for its own account for the purposes of
investment and not with a view to or for sale in connection with any
distribution of the Preferred Shares. Purchaser understands that the
Preferred Shares have not been registered under the Securities Act.
3.05 There is no action, suit, investigation, or proceeding pending or to
Purchaser's knowledge, threatened which questions the legality or
validity of the Purchaser's purchase of the Preferred Shares.
ARTICLE IV
COVENANTS
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4.01 Seller and Subsidiary shall not pay any dividends on any class of stock
whether created or issued before or after the Closing Date except for
dividends payable on the Preferred Shares issued to Purchaser under this
Agreement, without the approval of the designated representative of
Purchaser on Seller's Board of Directors.
4.02 Seller and Subsidiary shall not create or issue new stock of any class
or type, or issue stock in an existing class of stock, without the
approval of the designated representative of Purchaser on Seller's Board
of Directors. The provisions of this section shall not be applicable to
stock options and warrants outstanding on the Closing Date per the
attached Schedule 4.02.
4.03 Seller and Subsidiary shall not create, assume, or incur any
indebtedness or other obligation directly or indirectly, through one
transaction or in a series of transactions, in excess of amounts
contemplated by Seller's annual budget approved in accordance with
Section 5.07, without the approval of the designated representative of
Purchaser on Seller's Board of Directors.
4.04 Seller shall not acquire or dispose of assets of Seller and its
Subsidiary directly or indirectly, through one transaction or in a
series of transactions, in excess of amounts contemplated by Seller's
annual budget approved in accordance with Section 5.07, without the
approval of the designated representative of Purchaser on Seller's Board
of Directors.
4.05 Seller and Subsidiary shall not grant or award new stock options or
grants in an existing stock option plan or similar compensation plan, or
create a new stock option plan or similar compensation plan without the
approval of the designated representative of Purchaser of Seller's Board
of Directors.
4.06 Neither Seller nor its Subsidiary shall knowingly enter into any
transaction or perform any act which would be prohibited by any statute,
rule, or regulation of any governmental body which would have a material
adverse effect on Seller's operations or assets.
4.07 Upon conversion of Purchaser's Preferred Shares to Common Shares of the
Seller, these Covenants shall no longer be in effect.
ARTICLE V
AFFIRMATIVE COVENANTS
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Seller agrees that, so long as Purchaser owns any Preferred Shares of Seller:
5.01 As promptly as possible, Seller shall furnish to Purchaser all audited
annual GAAP consolidated financial statements, beginning with the fiscal
year ending June 30, 1996.
5.02 As promptly as possible after the end of each quarter, Seller shall
furnish to Purchaser GAAP consolidated financial statements, certified
by Seller's Chief Financial Officer, beginning with the quarter ending
September 30, 1996.
5.03 As promptly as possible, Seller will furnish to Purchaser copies of all
material filed with the SEC, NASDAQ, or any other securities regulatory
authority.
5.04 As promptly as possible, Seller shall furnish to Purchaser copies of all
proxy statements and other material sent to Seller's shareholders.
5.05 Seller and its subsidiary shall comply with all laws, rules,
regulations, and orders of any governmental authority.
5.06 Effective on the Closing Date, and so long as Purchaser shall own any
Preferred Shares of Seller, Seller shall take all necessary action to
establish the size of its Board of Directors at five (5) directors and
Seller shall take all necessary and appropriate action to elect or
appoint two representatives designated by Purchaser to Seller's Board of
Directors. Seller will recommend the nomination and election of the two
representatives designated by Purchaser for election to Seller's Board
of Directors, and Seller will use its best efforts to accomplish the
election of said two representatives within ten (10) days of Closing
Date.
5.07 Seller shall have prepared a budget for fiscal year 1997 by September
30, 1996, which budget must have received the approval the designated
representative of Purchaser on Seller's Board of Directors. For every
subsequent fiscal year, Seller shall have a budget approved by the
designated representative of Purchaser on Seller's Board of Directors.
5.08 Upon conversion of Purchaser's Preferred Shares to Common Shares of the
Seller, these Affirmative Covenants shall no longer be in effect.
5.09 Within ten (10) calendar days of the end of each month, Seller shall
furnish to Purchaser monthly management accounts, which shall include
monthly budget variance reports.
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS
OF PURCHASER
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The obligation of the Purchaser to purchase the Preferred Shares on the Closing
Date is, at the Purchaser's option, subject to the satisfaction on or before
the Closing Date, of each of the following conditions:
6.01 The representations and warranties contained in Article II shall be
true, complete and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on
and as of such date, and the President and Treasurer of the Seller shall
have certified on behalf of the Seller to the Purchaser in writing to
such effect.
6.02 The Seller shall have performed and complied with all agreements
contained herein required to be performed or complied with by it prior
to or at the Closing Date, and the President and Treasurer of the Seller
shall have certified on behalf of the Seller to the Purchaser in writing
to such effect and to the further effect that all of the conditions set
forth in this Article VI have been satisfied (or waived, if applicable).
6.03 All corporate and other proceedings to be taken by the Seller in
connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in form and substance to the
Purchaser and its counsel.
6.04 The Purchaser and its counsel shall have received copies of the
following documents:
a. Certificate of Incorporation, certified as of a recent date by the
Secretary of State of the State of Colorado and a certificate of
said Secretary dated as of a recent date as to the due incorporation
and good standing of the Seller and its subsidiary;
b. A certificate of the Secretary of the Seller dated the Closing Date
certifying: (i) that attached thereto is a true and complete copy
of the By-laws of the Seller as in effect on the date of such
certification; (ii) that attached thereto is a true and complete
copy of all resolutions adopted by the Board of Directors or the
shareholders of the Seller authorizing the execution, delivery and
performance of this Agreement and the creation, issuance and
delivery of the Preferred Shares, and that all such resolutions are
in full force and effect and are all the resolutions adopted in
connection with the transactions contemplated by this Agreement; and
(iii) that the Certificate of Incorporation has not been amended
since the date of the last amendment referred to in the certificate
delivered pursuant to clause (a) above; and
c. Such additional supporting documents and other information with
respect to the operations and affairs of the Seller as the Purchaser
or its counsel reasonably may request.
6.05 The Seller shall have tendered to the Purchaser the following:
a. The Preferred Shares in the form of Exhibit A hereto;
b. The opinion of counsel to Seller in form and substance satisfactory
to the Purchaser and its counsel, to the effect that: (i) the Seller
and its subsidiary are duly organized, validly existing and in good
standing under the laws of the state in which they are organized and
are duly qualified to transact business in each such state; (ii)
this Agreement and the Preferred Shares have been duly approved by
all necessary action on the part of the Seller in the shareholders
and directors of Seller and this Agreement, assuming due execution
thereof by the Purchaser, is the valid and binding agreement of the
Seller enforceable in accordance with its terms except as the
enforcement of such agreements may be limited by bankruptcy,
insolvency or other similar laws affecting creditors' rights
generally and that the remedy of specific performance is subject to
the discretion of the court before which proceedings therefor are
brought; (iii) the Preferred Shares have been validly issued, fully
paid, and non-assessable; (iv) the Certificate of Designations of
Rights and Preferences of the Preferred Shares has been adopted by
all necessary corporate action of Seller and has been filed with the
appropriate government entity and all rights, preferences and
privileges accorded the Preferred Shares therein are valid and
enforceable in accordance with its terms; and (v) the Common Shares
to be issued upon conversion of the Preferred Shares will be validly
issued, fully paid and nonassessable shares of the Seller's Common
Shares.
6.06 Purchaser shall have approved, in the sole and absolute discretion of
Purchaser, the Certificate of Designations of Rights and Preferences of
the Preferred Stock.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS
OF THE SELLER
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The obligation of the Seller to issue and sell the Preferred Shares to the
Purchaser on the Closing Date is, at the Seller's option, subject to the
satisfaction, on or before the Closing Date, of the following conditions:
7.01 The representations and warranties contained in Article III shall be
true, complete and correct on and as of the Closing Date with the same
effect as though such representations and warranties had been made on
and as of such date, and the President and Secretary of the Purchaser
shall have certified to such effect to the Seller in writing.
7.02 All corporate and other proceedings to be taken by the Purchaser in
connection with the transactions contemplated hereby and all documents
incident thereto shall be satisfactory in form and substance to the
Seller and its counsel.
7.03 Purchaser shall deliver to Seller the sum of $1,000,000 in immediately
available funds payable by wire transfer to account designated by Seller
in writing.
ARTICLE VIII
MISCELLANEOUS
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8.01 Each party hereto will pay its own expenses in connection with the
transactions contemplated hereby. Each party will use its own
accountants, legal counsel, and other experts.
8.02 All representations, covenants and agreements contained in this
Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not.
8.03 All notices, requests, consents and other communications hereunder shall
be in writing and shall be delivered in person, mailed by certified or
registered mail or sent by facsimile, as follows:
If to Seller: If to Purchaser:
Xxxxxxx X. Xxxxx Xxxx X. Xxxx
President and CEO President and CEO
0000 Xxxxxxxx Xxxxxx, Xxxxx X-00 30A Xxxxxxxx Avenue, 4th Floor
Boulder, Colorado 80303 Xxxxxxx, Xxxxxxx X0X 0X0
XXXXXX
Fax #: (000) 000-0000
Fax #: (000) 000-0000
8.04 This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario, Canada and the federal laws of Canada
applicable therein.
8.05 This Agreement may not be amended or modified, and no provision may be
waived, without the written consent of Seller and Purchaser.
8.06 Purchaser and Seller shall indemnify and hold harmless each other
against all loss, liability, damage and expense suffered as a result of
or arising from any inaccuracy or breach of the representations and
warranties or conditions in this Agreement.
This Agreement has been executed by and on behalf of the parties on the date
first written above.
GLOBAL EQUITY CORPORATION
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Xxxx X. Xxxx
President and CEO
SATELLITE INFORMATION SYSTEMS COMPANY
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Xxxxxxx X. Xxxxx
President and CEO
