EXHIBIT 10.40
THE NEPTUNE SOCIETY, INC.
DEBENTURE AND WARRANT AMENDMENT AGREEMENT
This Debenture and Warrant Amendment Agreement (this "Agreement") is
effective as of December 31, 2001 (the "Effective Date"), by and between The
Neptune Society, Inc., a Florida corporation (the "Company"), CapEx, L.P., a
Delaware limited partnership ("CapEx"), and X.X. Xxxxx Investment Banking Corp.,
a New York corporation ("DHB") (together with CapEx, the "Holders"). The Company
and the Holders are collectively referred to herein as the "Parties" and each a
"Party."
RECITALS
1. The Company and the Holders are parties to a Debenture and Warrant
Purchase Agreement dated November 24, 1999, pursuant to which the
Company issued certain securities to CapEx and DHB (the "Purchase
Agreement");
2. The Company issued to CapEx pursuant to the Purchase Agreement: (i) a
Convertible Debenture dated December 24, 1999 in the initial principal
amount of $3,000,000 (the "CapEx Debenture"), due February 24, 2005
and convertible into shares of the Company's common stock, par value
$0.002 ("Common Stock"); (ii) a Warrant initially exercisable to
purchase 120,000 shares of Common Stock at $5.21 per share, subject to
certain adjustments (the "CapEx Warrant No. 1"); and (iii) a Warrant
initially exercisable to purchase 120,000 shares of Common Stock at
$6.25 per share, subject to certain adjustments (the "CapEx Warrant
No. 2");
3. The Company issued to DHB pursuant to the Purchase Agreement: (i) a
Convertible Debenture dated December 24, 1999 in the initial principal
amount of $2,000,000 (the "DHB Debenture"), due February 24, 2005,
convertible into Common Shares; (ii) a Warrant exercisable to purchase
80,000 shares of Common Stock, at $5.21 per share, subject to certain
adjustments (the "DHB Warrant No. 1"); and (iii) a Warrant exercisable
to purchase 80,000 shares of Common Stock, at $6.25 per share, subject
to certain adjustments (the "DHB Warrant No. 2");
4. The Company has entered into certain transactions, which have
triggered adjustments to effective conversion price of the CapEx
Debenture and the DHB Debenture (collectively, the "Debentures") and
the exercise price of the CapEx Warrant Xx. 0, XxxXx Xxxxxxx Xx. 0,
XXX Xxxxxxx No. 1 and DHB Warrant No. 2 (collectively, the
"Warrants");
5. The Company and CapEx have entered into a Memorandum of Understanding
dated February 13, 2002 (the "MOU"), under which the parties are
agreeing, effective as of the Effective Date: (i) to amend Section 3.1
to adjust the Conversion Ratio (as defined therein) of the Debentures
to adjust the effective conversion price of the Debentures to $3.00
per share, subject to future adjustments under the terms thereof; (ii)
to delete Section 5.16 of the Debentures
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to eliminate the "full ratchet" anti-dilution provision; (iii) to
amend Section 3.3 of the Debentures to provide that, in the event the
Company's Common Stock is combined into a smaller number of shares,
the Conversion Ratio shall not be adjusted below a ratio that would
increase the effective conversion price above $3.00 per share (after
giving effect to the adjustment) subject to certain limitations on
conversion; (iv) to amend Section 1.1 of the Debentures to provide
that beginning with the regularly scheduled interest payment due in
June 2003, the Company shall pay the Holders interest on the Principal
Amount and all accrued and unpaid Current Interest (as defined
therein) at the rate of 13% per annum, payable in cash, monthly in
arrears; (v) to amend Section 1.1 to provide that beginning with the
regularly scheduled interest payment due in June 2003, the Company
shall begin to pay the Holders, subject to certain limitations, the
accrued Deferred Interest in monthly installment payments of $25,000
until paid in full; (vi) to amend Section 5.18 to change the Fixed
Charge Coverage Ratio (as defined therein); and (vii) to amend the
Warrants to decrease the Exercise Price to $3.00 per share, subject to
future adjustments under the terms thereof.
6. Under the terms of the MOU, the parties are also agreeing effective as
of the Closing Date (as defined in Section 3.1, below): (i) to issue
to the Holders, on a pro rata basis, a total of 675,000 shares of
Common Stock as a restructuring fee, and (ii) to provide the Holders
with certain preemptive rights to maintain their pro rata interest in
the Company (based on the percentage interest represented by the
shares issued as the restructuring fee) in the event the Company
offers to sell Common Stock or Equity Securities (as defined in
Section 2.2, below).
In consideration of the mutual promises hereinafter set forth, the parties
hereto agree as follows:
1. AGREEMENT TO AMEND AND RESTATE CONVERTIBLE DEBENTURES AND WARRANTS;
LIMITATION ON CONVERSION
1.1 Amendment of Debentures. Subject to the terms and conditions hereof, at
Closing (as defined in Section 3.1 below), the Company and the Holders hereby
agree to amend the Debentures, each amendment to the Debentures to be in the
forms attached hereto as Exhibit A (each, a "Debenture Amendment") and effective
as of the Effective Date, to, among other things, be convertible (subject to
adjustment and in accordance with the terms thereof) into the number of shares
of the Company's Common Stock set forth opposite the name of each of the Holders
after giving effect to such amendments:
Holder Debenture No. Principal Amount Shares Convertible Into
------ ------------- ---------------- -----------------------
CapEx 1 $3,000,000 1,000,000
DHB 2 $2,000,000 666,667
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The CapEx Debenture, as amended by the Debenture Amendment is referred to herein
as the "CapEx Amended Debenture," and the DHB Debenture, as amended by the
Debenture Amendment is referred to herein as the "DHB Amended Debenture."
1.2 Limitation on Conversion. Until the earlier of: (a) the Company issuing
shares of Common Stock or Equity Securities (as defined in Section 2.2 below) in
satisfaction of $750,000 or more of its present aggregate debt liabilities owed
to either (i) Consulting Commerce Distribution AG/SA/LTD in the amount of
$1,500,000 and/or (ii) Private Investment Company, Ltd. in the amount of
$1,000,000; (b) the Company issuing new shares of Common Stock or Equity
Securities for gross cash consideration of at least $1,000,000; (c) the Company
issuing at least 1,000,000 shares (as adjusted to give effect to any capital
reclassification, stock dividend, subdivision, split up, combination,
consolidation or other reorganization of Common Stock) of Common Stock or Equity
Securities (which Equity Securities would include any preferred stock or
convertible securities which are at the time of issuance or could at some future
time be convertible into Common Stock); (d) 120 days after the Company effects
the Reverse Stock Split (as defined in Section 7.2 below); or (e) 180 days after
the Closing Date (as defined in Section 3.1 below):
(1) in no event shall CapEx, its affiliates or a transferee of all or
a portion of the CapEx Amended Debenture convert, in one or more
transactions, all or a portion of the CapEx Amended Debenture, in any
transaction which upon giving effect to one or more conversions, would
cause the Company to issue to CapEx, its affiliates or a transferee of all
or a portion of such CapEx Amended Debenture, an aggregate number of shares
of Common Stock (issued as a result of such conversions) that would exceed
11.99% of the outstanding shares of the Common Stock immediately following
the last such conversion; and
(2) in no event shall DHB, its affiliates or a transferee of all or a
portion of the DHB Amended Debenture convert, in one or more transactions,
all or a portion of the DHB Amended Debenture, in any transaction which
upon giving effect to one or more conversions, would cause the Company to
issue to DHB, its affiliates or a transferee of all or a portion of such
DHB Amended Debenture, an aggregate number of shares of Common Stock
(issued as a result of such conversions) that would exceed 7.99% of the
outstanding shares of the Common Stock immediately following the last such
conversion.
Each of the Holders agrees that if it decides to transfer all or a portion of a
Debenture prior to the occurrence of any one of the conditions set forth in
subsections (a), (b), (c), (d) and (e) of this Section 1.2, the Holder will not
sell, assign or otherwise transfer such Debenture, directly or indirectly,
unless the purchaser, assignee or transferee agrees to be bound by the
limitations on conversion set forth in this Section 1.2.
1.3 Amendment of Warrants. Subject to the terms and conditions hereof, at
Closing (as defined in Section 3.1 below), the Company and the Holders hereby
agree to amend the Warrants, each amendment to the Warrants to be in the forms
attached hereto as Exhibit B (each, a "Warrant Amendment") and effective as of
the Effective Date, to be exercisable (subject to
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adjustment as therein provided) to purchase from the Company the number of
shares of the Company's Common Stock at the respective exercise prices as set
forth opposite the name of such Holder:
Holder Warrant No. Shares Purchasable Initial Exercise Price
------ ----------- ------------------ ----------------------
CapEx 1 60,000 $3.00
CapEx 2 60,000 $3.00
DHB 3 40,000 $3.00
DHB 4 40,000 $3.00
1.4 Condition for Rescission and Termination of Certain Debenture
Amendments. The Company and the Holders hereby agree that if the Company fails
to effect the Reverse Stock Split (as defined in Section 7.2) on or before June
30, 2002, then without further action by the Company or the Holders, (a) the
Warrant Amendment shall be amended to delete in its entirety Section 4 related
to the Conversion Ratio Cap (as defined therein) and such section shall be null
and void ab initio; (b) the Debenture Amendment shall be amended to delete in
its entirety Section 7 related to the amendment and restatement of Section 3.3
of the Debenture to provide, among other things, the Conversion Ratio Cap (as
defined therein) and such section shall be null and void ab initio; and (c) the
Debenture Amendment shall be amended to delete in its entirety Section 10
related to the deletion of Section 5.16 of the Debentures to eliminate the "full
ratchet" anti-dilution provision (to apply, however, only to the extent such
Debentures have not been previously converted) and such section shall be null
and void ab initio. Notwithstanding the foregoing, the Company and the Holders
hereby agree that Section 5.16 of the Debentures shall not apply any offer or
sale of Equity Offerings (as that term is defined in Section 5.16(b) of the
Debentures) specifically set forth on Schedule 4.2 of this Agreement.
Except as otherwise provided in this Section 1.4, the remaining terms,
conditions, representations, warranties and covenants set forth in this
Agreement, the Debenture Amendments (to apply, however, only to the extent such
Debentures have not been previously converted), and the Warrant Amendments shall
be binding on the Company and the Holders.
2. RESTRUCTURING FEE
2.1 Restructuring Fee. At Closing, the Company will issue the Holders a
total of 675,000 shares of the Company's Common Stock as a restructuring fee
(the "Consideration Shares") in consideration of amending the Debentures and
Warrants, under the terms provided herein, in the amounts set out opposite the
name of each Holder:
Holder Consideration Shares
------ --------------------
CapEx 405,000
DHB 270,000
2.2 Preemptive Rights. Whenever the Board of Directors of the Company shall
authorize the issuance and/or sale of (a) shares of Common Stock, (b) any other
securities of the
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Company entitled to participate with the Common Stock in a distribution of the
Company's remaining assets (after distribution to all holders of securities
entitled to such distribution in priority to the holders of Common Stock), or
(c) any rights, options or warrants to purchase, or securities of any type
whatsoever (except for stock options to employees, officers or directors of the
Corporation or any of its subsidiaries pursuant to employee stock option plans
approved of by Agent not to exceed 10% of the issued and outstanding shares of
Common Stock) that are, or may become, convertible into, or otherwise
exchangeable for, securities of the type referred to in Section 2.2(a) or (b)
(the securities described in (a), (b) and (c), hereinafter collectively referred
to as "Equity Securities"), the Equity Securities shall first be ratably offered
to the Holders effective on the date of the authorization by the Board of
Directors of such issuance (the "Preemptive Rights"). The Holders (each, a
"Preemptive Rightholder") shall be entitled to exercise preemptive rights for
that number of such Equity Securities equal to the percentage the Consideration
Shares represents of the total number of shares of Common Stock issued and
outstanding on the close of business (5 p.m. Pacific time) on the Closing Date
(the "Equity Percentage"). The Equity Percentage for CapEx will be 4.3096% and
the Equity Percentage for DHB will be 2.8731%. Each Preemptive Rightholder shall
be entitled to exercise the Preemptive Rights provided herein with respect to
the whole of such proportionate share or with respect to only a part thereof.
The Preemptive Rights provided herein are in addition to the preemptive rights
contained in the Purchase Agreement.
2.3 Consideration for Equity Securities. The Preemptive Rights provided for
in Section 2.2 shall entitle Holder to subscribe for, purchase, or otherwise
acquire any Equity Securities to be offered for sale, at a price which such
Equity Securities are proposed to be offered for sale to others (net of any
expenses of, or compensation for, underwriting or purchase of such Equity
Securities by underwriters or dealers). In the event that the Company proposes
to offer for sale to others any Equity Securities for a consideration other than
cash, such Preemptive Rights shall be exercisable by a Preemptive Rightholder
for cash, in an amount which shall equal the Fair Market Value of any
consideration other than cash. The term "Fair Market Value" with respect to
assets or property received by the Company or any other person shall be the fair
market value, regardless of any prior accounting treatment, of such assets or
property, determined in good faith by agreement of Agent (as defined below) and
the Board of Directors of the Company. If Agent and the Board of Directors shall
be unable to agree as to such Fair Market Value, the Fair Market Value shall be
determined by the independent certified public accountant at that time retained
by the Company to audit its books and records, and a determination by such
independent certified public accountant shall be final, conclusive and binding
or, if there be none, or if such accountant shall refuse or be unable to make
such a determination then the Fair Market Value shall be determined in good
faith by the Board of Directors of the Company, and the price paid by the
Holders to purchase the Equity Securities shall be adjusted after the sole issue
of Fair Market Value is submitted to and settled by binding arbitration under
and pursuant to the Colorado Uniform Arbitration Act and the rules and
regulations of the American Arbitration Association, and the decision or award
of the arbitrator or arbitrators in such arbitration shall be final, conclusive
and binding and a final judgment may be entered thereon by any court of
competent jurisdiction.
2.4 Issuance Notice. The Company shall, on or before the 5th business day
after the date of authorization of the issuance of any Equity Securities, give
notice to Agent (the
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"Issuance Notice") of such authorization, which Issuance Notice shall specify
the number of shares of Equity Securities to be issued, a full description of
such class of Equity Securities and the offering price or Fair Market Value of
the consideration thereof.
2.5 Acceptance or Decline of Offer. The Preemptive Rights granted pursuant
to Section 2.2 with respect to any Equity Securities to be issued by the Company
shall be exercised by the Preemptive Rightholder by the giving of notice by
Agent of such exercise (the "Preemptive Exercise Notice") within 10 business
days after receipt by the Agent of the Issuance Notice (the "Preemptive Rights
Period"). In the event any Preemptive Rightholder fails or declines to purchase
his/her proportionate share of the Equity Securities so offered (a "Declining
Rightholder"), the Equity Securities not purchased by the Declining Rightholders
shall be offered for sale to those Preemptive Rightholders who shall have duly
exercised their preemptive rights with respect to that issue (the "Accepting
Rightholders"). Each Accepting Rightholder shall be entitled to purchase the
Equity Securities not purchased by the Declining Rightholders (the "Reoffered
Securities") in the proportion which the Equity Percentage of the Accepting
Rightholders bears to the aggregate of the Equity Percentages of all Accepting
Rightholders; provided, however, that each Accepting Rightholder shall be
entitled to exercise his/her preemptive rights to purchase Reoffered Securities
only with respect to the whole of such proportionate share thereof and not with
respect to only a part thereof. On the 1st business day after the expiration of
the Preemptive Rights Period, the Agent shall give notice (the "Reoffer Notice")
to Accepting Shareholders of the amount of Reoffered Securities available for
purchase. The preemptive rights granted with respect to the Reoffered Securities
shall be exercised by the giving of notice by Agent on behalf of an Accepting
Rightholder of such exercise within the 2nd business day after receipt by the
Accepting Rightholder of the Reoffer Notice; provided however, that each
Accepting Shareholder may provide notice of such shareholder's election to
acquire all unpurchased Reoffered Securities in the event that any Accepting
Rightholder fails or declines to purchase his/ her proportionate share of such
Reoffered Securities, then such unpurchased Reoffered Securities shall be sold
to those electing to acquire all unpurchased Reoffered Securities
proportionately based on the Equity Percentage of the Accepting Rightholders
making such election. The Agent shall provide the Company notice of any
Preemptive Exercise Notice and Reoffer Notice no later than 5 business days
after expiration of the Preemptive Rights Period. No later than 3 business days
prior to the closing date of the Equity Securities offering, the Company shall
give notice to Agent of such closing date and the Company shall close the Equity
Securities offering concurrently with the sale of Equity Securities to
Preemptive Rightholder exercising Preemptive Rights under the terms of Section
2.2.
3. CLOSING
3.1 The closing of the transactions contemplated under this Agreement (the
"Closing") shall take place at 10:00 a.m. on March 15, 2002 at the offices of
Xxxxxx & Xxxxxxx, LLP, 0000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxxxx, xx at
such other time or place as the Company and the Holders may mutually agree (such
date being hereinafter referred to as the "Closing Date").
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3.2 At the Closing, upon and in consideration of the transactions
contemplated under this Agreement, the Parties agree as follows:
(a) the Company will execute and deliver to CapEx (i) the Debenture
Amendment to the CapEx Debenture, (ii) the Warrant Amendment to the CapEx
Warrant No. 1, and (iii) the Warrant Amendment to the CapEx Warrant No. 2;
(b) CapEx will accept and acknowledge (i) the Debenture Amendment to
the CapEx Debenture, (ii) the Warrant Amendment to the CapEx Warrant No. 1, and
(iii) the Warrant Amendment to the CapEx Warrant No. 2;
(c) the Company will execute and deliver to DHB (i) the Debenture
Amendment to the DHB Debenture, (ii) the Warrant Amendment to the DHB Warrant
No.1, and (iii) the Warrant Amendment to the DHB Warrant No. 2; and
(d) DHB will accept and acknowledge (i) Debenture Amendment to the DHB
Debenture, (ii) the Warrant Amendment to the DHB Warrant No. 1, and (iii) the
Warrant Amendment to the DHB Warrant No. 2.
4. REPRESENTATIONS, WARRANTIES, AND COVENANTS OF THE COMPANY
The Company hereby represents, warrants and covenants to each of the
Holders as of the Closing Date:
4.1 Organization, Subsidiaries, Good Standing, Qualification and Power and
Authority. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Florida. The Company and each
Subsidiary has all requisite corporate power and authority (a) to execute and
deliver this Agreement, the Debenture Amendments, the Warrant Amendments and the
other agreements, instruments and documents contemplated to be executed and
delivered by it pursuant to this Agreement (this Agreement, the Debenture
Amendments, the Warrant Amendments and such other agreements instruments and
documents being herein sometimes collectively referred to as the "Transaction
Documents"), (b) to issue the Consideration Shares, (c) to issue the shares of
the Company's Common Stock issuable upon conversion of the Debentures, as
amended by the Debenture Amendments (the "Conversion Shares"), (d) to issue the
shares of the Company's Common Stock issuable upon conversion of the Warrants,
as amended by the Warrant Amendments (the "Warrant Shares"), and (e) to carry
out the other provisions of the Transaction Documents.
4.2 Capitalization. All issued and outstanding shares of the Common Stock
of the Company have been duly authorized and validly issued and are fully paid
and non-assessable. The issued and outstanding capital stock of the Company
immediately prior to the Closing will be as set forth on Schedule 4.2 attached
hereto and incorporated by reference herein. Except as set forth on Schedule
4.2, there are no outstanding (or deemed outstanding) options, warrants,
convertible debentures, convertible instruments, agreements or other rights to
purchase or otherwise acquire upon conversion, exchange or otherwise from the
Company any of its securities.
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4.3 Authorization; Binding Obligations. All corporate action on the part of
the Company, its officers, directors and shareholders necessary for the
authorization of the Transaction Documents and the performance of all of its
obligations thereunder and for the authorization, sale, issuance and delivery of
the Debenture Amendments, the Warrant Amendments, the Consideration Shares, the
Conversion Shares and the Warrant Shares has been taken or will be taken prior
to the Closing. The Conversion Shares and the Warrant Shares have been or will
be, prior to the Closing, duly and validly reserved for issuance and, when
issued upon conversion of the Debentures, as amended by the Debenture
Amendments, or upon the exercise of the Warrants, as amended by the Warrant
Amendments, as the case may be, will be validly issued, fully paid and
non-assessable, and the Consideration Shares will be validly issued, fully paid
and non-assessable. The Company has taken or will take all such action as may be
necessary to assure that an adequate number of shares of Common Stock is
authorized and reserved for issuance of the Conversion Shares and the Warrant
Shares. This Agreement has been duly authorized and executed by the Company.
This Agreement, the Debenture Amendments, the Warrant Amendments, and the other
Transaction Documents will, once executed, constitute, valid, legal and binding
obligations of the Company enforceable in accordance with their terms, except to
such limitations as may result from any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
enforcement of creditors' rights generally.
4.4 Consents and Approvals. Except as required by the Securities Act of
1933, as amended (the "Securities Act"), or any state securities laws, no
filings with, notices to, or approvals of any governmental or regulatory body
are required to be obtained or made by the Company in connection with the
consummation of the transactions contemplated hereby.
4.5 No Violations. The execution and delivery of this Agreement, the
Debenture Amendments, the Warrant Amendments or the other Transaction Documents
and the performance by the Company of its obligations hereunder and thereunder
(a) do not and will not conflict with or violate any provision of the Company's
Articles of Incorporation or bylaws, and (b) do not and will not (i) conflict
with or result in a breach of the terms, conditions or provisions of, (ii)
constitute a default under, (iii) result in a violation of, or (iv) require any
authorization, consent, approval, exemption or other action by or notice to any
court or administrative or governmental body or other third party pursuant to,
any law, statute, rule or regulation or any agreement or instrument or any
order, judgment or decree to which the Company is subject or by which any of its
assets are bound except for such consents which have been obtained by the
Company.
4.6 Rule 144. The Company has maintained and will continue to maintain all
reports and documents and has taken all actions as may be necessary or useful in
order to allow a holder of Registrable Securities (as defined in Section 6
below) to sell any such securities without registration in accordance with Rule
144 under the Securities Act.
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5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE HOLDERS
The Holders each, severally and not jointly, hereby represent, warrant and
covenant to the Company as of the Closing Date:
5.1 Requisite Power and Authority. Such Holder has all necessary power and
authority to execute and deliver this Agreement, the Debenture Amendments, and
the Warrant Amendments and to carry out their provisions. All actions on such
Holder's part required for the lawful execution and delivery of this Agreement,
the Debenture Amendments, and the Warrant Amendments have been or will be
effectively taken prior to the Closing.
5.2 Investment Representations. Such Holder understands that none of the
Debentures, as amended by the Debenture Amendments, the Warrants, as amended by
the Warrant Amendments, the Consideration Shares, the Conversion Shares and the
Warrant Shares to be acquired by such Holder has yet been registered under the
Securities Act. Such Holder also understands that such Debentures, as amended by
the Debenture Amendments, the Warrants, as amended by the Warrant Amendments,
and Consideration Shares are being offered and sold pursuant to an exemption
from registration contained in regulations under the Securities Act based in
part upon such Holder's representations contained in this Agreement.
(a) Acquisition for Own Account. Such Holder is acquiring the
Consideration Shares for its own account for investment only, and not with a
view towards distribution in violation of applicable securities laws.
(b) Accredited Investor. Such Holder represents that it is an
accredited investor within the meaning of Rule 501(a) of Regulation D as
promulgated under the Securities Act.
(c) Non-Foreign Status. Such Holder certifies that it is not a
nonresident alien for purposes of income taxation (as such term is defined in
the Internal Revenue Code of 1986, as amended, and Income Tax Regulations).
(d) Financial Experience. Such Holder has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of an investment in the Debenture Amendment, the Warrant
Amendments, the Consideration Shares, the Conversion Shares and the Warrant
Shares (collectively, the "Securities") and it is able to bear the economic risk
of loss of its entire investment.
(e) Information. The Company has provided to such Holder the
opportunity to ask questions and receive answers concerning the terms and
conditions of the transactions contemplated in this Agreement and it has had
access to such information concerning the Company as it has considered necessary
or appropriate in connection with its investment decision to acquire the
Securities.
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(f) Transfer Restrictions. Such Holder agrees that if it decides to
offer, sell or otherwise transfer any of the Securities, it will not offer, sell
or otherwise transfer any of such Securities directly or indirectly, unless:
(i) the sale is made pursuant to registration under the
Securities Act;
(ii) the sale is made pursuant to the exemption from the
registration requirements under the Securities Act provided
by Rule 144 thereunder and in accordance with any applicable
state securities or "Blue Sky" laws; or
(iii)the Securities are sold in a transaction that does not
require registration under the Securities Act or any
applicable state laws and regulations governing the offer
and sale of securities, and it has prior to such sale
furnished to the Company an opinion of counsel reasonably
satisfactory to the Company.
(g) Legends. Such Holder understands and agrees that the certificates
representing the Securities will bear a legend stating that such shares have not
been registered under the Securities Act or the securities laws of any state of
the United States and may not be offered for sale or sold unless registered
under the Securities Act and the securities laws of all applicable states of the
United States or an exemption from such registration requirements is available.
(h) Warrant Restrictions. Such Holder understands and agrees that the
Warrants, as amended, may not be sold or transferred unless the Warrant Shares
are registered under the Securities Act and any applicable state securities laws
or unless an exemption from such registration requirements is available and that
certificates representing the Warrants will bear a legend to such effect.
(i) Notations. Such Holder consents to the Company making a notation
on its records or giving instructions to any transfer agent of the Company in
order to implement the restrictions on transfer set forth and described herein.
5.3 Knowledge of Breach or Event of Default. As of the Closing Date, each
Holder acknowledges and confirms that it has no knowledge and is not aware of
any fact or circumstance that would cause or constitute a breach of or an event
of default under the Purchase Agreement, the Debentures or the Warrants, other
than as are cured by entering into this Agreement, and each Holder agrees that
it is the intent of the Parties, without admitting any breach or event of
default, to enter into this Agreement for the purposes of curing any breaches or
events of default which may have arisen as a result of any Holder's knowledge of
facts and circumstances as of the Date of Closing.
6. REGISTRATION RIGHTS RELATING TO CONSIDERATION SHARES
6.1 Definitions. As used in this Section 6, the following terms shall have
the following respective meanings:
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(a) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, (or any similar successor federal statute) and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(b) "Public Sale" means any sale of Registrable Securities to the
public pursuant to an offering registered under the Securities Act or to the
public through a broker, dealer or market maker pursuant to the provisions of
Rule 144.
(c) "registers," "registered," and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement by the SEC.
(d) "Registrable Securities" shall mean (i) Consideration Shares and
(ii) any Common Stock or Common Stock Equivalents issued as a dividend or other
distribution with respect to or in exchange for or in replacement of the shares
referenced in Sections 6.1(d)(i) and 6.1(d)(ii), provided, however, that
Registrable Securities shall not include any such shares or Equity Securities
that have previously been registered under the Securities Act or that have
otherwise been sold to the public in an open-market transaction under Rule 144.
(e) "Registration Expenses" shall mean all expenses incurred in
connection with effecting any registration pursuant to this Agreement, including
without limitation all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company, blue
sky fees and expenses, expenses of any regular or special audits incident to or
required by any such registration, and the fees and expenses of one counsel for
the selling holders of Registrable Securities, but excluding Selling Expenses.
(f) "Rule 144" shall mean Rule 144 as promulgated by the SEC under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that may be promulgated by the SEC.
(g) "SEC" shall mean the United States Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(h) "Securities Act" shall mean the Securities Act of 1933, as
amended, (or any similar successor federal statute) and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(i) "Selling Expenses" shall mean all stock transfer taxes,
underwriting discounts, expenses for special counsel of a selling stockholder
(in addition to the counsel referred to in the definition of "Registration
Expenses") and selling commissions applicable to the sale of Registrable
Securities.
6.2 Demand Registration.
(a) Request for Registration. Subject to Sections 6.2(b) and 6.2(e),
at any time from the issue of the Consideration Shares, when any Registrable
Securities are outstanding, any Holder may, by notice (the "Demand Notice")
given by Agent, demand that the
11
Company effect one (1) registration under the Securities Act utilizing either
(i) a registration on Form X-0, Xxxx XX-0, if available, or any similar or
successor form, or (ii) a registration on Form S-3 or any similar or successor
form, if available (a "Demand Registration"). These Demand Registration rights
are in addition to the rights granted in the Purchase Agreement.
(b) Deferral of Demand Registration. The Company shall use its best
efforts to file a registration statement with respect to a Demand Registration
demanded pursuant to Section 6.2(a) as soon as practicable and in any event
within 60 days after receipt of the Demand Notice; provided, however, that if
the Company selects an underwriter to distribute the Registrable Securities
covered by the Demand Registration as part of an offering of other securities of
the Company, and such underwriter determines in good faith that, and provides
Agent with a certificate (an "Underwriter Notice") of an officer of such
underwriter certifying that in its view such Demand Registration would be
materially detrimental to the Company or would negatively impact any other
material corporate transaction and concludes, as a result, that it is advisable
to defer the filing of such registration statement at such time, then the
Company shall have the right to defer such filing for the period during which
such registration would be detrimental; provided, however, that the Company may
not defer the filing for a period of more than 90 days following receipt of the
Demand Notice. In addition, and notwithstanding the Demand Notice, the Company
shall not be required to effect a registration statement if, within 10 days
after receiving any Demand Notice, the Company delivers a notice (a "Company
Registration Notice") to Agent of its intent to file a registration statement
within the following 60 days and does so file such registration within such time
period. In addition, the Company may, not more than once in each calendar year
and provided that in such calendar year neither an Underwriter Notice nor a
Company Registration Notice shall have been previously given, and no Demand
Notice shall have been given at any time prior thereto, be entitled to provide
to Agent a written notice (a "Company Deferral Notice") stating that the Company
has determined that it would be materially detrimental to the Company or would
negatively impact on other material corporate transactions for Agent to give a
Demand Notice within the period of 60 days following the date of receipt of such
Company Deferral Notice, in which case, Agent shall not be permitted, during
such 60 day period, to give a Demand Notice.
(c) Underwriting. The right of any Holder of Registrable Securities to
participate in an underwritten Demand Registration shall be conditioned upon
such Holder's participation in such underwriting in accordance with the terms
and conditions thereof, and Holder shall enter into an underwriting agreement in
customary form with the underwriter and the Company.
(d) Priorities. The Holders of Registrable Securities will have
absolute priority over any other securities proposed to be included in a
registered offering pursuant to Section 6.2(a) hereof. If other securities are
included in any Demand Registration that is not an underwritten offering, all
Registrable Securities included in such offering shall be sold prior to the sale
of any of such other securities. If the Registrable Securities are included in
any underwritten offering, and the managing underwriter for such offering
advises the Company that in its opinion the amount of the Registrable Securities
to be included, when given absolute priority over any other securities proposed
to be included in such underwritten offering as provided for in the first
sentence of this Section 6.2(d), exceeds the amount of securities which
12
can be sold in such offering without adversely affecting the marketability
thereof (including the price at which such securities are to be sold), such
number of Registrable Securities included in such registration shall be reduced,
pro rata among the holders thereof based on the percentage of the outstanding
Common Stock held by each such holder, by no more than 50% of the total number
of Registrable Securities held by the Holder (an "Underwriter's Cut-Back"). In
no event shall the Registrable Securities be subject to more than one
Underwriter's Cut-Back unless expressly agreed to in writing by the Holders.
(e) One Registration. Where the Company has effected the Demand
Registration, it shall have no obligation to effect any further Demand
Registrations; provided, however, that (i) where at any time within two (2)
years after such Demand Registration was made pursuant to Section 6.2 the time
period within which any issue or trade of Registrable Securities is required to
be made under such registration has passed or will in 30 days pass, the Holders
shall have the right to demand (by notice given by Agent on their behalf) that
the Company effect a further registration (including, but not limited to, a new
Demand Registration) as may be required for registration of the Registrable
Securities or (ii) if such Demand Registration is subject to an Underwriter's
Cut-Back, the Holders shall have (effective 30 days after completion of the
offering in which the Underwriter's Cut-Back related) the right to demand (by
notice given by Agent on their behalf) that the Company effect a further
registration (including, but not limited to, a new Demand Registration) as may
be required for registration of the remaining Registrable Securities held by
such Holders.
6.3 Expenses of Registration. Except as provided in this Section 6.3, the
Company shall bear all Registration Expenses incurred in connection with the
Demand Registration and any Piggyback Registration. All Selling Expenses
incurred by the Company relating to Registrable Securities included in any
Demand Registration and Piggyback Registration shall be reimbursed by Agent.
6.4 Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 6, the Company will keep Agent advised in
writing as to the initiation of such registration and as to the completion
thereof. The Company will use its reasonable efforts to:
(a) cause such registration to be declared effective by the SEC and,
in the case of a Demand Registration, keep such registration effective for a
period of two years or until the holders of Registrable Securities included
therein have completed the distribution described in the registration statement
relating thereto, whichever first occurs;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement (including post-effective amendments) as may be necessary
to comply with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all securities covered by such registration
statement;
(c) obtain appropriate qualifications of the securities covered by
such registration under state securities or "blue sky" laws in such
jurisdictions as may be requested by Agent;
13
(d) furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as Agent
from time to time may reasonably request;
(e) notify Agent at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of Agent, prepare and furnish to
Agent a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the Holders
of such shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or incomplete in the
light of the circumstances then existing; cause all Registrable Securities
covered by such registration to be listed on each securities exchange or
inter-dealer quotation system on which similar securities issued by the Company
are then listed;
(f) provide a transfer agent and registrar for all Registrable
Securities covered by such registration and, if necessary, a CUSIP number for
all such Registrable Securities, in each case not later than the effective date
of such registration;
(g) otherwise comply with all applicable rules and regulations of the
SEC, and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least 12 months,
but not more than 18 months, beginning with the first month after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(h) in connection with any underwritten registration, the Company will
enter into an underwriting agreement reasonably satisfactory to Agent containing
customary underwriting provisions, including indemnification and contribution
provisions.
6.5 Indemnification.
(a) The Company will indemnify Holder, each of Holder's officers and
directors, and each person controlling such Holder within the meaning of Section
15 of the Securities Act, with respect to each registration, qualification or
compliance effected pursuant to this Section 6 or otherwise, against all
expenses, claims, losses, damages and liabilities (or actions, proceedings or
settlements in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such indemnified person for any legal and
any other expenses reasonably incurred in connection with
14
investigating and defending or settling any such claim, loss, damage, liability
or action; provided, however, that the Company will not be liable in any such
case to the extent that any such claims, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by Holder and stated to be specifically for
use therein. It is agreed that the indemnity agreement contained in this Section
6.5(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).
(b) Each of the Holders, to the extent it is a holder of Registrable
Securities included in any registration effected pursuant to this Section 6,
shall indemnify the Company, each of its directors, officers, agents, employees
and representatives, and each person who controls the Company within the meaning
of Section 15 of the Securities Act, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse such indemnified persons for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, in each case to the extent,
but only to the extent, that such untrue statement (or alleged untrue statement)
or omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in strict
conformity with written information furnished to the Company by Agent on behalf
of such Holder; provided, however, that (x) such Holder shall not be liable
hereunder for any amounts in excess of the net proceeds received by such Holder
pursuant to such registration, and (y) the obligations of such Holder hereunder
shall not apply to amounts paid in settlement of any such claims, losses,
damages or liabilities (or actions in respect thereof) if such settlement is
effected without the consent of such Holder (which consent has not been
unreasonably withheld).
(c) Each party entitled to indemnification under this Section 6.5 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel selected by the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not unreasonably be withheld), and the Indemnified Party
may participate in such defense at such party's expense, and provided further
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its obligations under this Section
6.5 to the extent such failure is not prejudicial. No Indemnifying Party in the
defense of any such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include an unconditional release of such Indemnified Party from
all liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
15
(d) If the indemnification provided for in this Section 6.5 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in an underwriting agreement
entered into in connection with an underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
6.6 Lock-up Agreement. The Holders agree and acknowledge that the offer and
sale of Registrable Securities under a Demand Registration may adversely affect
the marketability of the Company's Common Stock. Each of the Holders agrees that
during any three month period, no Holder shall sell, or cause or permit the sale
of, more than one-third of the Registrable Securities held by such Holder and
registered under a Demand Registration.
6.7 Other Obligations. With a view to making available the benefits of
certain rules and regulations of the SEC which may effectuate the registration
of Registrable Securities or permit the sale of Registrable Securities to the
public without registration, the Company agrees to:
(a) after its initial registration under the Securities Act, exercise
best efforts to cause the Company to be eligible to utilize Form S-3 (or any
similar form) for the registration of Registrable Securities;
(b) at such time as any Registrable Securities are eligible for
transfer under Rule 144(k), upon the request of Agent on behalf of the holder of
such Registrable Securities, promptly remove any restrictive legend from the
certificates evidencing such securities, at no cost to Agent or such holder
where such holder is a Holder hereunder, and at the cost of Agent in any other
case;
(c) make and keep available public information as defined in Rule 144
under the Securities Act at all times from and after its initial registration
under the Securities Act;
(d) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements; and
16
(e) furnish Agent upon request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time
following the effective date of the first registration statement filed by the
Company under the Securities Act for an offering of its securities to the
general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents as a holder of Registrable Securities may reasonably request in
availing itself of any rule or regulation of the Commission (including Rule
144A) allowing a holder of Registrable Securities to sell any such securities
without registration.
6.8 Termination of Registration Rights. The right of Agent to request
inclusion of Registrable Securities in any registration pursuant to this Section
6 shall terminate at the date that is the earlier of: (a) that date that all
Registrable Securities have been registered under the Securities Act has or
otherwise been sold to the public in an open-market transaction under Rule 144;
and (b) the fifth anniversary of the Closing Date; provided, however, that where
a Company Deferral Notice has been given within 70 days prior to the date on
which termination would otherwise occur, it shall not occur for 60 days beyond
the end of the 60 day period during which a Demand Notice cannot be given
pursuant to Section 6.2(b).
6.9 Piggyback Registrations.
(a) Request for Inclusion. At any time after the completion of a
Public Offering (as defined in the Purchase Agreement), after the date hereof,
if the Company shall determine to register any of its securities for its own
account or for the account of other security holders of the Company on any
registration form (other than a registration relating to either Form S-4 or S-8)
which permits the inclusion of Registrable Securities (a "Piggyback
Registration"), the Company will promptly give Agent written notice thereof and,
subject to Section 6.9(c), shall include in such registration all of the
Registrable Securities requested to be included therein pursuant to the written
request of Agent received within twenty (20) days after delivery of the
Company's notice.
(b) Underwriting. If the Piggyback Registration relates to an
underwritten public offering, the Company shall so advise Agent as a part of the
written notice given pursuant to Section 6.9(a). In such event, the right of any
holder of Registrable Securities to participate in such registration shall be
conditioned upon such holder's participation in such underwriting in accordance
with the terms and conditions thereof. Each Holder of Registrable Securities
proposing to distribute their securities through such underwriting shall enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected by the Company.
(c) Priorities. If such proposed Piggyback Registration is an
underwritten offering and the managing underwriter for such offering advises the
Company that the amount of securities requested to be included therein exceeds
the amount of securities that can be sold in such offering, or if the Company
and the managing underwriter shall in good faith determine to reduce the number
of shares to be offered by the Company pursuant to a reasonable assessment of
market conditions, (i) the number of Registrable Securities requested to be
included in such Piggyback Registration, (ii) the number of securities
determined by the directors of the Company
17
in good faith to be sold by the Company, and (iii) the number of securities, if
any, to be sold by any other security holders of the Company exercising Demand
Registration rights in such offering, shall be reduced pro rata among the
Holders on the basis of the percentage of the outstanding Common Stock held by
such Holders.
7. COMPANY COVENANTS
The Company covenants and agrees with the Holders that:
7.1 Reservation of Common Stock. The Company will reserve and keep
available that maximum number of its authorized but unissued Common Stock as may
be required for the issuance of Conversion Shares and the Warrant Shares.
7.2 Reverse Stock Split. The Company agrees to use its best efforts to
effect a consolidation of its issued and outstanding shares of Common Stock on a
four (old) share for one (new) share basis, no later than 90 days after the
Closing Date (the "Reverse Stock Split"). The Company shall provide the Agent
with Articles of Amendment to the Company's Articles of Incorporation effecting
the reverse split, certified by the Secretary of State of Florida, as soon as
practicable following the Reverse Stock Split. In the event such Reverse Stock
Split is not effected before June 30, 2002, certain amendments to the Debenture
Amendments and the Warrant Amendments shall be terminated, rescinded, cancelled,
null and void under the terms of Section 1.4 of this Agreement.
7.3 Issuance of Additional Common Stock. The Company agrees that it will
not for so long as: (a) CapEx or its affiliates holds Debentures in the
aggregate principal amount of $300,000 or more, without the prior written
consent of CapEx, and/or (b) DHB or its affiliates holds Debentures in the
aggregate principal amount of $200,000 or more, without the prior written
consent of DHB:
(a) issue Equity Securities to cause the Fully Diluted Capital of the
Company to exceed 6,250,000 shares of Common Stock, after giving effect to the
Reverse Stock Split, unless such Equity Securities are issued for consideration
in cash or with a Fair Market Value in excess of $2.00 per share of Common Stock
(as calculated on a post Reverse Stock Split basis); or
(b) issue Equity Securities to cause the Fully Diluted Capital of the
Company to exceed 7,500,000 shares of Common Stock, after giving effect to the
Reverse Stock Split.
For the purposes of this Section 7.3, "Fully Diluted Capital" means the issued
and outstanding shares of Common Stock on a fully diluted basis (after giving
effect to conversion, exchange, exercise or otherwise of preferred stock,
convertible debentures, convertible instruments, options warrants or other
rights to acquire Common Stock); provided however:
(i) that such calculation of the Fully Diluted Capital shall not
include the shares of Common Stock issuable upon conversion of
the Debentures; and
(ii) the references to 6,250,000 shares and $2.00 in subsection (a)
above and the calculation of Fully Diluted shall be adjusted to
give effect to any
18
capital reclassification, stock dividend, subdivision, split up,
combination, consolidation or other reorganization of Common
Stock.
7.4 Board Meeting Attendance. Until such time as either (a) 75% of the
principal amount of the Debentures has been converted into the Company's Common
Stock, or (b) the Debentures shall have been repaid in full, Agent shall be
entitled to receive notice of and to have a representative attend all meetings
(including telephonic meetings) and all adjournments of meetings of the Board of
Directors and any committee thereof (including committees comprised of both
directors and non-directors). Failure to provide notice (on the same basis as is
required for all board members and in any event not less than three business
days') of or to permit such representative to attend such meeting shall
constitute a material breach of the provisions of this Agreement. Such
representative shall sign a confidentiality agreement as may reasonably be
required by the Company to comply with applicable law, including but not limited
to Regulation FD as promulgated by the SEC, and such representative shall have
no voting rights at any such meeting, but shall be entitled to participate fully
in all discussions that take place thereat.
8. CAPEX AS AGENT FOR THE HOLDER
8.1 Ratification of CapEx as Agent. Each Holder hereby ratifies the
appointment of CapEx, L.P. as its agent (in such capacity, "Agent"), under the
terms set forth in Section 8 of the Purchase Agreement.
9. EXPENSE REIMBURSEMENT
The Company hereby agrees to reimburse Agent on behalf of the Holders for
all of its out-of-pocket expenses incurred in connection with the transactions
contemplated hereby, including all out-of-pocket expenses (including filing fees
and other third party charges) incurred in connection with its third party due
diligence costs, the preparation and negotiation of this Agreement, the
Debenture Amendments, the Warrant Amendments, and all other documents evidencing
the transactions contemplated herein (including reasonable attorneys' fees).
10. MISCELLANEOUS
10.1 Currency. Except as may be otherwise expressly provided, all dollar
amounts herein are references to United States dollars.
10.2 Governing Law. This Agreement shall be governed by the internal law,
and not the law of conflicts, of the State of Colorado.
10.3 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by or on behalf of the Holders
and the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
19
10.4 Successors and Assigns. Except as provided in Section 8.11 of the
Purchase Agreement, neither Holder shall be entitled to assign its rights under
this Agreement or any of the other Transaction Documents, without the consent of
the Company, which consent shall not be unreasonably withheld or delayed;
provided always, however, that no such consent shall be required for either
Holder to assign such rights to any person or group of persons controlling or
owning the majority of all beneficial interests in such Holder, any other entity
controlled by such person or persons, or an entity controlled by such Holder,
provided that such entity shall continue to be so controlled by such persons or
such Holder as applicable. The provisions hereof shall inure to the benefit of,
and be binding upon, the successors, permitted assigns, heirs, executors and
administrators of the parties hereto.
10.5 Entire Agreement; Amendment and Waiver. The Purchase Agreement, this
Agreement, the Schedules and Exhibits hereto and the other documents expressly
delivered pursuant hereto or thereto supersede any other agreement, whether
written or oral, that may have been made or entered into by the parties hereto
relating to the matters contemplated hereby, and constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof, and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth or incorporated by reference herein and therein. Neither
this Agreement nor any term hereof may be amended, waived, discharged or
terminated except by a written instrument signed by the Company and the Holders.
10.6 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
10.7 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, and if not, then on the next
business day; (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (iv) one (1) day
after deposit with a nationally recognized overnight courier, special next day
delivery, with verification of receipt. All communications shall be sent:
to the Company at:
The Neptune Society, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx
Attention: Xxxxx Xxxxxx, Chief Financial Officer
20
to the Holders at:
x/x XxxXx, X.X.
000 00xx Xx., Xxxxx 0000
Xxxxxx, XX 00000
Telecopier No. (000) 000-0000
Telephone No. (000) 000-0000
Attention: Xxxx Xxxxxx, Managing Partner
with a copy to:
X.X. Xxxxx Investment Banking Corp.
00 Xxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Telecopier No. (000) 000-0000
Telephone No. (000) 000-0000
Attention: Xxxxxx Xxxx
or at such other address as the Company or Agent on behalf of Holders may
designate by ten (10) days advance written notice to the other parties hereto.
10.8 Counterparts; Facsimile. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. This Agreement may be executed and delivered by
facsimile.
10.9 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein.
[This space intentionally left blank - signature page follows]
21
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
___ day of March, 2002.
COMPANY:
THE NEPTUNE SOCIETY, INC.
By: /s/ Xxxxx Xxxxxx
-------------------------------------------------
Name: Xxxxx Xxxxxx
-----------------------------------------------
Title: CEO
----------------------------------------------
HOLDERS:
CAPEX, L.P. D.H. XXXXX INVESTMENT BANKING CORP.
By Its General Partner, RBP, LLC
By: /s/ Xxxx Xxxxxx By: /s/ J. Xxxxxx Xxxxx
------------------------------- -------------------------------
Name: Xxxx Xxxxxx Name: J. Xxxxxx Xxxxx
Title: Managing Member Title: Chairman
22
Acknowledgement
The undersigned guarantors hereby acknowledge and consent to the foregoing
Agreement and the amendments to the Convertible Debentures contemplated thereby.
NEPTUNE SOCIETY OF AMERICA, INC.
By: /s/ Xxxxx Xxxxxx
-------------------------------------------------
Name: Xxxxx Xxxxxx
-----------------------------------------------
Title: Director
----------------------------------------------
NEPTUNE MANAGEMENT CORP.
By: /s/ Xxxxx Xxxxxx
-------------------------------------------------
Name: Xxxxx Xxxxxx
-----------------------------------------------
Title: CEO
----------------------------------------------
HERITAGE ALTERNATIVES, INC.
By: /s/ Xxxxxx Xxxxxx
-----------------------------------------------
Name: Xxxxxx Xxxxxx
-----------------------------------------------
Title: Director, Treasurer
-----------------------------------------------
23
Exhibit A
FORMS OF DEBENTURE AMENDMENT XX. 0
00
Xxxxxxx X
XXXXX XX XXXXXXX AMENDMENT NO. 1
25
