Form 8-K
Exhibit 10.1
Buyers United, Inc., File No. 0-26917
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this "Agreement") is dated as of March
10, 2004, by and among Buyers United, Inc., a Delaware corporation (the
"Company"), Acceris Communications Inc. (formerly I-Link Incorporated), a
Florida corporation (the "Selling Stockholder"), and the investors identified on
the signature pages hereto (each, an "Investor" and collectively, the
"Investors").
WHEREAS, subject to the terms and conditions set forth in this Agreement
and pursuant to exemptions from registration available under the Securities Act
(as defined below), the Company and the Selling Stockholder each desires to
issue and sell to each Investor, and each Investor, severally and not jointly,
desire to purchase from the Company and the Selling Stockholder, certain
securities of the Company, as more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company, the Selling Stockholder
and the Investors agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
Agreement, for all purposes of this Agreement, the following terms shall have
the meanings indicated in this Section 1.1:
"Action" means any action, suit, inquiry, notice of violation,
proceeding (including any partial proceeding such as a deposition) or
investigation pending or threatened in writing against or affecting the
Company, any Subsidiary or any of their respective properties before or by
any court, arbitrator, governmental or administrative agency, regulatory
authority (federal, state, county, local or foreign), stock market, stock
exchange or trading facility.
"Affiliate" means any Person that, directly or indirectly through one
or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule
144. With respect to an Investor, any investment fund or managed account
that is managed on a discretionary basis by the same investment manager as
such Investor will be deemed to be an Affiliate of such Investor.
"Business Day" means any day except Saturday, Sunday and any day that
is a federal legal holiday or a day on which banking institutions in the
State of New York are authorized or required by law or other governmental
action to close.
"Closing" means the closing of the purchase and sale of the Securities
pursuant to Article II.
"Closing Date" means the Business Day immediately following the date
on which all the conditions set forth in Sections 5.1 and 5.2 hereof are
satisfied, or such other date as the parties may agree.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, $0.0001 par
value per share, and any securities into which such common stock may
hereafter be reclassified.
"Common Stock Equivalents" means any securities of the Company or any
Subsidiary which entitle the holder thereof to acquire Common Stock at any
time, including without limitation, any debt, preferred stock, rights,
options, warrants or other instrument that is at any time convertible into
or exchangeable for, or otherwise entitles the holder thereof to receive,
Common Stock or other securities that entitle the holder to receive,
directly or indirectly, Common Stock.
"Company Counsel" means Cohne, Xxxxxxxxx & Xxxxx, P.C.
"Disclosure Materials" means the SEC Disclosure Documents and the
Company's Schedules to this Agreement, collectively.
"Effective Date" means the date that the Registration Statement
required by Section 2(a) of the Registration Rights Agreement is first
declared effective by the Commission.
"Escrow Agent" means the Escrow Agent under the Escrow Agreement.
"Escrow Agreement" means the Escrow Agreement, dated as of the date of
this Agreement, among the Company, Xxxx Capital Partners LLC and the Escrow
Agent.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means U.S. generally accepted accounting principles.
"Intellectual Property Rights" means the ownership or right to use
patents, patent applications, trademarks, trademark applications, service
marks, trade names, copyrights, licenses and other similar rights in
connection with the respective businesses of the Company and the
Subsidiaries as described in the SEC Disclosure Documents.
"Investment Amount" means, with respect to each Investor, the
investment amount indicated below such Investor's name on the signature
page of this Agreement.
"Investor Party" shall have the meaning set forth in Section 4.7.
"Knowledge" means, with respect to any statement made to the Knowledge
of a party, that the statement is based upon actual knowledge of the
officers of such party having responsibility for the matter or matters that
are the subject of the statement, after due inquiry.
"Lien" means any lien, charge, encumbrance, security interest, right
of first refusal, preemptive right or other restrictions of any kind.
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"Losses" means any loss, liability, obligation, claim, contingency,
damage, cost or expense, including all judgments, amounts paid in
settlements, court costs and reasonable attorneys' fees and costs of
investigation.
"Material Adverse Effect" means any of (a) an adverse effect on the
legality, validity or enforceability of any Transaction Document, (b) a
material and adverse effect on the results of operations, assets,
prospects, business or condition (financial or otherwise) of the Company
and the Subsidiaries, taken as a whole, or (c) an adverse impairment to the
Company's ability to perform on a timely basis its obligations under any
Transaction Document.
"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Per Unit Purchase Price" equals $2.30.
"Proceeding" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding,
such as a deposition), whether commenced or threatened.
"Registration Statement" means a registration statement meeting the
requirements set forth in the Registration Rights Agreement and covering
the resale by the Investors of the Securities.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company and
the Investors, in the form of Exhibit B hereto.
"Rule 144" means Rule 144 promulgated by the Commission pursuant to
the Securities Act, as such Rule may be amended from time to time, or any
similar rule or regulation hereafter adopted by the Commission having
substantially the same effect as such Rule.
"SEC Disclosure Documents" means the Company's: Annual Report on Form
10-KSB for the year ended December 31, 2002; Quarterly Reports on Form
10-QSB for the calendar quarters ended March 31, June 30, and September 30,
2003; Proxy Statement for the 2003 Annual Meeting of Stockholders filed
with the Commission on May 1, 2003; Current Report on Form 8-K filed May 8,
2003, as amended July 15, 2003; Registration Statement on Form SB-2 filed
with the Commission on September 10, 2003; Rule 424(b)(3) prospectus
filings with the Commission on October 22 and December 19, 2003, and all
other filings made by the Company under the Exchange Act since February 21,
2003.
"Securities" means the Shares and Selling Stockholder Shares, and
include the shares of Common Stock issuable to the Investors pursuant to
Section 2.1(a).
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Stockholder Shares" means the 750,000 shares of Common Stock
being offered and sold by the Selling Stockholder to the Investors
hereunder.
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"Shares" means the 3,782,000 shares of Common Stock being offered and
sold to the Investors by the Company hereunder.
"Subsidiary" means any subsidiary of the Company that is required to
be listed in Schedule 3.1(a).
"Trading Day" means (i) a day on which the Common Stock is traded on a
Trading Market (other than the OTC Bulletin Board), or (ii) if the Common
Stock is not listed on a Trading Market (other than the OTC Bulletin
Board), a day on which the Common Stock is traded in the over-the-counter
market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock
is not quoted on the OTC Bulletin Board, a day on which the Common Stock is
quoted in the over-the-counter market as reported by the National Quotation
Bureau Incorporated (or any similar organization or agency succeeding to
its functions of reporting prices); provided, that in the event that the
Common Stock is not listed or quoted as set forth in (i), (ii) and (iii)
hereof, then Trading Day shall mean a Business Day.
"Trading Market" means whichever of the New York Stock Exchange, the
American Stock Exchange, the NASDAQ National Market, the NASDAQ SmallCap
Market or OTC Bulletin Board on which the Common Stock is listed or quoted
for trading on the date in question.
"Transaction Documents" means this Agreement, the Registration Rights
Agreement, the Escrow Agreement and any other documents or agreements
executed in connection with the transactions contemplated hereunder.
ARTICLE II.
PURCHASE AND SALE
2.1 Purchase of Shares; Closing.
(a) Subject to the terms and conditions set forth in this Agreement,
at the Closing: (i) the Company shall sell to each Investor, and each
Investor shall, severally and not jointly, purchase from the Company,
Shares in such number as equals the quotient (rounded to the nearest whole
share) obtained by dividing (1) 83.451% of such Investor's Investment
Amount by (2) the Per Unit Purchase Price; and (ii) the Selling Stockholder
shall sell to each Investor, and each Investor shall, severally and not
jointly, purchase from such Selling Stockholder, Selling Stockholder Shares
in such number as equals the quotient (rounded to the nearest whole share)
obtained by dividing (1) 16.549% of such Investor's Investment Amount by
(2) the Per Unit Purchase Price. The Closing shall take place at the
offices of Xxxxx Xxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000
or at such other location as the parties may agree.
(b) Before the Closing, the Company and Selling Stockholder will
cooperate with one another, and will otherwise to cause the Selling
Stockholder Shares to be issued to the Investors as part of a single stock
certificate from the Company to each Investor that will include all Shares
and Selling Stockholder Shares being acquired by such Investor under this
Agreement. In furtherance of such efforts, prior to the Closing, the
Selling Stockholder will (i) tender for conversion to Common Stock in
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accordance with the Certificate of Designations of Series B Convertible
Preferred Stock of the Company such shares of Series B Convertible
Preferred Stock as is necessary for the issuance by the Company of the
number of Selling Stockholder Shares being sold hereunder, (ii) instruct
the Company to hold the Selling Stockholder Shares issuable upon the
conversion contemplated in (i) above and deliver the Selling Stockholder
Shares at Closing in accordance with Section 2.2, and (iii) deliver to the
Company such other documents as the Company or the Company's transfer agent
may require to effect the transfer of such securities to the name of the
Investors.
2.2 Closing Deliveries. (a) At the Closing, the Company shall deliver or
cause to be delivered to each Investor the following (collectively, the "Company
Deliverables"):
(i) a single certificate representing that number of Shares and
Selling Stockholder Shares determined under Section 2.1(a), registered
in the name of such Investor;
(ii) the legal opinion of Company Counsel, in agreed form,
addressed to the Investors; and
(iii) the Registration Rights Agreement duly executed by the
Company.
(b) At the Closing, the Selling Stockholder shall deliver or cause to
be delivered to each Investor, the Selling Stockholder Shares to be sold to
such Investor in accordance with Section 2.1(a), which shall be delivered
to the Investor at Closing as part of the stock certificate of the Company
to be delivered in accordance with Section 2.2(a)(i), and the legal opinion
of counsel to the Selling Stockholder, in agreed form, addressed to the
Investors (the "Selling Stockholder Deliverables").
(c) At the Closing, each Investor shall deliver or cause to be
delivered the following (collectively, the "Investors Deliverables"):
(i) to the Company, the Registration Rights Agreement duly
executed by each Investor; and
(ii) to the Escrow Agent, for deposit and distribution in
accordance with the terms of the Escrow Agreement, such Investor's
Investment Amount, in United States dollars and in immediately
available funds, by wire transfer to the account designated for such
purpose in the Escrow Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company hereby makes
the following representations and warranties to each Investor:
(a) Subsidiaries. The Company has no direct or indirect Subsidiaries
other than those listed in Schedule 3.1(a). Except as disclosed in Schedule
3.1(a), the Company owns, directly or indirectly, all of the capital stock
of each Subsidiary free and clear of any and all Liens, and all the issued
and outstanding shares of capital stock of each Subsidiary are validly
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issued and are fully paid, non-assessable and free of preemptive and
similar rights to subscribe for or purchase securities.
(b) Organization and Qualification. Each of the Company and each
Subsidiary is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Neither the Company nor any Subsidiary is
in violation of any of the provisions of its respective certificate or
articles of incorporation, bylaws or other organizational or charter
documents. Each of the Company and each Subsidiary is duly qualified to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted
or property owned by it makes such qualification necessary, except where
the failure to be so qualified or in good standing, as the case may be,
could not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect and no Proceeding has been
instituted in any such jurisdiction revoking, limiting or curtailing or
seeking to revoke, limit or curtail such power and authority or
qualification.
(c) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated thereby have been duly
authorized by all necessary action on the part of the Company and no
further action is required by the Company in connection therewith. Each
Transaction Document has been (or upon delivery will have been) duly
executed by the Company and, when delivered in accordance with the terms
hereof, will constitute the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
(d) No Conflicts. Neither the execution, delivery and performance of
the Transaction Documents by the Company, the consummation by the Company
of the transactions contemplated thereby, nor the sale of the Selling
Stockholder Shares hereunder, (i) conflict with or violate any provision of
the Company's or any Subsidiary's certificate or articles of incorporation,
bylaws or other organizational or charter documents, or (ii) conflict with,
or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, result in the creation of any Lien upon
any of the properties or assets of the Company or any Subsidiary, or give
to others any rights of termination, amendment, acceleration or
cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company
or Subsidiary debt or otherwise) or other understanding to which the
Company or any Subsidiary is a party or by which any property or asset of
the Company or any Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree
or other restriction of any court or governmental authority to which the
Company or a Subsidiary is subject (including federal and state securities
laws and regulations), or by which any property or asset of the Company or
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a Subsidiary is bound or affected; except in the case of each of clauses
(ii) and (iii), such as could not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect.
(e) Filings, Consents and Approvals. The Company is not required to
obtain any consent, waiver, authorization or order of, give any notice to,
or make any filing or registration with, any court or other federal, state,
local or other governmental authority or other Person in connection with
the execution, delivery and performance by the Company of the Transaction
Documents or by reason of the sale of the Selling Stockholder Shares
hereunder, other than (i) the filing with the Commission of one or more
Registration Statements in accordance with the requirements of the
Registration Rights Agreement, (ii) filings under state securities laws in
accordance with the requirements of the Registration Rights Agreement,
which will be made prior to the Effectiveness Date (as such term is defined
in the Registration Rights Agreement), (iii) the filings required in
accordance with Section 4.5, (iv) the filing of a Form D with the
Commission and under applicable state securities statutes pertaining to the
purchase and sale contemplated by this Agreement, and (v) those that have
been made or obtained prior to the date of this Agreement. The Selling
Stockholder is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any
court or other federal, state, local or other governmental authority or
other Person in connection with the execution, delivery and performance by
it of the Transaction Documents or by reason of the sale of the Selling
Stockholder Shares hereunder, except for such as would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse
Effect.
(f) Issuance of the Securities. The shares of Common Stock to be
issued and sold to the Investors in accordance with Section 2.1(a) have
been duly authorized and, when issued and paid for in accordance with
Section 2.2(c), will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. The Company has reserved from
its duly authorized capital stock the shares of Common Stock issuable
pursuant to this Agreement. The Series B Convertible Preferred Stock issued
to the Selling Stockholder was, when issued, duly authorized, validly
issued, fully paid and non-assessable, free and clear of all Liens in favor
of the Company or any of its Subsidiaries. The Selling Stockholder Shares
have been duly authorized by all necessary corporate action and are validly
issued, fully paid and nonassessable. The Selling Stockholder is the sole
record owner of the Selling Stockholder Shares to be sold hereunder. The
Securities are not subject to any preemptive or similar rights to subscribe
for or purchase securities.
(g) Capitalization. The number of shares and type of all authorized,
issued and outstanding capital stock of the Company, and all shares of
Common Stock reserved for issuance under the Company's various option and
incentive plans, is as set forth in Schedule 3.1(g). No securities of the
Company are entitled to preemptive or similar rights, and no Person has any
right of first refusal, preemptive right, right of participation, or any
similar right to participate in the transactions contemplated by the
Transaction Documents. Except as disclosed on Schedule 3.1(g), there are no
outstanding options, warrants, scrip rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights
or obligations convertible into or exchangeable for, or giving any Person
any right to subscribe for or acquire, any shares of the Company's capital
stock, or contracts, commitments, understandings or arrangements by which
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the Company or any Subsidiary is or may become bound to issue additional
shares of its capital stock, or securities or rights convertible or
exchangeable into shares of Common Stock. The issue and sale of the
Securities hereunder will not, immediately or with the passage of time,
obligate the Company to issue shares of Common Stock or other securities to
any Person (other than the Investors) and will not result in a right of any
holder of Company securities to adjust the exercise, conversion, exchange
or reset price under such securities. All of the outstanding shares of
capital stock of the Company are validly issued, fully paid and
non-assessable, have been issued in compliance with all federal and state
securities laws, and none of such outstanding shares was issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase any capital stock of the Company. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Securities. There are
no stockholders agreements, voting agreements, or other similar agreements
with respect to the Company's capital stock to which the Company is a party
or, to the Knowledge of the Company, between or among any of the Company's
stockholders.
(h) SEC Disclosure Documents; Financial Statements. The Company has
filed all reports and proxy statements required to be filed by the Company
under the Securities Act and the Exchange Act for the twenty-four months
preceding the date of this Agreement. The Company has filed all SEC
Disclosure Documents on a timely basis or has timely filed a valid
extension of such time of filing and has filed any such SEC Disclosure
Documents prior to the expiration of any such extension. As of their
respective dates, the SEC Disclosure Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act
and the rules and regulations of the Commission promulgated thereunder, and
none of the SEC Disclosure Documents, when filed, contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading.
The financial statements of the Company included in the SEC Disclosure
Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing and were prepared in accordance
with GAAP applied on a consistent basis during the periods involved, except
as may be otherwise specified in such financial statements or the notes
thereto, and fairly present in all material respects the financial position
of the Company and its consolidated Subsidiaries as of and for the dates
thereof and the results of operations and cash flows for the periods then
ended, subject, in the case of unaudited statements, to normal, year-end
audit adjustments. The Company maintains and will continue to maintain a
standard system of accounting established and administered in accordance
with GAAP and the applicable requirements of the Exchange Act.
(i) Press Releases. The press releases disseminated by the Company
during the two (2) years preceding the date of this Agreement taken as a
whole do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(j) Material Changes. Except as set forth in Schedule 3.1(j) and
disclosed in the SEC Disclosure Documents, since the date of the latest
audited financial statements included within the SEC Disclosure Documents,
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(i) there has been no event, occurrence or development that has had or
that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect, (ii) the Company has not incurred any
liabilities (contingent or otherwise) other than (A) trade payables and
accrued expenses incurred in the ordinary course of business consistent
with past practice, (B) liabilities not required to be reflected in the
Company's financial statements pursuant to GAAP or required to be disclosed
in filings made with the Commission, and (C) other liabilities that would
not, individually or in the aggregate, have a Material Adverse Effect,
(iii) the Company has not altered its method of accounting or the identity
of its auditors, (iv) the Company has not declared or made any dividend or
distribution of cash or other property to its stockholders or purchased,
redeemed or made any agreements to purchase or redeem any shares of its
capital stock, other than dividends paid in the ordinary course on
outstanding series of the Company's preferred stock, and (v) the Company
has not issued any equity securities to any officer, director or Affiliate,
except Common Stock issued in the ordinary course as dividends on
outstanding preferred stock and pursuant to existing Company stock option
plans or executive and director compensation arrangements. The Company does
not have pending before the Commission any request for confidential
treatment of information.
(k) Litigation. There is no Action that (i) adversely affects or
challenges the legality, validity or enforceability of any of the
Transaction Documents or the Securities or (ii) except as set forth in the
SEC Disclosure Documents, could, if there were an unfavorable decision,
individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect. Except as set forth in the SEC Disclosure
Documents, neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been during the ten-year period prior to the
Closing Date the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the Knowledge of the Company,
there is not pending or contemplated, any investigation by the Commission
involving the Company or any current or former director or officer of the
Company. The Commission has not issued any stop order or other order
suspending the effectiveness of any registration statement filed by the
Company or any Subsidiary under the Exchange Act or the Securities Act.
(l) Labor Relations. No material labor dispute exists or, to the
Knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(m) Compliance. Neither the Company nor any Subsidiary (i) is in
default under or in violation of (and no event has occurred that has not
been waived that, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that
it is in violation of, any indenture, loan or credit agreement or any other
agreement or instrument to which it is a party or by which it or any of its
properties is bound (whether or not such default or violation has been
waived), (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is or has been in violation of any statute,
rule or regulation of any governmental authority, including without
limitation all foreign, federal, state and local laws relating to taxes,
environmental protection, occupational health and safety, product quality
and safety and employment and labor matters, except in each case of (i),
(ii) and (iii) above as could not, individually or in the aggregate, have
or reasonably be expected to result in a Material Adverse Effect. The
Company is in compliance with the applicable requirements of the
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Xxxxxxxx-Xxxxx Act of 2002, as amended, and the rules and regulations
thereunder, except where such noncompliance, individually or in the
aggregate, could not have or reasonably be expected to result in a Material
Adverse Effect.
(n) Regulatory Permits. The Company and the Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate federal,
state, local or foreign regulatory authorities necessary to conduct their
respective businesses as described in the SEC Disclosure Documents, except
where the failure to possess such permits would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, and neither the Company nor any Subsidiary has received any notice
of proceedings relating to the revocation or modification of any such
permits.
(o) Title to Assets. The Company and the Subsidiaries do not own any
real property. The Company and the Subsidiaries have good and marketable
title in all personal property owned by them that is material to their
respective businesses, in each case free and clear of all Liens, except for
Liens described in the SEC Disclosure Documents and Liens as do not
materially affect the value of such property and do not materially
interfere with the use made and proposed to be made of such property by the
Company and the Subsidiaries. Any real property and facilities held under
lease by the Company and the Subsidiaries are held by them under valid,
subsisting and enforceable leases of which the Company and the Subsidiaries
are in compliance, except as could not, individually or in the aggregate,
have or reasonably be expected to result in a Material Adverse Effect.
(p) Patents and Trademarks. The Company and the Subsidiaries have, or
have rights to use, all Intellectual Property Rights that are necessary or
material for use in connection with their respective businesses as
described in the SEC Disclosure Documents and which the failure to so have
could, individually or in the aggregate, have or reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any Subsidiary
has received a written notice that the Intellectual Property Rights used by
the Company or any Subsidiary violates or infringes upon the rights of any
Person. Except as set forth in the SEC Disclosure Documents, to the
Knowledge of the Company all such Intellectual Property Rights are
enforceable and do not violate or infringe the Intellectual Property Rights
of others in any respect that would, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect and, to the
Knowledge of the Company, there is no existing infringement by another
Person of any of the Company's or the Subsidiary's Intellectual Property
Rights.
(q) Insurance. The Company and the Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and
risks and in such amounts as are prudent and customary in the businesses in
which the Company and the Subsidiaries are engaged. The Company has no
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business without
a significant increase in cost.
(r) Transactions With Affiliates and Employees. Except as set forth in
the SEC Disclosure Documents, none of the officers or directors of the
Company and, to the Knowledge of the Company, none of the employees of the
Company is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
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including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any
officer, director or such employee or, to the Knowledge of the Company, any
entity in which any officer, director, or any such employee has a
substantial interest or is an officer, director, trustee or partner.
(s) Internal Accounting Controls. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management's general or
specific authorization, and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences. The Company has
established disclosure controls and procedures (as defined in Exchange Act
rules 13a-14 and 15d-14) for the Company and designed such disclosure
controls and procedures to ensure that material information relating to the
Company, including its Subsidiaries, is made known to the certifying
officers by others within those entities, particularly during the period in
which the Company's Form 10-K or 10-Q, as the case may be, is being
prepared. The Company's certifying officers have evaluated the
effectiveness of the Company's controls and procedures as of the end of the
Company's fiscal quarter ended September 30, 2003 (such date, the
"Evaluation Date"). The Company presented in its most recently filed Form
10-QSB the conclusions of the certifying officers about the effectiveness
of the disclosure controls and procedures based on their evaluations as of
the Evaluation Date. Since the Evaluation Date, there have been no
significant changes in the Company's internal controls (as such term is
defined in Item 307(b) of Regulation S-K under the Exchange Act), or to the
Company's Knowledge, in other factors that could significantly affect the
Company's internal controls.
(t) Solvency. Based on the financial condition of the Company as of
the Closing Date (and assuming that the Closing shall have occurred), (i)
the Company's cash and fair saleable value of its assets in an orderly
liquidation exceeds the amount that will be required to be paid on or in
respect of the Company's existing debts and other liabilities (including
known contingent liabilities) as they mature; (ii) the Company's assets do
not constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted
including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected
capital requirements and capital availability thereof; and (iii) the
current cash flow of the Company, together with the proceeds the Company
would receive, were it to liquidate all of its assets, after taking into
account all anticipated uses of the cash, would be sufficient to pay all
amounts on or in respect of its debt when such amounts are required to be
paid. The Company does not intend to incur debts beyond its ability to pay
such debts as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debt).
(u) Certain Fees. Except as described in Schedule 3.1(u), no brokerage
or finder's fees or commissions are or will be payable by the Company to
any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Investors shall have no obligation with
11
respect to any fees or with respect to any claims (other than such fees or
commissions owed by an Investor pursuant to written agreements executed by
such Investor which fees or commissions shall be the sole responsibility of
such Investor) made by or on behalf of other Persons for fees of a type
contemplated in this Section that may be due in connection with the
transactions contemplated by this Agreement.
(v) Certain Registration Matters. Assuming the accuracy of the
Investors' representations and warranties set forth in Section 3.2(b)-(e),
no registration under the Securities Act is required for the offer and sale
of the Securities by the Company and the Selling Stockholder (as
applicable) to the Investors under the Transaction Documents. Neither the
Company nor any person acting on behalf of the Company has offered or sold
any of the Securities by any form of general solicitation or general
advertising. The Company has offered the Securities for sale only to the
Investors and certain other "accredited investors" within the meaning of
Rule 501 under the Securities Act. Except as described in Schedule 3.1(v),
the Company has not granted or agreed to grant to any Person any rights
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority
that have not been satisfied.
(w) Listing and Maintenance Requirements. The Company's Common Stock
is registered pursuant to Section 12(g) of the Exchange Act, and the
Company has taken no action designed to, or which to its Knowledge is
likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act nor has the Company received any notification
that the Commission is contemplating terminating such registration. Except
as specified in the SEC Disclosure Documents, the Company has not, in the
two years preceding the date hereof, received notice from any Trading
Market to the effect that the Company is not in compliance with the listing
or maintenance requirements thereof. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in
compliance with the listing and maintenance requirements for continued
listing of the Common Stock on the Trading Market. The issuance and sale of
the Securities under the Transaction Documents does not contravene the
rules and regulations of the Trading Market on which the Common Stock is
currently listed or quoted, and no approval of the stockholders of the
Company thereunder is required for the Company to issue and deliver to the
Investors the Securities contemplated by the Transaction Documents. As of
the date hereof, the Company's Common Stock is listed on the OTC Bulletin
Board.
(x) Investment Company. The Company is not, and is not an Affiliate
of, and immediately after the Closing will not be, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(y) Application of Takeover Protections. The Company has taken all
necessary action, if any, in order to render inapplicable any control share
acquisition, business combination, poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision under
the Company's Certificate of Incorporation (or similar charter documents)
or the laws of its state of incorporation that is or could become
applicable to the Investors as a result of the Investors and the Company
fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation the Company's issuance
of the Securities and the Investors' ownership of the Securities.
12
(z) No Additional Agreements. The Company does not have any agreement
or understanding with any Investor with respect to the transactions
contemplated by the Transaction Documents other than as specified in the
Transaction Documents.
(aa) Disclosure. The Company confirms that neither it nor any Person
acting on its behalf has provided any of the Investors or their agents or
counsel with any information that the Company believes constitutes
material, non-public information. The Company understands and confirms that
the Investors will rely on the foregoing representations and covenants in
effecting transactions in securities of the Company. To the Knowledge of
the Company, the representations and warranties of the Selling Stockholder
are true and accurate in all material respects. All disclosure provided to
the Investors regarding the Company, its business and the transactions
contemplated hereby, furnished by or on behalf of the Company (including
the Company's representations and warranties set forth in this Agreement)
are true and correct and do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading.
(bb) No Integrated Offering. Neither the Company, nor any of its
Affiliates, nor any Person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any
offers to buy any security, under circumstances that would cause this
offering of the Securities to be integrated with prior offerings by the
Company for purposes of the Securities Act or any applicable stockholder
approval provisions, including without limitation, under the rules and
regulations of the Trading Market on which the Common Stock is currently
listed or quoted.
(cc) Form S-2 Eligibility. The Company is eligible to register the
resale of the Shares by the Investors under Form S-2 promulgated under the
Securities Act and the Company hereby covenants and agrees to use its best
efforts to maintain its eligibility to use Form S-2 until the Registration
Statement covering the resale of Shares shall have been filed with, and
declared effective by, the Commission.
(dd) Acknowledgment Regarding Investors' Purchase of Shares. The
Company acknowledges and agrees that each of the Investors is acting solely
in the capacity of an arm's length purchaser with respect to the
Transaction Documents and the transactions contemplated thereby. The
Company further acknowledges that no Investor is acting as financial
advisor or fiduciary of the Company (or in any similar capacity) with
respect to this Agreement and the transactions contemplated hereby and any
advice given by any Investor or any of their respective representatives or
agents in connection with this Agreement and the transactions contemplated
hereby is merely incidental to the Investors' purchase of the Securities.
The Company further represents to each Investor that the Company's decision
to enter into this Agreement has been based solely on the independent
evaluation of the transactions contemplated hereby by the Company and its
representatives.
(ee) Taxes. Except for matters that would not, individually or in the
aggregate, have or reasonably be expected to result in a Material Adverse
Effect, the Company and each of its Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon, and the Company has no Knowledge of
a tax deficiency which as been asserted or threatened against the Company
or any Subsidiary.
13
3.2 Representations and Warranties of the Investors. Each Investor hereby,
for itself and for no other Investor, represents and warrants to the Company as
follows:
(a) Organization; Authority. Such Investor is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or
partnership power and authority to enter into and to consummate the
transactions contemplated by the applicable Transaction Documents and
otherwise to carry out its obligations thereunder. The execution, delivery
and performance by such Investor of the transactions contemplated by this
Agreement has been duly authorized by all necessary corporate or, if such
Investor is not a corporation, such partnership, limited liability company
or other applicable like action, on the part of such Investor. Each of this
Agreement and the Registration Rights Agreement has been duly executed by
such Investor, and when delivered by such Investor in accordance with terms
hereof, will constitute the valid and legally binding obligation of such
Investor, enforceable against it in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights and remedies or
by other equitable principles of general application.
(b) Investment Intent. Such Investor is acquiring the Securities as
principal for its own account for investment purposes only and not with a
view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Investor's right at all times
to sell or otherwise dispose of all or any part of such Securities in
compliance with applicable federal and state securities laws. Subject to
the immediately preceding sentence, nothing contained herein shall be
deemed a representation or warranty by such Investor to hold the Securities
for any period of time. Such Investor is acquiring the Securities hereunder
in the ordinary course of its business. Other than the Registration Rights
Agreement, such Investor does not have any agreement or understanding,
directly or indirectly, with any Person to distribute any of the
Securities.
(c) Investor Status. Such Investor is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Such Investor is not a
registered broker-dealer under Section 15 of the Exchange Act.
(d) General Solicitation. Such Investor is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine
or similar media or broadcast over television or radio or presented at any
seminar or any other general solicitation or general advertisement.
(e) Access to Information. Such Investor acknowledges that it has
reviewed the Disclosure Materials and has been afforded (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of
the offering of the Shares and the merits and risks of investing in the
Securities; and (ii) access to information about the Company and the
Subsidiaries and their respective financial condition, results of
operations, business, properties, management and prospects sufficient to
14
enable it to evaluate its investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Investor or its
representatives or counsel shall modify, amend or affect such Investor's
right to rely on the truth, accuracy and completeness of the Disclosure
Materials and the Company's representations and warranties contained in the
Transaction Documents.
(f) Independent Investment Decision. Such Investor has independently
evaluated the merits of its decision to purchase Securities pursuant to
this Agreement, such decision has been independently made by such Investor
and such Investor confirms that it has only relied on the advice of its own
business and/or legal counsel (which such Investor acknowledges is not
Xxxxx Xxxx LLP) and not on the advice of any other Investor or other
Investor's business or legal counsel nor upon the counsel of any investment
banker, placement agent, or their respective counsel in making such
decision.
(g) Limited Ownership. Based upon the representations of the Company
set forth in Section 3.1(g), the purchase by such Investor of the
Securities issuable to it at the Closing will not upon the Closing result
in such Investor acquiring, or obtaining the right to acquire, in excess of
14.999% of the Common Stock.
(h) Short Sales. Such Investor represents and warrants that from the
date first contacted about the purchase of any Securities of the Company
under this Agreement through the Closing, neither the Investor nor to its
Knowledge any of its Affiliates have engaged in any "short sales" (as
defined in Rule 3b-3 under the Exchange Act) of the Common Stock; provided,
however, that the foregoing shall not apply to any Affiliate of such
Investor that is a member firm of the National Association of Securities
Dealers, Inc., executing unsolicited transactions for its customers prior
to the press release contemplated by Section 4.5.
Each of the Company and the Selling Stockholder acknowledge and agree that no
Investor makes or has made any representations or warranties with respect to the
transactions contemplated hereby other than those specifically set forth in this
Section 3.2.
3.3 Representations and Warranties of the Selling Stockholder. The Selling
Stockholder hereby makes the following representations and warranties to each
Investor:
(a) Organization. The Selling Stockholder is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization, with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted.
(b) Authorization; Enforcement. The Selling Stockholder has the
requisite corporate power and authority to enter into and to consummate the
transactions contemplated hereby and otherwise to carry out its obligations
hereunder. The execution and delivery of this Agreement by the Selling
Stockholder and the consummation by it of the transactions contemplated
hereby have been duly authorized by all necessary action on the part of the
Selling Stockholder and no further action is required by the Selling
Stockholder or its stockholders in connection therewith. This Agreement has
been duly executed and delivered by the Selling Stockholder and constitutes
the valid and binding obligation of the Selling Stockholder enforceable
15
against it in accordance with its terms except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally
the enforcement of, creditors' rights and remedies or by other equitable
principles of general application.
(c) No Consents. No consent, approval, authorization or order of, or
any filing or declaration with, any court or governmental agency or body is
required in connection with the consummation by the Selling Stockholder of
the transactions on its part contemplated by the Transaction Documents,
except (i) filings as may be required under Section 13(d) and 16(a) of the
Exchange Act, and (ii) those that have been made or obtained prior to the
date of this Agreement.
(d) No Conflicts. Neither the execution, delivery and performance of
the Transaction Documents by the Selling Stockholder, the consummation by
the Selling Stockholder of the transactions contemplated thereby, nor the
sale of the Selling Stockholder Shares hereunder, (i) conflict with or
violate any provision of the Selling Stockholder's certificate or articles
of incorporation, bylaws or other organizational or charter documents, or
(ii) conflict with, or constitute a default (or an event that with notice
or lapse of time or both would become a default) under, result in the
creation of any Lien upon any of the properties or assets of the Selling
Stockholder, or give to others any rights of termination, amendment,
acceleration or cancellation (with or without notice, lapse of time or
both) of, any agreement, credit facility, debt or other instrument
(evidencing a Selling Stockholder debt or otherwise) or other understanding
to which the Selling Stockholder is a party or by which any property or
asset of the Selling Stockholder is bound or affected, or (iii) conflict
with or result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or
governmental authority to which the Selling Stockholder is subject
(including federal and state securities laws and regulations), or by which
any property or asset of the Selling Stockholder is bound or affected, or
(iv) conflict with or violate the terms of any agreement by which the
Selling Stockholder is bound or to which any property or asset of the
Selling Stockholder is bound or affected, or (v) do not and will not result
in a breach or violation of, or constitute a default under (with or without
notice or lapse of time), any stockholders agreement, voting trust
agreement or pledge registration rights agreement to which the Selling
Stockholder or any of its properties is bound or affected; except in the
case of each of clauses (ii), (iii) and (iv), such as could not,
individually or in the aggregate, have or reasonably be expected to result
in a Material Adverse Effect.
(e) Certain Registration Matters. Assuming the accuracy of the
Investors' representations and warranties set forth in Section 3.2(b)-(d),
no registration under the Securities Act is required for the purchase and
sale of the Selling Stockholder Shares to the Investors hereunder. Neither
the Selling Stockholder nor any person acting on behalf of such Stockholder
has offered or sold any of the Selling Stockholder Shares by any form of
general solicitation or general advertising. The Selling Stockholder has
offered the Selling Stockholder Shares for sale only to the Investors.
(f) Good and Marketable Title. The Selling Stockholder is the lawful
record and sole beneficial owner of all of the Selling Stockholder Shares
to be sold hereunder. As of the Closing, the Selling Stockholder will have
good and marketable title to the Selling Stockholder Shares, free and clear
16
of any Liens, except for restrictions on subsequent transfer imposed by the
securities laws. Upon consummation of the Closing, each Investor will have
good and marketable title to all Selling Stockholder Shares purchased by
such Investor, free and clear of all Liens created by or through the
Selling Stockholder.
(g) Certain Fees. Except as described in Schedule 3.3(g), no brokerage
or finder's fees or commissions are or will be payable by the Selling
Stockholder to any broker, financial advisor or consultant, finder,
placement agent, investment banker, bank or other Person with respect to
the transactions contemplated by this Agreement. The Investors shall have
no obligation with respect to any fees or with respect to any claims (other
than such fees or commissions owed by an Investor pursuant to written
agreements executed by such Investor which fees or commissions shall be the
sole responsibility of such Investor) made by or on behalf of other Persons
for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement.
(h) No Additional Agreements. The Selling Stockholder does not have
any agreement or understanding with any Investor with respect to the
transactions contemplated by the Transaction Documents other than as
specified in the Transaction Documents.
(i) Non-Public Information. The Selling Stockholder does not possess
any material, non-public information concerning the Company. The Selling
Stockholder understands and confirms that each Investor shall be relying on
the foregoing representations in effecting transactions in the securities
of the Company.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 (a) Securities may only be disposed of in compliance with state
and federal securities laws. In connection with any transfer of the
Securities other than pursuant to an effective registration statement, to
the Company, to an Affiliate of an Investor or in connection with a pledge
as contemplated in Section 4.1(b), the Company may require the transferor
thereof to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not
require registration of such transferred Securities under the Securities
Act.
(b) Certificates evidencing the Securities will contain the following
legend, until such time as they are not required under Section 4.1(c):
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
17
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO
THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH
SECURITIES.
The Company acknowledges and agrees that an Investor may from time to
time pledge, and/or grant a security interest in some or all of the
Securities pursuant to a bona fide margin agreement in connection with a
bona fide margin account and, if required under the terms of such agreement
or account, such Investor may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject
to approval or consent of the Company and no legal opinion of legal counsel
to the pledgee, secured party or pledgor shall be required in connection
with the pledge, but such legal opinion may be required in connection with
a subsequent transfer following default by the Investor transferee of the
pledge. No notice shall be required of such pledge. At the appropriate
Investor's expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Securities may reasonably
request in connection with a pledge or transfer of the Securities including
the preparation and filing of any required prospectus supplement under Rule
424(b)(3) of the Securities Act or other applicable provision of the
Securities Act to appropriately amend the list of selling stockholders
thereunder.
(c) Certificates evidencing the Securities shall not contain any
legend (including the legend set forth in Section 4.1(b)): (i) following a
sale of such Securities pursuant to an effective registration statement
(including the Registration Statement), or (ii) following a sale of such
Securities pursuant to Rule 144, or (iii) while such Securities are
eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission).
Following such time as restrictive legends are not required to be placed on
certificates representing Securities, the Company will, no later than three
Trading Days following the delivery by an Investor to the Company or the
Company's transfer agent of a certificate representing such Securities
containing a restrictive legend, deliver or cause to be delivered to such
Investor a certificate representing such Securities that is free from all
restrictive and other legends. The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that
enlarge the restrictions on transfer set forth in this Section.
4.2 Furnishing of Information. As long as any Investor owns any Securities
that are not eligible for resale under Rule 144(k) promulgated under the
Securities Act, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. As long as any Investor owns Securities that are not eligible for
resale under Rule 144(k) promulgated under the Securities Act, if the Company is
not required to file reports pursuant to the Exchange Act, it will prepare and
furnish to the Investors and make publicly available in accordance with Rule
144(c) such information as is required for the Investors to sell the Shares
under Rule 144. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
18
required from time to time to enable such Person to sell such Shares without
registration under the Securities Act within the limitation of the exemptions
provided by Rule 144.
4.3 Integration. The Company shall not, and shall use its best efforts to
ensure that no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Investors, or that would be
integrated with the offer or sale of the Securities for purposes of the rules
and regulations of any Trading Market.
4.4 Subsequent Registrations. Other than pursuant to the Registration
Statement, prior to the Effective Date, the Company may not file any
registration statement (other than on Form S-8 and amendments to the Company's
registration statement on Form SB-2 on file with the commission, File No.
333-108655, solely to maintain the effectiveness of such registration statement,
but not to add additional shares thereto) with the Commission with respect to
any securities of the Company.
4.5 Securities Laws Disclosure; Publicity. By 8:30 a.m. (New York time) on
the Closing Date, the Company shall issue a press release reasonably acceptable
to the Investors disclosing the transactions contemplated hereby and by 4:00
p.m. (New York time) on the Closing Date the Company shall file a Current Report
on Form 8-K disclosing the material terms of the transactions contemplated
hereby. In addition, the Company will make such other filings and notices in the
manner and time required by the Commission and the Trading Market on which the
Common Stock is listed or quoted. Notwithstanding the foregoing, the Company
shall not publicly disclose the name of any Investor, or include the name of any
Investor in any filing with the Commission (other than the Registration
Statement and any exhibits to filings made in respect of this transaction in
accordance with periodic filing requirements under the Exchange Act) or any
regulatory agency or Trading Market, without the prior written consent of such
Investor, except to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Investors with
prior notice of such disclosure.
4.6 Limitation on Issuance of Future Priced Securities. During the six
months following the Closing Date, the Company shall not issue any security that
would be a "Future Priced Securities" as such term is described by NASD
IM-4350-1, except for Common Stock that may be issued under any employee stock
purchase plan approved by the Company's stockholders.
4.7 Indemnification of Investors. In addition to the indemnity provided in
the Registration Rights Agreement, the Company and the Selling Stockholder
hereby agree to the following indemnification of the Investors:
(a) In addition to the indemnity provided in the Registration Rights
Agreement, the Company will indemnify and hold the Investors and their
directors, officers, shareholders, partners, employees and agents (each, an
"Investor Party") harmless from any and all that any such Investor Party
may suffer or incur as a result of or relating to any misrepresentation,
breach or inaccuracy of any representation, warranty, covenant or agreement
19
made by the Company in any Transaction Document. In addition to the
indemnity contained herein, the Company will reimburse each Investor Party
for its reasonable legal and other expenses (including the cost of any
investigation, preparation and travel in connection therewith) incurred in
connection therewith, as such expenses are incurred.
(b) The Selling Stockholder will indemnify and hold each Investor
Party harmless from any and all Losses that any such Investor Party may
suffer or incur as a result of or relating to any misrepresentation, breach
or inaccuracy of any representation, warranty, covenant or agreement made
by the Selling Stockholder in any Transaction Document. In addition, the
Selling Stockholder will reimburse each Investor Party for its reasonable
legal and other expenses (including the cost of any investigation,
preparation and travel in connection therewith) incurred in connection with
any claim under this Section 4.7(b), as such expenses are incurred.
4.8 Non-Public Information. The Company covenants and agrees that neither
it nor any other Person acting on its behalf will provide any Investor or its
agents or counsel with any information that the Company believes constitutes
material non-public information, unless prior thereto such Investor shall have
executed a written agreement regarding the confidentiality and use of such
information. The Company understands and confirms that each Investor shall be
relying on the foregoing representations in effecting transactions in securities
of the Company.
4.9 Use of Proceeds. The Company shall use the net proceeds from the sale
of the Shares hereunder for capital purchases and lease obligations, redemption
of outstanding preferred stock (as constituted or converted to Common Stock),
acquisitions, retirement of debt not to exceed $3,000,000, and working capital
purposes and not to redeem any Common Stock or Common Stock Equivalents (other
than preferred stock) or to settle any outstanding Action.
4.10 Listing of Common Stock. The Company hereby agrees to use best efforts
to maintain the listing and trading of its Common Stock on the OTC Bulletin
Board (or another nationally recognized Trading Market),. The Company further
agrees, if the Company applies to have the Common Stock traded on any other
Trading Market, it will include in such application the Securities, and will
take such other action as is necessary or desirable in the opinion of the
Investors to cause all of the Securities to be listed on such other Trading
Market as promptly as possible. The Company will use best efforts to continue
the listing and trading of its Common Stock on the Trading Market on which the
Common Stock is currently listed or quoted and will comply in all respects with
the Company's reporting, filing and other obligations under the bylaws or rules
of such Trading Market.
4.11. Anti-dilution. At any time that the Company has Common Stock
Equivalents outstanding that provide for an adjustment in the conversion price,
conversion rate, or number of shares purchasable when the Company issues any
Common Stock or Common Stock Equivalents at an effective purchase price less
than $2.00 per share of Common Stock (as adjusted proportionately for any
distribution of Common Stock to the Company's stockholders on a pro rata basis,
combination of the issued and outstanding shares of Common Stock, or similar
recapitalization), the Company shall not issue any Common Stock or Common Stock
Equivalents at an effective purchase price less than $2.00 per share (as
20
adjusted proportionately for any distribution of Common Stock to the Company's
stockholders on a pro rata basis, combination of the issued and outstanding
shares of Common Stock, or similar recapitalization) without first obtaining the
written consent of the Investors holding a majority of the Securities. The
restrictions imposed by this Section 4.11 will terminate at the time the
aggregate beneficial ownership by all Investors of Securities issued to the
Investors under this Agreement falls below five percent of the aggregate amount
originally issued to all Investors.
ARTICLE V.
CONDITIONS PRECEDENT
5.1 Conditions Precedent to the Obligations of the Investors to Purchase
Securities. The obligation of each Investor to acquire Securities at the Closing
is subject to the satisfaction or waiver by such Investor, at or before the
Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of the Company and the Selling Stockholder contained herein shall be true
and correct in all material respects as of the date when made and as of the
Closing as though made on and as of such date;
(b) Performance. Each of the Company and the Selling Stockholder shall
have performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Transaction Documents
to be performed, satisfied or complied with by them at or prior to the
Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) Adverse Changes. Since the date of execution of this Agreement, no
event or series of events shall have occurred that reasonably could have or
result in (i) an adverse effect on the legality, validity or enforceability
of any Transaction Document, or (ii) a Material Adverse Effect; (e) No
Suspensions of Trading in Common Stock; Listing. Trading in the Common
Stock shall not have been suspended by the Commission or any Trading Market
(except for any suspensions of trading of not more than one Trading Day
solely to permit dissemination of material information regarding the
Company) at any time since the date of execution of this Agreement, and the
Common Stock shall have been at all times since such date listed for
trading on a Trading Market;
(f) Company Deliverables. The Company shall have delivered the Company
Deliverables in accordance with Section 2.2(a);
(g) Selling Stockholder Deliverables. The Selling Stockholder shall
have delivered the Selling Stockholder Deliverables in accordance with
Section 2.2(b); and
(h) Timing. The Closing shall have occurred no later than March 22,
2004.
21
5.2 Conditions Precedent to the Obligations of the Company and Selling
Stockholder to sell Securities. The obligation of the Company and Selling
Stockholder to sell Securities at the Closing is subject to the satisfaction or
waiver by the Company or Selling Stockholder (as the case may be), at or before
the Closing, of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of each Investor contained herein shall be true and correct in all material
respects as of the date when made and as of the Closing Date as though made
on and as of such date;
(b) Performance. Each Investor shall have performed, satisfied and
complied in all material respects with all covenants, agreements and
conditions required by the Transaction Documents to be performed, satisfied
or complied with by such Investor at or prior to the Closing;
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated
or endorsed by any court or governmental authority of competent
jurisdiction that prohibits the consummation of any of the transactions
contemplated by the Transaction Documents;
(d) Investors Deliverables. Each Investor shall have delivered its
Investors Deliverables in accordance with Section 2.2(c); and
(e) Timing. The Closing shall have occurred no later than March 22,
2004.
ARTICLE VI.
MISCELLANEOUS
6.1 Fees and Expenses. Each Investor and the Company shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of the Transaction Documents,
except that the Company agrees to pay at Closing by wire transfer not later than
one Business Day following the Company's receipt of funds from the Closing, up
to a total of $25,000 for fees and out-of-pocket expenses of Xxxxx, Xxxxxxx &
Xxxxxxxxx, LLP, incurred in connection with its review and negotiation of the
Transaction documents, subject to presentation to the Company of its billing
statement and wire transfer instructions not less than one Business Day prior to
the Closing Date. Failure to provide such billing statement and wire transfer
instructions as herein provided shall relieve the Company of the obligation to
make such payment on the Closing Date and the Closing may be completed without
such payment being made, and the Company shall make such payment one Business
Day following the latter of the day the Company receives funds from Closing and
the day the Company receives the billing statement and wire transfer
instructions of Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP. The Company and the Selling
Stockholder shall pay all stamp and other taxes and duties levied in connection
with the sale of the Securities.
6.2 Entire Agreement. The Transaction Documents, together with the Exhibits
and Schedules thereto, contain the entire understanding of the parties with
respect to the subject matter hereof and supersede all prior agreements and
22
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
6.3 Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earliest of (a) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (b) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (c) the Trading Day following the date of
mailing, if sent by U.S. nationally recognized overnight courier service, or (d)
upon actual receipt by the party to whom such notice is required to be given.
The address for such notices and communications shall be as follows:
If to the Company: BUYERS UNITED, INC.
00000 Xxxxxxxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Chief Financial Officer
Facsimile: (000) 000-0000
With a copy to: Cohne, Xxxxxxxxx & Xxxxx, P.C.
000 Xxxx Xxxxx Xxxxx, 0xx Xxxxx
Xxxx Xxxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Selling Stockholder: To the address set forth on its signature
hereof; page
If to an Investor: To the address set forth under such
Investor's name on the signature pages
hereof;
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
6.4 Amendments; Waivers. No provision of this Agreement may be waived or
amended except in a written instrument signed by the Investors holding at least
two-thirds of the Securities, and signed, in the case of an amendment, by the
Company. In addition, Sections 3.3, 4.7(b) and Article VI may not be waived or
amended except in a written instrument signed by the Investors holding at least
two-thirds of the Securities, the Company and the Selling Stockholder. No waiver
of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver of
any subsequent default or a waiver of any other provision, condition or
requirement hereof, nor shall any delay or omission of either party to exercise
any right hereunder in any manner impair the exercise of any such right.
6.5 Construction. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
23
any of the provisions hereof. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party. This Agreement
shall be construed as if drafted jointly by the parties, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement or any of the Transaction
Documents.
6.6 Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties and their successors and permitted assigns.
Neither the Company nor the Selling Stockholder may assign this Agreement or any
rights or obligations hereunder without the prior written consent of the
Investors. Any Investor may assign any or all of its rights under this Agreement
to any Person to whom such Investor assigns or transfers any Securities,
provided such transferee agrees in writing to be bound, with respect to the
transferred Securities, by the provisions hereof that apply to the "Investors."
6.7 No Third-Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Section 4.7 (as to each
Investor Party).
6.8 Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
agrees that all Proceedings concerning the interpretations, enforcement and
defense of the transactions contemplated by this Agreement and any other
Transaction Documents (whether brought against a party hereto or its respective
Affiliates, employees or agents) shall be commenced exclusively in the state and
federal courts sitting in the City of New York, Borough of Manhattan (the "New
York Courts"). Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the New York Courts for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein (including with respect to the enforcement of the any of the
Transaction Documents), and hereby irrevocably waives, and agrees not to assert
in any Proceeding, any claim that it is not personally subject to the
jurisdiction of any such New York Court, or that such Proceeding has been
commenced in an improper or inconvenient forum. Each party hereto hereby
irrevocably waives personal service of process and consents to process being
served in any such Proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law. Each party hereto hereby
irrevocably waives, to the fullest extent permitted by applicable law, any and
all right to trial by jury in any legal proceeding arising out of or relating to
this Agreement or the transactions contemplated hereby. If either party shall
commence a Proceeding to enforce any provisions of a Transaction Document, then
the prevailing party in such Proceeding shall be reimbursed by the other party
for its attorney's fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Proceeding.
24
6.9 Survival. The representations, warranties, agreements and covenants
contained herein shall survive the Closing and the delivery of the Shares.
6.10 Execution. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
6.11 Severability. If any provision of this Agreement is held to be invalid
or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
6.12 Rescission and Withdrawal Right. Notwithstanding anything to the
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Investor exercises a right, election, demand
or option under a Transaction Document and the Company or the Selling
Stockholder do not timely perform their related obligations within the periods
therein provided, then such Investor may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company and the Selling
Stockholder, any relevant notice, demand or election in whole or in part without
prejudice to its future actions and rights.
6.13 Replacement of Securities. If any certificate or instrument evidencing
any Securities is mutilated, lost, stolen or destroyed, the Company shall issue
or cause to be issued in exchange and substitution for and upon cancellation
thereof, or in lieu of and substitution therefor, a new certificate or
instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities. If a replacement
certificate or instrument evidencing any Securities is requested due to a
mutilation thereof, the Company may require delivery of such mutilated
certificate or instrument as a condition precedent to any issuance of a
replacement.
6.14 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, each of the
Investors, the Company and the Selling Stockholder will be entitled to specific
performance under the Transaction Documents. The parties agree that monetary
damages may not be adequate compensation for any loss incurred by reason of any
breach of obligations described in the foregoing sentence and hereby agrees to
waive in any action for specific performance of any such obligation the defense
that a remedy at law would be adequate.
6.15 Payment Set Aside. To the extent that the Company makes a payment or
payments to any Investor pursuant to any Transaction Document or an Investor
25
enforces or exercises its rights thereunder, and such payment or payments or the
proceeds of such enforcement or exercise or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by or are required to be refunded, repaid or otherwise restored
to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
6.16 Independent Nature of Investors' Obligations and Rights. The
obligations of each Investor under any Transaction Document are several and not
joint with the obligations of any other Investor, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor under any Transaction Document. The decision of each Investor to
purchase Securities pursuant to the Transaction Documents has been made by such
Investor independently of any other Investor. Nothing contained herein or in any
Transaction Document, and no action taken by any Investor pursuant thereto,
shall be deemed to constitute the Investors as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Investors are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Each
Investor acknowledges that no other Investor has acted as agent for such
Investor in connection with making its investment hereunder and that no Investor
will be acting as agent of such Investor in connection with monitoring its
investment in the Securities or enforcing its rights under the Transaction
Documents. Each Investor shall be entitled to independently protect and enforce
its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose.
6.17 Limitation of Liability. Notwithstanding anything herein to the
contrary, each of the Company and the Selling Stockholder acknowledge and agree
that the liability of any Investor arising directly or indirectly, under any
Transaction Document of any and every nature whatsoever shall be satisfied
solely out of the assets of such Investor, and that no trustee, officer, other
investment vehicle or any other Affiliate of such Investor or any investor,
shareholder or holder of shares of beneficial interest of such a Investor shall
be personally liable for any liabilities of such Investor.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
26
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
BUYERS UNITED, INC.
-----------------------------------------
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR SELLING STOCKHOLDER FOLLOW]
27
IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as of
the date first indicated above.
ACCERIS COMMUNICATIONS INC.
---------------------------------
Name:
Title:
Address and Facsimile No.:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR INVESTORS FOLLOW]
28
IN WITNESS WHEREOF, the parties have executed this Security Purchase
Agreement as of the date first written above.
NAME OF INVESTOR
____________________________________________
By: Name:
Title:
Investment Amount: $________________________
Tax ID No.: ________________________________
ADDRESS FOR NOTICE
c/o: _______________________________________
Street: ____________________________________
City/State/Zip: ____________________________
Attention: _________________________________
Tel: _______________________________________
Fax: _______________________________________
Email: _____________________________________
DELIVERY INSTRUCTIONS
(if different from above)
c/o: _______________________________________
Street: ____________________________________
City/State/Zip: ____________________________
Attention: _________________________________
Tel: _______________________________________
29
Schedule 3.1(a)
Subsidiaries
The Company has one subsidiary, Buyers United, Inc. - Virginia, a Virginia
corporation. The Company owns 100 percent of the outstanding shares of capital
stock of this subsidiary.
30
Schedule 3.1(g)
Capitalization
Capitalization Structure as of March 8, 2004
Issued and Common
Outstanding Equivalent
----------- ----------
Preferred Stock, $0.0001 par value; 15,000,000
shares authorized;
Series A 8% cumulative convertible
preferred (1 to 1); 1,827,500 1,827,500
Series B 8% cumulative convertible
preferred (5 to 1); 720,300 3,601,500
Common Stock, $0.0001 par value;
100,000,000 authorized 7,712,079 7,712,079
Warrants, average price $2.05 4,779,032 4,779,032
Options, average price $2.69 3,378,737 3,378,737
Convertible debt ($3,237,500) 1,441,250
31
Schedule 3.1(j)
Material Changes
1. The Company issued Common Stock to the following officers and directors on
exercise of outstanding options:
Name Date No. of Shares Price Per Share ($)
Xxxxxxxx Xxxxx 1/16/04 40,000 2.00
1/16/04 40,000 2.50
Xxxxxx X. Xxxxxx 1/16/04 25,000 2.00
1/20/04 25,000 2.50
2/06/04 25,000 2.50
Xxxxx X. Xxxxxxx 2/04/04 50,000 2.00
2/05/04 50,000 2.00
Xxxx X. Xxxxx 12/26/03 27,500 2.00
2. On or about January 12, 2004, the Company purchased in a privately negotiated
transaction 514,560 shares of the Company's Common Stock from Xxxx and Xxx
Xxxxxx at a total purchase price of $500,000.
32
Schedule 3.1(u)
Certain Fees
The Company engaged Xxxx Capital Partners, LLC ("RCP"), as its placement
agent for the offer and sale of the Securities. As compensation for such
services, the Company will pay to RCP:
1. Five and one-half percent of the gross proceeds received from the sale of the
Shares;
2. Reimbursement of documented out-of-pocket expenses up to $25,000 (amounts
above $25,000 to be pre-approved by the Company); and
3. Warrants to purchase the number of shares of Common Stock that is equal to
five percent of the aggregate purchase price of the Shares sold in the offering
divided by the price per share of the Company's Common Stock on the Closing
Date, exercisable over a three-year period commencing six months following the
Closing Date at an exercise price per share equal to 120 percent of the Per Unit
Purchase Price.
33
Schedule 3.1(v)
Certain Registration Rights
1. In connection with a private placement of Series B Preferred Stock and
Warrants conducted from November 2000 to January 2001, the Company issued
warrants with registration rights on the underlying common stock, most of which
are included in the Company's registration statement on Form SB-2 filed with the
Commission, File No. 333-108655 (the "2003 Registration Statement"). Prior to
filing the 2003 Registration Statement the Company made a diligent effort to
locate and communicate with five persons holding a total of 61,444 warrants
issued in connection with the above-referenced private placement. The Company
was unable to locate these persons, and the shares underlying their warrants
were not included in the 2003 Registration Statement. The Company may have an
obligation to include these 61,444 shares in the Registration Statement for the
Securities if it can locate the holders of the warrants.
2. The Company intends to file a Registration Statement on Form S-8 to register
approximately 1,280,000 shares of Common Stock issuable under outstanding
employee stock options.
3. The Company is considering a proposal to adopt at the annual stockholders
meeting scheduled for June 2004 an Employee Stock Purchase Plan covering
approximately 1,500,000 shares of Common Stock that will be registered on Form
S-8.
4. The Company proposes to grant to the Selling Stockholder, who now holds, or
may acquire, shares of Common Stock issued as dividends and issuable upon
conversions of Series B Convertible Preferred Stock (a total of approximately
808,546 shares of Common Stock) the right to include such shares of Common Stock
in the Registration Statement for the Securities.
34
Schedule 3.3(g)
Certain Fees
The Selling Stockholder has agreed to pay to Xxxx Capital Partners, LLC as
its placement agent for the offer and sale of the Selling Stockholder Shares,
five and one-half percent of the gross proceeds received from the sale of such
shares.
35
