EXHIBIT 10.29
EXECUTION COPY
AMENED[sic] AND RESTATED MASTER FACILITY AGREEMENT
AMENED[sic] AND RESTATED MASTER FACILITY AGREEMENT (the
"AGREEMENT"), dated as of April 25, 2000, by and between 5TH AVENUE CHANNEL
CORP., a Florida corporation (the "COMPANY"), and FUSION CAPITAL FUND II, LLC
(together with its assigns, the "BUYER").
WHEREAS:
Subject to the terms and conditions set forth herein, the
Company has authorized the entering into with the Buyer of up to two Equity
Purchase Agreements (each an "EQUITY PURCHASE AGREEMENT" and collectively the
"EQUITY PURCHASE AGREEMENTS"), substantially in the form attached hereto as
EXHIBIT A, with each Equity Purchase Agreement having an aggregate principal
amount of Six Million Dollars ($6,000,000). The principal amount of each Equity
Purchase Agreement shall be convertible into shares of the Company's common
stock, par value $.001 per share (the "COMMON STOCK") (as converted, the
"CONVERSION SHARES"), in accordance with the terms of each Equity Purchase
Agreement.
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. ENTRY INTO EQUITY PURCHASE AGREEMENTS.
-------------------------------------
a. EXECUTION AND DELIVERY OF THE EQUITY PURCHASE AGREEMENTS.
Subject to the satisfaction (or waiver) of the conditions set forth in Sections
6 and 7 below, the Company and the Buyer agree as follows: (i) the execution and
delivery of the first Equity Purchase Agreement to be entered into under this
Agreement (the "FIRST EQUITY PURCHASE AGREEMENT") shall take place within five
(5) Trading Days (as defined in the last sentence of this Section 1(a)) of the
date that the Registration Statement on Form SB-2 referred to in the first
sentence of Section 4(a) hereof is declared effective under the Securities Act
of 1933, as amended (the "1933 Act") by the United States Securities and
Exchange Commission (the "SEC") (the "FIRST CLOSING"); and (ii) the execution
and delivery of the second Equity Purchase Agreement to be entered into under
this Agreement (the "SECOND EQUITY PURCHASE AGREEMENT") shall take place within
five (5) Trading Days of the date that the Registration Statement on Form SB-2
referred to in the second sentence of Section 4(a) hereof is declared effective
under the 1933 Act by the SEC (the "SECOND CLOSING"), (each such execution and
delivery of an Equity Purchase Agreement, a "CLOSING"). It is agreed and
acknowledged by the parties hereto that entering into the Second Equity Purchase
Agreement shall be at the option of the Company in its sole discretion until
such time as the Company shall have delivered an irrevocable written notice (the
"SECOND CLOSING NOTICE") to the Buyer stating that the Company elects to enter
into the Second Equity Purchase Agreement under the terms and conditions
provided herein. The Second Equity Purchase Agreement may not be entered into
until the aggregate principal amount of the First Equity Purchase Agreement is
fully converted into Common Stock. The Buyer is not obligated to enter into the
Second Equity Purchase Agreement unless the Company has delivered the Second
Closing Notice prior to the date that is ten (10) Trading Days following the
date on which the aggregate principal amount of the First Equity Purchase
Agreement is fully converted into Common Stock. Upon delivery of the Second
Closing Notice to the Buyer, subject to the satisfaction (or waiver) of the
conditions set forth in Sections 6 and 7 below, the Company and the Buyer shall
be obligated to enter into the Second Equity Purchase Agreement. For purposes of
this Agreement, "TRADING DAY" shall mean any day on which the Principal Market
(as defined in Section 4(d) hereof) is open for customary trading.
b. CLOSING DATES. The date of each Closing (each a "CLOSING
DATE") shall be within five (5) Trading Days following the date of satisfaction
(or waiver) of the conditions to the Closing set forth in Sections 6 and 7 below
(or such later date as is mutually agreed to by the Company and the Buyer) with
respect to the Closing of each Equity Purchase Agreement.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
--------------------------------------
The Buyer represents and warrants to the Company that:
a. INVESTMENT PURPOSE. The Buyer (i) is entering into the
Equity Purchase Agreements and acquiring the Commitment Shares (as defined in
Section 7(b) hereof) (collectively referred to herein as the "SECURITIES"), for
its own account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof; provided however,
by making the representations herein, the Buyer does not agree to hold any of
the Securities for any minimum or other specific term.
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited
investor" as that term is defined in Rule 501(a)(3) of Regulation D.
c. RELIANCE ON EXEMPTIONS. The Buyer understands that the
Commitment Shares are being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that the Company is relying in part upon the truth and
accuracy of, and the Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set forth herein in
order to determine the availability of such exemptions and the eligibility of
the Buyer to acquire the Commitment Shares.
d. INFORMATION. The Buyer has been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Securities which have been
reasonably requested by the Buyer, including, without limitation, the SEC
Documents (as defined in Section 3(f) hereof). The Buyer understands that its
investment in the Securities involves a high degree of risk. The Buyer (i) is
able to bear the economic risk of an investment in the Securities including a
total loss, (ii) has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the proposed
investment in the Securities and (iii) has had an opportunity to ask questions
of and receive answers from the officers of the Company concerning the financial
condition and business of the Company and others matters related to an
investment in the Securities. Neither such inquiries nor any other due diligence
investigations conducted by the Buyer or its representatives shall modify, amend
or
2
affect the Buyer's right to rely on the Company's representations and
warranties contained in Section 3 below. The Buyer has sought such accounting,
legal and tax advice as it has considered necessary to make an informed
investment decision with respect to its acquisition of the Securities.
e. NO GOVERNMENTAL REVIEW. The Buyer understands that no
United States federal or state agency or any other government or governmental
agency has passed on or made any recommendation or endorsement of the Securities
or the fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. TRANSFER OR RESALE. The Buyer understands that except as
provided in the Registration Rights Agreement (as defined in Section 6(a)
hereof): (i) the Securities have not been and are not being registered under the
1933 Act or any state securities laws, and may not be offered for sale, sold,
assigned or transferred unless (A) subsequently registered thereunder or (B) an
exemption exists permitting such Securities to be sold, assigned or transferred
without such registration; (ii) any sale of the Securities made in reliance on
Rule 144 may be made only in accordance with the terms of Rule 144 and further,
if Rule 144 is not applicable, any resale of the Securities under circumstances
in which the seller (or the person through whom the sale is made) may be deemed
to be an underwriter (as that term is defined in the 0000 Xxx) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations of the SEC thereunder; and (iii) neither the Company nor any other
person is under any obligation to register such securities under the 1933 Act or
any state securities laws or to comply with the terms and conditions of any
exemption thereunder.
g. VALIDITY; ENFORCEMENT. This Agreement has been duly and
validly authorized, executed and delivered on behalf of the Buyer and is a valid
and binding agreement of the Buyer enforceable against the Buyer in accordance
with its terms, subject as to enforceability to general principles of equity and
to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation
and other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
h. RESIDENCY. The Buyer is a resident of the State of
Illinois.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company represents and warrants to the Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company and its
"SUBSIDIARIES" (which for purposes of this Agreement means any entity in which
the Company, directly or indirectly, owns 50% or more of the voting stock or
capital stock or other similar equity interests) are corporations duly organized
and validly existing in good standing under the laws of the jurisdiction in
which they are incorporated, and have the requisite corporate power and
authority to own their properties and to carry on their business as now being
conducted. Each of the Company and its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which its ownership of property or the nature of the business conducted by
3
it makes such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing could not reasonably be expected to have
a Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means any material adverse effect on any of: (i) the business, properties,
assets, operations, results of operations or financial condition of the Company
and its Subsidiaries, if any, taken as a whole, (ii) the value of the Common
Stock or the value of, or security for, any Equity Purchase Agreement, (iii) the
transactions contemplated hereby or by the agreements and instruments to be
entered into in connection herewith or (iv) the authority or ability of the
Company to perform its obligations under the Transaction Documents (as defined
in Section 2(b) hereof). The Company has no Subsidiaries except as set forth on
SCHEDULE 3(A).
b. AUTHORIZATION; ENFORCEMENT; VALIDITY. (i) The Company has
the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Equity Purchase Agreements, the
Registration Rights Agreements (as defined in Section 6(a) hereof) and each of
the other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "TRANSACTION
DOCUMENTS"), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation, the issuance of the Commitment Shares and
the reservation for issuance and the issuance of the Conversion Shares issuable
upon conversion of the Equity Purchase Agreements, have been duly authorized by
the Company's Board of Directors and no further consent or authorization is
required by the Company, its Board of Directors or its shareholders, (iii) this
Agreement has been, and each other Transaction Document shall be at its
respective Closing, duly executed and delivered by the Company and (iv) this
Agreement constitutes, and each other Transaction Document shall constitute as
of its respective Closing, the valid and binding obligations of the Company
enforceable against the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of creditors' rights and
remedies.
c. CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of Common Stock,
of which as of the date hereof, 12,714,702 shares are issued and outstanding,
none are held as treasury shares,1,599,100 shares are reserved for issuance
pursuant to the Company's stock option plan and 6,562,362 shares are issuable
and reserved for issuance pursuant to securities (other than the Equity Purchase
Agreements or stock options issued pursuant to the Company's stock option plan)
exercisable or exchangeable for, or convertible into, shares of Common Stock and
(ii) 5,000,000 shares of preferred stock, $.001 par value, of which as of the
date hereof no shares are issued and outstanding. All of such outstanding shares
have been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except as disclosed in SCHEDULE 3(C), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company, (ii)
there are no outstanding debt securities, (iii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the
4
Company or any of its Subsidiaries or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries, (iv) there are no agreements or arrangements
under which the Company or any of its Subsidiaries is obligated to register the
sale of any of their securities under the 1933 Act (except the Registration
Rights Agreement), (v) there are no outstanding securities or instruments of the
Company or any of its Subsidiaries which contain any redemption or similar
provisions, and there are no contracts, commitments, understandings or
arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries, (vi) there
are no securities or instruments containing anti-dilution or similar provisions
that will be triggered by the issuance of the Securities as described in this
Agreement and (vii) the Company does not have any stock appreciation rights or
"phantom stock" plans or agreements or any similar plan or agreement. The
Company has furnished to the Buyer true and correct copies of the Company's
Articles of Incorporation, as amended and as in effect on the date hereof (the
"ARTICLES OF INCORPORATION"), and the Company's By-laws, as amended and as in
effect on the date hereof (the "BY-LAWS"), and a summary description of the
terms of all securities convertible into or exercisable for Common Stock, if
any, and the material rights of the holders thereof in respect thereto.
d. ISSUANCE OF SECURITIES. The Commitment Shares have been
duly authorized and, upon issuance in accordance with the terms hereof, shall be
(i) validly issued, fully paid and non-assessable and (ii) free from all taxes,
liens and charges with respect to the issue thereof. 1,200,000 shares of Common
Stock have been duly authorized and reserved for issuance upon conversion of
each Equity Purchase Agreement. Upon conversion in accordance with the terms and
conditions of the Equity Purchase Agreements, the Conversion Shares will be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock.
e. NO CONFLICTS. Except as disclosed in SCHEDULE 3(E), the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation by the Company of the transactions contemplated hereby and
thereby (including, without limitation, the reservation for issuance and
issuance of the Conversion Shares) will not (i) result in a violation of the
Articles of Incorporation, any Certificate of Designations, Preferences and
Rights of any outstanding series of preferred stock of the Company or the
By-laws or (ii) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market applicable to
the Company or any of its Subsidiaries) or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected which, in the case of
(ii), could not reasonably be expected to result in a Material Adverse Effect.
Except as disclosed in SCHEDULE 3(E), neither the Company nor its Subsidiaries
is in violation of any term of or
5
in default under its Articles of Incorporation, any Certificate of Designation,
Preferences and Rights of any outstanding series of preferred stock of the
Company or By-laws or their organizational charter or by-laws, respectively.
Except as disclosed in SCHEDULE 3(E), neither the Company nor any of its
Subsidiaries is in violation of any term of or in default under any material
contract, agreement, mortgage, indebtedness, indenture, instrument, judgment,
decree or order or any statute, rule or regulation applicable to the Company or
its Subsidiaries, except for possible conflicts, defaults, terminations or
amendments which could not reasonably be expected to have a Material Adverse
Effect. The business of the Company and its Subsidiaries is not being conducted,
and shall not be conducted, in violation of any law, ordinance, regulation of
any governmental entity, except for possible violations, the sanctions for which
either individually or in the aggregate could not reasonably be expected to have
a Material Adverse Effect. Except as specifically contemplated by this Agreement
and as required under the 1933 Act, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with, any
court or governmental agency or any regulatory or self-regulatory agency in
order for it to execute, deliver or perform any of its obligations under or
contemplated by the Transaction Documents in accordance with the terms hereof or
thereof. Except as disclosed in SCHEDULE 3(E), all consents, authorizations,
orders, filings and registrations which the Company is required to obtain
pursuant to the preceding sentence have been obtained or effected on or prior to
the date hereof. The Company is not and has not been since January 1, 1998, in
violation of the listing requirements of the Principal Market.
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since January 1, 1998,
the Company has filed all reports, schedules, forms, statements and other
documents required to be filed by it with the SEC pursuant to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934 ACT")
(all of the foregoing filed prior to the date hereof and all exhibits included
therein and financial statements and schedules thereto and documents
incorporated by reference therein being hereinafter referred to as the "SEC
DOCUMENTS"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC (except
as they may have been correctly amended), 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. As of their respective
dates, the financial statements of the Company included in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE
3(G), since September 30, 1999, there has been no material adverse change in the
business, properties, operations, financial condition or results of operations
of the Company or its Subsidiaries. The Company has not taken any steps, and
does not currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or any of its Subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy proceedings.
6
h. ABSENCE OF LITIGATION. There is no action, suit,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the Company or any of its Subsidiaries, threatened against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, which could reasonably be expected to have a Material
Adverse Effect. A description of each action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body which, as of the date of this Agreement, is
pending or threatened in writing against or affecting the Company, the Common
Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, is
set forth in SCHEDULE 3(H).
i. ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE
SECURITIES. The Company acknowledges and agrees that the Buyer is acting solely
in the capacity of arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby and thereby. The Company
further acknowledges that the Buyer is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to the
Transaction Documents and the transactions contemplated hereby and thereby and
any advice given by the Buyer or any of its representatives or agents in
connection with the Transaction Documents and the transactions contemplated
hereby and thereby is merely incidental to the Buyer's purchase of the
Securities. The Company further represents to the Buyer that the Company's
decision to enter into the Transaction Documents has been based solely on the
independent evaluation by the Company and its representatives and advisors.
j. NO GENERAL SOLICITATION. Neither the Company, nor any of
its affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
k. 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 require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable shareholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated, nor will
the Company or any of its Subsidiaries take any action or steps that would
require registration of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.
l. DILUTIVE EFFECT. The Company understands and acknowledges
that the number of Conversion Shares issuable upon conversion of the Equity
Purchase Agreements will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Equity Purchase Agreements in accordance with this
7
Agreement and the Equity Purchase Agreements is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other shareholders of the Company.
m. INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiaries own or possess adequate rights or licenses to use all material
trademarks, trade names, service marks, service xxxx registrations, service
names, patents, patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to conduct their
respective businesses as now conducted. Except as set forth on SCHEDULE 3(M),
none of the Company's material trademarks, trade names, service marks, service
xxxx registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets or
other intellectual property rights have expired or terminated, or, by the terms
and conditions thereof, could expire or terminate within two years from the date
of this Agreement. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of any material trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
SCHEDULE 3(M), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its Subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service xxxx
registrations, trade secret or other infringement, which could reasonably be
expected to have a Material Adverse Effect.
n. ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i)
are in compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
o. TITLE. The Company and its Subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in SCHEDULE 3(O) or such
as do not materially affect the value of such property and do not interfere with
the use made and proposed to be made of such property by the Company and any of
its Subsidiaries. Any real property and facilities held under lease by the
Company and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
p. INSURANCE. The Company and each of its Subsidiaries are
insured by insurers of recognized financial responsibility against such losses
and risks and in such amounts as
8
management of the Company believes to be prudent and customary in the businesses
in which the Company and its Subsidiaries are engaged. Neither the Company nor
any such Subsidiary has been refused any insurance coverage sought or applied
for and neither the Company nor any such Subsidiary has any 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 at a cost that would not materially and
adversely affect the condition, financial or otherwise, or the earnings,
business or operations of the Company and its Subsidiaries, taken as a whole.
q. REGULATORY PERMITS. The Company and its Subsidiaries
possess all material certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
Subsidiary has received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit.
r. TAX STATUS. The Company and each of its Subsidiaries has
made or filed all federal and state income and all other material tax returns,
reports and declarations required by any jurisdiction to which it is subject
(unless and only to the extent that the Company and each of its Subsidiaries has
set aside on its books provisions reasonably adequate for the payment of all
unpaid and unreported taxes) and has paid all taxes and other governmental
assessments and charges that are material in amount, shown or determined to be
due on such returns, reports and declarations, except those being contested in
good faith and has set aside on its books provision reasonably adequate for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of the Company know of no basis for any such claim.
s. TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 3(S) and other than the grant or exercise of stock options disclosed on
SCHEDULE 3(C), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), 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 corporation, partnership,
trust or other entity in which any officer, director, or any such employee has
an interest or is an officer, director, trustee or partner.
t. APPLICATION OF TAKEOVER PROTECTIONS. The Company and its
board of directors have 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 Articles of Incorporation or the laws of the
state of its incorporation which is or could become applicable to the Buyer as a
result of the transactions contemplated by this Agreement, including, without
limitation, the Company's issuance of the Securities and the Buyer's ownership
of the Securities.
9
u. RIGHTS AGREEMENT. The Company has not adopted a shareholder
rights plan or similar arrangement relating to accumulations of beneficial
ownership of Common Stock or a change in control of the Company.
v. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of
its Subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any of its Subsidiaries has, in the course of
its actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
4. COVENANTS.
---------
a. FILING REGISTRATION STATEMENT. The Company shall within ten
(10) Trading Days from the date hereof: (i) file a new Registration Statement on
Form SB-2 or (ii) file a pre-effective amendment to an existing Registration
Statement on Form SB-2, in either case covering the resale of at least 1,500,000
Conversion Shares underlying the First Equity Purchase Agreement and the resale
of 400,000 First Closing Commitment Shares (as defined in Section 7(b)). The
Company shall also within ten (10) Trading Days from the date of the delivery to
the Buyer of the Second Closing Notice: (i) file a new Registration Statement on
Form SB-2 or (ii) file a pre-effective amendment to an existing Registration
Statement on Form SB-2, in either case covering the resale of a reasonable
estimate of the number of Conversion Shares underlying the Second Equity
Purchase Agreement and a reasonable estimate of the number of Second Closing
Commitment Shares (as defined in Section 7(b)). The Buyer and its counsel shall
have a reasonable opportunity to review and comment upon each such registration
statement or amendment to such registration statement and any related prospectus
prior to its filing with the SEC. The Company shall use its reasonable best
efforts to have such registration statements or amendments declared effective by
the SEC at the earliest possible date.
b. BLUE SKY. The Company shall, on or before each Closing
Date, take such action, if any, as the Company shall reasonably determine is
necessary in order to obtain an exemption for or to qualify the Commitment
Shares and the Conversion Shares for sale to the Buyer at each Closing pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the Buyer on or prior to each Closing Date. The Company shall make all filings
and reports relating to the offer and sale of the Commitment Shares and the
Conversion Shares required under applicable securities or "Blue Sky" laws of the
states of the United States following each Closing Date.
c. NO VARIABLE PRICED FINANCING. Other than pursuant to this
Agreement, the Company agrees that beginning on the date of this Agreement and
ending on the date of termination of this Agreement (as provided in Section 9(k)
hereof), and so long as any Equity Purchase Agreement is executory, neither the
Company nor any of its Subsidiaries shall, without the prior
10
written consent of the Buyer, contract for any equity financing (including any
debt financing with an equity component) or issue any equity securities of the
Company or any Subsidiary or securities convertible or exchangeable into or for
equity securities of the Company or any Subsidiary (including debt securities
with an equity component) which, in any case (i) are convertible into or
exchangeable for an indeterminate number of shares of common stock, (ii) are
convertible into or exchangeable for Common Stock at a price which varies with
the market price of the Common Stock, (iii) directly or indirectly provide for
any "re-set" or adjustment of the purchase price, conversion rate or exercise
price or (iv) contain any "make-whole" provision based upon, directly or
indirectly, the market price of the Common Stock, in each case, other than
reasonable and customary anti-dilution adjustments for issuance of shares of
Common Stock at a price which is below the market price of the Common Stock.
d. LISTING. The Company shall promptly secure the listing of
all of the Conversion Shares and Commitment Shares upon each national securities
exchange and automated quotation system, if any, upon which shares of Common
Stock are then listed (subject to official notice of issuance) and shall
maintain, so long as any other shares of Common Stock shall be so listed, such
listing of all such securities from time to time issuable under the terms of the
Transaction Documents. The Company shall maintain the Common Stock's
authorization for quotation on The Nasdaq SmallCap Market (the "PRINCIPAL
MARKET") or the Nasdaq National Market. Neither the Company nor any of its
Subsidiaries shall take any action which would be reasonably expected to result
in the delisting or suspension of the Common Stock on the Principal Market. The
Company shall promptly, and in no event later than the following Trading Day,
provide to the Buyer copies of any notices it receives from the Principal Market
regarding the continued eligibility of the Common Stock for listing on such
automated quotation system or securities exchange. The Company shall pay all
fees and expenses in connection with satisfying its obligations under this
Section.
e. LIMITATION ON SHORT SALES AND HEDGING TRANSACTIONS. The
Buyer agrees that beginning on the date of this Agreement and ending on the date
of termination of this Agreement as provided in Section 9(k), the Buyer and its
affiliates shall not in any manner whatsoever enter into or effect, directly or
indirectly, any (i) "short sale" (as such term is defined in Rule 3b-3 of the
0000 Xxx) of the Common Stock or (ii) hedging transaction, which establishes a
net short position with respect to the Common Stock; provided, however, that
such restrictions shall not apply if an Event of Default (as defined the Equity
Purchase Agreement) has occurred, or any event which, after notice and/or lapse
of time, would become an Event of Default has occurred, under any Equity
Purchase Agreement including any failure by the Company to timely effect any
conversion properly submitted pursuant to an Equity Purchase Agreement.
f. LIMITATION ON SALES OF COMMITMENT SHARES. The Buyer agrees
that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 9(k), the Buyer shall not
transfer or sell (i) the First Closing Commitment Shares (as defined in Section
7(b) hereof) until such date as the First Equity Purchase Agreement is fully
performed and (ii) the Second Closing Commitment Shares (as defined in Section
7(b) hereof) until such date as the Second Equity Purchase Agreement is fully
performed; provided, however, that such restrictions shall not apply: (A) to any
transfers to or among affiliates (as defined in the Securities
11
Exchange Act of 1934, as amended), (B) to any pledge in connection with a bona
fide loan or margin account or (C) if an Event of Default has occurred, or any
event which, after notice and/or lapse of time, would become an Event of
Default, under any Equity Purchase Agreement including any failure by the
Company to timely effect any conversion properly submitted pursuant to an Equity
Purchase Agreement.
g. MAINTENANCE OF FUNDING ACCOUNT BY BUYER. The Buyer agrees
to deliver to the Company on the Closing Date of the First Closing immediately
available funds in the amount of $500,000. The Buyer shall maintain a segregated
account in its own name (the "FUNDING ACCOUNT") and shall deposit into such
Funding Account (i) on the Closing Date of the First Closing, $500,000, and (ii)
thereafter on the first day of each Monthly Period, $1,000,000. On the Closing
Date of the First Closing and on the first day of each Monthly Period, the Buyer
shall provide to the Company reasonable documentation of deposits made to the
Funding Account.
h. DUE DILIGENCE. The Buyer shall have the right, from time to
time as the Buyer may deem appropriate, to perform reasonable due diligence on
the Company during normal business hours.
5. TRANSFER AGENT INSTRUCTIONS.
---------------------------
The Company shall issue irrevocable instructions to its
transfer agent, and any subsequent transfer agent, to issue certificates,
registered in the name of the Buyer or its respective nominee(s), for the
Conversion Shares from time to time upon conversion of an Equity Purchase
Agreement (the "IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants
to the Buyer that no instruction other than the Irrevocable Transfer Agent
Instructions referred to in this Section 5, will be given by the Company to its
transfer agent with respect to the Securities and that the Securities shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement
subject to the provisions of Section 4(f) in the case of the Commitment Shares.
Nothing in this Section 5 shall affect in any way the Buyer's obligations to
comply with all applicable prospectus delivery requirements, if any, upon resale
of the Securities. If a Buyer provides the Company with an opinion of counsel,
in a generally acceptable form, to the effect that a public sale, assignment or
transfer of the Securities may be made without registration under the 1933 Act
or the Buyer provides the Company with reasonable assurances that the Securities
can be sold pursuant to Rule 144, the Company shall permit the transfer, and, in
the case of the Conversion Shares, promptly instruct its transfer agent to issue
one or more certificates in such name and in such denominations as specified by
the Buyer and without any restrictive legend. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyer by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Section 5 will be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
this Section 5, that the Buyer shall be entitled, in addition to all other
available remedies, to an order and/or injunction restraining any breach and
requiring immediate issuance and transfer, without the necessity of showing
economic loss and without any bond or other security being required.
12
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ENTER INTO
EQUITY PURCHASE AGREEMENTS.
----------------------------------------------------
The obligation of the Company hereunder to enter into each
Equity Purchase Agreement with the Buyer at each Closing is subject to the
satisfaction, at or before the respective Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
the Buyer with prior written notice thereof:
a. The Buyer shall have executed each of the Transaction
Documents to which it is a party and delivered the same to the Company
applicable to the respective Closing including for each Closing: (i) an Equity
Purchase Agreement substantially in the form of EXHIBIT A hereto and (ii) a
Registration Rights Agreement substantially in the form of EXHIBIT B hereto
(individually, a "REGISTRATION RIGHTS AGREEMENT" and collectively, the
"REGISTRATION RIGHTS AGREEMENTS").
b. Subject to the Company's compliance with Section 4(a), a
Registration Statement on Form SB-2 covering the resale of the respective
Commitment Shares and the Conversion Shares underlying the Equity Purchase
Agreement to be sold at such Closing shall have been declared effective under
the 1933 Act by the SEC and no stop order with respect to the Registration
Statement shall be pending or threatened by the SEC.
c. The representations and warranties of the Buyer shall be
true and correct in all material respects as of the date when made and as of
such Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and the Buyer shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Buyer at or prior to the Closing Date.
d. In connection with entering into the First Equity Purchase
Agreement, the Buyer shall have, on the Closing Date of the First Closing: (i)
delivered to the Company immediately available funds in the amount of $500,000,
and (ii) provided to the Company evidence of a deposit to the Funding Account in
the amount of $500,000. In connection with entering into the Second Equity
Purchase Agreement, the Buyer shall have, on the Closing Date of the Second
Closing provided to the Company evidence of a deposit to the Funding Account in
the amount of $1,000,000.
It is agreed and acknowledged by the parties hereto, that until such time has
the Company shall have delivered the Second Closing Notice to the Buyer with
respect to the Closing of the Second Equity Purchase Agreement, the Company
shall not be obligated to enter into the Second Equity Purchase Agreement.
13
7. CONDITIONS TO THE BUYER'S OBLIGATION TO ENTER INTO
EQUITY PURCHASE AGREEMENTS.
--------------------------------------------------
The obligation of the Buyer hereunder to enter into each
Equity Purchase Agreement at the respective Closing is subject to the
satisfaction, at or before the respective Closing Date, of each of the following
conditions, provided that these conditions are for the Buyer's sole benefit and
may be waived by the Buyer at any time in its sole discretion by providing the
Company with prior written notice thereof:
a. The Company shall have executed each of the Transaction
Documents and delivered the same to the Buyer applicable to the respective
Closing including for each Closing: (i) the respective Equity Purchase Agreement
and (ii) a Registration Rights Agreement substantially in the form of EXHIBIT B
hereto.
b. On the Closing Date for the First Closing the Company shall
have delivered to the Buyer a number of shares of Common Stock (the "FIRST
CLOSING COMMITMENT SHARES") equal to: (i) 12% of $6,000,000 divided by the lower
of (A) the arithmetic average of the Closing Bid Prices (as defined in the
Equity Purchase Agreements) of the Common Stock for the five (5) consecutive
Trading Days immediately preceding the Trading Day which is two (2) Trading Days
prior to the Closing Date for the First Closing and (B) the arithmetic average
of the Closing Bid Prices of the Common Stock for the five (5) consecutive
Trading Days immediately preceding the Trading Day which is two (2) Trading Days
prior to the date hereof, PLUS (ii) 3% of $6,000,000 divided by the lower of (A)
the arithmetic average of the Closing Bid Prices of the Common Stock for the
five (5) consecutive Trading Days immediately preceding the Trading Day which is
two (2) Trading Days prior to the Closing Date for the First Closing and (B) the
arithmetic average of the Closing Bid Prices of the Common Stock for the five
(5) consecutive Trading Days immediately preceding the date hereof. On the
Closing Date for the Second Closing the Company shall have delivered to the
Buyer a number of shares of Common Stock (the "SECOND CLOSING COMMITMENT SHARES"
and together with the First Closing Commitment Shares, the "COMMITMENT SHARES")
equal to 7% of $6,000,000 divided by the lower of (A) the arithmetic average of
the Closing Bid Prices of the Common Stock for the five (5) consecutive Trading
Days immediately preceding the Trading Day which is two (2) Trading Days prior
to the Closing Date for the Second Closing and (B) the arithmetic average of the
Closing Bid Prices of the Common Stock for the five (5) consecutive Trading Days
immediately preceding the date on which the Second Closing Notice is delivered.
The number of Commitment Shares shall be appropriately adjusted for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction during such five (5) Trading Day period.
c. The Common Stock shall be authorized for quotation on the
Principal Market, trading in the Common Stock shall not have been within the
last 365 days suspended by the SEC or the Principal Market and the Conversion
Shares and the Commitment Shares shall be listed upon the Principal Market.
14
d. The Buyer shall have received the opinions of the Company's
legal counsel dated as of the respective Closing Date, in the forms of EXHIBIT
C-1 and EXHIBIT C-2 attached hereto.
e. The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
respective Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the respective Closing Date. The Buyer shall
have received a certificate, executed by the President of the Company, dated as
of the respective Closing Date, to the foregoing effect in the form attached
hereto as EXHIBIT D.
f. The Board of Directors of the Company shall have adopted
resolutions in the form attached hereto as EXHIBIT E which shall be in full
force and effect without any amendment or supplement thereto as of the
respective Closing Date.
g. As of the respective Closing Date, the Company shall have
reserved out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the respective Equity Purchase Agreement, at
least 1,200,000 shares of Common Stock.
h. The Irrevocable Transfer Agent Instructions, in the form of
EXHIBIT F attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent.
i. The Company shall have delivered to the Buyer a certificate
evidencing the incorporation and good standing of the Company in the State of
Florida issued by the Secretary of State of the State of Florida as of a date
within ten (10) Trading Days of the respective Closing Date.
j. The Company shall have delivered to the Buyer a certified
copy of the Articles of Incorporation as certified by the Secretary of State of
the State of Florida within ten (10) Trading Days of the respective Closing
Date.
k. The Company shall have delivered to the Buyer a secretary's
certificate executed by the Secretary of the Company, dated as of the respective
Closing Date, in the form attached hereto as EXHIBIT G.
l. A Registration Statement on Form SB-2 covering the resale
of all of the respective Commitment Shares and the Conversion Shares (assuming
the Closing Date is the Conversion Date) underlying the Equity Purchase
Agreement to be sold at such Closing shall have been declared effective under
the 1933 Act by the SEC and no stop order with respect to the Registration
Statement shall be pending or threatened by the SEC. The Company shall have made
15
all filings under all applicable federal and state securities laws necessary to
consummate the issuance of the Securities pursuant to this Agreement in
compliance with such laws.
m. No Event of Default (as defined in the Equity Purchase
Agreement) has occurred, or any event which, after notice and/or lapse of time,
would become an Event of Default under the Equity Purchase Agreement has
occurred.
8. INDEMNIFICATION. In consideration of the Buyer's execution and
delivery of the Transaction Documents and acquiring the Securities thereunder
and in addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Buyer and each other holder of the Securities and all of their shareholders,
officers, directors, employees and direct or indirect investors and any of the
foregoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby. To
the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
9. GOVERNING LAW; MISCELLANEOUS.
----------------------------
a. GOVERNING LAW; JURISDICTION; JURY TRIAL. The corporate laws
of the State of Florida shall govern all issues concerning the relative rights
of the Company and its shareholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Agreement and the
other Transaction Documents shall be governed by the internal laws of the State
of Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably
16
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof to such party at the
address for such 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 HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which 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; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all
other prior oral or written agreements between the Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement, the Other Transaction Documents and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be amended other than by an
instrument in writing signed by the Company and the Buyer, and no provision
hereof may be waived other than by an instrument in writing signed by the party
against whom enforcement is sought.
f. NOTICES. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to have been delivered: (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile
(provided confirmation of transmission is mechanically or electronically
generated and kept on file by the sending party); or (iii) one Trading Day after
deposit with a nationally recognized overnight delivery service, in each case
properly addressed to the party to receive the same. The addresses and facsimile
numbers for such communications shall be:
17
If to the Company:
5th Avenue Channel Corp.
0000 X.X. 000xx Xxxxxx
Xxxxx Xxxxx Xxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx Xxxxx
With a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 404-572-5100
Attention: Xxxxxx X. Xxxx
If to the Buyer:
Fusion Capital Fund II, LLC
000 Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Ungaretti & Xxxxxx
0000 Xxxxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxxxx
If to the Transfer Agent:
Continental Stock Transfer and Trust Company
0 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000 x000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx
18
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Trading Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective successors and
assigns, including any transferee of the Equity Purchase Agreements. The Company
shall not assign this Agreement or any rights or obligations hereunder without
the prior written consent of the Buyer, including by merger or consolidation.
The Buyer may not assign its rights under this Agreement without the consent of
the Company, other than to an affiliate of the Buyer. Notwithstanding anything
to the contrary contained in the Transaction Documents, the Buyer shall be
entitled to pledge the Securities in connection with a bona fide loan or margin
account.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
i. PUBLICITY. The Company and the Buyer shall have the right
to approve before issuance any press releases or any other public disclosure
(including any filings with the SEC) with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior approval of any Buyer, to make any press release or other
public disclosure (including any filings with the SEC) with respect to such
transactions as is required by applicable law and regulations (although the
Buyer shall be consulted by the Company in connection with any such press
release or other public disclosure prior to its release and shall be provided
with a copy thereof).
j. FURTHER ASSURANCES. Each party shall do and perform, or
cause to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. TERMINATION; SURVIVAL. This Agreement may be terminated
only as follows:
(i) By the Buyer any time after an Event of Default (as
defined in the Equity Purchase Agreements) has occurred.
19
(ii) In the event that the First Closing shall not have
occurred, the Company shall have the option to terminate this Agreement
for any reason or for no reason without liability of any party to any
other party. If this Agreement is terminated pursuant to this Section
9(k)(ii), the Company shall issue to the Buyer the First Closing
Commitment Shares immediately prior to the termination hereof. In the
such case, the number of First Closing Commitment Shares shall be equal
to: (A) 12% of $6,000,000 divided by the lower of (1) the arithmetic
average of the Closing Bid Prices of the Common Stock for the five (5)
consecutive Trading Days immediately preceding the Trading Day which is
two (2) Trading Days prior to the date of termination of this Agreement
and (2) the arithmetic average of the Closing Bid Prices of the Common
Stock for the five (5) consecutive Trading Days immediately preceding
the date hereof, plus (B) 3% of $6,000,000 divided by the lower of (1)
the arithmetic average of the Closing Bid Prices of the Common Stock
for the five (5) consecutive Trading Days immediately preceding the
Trading Day which is two (2) Trading Days prior to the date of
termination of this Agreement and (2) the arithmetic average of the
Closing Bid Prices of the Common Stock for the five (5) consecutive
Trading Days immediately preceding the date hereof.
(iii) In the event that the First Closing shall not have
occurred on or before June 30, 2000, due to the failure to satisfy the
conditions set forth in Sections 6 and 7 above with respect to the
First Closing (and the nonbreaching party's failure to waive such
unsatisfied condition(s)), the nonbreaching party shall have the option
to terminate this Agreement at the close of business on such date
without liability of any party to any other party; provided, however,
that any such termination shall not release any breaching party from
liability hereunder. If this Agreement is terminated pursuant to this
Section 9(k)(iii) prior to the First Closing other than solely as a
result of any material breach of the Buyer's obligation hereunder, the
Company shall issue to the Buyer the First Closing Commitment Shares
immediately upon the termination hereof. In the such case, the number
of First Closing Commitment Shares shall be equal to: (A) 12% of
$6,000,000 divided by the lower of (1) the arithmetic average of the
Closing Bid Prices of the Common Stock for the five (5) consecutive
Trading Days immediately preceding the Trading Day which is two (2)
Trading Days prior to the date of termination of this Agreement and (2)
the arithmetic average of the Closing Bid Prices of the Common Stock
for the five (5) consecutive Trading Days immediately preceding the
date hereof, plus (B) 3% of $6,000,000 divided by the lower of (1)
arithmetic average of the Closing Bid Prices of the Common Stock for
the five (5) consecutive Trading Days immediately preceding the Trading
Day which is two (2) Trading Days prior to the date of termination of
this Agreement and (2) the arithmetic average of the Closing Bid Prices
of the Common Stock for the five (5) consecutive Trading Days
immediately preceding the date hereof.
(iv) If the First Equity Purchase Agreement has been entered
into as provided herein, by the Company any time after the date on
which the aggregate principal amount of the First Equity Purchase
Agreement has been fully converted to Common Stock, but prior to the
delivery to the Buyer of the Second Closing Notice.
20
(v) If the First Equity Purchase Agreement has been entered
into as provided herein, by either the Company or the Buyer if (A) the
aggregate principal amount of the First Equity Purchase Agreement has
been fully converted to Common Stock and (B) the Company has not
delivered a Second Closing Notice to the Buyer on or prior to the tenth
(10th) Trading Day after the date on which the aggregate principal
amount of the First Equity Purchase Agreement has been fully converted
to Common Stock.
(vi) If (A) the First Equity Purchase Agreement has been
entered into as provided herein, (B) the aggregate principal amount of
the First Equity Purchase Agreement has been fully converted to Common
Stock and (C) the Company has delivered a Second Closing Notice to the
Buyer, in the event that the Second Closing shall not have occurred on
or before twenty (20) Trading Days from the date of the Second Closing
Notice due to the failure to satisfy the conditions set forth in
Sections 6 and 7 above with respect to the Second Closing (and the
nonbreaching party's failure to waive such unsatisfied condition(s)),
the nonbreaching party shall have the option to terminate this
Agreement at the close of business on such date without liability of
any party to any other party; provided, however, that any such
termination shall not release any breaching party from liability
hereunder. If this Agreement is terminated pursuant to this Section
9(k)(vi) prior to the Second Closing other than a material breach of
the Buyer's obligation hereunder, the Company shall issue to the Buyer
the Second Closing Commitment Shares immediately upon the termination
hereof. In such case, the number of Second Closing Commitment Shares
shall be equal to 7% of $6,000,000 divided by the lesser of (A) the
arithmetic average of the Closing Bid Prices of the Common Stock for
the five (5) consecutive Trading Days immediately preceding the Trading
Day which is two (2) Trading Days prior to the date of termination of
this Agreement and (B) the arithmetic average of the Closing Bid Prices
of the Common Stock for the five (5) consecutive Trading Days
immediately preceding the date on which the Second Closing Notice is
delivered.
(vii) If the First Equity Purchase Agreement or the Second
Equity Purchase Agreement is terminated by either party pursuant to its
terms without full conversion into Common Stock or if the Second Equity
Purchase Agreement has been fully converted to Common Stock, this
Agreement shall automatically terminate at such time.
Except for termination of this Agreement under Section 9(k)(vii), any
termination of this Agreement pursuant to this Section 9(k) shall be effected by
written notice from the Company to the Buyer, or the Buyer to the Company, as
the case may be, setting forth the basis for the termination hereof. A
termination of this Agreement under Section 9(k)(vii) shall automatically occur
on such date as the First Equity Purchase Agreement or the Second Equity
Purchase Agreement has been terminated by either party pursuant to its terms
without full conversion into Common Stock or on such date as the aggregate
principal amount of the Second Equity Purchase Agreement has been fully
converted to Common Stock, in each case, without any action or notice on the
part of any party. Except as expressly set forth in this Agreement, the
representations and warranties of the Company and the Buyer contained in
Sections 2 and 3 hereof, the indemnification provisions set forth in Section 8
hereof and the agreements and covenants set forth in Section 9, shall survive
each Closing and any termination hereof.
21
l. FINANCIAL ADVISOR. The Company acknowledges that it has
engaged Xxxxx Xxxxxx, as financial advisor in connection with the sale of the
Securities. The Company shall be responsible for the payment of any fees or
commissions, if any, of Xx. Xxxxxx or any other financial advisor or placement
agent relating to or arising out of the transactions contemplated hereby. The
Company shall pay, and hold the Buyer harmless against, any liability, loss or
expense (including, without limitation, attorneys' fees and out of pocket
expenses) arising in connection with any such claim.
m. NO STRICT CONSTRUCTION. 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.
n. REMEDIES. The Buyer and each holder of the Securities shall
have all rights and remedies set forth in the Transaction Documents and all
rights and remedies which such holders have been granted at any time under any
other agreement or contract and all of the rights which such holders have under
any law. Any person having any rights under any provision of the Transaction
Documents shall be entitled to enforce such rights specifically (without posting
a bond or other security), to recover damages by reason of any breach of any
provision of the Transaction Documents and to exercise all other rights granted
by law.
o. PAYMENT SET ASIDE. To the extent that the Buyer receives a
payment or payments hereunder or pursuant to the other Transaction Documents or
the Buyer enforces or exercises its rights hereunder or 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.
q. PAYMENT OF EXPENSES. The Company shall pay to the Buyer
$20,000 as a refundable deposit towards the Buyer's expenses. In addition, in
the event the Buyer incurs expenses in excess of $10,000, the Company shall
reimburse the investor for all expenses in connection with consummation of the
transaction, including any due diligence expenses and legal fees, provided that
the Buyer submits full documentation and accounting of such expenses up to a
limit of $40,000.
* * * * * *
22
IN WITNESS WHEREOF, the Buyer and the Company have caused this AMENED
AND RESTATED Master Facility Agreement to be duly executed as of the date first
written above.
COMPANY:
5TH AVENUE CHANNEL CORP.
By: /s/ XXXX XXXXXXXXX
----------------------------------------
Name: Xxxx Xxxxxxxxx
Title: Executive Vice President
BUYER:
FUSION CAPITAL FUND II, LLC
BY: FUSION CAPITAL PARTNERS II, LLC
BY: SGM HOLDING CORP.
By: /s/ XXXXXX X. XXXXXX
-------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
23
EXHIBIT E
---------
FORM OF COMPANY RESOLUTIONS
5TH AVENUE CHANNEL CORP.
Attached hereto.
