PURCHASE AGREEMENT
This Purchase Agreement (the "Agreement") is made as of December 24,
1998, between FaxSav Incorporated, a Delaware corporation (the "Corporation"),
and The Tail Wind Fund Ltd. (the "Purchaser").
The Corporation and the Purchaser hereby agree as follows:
SECTION 1
AUTHORISATION, PURCHASE AND SALE OF THE STOCK AND THE WARRANTS
1.1 AUTHORISATION OF THE STOCK. The Corporation has authorised the
issuance and sale to the Purchaser of 645,161 shares of the Corporation's common
stock (the "Stock") and warrants to purchase 64,516 shares of its common stock
in the form attached hereto as Exhibit A (the "Warrants") and as herein
provided.
1.2 SALE AND PURCHASE OF THE STOCK AND THE WARRANTS. At the Closing,
subject to the terms and conditions hereof and in reliance upon the
representations, warranties and agreements contained herein, the Purchaser will
purchase the Stock from the Corporation and the Corporation shall issue and sell
the stock to the Purchaser at a purchase price of $5.425 per share, $3,500,000
in total and the Corporation shall issue the Warrants to the Purchaser.
SECTION 2
CLOSING, PAYMENT AND DELIVERY
2.1 CLOSING DATE AND PLACE OF CLOSING. The closing shall be held as soon
as practicable, and in no event more than seven (7) business days after
execution of this Agreement, on such date as the Corporation and the Purchaser
may agree to (the "Closing Date").
2.2. PAYMENT AND DELIVERY. At the Closing, the Purchaser will pay or cause
to be paid to the Corporation by wire transfer of same day funds the entire
purchase price. The Corporation will deliver in advance of the Closing to
Purchaser's counsel in trust a certificate or certificates, registered in such
name or names as Purchaser may designate, representing all of the Stock and all
of the Warrants, with instructions that such certificates are to be held for
release to the Purchaser only upon payment of the purchase price to the
Corporation.
2.3 COVENANT OF BEST EFFORTS AND GOOD FAITH. The Corporation and the
Purchaser agree to use their respective best efforts and to act in good faith to
cause to occur all conditions to Closing which are in their respective control.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation hereby represents and warrants to the Purchaser that:
3.1 CORPORATION POWER, QUALIFICATION AND STANDING. The Corporation and its
subsidiaries are validly existing and in good standing under the laws of their
respective jurisdictions of incorporation. Each of them is qualified to transact
business in each jurisdiction in which its ownership of property or conduct of
activities requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the Corporation's
financial condition, business, assets, results of operations or prospects, or on
the ability of the Corporation to perform its obligations hereunder (hereafter
"Material Adverse Effect"). The Corporation has all requisite corporate power
and authority to enter into this Agreement, to sell the Stock and to carry out
and perform its other obligations under this Agreement.
3.2 S.E.C. REPORTS; FINANCIAL STATEMENTS. The common stock of the
Corporation is registered under Section 12(b) or (g) of the Securities Exchange
Act of 1934 and the Corporation is in full compliance with its reporting and
filing obligations under said Act. The Corporation has delivered to Purchaser
its Annual Reports to shareholders and its reports on Form 10K for its last
three fiscal years, and all its quarterly reports on Form 10Q, and each other
report, registration statement or definitive proxy statement filed with the
S.E.C. since the beginning of said three fiscal years (collectively, the "SEC
Reports"). The SEC Reports do not (as of their respective dates) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The audited and
unaudited financial statements of the Corporation included in the SEC Reports
(the "Financial Statements") have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as stated
in such Financial Statements or the notes thereto) and fairly present the
financial position of the Corporation and its consolidated subsidiaries as of
the dates thereof and the results of their operations and changes in financial
position for the periods then ended. Except as publicly disclosed by the
Corporation in the SEC Reports or otherwise, since the end of the most recent of
said fiscal years there has been no material adverse change in the business,
financial condition, or results of operations of the Corporation and its
subsidiaries taken together, and there is no existing condition, event or series
of events which can reasonably be expected to have a material adverse effect on
the business, financial condition or results of operations of the Corporation
and its subsidiaries taken together, or its ability to perform its obligations
under this Agreement.
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3.3 AUTHORISATION; NO CONFLICT. Execution and delivery of this Agreement
and issuance and sale of the Stock have been duly authorised by all necessary
corporate action of the Corporation, and the Stock when issued will be validly
issued, fully paid and non assessable. Performance by the Corporation of its
obligations under this Agreement will not conflict with or violate (i) the
charter documents or bylaws of the Corporation, (ii) any indenture, loan
agreement, lease, mortgage or other material agreement binding on the
Corporation, (iii) except where such conflict or violation would not have a
Material Adverse Effect, any order of a court or administrative agency binding
on the Corporation, or (iv) except where such conflict or violation would not
have a Material Adverse Effect, any applicable law or governmental regulation;
and such performance does not and will not require the permission or approval of
any governmental agency, and will not result in the imposition or creation of
any lien or charge against any assets of the Corporation. Except as disclosed in
the Financial Statements, (i) the Corporation has no obligation to redeem or
repurchase any of its equity securities, (ii) no shareholder or other person has
pre-emptive or other rights to acquire equity securities of the Corporation, and
(iii) the Corporation has no obligation to register any of its securities
otherwise than pursuant to Section 7 of this Agreement or as disclosed on
Exhibit A hereto.
3.4 MATERIAL AGREEMENT; NO DEFAULTS. All material indentures, loan
agreements, leases, mortgages and other agreements binding on the Corporation or
its subsidiaries are identified in the list of exhibits contained in the
Corporation's most recent Form 10K report ("Other Agreements"). No material
default on the part of the Corporation or any of its subsidiaries (including any
event which, with notice or the passage of time, would constitute a default)
exists under any of the Other Agreements.
3.5 MATERIAL LIABILITIES. Except for liabilities disclosed in the
Financial Statements or the SEC Reports, and obligations under the Other
Agreements, the Corporation and its subsidiaries have no material liabilities or
obligations, absolute or contingent, other than liabilities arising in the
ordinary course of business subsequent to the date of the most recent of the
Financial Statements.
3.6 PROPERTIES. The Corporation and its subsidiaries (i) have good title
to the properties and assets reflected in the Financial Statements as owned by
them, (ii) have valid leasehold interests in the properties leased by them, and
(iii) own or have the right to use under valid license agreements all
trademarks, trade names, copy rights, patents and other intellectual property
rights regularly utilised by them; subject in each case to no material liens,
security interests or adverse claims except as disclosed in the Financial
Statements.
3.7 LITIGATION. There are no material legal actions, arbitrations, or
administrative proceedings pending against the Corporation or its subsidiaries,
except for the matters disclosed in the SEC Reports.
3.8 TAX MATTERS. The Corporation and its subsidiaries have filed on a
timely basis all tax returns required to be filed by them and have paid their
taxes prior to delinquency, except where such filing failure or non-payment
would not have a Material Adverse Effect,
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and have made adequate accruals for tax liabilities on the Financial Statements
in accordance with generally accepted accounting principles.
3.9 ERISA COMPLIANCE. Neither the Corporation nor any of its subsidiaries
has incurred any material funding deficiency within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") or any material
liability to the Pension Benefit Guarantee Corporation in connection with any
employee benefit plan. The Corporation and its subsidiaries are in compliance in
all material respects with all applicable provisions of ERISA, and have no
obligations with respect to any multi-employer plan. No "reportable event" as
such term is defined in ERISA, which may result in any material liability, has
occurred with respect to any employee benefit or other plan maintained for
employees of the Corporation or any subsidiary.
3.10 ENVIRONMENTAL MATTERS. Except as disclosed in the SEC Reports,
neither the Corporation nor any of its subsidiaries (i) has been notified by any
governmental authority that it is, or may be, a Responsible Party with respect
to cleanup or remediation of any environmental condition or hazardous waste
site, (ii) has violated any law, regulation, order or requirement of
governmental authority with respect to Hazardous Substances, except where such
violation would not have a Material Adverse Effect, or (iii) has incurred any
material liability for violation or noncompliance with applicable Environmental
Regulations.
The term "Environmental Regulation" means any law, regulation, order or
requirement relating to protection of the environment, including with
limitation, the Clean Air Act, the Clean Water Act, the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Hazardous Materials Transportation Act and
the Toxic Substances Control Act. The term "Hazardous Substance" means any
substance defined or listed as such in any Environmental Regulation.
3.11 OTHER MATTERS. The Corporation is not now and will not be after
giving effect to the receipt of the proceeds from the sale of the Stock an
"Investment Company" within the meaning of the Investment Company Act of 1940,
nor will it be controlled by or acting on behalf of any person which is such an
investment company. The Corporation is not selling the Stock "for the purpose of
purchasing or carrying any margin stock" within the meaning of Regulation G of
the Board of Governors of the Federal Reserve System. The Corporation has not
offered the Stock to any person other than the Purchaser.
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SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Corporation that:
4.1 CORPORATE POWER AND AUTHORITY. It is validly existing and in good
standing with all requisite power and authority to enter into this Agreement and
carry out its obligations hereunder and has taken all actions necessary to
authorise it to enter into this Agreement and carry out such obligations.
4.2 INVESTMENT. It is acquiring the Stock for investment and not with the
view to, or for resale in connection with, any distribution thereof. It is an
"accredited investor" within the meaning of the Securities Act of 1933 and the
rules thereunder. It understands that the Stock has not been registered under
the Securities Act of 1933 nor qualified under any State blue sky law by reason
of specified exemptions therefrom which depend upon, among other things, the
bona fide nature of its investment intent as expressed herein.
4.3 RULE 144. It acknowledges that the Stock must be held indefinitely
unless it is subsequently registered under the Securities Act of 1933 or an
exemption from such registration is available. It has been advised or is aware
of the provisions of Rule 144 promulgated under the Securities Act of 1933.
SECTION 5
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
The obligation of the Purchaser to purchase the Stock is subject to the
fulfilment on or prior to the Closing Date of each of the following conditions:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Corporation shall be true and correct in all material respects on the
Closing Date.
5.2 PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Corporation on or prior
to the Closing Date shall have been performed or complied with in all material
respects.
5.3 OPINION OF CORPORATION'S COUNSEL. The Purchaser shall have received
from counsel to the Corporation an opinion with respect to the representations
set forth in the first sentence of Section 3.3 hereof, and on the basis of such
counsel's review of the Other Agreements and certificates of officers of the
Corporation as to factual matters, with respect to the representations set forth
in the second sentence and clause (ii) of the third sentence relating to
pre-emptive rights of Section 3.3 hereof.
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5.4 LEGAL ISSUANCE. At the time of the Closing, the issuance and purchase
of the Stock shall be legally permitted by all laws and regulations to which the
Purchaser and the Corporation are subject.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in form and
substance to the Purchaser and its counsel.
5.6 SATISFACTION OF OBLIGATIONS TO BROKER. The Corporation shall have
furnished the Purchaser with assurances satisfactory to the Purchaser that the
Corporation has satisfied its obligation to any broker entitled to compensation
in connection with the sale of the Stock.
SECTION 6
CONDITIONS TO OBLIGATIONS OF THE CORPORATION
The Corporation's obligation to sell the Stock is subject to the
fulfilment on or prior to the Closing Date of each of the following conditions:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
made by the Purchaser shall be true and correct in all material respects on the
Closing Date.
6.2 LEGAL ISSUANCE. At the time of the Closing, the issuance and purchase
of the Stock shall be legally permitted by all laws and regulations to which the
Purchaser and the Corporation are subject.
6.3 PAYMENT. The Corporation shall concurrently receive payment for the
Stock as provided in Section 2.
SECTION 7
COVENANT TO REGISTER
7.1 For purposes of this Section 7, the following definitions shall apply:
(i) The terms "register", "registered", and "registration" refer to
a registration under the Securities Act of 1933, as amended (the "Act") effected
by preparing and filing a registration statement or similar documents in
compliance with the Act or an amendment thereto, and the declaration or ordering
of effectiveness of such registration statement, document or amendment thereto.
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(ii) The term "Registrable Securities" means the Stock, the shares
issuable upon exercise of the Warrants, additional shares issued pursuant to
Section 10.1 below and any securities of the Corporation or securities of any
successor corporation issued as, or issuable upon the conversion or exercise of
any warrant, right or other security that is issued as, a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Stock and the shares underlying the Warrants.
7.2 The Corporation agrees to file promptly a registration statement on
Form S-3 in order to register the resale of the Registrable Securities and to
cause such registration statement to be declared effective within one hundred
twenty (120) days after Closing. A 2% cash payment, as liquidated damages, will
accrue for every thirty (30) days after such one hundred twenty (120) days after
Closing that the securities remain unregistered. The payment shall be pro-rated
for period of less than thirty (30) days.
7.3 If the Corporation proposes to register (including for this purpose a
registration effected by the Corporation for shareholders other than the
Purchaser) any of its stock or other securities under the Act in connection with
a public offering of such securities (other than a registration on Form X-0,
Xxxx X-0 or other limited purpose form or a registration effected pursuant to
agreements to register in effect on the date hereof) and the Registrable
Securities have not heretofore been included in a registration statement under
Subsection 7.2, which remains effective, the Corporation shall, at such time,
promptly give the Purchaser written notice of such registration. Upon the
written request of the Purchaser given within ten (10) days after receipt of
such notice by the Purchaser, the Corporation shall cause to be registered under
the Act all of the Registrable Securities that the Purchaser has requested to be
registered. However, the Corporation shall have no obligation under this
Subsection 7.3 to the extent that, with respect to a public offering
registration, any underwriter of such public offering reasonably requests that
the Registrable Securities or a portion thereof be excluded therefrom.
7.4 Whenever required under this Section 7 to effect the registration of
any Registrable Securities, the Corporation shall, as expeditiously as
reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration to become effective and, upon the request of the Purchaser, keep
such registration statement effective for so long as Purchaser desires to
dispose of the securities covered by such registration statement or, if earlier,
at such time as Purchaser could sell all of such Registrable Securities under
Rule 144(k). The registration statement (and each amendment or supplement
thereto, and each request for acceleration of effectiveness thereof) shall be
provided to (and subject to the approval of) the holders of the Registrable
Securities and their counsel at least 8 days prior to its filing or other
submission, which approval shall be promptly provided and shall not be
unreasonably withheld.
(ii) Prepare and file with the SEC such amendments and supplements
to such registration statements and the prospectus used in connection with such
registration
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statement as may be necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such registration
statement (including any amendment to increase the number of shares subject to
registration to include additional shares issued to the Purchaser pursuant to
Section 10.1 below).
(iii) Furnish to the Purchaser such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the 1933 Act, and such other documents as the Purchaser may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by Purchaser.
(iv) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by Purchaser,
provided that the Corporation shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a general consent to
service and process in any such states or jurisdictions.
(v) Notify Purchaser of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
(vi) Furnish, at the request of Purchaser, an opinion of counsel of
the Corporation, dated the effective date of the registration statement, as to
the due authorisation and issuance of the securities being registered and
compliance with securities laws by the Corporation in connection with the
authorisation and issuance thereof.
7.5 The Purchaser will furnish to the Corporation in connection with any
registration under this Section 7 such information regarding itself, the
Registrable Securities and other securities of the Corporation held by it, and
the intended method of disposition of such securities as shall be required to
effect the registration of the Registrable Securities held by Purchaser.
7.6 (i) The Corporation shall indemnify, defend and hold harmless each
holder of Registrable Securities which are included in a registration statement
pursuant to the provisions of this Section 7, any underwriter (as defined in the
Act) for such holder, and the directors, officers and controlling persons of
such holder or underwriter from and against, and shall reimburse all of them
with respect to, any and all claims, suits, demands, causes of action, losses,
damages, liabilities, costs or expenses ("Liabilities") to which any of them may
become subject under the Act or otherwise, arising from or relating to (A) any
untrue statement or alleged untrue statement of any material fact contained in
such registration statement, any prospectus contained therein or any amendment
or supplement thereto, or (B) the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements herein, in light of the circumstances in which they were made, no
misleading; PROVIDED, HOWEVER, that the Corporation shall not be liable in any
such
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case to he extent that any such Liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such person in writing
specifically for use in the preparation thereof.
(ii) Each holder of Registrable Securities included in a
registration pursuant to the provision of this Section 7 shall indemnify,
defend, and hold harmless the Corporation, its directors and officers, and shall
reimburse the Corporation its directors and officers with respect to, any and
all Liabilities to which any of them may become subject under the Act or
otherwise, arising from or relating to (A) any untrue statement or alleged
untrue statement of any material fact contained in such registration statement,
any prospectus contained therein or any amendment or supplement thereto, or (B)
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf of such
holder specifically for use in the preparation thereof.
(iii) Promptly after receipt by an indemnified party pursuant to the
provisions of Subsection 7.6(i) or 7.6(ii) of notice of the commencement of any
action involving the subject matter of the foregoing indemnity provisions, such
indemnified party shall, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of Subsection 7.6(i) or 7.6(ii),
promptly notify the indemnifying party of the commencement thereof; PROVIDED,
HOWEVER, that the failure to so notify the indemnifying party shall not relieve
it from its indemnification obligations hereunder except to the extent that the
indemnifying party is materially prejudiced by such failure . If such action is
brought against any indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party shall have the right to
participate in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party; PROVIDED, HOWEVER, if the
defendants in any action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that there may
be legal defenses different from or in addition to those available to the
indemnifying party, or if there is conflict of interest which would prevent
counsel for the indemnifying party from also representing the indemnified party,
the indemnified party shall have the right to select separate counsel to
participate in the defense of such action on behalf of such indemnified party.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party pursuant to Subsection 7.6(i) or 7.6(ii) for
any expense of counsel subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable costs of
investigation, unless (A) the indemnified party shall have employed counsel in
accordance with the provisions of the preceding sentence, or (B) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action. An
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indemnifying party shall not be responsible for amounts paid in settlement
without its consent, provided that its consent may not be unreasonably withheld.
7.7 (i) With respect to the inclusion of Registrable Securities in a
registration statement pursuant to this Section 7, all fees, costs and expenses
of and incidental to such registration, inclusion and public offering shall be
borne by the Corporation; provided, however, that any securityholders
participating in such registration shall bear their pro rata share of the
underwriting discounts and commissions, if any.
(ii) The fees, costs and expenses of registration to be borne by the
Corporation as provided in this Subsection 7.7 shall include, without
limitation, all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Corporation, and all legal fees
and disbursements and other expenses of complying with state securities or Blue
Sky laws of any jurisdiction or jurisdictions in which securities to be offered
are to be registered and qualified.
7.8 The rights to cause the Corporation to register all or any portion of
Registrable Securities pursuant to this Section 7 may be assigned by Purchaser
to a transferee or assignee of 20% or more of the Registrable Securities. Within
a reasonable time after such transfer the Purchaser shall notify the Corporation
of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned. Such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Act. Any transferee asserting registration rights hereunder shall be bound
by the provision of this Section 7.
7.9 From and after the date of this Agreement, the Corporation shall not
agree to allow the holders of any securities of the Corporation to include any
of their securities in any registration statement filed by the Corporation
pursuant to Subsection 7.2 unless the inclusion of such securities will not
reduce the amount of the Registrable Securities included therein.
7.10 Purchaser hereby agrees that, during the period of duration specified
by the Corporation and an underwriter of common stock or other securities of the
Corporation, following the effective date of a registration statement of the
Corporation filed under the Act for a primary offering of the Company's
securities, it shall not, to the extent requested by the Corporation and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Corporation held by it at any time during such
period except common stock included in such registration; provided, however,
that:
(i) all officers and directors of the Corporation and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements;
(ii) such market stand off time period shall not exceed 180 days.
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In order to enforce the foregoing covenant, the Corporation may impose stop
transfer instructions with respect to the Registrable Securities of the
Purchaser (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this Section 7.10
shall not apply to a registration relating solely to employee benefit plans on
Form S-8 or similar forms, or a registration relating solely to a Rule 145
transaction on Form S-4.
7.11 In connection with any primary offering involving an underwriting of
shares of the Corporation's common stock, the Corporation shall not be required
under this Section 7 to include any of the Purchaser's securities in such
underwriting unless it accepts the terms of the underwriting as agreed upon
between the Corporation and the underwriters selected by it, and then only in
such quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Corporation.
7.12 The Corporation may suspend the effectiveness of a registration
statement required by this Section 7.12 for a period of not more than thirty
(30) days if the Corporation is engaged in confidential negotiations or other
confidential business activities the disclosure of which (in the reasonable
opinion of outside counsel to the Corporation) would be required in such
registration statement and would not be required if such registration statement
were not filed and effective, and the Board of Directors of the Corporation
determines in good faith that such disclosure would be materially detrimental to
the Corporation and its stockholders, provided, however, that the Corporation
shall not utilize this right more than once in any twelve-month period. The
Restricted Period referenced in Section 10.1 below shall be extended for an
additional number of days equal to the number of days during which the right to
sell shares was suspended pursuant to this Section 7.11.
SECTION 8
AFFIRMATIVE COVENANTS OF THE CORPORATION
The Corporation hereby covenants that, during such time as the Purchaser
(or one of its affiliates) owns any Warrants or shares of Stock totaling in
excess of 50,000 shares, or for four years, whichever period is shorter.
8.1 REPORTS AND FINANCIAL STATEMENTS
(a) The Corporation will cause its common stock to continue to be
registered under Sections 12(b) or 12(g) of the Securities Exchange Act of 1934,
will comply in all respects with its reporting and filing obligations under said
Act, and will not take any action or file any document (whether or not permitted
by said Act or the rules thereunder) to terminate or suspend such registration
or to terminate or suspend its reporting and filing obligations under
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said Act. The Corporation will take all action necessary to continue the listing
or trading of its common stock on any national securities exchange or the
Automated Quotation System of the National Association of Securities Dealers on
which such common stock is listed or traded, and will comply in all respects
with its reporting, filing and other obligations under the bylaws or rules of
said exchange or Association.
(b) The Corporation will furnish to the Purchaser, concurrently with the
distribution or filing thereof, each annual and quarterly report to its
shareholders, its reports on Form 10K and 10Q, and each other report,
registration statement, definitive proxy statement or other document filed with
the S.E.C., and each press release or other public announcement issued by the
Corporation.
8.2 MAINTENANCE OF OFFICE. The Corporation will maintain an office or
agency in the United States at such address as may be designated in writing from
time to time to the registered holders of the Stock, where notices,
presentations and demands to or upon the Corporation in respect of the Stock may
be given or made. Unless or until another office or agency is designated by the
Corporation, such office shall be at the address set forth adjacent to the name
of the Corporation at the foot of this Agreement.
8.3 MAINTENANCE AND COMPLIANCE. The Corporation will (i) maintain its
corporate existence, rights, powers and privileges in good standing, (ii) comply
in all material respects with all laws and governmental regulations and
restrictions applicable to its business or properties, (iii) keep records and
books of account and maintain a system of internal accounting controls in
accordance with generally accepted accounting principles and in compliance with
Section 13(b)(2) of the Securities Exchange Act of 1934, and (iv) retain
independent public accountants of recognised national standing as auditors of
the Corporation's annual financial statements.
8.4 ASSIGNMENT OF RIGHTS. The rights of the Purchaser hereunder may be
assigned by the Purchaser in connection with the transfer or assignment to a
single transferee of not less than 20% of the Stock originally purchased by the
Purchaser hereunder, and such rights may be further reassigned by such
transferee to another such single transferee to another such single transferee.
Any transferee asserting rights under this Agreement shall be bound by its
provisions.
8.5 EFFECT OF COVENANTS. The covenants in Sections 8.1 and 8.3 shall not
be deemed to prohibit a merger, sale of all assets or other corporate
reorganisation if (i) the entity surviving or succeeding to the Corporation is
bound by this Agreement with respect to its securities issued in exchange for or
replacement of the Stock, or (ii) the consideration received in exchange for or
replacement of the Stock is cash.
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SECTION 9
LEGEND ON STOCK
Until the registration contemplated by Section 7 above is declared
effective with respect to the stock, each certificate representing the Stock
shall be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend required under any applicable state
securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAW OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
Upon request of a holder of Stock the Corporation shall remove the
foregoing legend or issue to such holder a new certificate therefor free of any
such legend, if the Corporation shall have received either an opinion of counsel
or a "no-action" letter of the S.E.C., in either case reasonably satisfactory in
substance to the Corporation and its counsel, to the effect that such legend is
no longer required.
SECTION 10
PURCHASE PRICE ADJUSTMENT
10.1 SUBSEQUENT SALE AT LOWER PRICE. Subject to the exclusions contained
in Section 10.5 below, if during the period (a) ending twelve months following
the Closing Date, or (b) ending nine months after the effectiveness of the
registration pursuant to Section 7, whichever is later (the "Restricted
Period"), the Corporation sells any shares of its common stock in a capital
raising transaction at a selling price lower than the purchase price per share
set forth in Section 1.2 hereof, the purchase price per share of the Stock sold
to Purchaser hereunder shall be adjusted downward to equal such lower selling
price; provided, however, that in the event Purchaser then owns less than 60% of
the Stock acquired hereunder, Purchaser shall be entitled to additional shares
only with respect to the number of shares of the Stock then owned by Purchaser .
The Corporation shall give to the Purchaser prompt written notice of any such
sale. The Restricted Period shall be extended by that number of days that the
Purchaser is required to abide by a "market stand off" pursuant to Section 7.10
above and that the Corporation suspends the effectiveness of a registration
statement pursuant to Section 7.11 above.
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10.2 ADJUSTMENT MECHANISM. If an adjustment of the purchase price is
required pursuant to this Section the Corporation shall immediately deliver to
Purchaser such number of additional shares of common stock as will cause (i) the
total number of shares of common stock delivered to Purchaser hereunder,
multiplied by (ii) the adjusted purchase price per share, to equal (iii) the
total purchase price set forth in Section 1.2 hereof; PROVIDED HOWEVER, that the
Corporation shall effect such adjustment in cash, in whole or in part, to the
extent required by the following subsection.
10.3 LIMITATION ON NUMBER OF SHARES. Purchaser shall not be required to
accept, by way of any such adjustment a number of shares of the Corporation such
that the total number of such shares held by Purchaser, which were held by it as
of the date of such adjustment or acquired by them pursuant to this Agreement or
agreements of like tenor, would exceed 4.99% of the total outstanding stock of
the Corporation. The Corporation shall effect the adjustment required by this
Section by cash refund to the extent necessary to avoid causing the aforesaid
limitation to be exceeded.
10.4 CAPITAL ADJUSTMENTS. In case of any stock split or reverse stock
split, stock dividend, reclassification of the common stock, recapitalisation,
merger or consolidation, or like capital adjustment affecting the common stock
of the Corporation, the provisions of this Section shall be applied as if such
capital adjustment event had occurred immediately prior to the Closing Date and
the original purchase price had been fairly allocated to the stock resulting
from such capital adjustment; and in other respects the provisions of this
Section shall be applied in a fair, equitable and reasonable manner so as to
give effect, as nearly as may be, to the purposes hereof.
10.5 EXCLUSIONS. Section 10.1 shall not apply to (i) a sale of fewer than
50,000 shares of common stock in any one transaction or series of related
transactions, subject to a limit of 150,000 shares pursuant to this exclusion
during the Restricted Period; (ii) sales of shares by the Corporation upon
conversion or exercise of any convertible securities, options or warrants
outstanding 30 days prior to the date hereof, if the conversion or exercise
price thereof is fixed at the date of this Agreement, or (iii) sales of shares
by the Corporation pursuant to the provisions of any shareholder-approved
employee benefit or incentive plan heretofore or hereafter adopted by the
Corporation.
10.6 DEFINITIONS. For purposes of Section 10.1 hereof, a sale of shares
shall include the sale or issuance of rights, options, warrants or convertible
securities under which the Corporation is or may become obligated to issue
shares of common stock, and the "selling price" of the common stock covered
thereby shall be the exercise or conversion price thereof plus the consideration
(if any) received by the Corporation upon such sale or issuance. In case of any
such security presently outstanding or issued within twelve months after the
Closing Date, if the conversion or exercise price is variable, the "selling
price" shall be deemed to be the lowest conversion or exercise price at which
such securities are converted or exercised or might have been converted or
exercised during the twenty-four months following the Closing Date. If shares
are issued for a consideration other than cash, the "selling price" shall be the
fair value of such consideration as determined in good faith by the Board of
Directors of the
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Corporation. The term "Stock" as used in this Agreement shall include shares
issued pursuant to this Section.
SECTION 11
NEGATIVE COVENANTS OF THE CORPORATION
11.1 Limitation on Variable Rate Transactions. For the period of one
calendar month from the Closing Date, without the prior written consent of the
Purchaser (which consent may be withheld in the Purchaser's sole discretion),
the Corporation shall not issue or sell or agree to issue or sell for cash in a
non-public offering any debt or equity securities that are convertible into,
exchangeable or exercisable for, or include the right to receive additional
shares of Common Stock either (a) at a conversion, exercise or exchange rate or
other price that is based upon and/or varies with the trading prices of or
quotations for the Corporation's common stock at any time after the initial
issuance of such convertible debt or equity securities.
11.2 Limitation on Similar Transactions. For the period of one year from
the Closing Date, without the prior written consent of the Purchaser (which
consent may be withheld in the Purchaser's sole discretion), the Corporation
shall not issue or sell or agree to issue or sell for cash in a non-public
offering any equity securities issued in a transaction which grants to an
investor the right to receive additional shares based upon future equity raising
transactions of the Corporation on terms more favorable than those granted to
the investor in the subject transaction.
SECTION 12
ARBITRATION
12. ARBITRATION.
12.1 SCOPE. Resolution of any and all dispute arising from or in
connection with this Agreement, whether based on contract, tort, common law,
equity, statute, regulation, order or otherwise ("Disputes"), including disputes
arising in connection with claims by third persons, shall be exclusively
governed by and settled in accordance with the provisions of this Section 12;
provided, that the foregoing shall not preclude equitable or other judicial
relief to enforce the provisions hereof or to preserve the status quo pending
resolution of Disputes hereunder.
12.2. BINDING ARBITRATION. The parties hereby agree to submit all
Disputes to arbitration for final and binding resolution. Either party may
initiate such arbitration by delivery of a demand therefor (the "Arbitration
Demand") to the other party. The arbitration shall be conducted in New York, New
York by a sole arbitrator selected by agreement of the
15
parties not later than 10 days after delivery of the Arbitration Demand, or,
failing such agreement, appointed pursuant to the Commercial Arbitration Rules
of the America Arbitration Association, as amended from time to time (the "AAA
Rules"). If the arbitrator becomes unable to serve, his successor(s) shall be
similarly selected or appointed.
12.3. PROCEDURE. The arbitration shall be conducted pursuant to the
Federal Arbitration Act and such procedures as the parties may agree or, in the
absence of or failing such agreement, pursuant to the AAA Rules. Notwithstanding
the foregoing, (a) each party shall have the right to audit the books and
records of the other party that are reasonably related to the Dispute; (b) each
party shall provide to the other, reasonably in advance of any hearing, copies
of all documents that a party intends to present in such hearing; (c) all
hearings shall be conducted on an expedited schedule; and (d) all proceedings
shall be confidential, except that either party may at its expense make a
stenographic record thereof.
12.4. TIMING. The arbitrator shall complete all hearings not later
than 90 days after his or her selection or appointment, and shall make a final
award not later than 30 days thereafter. The arbitrator shall apportion all
costs and expenses of the arbitration, including the arbitrator's fees and
expenses, and fees and expenses of experts ("Arbitration Costs") between the
prevailing and non-prevailing party as the arbitrator shall deem fair and
reasonable. In circumstances where a Dispute has been asserted or defended
against on grounds that the arbitrator deems manifestly unreasonable, the
arbitrator may assess all Arbitration Costs against the non-prevailing party and
may include in the award the prevailing party's attorney's fees and expenses in
connection with any and all proceedings under this Section 12. Notwithstanding
the foregoing, in no event may the arbitrator award multiple or punitive
damages.
SECTION 13
MISCELLANEOUS
13.1 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any action or proceeding
relating to this Agreement may be brought in the courts of New York sitting in
New York City, or in the United States courts located in New York, and each of
the parties irrevocably consents to the jurisdiction of such courts in any such
action or proceeding.
13.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of and be binding upon
the successors and assigns of the parties.
13.3 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including any Exhibits
hereto) and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and
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thereof. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated except by a written instrument signed by the
Corporation and the Purchaser.
13.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be mailed by internationally recognized courier
service and facsimile addressed (a) if to the Purchaser, as indicated below the
Purchaser's signature with a copy to the designated entity or at such other
address as the Purchaser shall have furnished to the Corporation in writing, or
(b) if to any other holder of any Stock at the address of such holder as shown
on the records of the Corporation, or (c) if to the Corporation, at its address
set forth below or at such other address as the Corporation shall have furnished
to the Purchaser and each such other holder in writing. All such notices or
communications shall be deemed given when delivered personally, by
internationally recognized courier or by facsimile.
13.5 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party to this Agreement (including any holder of
Stock), upon any breach or default of another party under this Agreement, shall
impair any such right, power or remedy of such party nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative.
13.6 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
13.7 TITLES AND SUBTITLES. The titles of the Sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
13.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
13.9 PUBLIC STATEMENTS. Any press release or other publicity concerning
this Agreement or the transactions contemplated by this Agreement shall be
submitted to the Purchaser for comment at least two (2) business days prior to
issuance.
13.10 FEES AND EXPENSES. The parties hereto shall pay their own costs and
expenses in connection herewith, except that the Corporation shall pay to Tail
Wind, Inc. the sum of $17,000 as and for legal expenses incurred by The Tail
Wind Fund Ltd. in connection herewith.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorised officers as of the day and year first
written above.
FAXSAV INCORPORATED
BY: /s/ Xxxxx X. Xxxxxxxx
------------------------------------
Xxxxx X. Xxxxxxxx, Vice President CEO
ADDRESS:
PURCHASER
BY: /s/ Xxxxx XxXxxxxxx /s/ Xxxxxx Xxxxxx
--------------------- ------------------
ADDRESS: XX XXXXX XXXXXXXXX
THE TAIL WIND FUND LIMITED
XXXXXXXXXX XXXXX, 000 XXXX XXX XXXXXX
PO BOX SS 5539. NASSAU, BAHAMAS.
ALL COMMUNICATIONS SHOULD BE COPIED TO:
MR XXXXX XXXXX
EASI, 0 XXXXXX XXXXXX, 0XX XXXXX
XXXXXX, XX0X 0XX, XXXXXXX
FAX: x00 000 000 0000
