SECURITIES PURCHASE AGREEMENT
Securities Purchase Agreement dated January 16, 2001 (this
"AGREEMENT") by and between The Xxxxx Group, Inc., a Delaware corporation, with
principal executive offices located at 00 Xxxxxxx Xxxxx, Xxxx Xxxxxxxx, Xxx
Xxxxxx 00000 (the "COMPANY"), and __________________ (the "BUYER").
WHEREAS, prior to the closing of the transactions contemplated
hereby the Company required an infusion of funds for working capital purposes;
WHEREAS, the Buyer made a bridge loan ("BRIDGE LOAN") to the
Company;
WHEREAS, the Buyer is willing to surrender its promissory note
("BRIDGE LOAN NOTE") evidencing its Bridge Loan in exchange for an 8%
Convertible Debenture of the Company, in the form attached hereto as EXHIBIT A
(the "DEBENTURE"), in the principal amount of ________ Dollars ($________), on
the terms and conditions set forth in this Agreement;
WHEREAS, upon the terms and subject to the conditions set
forth therein, the Debenture is convertible into shares of the Company's common
stock, par value $0.001 per share ("COMMON STOCK");
WHEREAS, the Company desires to issue and sell the Debenture
to the Buyer, on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
I. PURCHASE AND SALE OF THE DEBENTURE
Concurrently with the execution and delivery of this Agreement
by each of the Company and the Buyer, (i) the Company shall (A) execute and
deliver the Debenture in the aggregate principal amount set forth in the third
WHEREAS clause of this Agreement to the Buyer; (B) deliver an officers'
certificate dated the date of this Agreement certifying to the Buyer that the
(1) resolutions attached thereto relating to the transactions contemplated by
the Documents (as such term is hereinafter defined) have been duly approved and
adopted by the Company's board of directors, (2) Certificate of Incorporation of
the Company attached thereto is a true and complete copy and in full force and
effect on the date of this Agreement and (3) By-Laws of the Company attached
thereto is a true and complete copy and in full force and effect on the date of
this Agreement and (C) deliver an opinion of its counsel addressed to the Buyer
opining as to the matters set forth on ANNEX A attached hereto; (ii) the Buyer
shall surrender its Bridge Loan Note to the Company and (iii) the Company and
the Buyer shall execute and deliver the registration rights agreement (the
"REGISTRATION RIGHTS AGREEMENT") in the form attached hereto as EXHIBIT B
providing for the registration by the Company under the Securities Act of 1933,
as amended (the "SECURITIES ACT"), of the Common Stock, if any, issuable in
payment of interest on the Debenture (the "INTEREST SHARES") and the Common
Stock issuable upon conversion of the Debenture (the "CONVERSION SHARES" and
collectively with the Debenture and the Interest Shares, the "SECURITIES").
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II. REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warrants to and covenants and agrees
with the Company as follows:
A. It is purchasing the Securities for its own account, for investment
purposes only and not with a view towards or in connection with the public sale
or distribution thereof in violation of the Securities Act.
B. It is (i) an "accredited investor" within the meaning of Rule 501 of
Regulation D under the Securities Act, (ii) experienced in making investments of
the kind contemplated by this Agreement, (iii) capable, by reason of its
business and financial experience, of evaluating the relative merits and risks
of an investment in and (iv) able to afford the loss of its investment in the
Securities.
C. It understands that the Securities are being offered and sold by the
Company in reliance on an exemption from the registration requirements of the
Securities Act and equivalent state securities and "blue sky" laws, and that the
Company is relying upon the accuracy of, and the Buyer's compliance with, the
Buyer's representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of the Buyer to
purchase the Securities.
D. It understands that the Securities have not been approved or disapproved
by the Commission or any state securities commission.
E. This Agreement has been duly and validly authorized, executed and
delivered by it and is a valid and binding agreement of it enforceable against
it in accordance with terms of this Agreement, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and except as rights to
indemnity and contribution may be limited by federal or state securities laws or
the public policy underlying such laws.
III. THE COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Buyer that:
A. CAPITALIZATION.
1. The authorized capital stock of the Company consists of (i) One Billion
(1,000,000,000) shares of Common Stock, of which One Hundred Three Million Six
Hundred Thirty-Seven Thousand and Thirty (103,637,030) shares are issued and
outstanding as of the date hereof and (ii) Twenty-Five Million (25,000,000)
shares of preferred stock, par value $0.001 per share ("PREFERRED STOCK"), of
which Two Million Seven Hundred Fifty Thousand (2,750,000) shares are issued and
outstanding as of the date hereof. All of the aforesaid issued and outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable. As of the date hereof, the Company
has outstanding options to purchase Five Million (5,000,000) shares of Common
Stock, warrants to purchase Two Hundred Thousand
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(200,000) shares of Common Stock and no other securities or agreements entitling
the holders thereof to purchase or convert into shares of Common Stock. The
exercise price and expiry date for each such outstanding option and warrant is
accurately set forth on SCHEDULE III.A.1. As of the date hereof, the Company
does not have outstanding any options, warrants or other securities or
agreements entitling the holders thereof to purchase or convert into shares of
Preferred Stock.
2. Except as disclosed on SCHEDULE III.A.1., there are no preemptive,
----------------- subscription, "call," right of first refusal or other similar
rights to acquire any capital stock of the Company or any of its Subsidiaries
(as such term is hereinafter defined) or other voting securities of the Company
that have been issued or granted to any person and no other obligations of the
Company or any of its Subsidiaries to issue, grant, extend or enter into any
security, option, warrant, "call," right, commitment, agreement, arrangement or
undertaking with respect to any of their respective capital stock.
3. SCHEDULE III.A.3. lists all the subsidiaries of the Company (the
----------------- "SUBSIDIARIES"). Except as disclosed on SCHEDULE III.A.3., the
Company does not own or control, ----------------- directly or indirectly, any
interest in any other corporation, partnership, limited liability company,
unincorporated business organization, association, trust or other business
entity.
4. The Conversion Shares and the Interest Shares have been duly and validly
authorized and reserved for issuance by the Company, and when issued by the
Company upon conversion of, or in lieu of cash dividends on, the Debenture will
be duly and validly issued, fully paid and nonassessable and will not subject
the holder thereof to personal liability by reason of being such holder.
B. ORGANIZATION; REPORTING COMPANY STATUS.
1. Each of the Company and the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the state or
jurisdiction in which it is incorporated and is duly qualified as a foreign
corporation in all jurisdictions in which the failure so to qualify would
reasonably be expected to have a material adverse effect on the business,
properties, prospects, condition (financial or otherwise) or results of
operations of the Company and the Subsidiaries taken as a whole or on the
consummation of any of the transactions contemplated by this Agreement (a
"MATERIAL ADVERSE EFFECT").
2. The Company has registered the Common Stock pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). The Common
Stock is traded on the OTC Bulletin Board service of the National Association of
Securities Dealers, Inc. ("OTCBB") and the Company has not received any notice
regarding, and to its knowledge there is no threat of, the termination or
discontinuance of the eligibility of the Common Stock for such trading.
C. AUTHORIZATION. The Company (i) has duly and validly authorized and
reserved for issuance a sufficient number of shares of Common Stock for the
conversion of and the payment of interest (in lieu of cash payments) on the
Debenture in full and (ii) at all times from and after the date hereof shall
have a sufficient number of shares of Common Stock duly and validly authorized
and reserved for issuance to satisfy the conversion of the Debenture and the
payment of
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interest (in lieu of cash payments) on the Debenture in full. The Company
understands and acknowledges the potentially dilutive effect on the Common Stock
of the issuance of the Conversion Shares and the Interest Shares upon the
conversion of, and payment of interest on, the Debenture. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Debenture in accordance with this Agreement and the Debenture is absolute
and unconditional regardless of the dilutive effect that such issuance may have
on the ownership interests of other stockholders of the Company and
notwithstanding the commencement of any case under 11 U.S.C. ss. 101 ET SEQ.
(the "BANKRUPTCY CODE"). In the event the Company is a debtor under the
Bankruptcy Code, the Company hereby waives to the fullest extent permitted any
rights to relief it may have under 11 U.S.C. ss.362 in respect of the conversion
of the Debenture. The Company agrees, without cost or expense to the Buyer, to
take or consent to any and all action necessary to effectuate relief under 11
U.S.C. ss. 362. SCHEDULE III.C. sets forth (i) all issuances and sales by the
Company since December 31, 1999 of its capital stock and other securities
convertible into or exercisable or exchangeable for capital stock of the
Company, (ii) the amount of such securities sold, including the amount of any
underlying shares of capital stock, (iii) the purchaser(s) thereof, (iv) the
amount(s) paid therefor and (v) the material terms of all outstanding capital
stock of the Company (other than the Common Stock).
D. AUTHORITY; VALIDITY AND ENFORCEABILITY. The Company has the requisite
corporate power and authority to enter into the Documents and to perform all of
its obligations hereunder and thereunder (including, without limitation, the
issuance, sale and delivery to the Buyer of the Securities). The execution,
delivery and performance by the Company of the Documents and the consummation by
the Company of the transactions contemplated hereby and thereby (including,
without limitation, the issuance of the Debenture and the reservation for
issuance and issuance of the Conversion Shares and the Interest Shares) have
been duly and validly authorized by all necessary corporate action on the part
of the Company. Each of the Documents has been duly and validly executed and
delivered by the Company and each Document constitutes a valid and binding
obligation of the Company enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and except as rights to indemnity and contribution may be
limited by federal or state securities laws or the public policy underlying such
laws. The Securities have been duly and validly authorized for issuance by the
Company and, when executed and delivered by the Company, will be valid and
binding obligations of the Company enforceable against it in accordance with
their respective terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally. For purposes of this Agreement, the term
"DOCUMENTS" means (i) this Agreement; (ii) the Debenture and (iii) the
Registration Rights Agreement.
E. VALIDITY OF ISSUANCE OF THE SECURITIES. The Debenture has been duly and
validly issued, and the Conversion Shares and the Interest Shares, if any, upon
their issuance in accordance with the Debenture will be duly and validly issued
and outstanding, fully paid and nonassessable, and not subject to any preemptive
rights, rights of first refusal, tag-along rights, drag- along rights or other
similar rights and will not subject the holder thereof to personal liability by
reason of being such holder.
F. NON-CONTRAVENTION. The execution and delivery by the Company of the
Documents, the issuance of the Securities, and the consummation by the Company
of the other
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transactions contemplated hereby and thereby do not, and compliance with the
provisions of this Agreement and other Documents will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under, or result in
the creation of any Lien (as such term is hereinafter defined) upon any of the
properties or assets of the Company or any of its Subsidiaries under, or result
in the termination of, or require that any consent be obtained or any notice be
given with respect to (i) the Certificate of Incorporation or By-Laws of the
Company or the comparable charter or organizational documents of any of its
Subsidiaries, in each case as amended to the date of this Agreement, (ii) any
loan or credit agreement, note, bond, mortgage, indenture, lease, contract or
other agreement, instrument or permit applicable to the Company or any of its
Subsidiaries or their respective properties or assets or (iii) any Law (as such
term is hereinafter defined) applicable to, or any judgment, decree or order of
any court or government body having jurisdiction over, the Company or any of its
Subsidiaries or any of their respective properties or assets.
G. APPROVALS. No authorization, approval or consent of any court or public
or governmental authority is required to be obtained by the Company for the
issuance and sale of the Securities as contemplated by this Agreement, except
such authorizations, approvals and consents as have been obtained by the Company
prior to the date hereof.
H. COMMISSION FILINGS. The Company has properly filed with the Commission
all reports, proxy statements, forms and other documents required to be filed
with the Commission under the Securities Act and the Exchange Act since becoming
subject to such Acts (the "COMMISSION FILINGS"). As of their respective dates,
(i) the Commission Filings complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations of the Commission promulgated thereunder applicable to
such Commission Filings and (ii) none of the Commission Filings contained at the
time of its filing any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of the Company included in the
Commission Filings, as of the dates of such documents, were true and complete in
all material respects and complied with applicable accounting requirements and
the published rules and regulations of the Commission with respect thereto, were
prepared in accordance with generally accepted accounting principles in the
United States ("GAAP") (except in the case of unaudited statements permitted by
Form 10-QSB under the Exchange Act) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented the consolidated financial position of the Company and its
Subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments that in the aggregate
are not material and to any other adjustment described therein).
I. ABSENCE OF CERTAIN CHANGES. Since the Balance Sheet Date (as such term
is hereinafter defined), there has not occurred any change, event or development
in the business, financial condition, prospects or results of operations of the
Company and the Subsidiaries, except as set forth on SCHEDULE III.I.; there has
not existed any condition having or reasonably likely to have a Material Adverse
Effect and the Company and the Subsidiaries have conducted their respective
businesses only in the ordinary course.
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J. FULL DISCLOSURE. There is no fact known to the Company (other than
general economic or industry conditions known to the public generally) that has
not been fully disclosed in writing to the Buyer that (i) reasonably could be
expected to have a Material Adverse Effect or (ii) reasonably could be expected
to materially and adversely affect the ability of the Company to performing its
obligations pursuant to the Documents.
K. ABSENCE OF LITIGATION. Except as set forth on SCHEDULE III.K., there are
(i) no suits, actions or proceedings pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries, (ii) no
complaints, lawsuits, charges or other proceedings pending or, to the knowledge
of the Company, threatened in any forum by or on behalf of any present or former
employee of the Company or any of its Subsidiaries, any applicant for employment
or classes of the foregoing alleging breach of any express or implied contract
of employment, any applicable law governing employment or the termination
thereof or other discriminatory, wrongful or tortuous conduct in connection with
the employment relationship and (iii) no judgments, decrees, injunctions or
orders of any court or other governmental entity or arbitrator outstanding
against the Company or any Subsidiary.
L. ABSENCE OF EVENTS OF DEFAULT. No "EVENT OF DEFAULT" (as defined in any
agreement or instrument to which the Company is a party) and no event which,
with notice, lapse of time or both, would constitute an Event of Default (as so
defined), has occurred and is continuing.
M. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. The Company has
delivered to the Buyer true and complete copies of the (i) audited balance sheet
of the Company and the Subsidiaries as at December 31, 1999 and 1998,
respectively, and the related audited statements of income, changes in
stockholders' equity and cash flows for the two fiscal years ended December 31,
1999 including the related notes and schedules thereto and (ii) unaudited
balance sheets of the Company and the Subsidiaries and the statements of income,
changes in stockholders' equity and cash flows as at the end of and for each
fiscal quarter ended since December 31, 1999 including the related notes and
schedules thereto, all certified by the chief financial officer of the Company
(collectively, the "FINANCIAL STATEMENTS"), and all management letters, if any,
from the Company's independent auditors relating to the dates and periods
covered by the Financial Statements. Each of the Financial Statements is
complete and correct in all material respects, has been prepared in accordance
with GAAP (subject, in the case of the interim Financial Statements, to normal
year end adjustments and the absence of footnotes) and fairly presents the
financial position, results of operations and cash flows of the Company as at
the dates and for the periods indicated. For purposes hereof, the audited
balance sheet of the Company as at December 31, 1999, is hereinafter referred to
as the "BALANCE SHEET" and December 31, 1999 is hereinafter referred to as the
"BALANCE SHEET DATE". The Company has no indebtedness, obligations or
liabilities of any kind (whether acquired, absolute, contingent or otherwise,
and whether due or to become due), which was not fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto or
incurred in the ordinary course of business consistent with the Company's past
practices since the Balance Sheet Date.
N. COMPLIANCE WITH LAWS; PERMITS. Each of the Company and its Subsidiaries
is in compliance with all laws, rules, regulations, codes, ordinances and
statutes (collectively, "LAWS") applicable to it or to the conduct of its
business. The Company possesses all material
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permits, approvals, authorizations, licenses, certificates and consents from all
public and governmental authorities which are necessary to conduct its business.
O. RELATED PARTY TRANSACTIONS. Except as set forth on SCHEDULE III.O.,
neither the Company nor any of its officers, directors or "AFFILIATES" (as such
term is defined in Rule 12b-2 under the Exchange Act) nor any family member of
any officer, director or Affiliate of the Company has borrowed any moneys from
or has outstanding any indebtedness or other similar obligations to the Company
or any of the Subsidiaries. Except as set forth on SCHEDULE III.O., neither the
Company nor any of its officers, directors or Affiliates nor any family member
of any officer, director or Affiliate of the Company (i) owns any direct or
indirect interest constituting more than a one percent (1%) equity (or similar
profit participation) interest in, or controls or is a director, officer,
partner, member or employee of, or consultant or lender to or borrower from, or
has the right to participate in the profits of, any person or entity which is
(x) a competitor, supplier, customer, landlord, tenant, creditor or debtor of
the Company or any Subsidiary, (y) engaged in a business related to the business
of the Company or any Subsidiary or (z) a participant in any transaction to
which the Company or any Subsidiary is a party or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company or any
Subsidiary.
P. INSURANCE. Each of the Company and the Subsidiaries maintains property
and casualty, general liability, workers' compensation, environmental hazard,
personal injury and other similar types of insurance with financially sound and
reputable insurers that is adequate and consistent with industry standards and
the Company's historical claims experience. None of the Company or the
Subsidiaries has received notice from, and none of them has knowledge of any
threat by, any insurer (that has issued any insurance policy to the Company or
any Subsidiary) that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force.
Q. SECURITIES LAW MATTERS. Assuming the accuracy of the representations and
warranties of the Buyer contained in this Agreement, the offer and sale by the
Company of the Securities is exempt from (i) the registration and prospectus
delivery requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification provisions
of all applicable state securities and "blue sky" laws. Other than pursuant to
an effective registration statement under the Securities Act, the Company has
not issued, offered or sold any security similar to the Debenture or any shares
of Common Stock (including for this purpose any securities of the same or a
similar class as the Common Stock or any other securities convertible into or
exchangeable or exercisable for Common Stock or any such other securities)
within the one-year period next preceding the date hereof, except as disclosed
on SCHEDULE III.Q., and the Company shall not directly or indirectly take, and
shall not permit any of its directors, officers or Affiliates directly or
indirectly to take, any action which will make unavailable the exemption from
Securities Act registration being relied upon by the Company for the offer and
sale to the Buyer of the Securities as contemplated by this Agreement. No form
of general solicitation or advertising has been used or authorized by the
Company or any of its officers, directors or Affiliates in connection with the
offer or sale of the Securities as contemplated by this Agreement or any other
agreement to which the Company is a party.
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R. ENVIRONMENTAL MATTERS.
With respect to environmental matters:
1. The Company, the Subsidiaries and their respective operations are in
compliance with all applicable Environmental Laws (as such term is hereinafter
defined) and all permits (including terms, conditions and limitations therein)
issued pursuant to Environmental Laws or otherwise;
2. Each of the Company and the Subsidiaries has all permits, licenses,
waivers, exceptions, and exemptions required under all applicable Environmental
Laws necessary to operate its business;
3. None of the Company or the Subsidiaries is the subject of any
outstanding written order of or agreement with any governmental authority or
person respecting (i) Environmental Laws or permits, (ii) Remedial Action (as
such term is hereinafter defined) or (iii) any Release (as such term is
hereinafter defined) or threatened Release of Hazardous Materials (as such term
is hereinafter defined);
4. None of the Company or the Subsidiaries has received any written
communication alleging that it may be in violation of any Environmental Law or
any permit issued pursuant to any Environmental Law, or may have any liability
under any Environmental Law;
5. None of the Company or the Subsidiaries has any liability, contingent or
otherwise, in connection with any presence, treatment, storage, disposal or
Release of any Hazardous Materials whether on property owned or operated by the
Company or any Subsidiary or property of third parties, and none of the Company
or the Subsidiaries has transported, or arranged for transportation of, any
Hazardous Materials for treatment or disposal on any property;
6. There are no investigations of the business, operations, or currently or
previously owned, operated or leased property of the Company or any Subsidiary
pending or threatened which could lead to the imposition of any case or
liability pursuant to any Environmental Law;
7. There is not located at any of the properties owned or operated by the
Company or any Subsidiary any (i) underground storage tanks, (ii)
asbestos-containing material or (iii) equipment containing polychlorinated
biphenyls;
8. Each of the Company and the Subsidiaries has provided to the Buyer all
environmentally related assessments, audits, studies, reports, analyses, and
results of investigations that have been performed with respect to the currently
or previously owned, leased or operated properties or activities of the Company
and such Subsidiaries;
9. There are no liens arising under or pursuant to any Environmental Law on
any real property owned, operated, or leased by the Company or any Subsidiary,
and no action of any governmental authority has been taken or, to the knowledge
of the Company, is in process of being taken which could subject any of such
properties to such liens, and none of the Company or
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the Subsidiaries has been or is expected to be required to place any notice or
restriction relating to the presence of Hazardous Material at any real property
owned, operated, or leased by it in any deed to such property;
10. Neither the Company nor any of the Subsidiaries owns, operates, or
leases any hazardous waste generation, treatment, storage, or disposal facility,
as such terms are used pursuant to RCRA (as such term is hereinafter defined)
and related or analogous state, local or foreign law. None of the properties
owned, operated or leased by the Company, any of the Subsidiaries or any
predecessor thereof are now, or were in the past, used in any part as a dump,
landfill, or disposal site, and neither the Company, any of the Subsidiaries nor
any predecessor of any of them has filled any wetlands;
11. The purchase that is the subject of this Agreement will not require any
governmental approvals under Environmental Laws, including those that are
triggered by sales or transfers of businesses or real property, including, as
examples and without limitation, the New Jersey Industrial Site Recovery Act,
N.J. Stat. 13:1K-7 ET SEQ., and the Connecticut Transfer of -- ----
Establishments Act, Conn. Gen. Stat.ss.22a-134 ET SEQ.; -- ----
12. There is no currently existing requirement or requirement to be imposed
in the future by any Environmental Law or Environmental Permit which could
result in the incurrence of a cost that could be reasonably expected to have a
Material Adverse Effect and
13. Each of the Company and each of the Subsidiaries has disclosed to the
Buyer all other acts or conditions that could result in any costs or liabilities
under Environmental Laws.
For purposes of this Section III.R.:
"ENVIRONMENTAL LAW" means any foreign, federal, state or local statute,
regulation, ordinance, or common law as now or hereafter in effect in any way
relating to the protection of human health, safety or welfare, or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Hazardous Materials Transportation
Act, the Resource Conservation and Recovery Act ("RCRA"), the Clean Water Act,
the Clean Air Act, the Toxic Substances Control Act, the Federal Insecticide,
Fungicide, and Rodenticide Act and the Occupational Safety and Health Act, and
the regulations promulgated pursuant to any of them;
"HAZARDOUS MATERIAL" means any substance that is listed, classified or
regulated pursuant to any Environmental Law, including petroleum, gasoline, and
any other petroleum product, by-product, fraction or derivative, asbestos or
asbestos-containing material, lead-containing paint, water or plumbing,
polychlorinated biphenyls, radioactive materials and radon;
"RELEASE" means any placement, release, spill, filtration, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, migration,
or leaching to, through, or under the indoor or outdoor environment, or into,
through, under, or out of any property and
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"REMEDIAL ACTION" means any action to (x) clean up, remove, remediate,
treat or in any other way address any Hazardous Material; (y) prevent or contain
the Release of any Hazardous Material or (z) perform studies and investigations
or post-remedial monitoring and care in relation to clause (x) or (y) above.
S. LABOR MATTERS. Neither the Company nor any of the Subsidiaries is party
to any labor or collective bargaining agreement, and there are no labor or
collective bargaining agreements which pertain to any employees of the Company
or any Subsidiary. No employees of the Company or any of the Subsidiaries are
represented by any labor organization and none of such employees has made a
pending demand for recognition, and there are no representation proceedings or
petitions seeking a representation proceeding presently pending or, to the
Company's knowledge, threatened to be brought or filed, with the National Labor
Relations Board or other labor relations tribunal. There is no organizing
activity involving the Company or any Subsidiary pending or to the Company's
knowledge, threatened by any labor organization or group of employees of the
Company or any of the Subsidiaries. There are no (i) strikes, work stoppages,
slowdowns, lockouts or arbitrations or (ii) material grievances or other labor
disputes pending or, to the knowledge of the Company, threatened against or
involving the Company or any of the Subsidiaries. There are no unfair labor
practice charges, grievances or complaints pending or, to the knowledge of the
Company, threatened by or on behalf of any employee or group of employees of the
Company or any of the Subsidiaries.
T. ERISA MATTERS. All Plans (as such term is hereinafter defined)
maintained by the Company or any of its Subsidiaries and ERISA Affiliates (as
such term is hereinafter defined) are listed in SCHEDULE III.T. and copies of
all documentation relating to such Plans (including, but not limited to, copies
of written Plans, written descriptions of oral Plans, summary plan descriptions,
trust agreements, the three most recent annual returns, employee communications
and IRS (as such term is hereinafter defined) determination letters) have been
delivered to or made available for review by the Buyer. Each Plan has at all
times been maintained and administered in all material respects in accordance
with its terms and the requirements of applicable law, including ERISA (as such
term is hereinafter defined) and the Code (as such term is hereinafter defined),
and each Plan intended to qualify under Section 401(a) of the Code has at all
times since its adoption been so qualified, and each trust which forms a part of
any such Plan has at all times since its adoption been tax-exempt under Section
501(a) of the Code. The Company and each of its Subsidiaries and ERISA
Affiliates are in compliance in all material respects with all provisions of
ERISA applicable to it. No Reportable Event (as such term is hereinafter
defined) has occurred, been waived or exists as to which the Company or any of
its Subsidiaries and ERISA Affiliates was required to file a report with the
PBGC, and the present value of all liabilities under each Pension Plan (as such
term is hereinafter defined) (based on those assumptions used to fund such
Pension Plans) listed in SCHEDULE III.T. did not, as of the most recent annual
valuation date applicable thereto, exceed the value of the assets of such
Pension Plan. None of the Company, its Subsidiaries and ERISA Affiliates has
incurred, or reasonably expects to incur, any Withdrawal Liability (as such term
is hereinafter defined) with respect to any Multi-employer Plan (as such term is
hereinafter defined) that could result in a Material Adverse Effect. None of the
Company, its Subsidiaries and ERISA Affiliates has received any notification
that any Multi-employer Plan is in reorganization or has been terminated within
the meaning of Title IV of ERISA, and no Multi-employer Plan is reasonably
expected to be in reorganization or termination where such reorganization or
termination has resulted or could reasonably be expected to result in increases
to the contributions required to be made to such Multi- employer Plan or
otherwise. No direct, contingent or secondary liability has been incurred or is
expected to be incurred by the Company or any of its Subsidiaries under Title IV
of ERISA to any party with respect to any Plan, or with respect to any other
Plan presently or heretofore maintained or contributed to by any ERISA
Affiliate. Neither the Company nor any of its Subsidiaries and ERISA Affiliates
has incurred any liability for any tax imposed under Sections 4971 through 4980B
of the Code or civil liability under Section 502(i) or (l) of ERISA. No suit,
action or other litigation or any other claim which could reasonably be expected
to result in a material liability or expense to the Company or any of its
Subsidiaries or ERISA Affiliates (excluding claims for benefits incurred in the
ordinary course of plan activities) has been brought or, to the knowledge of the
Company, threatened against or with respect to any Plan and there are no facts
or circumstances known to the Company or any of its Subsidiaries or ERISA
Affiliates that could reasonably be expected to give rise to any such suit,
action or other litigation. All contributions to Plans that were required to be
made under such Plans have been made, and all benefits accrued under any
unfunded Plan have been paid, accrued or otherwise adequately reserved in
accordance with GAAP, all of which accruals under unfunded Plans are as
disclosed in SCHEDULE III.T., and the Company, its Subsidiaries and ERISA
Affiliates have each performed all material obligations required to be performed
under all Plans. The execution, delivery and performance of this Agreement and
the other Documents and the consummation of the transactions contemplated hereby
and thereby will not involve any "PROHIBITED TRANSACTION" within the meaning of
ERISA or the Code with respect to any Plan.
As used in this Agreement:
"CODE" means the Internal Revenue Code of 1986, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, or any
successor statute, together with the regulations thereunder, as the same may be
amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not incorporated)
that was, is or hereafter may become, a member of a group of which the Company
is a member and which is treated as a single employer under section 414 of the
Code.
"MULTI-EMPLOYER PLAN" means a multi-employer plan as defined in Section
4001(a)(3) of ERISA to which the Company or any ERISA Affiliate (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Code) is making or accruing an obligation to make contributions, or
has within any of the preceding six plan years made or accrued an obligation to
make contributions.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"PENSION PLAN" means any pension plan (other than a Multi-employer Plan)
subject to the provision of Title IV of ERISA or Section 412 of the Code that is
maintained for employees of the Company or any of its Subsidiaries, or any ERISA
Affiliate.
"PLAN" means any bonus, incentive compensation, deferred compensation,
pension, profit sharing, retirement, stock purchase, stock option, stock
ownership, stock appreciation rights,
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phantom stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, accident, disability, workmen's compensation
or other insurance, severance, separation or other employee benefit plan,
practice, policy or arrangement of any kind, whether written or oral, or whether
for the benefit of a single individual or more than one individual including,
but not limited to, any "EMPLOYEE BENEFIT PLAN" within the meaning of Section
3(3) of ERISA, including any Pension Plan.
"REPORTABLE EVENT" means any reportable event as defined in Section 4043(b)
of ERISA or the regulations issued thereunder with respect to a Plan.
"WITHDRAWAL LIABILITY" means liability to a Multi-employer Plan as a result
of a complete or partial withdrawal from such Multi-employer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
U. TAX MATTERS.
1. The Company has filed all material Tax Returns (as such term is
hereinafter defined) which it is required to file under applicable Laws; all
such Tax Returns are true and accurate in all material respects and have been
prepared in compliance with all applicable Laws; the Company has paid all Taxes
(as such term is hereinafter defined) due and owing by it (whether or not such
Taxes are required to be shown on a Tax Return) and has withheld and paid over
to the appropriate taxing authorities all Taxes which it is required to withhold
from amounts paid or owing to any employee, stockholder, creditor or other third
parties; and since the Balance Sheet Date, the charges, accruals and reserves
for Taxes with respect to the Company (including any provisions for deferred
income taxes) reflected on the books of the Company are adequate to cover any
Tax liabilities of the Company if its current tax year were treated as ending on
the date hereof.
2. No claim has been made by a taxing authority in a jurisdiction where the
Company does not file tax returns that the Company is or may be subject to
taxation by such jurisdiction. There are no foreign, federal, state or local tax
audits or administrative or judicial proceedings pending or being conducted with
respect to the Company; no information related to Tax matters has been requested
by any foreign, federal, state or local taxing authority; and, except as
disclosed above, no written notice indicating an intent to open an audit or
other review has been received by the Company from any foreign, federal, state
or local taxing authority. There are no material unresolved questions or claims
concerning the Company's Tax liability. The Company (i) has not executed or
entered into a closing agreement pursuant to Section 7121 of the Code or any
predecessor provision thereof or any similar provision of state, local or
foreign law or (ii) has not agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code or any similar provision of state, local
or foreign law by reason of a change in accounting method initiated by the
Company or any of its Subsidiaries or has any knowledge that the IRS has
proposed any such adjustment or change in accounting method, or has any
application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of the
Company. The Company has not been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
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3. The Company has not made an election under Section 341(f) of the Code.
The Company is not liable for the Taxes of another person that is not a
subsidiary of the Company under (i) Treas. Reg. Section 1.1502-6 (or comparable
provisions of state, local or foreign law), (ii) as a transferee or successor,
(iii) by contract or indemnity or (iv) otherwise. The Company is not a party to
any tax sharing agreement. The Company has not made any payments, is not
obligated to make payments and is not a party to any agreement that could
obligate it to make any payments that would not be deductible under Section 280G
of the Code.
As used in this Agreement:
"IRS" means the United States Internal Revenue Service.
"TAX" or "TAXES" means federal, state, county, local, foreign, or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
"TAX RETURN" means any return, information report or filing with respect to
Taxes, including any schedules attached thereto and including any amendment
thereof.
V. PROPERTY. Except as set forth on SCHEDULE III.V., each of the Company
and the Subsidiaries has good and marketable title to all of its assets and
properties material to the conduct of its business, free and clear of any liens,
pledges, security interests, claims, encumbrances or other restrictions of any
kind (collectively, "LIENS"). With respect to any assets or properties it
leases, each of the Company and its Subsidiaries holds a valid and subsisting
leasehold interest therein, free and clear of any Liens, is in compliance, in
all material respects, within the terms of the applicable lease, and enjoys
peaceful and undisturbed possession under such lease. All of the assets and
properties of the Company and its Subsidiaries that are material to the conduct
of business as presently conducted or as proposed to be conducted by it are in
good operating condition and repair. The inventory of each of the Company and
its Subsidiaries is in good and marketable condition, does not include any
material quantity of items which are obsolete, damaged or slow moving, and is
salable (or may be leased) in the normal course of business as currently
conducted by it.
W. INTELLECTUAL PROPERTY. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"INTANGIBLES") necessary for the conduct of its business as now being conducted
including, but not limited to, those described on SCHEDULE III.W. Except as set
forth on SCHEDULE III.W., the Company has all right, title and interest in all
of the Intangibles, free and clear of any and all Liens. The Company is not
infringing upon or in conflict with any right of any other person with respect
to any Intangibles. Except as disclosed on SCHEDULE III.W., (i) no claims have
been asserted by any individual, partnership, corporation, unincorporated
organization or association, limited liability company, trust or other entity
(collectively, a "PERSON") contesting the validity, enforceability, use or
ownership of
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any Intangibles, and the Company has no knowledge of any basis for such claim
and (ii) neither the Company nor the Subsidiaries has any knowledge of
infringement or misappropriation of the Intangibles by any third party.
X. CONTRACTS. All contracts, agreements, notes, instruments, franchises,
leases, licenses, commitments, arrangements or understandings, written or oral
(collectively, "CONTRACTS") which are material to the business and operations of
the Company and the Subsidiaries are in full force and effect and constitute
legal, valid and binding obligations of the Company and the Subsidiaries and, to
the best knowledge of the Company, the other parties thereto; the Company and
the Subsidiaries and, to the best knowledge of the Company, each other party
thereto, have performed in all material respects all obligations required to be
performed by them under the Contracts, and no material violation or default
exists in respect thereof, nor any event that with notice or lapse of time, or
both, would constitute a default thereof, on the part of the Company and the
Subsidiaries or, to the best knowledge of the Company, any other party thereto;
none of the Contracts is currently being renegotiated; and the validity,
effectiveness and continuation of all Contracts will not be materially adversely
affected by the transactions contemplated by this Agreement.
Y. REGISTRATION RIGHTS. Except as set forth on SCHEDULE III.Y., no Person
has --------------- any demand, "piggy-back" or other rights to cause the
Company to file any registration statement under the Securities Act relating to
any of its securities or to participate in any such registration statement.
Z. INTEREST. The timely payment of interest on the Debenture is not
prohibited by the Certificate of Incorporation or By-Laws of the Company, in
each case as amended to the date of this Agreement, or any agreement, Contract,
document or other undertaking to which the Company or any of the Subsidiaries is
a party.
AA. INVESTMENT COMPANY ACT. Neither the Company nor any of the Subsidiaries
is an "investment company" within the meaning of the Investment Company Act of
1940, as amended (the "INVESTMENT COMPANY ACT"), nor is the Company nor any of
the Subsidiaries directly or indirectly controlled by or acting on behalf of any
Person which is an "investment company" within the meaning of the Investment
Company Act.
BB. BUSINESS PLAN. Any business information of the Company previously
submitted to the Buyer in any form, including the projections contained therein,
was prepared by the senior management of the Company in good faith and is based
on assumptions that the Company believes are reasonable. The Company is not
aware of any fact or condition that could reasonably be expected to result in
the Company not achieving the results described therein.
CC. YEAR 2000 COMPLIANCE. The Company has reviewed its products, business
and operations that could be adversely affected by the risk that computer
applications used by the Company and the Subsidiaries may be unable to
recognize, and properly perform date-sensitive functions involving, dates prior
to and after December 31, 1999 (the "YEAR 2000 PROBLEM"). The Company believes
its internal information and business systems will be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000. In
addition, the Company has surveyed those vendors, suppliers and other third
parties (collectively, the "OUTSIDE PARTIES") with
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which the Company or any of the Subsidiaries do business and whose failure to
adequately address the Year 2000 Problem could reasonably be expected to
adversely affect the business and operations of the Company or any of the
Subsidiaries. Based upon the aforementioned internal review and surveys of the
Outside Parties as of the date of this Agreement, the Year 2000 Problem has not
resulted in, and is not reasonably expected to have, a Material Adverse Effect.
DD. INTERNAL CONTROLS AND PROCEDURES. The Company maintains accurate books
and records and internal accounting controls that provide reasonable assurance
that (i) all transactions to which the Company or each of the Subsidiaries is a
party or by which its properties are bound are executed with management's
authorization; (ii) the reported accountability of the Company's and the
Subsidiaries' assets is compared with existing assets at regular intervals;
(iii) access to the Company's and the Subsidiaries' assets is permitted only in
accordance with management's authorization and (iv) all transactions to which
any of the Company and the Subsidiaries is a party or by which its properties
are bound are recorded as necessary to permit preparation of the financial
statements of the Company in accordance with GAAP.
EE. PAYMENTS AND CONTRIBUTIONS. Neither the Company nor any of its
Subsidiaries nor any of their respective directors, officers or, to their
respective knowledge, other employees has (i) used any company funds for any
unlawful contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or indirect
unlawful payment of company funds to any foreign or domestic government official
or employee; (iii) violated or is in violation of any provision of the United
States Foreign Corrupt Practices Act of 1977, as amended, or (iv) made any
bribe, rebate, payoff, influence payment, kickback or other similar payment to
any person with respect to Company matters.
FF. NO MISREPRESENTATION. No representation or warranty of the Company
contained in this Agreement or any of the other Documents, any schedule, annex
or exhibit hereto or thereto or any agreement, instrument or certificate
furnished by the Company to the Buyer pursuant to this Agreement contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading.
GG. FINDER'S FEE. There is no finder's fee, brokerage commission or like
payment in connection with the transactions contemplated by this Agreement for
which the Buyer is liable or responsible.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
A. RESTRICTIVE LEGEND. Upon issuance pursuant to this Agreement, the
Securities shall have endorsed thereon a legend in substantially the following
form (and a stop- transfer order may be placed against transfer of the Interest
Shares, if any, and Conversion Shares until such legend has been removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE
SECURITIES LAWS OF ANY STATE, AND ARE BEING OFFERED AND SOLD
PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
HFNY2: #520569 v1/05466-0001 / 01/04/2001
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REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
B. FILINGS. The Company shall make all necessary Commission Filings and
"blue sky" filings required to be made by the Company in connection with the
sale of the Securities to the Buyer as required by all applicable Laws, and
shall provide a copy thereof to the Buyer promptly after such filing.
C. REPORTING STATUS. So long as the Buyer beneficially owns any of the
Securities, the Company shall timely file all reports required to be filed by it
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act.
D. LISTING. Except to the extent the Company lists its Common Stock on The
New York Stock Exchange, The American Stock Exchange or The Nasdaq Stock Market,
the Company shall use its best efforts to maintain its listing of the Common
Stock on OTCBB. If the Common Stock is delisted from OTCBB, the Company will use
its best efforts to list the Common Stock on the most liquid national securities
exchange or quotation system that the Common Stock is qualified to be listed on.
E. RESERVED CONVERSION SHARES. The Company at all times from and after the
date hereof shall have such number of shares of Common Stock duly and validly
authorized and reserved for issuance as shall be sufficient for the conversion
in full of, and the payment of interest on, the Debenture.
F. INFORMATION. The Company hereby acknowledges and agrees that the Buyer
shall not be provided with, nor be given access to, any material non-public
information relating to the Company or any of the Subsidiaries.
G. EXEMPTION FROM INVESTMENT COMPANY ACT. The Company shall conduct its
business, and shall cause the Subsidiaries to conduct their businesses, in such
a manner that neither the Company nor any Subsidiary shall become an "investment
company" within the meaning of the Investment Company Act.
H. ACCOUNTING AND RESERVES. The Company shall maintain a standard and
uniform system of accounting and shall keep proper books and records and
accounts in which full, true and correct entries shall be made of its
transactions, all in accordance with GAAP applied on consistent basis through
all periods, and shall set aside on such books for each fiscal year all such
reserves for depreciation, obsolescence, amortization, bad debts and other
purposes in connection with its operations as are required by such principles so
applied.
I. TRANSACTIONS WITH AFFILIATES. Neither the Company nor any of its
Subsidiaries shall, directly or indirectly, enter into any transaction or
agreement with any
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stockholder, officer, director or Affiliate of the Company or family member of
any officer, director or Affiliate of the Company, unless the transaction or
agreement is (i) reviewed and approved by a majority of Disinterested Directors
(as such term is hereinafter defined) and (ii) on terms no less favorable to the
Company or the applicable Subsidiary than those obtainable from a nonaffiliated
person. A "DISINTERESTED DIRECTOR" shall mean a director of the Company who is
not and has not been an officer or employee of the Company and who is not a
member of the family of, controlled by or under common control with, any such
officer or employee.
J. ISSUANCES OF CONVERTIBLE SECURITIES. So long as the Debenture remains
outstanding, the Company shall not issue any convertible preferred stock or
additional convertible debt securities, in each case, convertible into any
Common Stock at a floating, variable or otherwise adjustable or resetable
conversion price, without the prior written consent of Xxxxxx, Xxxxxx &
Xxxxxxxxx Capital Corp. ("PHD").
K. CERTAIN RESTRICTIONS. So long as the Debenture remains outstanding, no
dividends shall be declared or paid or set apart for payment nor shall any other
distribution be declared or made upon any capital stock of the Company, nor
shall any capital stock of the Company be redeemed, purchased or otherwise
acquired (other than a redemption, purchase or other acquisition of shares of
Common Stock made for purposes of an employee incentive or benefit plan
(including a stock option plan) of the Company or any Subsidiary) for any
consideration by the Company, directly or indirectly, nor shall any moneys be
paid to or made available for a sinking fund for the redemption of any shares of
any such stock.
L. TRANSFER AGENT. If requested by the Buyer or PHD following the
occurrence of an Event of Default (as such term is defined in the Debenture),
the Company shall replace the then transfer agent for the Common Stock with a
transfer agent designated by the Buyer or PHD, as the case may be.
V. TRANSFER AGENT INSTRUCTIONS
A. The Company undertakes and agrees that no instruction other than the
instructions referred to in this Article V, the Registration Rights Agreement
and customary stop transfer instructions prior to the registration and sale of
shares of Common Stock pursuant to an effective Securities Act registration
statement shall be given to its transfer agent for the Common Stock and that the
Interest Shares, if any, and Conversion Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing contained in this Article V shall affect in any way the Buyer's
obligations and agreements to comply with all applicable securities laws upon
resale of such shares of Common Stock. If, at any time, the Buyer provides the
Company with an opinion of counsel reasonably satisfactory to the Company that
registration of the resale by the Buyer of the Interest Shares, if any, and/or
Conversion Shares is not required under the Securities Act and that the removal
of restrictive legends is permitted under applicable law, the Company shall
permit the transfer of such shares and promptly instruct the Company's transfer
agent to issue one or more certificates for such shares without any restrictive
legends endorsed thereon.
B. The Buyer shall have the right to convert the Debenture by telecopying
an executed and completed Conversion Notice (as such term is defined in the
Debenture) to the
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16
Company. Each date on which a Conversion Notice is telecopied to and received by
the Company in accordance with the provisions hereof shall be deemed a
Conversion Date (as such term is defined in the Debenture). The Company shall
transmit the certificates evidencing the shares of Common Stock issuable upon
conversion of the Debenture (together with a new debenture, if any, representing
the principal amount of the Debenture not being so converted) to the Buyer via
express courier, by electronic transfer or otherwise, within three (3) business
days after receipt by the Company of the Conversion Notice (the "DELIVERY
DATE"). Within thirty (30) days after the Buyer delivers the Conversion Notice
to the Company, Buyer shall deliver to the Company the Debenture being
converted.
C. The Company understands that a delay in the issuance of the Interest
Shares, if any, and Conversion Shares beyond the applicable Delivery Date could
result in economic loss to the Buyer. As compensation to the Buyer for such loss
(and not as a penalty), the Company agrees to pay to the Buyer for any late
issuance of Common Stock in accordance with the following schedule (where "NO.
BUSINESS DAYS" is defined as the number of business days beyond three (3) days
from the applicable Delivery Date:
COMPENSATION FOR EACH 50 SHARES OF
COMMON STOCK ISSUABLE IN PAYMENT OF
INTEREST ON OR CONVERSION OF THE
NO. BUSINESS DAYS DEBENTURE NOT ISSUED TIMELY
1 $ 2.50
2 5.00
3 7.50
4 10.00
5 12.50
6 15.00
7 17.50
8 20.00
9 22.50
10 25.00
more than 10 $25.00 + $10.00 for each business day late
beyond 10 days
The Company shall pay to the Buyer the compensation described above by the
transfer of immediately available funds upon the Buyer's demand. Nothing herein
shall limit the Buyer's right to pursue actual damages for the Company's failure
to issue and deliver Common Stock. In addition to any other remedies which may
be available to the Buyer, in the event the Company fails for any reason to
deliver such shares of Common Stock within three (3) business days after the
applicable
HFNY2: #520569 v1/05466-0001 / 01/04/2001
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Delivery Date, the Buyer shall be entitled to rescind the relevant Conversion
Notice by delivering a notice to such effect to the Company whereupon the
Company and the Buyer shall each be restored to their respective original
positions immediately prior to delivery of such Conversion Notice on delivery.
VI. SURVIVAL; INDEMNIFICATION
A. The representations, warranties and covenants made by each of the
Company and the Buyer in this Agreement, the annexes, schedules and exhibits
hereto and in each instrument, agreement and certificate entered into and
delivered by them pursuant to this Agreement shall survive the consummation of
the transactions contemplated hereby. In the event of a breach or violation of
any of such representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the date of this
Agreement.
B. The Company hereby agrees to indemnify and hold harmless the Buyer and
its affiliates and their respective officers, directors, partners and members
(collectively, the "INVESTOR INDEMNITEES") from and against any and all losses,
claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "LOSSES") and agrees to reimburse the Investor Indemnitees for
all out of-pocket expenses (including the fees and expenses of legal counsel),
in each case promptly as incurred by the Investor Indemnitees and to the extent
arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of the
Company's representations or warranties contained in this Agreement or the other
Documents, or the annexes, schedules or exhibits hereto or thereto or any
instrument, agreement or certificate entered into or delivered by the Company
pursuant to this Agreement or the other Documents;
2. any failure by the Company to perform any of its covenants, agreements,
undertakings or obligations set forth in this Agreement or the other Documents
or any instrument, certificate or agreement entered into or delivered by the
Company pursuant to this Agreement or the other Documents;
3. the offer, sale and issuance of the Securities, the conversion of the
Debenture, the consummation of the transactions contemplated by this Agreement
and the other Documents, the purchase or ownership of any or all of the
Securities, the performance by the parties hereto of their respective
obligations hereunder and under the other Documents or any claim, litigation,
investigation, proceeding or governmental action relating to any of the
foregoing, whether or not the Buyer is a party thereto or
4. resales of the Securities in the manner and as contemplated by this
Agreement.
C. The Buyer hereby agrees to indemnify and hold harmless the Company, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "COMPANY
HFNY2: #520569 v1/05466-0001 / 01/04/2001
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INDEMNITEES") from and against any and all Losses, and agrees to reimburse the
Company Indemnitees for all out-of-pocket expenses (including the fees and
expenses of legal counsel), in each case promptly as incurred by the Company
Indemnitees and to the extent arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of the Buyer's
representations or warranties contained in this Agreement or the other
Documents, or the annexes, schedules or exhibits hereto or thereto or any
instrument, agreement or certificate entered into or delivered by the Buyer
pursuant to this Agreement or the other Documents or
2. any failure by the Buyer to perform in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this Agreement
or the other Documents or any instrument, certificate or agreement entered into
or delivered by the Buyer pursuant to this Agreement or the other Documents.
D. Promptly after receipt by either party hereto seeking indemnification
pursuant to this Article VI (an "INDEMNIFIED PARTY") of written notice of any
investigation, claim, proceeding or other action in respect of which
indemnification is being sought (each, a "CLAIM"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Article VI is being sought (the "INDEMNIFYING PARTY") of the commencement
thereof, but the omission so to notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party except
to the extent that the Indemnifying Party is materially prejudiced and forfeits
substantive rights or defenses by reason of such failure. In connection with any
Claim as to which both the Indemnifying Party and the Indemnified Party are
parties, the Indemnifying Party shall be entitled to assume the defense thereof.
Notwithstanding the assumption of the defense of any Claim by the Indemnifying
Party, the Indemnified Party shall have the right to employ separate legal
counsel and to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and expenses of such
separate legal counsel to the Indemnified Party if (and only if): (x) the
Indemnifying Party shall have agreed to pay such fees, out-of-pocket costs and
expenses, (y) the Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Party and the Indemnifying
Party by the same legal counsel would not be appropriate due to actual or, as
reasonably determined by legal counsel to the Indemnified Party, potentially
differing interests between such parties in the conduct of the defense of such
Claim, or if there may be legal defenses available to the Indemnified Party that
are in addition to or disparate from those available to the Indemnifying Party
or (z) the Indemnifying Party shall have failed to employ legal counsel
reasonably satisfactory to the Indemnified Party within a reasonable period of
time after notice of the commencement of such Claim. If the Indemnified Party
employs separate legal counsel in circumstances other than as described in
clauses (x), (y) or (z) above, the fees, costs and expenses of such legal
counsel shall be borne exclusively by the Indemnified Party. Except as provided
above, the Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more than one firm of
legal counsel for the Indemnified Party (together with appropriate local
counsel). The Indemnifying Party shall not, without the prior written consent of
the Indemnified Party (which consent shall not unreasonably be withheld), settle
or compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
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E. In the event one party hereunder should have a claim for indemnification
that does not involve a claim or demand being asserted by a third party, the
Indemnified Party promptly shall deliver notice of such claim to the
Indemnifying Party. If the Indemnified Party disputes the claim, such dispute
shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
VII. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York, without regard to the conflicts of law principles
of such state.
VIII. SUBMISSION TO JURISDICTION
Each of the parties hereto consents to the exclusive jurisdiction of the
federal courts whose districts encompass any part of the City of New York or the
state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and the other
Documents. Each party hereto hereby irrevocably and unconditionally waives, to
the fullest extent it may effectively do so, any defense of an inconvenient
forum or improper venue to the maintenance of such action or proceeding in any
such court and any right of jurisdiction on account of its place of residence or
domicile. Each party hereto irrevocably and unconditionally consents to the
service of any and all process in any such action or proceeding in such courts
by the mailing of copies of such process by registered or certified mail (return
receipt requested), postage prepaid, at its address specified in Article XIV.
Each party hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law.
IX. WAIVER OF JURY TRIAL
TO THE FULLEST EXTENT PERMITTED BY LAW, EACH OF THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER DOCUMENT OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT AND OTHER DOCUMENTS. EACH PARTY HERETO (I)
CERTIFIES THAT NEITHER OF THEIR RESPECTIVE REPRESENTATIVES, AGENTS OR ATTORNEYS
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT
OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (II) ACKNOWLEDGES THAT
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS HEREIN.
X. COUNTERPARTS; EXECUTION
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but both of which counterparts
shall together constitute one and
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the same instrument. A facsimile transmission of this signed Agreement shall be
legal and binding on both parties hereto.
XI. HEADINGS
The headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this Agreement.
XII. SEVERABILITY
In the event any one or more of the provisions contained in this Agreement
or in the other Documents should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein or therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions,
the economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
XIII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND
WAIVERS
This Agreement and the other Documents constitute the entire agreement
between the parties hereto pertaining to the subject matter hereof and supersede
all prior agreements, understandings, negotiations and discussions, whether oral
or written, of such parties. No supplement, modification or waiver of this
Agreement shall be binding unless executed in writing by both parties. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
XIV. NOTICES
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally, or sent by telecopier machine or by a
nationally recognized overnight courier service, and shall be deemed given when
so delivered personally, or by telecopier machine or overnight courier service
as follows:
A. if to the Company, to:
The Xxxxx Group, Inc.
00 Xxxxxxx Xxxxx
Xxxx Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Telecopier: 973.890.9877
Telephone: 000.000.0000
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with a copy to:
Xxxxxx & Jaclin, LLP
0000 Xxxxx 0 Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopier: 732.577.1188
Telephone: 000.000.0000
B. if to the Buyer, to:
x/x Xxxxxx, Xxxxxx & Xxxxxxxxx Xxxxxxx Xxxx.
Mezzanine Xxxxx
0 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx
Telecopier: 212.269.3087
Telephone: 000.000.0000
with a copy to:
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Telecopier: 212.592.1500
Telephone: 000.000.0000
The Company or the Buyer may change the foregoing address by notice given
pursuant to this Article XIV.
XV. CONFIDENTIALITY
Each of the Company and the Buyer agrees to keep confidential and not to
disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; PROVIDED, HOWEVER, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 601(b)(10)
of Regulation S-K under the Securities Act and the Exchange Act).
[REMAINDER OF PAGE INTENTIONALLY BLANK. NEXT PAGE IS SIGNATURE PAGE.]
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IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement or duly caused this Agreement to be executed and delivered on the
date first above written.
THE XXXXX GROUP, INC.
By: Name: Title:
---------------------
By:
---------------------
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EXHIBIT A
DEBENTURE
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EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
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SCHEDULE III.A.1.
EXERCISE, CONVERSION OR SUBSCRIPTION PRICES
OF OPTIONS, WARRANTS, OTHER SECURITIES AND AGREEMENTS
TYPE OF SECURITY EXERCISE, CONVERSION OR NUMBER OF SHARES OF EXPIRY
OR AGREEMENT SUBSCRIPTION PRICE ($U.S.) COMMON STOCK DATE
------------ -------------------------- ------------ ----
Option $0.05 100,000 05.01.05
Option $0.05 100,000 05.01.05
Option $0.05 100,000 05.01.05
Option $0.05 500,000 05.01.05
Option $0.05 100,000 05.01.05
Option $0.05 500,000 05.15.05
Option $0.05 25,000 05.15.05
Option $0.05 10,000 05.15.05
Option $0.05 565,000 05.15.05
Option $0.10 2,000,000 05.23.02
Option $0.50 500,000 08.07.02
Option $1.00 500,000 08.07.02
Warrant $0.047 200,000 12.08.10
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SCHEDULE III.A.3.
SUBSIDIARIES
NAME TYPE OF ENTITY
---- --------------
Xxxxxx-Xxxxxxxx Corporation New York corporation
Hardyston Distributors, Inc. Nevada corporation
CT Industries, Inc. New Jersey corporation
Universal Filtration Industries, Inc. New York corporation
Xxxxx Telecom Inc. Delaware corporation
Clifton Telecard Inc. Delaware corporation
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SCHEDULE III.C.
ISSUANCES AND SALES OF SECURITIES
SINCE DECEMBER 31, 1999
NUMBER OF PER SHARE TYPE OF
DATE SHARES OF COMMON STOCK SALES PRICE ($U.S.) OFFERING
---- ---------------------- ------------------- --------
01.24.00 2,000,000 $0.03 Reg. D (CO)
01.26.00 1,666,666 $0.03 Reg. D (CO)
01.28.00 4,600,000 $0.03 Reg. D (CO)
03.01.00 300,000 $0.0585 Section 4(2) (NJ)
03.17.00 209,091 $0.0550 Section 4(2) (NJ)
03.17.00 209,091 $0.0550 Section 4(2) (NJ)
03.21.00 1,125,000 $0.0550 Section 4(2) (NJ)
03.24.00 500,000 $0.0500 Section 4(2) (NJ)
05.11.00 2,250,000 $0.0763 Form S-8 (KY)
05.24.00 4,615,385 $0.0325 Form S-8 (NV)
06.06.00 1,000,000 $0.0763 Form S-8 (FL)
06.13.00 1,000,000 $0.0763 Form S-8 (CA)
06.13.00 200,000 $0.0763 Form S-8 (NJ)
06.19.00 2,500,000 $0.0400 Form S-8 (CA)
07.24.00 400,000 $0.0500 Section 4(2) (NJ)
08.04.00 8,750,000 $0.0428 Form S-8 (NV)
08.04.00 8,750,000 $0.0428 Form S-8 (NV)
09.05.00 1,000,000 $0.1020 Section 4(2) (OH)
09.18.00 600,000 $0.1000 Section 4(2) (NY)
09.18.00 1,000,000 $0.0810 Section 4(2) (NJ)
09.18.00 1,000,000 $0.0810 Section 4(2) (NJ)
09.21.00 500,000 $0.1000 Form S-8 (CA)
12.08.00 2,125,000 N/A Reg. D. (NY)
12.18.00 600,000 N/A Reg. D. (NY)
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SCHEDULE III.I.
ABSENCE OF CERTAIN CHANGES
The Company incorporated the following two (2) wholly-owned subsidiaries:
Xxxxxxx Telecard Inc., a Delaware corporation and wholesale distributor of
prepaid phone cards, and Xxxxx Telecom Inc., a Delaware corporation which
provides telecommunication services from telecommunications carriers to the
telecommunications industry.
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SCHEDULE III.K.
LITIGATION
Set forth below is a summary of outstanding litigation as of
December 5, 2000:
Xxxx & Xxxxx Solicitors x. Xxxxx Industries, Inc. - Superior Court of New
Jersey, Law Division, Passaic County - Index No. L1598-98. This is a case
brought by an English partnership against the Company. Xxxx & Xxxxx Solicitors
is requesting the sum of $46,666.23 plus interest accruing from 1997 for work,
labor and services rendered. This case should have been commenced in England
against one of the Company's subsidiary or affiliate corporations and perhaps
against certain management of the Company individually. To date, there has been
a complaint served and an answer filed. The Company has a pending motion to
extend discovery. The Company plans to contest the case vigorously. To date, the
Company cannot estimate the likelihood of success of the defense because
discovery has not yet begun.
The Company is not currently aware of any other pending, past or present
litigation that would be considered to have a material effect on the Company.
The Company considers that any litigation under ten percent (10%) of its net
assets is not material. There are no known bankruptcy or receivership issues
outstanding and the Company has no known securities law violations.
Additionally, the Company has no known legal proceedings in which certain
corporate insiders or affiliates of the Company are in a position that is
adverse to the Company.
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SCHEDULE III.O.
RELATED PARTY TRANSACTIONS
As of September 30, 2000, loans in the aggregate amount of $75,732 were
outstanding to officers of the Company.
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SCHEDULE III.Q.
SECURITIES LAW MATTERS
The offerings not registered under the Securities Act set forth on Schedule
III.C. hereto are hereby incorporated herein by reference. The information set
forth on Schedule III.A.1. hereto is hereby incorporated herein by reference.
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SCHEDULE III.T.
ERISA MATTERS
As more fully described in the Commission Filings, the Company
currently has two stock option plans.
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SCHEDULE III.V.
PROPERTY
On July 11, 2000, Xxxxxx-Xxxxxxxx Corporation completed a security
agreement with Merchant Financial Corp. Under the terms of the agreement, the
accounts receivable and inventory bought and sold under Xxxxxx-Xxxxxxxx
Corporation is secured against an existing credit line with Merchant Financial
Corporation.
On August 10, 2000, Xxxxx Telecom Inc. completed a contract for the
sale of goods with Chasin of Long Beach, Inc., d/b/a Colbie Pacific Capital. As
part of the agreement, Xxxxx Telecom Inc. granted a purchase money security
interest to Colbie Pacific Capital for the Magellan Telephone Switching
equipment described as: CDR format DBF, fraud detection, software version 4.33,
two M4000 LNX driven NT based platforms (64 ports each), redundant CPUs and
power supplies, and all proceeds and products of, and additions and accessions
to, any and all of the foregoing.
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XXXXXXXX XXX.X.
INTELLECTUAL PROPERTY
Easy Test(R) Registration Number 942648
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SCHEDULE III.Y.
REGISTRATION RIGHTS
The Company is a party to registration rights agreements dated either
December 8, 2000 or December 18, 2000 covering 2,725,000 shares of Common Stock
in the aggregate.
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ANNEX A
FORM OF OPINION
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware, is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions where the Company owns or leases properties or conducts business,
except for jurisdictions in which the failure to so qualify would not have a
Material Adverse Effect, and has all requisite corporate power and authority to
own its properties and conduct its business as described in the Commission
Filings.
2. Each Subsidiary has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the state of its
incorporation, is duly qualified to do business as a foreign corporation and is
in good standing in all jurisdictions where such Subsidiary owns or leases
properties or conducts business, except for jurisdictions in which the failure
to so qualify would not have a Material Adverse Effect, and has all requisite
corporate power and authority to own its properties and conduct its business as
described in the Commission Filings.
3. The authorized capital stock of the Company consists of (i)
1,000,000,000 shares of Common Stock and (ii) 25,000,000 shares of Preferred
Stock.
4. When delivered to you or upon your order against payment of the
agreed consideration therefor in accordance with the provisions of the
Documents, the Debenture will be duly authorized and validly issued, fully paid
and nonassessable, and free and clear of all encumbrances and restrictions,
except for restrictions on transfer imposed by applicable securities laws.
5. The Company has the requisite corporate power and authority to enter
into the Documents and to sell and deliver the Securities as described in the
Documents; each of the Documents has been duly and validly authorized by all
necessary corporate action by the Company; each of the Documents has been duly
and validly executed and delivered by and on behalf of the Company, and is a
valid and binding agreement of the Company, enforceable in accordance with its
terms, except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws affecting creditors rights generally.
6. Except as set forth on the Schedules to the Securities Purchase
Agreement, the execution and delivery by the Company of the Documents, the
issuance of the Securities and the consummation by the Company of the other
transactions contemplated thereby do not, and compliance with the provisions of
the Documents will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or loss of
a material benefit under, or result in the creation of any Lien upon any of the
properties or assets of the Company or any of its Subsidiaries under, or result
in the termination of, or require that any consent be obtained or any notice be
given with respect to, (i) the Certificate of Incorporation or By-Laws of the
Company, in each case as amended to the date of the Securities Purchase
Agreement, or the comparable charter or organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, contract or other agreement, instrument or permit to the best
of our
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knowledge known to us and applicable to the Company or any of its Subsidiaries
or their respective properties or assets or (iii) any Law applicable to, or, to
the best of our knowledge, any judgment, decree or order of any court or
government body having jurisdiction over, the Company or any of its Subsidiaries
or any of their respective properties or assets. To the best of our knowledge,
no consent, approval, authorization, order, registration, filing, qualification,
license or permit of or with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of its properties or
assets is required for the execution, delivery and performance by the Company of
the Documents or the consummation by the Company of the transactions
contemplated thereby.
7. Based on the representations of the Buyer contained in the
Securities Purchase Agreement, the offer and sale of the Securities are exempt
from the registration requirements of the Securities Act.
8. The shares of Common Stock underlying the Debenture upon issuance
will be duly authorized, validly issued, fully paid and nonassessable, and free
and clear of all encumbrances and restrictions, except for restrictions on
transfer imposed by applicable securities laws.
9. To the best of our knowledge, other than as described in the
Commission Filings, there are no outstanding options, warrants or other
securities exercisable or convertible into Common Stock of the Company.
10. There is no action, suit, claim, inquiry or investigation pending
or, to the best of our knowledge, threatened by or before any court or public or
governmental authority which, if determined adversely to the Company, would have
a Material Adverse Effect.
11. Neither the Company nor any of its Subsidiaries is, or will be
after the consummation of the transactions contemplated by the Securities
Purchase Agreement and the other Documents and the use of the proceeds from the
sale of the Securities, an "investment company" or an entity "controlled" by an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
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