1
EXHIBIT 10.21
SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT, dated as of May 2, 2000 (this
"AGREEMENT"), by and between Xxxxxxxxx.xxx, Inc., a Nevada corporation, with
principal executive offices located at 0000 Xxxxxxxxx Xxxxxx, Xxxxxxxxx Xxxxx,
Xxxxxxxxxx 00000 (the "COMPANY"), and The Shaar Fund Ltd. ("BUYER").
WHEREAS, Buyer desires to purchase from the Company, and the Company
desires to issue and sell to Buyer, upon the terms and subject to the conditions
of this Agreement, (i) 389,610 shares of the Company's Series A 6% Convertible
Preferred Stock, par value $0.001 per share (collectively, the "PREFERRED
SHARES"), and (ii) Common Stock Purchase Warrants in the form attached hereto as
Exhibit A to purchase 100,000 shares of Common Stock (as defined below)
(collectively, the "WARRANTS");
WHEREAS, upon the terms and subject to the designations, preferences and
rights set forth in the Company's Certificate of Designation of Series A 6%
Convertible Preferred Stock in the form attached hereto as Exhibit B (the
"CERTIFICATE OF DESIGNATION"), the Preferred Shares are convertible into shares
of the Company's common stock, par value $0.001 per share (the "COMMON STOCK");
and
WHEREAS, the Warrants, upon the terms and subject to the conditions
specified in the Warrants, will be exercisable for a period of five years;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties hereto, intending to be legally bound, hereby
agree as follows:
I. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS
A. TRANSACTION. Buyer hereby agrees to purchase from the Company, and the
Company has offered and hereby agrees to issue and sell to Buyer in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "SECURITIES ACT"), the Preferred
Shares and the Warrants to purchase 100,000 shares of Common Stock.
B. PURCHASE PRICE; FORM OF PAYMENT. The purchase price for the Preferred
Shares and the Warrants to be purchased by Buyer hereunder shall be $3,000,000
(the "PURCHASE PRICE"). Simultaneously with the execution of this Agreement,
Buyer shall pay the Purchase Price by wire transfer of immediately available
funds to the escrow agent (the "ESCROW AGENT") identified in those certain
Escrow Instructions of even date herewith, a copy of which is attached hereto as
Exhibit C (the "ESCROW INSTRUCTIONS"). Simultaneously with the execution of this
Agreement, the Company shall deliver one or more duly authorized, issued and
executed certificates (I/N/O Buyer or, if the Company otherwise has been
notified, I/N/O Buyer's nominee) evidencing the Preferred Shares and the
Warrants which Buyer is purchasing, to the
2
Escrow Agent or its designated depository. By executing and delivering this
Agreement, Buyer and the Company each hereby agree to observe the terms and
conditions of the Escrow Instructions, all of which are incorporated herein by
reference as if fully set forth herein.
C. METHOD OF PAYMENT. Payment into escrow of the Purchase Price shall be
made as set forth in the Escrow Instructions.
II. BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to and covenants and agrees with the Company
as follows:
A. Buyer is purchasing the Preferred Shares, the Warrants, the Common Stock
issuable upon exercise of the Warrants (the "WARRANT SHARES"), the Common Stock,
if any, issuable in payment of dividends on the Preferred Shares (the "DIVIDEND
SHARES"), and the Common Stock issuable upon conversion or redemption of the
Preferred Shares (the "CONVERSION SHARES" and, collectively with the Preferred
Shares, the Warrants, the Warrant Shares and the Dividend Shares, 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. Buyer 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 the Securities, and (iv) able to afford the loss of its
investment in the Securities.
C. Buyer 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 Buyer's compliance with, Buyer's
representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities;
D. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "COMMISSION") or any
state securities commission.
E. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer 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.
F. Neither Buyer nor its affiliates nor any person acting on its or their
behalf shall enter into, prior to the Closing or at any other time while any of
the Preferred Shares remain
-2-
3
outstanding, any put option, short position or other similar instrument or
position with respect to the Common Stock and neither Buyer nor any of its
affiliates nor any person acting on its or their behalf will use at any time
shares of Common Stock acquired pursuant to this Agreement to settle any put
option, short position or other similar instrument or position that may have
been entered into prior to the execution of this Agreement; provided, however,
that nothing in this Section II.F. shall operate to forbid Buyer or any of its
affiliates or any person acting on its or their behalf from selling, or entering
into any other transaction with respect to, the Common Stock contemporaneously
with or following such date and time as the person or persons in whose name or
names the Common Stock delivered at conversion of Preferred Shares, as provided
in the Certificate of Designation, shall be issuable shall be deemed to have
become the holder or holders of record of the Common Shares represented thereby
and all voting and other rights associated with the beneficial ownership of such
Common Shares shall have vested with such person or persons.
III. THE COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. CAPITALIZATION.
1. The authorized capital stock of the Company consists solely of: (x)
50,000,000 shares of Common Stock, of which 11,997,598 shares are issued
and outstanding on the date hereof; and (y) 5,000,000 shares of preferred
stock, of which no shares are issued and outstanding. As of April 18, 2000,
the Company had outstanding stock options to purchase 647,000 shares of
Common Stock and warrants outstanding to purchase 1,575,850 shares of
Common Stock. The exercise price for each of such outstanding options and
warrants is accurately set forth on Schedule III.A.1. hereto.
2. The Conversion Shares, the Dividend Shares and the Warrant 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 Preferred Shares and on exercise of the Warrants
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.
3. Except as disclosed on Schedule III.A.3. hereto, 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 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.
4. Schedule III.A.4. hereto lists all the subsidiaries of the Company
(the "SUBSIDIARIES"). Except as disclosed on Schedule III.A.4. hereto, the
Company does not own or control, directly or indirectly, any interest in
any other corporation,
-3-
4
partnership, limited liability company, unincorporated business
organization, association, trust or other business entity.
5. The Company has delivered to Buyer complete and correct copies of
the Certificate of Incorporation and the By-Laws of each of the Company and
the Subsidiaries, in each case as amended to the date of this Agreement.
Except as set forth on Schedule III.A.5., the Company has delivered to
Buyer true and complete copies of all minutes of the Board of Directors of
the Company (the "BOARD OF DIRECTORS") since April 1, 1997.
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 validly registered the Common Stock pursuant to the
provisions 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 2,000,000 shares of Common Stock, which is a number
sufficient for the conversion of and the payment of dividends (in lieu of cash
payments) on the 389,610 Preferred Shares and the exercise of the Warrants 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 Preferred Shares, the payment
of dividends (in lieu of cash payments) on the Preferred Shares and the exercise
of the Warrants in full. The Company understands and acknowledges the
potentially dilutive effect on the Common Stock of the issuance of the Preferred
Shares and of the Conversion Shares, the Dividend Shares and the Warrant Shares
upon the conversion of, and payment of dividends on, the Preferred Shares and
the exercise of the Warrants, respectively. The Company further acknowledges
that its obligation to issue Conversion Shares upon conversion of the Preferred
Shares and Warrant Shares upon exercise of the Warrants in accordance with this
Agreement, the Certificate of Designation and the Warrants 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. Section 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. Section 362 in respect of the conversion of
the Preferred Shares and the exercise of the Warrants. The
-4-
5
Company agrees, without cost or expense to Buyer, to take or consent to any and
all action necessary to effectuate relief under 11 U.S.C. Section 362. Schedule
III.C. hereto sets forth (i) all issuances and sales by the Company since
December 31, 1998 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 thereof, (iv) the amount 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 file, and perform its obligations under, the
Certificate of Designation and to enter into the Documents (as hereinafter
defined) and to perform all of its obligations hereunder and thereunder
(including the issuance, sale and delivery to 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 filing of the Certificate of Designation
with the Nevada Secretary of State's office, the issuance of the Preferred
Shares and the Warrants and the issuance and reservation for issuance of the
Conversion Shares, the Dividend Shares and the Warrant 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 the Certificate of Designation has been duly filed with the
Nevada Secretary of State's office 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 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 Registration
Rights Agreement of even date herewith between the Company and Buyer, a copy of
which is annexed hereto as Exhibit D (the "REGISTRATION RIGHTS AGREEMENT");
(iii) the Certificate of Designation; (iv) the Warrants; and (v) the Escrow
Instructions.
E. VALIDITY OF ISSUANCE OF THE SECURITIES. The Preferred Shares and the
Warrants as of the Closing Date, AND the Conversion Shares, the Dividend Shares
and the Warrant Shares upon their issuance in accordance with the Certificate of
Designation and the Warrants, respectively, will be 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.
F. NON-CONTRAVENTION. Except as set forth on Schedule III.F., 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
hereby and thereby, including, without limitation, the filing of the Certificate
of Designation with the Nevada Secretary of State's office, do not, and
compliance with the provisions of this Agreement and
-5-
6
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
defined in Section III.V.) 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, (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 defined in Section
III.N.) 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 Preferred Shares or the Warrants (or the Conversion
Shares, the Dividend Shares or Warrant Shares) to Buyer 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 and timely 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
November 12, 1999 (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-Q 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 defined in
Section III.M.), 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, 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.
-6-
7
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 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 perform 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 tortious 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. Except as set forth in Schedule III.L., 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 Buyer true and complete copies of the audited balance sheet of the
Company and the Subsidiaries as at December 31, 1999, 1998 and 1997,
respectively, and the related audited statements of income, changes in
stockholders' equity and cash flows for the three fiscal years ended December
31, 1999, 1998 and 1997 including the related notes and schedules thereto
(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 accrued, 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 permits, approvals, authorizations,
licenses, certificates and consents from all public and governmental authorities
which are necessary to conduct its business.
-7-
8
O. RELATED PARTY TRANSACTIONS. Except as set forth on Schedule III.O.
hereto, 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.
hereto, 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 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 Buyer set forth in Article II hereof, 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 the Preferred Shares or any shares of Common Stock
(including for this purpose any securities of the same or a similar class as the
Preferred Shares or Common Stock, or any securities convertible into or
exchangeable or exercisable for the Preferred Shares or Common Stock or any such
other securities) within the one-year period next preceding the date hereof,
except as disclosed on Schedule III.Q. hereto, 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 (including, without
limitation, any offering or sale to any person or entity of the Preferred Shares
or shares of Common Stock) which will make unavailable the exemption from
Securities Act registration being relied upon by the Company for the offer and
sale to Buyer of the Preferred Shares and the Warrants (and the Conversion
Shares, the Dividend Shares and the Warrant Shares) 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 Preferred Shares and the Warrants (and
the Conversion Shares, the Dividend Shares and the Warrant Shares) as
contemplated by this Agreement or any other agreement to which the Company is a
party.
-8-
9
R. ENVIRONMENTAL MATTERS.
Except as set forth on Schedule III.R. hereto:
1. The Company, the Subsidiaries and their respective operations
are in compliance with all applicable Environmental Laws 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 or (iii) any Release or threatened Release of
Hazardous Materials;
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 (A) underground storage
tanks, (B) asbestos-containing material or (C) equipment containing
polychlorinated biphenyls;
8. Each of the Company and the Subsidiaries has provided to 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 the Subsidiaries has been or is
expected to be required
-9-
10
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 the
RCRA 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.
Section 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 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
-10-
11
"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 (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 maintained by the Company or any of its
Subsidiaries and ERISA Affiliates 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 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 and the Code, 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 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 (based on those
assumptions used to fund such 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 with respect to any Multi-employer Plan 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 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
-11-
12
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 (including, without limitation, the offer, issue and sale by the
Company, and the purchase by the Buyer, of the Preferred Shares, the Conversion
Shares, the Warrants, the Warrant Shares and Dividend Shares) 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,
-12-
13
stock appreciation rights, 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 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 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 (A) 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 (B) 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
-13-
14
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.
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 (A) Treas. Reg. Section 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee
or successor, (C) by contract or indemnity or (D) 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 an
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, with 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
-14-
15
not limited to, those described on Schedule III.W. hereto. 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. hereto, (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 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 (i) for Triton Private Equities Fund, L.P.
and (ii) as set forth on Schedule III.Y., no Person has, and as of the Closing
(as defined in Article VII), no Person shall have, 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. DIVIDENDS. The timely payment of dividends on the Preferred Shares as
specified in the Certificate of Designation is not prohibited by the Certificate
of Incorporation or By-Laws of the Company 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 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 in such business plan.
-15-
16
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 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 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 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 Buyer is liable or responsible.
-16-
17
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS
A. RESTRICTIVE LEGEND. Buyer acknowledges and agrees that, upon issuance
pursuant to this Agreement, the Securities (including any Dividends Shares,
Conversion Shares or the Warrant Shares) shall have endorsed thereon a legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Preferred Shares, the Warrant Shares and the 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 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 Buyer as required by all applicable Laws, and shall
provide a copy thereof to Buyer promptly after such filing.
C. REPORTING STATUS. So long as 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. USE OF PROCEEDS. The Company shall use the proceeds from the sale of the
Securities (net of amounts paid by the Company for Buyer's out-of-pocket costs
and expenses, whether or not accounted for or incurred in connection with the
transactions contemplated by this Agreement (including the fees and
disbursements of Buyer's legal counsel), and finder's fees in connection with
such sale) solely for general corporate and working capital purposes.
E. 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.
F. 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 dividends on, the Preferred Shares and the
exercise in full of the Warrants.
-17-
18
G. RIGHT OF FIRST REFUSAL. If, during the period commencing on the date
hereof and ending on the earlier of (i) the third anniversary of the Closing
Date and (ii) the date all the Preferred Shares are either redeemed or converted
into Common Stock (the "RIGHT OF FIRST REFUSAL PERIOD"), the Company should
propose (the "PROPOSAL") to issue Common Stock or securities convertible into
Common Stock at a price less than the Current Market Price (as defined in the
Certificate of Designation), or debt at less than par value or having an
effective annual interest rate in excess of 9.9% (each a "RIGHT OF FIRST REFUSAL
SECURITY" and collectively, the "RIGHT OF FIRST REFUSAL SECURITIES"), in each
case on the date of issuance the Company shall be obligated to offer such Right
of First Refusal Securities to Buyer on the terms set forth in the Proposal (the
"OFFER") and Buyer shall have the right, but not the obligation, to accept such
Offer on such terms. The Company shall provide written notice to Buyer of any
Proposal, setting forth in full the terms and conditions thereof, and Buyer
shall then have 5 business days to accept or reject the Offer in writing. If the
Company issues any Right of First Refusal Securities during the Right of First
Refusal Period but fails to: (i) notify Buyer of the Proposal, (ii) offer Buyer
the opportunity to complete the transaction as set forth in the Proposal, or
(iii) enter into and consummate an agreement to issue such Right of First
Refusal Securities to Buyer on the terms and conditions set forth in the
Proposal, after Buyer has accepted the Offer, then the Company shall pay to
Buyer, as liquidated damages, an amount equal to 10% of the amount paid to the
Company for the Right of First Refusal Securities. The foregoing Right of First
Refusal is and shall be senior in right to any other right of first refusal
issued by the Company to any other Person. Notwithstanding the foregoing, the
Buyer acknowledges that the Company has granted rights similar to the rights
granted to the Buyer pursuant to this paragraph G to one other purchaser of the
Company's Series A 6% Convertible Preferred Shares and in the event that, in
addition to the Buyer, such other purchaser wishes to exercise such first
refusal rights to purchase the applicable securities, the Company shall allocate
such securities among the Buyer and such other purchaser on a pro-rata basis,
based on the number of such securities each such person or entity wishes to
purchase and the number of Series A 6% Convertible Preferred Shares then owned
by each such person or entity.
H. INFORMATION. Each of the parties hereto acknowledges and agrees that
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.
I. 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.
J. 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 a 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.
K. TRANSACTIONS WITH AFFILIATES. Neither the Company nor any of its
Subsidiaries shall, directly or indirectly, enter into any transaction or
agreement with any
-18-
19
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 defined below) and (ii) on terms no less favorable
to the Company or the applicable Subsidiary than those obtainable from a
non-affiliated 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.
L. CERTAIN RESTRICTIONS. Except as otherwise expressly provided in Section
4(e) of the Certificate of Designation, so long as any Preferred Shares are
outstanding, no dividends shall be declared or paid or set apart for payment nor
shall any other distribution be declared or made upon Junior Securities (as
defined in the Certificate of Designation), nor shall any Junior Securities 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.
V. TRANSFER AGENT INSTRUCTIONS
A. The Company undertakes and agrees that no instruction other than the
instructions referred to in this Article V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement shall be given to its
transfer agent for the Common Stock and that the Conversion Shares, the Dividend
Shares and the Warrant 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 Section V.A. shall affect in any way Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of such
Common Stock. If, at any time, Buyer provides the Company with an opinion of
counsel reasonably satisfactory to the Company that registration of the resale
by Buyer of such Common Stock 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 Common Stock and promptly instruct the
Company's transfer agent to issue one or more certificates for Common Stock
without any restrictive legends endorsed thereon.
B. Buyer shall have the right to convert the Preferred Shares by
telecopying an executed and completed Notice of Conversion (as defined in the
Certificate of Designation) to the Company. Each date on which a Notice of
Conversion is telecopied to and received by the Company in accordance with the
provisions hereof shall be deemed a Conversion Date (as defined in the
Certificate of Designation). The Company shall transmit the certificates
evidencing the shares of Common Stock issuable upon conversion of any Preferred
Shares (together with certificates evidencing any Preferred Shares not being so
converted) to Buyer via express courier, by electronic transfer or otherwise,
within five business days after receipt by the Company of the Notice of
Conversion (the "DELIVERY DATE"). Within 30 days after Buyer delivers the Notice
of Conversion to the Company, Buyer shall deliver to the Company a certificate
or certificates evidencing the Preferred Shares being converted.
-19-
20
C. Buyer shall have the right to purchase shares of Common Stock pursuant
to exercise of the Warrants in accordance with its applicable terms of the
Warrants. The last date that the Company may deliver shares of Common Stock
issuable upon any exercise of Warrants is referred to herein as the "WARRANT
DELIVERY DATE."
D. The Company understands that a delay in the issuance of the shares of
Common Stock issuable in lieu of cash dividends on the Preferred Shares or upon
the conversion of the Preferred Shares or exercise of the Warrants beyond the
applicable Dividend Payment Due Date (as defined in the Certificate of
Designation), Delivery Date or Warrant Delivery Date could result in economic
loss to Buyer. As compensation to Buyer for such loss (and not as a penalty),
the Company agrees to pay to Buyer for late issuance of Common Stock issuable in
lieu of cash dividends on the Preferred Shares or upon conversion of the
Preferred Shares or exercise of the Warrants in accordance with the following
schedule (where "NO. BUSINESS DAYS" is defined as the number of business days
beyond five days from the Dividend Payment Due Date, the Delivery Date or the
Warrant Delivery Date, as applicable):
COMPENSATION FOR EACH 10 SHARES
OF PREFERRED SHARES NOT CONVERTED
TIMELY OR 500 SHARES OF COMMON
STOCK ISSUABLE IN PAYMENT OF
DIVIDENDS OR UPON EXERCISE OF
NO. BUSINESS DAYS WARRANTS NOT ISSUED TIMELY
------------------- ---------------------------------
1 $ 25
2 50
3 75
4 100
5 125
6 150
7 175
8 200
9 225
10 250
more than 10 $250 + $100 for each Business Day
Late beyond 10 days
The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer. In addition to any other remedies which may be
available to Buyer, in the event the Company fails for any reason to deliver
such shares of Common Stock within five business days after the relevant
Dividend Payment Due Date, Delivery Date or Warrant Delivery Date, as
applicable, Buyer shall be entitled to rescind the relevant Notice of Conversion
or exercise of Warrants by delivering a notice to such effect to the Company
whereupon the Company and Buyer shall each be restored to their respective
original positions immediately prior to delivery of such Notice of Conversion on
delivery.
-20-
21
VI. DELIVERY INSTRUCTIONS
The Securities shall be delivered by the Company to the Escrow Agent
pursuant to Section I.B. hereof on a "delivery-against-payment basis" at the
Closing.
VII. CLOSING DATE
The date and time (the "CLOSING DATE") of the issuance and sale of the
Preferred Shares and the Warrants (the "CLOSING") shall be May 4, 2000 or such
other date as shall be mutually agreed upon in writing. The issuance and sale of
the Securities shall occur on the Closing Date at the offices of the Escrow
Agent. Notwithstanding anything to the contrary contained herein, the Escrow
Agent shall not be authorized to release to the Company the Purchase Price or to
Buyer the certificate(s) (I/N/O Buyer or I/N/O Buyer's nominee) evidencing the
Securities being purchased by Buyer unless the conditions set forth in Sections
VIII.C. and IX.H. hereof have been satisfied.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS
Buyer understands that the Company's obligation to sell the Securities on
the Closing Date to Buyer pursuant to this Agreement is conditioned upon:
A. Delivery by Buyer to the Escrow Agent of the Purchase Price;
B. The accuracy on the Closing Date of the representations and warranties
of Buyer contained in this Agreement as if made on the Closing Date (except for
representations and warranties which, by their express terms, speak as of and
relate to a specified date, in which case such accuracy shall be measured as of
such specified date) and the performance by Buyer in all material respects on or
before the Closing Date of all covenants and agreements of Buyer required to be
performed by it pursuant to this Agreement on or before the Closing Date; and
C. There shall not be in effect any Law or order, ruling, judgment or writ
of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
IX. CONDITIONS TO BUYER'S OBLIGATIONS
The Company understands that Buyer's obligation to purchase the Securities
on the Closing Date pursuant to this Agreement is conditioned upon:
A. Delivery by the Company to Buyer of evidence that the Certificate of
Designation has been filed and is effective;
B. Delivery by the Company to the Escrow Agent of one or more certificates
(I/N/O Buyer or I/N/O Buyer's nominee) evidencing the Securities to be purchased
by Buyer pursuant to this Agreement;
-21-
22
C. The accuracy on the Closing Date of the representations and warranties
of the Company contained in this Agreement as if made on the Closing Date
(except for representations and warranties which, by their express terms, speak
as of and relate to a specified date, in which case such accuracy shall be
measured as of such specified date) and the performance by the Company in all
respects on or before the Closing Date of all covenants and agreements of the
Company required to be performed by it pursuant to this Agreement on or before
the Closing Date, all of which shall be confirmed to Buyer by delivery of the
certificate of the chief executive officer of the Company to that effect;
D. Buyer having received an opinion of counsel for the Company, dated the
Closing Date, in form, scope and substance reasonably satisfactory to Buyer as
to the matters set forth in Annex A;
E. There not having occurred (i) any general suspension of trading in, or
limitation on prices listed for, the Common Stock on OTCBB, (ii) the declaration
of a banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly involving the United
States or any of its territories, protectorates or possessions, or (iv) in the
case of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof;
F. There not having occurred any event or development, and there being in
existence no condition, having or which reasonably and foreseeably could have a
Material Adverse Effect;
G. The Company shall have delivered to Buyer (as provided in the Escrow
Instructions) reimbursement of Buyer's out-of-pocket costs and expenses, whether
or not accounted for or incurred in connection with the transactions
contemplated by this Agreement (including the fees and disbursements of Buyer's
legal counsel), of $50,000;
H. There shall not be in effect any Law, order, ruling, judgment or writ of
any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement;
I. Delivery by the Company of irrevocable instructions to the Company's
transfer agent to reserve 2,000,000 shares of Common Stock for issuance of the
Conversion Shares and the Warrant Shares;
J. The Company shall have obtained all consents, approvals or waivers from
governmental authorities and third persons necessary for the execution, delivery
and performance of the Documents and the transactions contemplated thereby, all
without material cost to the Company; and
K. Buyer shall have received such additional documents, certificates,
payment, assignments, transfers and other delivers, as it or its legal counsel
may reasonably request and as are customary to effect a closing of the matters
herein contemplated.
-22-
23
X. TERMINATION
A. TERMINATION BY MUTUAL WRITTEN CONSENT. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned, for any reason and at
any time prior to the Closing Date, by the mutual written consent of the Company
and Buyer.
B. TERMINATION BY THE COMPANY OR BUYER. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned by action of the
Company or Buyer if (i) the Closing shall not have occurred at or prior to 5:00
p.m., New York City time, on May 5, 2000 (the "LATEST CLOSING DATE"); provided,
however, that the right to terminate this Agreement pursuant to this Section
X.B. shall not be available to any party whose failure to fulfill any of its
obligations under this Agreement has been the cause of or has resulted in the
failure of the Closing to occur at or before such time and date; provided,
further, however, that if the Closing shall not have occurred on or prior to the
Latest Closing Date, the Closing may only occur after the Latest Closing Date
with the written consent of Buyer.
C. TERMINATION BY BUYER. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
the Closing Date, if (i) the Company shall have failed to comply with any of its
covenants or agreements contained in this Agreement, (ii) there shall have been
a breach by the Company of any representation or warranty made by it in this
Agreement, (iii) there shall have occurred any event or development, or there
shall be in existence any condition, having or reasonably likely to have a
Material Adverse Effect or (iv) the Company shall have failed to satisfy the
conditions provided in Article IX hereof.
D. TERMINATION BY THE COMPANY. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) Buyer shall have failed to comply with any of
its covenants or agreements contained in this Agreement or (ii) there shall have
been a breach by Buyer of any representation or warranty made by it in this
Agreement.
E. EFFECT OF TERMINATION. In the event of the termination of this Agreement
pursuant to this Article X, this Agreement shall thereafter become void and have
no effect, and no party hereto shall have any liability or obligation to any
other party hereto in respect of this Agreement, except that the provisions of
Article XI, this Section X.E and Section X.F shall survive any such termination;
provided, however, that no party shall be released from any liability hereunder
if this Agreement is terminated and the transactions contemplated hereby
abandoned by reason of (i) willful failure of such party to perform its
obligations hereunder or (ii) any misrepresentation made by such party of any
matter set forth herein.
XI. SURVIVAL; INDEMNIFICATION
A. The representations, warranties and covenants made by each of the
Company and 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 Closing and the consummation
of the transactions contemplated hereby. In the event of a breach or violation
of any of such representations, warranties or
-23-
24
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 Closing Date.
B. The Company hereby agrees to indemnify and hold harmless Buyer, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "BUYER INDEMNITEES") from and against any and all losses,
claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "LOSSES") and agrees to reimburse Buyer Indemnitees for all out
of-pocket expenses (including the fees and expenses of legal counsel), in each
case promptly as incurred by Buyer 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 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 Company pursuant to this
Agreement or the other Documents;
3. the purchase of the Preferred Shares and the Warrants, the
conversion of the Preferred Shares and the exercise of the Warrants and the
consummation of the transactions contemplated by this Agreement and the
other Documents, the use of any of the proceeds of the Purchase Price by
the Company, 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 Documents or any claim, litigation, investigation,
proceedings or governmental action relating to any of the foregoing,
whether or not Buyer is a party thereto; or
4. resales of the Common Shares by Buyer in the manner and as
contemplated by this Agreement and the Registration Rights Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the Company, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "COMPANY 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 any of 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 Buyer
pursuant to this Agreement or the other Documents; or
-24-
25
2. any failure by 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 Buyer pursuant to this Agreement or
the other Documents.
D. Promptly after receipt by either party hereto seeking indemnification
pursuant to this Article XI (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 XI 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.
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.
-25-
26
XII. 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.
XIII. 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 certified or registered airmail at
its address specified in Article XIX. 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.
XIV. 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.
XV. COUNTERPARTS; EXECUTION
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument. A facsimile transmission of
this signed Agreement shall be legal and binding on all parties hereto.
-26-
27
XVI. HEADINGS
The headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this Agreement.
XVII. 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.
XVIII. ENTIRE AGREEMENT; REMEDIES, AMENDMENTS AND WAIVERS
This Agreement and the Documents constitute the entire agreement among the
parties pertaining to the subject matter hereof and supersede all prior
agreements, understandings, negotiations and discussions, whether oral or
written, of the parties. No supplement, modification or waiver of this Agreement
shall be binding unless executed in writing by all 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.
XIX. 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 certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:
A. if to the Company, to:
Xxxxxxxxx.xxx, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx Xxxxx, XX 00000
Attention: Xxx Xxxxxx
(000) 000-0000
(000) 000-0000 (Fax)
with a copy to:
-27-
28
Xxxxxxxxx.xxx, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xx Xxxxxxx, XX 00000
Attention: Xxx Xxxxxxxx
(000) 000-0000
(000) 000-0000 (Fax)
B. if to Buyer, to:
The Shaar Fund Ltd.
c/x Xxxxxxxx Capital Management
0 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention: Xxxxxx Xxxxxxxx
(000) 000-0000
(000) 000-0000 (Fax)
with a copy to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Block, Esq.
(000) 000-0000
(000) 000-0000 (Fax)
C. if to the Escrow Agent, to:
Cadwalader, Xxxxxxxxxx & Xxxx
000 Xxxxxx Xxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Block, Esq.
(000) 000-0000
(000) 000-0000 (Fax)
The Company, Buyer or the Escrow Agent may change the foregoing address by
notice given pursuant to this Article XIX.
XX. CONFIDENTIALITY
Each of the Company and 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,
-28-
29
without limitation, pursuant to Item 601(b)(10) of Regulation S-K under the
Securities Act and the Exchange Act).
XXI. ASSIGNMENT
This Agreement shall not be assignable by either of the parties hereto
prior to the Closing without the prior written consent of the other party, and
any attempted assignment contrary to the provisions hereby shall be null and
void; provided, however, that Buyer may assign its rights and obligations
hereunder, in whole or in part, to any Affiliate of Buyer.
[SIGNATURE PAGE FOLLOWS.]
-29-
30
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the date first above written.
XXXXXXXXX.XXX, INC.
By:
---------------------------------------
Name:
Title:
-
THE SHAAR FUND LTD.
BY: INTERCARIBBEAN SERVICES
By:
----------------------------------
Name:
Title:
31
EXHIBIT A
COMMON STOCK PURCHASE WARRANTS
32
EXHIBIT B
CERTIFICATE OF DESIGNATION
33
EXHIBIT C
ESCROW INSTRUCTIONS
34
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
35
SCHEDULE III.A.1.
EXERCISE PRICES OF OPTIONS AND WARRANTS
36
SCHEDULE III.A.3.
PREEMPTIVE, SUBSCRIPTION, "CALL," RIGHT OF FIRST REFUSAL OR SIMILAR
RIGHTS
37
SCHEDULE III.A.4.
SUBSIDIARIES
38
SCHEDULE III.A.5.
MINUTES
39
SCHEDULE III.C.
ISSUANCES AND SALES OF SECURITIES
40
SCHEDULE III.F.
CONTRAVENTION
41
SCHEDULE III.K.
LITIGATION
42
SCHEDULE III.L.
EVENTS OF DEFAULT
43
SCHEDULE III.O.
RELATED PARTY TRANSACTIONS
44
SCHEDULE III.Q.
SECURITIES LAW MATTERS
45
SCHEDULE III.R.
ENVIRONMENTAL MATTERS
46
SCHEDULE III.T.
ERISA MATTERS
47
SCHEDULE III.V.
PROPERTY
48
SCHEDULE III.W.
INTELLECTUAL PROPERTY
49
SCHEDULE III.Y.
REGISTRATION RIGHTS
50
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 Nevada, 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. The authorized capital stock of the Company consists of 50,000,000
shares of Common Stock, par value $0.001 per share (the "COMMON STOCK"), and
5,000,000 shares of Preferred Stock, par value $0.001 per share.
3. When delivered to you or upon your order against payment of the agreed
consideration therefor in accordance with the provisions of the Documents, the
Securities will be duly authorized and validly issued, fully paid and
nonassessable.
4. 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 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.
5. 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, including, without limitation, the filing of
the Certificate of Designation with the Nevada Secretary of State's office, 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 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 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
A-1
51
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.
6. When issued, the Preferred Shares and the Warrants shall 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. The Conversion Shares and Warrant Shares issuable
upon conversion or exercise, respectively, of the Preferred Shares and the
Warrants, respectively, 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.
7. Based on Buyer's representations contained in this Agreement, the offer
and sale of the Preferred Shares and the Warrants are exempt from the
registration requirements of the Securities Act.
8. 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.
9. 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.
10. Neither the Company nor any of its subsidiaries is, or will be after
the consummation of the transactions contemplated by this 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.
A-2
