Exhibit 10.3
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
BETWEEN
SANJAY HARYAMA
AND
THE PURCHASER(S) LISTED ON
SCHEDULE 1 HERETO
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APRIL 21, 2003
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TABLE OF CONTENTS
ARTICLE I CERTAIN DEFINITIONS...........................................................................1
1.1 CERTAIN DEFINITIONS.............................................................................1
ARTICLE II PURCHASE AND SALE OF CONVERTIBLE DEBENTURES...................................................5
2.1 PURCHASE AND SALE; PURCHASE PRICE...............................................................5
2.2 EXECUTION AND DELIVERY OF DOCUMENTS; THE CLOSING................................................5
2.3 THE POST-CLOSING................................................................................6
ARTICLE III REPRESENTATIONS AND WARRANTIES...............................................................7
3.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.......................................7
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................................................10
ARTICLE IV OTHER AGREEMENTS OF THE PARTIES..............................................................12
4.1 MANNER OF OFFERING.............................................................................12
4.2 FURNISHING OF INFORMATION......................................................................12
4.3 NOTICE OF CERTAIN EVENTS.......................................................................12
4.4 COPIES AND USE OF DISCLOSURE DOCUMENTS AND NON-PUBLIC FILINGS..................................12
4.5 MODIFICATION TO DISCLOSURE DOCUMENTS...........................................................12
4.6 BLUE SKY LAWS..................................................................................13
4.7 INTEGRATION....................................................................................13
4.8 FURNISHING OF RULE 144(C) MATERIALS............................................................13
4.9 SOLICITATION MATERIALS.........................................................................13
4.10 SUBSEQUENT FINANCIAL STATEMENTS................................................................13
4.11 PROHIBITION ON CERTAIN ACTIONS.................................................................13
4.12 LISTING OF COMMON STOCK........................................................................14
4.13 ESCROW.........................................................................................14
4.14 CONVERSION PROCEDURES; MAINTENANCE OF ESCROW SHARES............................................14
4.15 ATTORNEY-IN-FACT...............................................................................14
4.16 INDEMNIFICATION................................................................................14
4.17 EXCLUSIVITY....................................................................................16
4.18 PURCHASER'S OWNERSHIP OF COMMON STOCK..........................................................16
4.19 PURCHASER'S RIGHTS IF TRADING IN COMMON STOCK IS SUSPENDED.....................................17
4.20 NO VIOLATION OF APPLICABLE LAW.................................................................18
4.21 REDEMPTION RESTRICTIONS........................................................................18
4.22 NO OTHER REGISTRATION RIGHTS...................................................................18
4.23 MERGER OR CONSOLIDATION........................................................................18
4.24 REGISTRATION OF ESCROW SHARES..................................................................19
4.25 LIQUIDATED DAMAGES.............................................................................20
4.26 SHORT SALES....................................................................................20
4.27 FEES...........................................................................................21
4.28 ADDITIONAL FEES................................................................................21
4.29 CHANGES TO FEDERAL AND STATE SECURITIES LAWS...................................................21
4.30 MERGER AGREEMENT...............................................................................21
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ARTICLE V TERMINATION..................................................................................22
5.1 TERMINATION BY THE COMPANY OR THE PURCHASER....................................................22
5.2. REMEDIES.......................................................................................23
ARTICLE VI LEGAL FEES AND DEFAULT INTEREST RATE.........................................................23
ARTICLE VII MISCELLANEOUS................................................................................. 23
7.1 FEES AND EXPENSES..............................................................................23
7.2 ENTIRE AGREEMENT; AMENDMENTS...................................................................24
7.3 NOTICES........................................................................................24
7.4 AMENDMENTS; WAIVERS............................................................................25
7.5 HEADINGS.......................................................................................25
7.6 SUCCESSORS AND ASSIGNS.........................................................................25
7.7 NO THIRD PARTY BENEFICIARIES...................................................................25
7.8 GOVERNING LAW; VENUE; SERVICE OF PROCESS.......................................................25
7.9 SURVIVAL.......................................................................................26
7.10 COUNTERPART SIGNATURES.........................................................................26
7.11 PUBLICITY......................................................................................26
7.12 SEVERABILITY...................................................................................26
7.13 LIMITATION OF REMEDIES.........................................................................26
7.14 OMNIBUS PROVISION..............................................................................26
LIST OF SCHEDULES:
Schedule 1 Purchaser(s)
Schedule 3.1(a) Subsidiaries
Schedule 3.1(c) Capitalization and Registration Rights
Schedule 3.1(d) Equity and Equity Equivalent Securities
Schedule 3.1(e) Conflicts
Schedule 3.1(f) Consents and Approvals
Schedule 3.1(g) Litigation
Schedule 3.1(h) Defaults and Violations
Schedule 5.1 Form 8-K Disclosure Obligations
LIST OF EXHIBITS:
Exhibit A Convertible Debenture
Exhibit B Agreement and Plan of Merger
Exhibit C1 Articles of Merger
Exhibit C2 Certificate of Merger
Exhibit D Conversion Procedures
Exhibit E Escrow Agreement
Exhibit F Power of Attorney
Exhibit G Legal Opinion
Exhibit H Rule 504 Legal Opinion
Exhibit I Officer's Certificate
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THIS CONVERTIBLE DEBENTURE PURCHASE AGREEMENT ("AGREEMENT") is made and
entered into as of April 21, 2003, between SANJAY HARYAMA, a corporation
organized and existing under the laws of the State of Wyoming (the "COMPANY"),
and the purchaser(s) listed on SCHEDULE 1 hereto (the "PURCHASER").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to acquire from the Company the Company's $1,000,000, 1%
Convertible Debenture, due April 20, 2008, at the price of One Million Dollars
($1,000,000) (the "DEBENTURE CONSIDERATION") in the form of EXHIBIT A annexed
hereto and made a part hereof (the "DEBENTURES").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and each Purchaser agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"AFFILIATE" means, with respect to any Person, any Person that,
directly or indirectly, controls, is controlled by or is under common control
with such Person. For the purposes of this definition, "CONTROL" (including,
with correlative meanings, the terms "CONTROLLED BY" and "UNDER COMMON CONTROL
WITH") shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of such Person, whether
through the ownership of voting securities or by contract or otherwise.
"AGREEMENT" shall have the meaning set forth in the introductory
paragraph of this Agreement.
"ATTORNEY-IN-FACT" shall have the meaning set forth in SECTION
2.3(B)(II) hereof.
"BUSINESS DAY" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in the State of
New York are authorized or required by law or other government actions to close.
"CLOSING" shall have the meaning set forth in SECTION 2.2(A).
"CLOSING DATE" shall have the meaning set forth in SECTION 2.2(A).
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means shares now or hereafter authorized of the class of
common stock, par value $0.001 per share, of the Company and stock of any other
class into which such shares may hereafter have been reclassified or changed.
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"COMPANY" shall have the meaning set forth in the introductory
paragraph.
"CONTROL PERSON" shall have the meaning set forth in SECTION 4.16(A)
hereof.
"CONVERSION DATE" shall have the meaning set forth in the Debentures.
"DEBENTURES" shall have the meaning set forth in the recital.
"DEFAULT" means any event or condition which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"DISCLOSURE DOCUMENTS" means (a) all documents and materials provided
to the Purchaser and/or its representatives in connection with the Company and
this offering, including, but not limited to, the Company's unaudited balance
sheet as at March 31, 2003 and profit and loss statement for the year ended
March 31, 2003 and (b) the Schedules required to be to furnished to the
Purchaser by or on behalf of the Company pursuant to SECTION 3.1 hereof.
"EFFECTIVE DATE" shall mean the date on which the articles of merger
and certificate of merger (collectively, the "Articles of Merger"), annexed as
EXHIBIT C1 AND EXHIBIT C2 hereto, are filed with the Secretary of State of the
States of Wyoming and Delaware, respectively, to effect the merger of the
Company with and into HY-TECH TECHNOLOGY GROUP INC., a Delaware corporation
("HYTT"), (the "Merger") pursuant to the Agreement and Plan of Merger annexed as
EXHIBIT B hereto.
"ESCROW AGENT" means Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP, or its
successors or assigns, 000 Xxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, XX 00000; Tel:
000-000-0000; Fax: 000-000-0000.
"ESCROW AGREEMENT" shall have the meaning set forth in SECTION 4.13
hereof.
"ESCROW SHARES" means the certificates representing Ten Million
(10,000,000) shares of duly issued Common Stock, without restriction and freely
tradable upon resale pursuant to Rule 504 of Regulation D of the Securities Act,
in the share denominations specified by the Purchaser, registered in the name of
the Purchaser and/or its assigns to be held in escrow pursuant to this Agreement
and the Escrow Agreement. The Escrow Shares are the shares into which the
Debentures are convertible in accordance with the terms hereof and the
Debentures. For purposes of this Agreement, such conversion shares may also be
referred to as the "UNDERLYING SHARES."
"EVENT OF DEFAULT" shall have the meaning set forth in SECTION 5.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXECUTION DATE" means the date of this Agreement first written above.
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"FULL CONVERSION SHARES" shall have the meaning set forth in SECTION
4.14 hereof.
"INDEMNIFIED PARTY" shall have the meaning set forth in SECTION 4.16(B)
hereof.
"INDEMNIFYING PARTY" shall have the meaning set forth in SECTION
4.16(B) hereof.
"KGL" means Xxxxxx Gottbetter & Xxxxxxxx, LLP, or its successors or
assigns.
"LIMITATION ON CONVERSION" shall have the meaning set forth in SECTION
4.18 hereof.
"LOSSES" shall have the meaning set forth in SECTION 4.16(A) hereof.
"MATERIAL" shall mean having a financial consequence in excess of
$100,000.
"MATERIAL ADVERSE EFFECT" shall have the meaning set forth in SECTION
3.1(A).
"MERGER AGREEMENT" means the Agreement and Plan of Merger between HYTT
and the Company, annexed as EXHIBIT B hereto.
"NASD" means the National Association of Securities Dealers, Inc.
"NASDAQ" shall mean the Nasdaq Stock Market, Inc.(R)
"NON-PUBLIC FILINGS" shall have the meaning set forth in SECTION 4.2
hereof.
"NOTICE OF CONVERSION" shall have the meaning set forth in EXHIBIT D
annexed hereto.
"ORIGINAL ISSUANCE DATE," shall have the meaning set forth in the
Debentures.
"OTCBB" shall mean the NASD over-the counter Bulletin Board(R) or
similar organization or agency succeeding to its functions.
"PER DEBENTURE CONSIDERATION" shall have the meaning set forth in the
recital.
"PER SHARE MARKET VALUE" of the Common Stock means on any particular
date (a) the last sale price of shares of Common Stock on such date or, if no
such sale takes place on such date, the last sale price on the most recent prior
date, in each case as officially reported on the principal national securities
exchange on which the Common Stock is then listed or admitted to trading, or (b)
if the Common Stock is not then listed or admitted to trading on any national
securities exchange, the closing bid price per share as reported by Nasdaq, or
(c) if the Common Stock is not then listed or admitted to trading on the Nasdaq,
the closing bid price per share of the Common Stock on such date as reported on
the OTCBB or if there is no such price on such date, then the last bid price on
the date nearest preceding such date, or (d) if the Common Stock is not quoted
on the OTCBB, the closing bid price for a share of Common Stock on such date in
the over-the-counter market as reported by the Pinksheets LLC (or similar
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organization or agency succeeding to its functions of reporting prices) or if
there is no such price on such date, then the last bid price on the date nearest
preceding such date, or (e) if the Common Stock is no longer publicly traded,
the fair market value of a share of the Common Stock as determined by an
Appraiser (as defined in Section 4(c)(iv) of the Debentures) selected in good
faith by the holders of a majority of the Debentures; PROVIDED, HOWEVER, that
the Company, after receipt of the determination by such Appraiser, shall have
the right to select an additional Appraiser, in which case, the fair market
value shall be equal to the average of the determinations by each such
Appraiser.
"PERSON" means an individual or a corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind.
"POST-CLOSING" shall have the meaning set forth in SECTION 2.3(A).
"POST-CLOSING DATE" shall have the meaning set forth in SECTION 2.3(A).
"POWER OF ATTORNEY" means the power of attorney in the form of EXHIBIT
F annexed hereto.
"PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.
"PURCHASE PRICE" shall have the meaning set forth in SECTION 2.1.
"PURCHASER" shall have the meaning set forth in the introductory
paragraph.
"REGISTRABLE SECURITIES" means the Underlying Shares and the Escrow
Shares entitled to registration pursuant to SECTION 4.24 and SECTION 4.29.
"REPORTING ISSUER" means a company that is subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act.
"REQUIRED APPROVALS" shall have the meaning set forth in SECTION
3.1(F).
"SECURITIES" means the Debentures, the Underlying Shares and the Escrow
Shares.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHORT SALE" shall have the meaning set forth in SECTION 4.26 hereof.
"SUBSIDIARIES" shall have the meaning set forth in SECTION 3.1(A).
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"TRADING DAY" means (a) a day on which the Common Stock is quoted on
Nasdaq, the OTCBB or the principal stock exchange on which the Common Stock has
been listed, or (b) if the Common Stock is not quoted on Nasdaq, the OTCBB or
any stock exchange, a day on which the Common Stock is quoted in the
over-the-counter market, as reported by the Pinksheets LLC (or any similar
organization or agency succeeding its functions of reporting prices).
"TRANSACTION DOCUMENTS" means this Agreement and all exhibits and
schedules hereto and all other documents, instruments and writings required
pursuant to this Agreement.
"UNDERLYING SHARES" means the shares of duly issued Common Stock,
without restriction and freely tradable upon resale pursuant to Rule 504 of
Regulation D of the Securities Act, into which the Debentures are convertible in
accordance with the terms hereof and the Debentures.
ARTICLE II
PURCHASE AND SALE OF CONVERTIBLE DEBENTURES
2.1 PURCHASE AND SALE; PURCHASE PRICE. Subject to the terms and
conditions set forth herein, the Company shall issue and sell and the Purchaser
shall purchase an aggregate principal amount of One Million Dollars ($1,000,000)
(the "PURCHASE PRICE") of the Debentures. The Debentures shall have the
respective rights, preferences and privileges as set forth in the Debenture
annexed as EXHIBIT A hereto.
2.2 EXECUTION AND DELIVERY OF DOCUMENTS; THE CLOSING.
(a) The Closing of the purchase and sale of the Debentures
(the "CLOSING") shall take place simultaneously with the execution and delivery
of this Agreement (the "CLOSING DATE"). On the Closing Date,
(i) the parties shall execute and deliver the Escrow
Agreement;
(ii) the Company shall deliver to the Purchaser the
(A) a duly executed copy of the Merger Agreement and (B) the
legal opinions of counsel to the Company substantially in the
form of Exhibit G and EXHIBIT H annexed hereto, addressed to
the Purchaser and dated the date hereof;
(iii) the Company shall deliver to the Escrow Agent
(A) original and duly executed Debentures registered in the
name of the Purchaser in the amount set forth in SCHEDULE 1,
(B) an original and duly executed Power of Attorney and (C)
the original Escrow Shares;
(iv) the Company shall execute and deliver to the
Purchaser a certificate of its President, in the form of
EXHIBIT I annexed hereto, certifying that attached thereto is
a copy of resolutions duly adopted by the Board of Directors
of the Company authorizing the Company to execute and deliver
the Transaction Documents and to enter into the transactions
contemplated thereby; and
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(v) the Purchaser shall deliver to the Escrow Agent
the Purchase Price by wire transfer of One Million Dollars
($1,000,000) pursuant to the Escrow Agent's wire transfer
instructions.
(b) If this Agreement is terminated pursuant to SECTIONS 5.1
hereof, then, within two (2) Business Days from the date of termination, either
the Company or the Purchaser shall notify the Escrow Agent of same, and
(i) the Escrow Agent shall, within two (2) Business Days of
its receipt of such notice,
(A) return the Purchase Price to the Purchaser;
and
(B) return the certificates representing (A) the
Debentures and
(B) the Escrow Shares to the Company.
2.3 THE POST-CLOSING.
(a) The post-closing of the purchase and sale of the Debentures (the
"POST-CLOSING") shall take place immediately after the Effective Date (the
"POST-CLOSING DATE") at the offices of Xxxxxx Gottbetter & Xxxxxxxx, LLP, or its
successors or assigns, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX 00000; PROVIDED, HOWEVER,
that all of the transactions contemplated by the Merger Agreement annexed as
EXHIBIT B hereto shall have been consummated in accordance with the terms of the
Merger Agreement prior to the Post-Closing; and FURTHER, PROVIDED, that the
Post-Closing may not occur later than ten (10) days after the Closing Date
(except if such 10th day is not a Business Day, then the next Business Day),
unless the Purchaser agrees in writing in advance to an extension, which writing
shall set forth the new Closing Date. The Merger Agreement shall be executed
immediately after the Closing.
(b) At the Post-Closing,
(i) the Escrow Agent shall deliver to the Purchaser original
and duly executed Debentures and/or its assigns in share denominations
specified by the Purchaser in the amount set forth in SCHEDULE 1
hereto;
(ii) the Company shall deliver to the Purchaser the following:
(A) certified copies of the Articles of Merger as
filed with the Secretary of State of the States of Delaware
and Wyoming; and
(B) all other documents, instruments and writings
required to have been delivered by the Company at or prior to
the Post-Closing pursuant to this Agreement.
(c) Upon receipt by the Purchaser of those items set forth in SECTIONS
2.3(B)(I) AND (II) above, the Escrow Agent shall deliver the following to the
Company:
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(i) the Purchase Price by wire transfer of immediately
available funds in the amount of One Million Dollars ($1,000,000)
pursuant to written wire transfer instructions delivered by the Company
to the Escrow Agent at least three (3) Business Days prior to the
Post-Closing Date; and
(ii) all documents, instruments, and writings required to have
been delivered or necessary at or prior to the Post-Closing by the
Purchaser pursuant to this Agreement.
(d) The Escrow Agent shall retain and hold the Escrow Shares, all of which
shall be held in accordance with the terms of this Agreement and the
Escrow Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. The
Company hereby makes the following representations and warranties to the
Purchaser, all of which shall survive the Post-Closing:
(a) ORGANIZATION AND QUALIFICATION. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of the State
of Wyoming, with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company has no subsidiaries other than as set forth on SCHEDULE 3.1(A) attached
hereto (collectively, the "SUBSIDIARIES"). Each of the Subsidiaries is a
corporation, duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, with the full corporate power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Each of the Company and the Subsidiaries is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the nature of the business conducted or property
owned by it makes such qualification necessary, except where the failure to be
so qualified or in good standing, as the case may be, would not, individually or
in the aggregate, have a material adverse effect on the results of operations,
assets, prospects, or financial condition of the Company and the Subsidiaries,
taken as a whole (a "MATERIAL ADVERSE EFFECT").
(b) AUTHORIZATION, ENFORCEMENT. The Company has the requisite corporate
power and authority to enter into and to consummate the transactions
contemplated hereby and by each other Transaction Document and to otherwise to
carry out its obligations hereunder and thereunder. The execution and delivery
of this Agreement and each of the other Transaction Documents by the Company and
the consummation by it of the transactions contemplated hereby and thereby has
been duly authorized by all necessary action on the part of the Company. Each of
this Agreement and each of the other Transaction Documents has been or will be
duly executed by the Company and when delivered in accordance with the terms
hereof or thereof will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
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affecting generally the enforcement of, creditors' rights and remedies or by
other equitable principles of general application.
(c) CAPITALIZATION. The authorized, issued and outstanding capital
stock of the Company is set forth on SCHEDULE 3.1(C). No Debentures have been
issued as of the date hereof. No shares of Common Stock are entitled to
preemptive or similar rights, nor is any holder of the Common Stock entitled to
preemptive or similar rights arising out of any agreement or understanding with
the Company by virtue of this Agreement. Except as described in this Agreement,
or disclosed in SCHEDULE 3.1(C), there are no outstanding options, warrants,
script, rights to subscribe to, registration rights, calls or commitments of any
character whatsoever relating to, or, except as a result of the purchase and
sale of the Debentures hereunder, securities, rights or obligations convertible
into or exchangeable for, or giving any person any right to subscribe for or
acquire, any shares of Common Stock, or contracts, commitments, understandings,
or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock. Neither the Company nor any Subsidiary
is in violation of any of the provisions of its respective Certificate of
Incorporation, bylaws or other charter documents.
(d) ISSUANCE OF SECURITIES. The Debentures and the Escrow Shares have
been duly and validly authorized for issuance, offer and sale pursuant to this
Agreement and, when issued and delivered as provided hereunder against payment
in accordance with the terms hereof, shall be valid and binding obligations of
the Company enforceable in accordance with their respective terms. The Company
has and at all times while the Debentures are outstanding will continue to
maintain an adequate reserve of shares of Common Stock to enable it to perform
its obligations under this Agreement and the Debentures. When issued in
accordance with the terms hereof, the Securities will be duly authorized,
validly issued, fully paid and non-assessable. Except as set forth in SCHEDULE
3.1(D) hereto, there is no equity, equity equivalent security, debt or equity
lines of credit outstanding that is substantially similar to the Debentures,
including any security having a floating conversion price substantially similar
to the Debentures; PROVIDED, HOWEVER, that, except as otherwise provided herein,
nothing contained in this SECTION 3.1(D) shall be deemed to permit the issuance
of any convertible security or instrument or equity line of credit.
(e) NO CONFLICTS. The execution, delivery and performance of this
Agreement and the other Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
do not and will not (i) conflict with or violate any provision of its
Certificate of Incorporation or bylaws (each as amended through the date hereof)
or (ii) be subject to obtaining any of the consents referred to in SECTION
3.1(F), conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company is a party, or (iii)
result in a violation of any law, rule, regulation, order, judgment, injunction,
decree or other restriction of any court or governmental authority to which the
Company or its Subsidiaries is subject (including, but not limited to, those of
other countries and the federal and state securities laws and regulations), or
by which any property or asset of the Company or its Subsidiaries is bound or
affected, except in the case of clause (ii), such conflicts, defaults,
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terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect. The
business of the Company and its Subsidiaries is not being conducted in violation
of any law, ordinance or regulation of any governmental authority.
(f) CONSENTS AND APPROVALS. Except as specifically set forth in
SCHEDULE 3.1(F), neither the Company nor any Subsidiary is required to obtain
any consent, waiver, authorization or order of, or make any filing or
registration with, any court or other federal, state, local or other
governmental authority or other Person in connection with the execution,
delivery and performance by the Company of this Agreement and each of the other
Transaction Documents, except for the filing of the Articles of Merger with the
Secretary of State of the States of Delaware and Wyoming to effect the Merger
pursuant to the Merger Agreement, which shall be filed no later than ten (10)
days from the Execution Date (together with the consents, waivers,
authorizations, orders, notices and filings referred to in SCHEDULE 3.1(F), the
"REQUIRED APPROVALS").
(g) LITIGATION; PROCEEDINGS. Except as specifically disclosed in
SCHEDULE 3.1(G), there is no action, suit, notice of violation, proceeding or
investigation pending or, to the best knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries or any of their
respective properties before or by any court, governmental or administrative
agency or regulatory authority (federal, state, county, local or foreign) which
(i) relates to or challenges the legality, validity or enforceability of any of
the Transaction Documents, the Debentures or the Underlying Shares, (ii) could,
individually or in the aggregate, have a Material Adverse Effect or (iii) could,
individually or in the aggregate, materially impair the ability of the Company
to perform fully on a timely basis its obligations under the Transaction
Documents.
(h) NO DEFAULT OR VIOLATION. Except as set forth in SCHEDULE 3.1(H)
hereto, neither the Company nor any Subsidiary (i) is in default under or in
violation of any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound, except such conflicts or defaults as do not have a Material Adverse
Effect, (ii) is in violation of any order of any court, arbitrator or
governmental body, except for such violations as do not have a Material Adverse
Effect, or (iii) is in violation of any statute, rule or regulation of any
governmental authority which could (individually or in the aggregate) (x)
adversely affect the legality, validity or enforceability of this Agreement, (y)
have a Material Adverse Effect or (z) adversely impair the Company's ability or
obligation to perform fully on a timely basis its obligations under this
Agreement.
(i) CERTAIN FEES. No fees or commission will be payable by the Company
to any investment banker, broker, placement agent or bank with respect to the
consummation of the transactions contemplated hereby except as provided in
SECTION 4.27 hereof.
(j) DISCLOSURE DOCUMENTS. The Disclosure Documents are accurate in all
material respects and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
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(k) MANNER OF OFFERING. The Securities are being offered and sold to
the Purchaser without registration under the Securities Act in a private
placement that is exempt from registration pursuant to Rule 504 of Regulation D
of the Securities Act and without registration under the Colorado Securities Act
of the Colorado Revised Statues (the "COLORADO ACT") upon the exemption provided
by Section 00-00-000 of the Colorado Act and regulation 51-3.13B promulgated
thereunder. Accordingly, the Securities are being issued without restriction and
may be freely traded upon resale pursuant to Rule 504 of Regulation D of the
Securities Act.
(l) NON-REGISTERED OFFERING. Neither the Company nor any Person acting
on its behalf has taken or will take any action (including, without limitation,
any offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Securities
under the Securities Act) which might subject the offering, issuance or sale of
the Securities to the registration requirements of Section 5 of the Securities
Act.
(m) NOT A REPORTING COMPANY; ELIGIBILITY TO USE EXEMPTION UNDER 504(B).
The Company is not subject to the reporting requirements of Section 13 or
Section 15(d) of the Exchange Act. The Company has not sold any securities under
Rule 504(b) in the last twelve months, except as disclosed in Schedule 3.1(m).
The Company is eligible to issue securities exempt from registration pursuant to
Rule 504 of Regulation D promulgated under the Securities Act.
The Purchaser acknowledges and agrees that the Company makes no representation
or warranty with respect to the transactions contemplated hereby other than
those specifically set forth in SECTION 3.1 hereof.
3.2 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
hereby represents and warrants to the Company as follows:
(a) ORGANIZATION; AUTHORITY. The Purchaser is a limited liability
company, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its formation with the requisite power and authority to
enter into and to consummate the transactions contemplated hereby and by the
other Transaction Documents and otherwise to carry out its obligations hereunder
and thereunder. The acquisition of the Debentures to be purchased by the
Purchaser hereunder has been duly authorized by all necessary action on the part
of the Purchaser. This Agreement has been duly executed and delivered by the
Purchaser and constitutes the valid and legally binding obligation of the
Purchaser, enforceable against it in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to, or affecting generally
the enforcement of, creditors rights and remedies or by other general principles
of equity.
(b) INVESTMENT INTENT. The Purchaser is acquiring the Debentures to be
purchased by it hereunder, and will acquire the Underlying Shares relating to
such Debentures for its own account for investment purposes only and not with a
view to or for distributing or reselling such Debentures or Underlying Shares or
any part thereof or interest therein, without prejudice, however, to such
Purchaser's right, subject to the provisions of this Agreement, at all times to
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sell or otherwise dispose of all or any part of such Debentures or Underlying
Shares in compliance with applicable federal and state securities laws.
(c) PURCHASER STATUS. At the time the Purchaser was offered the
Debentures to be acquired by it hereunder, it was and at the date hereof, it is
an "accredited investor" as defined in Rule 501(a) under the Securities Act.
(d) EXPERIENCE OF PURCHASER. The Purchaser, either alone or together
with its representatives, has such knowledge, sophistication and experience in
business and financial matters so as to be capable of evaluating the merits and
risks of an investment in the securities to be acquired by it hereunder, and has
so evaluated the merits and risks of such investment.
(e) ABILITY OF PURCHASER TO BEAR RISK OF INVESTMENT. The Purchaser is
able to bear the economic risk of an investment in the securities to be acquired
by it hereunder and, at the present time, is able to afford a complete loss of
such investment.
(f) PROHIBITED TRANSACTIONS. The securities to be acquired by the
Purchaser hereunder are not being acquired, directly or indirectly, with the
assets of any "employee benefit plan," within the meaning of Section 3(3) of the
Employment Retirement Income Security Act of 1974, as amended.
(g) ACCESS TO INFORMATION. The Purchaser acknowledges receipt of the
Disclosure Documents and further acknowledges that it has been afforded (i) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the securities offered hereunder and the merits and risks of investing in
such securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment in such securities;
and (iii) the opportunity to obtain such additional information which the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the investment
and to verify the accuracy and completeness of the information contained in the
Disclosure Documents.
(h) RELIANCE. The Purchaser understands and acknowledges that (i) the
Debentures being offered and sold to it hereunder are being offered and sold
without registration under the Securities Act in a private placement that is
exempt from the registration provisions of the Securities Act under Section 4(2)
of the Securities Act and (ii) the availability of such exemption depends in
part on, and that the Company will rely upon the accuracy and truthfulness of,
the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that the Purchaser makes no
representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this SECTION 3.2.
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ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 MANNER OF OFFERING. The Securities are being issued pursuant to
Rule 504 (b) of Regulation D of the Securities Act. The Securities will be
exempt from restrictions on transfer, and will carry no restrictive legend with
respect to the exemption from registration under the Securities Act. The Company
will use its best efforts to insure that no actions are taken that would
jeopardize the availability of the exemption from registration under Rule 504(b)
for the Securities and, if for any reason such exemption becomes unavailable,
shall cause the Securities to be registered under the Securities Act as required
by SECTION 4.29.
4.2 FURNISHING OF INFORMATION. As long as the Purchaser owns any of the
Securities, the Company will promptly furnish to the Purchaser all annual and
quarterly reports comparable to those required by Section 13(a) or 15(d) of the
Exchange Act (the "NON-PUBLIC FILINGS").
4.3 NOTICE OF CERTAIN EVENTS. The Company shall, on a continuing basis,
(i) advise the Purchaser promptly after obtaining knowledge of, and, if
requested by the Purchaser, confirm such advice in writing, of (A) the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of the Debentures or the
Underlying Shares, for offering or sale in any jurisdiction, or the initiation
of any proceeding for such purpose by any state securities commission or other
regulatory authority, or (B) any event that makes any statement of a material
fact made by the Company in SECTION 3.1 or in the Disclosure Documents untrue or
that requires the making of any additions to or changes in SECTION 3.1 in or in
the Disclosure Documents in order to make the statements therein, in the light
of the circumstances under which they are made, not misleading, (ii) use its
best efforts to prevent the issuance of any stop order or order suspending the
qualification or exemption from qualification of the Securities under any state
securities or Blue Sky laws, and (iii) if at any time any state securities
commission or other regulatory authority shall issue an order suspending the
qualification or exemption from qualification of the Securities under any such
laws, and use its best efforts to obtain the withdrawal or lifting of such order
at the earliest possible time.
4.4 COPIES AND USE OF DISCLOSURE DOCUMENTS AND NON-PUBLIC FILINGS. The
Company shall furnish the Purchaser, without charge, as many copies of the
Disclosure Documents and the Non-Public Filings and any amendments or
supplements thereto as the Purchaser may reasonably request. The Company
consents to the use of the Disclosure Documents and the Non-Public Filings and
any amendments and supplements to any of them by the Purchaser in connection
with resales of the Securities.
4.5 MODIFICATION TO DISCLOSURE DOCUMENTS. If any event shall occur as a
result of which, in the reasonable judgment of the Company or the Purchaser, it
becomes necessary or advisable to amend or supplement any of the Disclosure
Documents or the Non-Public Filings in order to make the statements therein, in
the light of the circumstances at the time such Disclosure Documents or the
Non-Public Filings were delivered to the Purchaser, not misleading, or if it
becomes necessary to amend or supplement any of the Disclosure Documents or the
Non-Public Filings to comply with applicable law, the Company shall promptly
prepare an appropriate amendment or supplement to each such document in form and
substance reasonably satisfactory to both the Purchaser and Company so that (i)
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as so amended or supplemented, each such document will not include an untrue
statement of material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances existing at
the time it is delivered to the Purchaser, not misleading and (ii) the
Disclosure Documents and the Non-Public Filings will comply with applicable law.
4.6 BLUE SKY LAWS. The Company shall cooperate with the Purchaser in
connection with the exemption from registration of the Securities under the
securities or Blue Sky laws of such jurisdictions as the Purchasers may request;
PROVIDED, HOWEVER, that neither the Company nor its Subsidiaries shall be
required in connection therewith to qualify as a foreign corporation where they
are not now so qualified. The Company agrees that it will execute all necessary
documents and pay all necessary state filing or notice fees to enable the
Company to sell the Securities to the Purchasers.
4.7 INTEGRATION. The Company shall not and shall use its best efforts
to ensure that no Affiliate shall sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in Section 2 of
the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale of the Securities to the Purchaser.
4.8 FURNISHING OF RULE 144(C) MATERIALS. The Company shall, for so long
as any of the Securities remain outstanding and during any period in which the
Company is not subject to Section 13 or 15(d) of the Exchange Act, make
available to any registered holder of the Securities ("Holder" or "Holders") in
connection with any sale thereof and any prospective purchaser of such
Securities from such Person, such information in accordance with Rule 144(c)
promulgated under the Securities Act as is required to sell the Securities under
Rule 144 promulgated under the Securities Act.
4.9 SOLICITATION MATERIALS. The Company shall not (i) distribute any
offering materials in connection with the offering and sale of the Debentures or
the Underlying Shares other than the Disclosure Documents and any amendments and
supplements thereto prepared in compliance herewith or (ii) solicit any offer to
buy or sell the Debentures or the Underlying Shares by means of any form of
general solicitation or advertising.
4.10 SUBSEQUENT FINANCIAL STATEMENTS. If not otherwise publicly
available, the Company shall promptly furnish to the Purchaser a copy of all
financial statements for any period subsequent to the period covered by the
financial statements included in the Disclosure Documents until the full
conversion of the Debentures..
4.11 PROHIBITION ON CERTAIN ACTIONS. From the date hereof through the
Post-Closing Date, the Company shall not and shall cause the Subsidiaries not
to, without the prior written consent of the Purchaser, (i) amend its
certificate or articles of incorporation, by-laws or other charter documents so
as to adversely affect any rights of the Purchaser; (ii) split, combine or
reclassify its outstanding capital stock; (iii) declare, authorize, set aside or
pay any dividend or other distribution with respect to the Common Stock; (iv)
redeem, repurchase or offer to repurchase or otherwise acquire shares of its
Common Stock; or (v) enter into any agreement with respect to any of the
foregoing.
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4.12 LISTING OF COMMON STOCK. If the Common Stock shall become listed
on the OTCBB or on another exchange, the Company shall (a) use its best efforts
to maintain the listing of its Common Stock on the OTCBB or such other exchange
on which the Common Stock is then listed until expiration of each of the periods
during which the Shares may be converted and (b) shall provide to the Purchaser
evidence of such listing.
4.13 ESCROW. The Company and the Purchaser agree to execute and
deliver, simultaneously with the execution and delivery of this Agreement, the
escrow agreement attached hereto and made part hereof as EXHIBIT D (the "ESCROW
AGREEMENT"), and to issue into escrow the certificates to be held by the Escrow
Agent, registered in the name of the Purchaser and without any restrictive
legend of any kind, pursuant to the terms of such escrow.
4.14 CONVERSION PROCEDURES; MAINTENANCE OF ESCROW SHARES. EXHIBIT D
attached hereto and made a part hereof sets forth the procedures with respect to
the conversion of the Debentures, including the form of Notice of Conversion to
be provided upon conversion, instructions as to the procedures for conversion
and such other information and instructions as may be reasonably necessary to
enable the Purchaser or its permitted transferee(s) to exercise the right of
conversion smoothly and expeditiously. The Company agrees that, at any time the
conversion price of the Debentures is such that the number of Escrow Shares with
respect to the Debentures is less than 200% of the number of shares of Common
Stock that would be needed to satisfy full conversion of all of the Debentures
given the then current conversion price (the "FULL CONVERSION SHARES"), upon
five (5) Business Days written notice of such circumstance to the Company by the
Purchaser and/or the Escrow Agent, the Company shall issue additional share
certificates in the name of the Purchaser and/or its assigns in denominations
specified by the Purchaser, and deliver same to the Escrow Agent, such that the
new number of Escrow Shares with respect to the Debentures is equal to 200% of
the Full Conversion Shares.
4.15 ATTORNEY-IN-FACT. To effectuate the terms and provisions of this
Agreement and the Escrow Agreement, the Company hereby agrees to give a power of
attorney as is evidenced by EXHIBIT F annexed hereto. All acts done under such
power of attorney are hereby ratified and approved and neither the
Attorney-in-Fact nor any designee or agent thereof shall be liable for any acts
of commission or omission, for any error of judgment or for any mistake of fact
or law, as long as the Attorney-in-Fact is operating within the scope of the
power of attorney and this Agreement and its exhibits. The power of attorney,
being coupled with an interest, shall be irrevocable while any of the Debentures
remain unconverted or any portion of this Agreement or the Escrow Agreement
remains unsatisfied. In addition, the Company shall give the Attorney-in-Fact
resolutions executed by the Board of Directors of the Company which authorize
transfers of the Debentures and future issuances of the Underlying Shares for
the Debentures, and which resolutions state that they are irrevocable while any
of the Debentures remain unconverted or any portion of this Agreement or the
Escrow Agreement remains unsatisfied.
4.16 INDEMNIFICATION.
(a) Indemnification
(i) The Company shall, notwithstanding termination of this
Agreement and without limitation as to time, indemnify and hold
harmless the Purchaser and its officers, directors, agents, employees
and affiliates, each Person who controls the Purchaser (within the
14
meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) (each such Person, a "CONTROL PERSON") and the officers,
directors, agents, employees and affiliates of each such Control
Person, to the fullest extent permitted by applicable law, from and
against any and all losses, claims, damages, liabilities, costs
(including, without limitation, costs of preparation and attorneys'
fees) and expenses (collectively, "LOSSES"), as incurred, arising out
of, or relating to, a breach or breaches of any representation,
warranty, covenant or agreement by the Company under this Agreement or
any other Transaction Document.
(ii) The Purchaser shall, notwithstanding termination of this
Agreement and without limitation as to time, indemnify and hold
harmless the Company, its officers, directors, agents and employees,
each Control Person and the officers, directors, agents and employees
of each Control Person, to the fullest extent permitted by application
law, from and against any and all Losses, as incurred, arising out of,
or relating to, a breach or breaches of any representation, warranty,
covenant or agreement by the Purchaser under this Agreement or the
other Transaction Documents.
(b) CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an "INDEMNIFIED PARTY"), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and expenses incurred in connection with defense thereof;
provided, that the failure of any Indemnified Party to give such notice shall
not relieve the Indemnifying Party of its obligations or liabilities pursuant to
this Agreement, except (and only) to the extent that it shall be finally
determined by a court of competent jurisdiction (which determination is not
subject to appeal or further review) that such failure shall have proximately
and materially adversely prejudiced the Indemnifying Party.
An Indemnified Party shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party or Parties unless: (1) the Indemnifying Party has agreed to
pay such fees and expenses; or (2) the Indemnifying Party shall have failed
promptly to assume the defense of such Proceeding and to employ counsel
reasonably satisfactory to such Indemnified Party in any such Proceeding; or (3)
the named parties to any such Proceeding (including any impeded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of the claim against the Indemnified Party but will
15
retain the right to control the overall Proceedings out of which the claim arose
and such counsel employed by the Indemnified Party shall be at the expense of
the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without its written consent, which
consent shall not be unreasonably withheld. No Indemnifying Party shall, without
the prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party from
all liability on claims that are the subject matter of such Proceeding.
All fees and expenses of the Indemnified Party to which the
Indemnified Party is entitled hereunder (including reasonable fees and expenses
to the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section) shall be paid to
the Indemnified Party, as incurred, within ten (10) Business Days of written
notice thereof to the Indemnifying Party.
No right of indemnification under this Section 4.16 shall be
available as to a particular Indemnified Party if there is a non-appealable
final judicial determination that such Losses arise solely out of the negligence
or bad faith of such Indemnified Party in performing the obligations of such
Indemnified Party under this Agreement or a breach by such Indemnified Party of
its obligations under this Agreement.
(c) CONTRIBUTION. If a claim for indemnification under this
Section 4.16(a) is unavailable to an Indemnified Party or is insufficient to
hold such Indemnified Party harmless for any Losses in respect of which this
Section 4.16 would apply by its terms (other than by reason of exceptions
provided in this Section 4.16(c)), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses in such proportion
as is appropriate to reflect the relative benefits received by the Indemnifying
Party on the one hand and the Indemnified Party on the other and the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions or omissions that resulted in such Losses as well as any other relevant
equitable considerations. The relative fault of such Indemnifying Party and
Indemnified Party shall be determined by reference to, among other things,
whether there was a judicial determination that such Losses arise in part out of
the negligence or bad faith of the Indemnified Party in performing the
obligations of such Indemnified Party under this Agreement or the Indemnified
Party's breach of its obligations under this Agreement. The amount paid or
payable by a party as a result of any Losses shall be deemed to include any
attorneys' or other fees or expenses incurred by such party in connection with
any Proceeding to the extent such party would have been indemnified for such
fees or expenses if the indemnification provided for in this Section was
available to such party.
(d) NON-EXCLUSIVITY. The indemnity and contribution agreements
contained in this Section are in addition to any obligation or liability that
the Indemnifying Parties may have to the Indemnified Parties.
4.17 EXCLUSIVITY. During the five year period commencing on the
Original Issuance Date (as defined in the Debentures), the Company and its
Affiliates shall not offer or issue any convertible security or instrument or
any equity line of credit, other than to the Purchaser or any of its Affiliates.
4.18 PURCHASER'S OWNERSHIP OF COMMON STOCK. In addition to and not in
lieu of the limitations on conversion set forth in the Debentures, the
conversion rights of the Purchaser set forth in the Debentures shall be limited,
solely to the extent required, from time to time, such that, unless the
16
Purchaser gives written notice 75 days in advance to the Company of the
Purchaser's intention to exceed the Limitation on Conversion as defined herein,
with respect to all or a specified amount of the Debentures and the
corresponding number of the Underlying Shares, in no instance shall the
Purchaser (singularly, together with any Persons who in the determination of the
Purchaser, together with the Purchaser, constitute a group as defined in Rule
13d-5 of the Exchange Act) be entitled to convert the Debentures to the extent
such conversion would result in the Purchaser beneficially owning more than five
percent (5%) of the outstanding shares of Common Stock of the Company. For these
purposes, beneficial ownership shall be defined and calculated in accordance
with Rule 13d-3, promulgated under the Exchange Act (the foregoing being herein
referred to as the "LIMITATION ON CONVERSION"); PROVIDED, HOWEVER, that the
Limitation on Conversion shall not apply to any forced or automatic conversion
pursuant to this Agreement or the Debentures; and PROVIDED, FURTHER that if such
Purchaser shall have declared an Event of Default and, if a cure period is
provided, the Company shall not have properly and fully cured such Event of
Default within any such cure period, the provisions of this Section 4.18 shall
be null and void from and after such date. The Company shall, promptly upon its
receipt of a Notice of Conversion tendered by such Purchaser (or its sole
designee) for the Debentures, notify such Purchaser by telephone and by
facsimile of the number of shares of Common Stock outstanding on such date and
the number of Underlying Shares which would be issuable to such Purchaser (or
its sole designee, as the case may be) if the conversion requested in such
Notice of Conversion were effected in full, whereupon, in accordance with the
Debentures notwithstanding anything to the contrary set forth in the Debentures,
such Purchaser may within one (1) Business Day of its receipt of the Company
notice required by this Section 4.18 by facsimile revoke such conversion to the
extent (in whole or in part) that such Purchaser determines that such conversion
would result in the ownership by such Purchaser of shares of Common Stock in
excess of the Limitation on Conversion.
4.19 PURCHASER'S RIGHTS IF TRADING IN COMMON STOCK IS SUSPENDED. If the
Common Stock is listed on any exchange, then at any time after the Post-Closing
if trading in the shares of the Common Stock is suspended (and not reinstated
within ten (10) Trading Days) on such stock exchange or market upon which the
Common Stock is then listed for trading (other than as a result of the
suspension of trading in securities on such market generally or temporary
suspensions pending the release of material information), or the Common Stock is
delisted from the OTCBB (and not reinstated within ten (10) Trading Days), then,
at the option of the Purchaser exercisable by giving written notice to the
Company (the "Redemption Notice"), the Company shall redeem, as applicable, all
of the Debentures and Underlying Shares owned by such Purchaser at an aggregate
purchase price equal to the sum of:
(i) the product of (1) the average Per Share Market Value for the five
(5) Trading Days immediately preceding (a) the date of the Redemption Notice,
(b) the date of payment in full of the repurchase price under this SECTION 4.19
recalculated as of such date, or (c) the day when the Common Stock was
suspended, delisted or deleted from trading, whichever is greater, multiplied by
(2) the aggregate number of Underlying Shares then held and owned by such
Purchaser;
(ii) the greater of (A) the outstanding principal amount and accrued
and unpaid interest on the Debentures owned by such Purchaser and (B) the
product of (1) the average Per Share Market Value for the five (5) Trading Days
immediately preceding (a) the date of the Redemption Notice, (b) the date of
17
payment in full of the repurchase price under this SECTION 4.19 recalculated as
of such date, or (c) the day when the Common Stock was suspended, delisted or
deleted from trading, whichever is greater, multiplied by (B) the aggregate
number of Underlying Shares issuable upon the conversion of the outstanding
Debentures then held and owned by the Purchaser(without taking into account the
Limitation on Conversion described in Section 4.18 hereof); and
(iii) interest on such amounts set forth in (i) - (ii) above accruing
from the seventh (7th) day after the date of the Redemption Notice until the
repurchase price under this Section 4.19 is paid in full, at the rate of fifteen
percent (15%) per annum.
4.20 NO VIOLATION OF APPLICABLE LAW. Notwithstanding any provision of
this Agreement to the contrary, if the redemption of the Debentures or the
Underlying Shares otherwise required under this Agreement or the Debentures
would be prohibited by the relevant provisions of Wyoming law, such redemption
shall be effected as soon as it is permitted under such law; PROVIDED, HOWEVER,
that interest payable by the Company with respect to any such redemption shall
accrue in accordance with SECTION 4.19.
4.21 REDEMPTION RESTRICTIONS. Notwithstanding any provision of this
Agreement to the contrary, if any redemption of the Debentures or the Underlying
Shares otherwise required under this Agreement or the Debentures would be
prohibited in the absence of consent from any lender to the Company or any of
the Subsidiaries, or by the holders of any class of securities of the Company,
the Company shall use its best efforts to obtain such consent as promptly as
practicable after any such redemption is required. Interest payable by the
Company with respect to any such redemption shall accrue in accordance with
SECTION 4.19 until such consent is obtained. Nothing contained in this SECTION
4.21 shall be construed as a waiver by the Purchaser of any rights it may have
by virtue of any breach of any representation or warranty of the Company herein
as to the absence of any requirement to obtain any such consent.
4.22 NO OTHER REGISTRATION RIGHTS. During the period commencing on the
date hereof and ending on the Post-Closing Date, the Company shall not file any
registration statement that provides for the registration of shares of Common
Stock to be sold by security holders of the Company, other than the Purchaser
and/or its respective Affiliates or assigns, without the prior written consent
of the Purchaser or its assigns, provided, however, that the limitation on the
right to file registration statements contained in this SECTION 4.22 shall not
apply to registration statements relating solely to (i) employee benefit plans,
notwithstanding the inclusion of a resale prospectus for securities received
under any such employee benefit plan, or (ii) business combinations not
otherwise prohibited by the terms of this Agreement or the other Transaction
Documents.
4.23 MERGER OR CONSOLIDATION. Until the earlier of (a) the full
conversion of the Debentures and (b) the Maturity Date of the Debentures (as
that term is defined in the Debentures), the Company and each Subsidiary will
not, in a single transaction or a series of related transactions, (i)
consolidate with or merge with or into any other Person, or (ii) permit any
other Person to consolidate with or merge into it, unless (w) either (A) the
Company shall be the survivor of such merger or consolidation or (B) the
surviving Person shall expressly assume by supplemental agreement all of the
obligations of the Company under the Debentures, this Agreement and the other
18
Transaction Documents; (x) immediately before and immediately after giving
effect to such transactions (including any indebtedness incurred or anticipated
to be incurred in connection with the transactions), no Event of Default shall
have occurred and be continuing; (y) if the Company is not the surviving entity,
such surviving entity's common shares will be listed on either The New York
Stock Exchange, American Stock Exchange, Nasdaq National Market or Nasdaq
SmallCap Market, or the OTCBB on or prior to the closing of such transaction(s)
and (z) the Company shall have delivered to the Purchaser an officers*
certificate and opinion of counsel, each stating that such consolidation, merger
or transfer complies with this Agreement, that the surviving Person agrees to be
bound thereby and that all conditions precedent in this Agreement relating to
such transaction(s) have been satisfied.
4.24 REGISTRATION OF ESCROW SHARES. (a) So long as the Purchaser and/or
its assigns owns any of the Securities and the Underlying Shares would not be
freely transferable without registration, the Company agrees not to file a
registration statement with the SEC, other than on Form 10, Form S-4 (except for
a public reoffering or resale) or Form S-8 without first having registered the
Registrable Securities for resale under the Securities Act and in such states of
the United States as the holders thereof shall reasonably request.
(b) If the Company shall propose to file with the SEC any registration
statement other than a Form 10, Form S-4 (except for a public reoffering or
resale) or Form S-8 which would cause, or have the effect of causing, the
Company to become a Reporting Issuer or to take any other action, other than the
sale of the Debentures to the Purchaser hereunder, the effect of which would be
to cause the Underlying Shares to be restricted securities (as such term is
defined in Rule 144 promulgated under the Securities Act), the Company agrees to
give written notification of such to the holders of the Securities at least two
weeks prior to such filing or taking of the proposed action. If any of the
Securities are then outstanding, the Company agrees to include in such
registration statement the Registrable Securities unless the Underlying Shares
would be freely transferable upon conversion of the Debentures without such
registration, so as to permit the public resale thereof.
If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company will so advise
the holders of the Securities. In such event, these registration rights shall be
conditioned upon such holder's participation in such underwriting and the
inclusion of such holder's Registrable Securities in the underwriting to the
extent provided herein. All holders proposing to distribute their Registrable
Securities through such underwriting shall enter into an underwriting agreement
in customary form with the underwriter selected by the Company. In the event
that the lead or managing underwriter in its good faith judgment determines that
material adverse market factors require a limitation on the number of shares to
be underwritten, the underwriter may limit the number of Registrable Securities.
In such event, the Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated pro rata among
all holders and other participants, including the Company, in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities and
other securities which they had requested to be included in such registration
statement at the time of filing the registration statement. If any holder
disapproves of the terms of any such underwriting, he may elect to withdraw
there from by written notice to the Company and the underwriter, provided such
notice is delivered within sixty (60) days of full disclosure of such terms to
19
such holder, without thereby affecting the right of such holder to participate
in subsequent offerings hereunder.
(c) Notwithstanding the foregoing, if the Company for any reason shall
have taken any action, other than the sale of the Debentures to the Purchaser
hereunder, the effect of which would be to cause the Registrable Securities to
be restricted securities (as such term is defined in Rule 144 promulgated under
the Securities Act), the Company agrees to immediately file with the SEC and
cause to become effective a registration statement which would permit the public
resale of the Registrable Securities under the Securities Act and in such states
of the United States as the holders thereof shall reasonably request.
(d) The Company agrees to keep any registration required pursuant to
this SECTION 4.24 continuously effective under the Securities Act and with such
states of the United States as the holders of the Registrable Securities shall
reasonably request until the earlier of (i) the date on which all of the
Registrable Securities covered by any such registration have been sold, (ii)
five (5) years from the effective date of any such registration, or (iii) the
date on which all of the Registrable Securities may be sold without restriction
pursuant to Rule 144 of the Securities Act. All costs and expenses of any such
registration and related Blue Sky filings and maintaining continuous
effectiveness of such registration and filings shall be borne by the Company.
(e) The Escrow Shares shall be registered by the Company under the
Securities Act if required by Section 4.29 and subject to the conditions stated
therein.
4.25 LIQUIDATED DAMAGES. The Company understands and agrees that a
breach by the Company of Section 4.1, Section 4.24, Section 4.29, Section 4.30
or an Event of Default as contained in this Agreement and/or any other
Transaction Document will result in substantial economic loss to the Purchaser,
which loss will be extremely difficult to calculate with precision. Therefore,
if, for any reason, the Company breaches Sections 4.1, Section 4.24, Section
4.29, Section 4.30 or fails to cure any Event of Default within the time, if
any, given to cure such Event of Default, as compensation and liquidated damages
for such breach or default, and NOT as a penalty, the Company agrees to pay the
Purchaser an amount obtained by multiplying the Purchase Price times two (2).
The Company shall, upon demand, pay the Purchaser such liquidated damages by
wire transfer of immediately available funds to an account designated by the
Purchaser. Nothing herein shall limit the right of the Purchaser to pursue
actual damages (less the amount of any liquidated damages received pursuant to
the foregoing) for the Company's breach of Section 4.1, Section 4.24, Section
4.29, Section 4.30 or failure to cure an Event of Default, consistent with the
terms of this Agreement. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN
THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS, THE COMPANY'S OBLIGATIONS
UNDER THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT OR THE OTHER
TRANSACTION DOCUMENTS.
4.26 SHORT SALES. The Purchaser agrees that it will not enter into any
Short Sales (as hereinafter defined) until the earlier to occur of the date that
the Purchaser no longer owns the Debentures and the Maturity Date. For purpose
hereof, a "SHORT SALE" shall mean a sale of Common Stock by the Purchaser that
is marked as a short sale and that is made at a time when there is no equivalent
offsetting long position in the Common Stock by the Purchaser. For the purposes
20
of determining whether there is an equivalent offsetting long position in the
Common Stock held by the Purchaser, shares of Common Stock issuable upon
conversion of the Debentures shall be deemed to be held long by the Purchaser
with respect to the Underlying Shares for which a Notice of Conversion is
delivered within two (2) Trading Days following the Trading Day that such short
sale is entered into.
4.27 FEES. The Company will pay the following fees and expenses in
connection with the transactions contemplated hereby: (a) to KGL (i) legal fees
for document production in the amount of $25,000 and (ii) all out-of-pocket
expenses incurred in connection with such document production; (b) to the Escrow
Agent, $5,000 for the escrow agent fee; and (c) to Hand & Hand, a Professional
Corporation, $5,000 for legal fees. Unless paid prior, all fees and expenses
will be paid at Post-Closing and the Company and the Purchaser hereby authorize
and direct the Escrow Agent to deduct such fees and expenses directly from
escrow prior to distributing any funds to the Company. Except with respect to
the fees set forth in subparagraphs (b) and (c) of this SECTION 4.27, all fees
and expenses shall be paid regardless of whether the transactions contemplated
hereby are closed or otherwise completed. All fees to be paid hereunder shall
have no offsets, are non-refundable and non-cancelable.
4.28 ADDITIONAL FEES. If the Company or any of its Affiliates enters
into any future financing with any prospective purchaser introduced by the
Purchaser within a period of two (2) years from the date hereof, the Company
agrees to pay to the Purchaser simultaneously with the closing of such financing
an amount equal to four percent (4%) of the aggregate amount of the portion of
such financing purchased by or for the account of such Person.
4.29 CHANGES TO FEDERAL AND STATE SECURITIES LAWS. If any of the
Securities require registration with or approval of any governmental authority
under any federal (including but not limited to the Securities Act or similar
federal statute then in force) or state law, or listing on any national
securities exchange, before they may be resold or transferred without any
restrictions on their resale or transfer for reasons including, but not limited
to, a material change in Rule 504 of Regulation D promulgated under the
Securities Act or a change to the exemption for sales made to Accredited
Investors in the state in which the Purchaser resides, the Company will, at its
expense, (a) as expeditiously as possible cause the Registrable Securities to be
duly registered or approved or listed on the relevant national securities
exchange, as the case may be, and (b) keep such registration, approval or
listing, as the case may be, continuously effective until the earlier of (i) the
date on which all of the Registrable Securities have been sold, (ii) five (5)
years from the effective date of any such registration, or (iii) the date on
which all of the Registerable Shares may be sold without restriction pursuant to
Rule 144 of the Securities Act. The Registrable Securities shall be registered
by the Company under the Securities Act if required by Section 4.24 and subject
to the conditions stated therein.
4.30 MERGER AGREEMENT. Immediately upon the Effective Date, all of the
transactions contemplated by the Merger Agreement annexed hereto as EXHIBIT B
shall be consummated in accordance with the terms thereof.
4.31 FUTURE FINANCING. If, at any time the Debenture is outstanding,
the Company, or its successors in interest due to mergers, consolidations and/or
acquisitions (the "Successors-in-Interest"), is funded an amount equal to or
exceeding Five Million United States dollars ($5,000,000), the Company or the
Successors-in-Interest, as the case may be, agrees to pay the Purchaser an
21
amount equal to One Hundred Fifty Percent (150%) of the then outstanding
Debenture (the "Lump Sum Payment"). Upon the Purchaser's receipt of the Lump Sum
Payment, any and all remaining obligations then outstanding between the Company
or the Successors-in-Interest, as the case may be, and Purchaser in connection
with this Agreement shall be deem satisfied, and the Agreement shall be
terminated. This provision shall survive both Closing and Post-Closing.
ARTICLE V
TERMINATION
5.1 TERMINATION BY THE COMPANY OR THE PURCHASER. This Agreement shall
be terminated as follows upon the occurrence of any of the following events
(each an "Event of Default"):
(a) Automatically terminated prior to Post-Closing if:
(i) there shall be in effect any statute, rule, law
or regulation, including an amendment to Regulation D or an
interpretive release promulgated or issued thereunder, that
prohibits the consummation of the Post-Closing or if the
consummation of the Post-Closing would violate any
non-appealable final judgment, order, decree, ruling or
injunction of any court of or governmental authority having
competent jurisdiction;
(ii) the Post-Closing shall not have occurred by the
Post-Closing Date;
(iii) the common stock of HYTT is not registered
under Section 12 of the Exchange Act;
(iv) HYTT is not current in its reporting obligations
under Section 13 or 15(d) of the Exchange Act;
(v) an event occurs prior to the Post-Closing
requiring HYTT to report such event to the SEC on Form 8-K and
not otherwise set forth in SCHEDULE 5.1, provided, however,
such event shall only include the following items under Form
8-K: Item 1; Item 2 to the extent that any event is reported
under Item 2 that involves a change in the nature of HYTT's
business; Item 3; or Item 4 (provided further, that as to Item
4, only if the event requires disclosure under Item 304
(a)(1)(iv) under Regulation S-B);
(vi) trading in the common stock of HYTT has been
suspended, delisted, or otherwise ceased by the Commission or
the NASD or other exchange or the Nasdaq (whether the National
Market or otherwise), except for any suspension of trading of
limited duration solely to permit dissemination of material
information regarding HYTT, and not reinstated within ten (10)
Trading Days; or
22
(vii) the Company fails to deliver or caused to be
delivered the Debentures and Escrow Shares as required by and
by the date set forth in Section 2.2 hereof.
(b) Prior to Post-Closing by the Purchaser, by giving written
notice of such termination to the Company, if the Company has
materially breached any representation, warranty, covenant or agreement
contained in this Agreement or the other Transaction Documents and such
breach is not cured within five (5) Business Days following receipt by
the Company of notice of such breach.
(c) Prior to Post-Closing by the Company, by giving written
notice of such termination to the Purchaser, if the Purchaser has
materially breached any representation, warranty, covenant or agreement
contained in this Agreement or the other Transaction Documents and such
breach is not cured within five (5) Business Days following receipt by
the Purchaser of notice of such breach.
5.2 REMEDIES. Notwithstanding anything else contained herein to the
contrary, if an Event of Default has occurred pursuant to Section 5.1, and only
with respect to Section 5.1(b) has not been cured within the cure period
provided for therein, the defaulting party shall be deemed in default hereof and
the non-defaulting party shall be entitled to pursue all available rights
without further notice. The defaulting party shall pay all attorney's fees and
costs incurred in enforcing this Agreement and the other Transaction Documents.
In addition, all unpaid amounts shall accrue interest at a rate of 15% per
annum.
ARTICLE VI
LEGAL FEES AND DEFAULT INTEREST RATE
In the event any party hereto commences legal action to enforce its
rights under this Agreement or any other Transaction Document, the
non-prevailing party shall pay all reasonable costs and expenses (including but
not limited to reasonable attorney's fees, accountant's fees, appraiser's fees
and investigative fees) incurred in enforcing such rights. In the event of an
uncured Event of Default by any party hereunder, interest shall accrue on all
unpaid amounts due the aggrieved party at the rate of 15% per annum, compounded
annually.
ARTICLE VII
MISCELLANEOUS
7.1 FEES AND EXPENSES. Except as set forth in this Agreement, each
party shall pay the fees and expenses of its advisers, counsel, accountants and
other experts, if any, and all other expenses incurred by such party incident to
the negotiation, preparation, execution, delivery and performance of this
Agreement. The Company shall pay the fees of the Escrow Agent and all stamp and
other taxes and duties levied in connection with the issuance of the Debentures
(and, upon conversion, the Underlying Shares) pursuant hereto. The Purchaser
shall be responsible for any taxes payable by the Purchaser that may arise as a
result of the investment hereunder or the transactions contemplated by this
23
Agreement or any other Transaction Document. Whether or not the transactions
contemplated hereby and thereby are consummated or this Agreement is terminated,
the Company shall pay (i) all costs, expenses, fees and all taxes incident to
and in connection with: (A) the preparation, printing and distribution of any
registration statement required hereunder and all amendments and supplements
thereto (including, without limitation, financial statements and exhibits), and
all preliminary and final Blue Sky memoranda and all other agreements,
memoranda, correspondence and other documents prepared and delivered in
connection herewith, (B) the issuance and delivery of the Securities, (C) the
exemption from registration of the Securities for offer and sale to the
Purchaser under the securities or Blue Sky laws of the applicable jurisdiction,
(D) furnishing such copies of any registration statement required hereunder, the
preliminary and final prospectuses and all amendments and supplements thereto,
as may reasonably be requested for use in connection with resales of the
Securities, and (E) the preparation of certificates for the Securities
(including, without limitation, printing and engraving thereof), (ii) all fees
and expenses of counsel and accountants of the Company and (iii) all expenses
and fees of listing on securities exchanges, if any.
7.2 ENTIRE AGREEMENT; AMENDMENTS. This Agreement, together with all of
the Exhibits and Schedules annexed hereto, and any other Transaction Document
contains the entire understanding of the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters. This Agreement shall be deemed to have
been drafted and negotiated by both parties hereto and no presumptions as to
interpretation, construction or enforceability shall be made by or against
either party in such regard.
7.3 NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be deemed to have been duly
given upon facsimile transmission (with written transmission confirmation
report) at the number designated below (if delivered on a Business Day during
normal business hours where such notice is to be received), or the first
Business Day following such delivery (if delivered other than on a Business Day
during normal business hours where such notice is to be received) whichever
shall first occur. The addresses for such communications shall be:
If to the Company: Sanjay Haryama
00000 Xxxxx Xxxx, Xxxxx X
Xxxx Xxxxx, Xxxxxxxxxx 00000
Attn: Xxx Hand
Tel: (000) 000-0000
Fax: (000) 000-0000
With copies to: Xxxxxx Gottbetter & Xxxxxxxx, LLP, or
its successors or assigns
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
24
If to the Purchaser: See SCHEDULE 1 attached hereto
With copies to: Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP, or
its successors or assigns
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Escrow Agent: Xxxxxx Xxxxxxxxxx & Xxxxxxxx, LLP, or
its successors or assigns
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Attn: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
or such other address as may be designated hereafter by notice given pursuant to
the terms of this Section 7.3.
7.4 AMENDMENTS; WAIVERS. No provision of this Agreement may be waived
or amended except in a written instrument signed, in the case of an amendment,
by both the Company and the Purchaser, or, in the case of a waiver, by the party
against whom enforcement of any such waiver is sought. No waiver of any default
with respect to any provision, condition or requirement of this Agreement shall
be deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right accruing to it thereafter.
7.5 HEADINGS. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
7.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. This Agreement and any of the rights, interests or
obligations hereunder may be assigned by the Purchaser without the consent of
the Company. This Agreement and any of the rights, interests or obligations
hereunder may not be assigned by the Company without the prior written consent
of the Purchaser.
7.7 NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
7.8 GOVERNING LAW; VENUE; SERVICE OF PROCESS. The parties hereto
acknowledge that the transactions contemplated by this Agreement and the
25
exhibits hereto bear a reasonable relation to the State of New York. The parties
hereto agree that the internal laws of the State of New York shall govern this
Agreement and the exhibits hereto, including, but not limited to, all issues
related to usury. Any action to enforce the terms of this Agreement or any of
its exhibits shall be brought exclusively in the state and/or federal courts
situate in the County and State of New York. Service of process in any action by
the Purchaser to enforce the terms of this Agreement may be made by serving a
copy of the summons and complaint, in addition to any other relevant documents,
by commercial overnight courier to the Company at its principal address set
forth in this Agreement.
7.9 SURVIVAL. The representations and warranties of the Company and the
Purchaser contained in Article III and the agreements and covenants of the
parties contained in Article IV and this Article VII shall survive the
Post-Closing (or any earlier termination of this Agreement).
7.10 COUNTERPART SIGNATURES. This Agreement may be executed in two or
more counterparts, all of which when taken together shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
7.11 PUBLICITY. The Company and the Purchaser shall consult with each
other in issuing any press releases or otherwise making public statements with
respect to the transactions contemplated hereby and neither party shall issue
any such press release or otherwise make any such public statement without the
prior written consent of the other, which consent shall not be unreasonably
withheld or delayed, unless counsel for the disclosing party deems such public
statement to be required by applicable federal and/or state securities laws.
Except as otherwise required by applicable law or regulation, the Company will
not disclose to any third party the names of the Purchaser.
7.12 SEVERABILITY. In case any one or more of the provisions of this
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affected or impaired thereby and the parties will attempt to agree
upon a valid and enforceable provision which shall be a reasonable substitute
therefore, and upon so agreeing, shall incorporate such substitute provision in
this Agreement.
7.13 LIMITATION OF REMEDIES. With respect to claims by the Company or
any person acting by or through the Company for remedies at law or at equity
relating to or arising out of a breach of this Agreement, liability, if any,
shall, in no event, include loss of profits or incidental, indirect, exemplary,
punitive, special or consequential damages of any kind.
7.14 OMNIBUS PROVISION. Anything contained herein or in the other
Transaction Documents notwithstanding, in the event that the Common Stock shall
become listed on the OTCBB and subsequently ceases to be listed for trading on
the OTCBB, then any reference thereto in this Agreement or the other Transaction
Documents shall be deemed to be a reference to (a) the principal national
securities exchange on which the Common Stock is then listed or admitted to
26
trading, or (b) if the Common Stock is not then listed or admitted to trading on
any national securities exchange, Nasdaq, or (c) if the Common Stock is not then
listed or admitted to trading on Nasdaq, then the over-the-counter market
reported by the Pinksheets LLC (or similar organization or agency succeeding to
its functions of reporting prices).
[SIGNATURE PAGE FOLLOWS]
27
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first indicated above.
Company:
Sanjay Haryama
By: ________________________
Name: Xxx Hand
Title: President
Purchaser:
HEM Mutual Assurance LLC
By: ________________________
Name: Xxxxxx Xxxxxxxx
Title: Manager
28
Schedule 1
PURCHASER(S)
--------------------------------------- -----------------------------
Name and Address of Purchaser Full Amount of Debentures
to be Purchased
--------------------------------------- -----------------------------
HEM Mutual Assurance LLC
One Xxxxx Center $1,000,000
0000 00xx Xxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
--------------------------------------- -----------------------------
29
Schedule 3.1(a)
SUBSIDIARIES
None.
30
Schedule 3.1(c)
CAPITALIZATION AND REGISTRATION RIGHTS
The articles of incorporation provide for unlimited authorization of the number
of shares of Common Stock and Preferred Stock. 1,000 shares of Common Stock are
outstanding.
31
Schedule 3.1(d)
EQUITY AND EQUITY EQUIVALENT SECURITIES
None.
32
Schedule 3.1(e)
CONFLICTS
None.
33
Schedule 3.1(f)
CONSENTS AND APPROVALS
SEC Filing - Form D
Colorado Blue Sky Filing (or exemption therefrom)
34
Schedule 3.1(g)
LITIGATION
None.
35
Schedule 3.1(h)
DEFAULTS AND VIOLATIONS
None.
36
Schedule 5.1
FORM 8-K DISCLOSURE OBLIGATIONS
None.
37
