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EXHIBIT 4.3
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), dated as of
December __, 2000, by and among Infotopia, Inc., a Nevada corporation, with
headquarters located at 000 Xxxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 (the
"COMPANY"), and each of the purchasers set forth on the signature pages hereto
(the "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by Rule 506 under Regulation D ("REGULATION D") as promulgated by the United
States Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 ACT");
B. Buyers desire to purchase and the Company desires to issue and
sell, upon the terms and conditions set forth in this Agreement (i) 12%
secured convertible debentures of the Company, in the form attached hereto as
EXHIBIT "A", in the aggregate principal amount of Six Hundred Thousand Dollars
($600,000) (together with any debenture(s) issued in replacement thereof or as
a dividend thereon or otherwise with respect thereto in accordance with the
terms thereof, the "DEBENTURES"), convertible into shares of common stock,
$0.001 par value per share, of the Company (the "COMMON STOCK"), upon the
terms and subject to the limitations and conditions set forth in such
Debentures and (ii) warrants, in the form attached hereto as EXHIBIT "B", to
purchase Two Million Four Hundred Thousand (2,400,000) shares of Common Stock
(the "WARRANTS");
C. Each Buyer wishes to purchase, upon the terms and conditions
stated in this Agreement, such principal amount of Debentures and number of
Warrants as is set forth immediately below its name on the signature pages
hereto; and
D. Contemporaneous with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights
Agreement, in the form attached hereto as EXHIBIT "C" (the "REGISTRATION
RIGHTS AGREEMENT"), pursuant to which the Company has agreed to provide
certain registration rights under the 1933 Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.
NOW THEREFORE, the Company and each of the Buyers severally (and not
jointly) hereby agree as follows:
1. PURCHASE AND SALE OF DEBENTURES AND WARRANTS.
a. PURCHASE OF DEBENTURES AND WARRANTS. On the
Closing Date (as defined below), the Company shall issue and sell to each
Buyer and each Buyer severally agrees to purchase from the Company such
principal amount of Debentures and number of Warrants as is set forth
immediately below such Buyer's name on the signature pages hereto.
b. FORM OF PAYMENT. On the Closing Date (as
defined below), (i) each Buyer shall pay the purchase price for the Debentures
and the Warrants to be issued and sold to it at the Closing (as defined below)
(the "PURCHASE PRICE") by wire transfer of immediately available funds (or as
otherwise mutually agreed) to the Company, in accordance with the Company's
written wiring instructions, against delivery of the Debentures in the
principal amount equal to the Purchase Price and the number of Warrants as is
set forth immediately below such Buyer's name on the signature pages hereto,
and (ii) the Company shall deliver such Debentures and Warrants duly executed
on behalf of the Company, to such Buyer, against delivery of such Purchase
Price.
c. CLOSING DATE. Subject to the satisfaction (or
waiver) of the conditions
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thereto set forth in Section 6 and Section 7 below, the date and time of the
issuance and sale of the Debentures and the Warrants pursuant to this
Agreement (the "CLOSING DATE") shall be 12:00 noon Eastern Standard Time on
December __, 2000 or such other mutually agreed upon time. The closing of the
transactions contemplated by this Agreement (the "CLOSING") shall occur on the
Closing Date at the offices of Xxxxx & Xxxxxxx LLP, 0 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, or at such other location as may be agreed to be the
parties.
2. BUYERS' REPRESENTATIONS AND WARRANTIES. Each Buyer
severally (and not jointly) represents and warrants to the Company solely as
to such Buyer that:
a. INVESTMENT PURPOSE. As of the date hereof, the
Buyer is purchasing the Debentures and the shares of Common Stock issuable
upon conversion of or otherwise pursuant to the Debentures (including, without
limitation, such additional shares of Common Stock, if any, as are issuable as
a result of the events described in Sections 1.3 and 1.4(g) of the Debentures
and Section 2(c) of the Registration Rights Agreement, such shares of Common
Stock being referred to herein as the "CONVERSION SHARES") and the Warrants
and the shares of Common Stock issuable upon exercise thereof (the "WARRANT
SHARES" and, collectively with the Debentures, Warrants and Conversion Shares,
the "SECURITIES") for its own account and not with a present view towards the
public sale or distribution thereof, except pursuant to sales registered or
exempted from registration under the 1933 Act; provided, however, that by
making the representations herein, the Buyer does not agree to hold any of the
Securities for any minimum or other specific term and reserves the right to
dispose of the Securities at any time in accordance with or pursuant to a
registration statement or an exemption under the 1933 Act.
b. ACCREDITED INVESTOR STATUS. The Buyer is an
"accredited investor" as that term is defined in Rule 501(a) of Regulation D
(an "ACCREDITED INVESTOR").
c. RELIANCE ON EXEMPTIONS. The Buyer understands
that the Securities are being offered and sold to it in reliance upon specific
exemptions from the registration requirements of United States federal and
state securities laws and that the Company is relying upon the truth and
accuracy of, and the Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Buyer set forth herein
in order to determine the availability of such exemptions and the eligibility
of the Buyer to acquire the Securities.
d. INFORMATION. The Buyer and its advisors, if
any, have been furnished with all materials relating to the business, finances
and operations of the Company and materials relating to the offer and sale of
the Securities which have been requested by the Buyer or its advisors. The
Buyer and its advisors, if any, have been afforded the opportunity to ask
questions of the Company. Neither such inquiries nor any other due diligence
investigation conducted by Buyer or any of its advisors or representatives
shall modify, amend or affect Buyer's right to rely on the Company's
representations and warranties contained in Section 3 below. The Buyer
understands that its investment in the Securities involves a significant
degree of risk.
e. GOVERNMENTAL REVIEW. The Buyer understands
that no United States federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or endorsement
of the Securities.
f. TRANSFER OR RE-SALE. The Buyer understands
that (i) except as provided in the Registration Rights Agreement, the sale or
re-sale of the Securities has not been and is not being registered under the
1933 Act or any applicable state securities laws, and the Securities may not
be transferred unless (a) the Securities are sold pursuant to an effective
registration statement under the 1933 Act, (b) the Buyer shall have delivered
to the Company an opinion of counsel (which opinion shall be in form,
substance and scope customary for opinions of counsel in comparable
transactions) to the effect that the Securities to be sold or transferred may
be sold or transferred pursuant to an exemption from such registration, (c)
the Securities are sold or transferred to an "affiliate" (as defined in Rule
144 promulgated
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under the 1933 Act (or a successor rule) ("RULE 144")) of the Buyer who agrees
to sell or otherwise transfer the Securities only in accordance with this
Section 2(f) and who is an Accredited Investor, or (d) the Securities are sold
pursuant to Rule 144; (ii) any sale of such Securities made in reliance on
Rule 144 may be made only in accordance with the terms of said Rule and
further, if said Rule is not applicable, any re-sale of such Securities under
circumstances in which the seller (or the person through whom the sale is
made) may be deemed to be an underwriter (as that term is defined in the 0000
Xxx) may require compliance with some other exemption under the 1933 Act or
the rules and regulations of the SEC thereunder; and (iii) neither the Company
nor any other person is under any obligation to register such Securities under
the 1933 Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to
the Registration Rights Agreement). Notwithstanding the foregoing or anything
else contained herein to the contrary, the Securities may be pledged as
collateral in connection with a bona fide margin account or other lending
arrangement.
g. LEGENDS. The Buyer understands that the
Debentures and the Warrants and, until such time as the Conversion Shares and
Warrant Shares have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement or otherwise may be sold pursuant to Rule 144
without any restriction as to the number of securities as of a particular date
that can then be immediately sold, the Conversion Shares and Warrant Shares
may bear a restrictive legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the certificates for
such Securities):
"The securities represented by this certificate have not
been registered under the Securities Act of 1933, as
amended. The securities may not be sold, transferred or
assigned in the absence of an effective registration
statement for the securities under said Act, or an opinion
of counsel, in form, substance and scope customary for
opinions of counsel in comparable transactions, that
registration is not required under said Act or unless sold
pursuant to Rule 144 under said Act."
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon
which it is stamped, if, unless otherwise required by applicable state
securities laws, (a) such Security is registered for sale under an effective
registration statement filed under the 1933 Act or otherwise may be sold
pursuant to Rule 144 without any restriction as to the number of securities as
of a particular date that can then be immediately sold, or (b) such holder
provides the Company with an opinion of counsel, in form, substance and scope
customary for opinions of counsel in comparable transactions, to the effect
that a public sale or transfer of such Security may be made without
registration under the 1933 Act and such sale or transfer is effected or (c)
such holder provides the Company with reasonable assurances that such Security
can be sold pursuant to Rule 144. The Buyer agrees to sell all Securities,
including those represented by a certificate(s) from which the legend has been
removed, in compliance with applicable prospectus delivery requirements, if
any.
h. AUTHORIZATION; ENFORCEMENT. This Agreement and
the Registration Rights Agreement have been duly and validly authorized. This
Agreement has been duly executed and delivered on behalf of the Buyer, and
this Agreement constitutes, and upon execution and delivery by the Buyer of
the Registration Rights Agreement, such agreement will constitute, valid and
binding agreements of the Buyer enforceable in accordance with their terms.
i. RESIDENCY. The Buyer is a resident of the
jurisdiction set forth immediately below such Buyer's name on the signature
pages hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to each Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company
and each of its Subsidiaries (as defined below), if any, is a corporation duly
organized, validly existing and in good
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standing under the laws of the jurisdiction in which it is incorporated, with
full power and authority (corporate and other) to own, lease, use and operate
its properties and to carry on its business as and where now owned, leased,
used, operated and conducted. SCHEDULE 3(a) sets forth a list of all of the
Subsidiaries of the Company and the jurisdiction in which each is
incorporated. The Company and each of its Subsidiaries is duly qualified as a
foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership or use of property or the nature of the
business conducted by it makes such qualification necessary except where the
failure to be so qualified or in good standing would not have a Material
Adverse Effect. "MATERIAL ADVERSE EFFECT" means any material adverse effect on
the business, operations, assets, financial condition or prospects of the
Company or its Subsidiaries, if any, taken as a whole, or on the transactions
contemplated hereby or by the agreements or instruments to be entered into in
connection herewith. "SUBSIDIARIES" means any corporation or other
organization, whether incorporated or unincorporated, in which the Company
owns, directly or indirectly, any equity or other ownership interest.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company
has all requisite corporate power and authority to enter into and perform this
Agreement, the Registration Rights Agreement, the Debentures and the Warrants
and to consummate the transactions contemplated hereby and thereby and to
issue the Securities, in accordance with the terms hereof and thereof, (ii)
the execution and delivery of this Agreement, the Registration Rights
Agreement, the Debentures and the Warrants by the Company and the consummation
by it of the transactions contemplated hereby and thereby (including without
limitation, the issuance of the Debentures and the Warrants and the issuance
and reservation for issuance of the Conversion Shares and Warrant Shares
issuable upon conversion or exercise thereof) have been duly authorized by the
Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its shareholders is required, (iii) this
Agreement has been duly executed and delivered by the Company, and (iv) this
Agreement constitutes, and upon execution and delivery by the Company of the
Registration Rights Agreement, the Debentures and the Warrants, each of such
instruments will constitute, a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms.
c. CAPITALIZATION. As of the date hereof, the
authorized capital stock of the Company consists of (i) __________ shares of
Common Stock, of which __________ shares are issued and outstanding,
__________ shares are reserved for issuance pursuant to the Company's stock
option plans, __________ shares are reserved for issuance pursuant to
securities (other than the Debentures and the Warrants) exercisable for, or
convertible into or exchangeable for shares of Common Stock and __________
shares are reserved for issuance upon conversion of the Debentures and
exercise of the Warrants (subject to adjustment pursuant to the Company's
covenant set forth in Section 4(h) below); and (ii) __________ shares of
preferred stock, _____ of which _______ shares are issued and outstanding, [of
which (a) _____ shares have been designated as Series __ Preferred Stock,
_____ of which are issued and outstanding, (b) _____ shares have been
designated as Series __ Preferred Stock, _____ of which are issued and
outstanding and (c) _____ shares have been designated as Series __ Preferred
Stock, _____ of which are issued and outstanding.] All of such outstanding
shares of capital stock are, or upon issuance will be, duly authorized,
validly issued, fully paid and nonassessable. No shares of capital stock of
the Company are subject to preemptive rights or any other similar rights of
the stockholders of the Company or any liens or encumbrances imposed through
the actions or failure to act of the Company. Except as disclosed in SCHEDULE
3(c), as of the effective date of this Agreement, (i) there are no outstanding
options, warrants, scrip, rights to subscribe for, puts, calls, rights of
first refusal, agreements, understandings, claims or other commitments or
rights of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for any shares of capital stock of the
Company or any of its Subsidiaries, or arrangements by which the Company or
any of its Subsidiaries is or may become bound to issue additional shares of
capital stock of the Company or any of its Subsidiaries, (ii) there are no
agreements or arrangements under which the Company or any of its Subsidiaries
is obligated to register the sale of any of its or their securities under the
1933 Act (except the Registration Rights Agreement) and (iii) there are no
anti-dilution or price adjustment provisions contained in any security issued
by the Company (or in any agreement providing rights to security holders) that
will be triggered by the issuance of the Debentures, the
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Warrants, the Conversion Shares or Warrant Shares. The Company has furnished
to the Buyer true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("CERTIFICATE OF
INCORPORATION"), the Company's By-laws, as in effect on the date hereof (the
"BY-LAWS"), and the terms of all securities convertible into or exercisable
for Common Stock of the Company and the material rights of the holders thereof
in respect thereto. The Company shall provide the Buyer with a written update
of this representation signed by the Company's Chief Executive or Chief
Financial Officer on behalf of the Company as of the Closing Date.
d. ISSUANCE OF SHARES. The Conversion Shares and
Warrant Shares are duly authorized and reserved for issuance and, upon
conversion of the Debentures and exercise of the Warrants in accordance with
their respective terms, will be validly issued, fully paid and non-assessable,
and free from all taxes, liens, claims and encumbrances with respect to the
issue thereof and shall not be subject to preemptive rights or other similar
rights of stockholders of the Company and will not impose personal liability
upon the holder thereof.
e. ACKNOWLEDGMENT OF DILUTION. The Company
understands and acknowledges the potentially dilutive effect to the Common
Stock upon the issuance of the Conversion Shares and Warrant Shares upon
conversion of the Debenture, or exercise of the Warrants. The Company further
acknowledges that its obligation to issue Conversion Shares and Warrant Shares
upon conversion of the Debentures or exercise of the Warrants in accordance
with this Agreement, the Debentures 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.
f. NO CONFLICTS. The execution, delivery and
performance of this Agreement, the Registration Rights Agreement, the
Debentures and the Warrants by the Company and the consummation by the Company
of the transactions contemplated hereby and thereby (including, without
limitation, the issuance and reservation for issuance of the Conversion Shares
and Warrant Shares) will not (i) conflict with or result in a violation of any
provision of the Certificate of Incorporation or By-laws or (ii) violate or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent, patent
license or instrument to which the Company or any of its Subsidiaries is a
party, or (iii) result in a violation of any law, rule, regulation, order,
judgment or decree (including federal and state securities laws and
regulations and regulations of any self-regulatory organizations to which the
Company or its securities are subject) applicable to the Company or any of its
Subsidiaries or by which any property or asset of the Company or any of its
Subsidiaries is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a Material Adverse Effect).
Neither the Company nor any of its Subsidiaries is in violation of its
Certificate of Incorporation, By-laws or other organizational documents and
neither the Company nor any of its Subsidiaries is in default (and no event
has occurred which with notice or lapse of time or both could put the Company
or any of its Subsidiaries in default) under, and neither the Company nor any
of its Subsidiaries has taken any action or failed to take any action that
would give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company
or any of its Subsidiaries is a party or by which any property or assets of
the Company or any of its Subsidiaries is bound or affected, except for
possible defaults as would not, individually or in the aggregate, have a
Material Adverse Effect. The businesses of the Company and its Subsidiaries,
if any, are not being conducted, and shall not be conducted so long as a Buyer
owns any of the Securities, in violation of any law, ordinance or regulation
of any governmental entity. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court,
governmental agency, regulatory agency, self regulatory organization or stock
market or any third party in order for it to execute, deliver or perform any
of its obligations under this Agreement, the Registration Rights Agreement,
the Debentures or the Warrants in accordance with the terms hereof or thereof
or to issue and sell the Debentures and Warrants in accordance with the terms
hereof and to issue
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the Conversion Shares upon conversion of the Debentures and the Warrant Shares
upon exercise of the Warrants. Except as disclosed in SCHEDULE 3(f), all
consents, authorizations, orders, filings and registrations which the Company
is required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. The Company is not in violation of
the listing requirements of the Over-the-Counter Bulletin Board (the "OTCBB")
and does not reasonably anticipate that the Common Stock will be delisted by
the OTCBB in the foreseeable future. The Company and its Subsidiaries are
unaware of any facts or circumstances which might give rise to any of the
foregoing.
g. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since
February 29, 1998, the Company has timely filed all reports, schedules, forms,
statements and other documents required to be filed by it with the SEC
pursuant to the reporting requirements of the Exchange Act of 1934, as amended
(the "1934 ACT") (all of the foregoing filed prior to the date hereof and all
exhibits included therein and financial statements and schedules thereto and
documents (other than exhibits to such documents) incorporated by reference
therein, being hereinafter referred to herein as the "SEC DOCUMENTS"). The
Company has delivered to each Buyer true and complete copies of the SEC
Documents, except for such exhibits and incorporated documents. As of their
respective dates, the SEC Documents complied in all material respects with the
requirements of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the SEC, contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have
been amended or updated in subsequent filings prior the date hereof). As of
their respective dates, the financial statements of the Company included in
the SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto. Such financial statements have been prepared in
accordance with United States generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of the
Company and its consolidated 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). Except as set forth in the financial statements of the Company
included in the SEC Documents, the Company has no liabilities, contingent or
otherwise, other than (i) liabilities incurred in the ordinary course of
business subsequent to February 29, 2000 and (ii) obligations under contracts
and commitments incurred in the ordinary course of business and not required
under generally accepted accounting principles to be reflected in such
financial statements, which, individually or in the aggregate, are not
material to the financial condition or operating results of the Company.
h. ABSENCE OF CERTAIN CHANGES. Since February 29,
2000, there has been no material adverse change and no material adverse
development in the assets, liabilities, business, properties, operations,
financial condition, results of operations or prospects of the Company or any
of its Subsidiaries.
i. ABSENCE OF LITIGATION. There is no action,
suit, claim, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the Company or any of its Subsidiaries, threatened
against or affecting the Company or any of its Subsidiaries, or their officers
or directors in their capacity as such, that could have a Material Adverse
Effect. SCHEDULE 3(i) contains a complete list and summary description of any
pending or threatened proceeding against or affecting the Company or any of
its Subsidiaries, without regard to whether it would have a Material Adverse
Effect. The Company and its Subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
j. PATENTS, COPYRIGHTS, ETC.
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(i) The Company and each of its
Subsidiaries owns or possesses the requisite licenses or rights to use all
patents, patent applications, patent rights, inventions, know-how, trade
secrets, trademarks, trademark applications, service marks, service names,
trade names and copyrights ("INTELLECTUAL PROPERTY") necessary to enable it to
conduct its business as now operated (and, except as set forth in SCHEDULE
3(j) hereof, to the best of the Company's knowledge, as presently contemplated
to be operated in the future); there is no claim or action by any person
pertaining to, or proceeding pending, or to the Company's knowledge
threatened, which challenges the right of the Company or of a Subsidiary with
respect to any Intellectual Property necessary to enable it to conduct its
business as now operated (and, except as set forth in SCHEDULE 3(j) hereof, to
the best of the Company's knowledge, as presently contemplated to be operated
in the future); to the best of the Company's knowledge, the Company's or its
Subsidiaries' current and intended products, services and processes do not
infringe on any Intellectual Property or other rights held by any person; and
the Company is unaware of any facts or circumstances which might give rise to
any of the foregoing. The Company and each of its Subsidiaries have taken
reasonable security measures to protect the secrecy, confidentiality and value
of their Intellectual Property.
(ii) All of the Company's computer
software and computer hardware, and other similar or related items of
automated, computerized or software systems that are used or relied on by the
Company in the conduct of its business or that were, or currently are being,
sold or licensed by the Company to customers (collectively, "INFORMATION
TECHNOLOGY"), are Year 2000 Compliant. For purposes of this Agreement, the
term "YEAR 2000 COMPLIANT" means, with respect to the Company's Information
Technology, that the Information Technology is designed to be used prior to,
during and after the calendar Year 2000 A.D., and the Information Technology
used during each such time period will accurately receive, provide and process
date and time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the 20th and 21st centuries, including the
years 1999 and 2000, and leap-year calculations, and will not malfunction,
cease to function, or provide invalid or incorrect results as a result of the
date or time data, to the extent that other information technology, used in
combination with the Information Technology, properly exchanges date and time
data with it. The Company has delivered to the Buyers true and correct copies
of all analyses, reports, studies and similar written information, whether
prepared by the Company or another party, relating to whether the Information
Technology is Year 2000 Compliant.
k. NO MATERIALLY ADVERSE CONTRACTS, ETC. Neither
the Company nor any of its Subsidiaries is subject to any charter, corporate
or other legal restriction, or any judgment, decree, order, rule or regulation
which in the judgment of the Company's officers has or is expected in the
future to have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries is a party to any contract or agreement which in the judgment of
the Company's officers has or is expected to have a Material Adverse Effect.
l. TAX STATUS. Except as set forth on SCHEDULE
3(l), the Company and each of its Subsidiaries has made or filed all federal,
state and foreign income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject (unless and only to the
extent that the Company and each of its Subsidiaries has set aside on its
books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments
and charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provisions reasonably adequate for the payment
of all taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. There are no unpaid taxes in any material
amount claimed to be due by the taxing authority of any jurisdiction, and the
officers of the Company know of no basis for any such claim. The Company has
not executed a waiver with respect to the statute of limitations relating to
the assessment or collection of any foreign, federal, statue or local tax.
Except as set forth on SCHEDULE 3(l), none of the Company's tax returns is
presently being audited by any taxing authority.
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m. CERTAIN TRANSACTIONS. Except as set forth on
SCHEDULE 3(m) and except for arm's length transactions pursuant to which the
Company or any of its Subsidiaries makes payments in the ordinary course of
business upon terms no less favorable than the Company or any of its
Subsidiaries could obtain from third parties and other than the grant of stock
options disclosed on SCHEDULE 3(c), none of the officers, directors, or
employees of the Company is presently a party to any transaction with the
Company or any of its Subsidiaries (other than for services as employees,
officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity
in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
n. DISCLOSURE. All information relating to or
concerning the Company or any of its Subsidiaries set forth in this Agreement
and provided to the Buyers pursuant to Section 2(d) hereof and otherwise in
connection with the transactions contemplated hereby is true and correct in
all material respects and the Company has not omitted to state any material
fact necessary in order to make the statements made herein or therein, in
light of the circumstances under which they were made, not misleading. No
event or circumstance has occurred or exists with respect to the Company or
any of its Subsidiaries or its or their business, properties, prospects,
operations or financial conditions, which, under applicable law, rule or
regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed (assuming for this
purpose that the Company's reports filed under the 1934 Act are being
incorporated into an effective registration statement filed by the Company
under the 1933 Act).
o. ACKNOWLEDGMENT REGARDING BUYERS' PURCHASE OF
SECURITIES. The Company acknowledges and agrees that the Buyers are acting
solely in the capacity of arm's length purchasers with respect to this
Agreement and the transactions contemplated hereby. The Company further
acknowledges that no Buyer is acting as a financial advisor or fiduciary of
the Company (or in any similar capacity) with respect to this Agreement and
the transactions contemplated hereby and any statement made by any Buyer or
any of their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is not advice or a
recommendation and is merely incidental to the Buyers' purchase of the
Securities. The Company further represents to each Buyer that the Company's
decision to enter into this Agreement has been based solely on the independent
evaluation of the Company and its representatives.
p. NO INTEGRATED OFFERING. Neither the Company,
nor any of its affiliates, nor any person acting on its or their behalf, has
directly or indirectly made any offers or sales in any security or solicited
any offers to buy any security under circumstances that would require
registration under the 1933 Act of the issuance of the Securities to the
Buyers. The issuance of the Securities to the Buyers will not be integrated
with any other issuance of the Company's securities (past, current or future)
for purposes of any stockholder approval provisions applicable to the Company
or its securities.
q. NO BROKERS. The Company has taken no action
which would give rise to any claim by any person for brokerage commissions,
transaction fees or similar payments relating to this Agreement or the
transactions contemplated hereby.
r. PERMITS; COMPLIANCE. The Company and each of
its Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), and there is no action pending or, to the knowledge of the Company,
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict with, or in
default or violation of, any of the Company Permits, except for any such
conflicts, defaults or violations which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect.
9
Since December 31, 1999, neither the Company nor any of its Subsidiaries has
received any notification with respect to possible conflicts, defaults or
violations of applicable laws, except for notices relating to possible
conflicts, defaults or violations, which conflicts, defaults or violations
would not have a Material Adverse Effect.
s. ENVIRONMENTAL MATTERS.
(i) Except as set forth in SCHEDULE
3(s), there are, to the Company's knowledge, with respect to the Company or
any of its Subsidiaries or any predecessor of the Company, no past or present
violations of Environmental Laws (as defined below), releases of any material
into the environment, actions, activities, circumstances, conditions, events,
incidents, or contractual obligations which may give rise to any common law
environmental liability or any liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 or similar federal, state,
local or foreign laws and neither the Company nor any of its Subsidiaries has
received any notice with respect to any of the foregoing, nor is any action
pending or, to the Company's knowledge, threatened in connection with any of
the foregoing. The term "ENVIRONMENTAL LAWS" means all federal, state, local
or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without
limitation, laws relating to emissions, discharges, releases or threatened
releases of chemicals, pollutants contaminants, or toxic or hazardous
substances or wastes (collectively, "HAZARDOUS MATERIALS") into the
environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(ii) Other than those that are or were
stored, used or disposed of in compliance with applicable law, no Hazardous
Materials are contained on or about any real property currently owned, leased
or used by the Company or any of its Subsidiaries, and no Hazardous Materials
were released on or about any real property previously owned, leased or used
by the Company or any of its Subsidiaries during the period the property was
owned, leased or used by the Company or any of its Subsidiaries, except in the
normal course of the Company's or any of its Subsidiaries' business.
(iii) Except as set forth in SCHEDULE
3(s), there are no underground storage tanks on or under any real property
owned, leased or used by the Company or any of its Subsidiaries that are not
in compliance with applicable law.
t. TITLE TO PROPERTY. The Company and its
Subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them which is
material to the business of the Company and its Subsidiaries, in each case
free and clear of all liens, encumbrances and defects except such as are
described in SCHEDULE 3(t) or such as would not have a Material Adverse
Effect. Any real property and facilities held under lease by the Company and
its Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as would not have a Material Adverse Effect.
u. INSURANCE. The Company and each of its
Subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the Company
and its Subsidiaries are engaged. Neither the Company nor any such Subsidiary
has any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at
a cost that would not have a Material Adverse Effect.
v. INTERNAL ACCOUNTING CONTROLS. The Company and
each of its Subsidiaries maintain a system of internal accounting controls
sufficient, in the judgment of the Company's board of
10
directors, to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
w. FOREIGN CORRUPT PRACTICES. Neither the
Company, nor any of its Subsidiaries, nor any director, officer, agent,
employee or other person acting on behalf of the Company or any Subsidiary
has, in the course of his actions for, or on behalf of, the Company, used any
corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee
from corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign
or domestic government official or employee.
x. SOLVENCY. The Company (both before and after
giving effect to the transactions contemplated by this Agreement) is solvent
(i.e., its assets have a fair market value in excess of the amount required to
pay its probable liabilities on its existing debts as they become absolute and
matured) and currently the Company has no information that would lead it to
reasonably conclude that the Company would not have the ability to, nor does
it intend to take any action that would impair its ability to, pay its debts
from time to time incurred in connection therewith as such debts mature. The
Company did not receive a qualified opinion from its auditors with respect to
its most recent fiscal year end and does not anticipate or know of any basis
upon which its auditors might issue a qualified opinion in respect of its
current fiscal year.
y. NO INVESTMENT COMPANY. The Company is not, and
upon the issuance and sale of the Securities as contemplated by this Agreement
will not be an "investment company" required to be registered under the
Investment Company Act of 1940 (an "INVESTMENT COMPANY"). The Company is not
controlled by an Investment Company.
4. COVENANTS.
a. BEST EFFORTS. The parties shall use their best
efforts to satisfy timely each of the conditions described in Section 6 and 7
of this Agreement.
b. FORM D; BLUE SKY LAWS. The Company agrees to
file a Form D with respect to the Securities as required under Regulation D
and to provide a copy thereof to each Buyer promptly after such filing. The
Company shall, on or before the Closing Date, take such action as the Company
shall reasonably determine is necessary to qualify the Securities for sale to
the Buyers at the applicable closing pursuant to this Agreement under
applicable securities or "blue sky" laws of the states of the United States
(or to obtain an exemption from such qualification), and shall provide
evidence of any such action so taken to each Buyer on or prior to the Closing
Date.
c. REPORTING STATUS; ELIGIBILITY TO USE FORM S-3.
The Company's Common Stock is registered under Section 12(g) of the 1934 Act.
So long as any Buyer beneficially owns any of the Securities, the Company
shall timely file all reports required to be filed with the SEC pursuant to
the 1934 Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act or the rules
and regulations thereunder would permit such termination. Henceforth, the
Company will take all necessary action to meet, the "registrant eligibility"
requirements set forth in the general instructions to Form S-3.
d. USE OF PROCEEDS. The Company shall use the
proceeds from the sale of the Debentures and the Warrants in the manner set
forth in SCHEDULE 4(d) attached hereto and made a part
11
hereof and shall not, directly or indirectly, use such proceeds for any loan
to or investment in any other corporation, partnership, enterprise or other
person (except in connection with its currently existing direct or indirect
Subsidiaries).
e. FUTURE OFFERINGS. Subject to the exceptions
described below, the Company will not, without the prior written consent of a
majority-in-interest of the Buyers, negotiate or contract with any party to
obtain additional equity financing (including debt financing with an equity
component) that involves (A) the issuance of Common Stock at a discount to the
market price of the Common Stock on the date of issuance (taking into account
the value of any warrants or options to acquire Common Stock issued in
connection therewith) or (B) the issuance of convertible securities that are
convertible into an indeterminate number of shares of Common Stock or (C) the
issuance of warrants during the period (the "LOCK-UP PERIOD") beginning on the
Closing Date and ending on the later of (i) one hundred eighty (180) days from
the Closing Date and (ii) one hundred fifty (150) days from the date the
Registration Statement (as defined in the Registration Rights Agreement) is
declared effective (plus any days in which sales cannot be made thereunder). In
addition, subject to the exceptions described below, the Company will not
conduct any equity financing (including debt with an equity component) ("FUTURE
OFFERINGS") during the period beginning on the Closing Date and ending two (2)
years after the end of the Lock-up Period unless it shall have first delivered
to each Buyer, at least fifteen (15) business days prior to the closing of such
Future Offering, written notice describing the proposed Future Offering,
including the terms and conditions thereof and proposed definitive documentation
to be entered into in connection therewith, and providing each Buyer an option
during the ten (10) day period following delivery of such notice to purchase its
pro rata share (based on the ratio that the aggregate principal amount of
Debentures purchased by it hereunder bears to the aggregate principal amount of
Debentures purchased hereunder) of the securities being offered in the Future
Offering on the same terms as contemplated by such Future Offering (the
limitations referred to in this sentence and the preceding sentence are
collectively referred to as the "CAPITAL RAISING LIMITATIONS"). In the event the
terms and conditions of a proposed Future Offering are amended in any respect
after delivery of the notice to the Buyers concerning the proposed Future
Offering, the Company shall deliver a new notice to each Buyer describing the
amended terms and conditions of the proposed Future Offering and each Buyer
thereafter shall have an option during the ten (10) day period following
delivery of such new notice to purchase its pro rata share of the securities
being offered on the same terms as contemplated by such proposed Future
Offering, as amended. The foregoing sentence shall apply to successive
amendments to the terms and conditions of any proposed Future Offering. The
Capital Raising Limitations shall not apply to any transaction involving (i)
issuances of securities in a firm commitment underwritten public offering
(excluding a continuous offering pursuant to Rule 415 under the 0000 Xxx) or
(ii) issuances of securities as consideration for a merger, consolidation or
purchase of assets, or in connection with any strategic partnership or joint
venture (the primary purpose of which is not to raise equity capital), or in
connection with the disposition or acquisition of a business, product or license
by the Company. The Capital Raising Limitations also shall not apply to the
issuance of securities upon exercise or conversion of the Company's options,
warrants or other convertible securities outstanding as of the date hereof or to
the grant of additional options or warrants, or the issuance of additional
securities, under any Company stock option or restricted stock plan approved by
the Stockholders of the Company. In the event that the Company completes a
Future Offering on terms more favorable than the transaction contemplated
hereby, the terms of the Debentures and the Warrants will be amended to reflect
such more favorable terms.
f. EXPENSES. At the Closing, the Company shall
reimburse Buyers for expenses incurred by it in connection with the
negotiation, preparation, execution, delivery and performance of this
Agreement and the other agreements to be executed in connection herewith,
including, without limitation, attorneys' and consultants' fees and expenses.
g. FINANCIAL INFORMATION. The Company agrees to
send the following reports to each Buyer until such Buyer transfers, assigns,
or sells all of the Securities: (i) within ten (10) days after the filing with
the SEC, a copy of its Annual Report on Form 10-KSB, its Quarterly Reports on
Form 10-QSB and any Current Reports on Form 8-K; (ii) within one (1) day after
release, copies of all press releases
12
issued by the Company or any of its Subsidiaries; and (iii) contemporaneously
with the making available or giving to the stockholders of the Company, copies
of any notices or other information the Company makes available or gives to
such stockholders.
h. RESERVATION OF SHARES. The Company shall at
all times have authorized, and reserved for the purpose of issuance, a
sufficient number of shares of Common Stock to provide for the full conversion
or exercise of the outstanding Debentures and Warrants and issuance of the
Conversion Shares and Warrant Shares in connection therewith (based on the
Conversion Price of the Debentures or Exercise Price of the Warrants in effect
from time to time) and as otherwise required by the Debentures. The Company
shall not reduce the number of shares of Common Stock reserved for issuance
upon conversion of Debentures and exercise of the Warrants without the consent
of each Buyer. The Company shall use its best efforts at all times to maintain
the number of shares of Common Stock so reserved for issuance at no less than
the greater of (a) 20,000,0000 or (b) two (2) times the number that is then
actually issuable upon full conversion of the Debentures and upon exercise of
the Warrants (based on the Conversion Price of the Debentures or the Exercise
Price of the Warrants in effect from time to time). If at any time the number
of shares of Common Stock authorized and reserved for issuance is below the
number of Conversion Shares and Warrant Shares issued and issuable upon
conversion of the Debentures and exercise of the Warrants (based on the
Conversion Price of the Debentures or the Exercise Price of the Warrants then
in effect), the Company will promptly take all corporate action necessary to
authorize and reserve a sufficient number of shares, including, without
limitation, calling a special meeting of stockholders to authorize additional
shares to meet the Company's obligations under this Section 4(h), in the case
of an insufficient number of authorized shares, and using its best efforts to
obtain stockholder approval of an increase in such authorized number of
shares.
i. LISTING. The Company shall promptly secure the
listing of the Conversion Shares and Warrant Shares upon each national
securities exchange or automated quotation system, if any, upon which shares
of Common Stock are then listed (subject to official notice of issuance) and,
so long as any Buyer owns any of the Securities, shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all
Conversion Shares and Warrant Shares from time to time issuable upon
conversion of the Debentures or exercise of the Warrants. The Company will
obtain and, so long as any Buyer owns any of the Securities, maintain the
listing and trading of its Common Stock on the OTCBB, the Nasdaq National
Market ("NASDAQ"), the Nasdaq SmallCap Market ("NASDAQ SMALLCAP"), the New
York Stock Exchange ("NYSE"), or the American Stock Exchange ("AMEX") and will
comply in all respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the National Association of
Securities Dealers ("NASD") and such exchanges, as applicable. The Company
shall promptly provide to each Buyer copies of any notices it receives from
the OTCBB and any other exchanges or quotation systems on which the Common
Stock is then listed regarding the continued eligibility of the Common Stock
for listing on such exchanges and quotation systems.
j. CORPORATE EXISTENCE. So long as a Buyer
beneficially owns any Debentures or Warrants, the Company shall maintain its
corporate existence and shall not sell all or substantially all of the
Company's assets, except in the event of a merger or consolidation or sale of
all or substantially all of the Company's assets, where the surviving or
successor entity in such transaction (i) assumes the Company's obligations
hereunder and under the agreements and instruments entered into in connection
herewith and (ii) is a publicly traded corporation whose Common Stock is
listed for trading on the OTCBB, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.
k. NO INTEGRATION. The Company shall not make any
offers or sales of any security (other than the Securities) under
circumstances that would require registration of the Securities being offered
or sold hereunder under the 1933 Act or cause the offering of the Securities
to be integrated with any other offering of securities by the Company for the
purpose of any stockholder approval provision applicable to the Company or its
securities.
l. STOCKHOLDER APPROVAL. The Company shall, at
its next special or annual
13
meeting of stockholders, which will be held not later than ________ __, 2001,
obtain such approvals of the Company's stockholders as may be required to
authorize, reserve and issue all of the Conversion Shares and Warrants Shares
in accordance with applicable law (the "STOCKHOLDER APPROVAL"). The Company
shall comply with the filing and disclosure requirements of Section 14 under
the Exchange Act, and the rules and regulations thereunder, in connection with
the solicitation, acquisition and disclosure of the Stockholder Approval. The
Company represents and warrants that its Board of Directors has approved, and
will recommend that the Company's stockholders approve, the proposal
contemplated by this Section 4(m) and shall so indicate such recommendation in
the proxy statement used to solicit the Stockholder Approval. The Company
shall use its best efforts to cause its officers and directors to vote in
favor of the proposal contemplated by this Section 4(l).
5. TRANSFER AGENT INSTRUCTIONS. The Company shall issue
irrevocable instructions to its transfer agent to issue certificates,
registered in the name of each Buyer or its nominee, for the Conversion Shares
and Warrant Shares in such amounts as specified from time to time by each
Buyer to the Company upon conversion of the Debentures or exercise of the
Warrants in accordance with the terms thereof (the "IRREVOCABLE TRANSFER AGENT
INSTRUCTIONS"). Prior to registration of the Conversion Shares and Warrant
Shares under the 1933 Act or the date on which the Conversion Shares and
Warrant Shares may be sold pursuant to Rule 144 without any restriction as to
the number of Securities as of a particular date that can then be immediately
sold, all such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no instruction other
than the Irrevocable Transfer Agent Instructions referred to in this Section
5, and stop transfer instructions to give effect to Section 2(f) hereof (in
the case of the Conversion Shares and Warrant Shares, prior to registration of
the Conversion Shares and Warrant Shares under the 1933 Act or the date on
which the Conversion Shares and Warrant Shares may be sold pursuant to Rule
144 without any restriction as to the number of Securities as of a particular
date that can then be immediately sold), will be given by the Company to its
transfer agent and that the Securities shall otherwise be freely transferable
on the books and records of the Company as and to the extent provided in this
Agreement and the Registration Rights Agreement. Nothing in this Section shall
affect in any way the Buyer's obligations and agreement set forth in Section
2(g) hereof to comply with all applicable prospectus delivery requirements, if
any, upon re-sale of the Securities. If a Buyer provides the Company with (i)
an opinion of counsel in form, substance and scope customary for opinions in
comparable transactions, to the effect that a public sale or transfer of such
Securities may be made without registration under the 1933 Act and such sale
or transfer is effected or (ii) the Buyer provides reasonable assurances that
the Securities can be sold pursuant to Rule 144, the Company shall permit the
transfer, and, in the case of the Conversion Shares and Warrant Shares,
promptly instruct its transfer agent to issue one or more certificates, free
from restrictive legend, in such name and in such denominations as specified
by such Buyer. The Company acknowledges that a breach by it of its obligations
hereunder will cause irreparable harm to the Buyers, by vitiating the intent
and purpose of the transactions contemplated hereby. Accordingly, the Company
acknowledges that the remedy at law for a breach of its obligations under this
Section 5 will be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of this Section, that the
Buyers shall be entitled, in addition to all other available remedies, to an
injunction restraining any breach and requiring immediate transfer, without
the necessity of showing economic loss and without any bond or other security
being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL. The
obligation of the Company hereunder to issue and sell the Debentures and
Warrants to a Buyer at the Closing is subject to the satisfaction, at or
before the Closing Date of each of the following conditions thereto, provided
that these conditions are for the Company's sole benefit and may be waived by
the Company at any time in its sole discretion:
a. The applicable Buyer shall have executed this
Agreement and the Registration Rights Agreement, and delivered the same to the
Company.
b. The applicable Buyer shall have delivered the
Purchase Price in accordance
14
with Section 1(b) above.
c. The representations and warranties of the
applicable Buyer shall be true and correct in all material respects as of the
date when made and as of the Closing Date as though made at that time (except
for representations and warranties that speak as of a specific date), and the
applicable Buyer shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the applicable Buyer
at or prior to the Closing Date.
d. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by or in any court or governmental authority
of competent jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the consummation of any
of the transactions contemplated by this Agreement.
7. CONDITIONS TO EACH BUYER'S OBLIGATION TO PURCHASE. The
obligation of each Buyer hereunder to purchase the Debentures and Warrants at
the Closing is subject to the satisfaction, at or before the Closing Date of
each of the following conditions, provided that these conditions are for such
Buyer's sole benefit and may be waived by such Buyer at any time in its sole
discretion:
a. The Company shall have executed this Agreement
and the Registration Rights Agreement, and delivered the same to the Buyer.
b. The Company shall have delivered to such Buyer
duly executed Debentures (in such denominations as the Buyer shall request)
and Warrants in accordance with Section 1(b) above.
c. The Irrevocable Transfer Agent Instructions, in
form and substance satisfactory to a majority-in-interest of the Buyers, shall
have been delivered to and acknowledged in writing by the Company's Transfer
Agent.
d. The representations and warranties of the
Company shall be true and correct in all material respects as of the date when
made and as of the Closing Date as though made at such time (except for
representations and warranties that speak as of a specific date) and the
Company shall have performed, satisfied and complied in all material respects
with the covenants, agreements and conditions required by this Agreement to be
performed, satisfied or complied with by the Company at or prior to the
Closing Date. The Buyer shall have received a certificate or certificates,
executed by the chief executive officer of the Company, dated as of the
Closing Date, to the foregoing effect and as to such other matters as may be
reasonably requested by such Buyer including, but not limited to certificates
with respect to the Company's Certificate of Incorporation, By-laws and Board
of Directors' resolutions relating to the transactions contemplated hereby.
e. No litigation, statute, rule, regulation,
executive order, decree, ruling or injunction shall have been enacted,
entered, promulgated or endorsed by or in any court or governmental authority
of competent jurisdiction or any self-regulatory organization having authority
over the matters contemplated hereby which prohibits the consummation of any
of the transactions contemplated by this Agreement.
f. The Conversion Shares and Warrant Shares shall
have been authorized for quotation on the OTCBB and trading in the Common
Stock on the OTCBB shall not have been suspended by the SEC or the OTCBB.
g. The Buyer shall have received an opinion of the
Company's counsel, dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in
15
substantially the same form as EXHIBIT "D" attached hereto.
h. The Buyer shall have received an officer's
certificate described in Section 3(c) above, dated as of the Closing Date.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. THIS AGREEMENT SHALL BE
ENFORCED, GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITH
SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES
HERETO HEREBY SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES
FEDERAL COURTS LOCATED IN NEW YORK, NEW YORK WITH RESPECT TO ANY DISPUTE
ARISING UNDER THIS AGREEMENT, THE AGREEMENTS ENTERED INTO IN CONNECTION
HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. BOTH PARTIES
IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH SUIT OR PROCEEDING. BOTH PARTIES FURTHER AGREE THAT SERVICE OF PROCESS
UPON A PARTY MAILED BY FIRST CLASS MAIL SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON THE PARTY IN ANY SUCH SUIT OR PROCEEDING.
NOTHING HEREIN SHALL AFFECT EITHER PARTY'S RIGHT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW. BOTH PARTIES AGREE THAT A FINAL NON-APPEALABLE
JUDGMENT IN ANY SUCH SUIT OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON SUCH JUDGMENT OR IN ANY OTHER
LAWFUL MANNER. THE PARTY WHICH DOES NOT PREVAIL IN ANY DISPUTE ARISING UNDER
THIS AGREEMENT SHALL BE RESPONSIBLE FOR ALL FEES AND EXPENSES, INCLUDING
ATTORNEYS' FEES, INCURRED BY THE PREVAILING PARTY IN CONNECTION WITH SUCH
DISPUTE.
b. COUNTERPARTS; SIGNATURES BY FACSIMILE. This
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party. This Agreement, once executed by
a party, may be delivered to the other party hereto by facsimile transmission
of a copy of this Agreement bearing the signature of the party so delivering
this Agreement.
c. HEADINGS. The headings of this Agreement are
for convenience of reference only and shall not form part of, or affect the
interpretation of, this Agreement.
d. SEVERABILITY. In the event that any provision
of this Agreement is invalid or enforceable under any applicable statute or
rule of law, then such provision shall be deemed inoperative to the extent
that it may conflict therewith and shall be deemed modified to conform with
such statute or rule of law. Any provision hereof which may prove invalid or
unenforceable under any law shall not affect the validity or enforceability of
any other provision hereof.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement
and the instruments referenced herein contain the entire understanding of the
parties with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Buyer
makes any representation, warranty, covenant or undertaking with respect to
such matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
f. NOTICES. Any notices required or permitted to
be given under the terms of this Agreement shall be sent by certified or
registered mail (return receipt requested) or delivered personally or by
courier (including a recognized overnight delivery service) or by facsimile
and shall be
16
effective five days after being placed in the mail, if mailed by regular
United States mail, or upon receipt, if delivered personally or by courier
(including a recognized overnight delivery service) or by facsimile, in each
case addressed to a party. The addresses for such communications shall be:
If to the Company:
Infotopia, Inc.
000 Xxxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Chief Executive Officer
Telephone:
Facsimile:
Email:
With copy to:
Xxxxx & Xxxxxxx LLP
0 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: 000-000-0000
Facsimile: 000-000-0000
Email: xxxxxx@xxxxxxxx.xxx
If to a Buyer: To the address set forth immediately below such
Buyer's name on the signature pages hereto.
Each party shall provide notice to the other party of any change in
address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon and inure to the benefit of the parties and their successors
and assigns. Neither the Company nor any Buyer shall assign this Agreement or
any rights or obligations hereunder without the prior written consent of the
other. Notwithstanding the foregoing, subject to Section 2(f), any Buyer may
assign its rights hereunder to any person that purchases Securities in a
private transaction from a Buyer or to any of its "affiliates," as that term
is defined under the 1934 Act, without the consent of the Company.
h. THIRD PARTY BENEFICIARIES. This Agreement is
intended for the benefit of the parties hereto and their respective permitted
successors and assigns, and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
i. SURVIVAL. The representations and warranties
of the Company and the agreements and covenants set forth in Sections 3, 4, 5
and 8 shall survive the closing hereunder notwithstanding any due diligence
investigation conducted by or on behalf of the Buyers. The Company agrees to
indemnify and hold harmless each of the Buyers and all their officers,
directors, employees and agents for loss or damage arising as a result of or
related to any breach or alleged breach by the Company of any of its
representations, warranties and covenants set forth in Sections 3 and 4 hereof
or any of its covenants and obligations under this Agreement or the
Registration Rights Agreement, including advancement of expenses as they are
incurred.
j. PUBLICITY. The Company and each of the Buyers
shall have the right to review a reasonable period of time before issuance of
any press releases, SEC, OTCBB or NASD filings, or any other public statements
with respect to the transactions contemplated hereby; provided, however, that
the Company shall be entitled, without the prior approval of each of the
Buyers, to make any press release or SEC, OTCBB (or other applicable trading
market) or NASD filings with respect to such transactions as is required by
applicable law and regulations (although each of the Buyers shall be
17
consulted by the Company in connection with any such press release prior to
its release and shall be provided with a copy thereof and be given an
opportunity to comment thereon).
k. FURTHER ASSURANCES. Each party shall do and
perform, or cause to be done and performed, all such further acts and things,
and shall execute and deliver all such other agreements, certificates,
instruments and documents, as the other party may reasonably request in order
to carry out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
l. NO STRICT CONSTRUCTION. The language used in
this Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will be
applied against any party.
m. REMEDIES. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
Buyers by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law for a
breach of its obligations under this Agreement will be inadequate and agrees,
in the event of a breach or threatened breach by the Company of the provisions
of this Agreement, that the Buyers shall be entitled, in addition to all other
available remedies at law or in equity, and in addition to the penalties
assessable herein, to an injunction or injunctions restraining, preventing or
curing any breach of this Agreement and to enforce specifically the terms and
provisions hereof, without the necessity of showing economic loss and without
any bond or other security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
IN WITNESS WHEREOF, the undersigned Buyers and the Company have
caused this Agreement to be duly executed as of the date first above written.
INFOTOPIA, INC.
By:
------------------------------------
Xxxxxx Xxxxx
Chairman and Chief Executive Officer
ALTEA INVESTMENTS, LTD.
By:
------------------------------------
Name:
Title:
RESIDENCE: British Virgin Islands
ADDRESS:
Altea Investments, Ltd.
Xxxxxxxxx Xxxxxxxx
XX Xxx 00
Xxxxxxxx, Xxxxxxx, Xxxxxxx Xxxxxx Xxxxxxx
AGGREGATE SUBSCRIPTION AMOUNT:
Aggregate Principal Amount of Debentures: $ 600,000
Number of Warrants: 2,400,000
Aggregate Purchase Price: $ 600,000
