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EXHIBIT 10.50
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (the "AGREEMENT"), dated as of March 25,
1999, by and among HomeCom Communications, Inc., a Delaware corporation, with
headquarters located at Fourteen Piedmont Center, Suite 100, 0000 Xxxxxxxx Xxxx,
Xxxxxxx, Xxxxxxx 00000 (the "COMPANY"), and the investor listed on the Schedule
of Buyers attached hereto (individually, a "BUYER" or collectively "BUYERS").
WHEREAS:
A. The Company and the Buyers are executing and delivering this
Agreement in reliance upon the exemption from securities registration pursuant
to Section 4(2) and/or Regulation D ("REGULATION D") at the sole election of
Buyer in the event that a registration statement filed by the Company pursuant
to Section 2(a) of the Registration Rights Agreement (described below) is not
declared effective by the Registration Deadline (as defined therein) as
promulgated by the U.S. Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 ACT") by the Registration Deadline
(as defined in the Registration Rights Agreement);
B. The Company has authorized the following new series of its
Preferred Xxxxx, x.0000 par value per share (the "PREFERRED STOCK"): the
Company's Series B Convertible Preferred Stock (the "SERIES B PREFERRED
SHARES"), which shall be convertible into shares of the Company's Common Stock,
$.0001 par value per share (the "COMMON STOCK") (as converted, the "CONVERSION
SHARES"), in accordance with the terms of the Company Certificate of
Designations, Preferences, and Rights of the Series B Preferred Shares,
substantially in the form attached hereto as Exhibit "A" (the "CERTIFICATE OF
DESIGNATIONS");
C. The Buyer wishes to purchase, upon the terms and conditions
stated in this Agreement, an aggregate amount of up to 125 shares of Series B
Preferred Stock in the respective amounts set forth opposite each Buyer's name
on the Schedule of Buyers;
D. Contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially in the form attached hereto as Exhibit "B" (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; and
E. The holders of Series B Preferred Shares and shall receive
stock purchase warrants to acquire shares of Common Stock substantially in the
form attached as Exhibit "C."
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NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. PURCHASE AND SALE OF SERIES B PREFERRED STOCK.
a. Purchase of Series B Preferred Stock. Subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and
7 below, the Company shall issue and sell to the Buyers and the Buyers
shall purchase from the Company an aggregate principal amount of
______________ shares of Series B Preferred Stock and Warrants, in the
respective amounts set forth opposite each Buyer's name on the Schedule
of Buyers (the "CLOSING").
b. Closing Date. The date and time of the Closing (the
"CLOSING DATE") shall be 10:00 a.m. Eastern Standard Time, within five
(5) business days following the date hereof, subject to notification of
satisfaction (or waiver) of the conditions to the Closing set forth in
Sections 6 and 7 below (or such later date as is mutually agreed to by
the Company and the Buyer). The Closing shall occur on the Closing Date
at the offices of Xxxx Xxxx Xxxxx & Xxxxx LLP, 000 Xxxxxxxxx Xxxx
Xxxxxx, Xxxxx 000, 0000 Xxxxxxxxx Xxxx, X.X., Xxxxxxx, Xxxxxxx 00000.
c. Form of Payment. On the Closing Date, (i) each Buyer
shall pay the Purchase Price to the Company for the Series B Preferred
Shares to be issued and sold to such Buyer at the Closing, by wire
transfer of immediately available funds in accordance with the
Company's written wire instructions, and (ii) the Company shall deliver
to each Buyer, certificates representing such Series B Preferred Stock
and Warrants which such Buyer is then purchasing (as indicated opposite
such Buyer's name on the Schedule of Buyers), duly executed on behalf
of the Company and registered in the name of such Buyer or its designee
(the "CERTIFICATES").
2. BUYER'S REPRESENTATIONS AND WARRANTEES.
Each Buyer represents and warrants with respect to only itself that:
a. Investment Purpose. Such Buyer (i) is acquiring the
Series B Preferred Shares, (ii) upon conversion of the Series B
Preferred Shares, will acquire the Conversion Shares then issuable, and
any Warrants, (iii) will acquire any Warrants issuable, and (iv) upon
exercise of the Warrants, will acquire the shares of Common Stock
issuable upon exercise thereof (the "WARRANT SHARES") for its own
account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by making the representations herein, such Buyer does not
agree to hold any Series B Preferred Shares or Conversion Shares for
any minimum or other specific term and reserves the right to dispose of
Series B Preferred Shares, Conversion Shares, Warrants, or Warrant
Shares at any time in accordance with or pursuant to a registration
statement or an exemption under the 1933 Act.
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b. Accredited Investor Status. Such Buyer is an
"accredited investor" as that term is defined in Rule 501(a)(3) of
Regulation D.
c. Reliance on Exemptions. Such Buyer understands that
the Series B Preferred Shares, the Conversion Shares, the Warrants, and
the Warrant Shares are being offered and sold to it in reliance on
specific exemptions from the registration requirements of United States
federal and state securities laws and that the Company is relying in
part upon the truth and accuracy of, and such Buyer's compliance with,
the representations, warranties, agreements, acknowledgments and
understandings of such Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of such Buyer to
acquire such securities.
d. Information. Such 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 Series B Preferred Shares, the Conversion Shares,
the Warrants, and the Warrant Shares, which have been requested by such
Buyer. Such 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 investigations conducted by such Buyer or its
advisors, if any, or its representatives shall modify, amend or affect
such Buyer's right to rely on the Company's representations and
warranties contained in Section 3 below. Such Buyer understands that
its investment in the Series B Preferred Shares, the Conversion Shares,
the Warrants, and the Warrant Shares involves a high degree of risk.
Such Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with
respect to its acquisition of the Series B Preferred Shares, the
Conversion Shares, the Warrants, and the Warrant Shares.
e. No Governmental Review. Such Buyer understands that
no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or
endorsement of the Series B Preferred Shares, the Conversion Shares,
the Warrants, and the Warrant Shares or the fairness or suitability of
the investment in the Series B Preferred Shares and the Conversion
Shares, nor have such authorities passed upon or endorsed the merits of
the offering of the Series B Preferred Shares and the Conversion
Shares.
f. Transfer or Resale. Such Buyer understands that
except as provided in the Registration Rights Agreement: (i) the Series
B Preferred Shares and the Conversion Shares have not been and are not
being registered under the 1933 Act or any state securities laws, and
may not be offered for sale, sold, assigned or transferred unless (a)
subsequently registered thereunder, (b) such Buyer shall have delivered
to the Company an opinion of counsel, in a generally acceptable form,
to the effect that such securities to be sold, assigned or transferred
may be sold, assigned or transferred pursuant to an exemption from such
registration, or (c) such Buyer provides the Company with reasonable
assurance that such securities can be sold, assigned or transferred
pursuant to Rule 144 or promulgated under the 1933 Act (or a successor
rule thereto); (ii) any sale of such securities made in reliance on
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Rule 144 promulgated under the 1933 Act (or a successor rule thereto)
("RULE 144") may be made only in accordance with the terms of Rule 144
and further, if Rule 144 is not applicable, any resale 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.
g. Legends. Such Buyer understands that the certificates
or other instruments representing the Series B Preferred Shares, the
Warrants and, until such time as the sale of the Conversion Shares and
Warrants have been registered under the 1933 Act as contemplated by the
Registration Rights Agreement, the stock certificates representing the
Conversion Shares, and the Warrant Shares shall bear a restrictive
legend in substantially the following form (and a stoptransfer order
may be placed against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, OR
AN OPINION OF COUNSEL, IN A REASONABLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE
SECURITIES LAWS 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 the
Series B Preferred Shares, the Conversion Shares, the Warrants, or the
Warrant Shares upon which it is stamped, if, unless otherwise required
by state securities laws, (i) the sale of the Conversion Shares or the
Warrant Shares is registered under the 1933 Act, (ii) in connection
with a sale transaction, such holder provides the Company with an
opinion of counsel, in an acceptable form, to the effect that a public
sale, assignment or transfer of the Series B Preferred Shares, the
Conversion Shares, the Warrants, or the Warrant Shares may be made
without registration under the 1933 Act, or (iii) such holder provides
the Company with reasonable assurances that the Series B Preferred
Shares, the Conversion Shares, the Warrants, or the Warrant Shares can
be sold pursuant to Rule 144 without any restriction as to the number
of securities acquired as of a particular date that can then be
immediately sold.
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h. Authorization, Enforcement. This Agreement has been
duly and validly authorized, executed and delivered on behalf of such
Buyer and is a valid and binding agreement of such Buyer enforceable in
accordance with its terms, subject as enforceability to general
principles of equity and to applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation and other similar laws relating
to, or affecting generally, the enforcement of applicable creditors'
rights and remedies.
i. Residency. Such Buyer is a resident of that
country specified in its address on the Schedule of Buyers.
j. No Scheme to Evade Registration. Buyer
represents and warrants to the Company that the acquisition of the
Series B Preferred Stock and the Conversion Shares is not a transaction
(or any element of a series of transactions) that is part of a plan or
scheme by the Buyer to evade the registration provisions of the 1933
Act.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyers that:
a. Organization and Qualification. The Company and its
subsidiaries are corporations duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power to own their
properties and to carry on their business as now being conducted. Each
of the Company and its subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
b. Authorization, Enforcement, Compliance with Other
Instruments. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration
Rights Agreement and any related agreements, and to issue the Series B
Preferred Shares, the Conversion Shares, the Warrants, and the Warrant
Shares in accordance with the terms hereof and thereof, (ii) the
execution and delivery of this Agreement, the Registration Rights
Agreement and any related agreements by the Company and the
consummation by it of the transactions contemplated hereby and thereby,
including without limitation the issuance of the Series B Preferred
Shares and the Warrants and the reservation for issuance and the
issuance of the Conversion Shares and the 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 is
required by the Company, its Board of Directors or its stockholders,
(iii) this Agreement and the Registration Rights Agreement and any
related agreements have been duly executed and delivered by the
Company, (iv) this Agreement, the Registration Rights Agreement and any
related agreements constitute the valid and binding obligations of the
Company enforceable against
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the Company in accordance with their terms, except as such
enforceability may be limited by general principles of equity or
applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies, and (v) prior to the
Closing Date, the Certificate of Designations has been filed with the
Secretary of State of the State of Delaware and will be in full force
and effect, 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 15,000,000 shares of Common
Stock, of which as of the date hereof 6,399,571 were issued and
outstanding, and 1,000,000 shares of Preferred Stock of which no series
of Preferred Stock or debentures or notes were issued and outstanding.
All of such outstanding shares have been validly issued and are fully
paid and nonassessable. Except as disclosed in Schedule 3(c), no shares
of Common Stock or preferred stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or
permitted by 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 to, calls or commitments
of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the Company or any of
its subsidiaries, or contracts, commitments, understandings 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 or options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into, any shares of capital
stock of the Company or any of its subsidiaries, (ii) there are no
outstanding debt securities and (iii) there are no agreements or
arrangements under which the Company or any of its subsidiaries is
obligated to register the sale of any of their securities under the
1933 Act (except the Registration Rights Agreement). There are no
securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Series B
Preferred Shares, the Conversion Shares, the Warrants, or the Warrant
Shares as described in this Agreement. The Company has furnished to the
Buyer true and correct copies of the Company's Certificate of
Incorporation, as amended and as in effect on the date hereof (the
"CERTIFICATE OF INCORPORATION"), and 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 and the
material rights of the holders thereof in respect thereto.
d. Issuance of Securities. The Series B Preferred Shares
are duly authorized and, upon issuance in accordance with the terms
hereof, shall be (i) validly issued, fully paid and nonassessable, are
free from all taxes, liens and charges with respect to the issue
thereof and are entitled to the rights and preferences set forth in the
Series B Preferred Shares. The Conversion Shares issuable upon
conversion of the Series B Preferred Shares have been duly authorized
and reserved for issuance. Upon conversion or exercise in accordance
with the Series B Preferred Shares or the Warrants, the Conversion
Shares and the Warrant Shares will be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges
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with respect to the issue thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock.
e. No Conflicts. Except as disclosed in Schedule 3(e),
the execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby will not (i) result in a material violation of the
Certificate of Incorporation, any Certificate of Designations,
Preferences, and Rights of any outstanding series of preferred stock of
the Company or By-laws or (ii) 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 material agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party,
or result in a violation of any law, rule, regulation, order, judgment
or decree (including federal and state securities laws and regulations
and the rules and regulations of the principal market or exchange on
which the Common Stock is traded or listed) 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 as
disclosed in Schedule 3(e), neither the Company nor its subsidiaries is
in violation of any term of or in default under its Certificate of
Incorporation or Bylaws or their organizational charter or by-laws,
respectively, or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree or order or any
statute, rule or regulation applicable to the Company or its
subsidiaries. The business of the Company and its subsidiaries is not
being conducted, and shall not be conducted in violation of any law,
ordinance, 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 or governmental agency in order
for it to execute, deliver or perform any of its obligations under or
contemplated by this Agreement or the Registration Rights Agreement in
accordance with the terms hereof or thereof except as disclosed in
Schedule 3(e), 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.
f. SEC Documents: Financial Statements. Since January 1,
1999, the Company has 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 Securities 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 incorporated by reference therein,
being hereinafter referred to as the "SEC DOCUMENTS"). The Company has
delivered to the Buyer or its representative true and complete copies
of the SEC Documents. As of their respective dates, the financial
statements of the Company attached as Schedule 3(f) hereto (the
"FINANCIAL STATEMENTS") 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 generally accepted accounting
principles,
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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 exclude footnotes or may be condensed or summary statements) and
fairly present in all material respects the financial position of the
Company as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
g. Absence of Certain Changes. Except as disclosed in
Schedule 3(g), since January 1, 1999, there has been no material
adverse change and no material adverse development in the business,
properties, operations, financial condition, results of operations or
prospects of the Company or its subsidiaries. The Company has not taken
any steps, and does not currently expect to take any steps, to seek
protection pursuant to any bankruptcy law nor does the Company or its
subsidiaries have any knowledge or reason to believe that its creditors
intend to initiate involuntary bankruptcy proceedings.
h. Absence of Litigation. There is no action, suit,
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, the Common Stock or any of
the Company's subsidiaries, wherein an unfavorable decision, ruling or
finding would (i) have a material adverse effect on the transactions
contemplated hereby (ii) adversely affect the validity or
enforceability of, or the authority or ability of the Company to
perform its obligations under, this Agreement or any of the documents
contemplated herein or (iii), except as expressly set forth in Schedule
3(h), have a material adverse effect on the business, operations,
properties, financial condition or results of operation of the Company
and its subsidiaries taken as a whole.
i. Acknowledgment Regarding Buyer's Purchase of
Series B Preferred Shares. The Company acknowledges and agrees that the
Buyer is acting solely in the capacity of an arm's length purchaser
with respect to this Agreement and the transactions contemplated
hereby.
j. No Undisclosed Events, Liabilities,
Developments or Circumstances. No event, liability, development or
circumstance has occurred or exists, or is contemplated to occur, with
respect to the Company or its subsidiaries or their respective
business, properties, prospects, operations or financial condition,
which could be material but which has not been publicly announced or
disclosed in writing to the Buyer.
k. No General Solicitation. Neither the Company, nor any
of its affiliates, nor any person acting on its or their behalf, has
engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D under the 0000 Xxx) in connection
with the offer or sale of the Series B Preferred Shares, the Conversion
Shares, the Warrants, or the Warrant Shares. The Company represents
that it has not offered the Series B Preferred
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Stock or Conversion Shares to the Buyer in the U.S. or, to the best
knowledge of the Company, to any person in the United States or any
U.S. person.
1. 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 of any security or
solicited any offers to buy any security, under circumstances that
would require registration of the Series B Preferred Shares, the
Conversion Shares, the Warrants, and the Warrant Shares under the 1933
Act or cause this offering of Series B Preferred Shares, the Conversion
Shares, the Warrants, or the Warrant Shares to be integrated with prior
offerings by the Company for purposes of the 1933 Act or any applicable
stockholder approval provisions.
m. Employee Relations. Neither the Company nor any of
its subsidiaries is involved in any labor dispute nor, to the knowledge
of the Company or any of its subsidiaries, is any such dispute
threatened. None of the Company's or its subsidiaries' employees is a
member of a union and the Company and its subsidiaries believe that
their relations with their employees are good.
n. Title. 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(n) or such as do not materially affect
the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries. 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 are not material and do
not interfere with the use made and proposed to be made of such
property and buildings by the Company and its subsidiaries.
o. Regulatory Permits. The Company and its subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary
to conduct their respective businesses, and neither the Company nor any
such subsidiary has received any notice of proceedings relating to the
revocation or modification of any such certificate, authorization or
permit.
p. Tax Status. Except as set forth on Schedule 3(p), the
Company and each of its subsidiaries has made or filed all federal and
state 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 provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
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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.
q. Fees and Rights of First Refusal. The Company is not
obligated to offer the securities offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not
limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.
r. Shareholder Approval. The Company covenants
to submit to its, shareholders at its next shareholder meeting a
proposal for ratification of the issuance of the Series B Preferred
Stock and the Conversion Shares, if and as required by the rules of the
National Association of Securities Dealers, Inc. (the "NASD")
applicable to the transaction or in the event of a Triggering Event as
defined in the Certificate of Designations, the Company covenants to
use its best efforts to seek to obtain Stockholder Approval (as defined
in the Certificate of Designations) for approval to issue additional
shares of Common Stock in excess of the Maximum Share Amounts (as
defined in the Certificate of Designations).
s. Defaults. No default by the Company or, to the best
knowledge of the Company, any other party exists in the due performance
under any material agreements to which the Company is a party or to
which any of its assets is subject (collectively, the "Company
Agreements"). The Company Agreements are in full force and effect in
accordance with their respective terms.
(t) No Violation. The Company is not in violation of: (i)
its charter or by-laws; (ii) any material indenture, mortgage, deed or
trust, note, or other agreement or instrument to which the Company is a
party of by which it is or may be bound or to which any of its assets
may be subject; (iii) any material statute, rule, or regulation; or
(iv) any judgment, decree, or order applicable to the Company, in which
violation or violations, individually or in the aggregate, might result
in any material adverse change in the condition (financial or
otherwise) or prospects of the Company.
(u) Intellectual Property. To the best knowledge of the
Company, the Company owns all right, title, and interest in, or
possesses adequate and enforceable rights to use, all patents, patent
applications, trademarks, trade names, service marks, copyrights,
rights, licenses, franchises, trade secrets, confidential information,
processes, and formulations necessary for the conduct of its business
(collectively, the "INTANGIBLES"). To the best knowledge of the
Company, it has not infringed upon the rights of others with respect to
the Intangibles and the Company has not received notice that it has or
may have infringed or is infringing upon the rights of others with
respect to the Intangibles, or any notice of conflict with the asserted
rights of others with respect to the Intangibles which could,
individually, or in the aggregate, materially and adversely affect the
condition (financial or otherwise) or prospects of the Company. To the
best knowledge of the Company, no others have infringed upon the
Intangibles.
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(v) Finders, Etc. The Company is not obligated to pay,
and has not obligated the Buyer to pay, a finder's or origination fee
in connection with the Offering and agrees to indemnify the Buyer from
any such claim made by any other person.
4. COVENANTS.
a. Best Efforts. Each party shall use its best efforts
timely to satisfy each of the conditions to be satisfied by it as
provided in this Agreement.
b. Form D. The Company agrees to file a Form D with
respect to the Series B Preferred Shares and the Conversion Shares 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 Series B Preferred Shares and the Conversion
Shares for, or obtain exemption for the Series B Preferred Shares and
the Conversion Shares for, sale to the Buyers at the Closing pursuant
to this Agreement under applicable securities or "Blue Sky" laws of the
states of the United States, and shall provide evidence of any such
action so taken to the Buyers on or prior to the Closing Date.
c. Reporting Status. Until the earlier of (i) the date
as of which the Investors (as that term is defined in the Registration
Rights Agreement) may sell all of the Conversion Shares without
restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or
successor thereto), or (ii) the date on which (A) the Investors shall
have sold all the Conversion Shares and (B) none of the Series B
Preferred Shares is outstanding (the "REGISTRATION PERIOD"), the
Company shall 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 otherwise
permit such termination.
d. Use of Proceeds. The Company will use the proceeds
from the sale of the Series B Preferred Shares for substantially the
same purposes and in substantially the same amounts as indicated in
Schedule 4(d).
e. Financial Information. The Company agrees to send the
following to each Buyer during the Registration Period: (i) within five
(5) days after the filing thereof with the SEC, a copy of its Annual
Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current
Reports on Form 8-K and any registration statements or amendments filed
pursuant to the 1933 Act; (ii) within one (1) day after release
thereof, copies of all press releases issued by the Company or any of
its subsidiaries and (ii) copies of the same notices and other
information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders.
-11-
12
f. Reservation of Shares. The Company shall
take all action necessary to at all times have authorized, and reserved
for the purpose of issuance, no less than 100% of the number of shares
of Common Stock needed to provide for the issuance of the Conversion
Shares and Warrant Shares; provided that all shares of the Common Stock
authorized and not otherwise reserved for other purposes as of the date
hereof shall be reserved for the purpose of issuance of the Conversion
Shares.
g. Listings. The Company shall promptly secure the
listing of all Registrable Securities (as defined in the Registration
Rights Agreement) 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 shall maintain, so
long as any other shares of Common Stock shall be so listed, such
listing of all Conversion Shares from time to time issuable under the
terms of this Agreement and the Registration Rights Agreement. The
Company shall maintain the Common Stock's authorization for quotation
in the over-the counter market. The Company shall promptly provide to
each Buyer copies of any notices it receives regarding the continued
eligibility of the Common Stock for trading on the Nasdaq SmallCap
Market(TM).
h. Expenses. Except as provided in Section 9.o. herein.
Each of the Company and the Buyer shall pay all costs and expenses
(including legal fees and disbursements) incurred by such party in
connection with the negotiation, investigation, preparation, execution
and delivery of this Agreement, the Registration Rights Agreement, and
all related documents.
i. Additional Financing; Right of First
Refusal. The Company shall not consummate any equity financing
(including any debt financing with an equity component) or issue any
equity securities of the Company or securities convertible or
exchangeable into or for equity securities of the Company or securities
convertible or exchangeable into or for equity securities of the
Company (including any debt securities with an equity component) in any
form ("FUTURE OFFERINGS") during the period beginning on the date
hereof and ending on March 24, 2000, unless it shall have first
delivered to each Buyer or designees appointed by such Buyer, written
notice (the "FUTURE OFFERING NOTICE") describing the proposed Future
Offering in reasonable detail, including the terms and conditions
thereof, and providing each Buyer an option to participate in such
financing or purchase such securities, on the same terms and conditions
thereof, up to its Series B Aggregate Percentage (as defined below) of
the Series B Financing Amount (as defined below), as of the date of
delivery of the Future Offering Notice, in the Future Offering (the
limitations referred to in this sentence are collectively referred to
as the "CAPITAL RAISING LIMITATION"). In addition to the foregoing
limitation on Future Offerings, during the period beginning on the date
hereof and ending ninety (90) days from the Issuance Date (as defined
in the Certificate of Designations), the Company shall not consummate
any Future Offerings without the written consent of a majority of the
then existing holders of Series B Convertible Preferred Stock, which
consent shall not be unreasonably withheld. Such holders agreed to
respond to the Company's request within five (5) days of receipt of
notice requesting consent by the
-12-
13
Company. For purposes of this Section 4(i), "SERIES B AGGREGATE
PERCENTAGE" at any time with respect to any Buyer shall mean the
percentage obtained by dividing (i) the aggregate number of Conversion
Shares issued or issuable, as if a conversion occurred on such date,
upon conversion of the Series B Preferred Shares then owned by such
Buyer by (ii) the aggregate number of Conversion Shares issued or
issuable, as if a conversion occurred on such date, upon conversion of
all of the Series B Preferred Shares initially held by all of the
Buyers. For purposes of this Section 4(i), "SERIES B FINANCING AMOUNT"
shall mean shall mean $2,500,000. A Buyer can exercise its option to
participate in a Future Offering by delivering written notice thereof
to participate to the Company within ten (10) days of receipt of a
Future Offering Notice, which notice shall state the quantity of
securities being offered in the Future Offering that such Buyer will
purchase, up to its Series B Aggregate Percentage of the Series B
Financing Amount, and that number of securities it is willing to
purchase in excess thereof. In the event the Company has not sold such
securities of the Future Offering within the sixty (60) day period
after the receipt of the Future Offering Notice, the Company shall not
thereafter issue or sell such securities without first offering such
securities to the Buyers in the manner provided in this Section 4(i).
The Capital Raising Limitations provided herein shall not apply to (i)
a loan from a commercial bank, (ii) any transaction involving the
Company's issuances of securities in connection with (A) a merger,
consolidation or sale of assets, (B) any strategic partnership, joint
venture, or relationship (the primary purpose of which is not to raise
equity capital), or (C) the disposition or acquisition of a business,
product, or license by the Company, (iii) the issuance of securities
pursuant to (A) a firm commitment, underwritten public offering, (B)
upon exercise or conversion of the Company's options, warrants, or
other convertible securities outstanding as of the date hereof or
issued after the date hereof not in violation of this Agreement, (C)
the grant of additional options or warrants or the issuance of
additional securities, under any Company stock option or restricted
stock plan for the benefit of the Company's employees, directors, or
consultants which such plan exists as of the date hereof and is set
forth in any disclosure schedule attached hereto, or (iv) any issuance
of securities or financing whereby the net consideration received or to
be received by the Company and any of its subsidiaries is less than
$500,000 in (i) any single transaction, (ii) any series of related
transactions, or (iii) series of unrelated transactions to the same
person or entity or to a group of persons and/or entities acting in
concert.
(j) No Short Sales of the Common Stock. So long as (i) a
Buyer or any of its affiliates beneficially owns any of Series B
Preferred Shares, (ii) the Company has not issued any publicly traded
convertible securities and (iii) the Issuer is not in material default
under the terms of the Series B Preferred Shares, each Buyer and its
affiliates shall not directly or indirectly engage in any short sales
or third party short sales of the Company's Common Stock or hold a "put
equivalent position" with respect to the Common Stock (as defined in
Rule 16a-1 under the 1934 Act). Notwithstanding anything contained to
the contrary in this Section 4(j), in the event that following date
hereof the Company enters into a private placement transaction (other
than in connection with employee benefit plans, employee or consultant
compensation, or in connection with mergers and acquisitions) which
permits the investors rights to engage in short sales of Common Stock,
the restrictions contained in this
-13-
14
Section 4(j) shall be automatically modified to permit the Buyer to
engage in short sales of Common Stock substantially to the extent
permitted by the Company with respect to such private placement
investors and to the extent permitted by applicable law.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent
to issue certificates, registered in the name of the Buyer or its respective
nominee(s), for the Conversion Shares and Warrant Shares in such amounts as
specified from time to time by the Buyer to the Company upon conversion of the
Series B Preferred Shares or exercise of the Warrants (the "IRREVOCABLE TRANSFER
AGENT INSTRUCTIONS"), or exercise of the Warrants. Prior to registration of the
Conversion Shares and Warrant Shares under the 1933 Act, 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 such shares under the 0000 Xxx) will be
given by the Company to its transfer agent and that the Series B Preferred
Shares, the Conversion Shares, the Warrants, and the Warrant Shares shall
otherwise be freely transferable on the books and records of the Company as and
to the extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section 5 shall affect in any way the Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of the
Series B Preferred Shares, the Conversion Shares, the Warrants, and the Warrant
Shares. If the Buyer provides the Company with an opinion of counsel,
satisfactory in form, and substance to the Company, that registration of a
resale by the Buyer of any of the Series B Preferred Shares, the Conversion
Shares, the Warrants, or the Warrant Shares is not required under the 1933 Act,
the Company shall permit the transfer, and, in the case of the Conversion Shares
or the Warrant Shares, promptly instruct its transfer agent to issue one or more
certificates in such name and in such denominations as specified by the Buyer.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the Series B
Preferred Shares to the Buyer 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 the Company's sole benefit and may be waived by the
Company at any time in its sole discretion:
a. The Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
b. The Certificate of Designations shall have been filed
with the Secretary of State of the State of Delaware.
c. The Buyer shall have delivered to the Company the
Purchase Price for the Series B Preferred Shares being purchased by the
Buyer at the Closing by wire transfer of immediately available funds
pursuant to the wire instructions provided by the Company.
-14-
15
d. The representations and warranties of the 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 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 Buyer at
or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer hereunder to purchase the Series B
Preferred Shares 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 the Buyer's sole benefit and may be waived by the 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 Common Stock shall be authorized for quotation on
the Nasdaq SmallCap Market(TM) and trading in the Common Stock shall
not have been suspended for any reason and all of the Conversion Shares
issuable upon conversion of the Series B Preferred Shares shall be
approved for listing.
c. The representations and warranties of the Company
shall be true and correct in all material respects (except to the
extent that any of such representations and warranties is already
qualified as to materiality in Section 3 above, in which case, such
representations and warranties shall be true and correct without
further qualification) 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 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, 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 the Buyer including, without limitation an
update as of the Closing Date regarding the representation contained in
Section 3(c) above.
d. The Buyer shall have received the opinion of the
Company's counsel dated as of the Closing Date, in form, scope and
substance reasonably satisfactory to the Buyer and in substantially the
form of Exhibit "D" attached hereto.
e. The Company shall have executed and delivered to the
Buyer the Certificates (in such denominations as the Buyer shall
request) for the Series B Preferred Shares and Warrants being purchased
by the Buyer at the Closing.
-15-
16
f. The Board of Directors of the Company shall have
adopted the resolutions in substantially the form of Exhibit "E"
attached hereto.
g. As of the Closing Date, the Company shall as of the
Closing Date have reserved out of its authorized and unissued Common
Stock, solely for the purpose of effecting the conversion of the Series
B Preferred Shares, such number of shares of Common Stock equal to or
greater than 100% of the number of shares of Common Stock for which are
issuable upon conversion of all of the Series B Preferred Shares which
and the Warrant Shares could be issued at any time under this
Agreement.
h. The Irrevocable Transfer Agent Instructions, in form
and substance satisfactory to the Buyer, shall have been delivered to
and acknowledged in writing by the Company's transfer agent.
i. Xxxxxx X. Xxx, Xxxxx Xxxxxxxxx, Xxxxxx Xxxxxx, Xxxxx
Xxxxx, Xxxxxxx Xxxxxx & Company, Xxx Xxxxxx, Xxxx Xxxx, Xxx Xxxxxxxxx,
Xxx Xxxxxxxxx, and Xxxx & Xxxxxxx Xxxxxxxx, which together constitute
approximately 40% of the issued and outstanding shares of Common Stock
as of the date hereof, shall have executed those proxies with regard to
voting their shares in favor of any Stockholder Approval for Common
Stock in excess of the Maximum Share Amount in substantially the Form
attached as Exhibit "F."
8. INDEMNIFICATION.
In consideration of the Buyer's execution and delivery of this
Agreement and acquiring the Series B Preferred Shares, the Conversion Shares,
and the Warrants, and the Warrant Shares hereunder and in addition to all of the
Company's other obligations under this Agreement, the Company shall defend,
protect, indemnify, reimburse, and hold harmless the Buyer and each other holder
of the Series B Preferred Shares, the Conversion Shares, and the Warrants, and
the Warrant Shares and all of their officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (collectively, the "INDEMNITEES")
from and against any and all actions, causes of action, suits, claims, losses,
costs, penalties, fees, liabilities and damages, and expenses in connection
therewith (irrespective of whether any such Indemnitee is a party to the action
for which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "INDEMNIFIED LIABILITIES"), incurred by
the Indemnitees or any of them as a result of, or arising out of, or relating to
(a) any misrepresentation or breach of any representation or warranty made by
the Company in this Agreement, the Series B Preferred Shares, the Warrants, or
the Registration Rights Agreement or any other certificate, instrument or
document contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement, the
Certificate of Designations, the Warrants, or the Registration Rights Agreement
or any other certificate, instrument or document contemplated hereby or thereby,
or (c) any cause of action, suit or claim brought or made against such
Indemnitee and arising out of or resulting from the execution, delivery,
performance or enforcement of this Agreement or any other instrument, document
or agreement executed pursuant hereto by any of the Indemnities, any transaction
financed or to be financed in
-16-
17
whole or in part, directly or indirectly, with the proceeds of the issuance of
the Series B Preferred Shares or the status of the Buyer or holder of the Series
B Preferred Shares, the Warrants, or the Conversion Shares or the Warrant
Shares, as an investor in the Company, except for the Indemnified Liability
which directly or primarily results from the particular Indemnitee's gross
negligence or willful misconduct for which such holder shall indemnify the
Company in the same manner as provided in this Section 8. To the extent that the
foregoing undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and satisfaction of
each of the Indemnified Liabilities which is permissible under applicable law.
9. GOVERNING LAW: MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by
and interpreted in accordance with the laws of the State of Delaware
without regard to the principles of conflict of laws. Any dispute or
controversy between the parties arising in connection with this
agreement or the subject matter contemplated by this agreement shall be
resolved by arbitration before a three-member panel of the American
Arbitration Association in accordance with the commercial arbitration
rules of said forum and the Federal Arbitration Act, 9 U.S.C. 1 et
seq., with the resulting award being final and conclusive. Said
arbitrators shall be empowered to award all forms of relief and damages
claimed, including, but not limited to, attorney's fees, expenses of
litigation and arbitration, exemplary damages, and prejudgment
interest. Notwithstanding the foregoing, Buyer may at any time and at
its option, whether or not an arbitration action is then pending,
initiate a civil action for temporary and permanent injunctive and
other equitable relief against Company. Company acknowledges that upon
any breach of Buyer's conversion rights hereunder, Buyer's resulting
injury may not be adequately compensated by a remedy at law.
Accordingly, upon such breach, Buyer, at its election and without
limitation of its other remedies, shall be entitled to pursue a claim
for specific performance of this Agreement, and Company hereby waives
the right to assert any defense thereto that Purchaser has an adequate
remedy at law.
b. Counterparts. This Agreement may be executed in two
or more identical counterparts, all of which 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. In the
event any signature page is delivered by facsimile transmission, the
party using such means of delivery shall cause four (4) additional
original executed signature pages to be physically delivered to the
other party within five (5) days of the execution and delivery hereof
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement
shall be invalid or unenforceable in any jurisdiction, such invalidity
or unenforceability shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.
-17-
18
e. Entire Agreement, Amendments. This Agreement
supersedes all other prior oral or written agreements between the
Buyer, the Company, their affiliates and persons acting on their behalf
with respect to the matters discussed herein, and 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 any 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, consents, waivers, or other
communications required or permitted to be given under the terms of
this Agreement must be in writing and will be deemed to have been
delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile, provided a copy is mailed by U.S.
certified mail, return receipt requested; (iii) three (3) days after
being sent by U.S. certified mail, return receipt requested, or (iv)
one (1) day after deposit with a nationally recognized overnight
delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Fourteen Piedmont Center, Suite 100
0000 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Attn: President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxx, Esq.
Xxxx Moss Kline & Xxxxx LLP
000 Xxxxxxxxx Xxxx Xxxxxx, Xxxxx 000
1000 Xxxxxxxxx Road, N.E.
Xxxxxxx, Xxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
-18-
19
If to the Transfer Agent:
American Stock Transfer
00 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Buyer, to its address and facsimile number on the Schedule of
Buyers, with copies to the Buyer's counsel as set forth on the Schedule
of Buyers. Each party shall provide five (5) days' prior written notice
to the other party of any change in address or facsimile number.
g. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties and their
respective successors and assigns. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior
written consent of the Buyer. The Buyer may assign its rights hereunder
without the consent of the Company, provided, however, that the Company
is given written notice by such holder at the time of such transfer,
stating the name and address of such transferee and any such assignment
shall not release the Buyer from its obligations hereunder unless such
obligations are assumed by such assignee and the Company has consented
to such assignment and assumption.
h. 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.
i. Survival. The representations and warranties of the
Company and the Buyer contained in Sections 2 and 3 shall survive for a
period of two years from the date hereof, the agreements and covenants
set forth in Sections 4, 5 and 9, the indemnification provisions set
forth in Section 8, shall survive the Closing. The Buyer shall be
responsible only for its own representations, warranties, agreements
and covenants hereunder.
j. Publicity. The Company and the Buyer shall have the
right to approve before issuance any press releases 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 the Buyer, to make any press release or other public
disclosure with respect to such transactions as is required by
applicable law and regulations (although the Buyer shall be consulted
by the Company in connection with any such press release or other
public disclosure prior to its release and shall be provided with a
copy thereof).
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
-19-
20
request in order to carry out the intent and accomplish the purposes of
this Agreement and the consummation of the transactions contemplated
hereby.
1. Termination. In the event that the Closing shall not
have occurred with respect to the Buyer on or before five (5) business
days from the date hereof due to the Company's or the Buyer's failure
to satisfy the conditions set forth in Sections 6 and 7 above (and the
nonbreaching party's failure to waive such unsatisfied condition(s)),
the nonbreaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business
on such date without liability of any party to any other party.
m. Placement Agent. The Company acknowledges that it has
engaged X.X. Xxxxxx & Company, L.L.C. as a placement agent in
connection with the sale of the Series B Preferred Shares. The Company
shall be responsible for and shall indemnify Buyer against the payment
of placement agent fees and warrants relating to or arising out of the
transactions contemplated hereby and any other brokers', finders', or
other similar fees, which may be actually due and payable. The Buyers
acknowledge that they have made their investment in reliance upon their
own independent due diligence investigation of the Company, and the
documents executed in connection therewith, and have not relied upon
any statements or representations by the Placement Agent in connection
therewith.
n. 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.
o. Costs and Expenses. Each party shall bear the costs
and expenses in connection with the negotiation, execution and
performance of this Agreement provided however that at Closing the
Company agrees to pay the reasonable and actual fees and expenses of
the one counsel to the Buyer in an amount not to exceed $15,000.
10. CONFIDENTIALITY.
(a) As much of the information and other material
furnished under or in connection with this Agreement (whether furnished
before, on or after the date hereof) as constitutes or contains
confidential business, financial or other information of the Company or
its subsidiaries, each Buyer covenants for itself, and, as applicable,
for its directors, officers, affiliates and partners, that it will use
due care to prevent its officers, directors, partners, employees,
counsel, accountants and other representatives from disclosing such
information to persons other than their respective authorized
employees, counsel, accountants, shareholders, partners, limited
partners and other authorized representatives. Notwithstanding the
foregoing, if a Buyer is advised by such counsel that such disclosure
or delivery is required by law, regulation or judicial or
administrative order, then they may disclose or deliver such
information or other after giving written notice to the Company of such
requirements.
-20-
21
For purposes of this Section 10(a), "due care" means at least
the same level of care that a Buyer would use to protect the
confidentiality of its own sensitive or proprietary information, and
this obligation shall survive termination of this Agreement.
(b) To the extent that any of the information furnished
by the Company to the Buyers hereof would constitute material,
nonpublic information for purposes of the Exchange Act, Buyers agree
not to engage in any purchase or sale of securities while in possession
of such information and prior to the time that such information is made
generally known to the public and Buyers agree to use due care to
prevent their officers, directors, partners, employees, counsel and
other representatives, who have been given access to such material,
nonpublic information, from engaging in any such purchase or sale
during such period.
-21-
22
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
"COMPANY"
HOMECOM COMMUNICATIONS, INC.
By:
---------------------------------------------
Name: Xxxxxx X. Xxx
Its: Chairman of the Board and Chief Executive
Officer
"BUYER"
CPR (USA), INC.
By:
---------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Managing Director
"BUYER"
LIBERTYVIEW FUNDS, L.P.
By:
---------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title:
"BUYER"
LIBERTYVIEW FUND, L.L.C.
By:
---------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title:
23
SCHEDULE OF BUYERS
-----------------------------------------------------------------------------------------------------------
NUMBER OF SERIES B
BUYER'S NAME ADDRESS/FACSIMILE NUMBER OF BUYER PREFERRED SHARES
-----------------------------------------------------------------------------------------------------------
x/x XxxxxxxXxxx Xxxxxxx Xxxxxxxxxx 00.0
XXX (XXX), Inc. 000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
-----------------------------------------------------------------------------------------------------------
LibertyView Funds, L.P. c/o LibertyView Capital Management 50
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
-----------------------------------------------------------------------------------------------------------
x/x XxxxxxxXxxx Xxxxxxx Xxxxxxxxxx 00.0
XxxxxxxXxxx Xxxx, X.X.X. 000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx Xxxx, XX 00000
-----------------------------------------------------------------------------------------------------------
24
SCHEDULE 3(C)
CAPITALIZATION
Outstanding Warrants:
--------------------
Ladenburg Xxxxxxxx & Co., Inc. 100,000 $ 7.20 May 12, 2002
First Granite Securities, Inc. 75,000 $ 4.00 October 27, 2000
First Granite Securities, Inc. 200,000 $ 6.00 October 27, 2000
Dominion Capital Fund, LTD,
Sovereign Partners, LP,
and Southridge Capital, Inc. 62,500 $14.50625 December 31, 2000
Dominion Capital Fund, LTD,
Sovereign Partners, LP,
and Southridge Capital, Inc. 62,500 $ 15.825 December 31, 2000
FIMI principals 300,000 $ 3.7375 March 9, 2004
Employee Stock Options approximately approximately
750,000 $ 4.50
Obligations to Register Securities:
FIMI principals 626,087
25
SCHEDULE 3(E)
CONFLICTS
None.
26
SCHEDULE 3(F)
FINANCIAL STATEMENTS
Reference is made to all public filings made by the Company with the
SEC available at xxxx://xxx.xxx.xxx/.
27
SCHEDULE 3(H)
LITIGATION
None.
28
SCHEDULE 3(N)
LIENS
None.
29
SCHEDULE 3(P)
TAX STATUS
None.
30
SCHEDULE 4(D)
USE OF PROCEEDS
Working capital.
