SECURITIES PURCHASE AGREEMENT
EXECUTION
VERSION
This
SECURITIES PURCHASE AGREEMENT (this “Agreement”),
is
entered into as of September 28, 2006, by and among ACROSS AMERICA REAL ESTATE
CORP., a Colorado corporation (the “Company”),
BOCO
INVESTMENTS, LLC, a Colorado limited liability company (“BOCO”),
GDBA
INVESTMENTS, LLLP, a Colorado limited liability limited partnership
(“GDBA”
and
together with BOCO, the “Institutional
Buyers”)
and
XXXXXX X. XXXXXXX (“Xxxxxxx”
and
together with the Institutional Buyers, collectively, the “Buyers”
and
individually a “Buyer”).
RECITALS
A. BOCO,
GDBA and Xxxxxxx desire to purchase and the Company desires to issue and
sell,
upon the terms and conditions set forth in this Agreement an aggregate of
517,000 shares of the Company’s Series A Convertible Preferred Stock with
the rights and preferences as shown in Exhibit A
(the
“Preferred
Stock”).
B. The
Institutional Buyers initially desire to purchase from the Company and the
Company initially desires to issue and sell senior subordinated notes, in
the
form attached hereto as Exhibit B,
in the
original aggregate principal amount of Seven Million Dollars ($7,000,000)
(together with any note(s) issued in replacement thereof or as any of the
same
may be amended, restated or modified, the “Term
Notes”).
C. Subject
to the terms and conditions set forth in this Agreement, the Institutional
Buyers will make available to the Company until December 31, 2007, a Revolving
Line of Credit in the maximum aggregate amount up to $7,000,000.
D. The
Company and the Buyers are executing and delivering this Agreement in reliance
upon the exemption from securities registration afforded by the rules and
regulations as promulgated by the United States Securities and Exchange
Commission (the “SEC”)
under
the Securities Act of 1933, as amended (the “1933
Act”);
NOW
THEREFORE,
in
consideration of the mutual promises and covenants contained herein and for
other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Company and the Buyers hereby agree as follows:
PURCHASE
AND SALE OF PREFERRED STOCK AND TERM NOTES.
a. Purchase
of Preferred Stock.
On the
Closing Date, the Company shall issue and sell to the Buyers and each Buyer
agrees to purchase from the Company the number of shares of Preferred Stock
in
exchange for the purchase price (the “Preferred
Stock Purchase Price”)
as set
forth below:
|
Name
|
Preferred
Shares
|
Purchase
Price
|
|
BOCO
|
250,000
|
$3,000,000
|
|
GDBA
|
250,000
|
$3,000,000
|
|
Xxxxxxx
|
17,000
|
$204,000
|
b. Purchase
of Term Notes .
On the
Closing Date, the Company shall issue and sell to the Institutional Buyers
and
each Institutional Buyer agrees to purchase from the Company such principal
amount of the Term Notes in exchange for the purchase price (the “Term
Notes Purchase Price”)
as set
forth below:
|
Name
|
Principal
Amount
|
Purchase
Price
|
|
BOCO
|
$3,500,000
|
$3,500,000
|
|
GDBA
|
$3,500,000
|
$3,500,000
|
REVOLVING
LOANS
a. Revolving
Loan Commitment.
Subject
to the terms and conditions of this Agreement, in reliance upon the
representations and warranties of the Company set forth herein, the
Institutional Buyers, severally (and not jointly), agree to make such Revolving
Loans at such times as the Company may request until, but not including,
the
Revolving Loan Commitment Date; provided,
however,
that
the aggregate principal balance of all Revolving Loans outstanding from time
to
time shall not exceed the Revolving Loan Commitment. Revolving Loans made
by the
Institutional Buyers may be repaid and, subject to the terms and conditions
hereof, borrowed again up to, but not including the Revolving Loan Commitment
Date unless the Revolving Loans are otherwise accelerated, terminated or
extended as provided in this Agreement.
b. Revolving
Loan Interest and Payments.
The
principal amount of the Revolving Loans outstanding from time to time shall
bear
interest at the Revolving Interest Rate. Accrued and unpaid interest on the
unpaid principal balance of all Revolving Loans outstanding from time to
time
shall be due and payable quarterly, in arrears, on the last Business Day
of each
calendar quarter, beginning December 29, 2006 (each, a “Revolving
Payment Due Date”),
through and including the Revolving Payment Due Date immediately prior to
the
Revolving Loan Maturity Date. Any amount of principal or interest on the
Revolving Loans that is not paid when due, whether at stated maturity, by
acceleration or otherwise, shall bear interest payable on demand at the Default
Interest Rate.
c. Revolving
Loan Principal Payments.
(i) Revolving
Loan Mandatory Repayments.
All
Revolving Loans hereunder shall be repaid by the Company on the Revolving
Loan
Maturity Date, unless payable sooner pursuant to the provisions of this
Agreement. In the event the aggregate outstanding principal balance of all
Revolving Loans hereunder exceeds the Revolving Loan Commitment, the Company
shall, without notice or demand of any kind, immediately make such repayments
of
the Revolving Loans or take such other actions as are satisfactory to the
Institutional Buyers as shall be necessary to eliminate such
excess.
(ii) Optional
Repayments.
The
Company may from time to time repay the Revolving Loans in whole or in part,
without any prepayment penalty whatsoever.
2
d. Use
of
Proceeds.
The
Company shall use the Revolving Loans for the purposes described in Section
6(d).
e. Revolving
Note.
The
Revolving Loans payable to each Institutional Buyer shall be evidenced by
a
single Revolving Note in the form attached as Exhibit
C,
duly
executed by the Company and payable to the applicable Institutional Buyer.
At
the time of the initial disbursement of a Revolving Loan and at each time
any
additional Revolving Loan shall be requested hereunder or repayment made
in
whole or in part thereon, a notation thereof shall be made on the books and
records of the Company. The failure to record any such amounts or any error
in
recording such amounts shall not, however, limit or otherwise affect the
obligations of the Company under the Revolving Note to repay the principal
amount of the Revolving Loans, together with all interest accruing thereon.
CLOSING
AND ADVANCES OF REVOLVING LOANS
a. Closing.
(i) Subject
to the satisfaction (or written waiver) of the conditions thereto set forth
in
Section 8, the sale and purchase of the Term Notes, the Revolving Notes and
the Preferred Stock (the “Closing”)
shall
take place at such date and time as is mutually agreed by the Company and
the
Buyers (such date, the “Closing
Date”).
The
Closing shall occur at the offices of Xxxxx Xxxxxx & Xxxxxx LLP, 0000
Xxxxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000, or at such other place
as
the Company and the Buyers may designate.
(ii) On
the
Closing Date,
(a) against
delivery by the Company of the Term Notes, the Revolving Notes and share
certificates representing the shares of Preferred Stock, each Buyer shall
pay
the Preferred Stock Purchase Price and the Term Notes Purchase Price applicable
to such Buyer (together, the “Purchase
Price”)
by
wire transfer of immediately available funds to the Company, in accordance
with
the Company’s written wiring instructions; provided,
however,
that
the Purchase Price payable to the Company by GDBA may be setoff against amounts
to be paid at the Closing Date by the Company with respect to the repayment
of
the GDBA Agreement to Fund pursuant to Section 8(b)(vi); and
(b) the
Company shall pay directly or reimburse the Buyers for all Buyer Expenses
as
provided in Section 6(e).
b. Advances.
Each
Institutional Buyer agrees, on the terms and conditions set forth herein,
to
make Advances to the Company of Revolving Loans from time to time on any
Business Day from and after the date of this Agreement.
(i) Request
for Advances.
Each
Advance shall be made after delivery by the Company to the Institutional
Buyers
of a Request for Advance, duly executed by the Company, delivered not later
than
11:00 a.m. (Denver, Colorado time) on the second Business Day prior to the
date
of the proposed Advance. The Request for Advance shall be in the form attached
hereto as Exhibit
D.
The
requested Advance shall be in an amount at least equal to the lesser of (A)
$200,000, or (B) the undrawn amount of such Institutional Buyer’s Revolving Loan
Commitment.
3
(ii) Funding
of Advances.
Not
later than 2:00 p.m. (Denver, Colorado time) on the date of such Advance,
subject to fulfillment of the applicable conditions set forth herein, the
Institutional Buyers will make such Advance available to the Company by wire
transfer of immediately available funds to an account specified in writing
by
the Company. All Advances shall be funded one-half by BOCO and one-half by
GDBA.
The Institutional Buyers obligation to fund each Advance shall be several
and
not joint. Nothing contained herein shall obligate either Institutional Buyer
to
fund more than one-half of any Advance, notwithstanding any failure by the
other
Institutional Buyer to fund its portion of the Advance.
BUYER’S
REPRESENTATIONS AND WARRANTIES.
Each
Buyer, with respect to itself and not with respect to the other Buyer,
represents and warrants to the Company that:
a. Investment
Purpose.
As of
the date hereof, the Buyer is purchasing the Term Notes and the Preferred
Stock
for its own account and not with a present view towards the public sale or
distribution thereof; 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 promulgated under the 1933 Act.
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 acknowledges that it has been afforded the opportunity to ask questions
and receive answers concerning the Company and to obtain additional information
that it has requested to verify the accuracy of the information contained
herein. Neither the foregoing nor any 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 5 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 or the Revolving Loans.
f. Transfer
or Resale.
The
Buyer understands that, except as provided in the Registration Rights Agreement,
(i) the sale or resale 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 reasonably
acceptable to the Company and its counsel that the Securities to be sold
or
transferred may be sold 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 promulgated under the 1933 Act (or any successor rule thereto)
(“Rule
144”);
(ii) any sale of such Securities made in reliance on 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. 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.
4
g. Legends.
The
certificates evidencing the Securities will 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 resale under the 1933 Act, (b) such holder
provides the Company with an opinion of counsel, which opinion shall be
reasonably acceptable to the Company’s counsel, to the effect that the sale or
transfer of such Security may be made without registration under the 1933
Act,
or (c) such holder provides the Company with reasonable assurances that such
Security has been or is being 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.
The
Agreements to which such Buyer is a party have been duly and validly authorized,
executed and delivered on behalf of the Buyer, and each Agreement constitutes
a
valid and binding agreement of the Buyer enforceable in accordance with its
terms.
5
i. Residency.
The
Buyer is a resident of the jurisdiction set forth immediately below such
Buyer’s
name on the signature pages hereto.
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 is duly organized, validly existing
and in
good standing under the laws of its jurisdiction of incorporation or
organization, with full power and authority 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
5(a)
sets
forth a list of all of the Subsidiaries of the Company, the jurisdiction
in
which each is incorporated or organized and the percentage of stock or ownership
interests held by the Company in such Subsidiary. 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 has not had and
could not reasonably be expected to have a Material Adverse Effect.
b. Authorization;
Enforcement.
(i) The
Company has all requisite corporate power and authority to enter into and
perform the Agreements, 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 the Agreements, the Notes and
the
Preferred Stock by the Company and the consummation by it of the transactions
contemplated hereby and thereby (including without limitation, the issuance
of
the Notes and the Preferred Stock and the issuance and reservation for issuance
of the Conversion Shares) 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) the Agreements have been
duly
executed and delivered by the Company by its authorized representative, and
such
authorized representative is the true and official representative with authority
to sign the Agreements and the other documents executed in connection herewith
and bind the Company accordingly, and (iv) the Agreements constitute, and
upon
execution and delivery by the Company of the Notes and the Preferred Stock,
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.
Before
giving effect to the transactions to be effected at the Closing, the authorized
capital stock of the Company consists of (i) 50,000,000 shares of Common
Stock,
of which 16,036,625 shares are issued and outstanding, and 2,068,000 shares
are
reserved for issuance upon conversion of the Preferred Stock (subject to
adjustment pursuant to the Company’s covenant set forth in Section 6(h)
below); and (ii) 1,000,000 shares of undesignated preferred stock (517,000
of
which will be designated Series A Convertible Preferred Stock upon filing
of the
Amendment to the Articles of Incorporation), of which none 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 shareholders of the Company or any liens
or
encumbrances imposed through the actions or failure to act of the Company.
Except as disclosed in Schedule 5(c),
as of
the effective date of this Agreement, (i) there are no outstanding options,
preferred stock, 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 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 Notes, the Preferred Stock, or the
Conversion Shares. The Company has furnished to the Buyer true and correct
copies of the Company’s Articles of Incorporation as in effect on the date
hereof (“Articles
of Incorporation”),
the
Company’s Bylaws, as in effect on the date hereof (the “Bylaws”),
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.
6
d. Issuance
of Shares.
The
Conversion Shares are duly authorized and reserved for issuance and, upon
conversion of the Preferred Stock in accordance with its 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 shareholders 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 upon conversion of
the
Preferred Stock. The Company further acknowledges that its obligation to
issue
Conversion Shares upon conversion of Preferred Stock in accordance with this
Agreement is absolute and unconditional regardless of the dilutive effect
that
such issuance may have on the ownership interests of other shareholders of
the
Company.
f. No
Conflicts.
The
execution, delivery and performance of the Agreements, the issuance of the
Securities to be issued 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) will
not (i)
conflict with or result in a violation of any provision of the Articles of
Incorporation or Bylaws 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 contract,
commitment, agreement, indenture 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 with respect to clause (ii)
and
(iii) only, for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as could not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
Neither
the Company nor any of its Subsidiaries is in violation of its Articles of
Incorporation, Bylaws 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 could
not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. Except as set forth on Schedule
5(f),
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 the
Agreements, to issue and sell the Notes and Preferred Stock or to issue the
Conversion Shares upon conversion of the Preferred Stock. Except as set forth
in
Schedule
5(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.
7
g. Trading.
The
Company’s Common Stock is traded on the Over-the-Counter Bulletin Board under
the symbol AARD.OB (the “OTCBB”).
The
Company is not in violation of the quotation requirements of the OTCBB and
does
not reasonably anticipate that the Common Stock will be removed by the OTCBB
in
the foreseeable future. To the Company’s Knowledge, there are no facts or
circumstances which might give rise to any of the foregoing.
h. SEC
Documents; Financial Statements.
The
Company’s Common Stock is registered under Section 12(g) of the 1934 Act.
Except as disclosed in Schedule
5(h),
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 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”).
None
of the SEC Documents contains any untrue statement of a material fact or
omits
any statement of material fact required in order to make the statements
contained therein not misleading. As of their respective dates, the financial
statements of the Company included in the SEC Documents (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. The 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) 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).
8
i. No
Undisclosed Liabilities.
The
Company does not have any Liabilities, except for (a) Liabilities reflected
on
the face of the liabilities section of the Company’s balance sheet at December
31, 2005 as filed with the Company’s Form 10-KSB for the year ended December 31,
2005, as amended (b) Liabilities under agreements, contracts, commitments,
licenses or leases which have arisen since December 31, 2005 in the ordinary
course of business, and (c) Liabilities set forth on Schedule
5(i).
j. Absence
of Certain Changes.
Except
as set forth in Schedule
5(j),
since
December 31, 2005, (i) each of the Company and its Subsidiaries has been
operated in the ordinary course, and (ii) there has occurred no fact, event
or
circumstance that, individually or in the aggregate, has or could reasonably
be
expected to have a Material Adverse Effect.
k. Absence
of Litigation.
Except
as set forth on Schedule
5(k),
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. To the Knowledge of the
Company
and its Subsidiaries there are no facts or circumstances which might give
rise
to any of the foregoing.
l. Intellectual
Property.
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
5(l)
hereof
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
5(l)
hereof
as presently contemplated to be operated in the future); 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 to
the Company’s Knowledge, there are no 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.
m. 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 has or could reasonably be expected to have a Material Adverse Effect.
Neither the Company nor any of its Subsidiaries is a party to any contract
or
agreement which has or could reasonably be expected to have a Material Adverse
Effect.
n. Tax
Status.
Except
as set forth on Schedule
5(n),
the
Company and each of its Subsidiaries has made or filed all Tax Returns that
it
was required to file. All such Tax Returns are correct and complete in all
material respects. Except as set forth on Schedule
5(n),
all
Taxes owned by the Company or any Subsidiary whether or not shown on any
Tax
Return have been paid in a timely fashion. Except as set forth on Schedule
5(n),
the
Company currently is not the beneficiary of any extension of time within
which
to file any Tax Return. There are no liens or encumbrances on any of the
assets
of the Company that arose in connection with any failure (or alleged failure)
to
pay any Tax. The Company has withheld and paid all Taxes required to have
been
withheld and paid in connection with amounts paid to or owed to any employee,
independent contractor, creditor, stockholder, or other third party. There
are
no unpaid Taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and to the Company’s Knowledge, there is 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,
state or local tax. Except as set forth on Schedule
5(n),
none of
the Company’s tax returns is presently being audited by any taxing
authority.
9
o. Certain
Transactions.
Except
as set forth on Schedule
5(o),
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 Company’s
Knowledge, 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.
p. Disclosure.
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. The Company has not disclosed to the
Buyers
any material nonpublic information and will not disclose such information
unless
such information is disclosed to the public prior to or promptly following
such
disclosure to the Buyers.
q. Acknowledgment
Regarding Buyer’s Purchase of Securities.
The
Company acknowledges and agrees that each Buyer is 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 Buyer’s 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.
r. 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
Buyer.
The issuance of the Securities to the Buyer will not be integrated with any
other issuance of the Company’s securities (past, current or future) for
purposes of any shareholder approval provisions applicable to the Company
or its
securities.
10
s. No
Brokers.
Except
as set forth in Schedule
5(s),
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.
t. 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, could not
reasonably be expected to have a Material Adverse Effect. Since January 1,
2004, 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 could not reasonably
be
expected to have a Material Adverse Effect.
u. Environmental
Matters.
(i) Except
as
set forth in Schedule
5(u),
there
are, 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.
(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
5(u),
to the
Company’s Knowledge 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.
11
v. Title
to Property.
Schedule
5(v)(i)
sets
forth a list of all real property owned by the Company or its Subsidiaries.
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
5(v).
Any
real property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable
leases.
w. Insurance.
Attached hereto as Schedule
5(w)
is a
list and brief description of all policies of fire, casualty, liability,
property or other forms of insurance and all fidelity bonds held by or
applicable to the Company or its Subsidiaries. Neither the Company nor any
Subsidiary is in default in any material respect under any provision of any
such
policy and neither the Company nor any Subsidiary has received notice of
cancellation of any such insurance. 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 is not materially in excess of current premiums.
x. Internal
Accounting Controls.
The
Company and each of its Subsidiaries maintain a system of internal accounting
controls sufficient 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.
y. Compliance
With Law.
The
Company has complied with all applicable laws, statutes, rules, regulations
or
orders of any governmental authority and no proceeding or investigation is
pending, or to the Knowledge of the Company, threatened, alleging any failure
to
so comply.
z. Solvency.
The
Company (after giving effect to the transactions contemplated by this Agreement)
is Solvent and currently the Company has no information that would lead it
to
reasonably conclude that the Company would not, after giving effect to the
transaction contemplated by this Agreement, 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.
aa. 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.
bb. Certain
Registration Matters.
Assuming the accuracy of the Buyer’s representations and warranties set forth in
Section 2, no registration under the Securities Act or action on the part
of the shareholders of the Company is required for the offer and sale of
the
Conversion Shares by the Company to the Buyer under the transaction documents.
Except as contemplated by the Registration Rights Agreement or as specified
in
Schedule
5(bb),
the
Company has not granted or agreed to grant to any Person any rights (including
“piggy-back” registration rights) to have any securities of the Company
registered with the Commission or any other governmental authority that have
not
been satisfied.
12
COVENANTS.
a. Best
Efforts.
The
Company and the Buyers shall each use their best efforts to satisfy timely
each
of the conditions described in Section 8 and 9 of this Agreement and to do
all things necessary, proper and advisable in order to consummate and make
effective the transactions contemplated by 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 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. Disclosure.
The
Company shall issue a press release describing the material terms of the
transaction contemplated hereby as soon as practicable following the Closing
Date but in no event more than two (2) business days after the Closing Date,
which press release shall be subject to prior review by the Buyers. The Company
agrees that such press release shall not disclose the name of the Buyer unless
expressly consented to in writing by the Buyer or unless required by applicable
law or regulation, and then only to the extent of such requirement. The Company
has not disclosed to the Buyers any material nonpublic information and will
not
disclose such information unless such information is disclosed to the public
prior to or promptly following such disclosure to the Buyers.
d. Use
of
Proceeds.
The
Company shall use the net proceeds from the sale of the Term Notes and the
Preferred Stock in the manner set forth in Schedule
6(d)
attached
hereto and made a part hereof and shall not, directly or indirectly, use
such
proceeds for (i) any loan to or investment in any other corporation,
partnership, enterprise or other person (except in connection with its currently
existing or future direct or indirect Subsidiaries); or (ii) the redemption
of
any Common Stock.
e. Expenses.
At the
Closing, the Company shall pay directly or reimburse the Buyers for all expenses
incurred by the Buyers in connection with the negotiation, preparation,
execution, delivery and performance of the Agreements, including, without
limitation, attorneys’ and consultants’ fees and expenses, transfer agent fees,
fees for stock quotation services, fees relating to any amendments or
modifications of the Agreements or any consents or waivers required to be
obtained by a Buyer in connection with this transaction (the “Buyer
Expenses”).
On or
before the Closing Date, each Buyer shall submit to the Company a schedule
of
Buyer Expenses that have been incurred by such Buyer, which schedule shall
specify the amounts to be paid by the Company directly on behalf of the Buyers
and amounts to be paid by the Company to the Buyers in reimbursement of amounts
expended by the Buyers. Notwithstanding anything herein to the contrary,
the
Company’s obligation to pay or reimburse the Buyers’ Expenses shall not exceed
$25,000 for each Buyer.
13
f. 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.
g. Affirmative
Covenants of the Company.
For so
long as either of the Buyers holds Notes, Preferred Stock or Conversion Shares,
the Company shall:
(i) 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;
(ii) Send
to
the Buyer contemporaneously with the making available or giving to the
shareholders of the Company, copies of any notices or other information the
Company makes available or gives to such shareholders, provided that,
the
Company shall not be required pursuant to this Section 6(g)(ii) to send reports
to any Buyer if the only Securities then held by such Buyer are Conversion
Shares;
(iii) Authorize
and reserve for the purpose of issuance, a sufficient number of shares of
Common
Stock (the “Reserved
Amount”)
to
provide for the full conversion of the Preferred Stock and issuance of the
Conversion Shares in connection therewith (based on the conversion ratio
of the
Preferred Stock in effect from time to time). If at any time the number of
shares of Common Stock authorized and reserved for issuance (“Authorized
and Reserved Shares”)
is
below the Reserved Amount, 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 shareholders to authorize
additional shares to meet the Company’s obligations under this
Section 6(g)(iii). In order to ensure that the Company has authorized a
sufficient amount of shares to meet the Reserved Amount at all times, the
Company shall deliver to the Buyer at the end of every fiscal quarter a list
detailing (1) the current amount of shares authorized by the Company and
reserved for the Buyer; and (2) amount of shares issuable upon conversion
of the
Preferred Stock.
(iv) Promptly
secure the listing of the Conversion 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, maintain, so long as any other shares
of
Common Stock shall be so listed, such listing of all Conversion Shares. 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 or any
equivalent replacement exchange, the Nasdaq Global Select Market, the Nasdaq
Global Market, the Nasdaq Capital Market, the New York Stock Exchange, or
the
American Stock Exchange 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 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. As long
as the
Company Stock is not listed for trading on a national securities or automated
quotation system, the Company shall ensure that the Company’s Common Stock is
listed on the OTCBB (or equivalent replacement) and shall use its commercially
reasonable efforts to ensure that at least two market-makers are making a
market
in the Company’s Common Stock.
14
(v) Maintain
its corporate existence in good standing.
h. Negative
Covenants of the Company.
For so
long as (i) any of the Buyers holds Term Notes, Preferred Stock or Conversion
Shares, or (ii) any Revolving Loans are outstanding, the Company, without
the
written consent of the Buyer or Buyers that hold such Notes, Preferred Stock
or
Conversion Shares, shall
not:
(i) authorize,
issue or agree to authorize or issue any new class or series of Parity
Securities or Senior Securities or securities or rights of any kind convertible
into or exercisable or exchangeable for any such Parity Securities or Senior
Securities, or offer, sell or issue any Parity Securities or Senior Securities
or securities or rights of any kind convertible into or exercisable or
exchangeable for any such Parity Securities or Senior Securities;
(ii) authorize,
issue or agree to authorize or issue 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 Preferred Stock or options to acquire Common Stock issued in connection
therewith), provided,
however,
that
this Section 6(h) shall not prohibit the Company from issuing up to 1,000,000
shares of Common Stock and/or Options therefore issued to the Company’s
officers, directors, employees, consultants or independent contractors pursuant
to an equity incentive plan or another similar plan or agreement approved
by the
Board of Directors;
(iii) authorize,
issue or agree to authorize or issue convertible securities that are convertible
into an indeterminate number of shares of Common Stock;
(iv) purchase,
repurchase or redeem shares of (i) Common Stock, (ii) securities or rights
of
any kind convertible into or exercisable or exchangeable for Common Stock
or
(iii) other securities of the Company, (except in the case of a termination
of
an employee, at which the Company may repurchase or redeem such shares of
Common
Stock at cost and pursuant to any agreement under which such shares of Common
Stock were issued);
(v) declare
or pay dividends or any other distribution on shares of Common Stock or any
other capital stock of the Company except as contemplated with respect to
the
Preferred Stock;
(vi) amend
the
Articles of Incorporation or Bylaws of the Company or alter or change the
rights, preferences or privileges of the Preferred Stock or any Parity
Securities or Senior Securities in each case so as to affect adversely the
rights, preferences or privileges of the Preferred Stock;
15
(vii) merge
or
consolidate with any other entity, or sell, assign, license, lease or otherwise
dispose of or voluntarily part with the control of (whether in one transaction
or in a series of transactions all, or a significant portion, of its assets
(whether now owned or later acquired)), or effect any transaction or series
of
transactions in which the holders of the Company’s voting interests prior to
such transaction or series of transactions hold less than 50% of the voting
interests of the Company following such transaction or series of transactions;
(viii) increase
or decrease the number of directors constituting the Company’s Board of
Directors;
(ix)
incur
Indebtedness for Borrowed Money in any single transaction in excess of
$10,000,000 or which obligates the Company to make aggregate expenditures
for
all Indebtedness for Borrowed Money in excess of $50,000,000;
(x) enter
into any non-ordinary course agreement, directly or indirectly, with officers,
employees, stockholders, directors or affiliates of the Company, other than
employment agreements, compensation arrangements, stock options or
service-related transactions that are approved by a majority of the
disinterested members of the Company’s Board of Directors;
(xi) initiate
the voluntary dissolution or winding up or reorganization of the Company;
or
(xii) change
its fiscal year.
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 nominee, for the
Conversion Shares in such amounts as specified from time to time by such
Buyer
to the Company upon conversion of the Preferred Stock in accordance with
the
terms thereof (the “Irrevocable
Transfer Agent Instructions”).
Prior
to registration of the Conversion Shares under the 1933 Act or the date on
which
the Conversion 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 4(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions referred
to
in this Section 7, and stop transfer instructions to give effect to
Section 4(f) hereof (in the case of the Conversion Shares, prior to
registration of the Conversion Shares under the 1933 Act or the date on which
the Conversion 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. If a Buyer
provides the Company with (i) an opinion of counsel reasonably acceptable
to the
Company and its 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, 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.
16
CLOSING
DATE CONDITIONS PRECEDENT
a. Conditions
to the Company’s Obligation to Sell.
The
obligation of the Company hereunder to issue and sell the Term Notes and
Preferred Stock to each 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:
(i) The
applicable Buyer shall have executed the Agreements and delivered the same
to
the Company.
(ii) The
applicable Buyer shall have delivered its portion of the Purchase Price in
accordance with Section 3(a) above.
(iii) 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.
(iv) 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 is reasonably expected to restrain, prohibit or invalidate
transactions contemplated by this Agreement.
b. Conditions
to the Buyers’ Obligation to Purchase.
The
obligations of each Buyer hereunder to purchase the Notes and Preferred Stock
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:
(i) The
Company shall have executed the Agreements and delivered the same to the
Buyer.
(ii) The
Company shall have delivered to such Buyer a duly executed Term Note in the
principal amount set forth in Section 3(a).
(iii) The
Company shall have delivered to such Institutional Buyer a duly executed
Revolving Note as required pursuant to Section 2(e).
(iv) The
Company shall have delivered to such Buyer a certificate representing such
number of shares of Preferred Stock as set forth in Section 3(a).
17
(v) 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.
(vi) The
Company shall have delivered a signed letter from GDBA confirming that the
GDBA
Agreement to Fund will be terminated and all amounts payable to GDBA thereunder
will be repaid on the Closing Date.
(vii) 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 Articles of Incorporation, Bylaws and Board of
Directors’ resolutions relating to the transactions contemplated
hereby.
(viii) 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 is reasonably expected to restrain, prohibit or invalidate the
transactions contemplated by this Agreement.
(ix) No
event
shall have occurred which has had or which could reasonably be expected to
have
a Material Adverse Effect on the Company.
(x) The
Common Shares shall have been authorized for quotation on the OTCBB, trading
in
the Common Stock on the OTCBB shall not have been suspended by the SEC or
the
OTCBB, and at least two market-makers shall be making a market in the Company’s
Common Stock.
(xi) The
Buyers shall have received an opinion of Xxxxx Xxxxxx & Associates, P.C.,
counsel for the Company, in the form of Exhibit
E.
(xii) The
amendment to the Company’s Articles of Incorporation required to designate the
number, preferences and rights of the Series A Preferred Stock, as set forth
in
Exhibit
A,
shall
have been accepted for filing with the Colorado Secretary of State.
CONDITIONS
PRECEDENT TO ADVANCES. The
obligations of each Institutional Buyer hereunder to make Advances of Revolving
Loans is subject to the satisfaction, at or before each Advance 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. No
Event
of Default or any event which, with notice or lapse of time, or both, would
constitute an Event of Default, shall have occurred and be
continuing.
18
b. No
event
shall have occurred which has had or which could reasonably be expected to
have
a Material Adverse Effect on the Company.
c. 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 is reasonably expected to restrain, prohibit or invalidate the
transactions contemplated by this Agreement.
d. The
representations and warranties of the Company shall be true and correct in
all
material respects as of the date of any Advance 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 or any of the other Agreements to be performed, satisfied or complied
with by the Company at or prior to the date of such Advance.
e. The
Institutional Buyers shall have received a Request for Advance duly executed
by
the Company.
SURVIVAL
AND INDEMNIFICATION.
a. Survival.
The
representations and warranties of the Company and the agreements and covenants
set forth in Sections 5, 6, 7 and 10 shall survive the Closing notwithstanding
any due diligence investigation conducted by or on behalf of the Buyers.
b. Indemnification.
The
Company shall defend, protect, indemnify and hold harmless each Buyer and
all of
such Buyer’s partners, members, officers, directors, employees and direct or
indirect investors and any of such Buyer’s agents or other representatives
(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 any Indemnitee 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 the Agreements 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 the Agreements 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 by a third party (including for these purposes a derivative action
brought on behalf of the Company) and arising out of or resulting from
(i) the execution, delivery, performance or enforcement of the Agreements
or any other certificate, instrument or document contemplated hereby or thereby,
(ii) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the issuance of the Notes or
Preferred Stock, or (iii) the status of such Buyer as an investor in the
Company. 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. Except as otherwise set forth herein, the
mechanics and procedures with respect to the rights and obligations under
this
Section 8(b) shall be the same as those set forth in Section 2.5 of the
Registration Rights Agreement.
19
DEFINITIONS.
“1934
Act”
means
the Securities and Exchange Act of 1934, as amended.
“Advance”
shall
mean an advance of funds by the Institutional Buyers to the Company as a
Loan
pursuant to a Request for Advance as provide in Section 3(b).
“Agreements”
means
this Agreement, the Registration Rights Agreement, the Shareholders Agreement,
the Notes and any other agreements or instruments to be executed in connection
with the transactions contemplated by this Agreement.
“Business
Day”
means
any day other than a Saturday, Sunday or a day on which commercial banks
in the
city of Denver, Colorado are authorized or required by law or executive order
to
remain closed.
“Closing”
has
the
meaning set forth in Section 1(c).
“Closing
Date”
has
the
meaning set forth in Section 1(c).
“Conversion
Shares”
means
the Common Stock issued upon conversion of the Preferred Stock.
“Default
Interest Rate”
means
the higher of (i) the Revolving Interest Rate plus 800 basis points, or (ii)
twenty-four percent (24%) per annum.
“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.
“Event
of Default”
has
the
meaning provided in the Term Note and the Revolving Note.
“GDBA
Agreement to Fund”
means
that certain Agreement to Fund dated November 26, 2004 by and between GDBA
Investments, LLLP and the Company, as amended.
“Indebtedness
for Borrowed Money”
means
all obligations of the Company and its Subsidiaries, on a consolidated basis,
(a) to repay money borrowed, (b) to pay money evidenced by term loans, bonds,
debentures, notes or other similar instruments, (c) to pay the deferred purchase
price of property or services, (d) as lessee under capital leases, and (e)
all
obligations of another individual or entity of the type listed in (a through
(d), payment of which is guaranteed by or secured by liens on the property
of
such individual or entity (with respect to liens, to the extent of the value
of
property pledged pursuant to such liens if less than the amount of such
obligations), provided,
that“Indebtedness
for Borrowed Money” shall not include trade accounts payable incurred in the
ordinary course of business.
20
“Knowledge”
means
a
Person’s actual knowledge and such knowledge as would be obtained by such Person
upon a reasonable inquiry. For the purposes of this agreement, the “Company’s
Knowledge” or “Knowledge of the Company” means the knowledge of Xxx X. Xxxxxxx
or Xxxxx X. Xxxxxxx III.
“Liability”
means
any liability or obligation, whether known or unknown, asserted or unasserted,
absolute or contingent, accrued or unaccrued, liquidated or unliquidated
and
whether due or to become due, regardless of when asserted.
“Market
Price”
means
the average closing bid price for the Company’s Common Stock on the OTCBB or any
equivalent replacement exchange (or such other exchange on which the Company’s
Common Stock is primarily listed or eligible for trading) for the previous
ten
trading days.
“Material
Adverse Effect”
means
(i) a material and adverse effect on the business, assets, liabilities, results
of operations, assets, prospects, business or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (ii) an adverse
impairment to the Company’s ability to perform under any of its obligations
under the Agreements.
“Notes”
means
the Term Notes and the Revolving Notes.
“Parity
Securities”
means
all equity securities of the Company to which the Preferred Stock ranks on
a
parity with, whether with respect to dividends or upon liquidation, dissolution,
winding up or otherwise.
“Person”
means
a
natural person or any corporation, limited liability company or other
entity.
“Registration
Rights Agreement”
means
the Registration Rights Agreement of even date herewith executed by and between
the Company and the buyers.
“Request
for Advance”
means
a
written request by the Company to the Institutional Buyers for an Advance
of
funds as a Loan hereunder, which written request will be in the form of
Exhibit
D.
“Revolving
Interest Rate”
means
a
rate per annum equal to the greatest of:
(i) the
ninety day average for U.S. Treasury Notes with a 10-year maturity as determined
on the last Business Day of each calendar quarter, using the constant maturity
calculation, plus
650
basis points;
21
(ii) eleven
percent (11%); or
(iii) the
highest effective interest rate accruing on any outstanding Indebtedness
for
Borrowed Money of the Company at any time during the applicable calendar
quarter.
“Revolving
Loans”
means
all Advances of funds by the Institutional Buyers to the Company pursuant
to the
Revolving Loan Commitment, which Loans will be evidenced by the Revolving
Notes.
“Revolving
Loan Commitment”
means
(a) with respect to BOCO, Three Million Five Hundred Thousand Dollars
($3,500,000), and (b) with respect to GDBA, Three Million Five Hundred Thousand
Dollars ($3,500,000).
“Revolving
Loan Commitment Date”
means
December 31, 2007.
“Revolving
Loan Maturity Date”
means
September 28, 2009.
“Revolving
Note”
shall
mean the revolving note in the form attached as Exhibit C.
“Revolving
Payment Due Date”
has
the
meaning set forth in Section 2(b).
“SEC
Documents”
has
the
meaning set forth in Section 5(h).
“Securities”
means
the Term Notes, the Preferred Stock and the Conversion Shares.
“Senior
Securities”
means
all equity securities of the Company to which the Preferred Stock ranks junior,
whether with respect to dividends or upon liquidation, dissolution, winding
up
or otherwise.
“Shareholders
Agreement”
means
the Shareholders Agreement of even date herewith executed by and between
the
Buyers.
“Solvent”
means
that the Company’s 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.
“Subsidiaries”
means
any corporation or other organization, whether incorporated or unincorporated,
in which the Company owns, directly or indirectly, any ownership
interest.
“Tax”
or
“Taxes”
means
any federal, state, local or foreign income, alternative or add-on minimum,
gross income, gross receipts, windfall profits, severance, property, production,
sales, use, transfer, gains, license, excise, employment, payroll, withholding
or minimum tax, transfer, goods and services, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional
amount
imposed by any governmental body.
22
“Tax
Return”
means
any return, report or similar statement required to be filed with respect
to any
Taxes (including attached schedules), including, without limitation, any
information return, claim for refund, amended return and declaration of
estimated Tax.
GOVERNING
LAW; MISCELLANEOUS.
a. Governing
Law.
This
Agreement shall be enforced, governed by and construed in accordance with
the
laws of the State of Colorado applicable to agreements made and to be performed
entirely within such state, without regard to the principles of conflict
of
laws. The parties hereto hereby submit to the exclusive jurisdiction of federal
or state courts located in Denver, Colorado 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 to
the
notice address set forth in Section 11(f) (or such other address specified
in
writing) by registered 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 reasonable 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 unenforceable 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.
23
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 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:
|
Across
America Real Estate Corp.
0000
Xxxxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxx 00000
Attention:
Chief Executive Officer
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
|
|
| With a copy to: | |
|
Xxxxx
Xxxxxx & Associates, P.C.
0000
Xxxx Xxxxxxxx Xxx.
Xxxxxxxxx
Xxxxx
Xxxxxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention:
Xxxxx X. Xxxxxx, Esq.
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
|
If
to a
Buyer:
|
BOCO
Investments, LLC
000
Xxxx Xxxxxxxx Xxx.
Xxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile:
(000) 000-0000
Attention:
Chief Executive Officer
|
24
|
With
a copy to:
Xxxxx
Xxxxxx & Xxxxxx LLP
0000
00xx
Xxxxxx, Xxxxx 000
Xxxxxx,
Xxxxxxxx 00000
Attention:
Xxxxxx X. Xxxxxx XX and Xxxxx X. Xxxxxxxx
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
|
|
|
GDBA
Investments, LLLP
0000
Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx,
XX 00000
Facsimile:
(000) 000-0000
Attention:
Chief Executive Officer
|
|
|
With
a copy to
Xxxxx
& Xxxxxxx X.X.
Xxxxx
000, Xxxxxx Xxxxxx
0000
Xxxxxxxxxxx Xxxxxx
Xxxxxx,
XX 00000
Facsimile:
(000) 000-0000
Attention:
Xxxxxxx X. Xxxxxxx
Xxxxxx
X. Xxxxxxx
000
Xxxx Xxxxxxxx Xxx.
Xxxx
Xxxxxxx, Xxxxxxxx 00000
Facsimile:
(000) 000-0000
|
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 4(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. 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.
j. 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.
25
IN
WITNESS WHEREOF, the undersigned Buyer and the Company have caused this
Agreement to be duly executed as of the date first above written.
ACROSS
AMERICA REAL ESTATE CORP.
/s/
Xxx X.
Xxxxxxx
Name:
Xxx
X. Xxxxxxx
Title:
President and CEO
BUYERS:
BOCO
INVESTMENTS, LLC
Xxxxxx
X.
Xxxxxxx
Name:
Xxxxxx X. Xxxxxxx
Title:
CEO
RESIDENCE:
Colorado
GDBA
INVESTMENTS, LLLP
/s/
G.
Xxxxx
Xxxxxxx
Name:
G.
Xxxxx Xxxxxxx
Title:
General Manager
RESIDENCE:
Colorado
XXXXXX
X. XXXXXXX
/s/
Xxxxxx X.
Xxxxxxx
RESIDENCE:
Colorado
