Exhibit 10.1
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CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
Among
AQUATIC CELLULOSE INTERNATIONAL
CORPORATION
and
THE INVESTORS SIGNATORY HERETO
Dated as of May 4, 2000
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SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this "Agreement"), dated
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as of May 4, 2000, among Aquatic Cellulose International Corporation, a Nevada
corporation (the "Company"), and the investors signatory hereto (each such
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investor is a "Purchaser" and all such investors are, collectively, the
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"Purchasers").
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WHEREAS, subject to the terms and conditions set forth in this Agreement,
the Company desires to issue and sell to the Purchasers and the Purchasers,
severally and not jointly, desire to purchase from the Company an aggregate
principal amount of $1,500,000 of the Company's 12% Secured Convertible
Debentures, due May 4, 2001, which shall be in the form of Exhibit A (the
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"Debentures"), and which are convertible into shares of the Company's common
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stock, $ .001 par value per share (the "Common Stock"). All references to $
(dollars) shall be to US$ (United States Dollars).
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy are hereby acknowledged, the Company and the Purchasers agree as
follows:
ARTICLE I
PURCHASE AND SALE
1.1 The Closing.
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(a) The Closing. (i) Subject to the terms and conditions set forth
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in this Agreement, the Company shall issue and sell to the Purchasers and the
Purchasers shall, severally and not jointly, purchase from the Company the
Debentures for an aggregate purchase price of $1,500,000. The closing of the
purchase and sale of the Debentures (the "Closing") shall take place at the
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offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP ("Xxxxxxxx
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Xxxxxxxxx"), 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000, immediately
following the execution hereof or such later date as the parties shall agree.
The date of the Closing is hereinafter referred to as the "Closing Date." The
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purchase and sale of the Debentures shall occur in two separate tranches. The
first tranche ("First Tranche") shall be completed on the Closing Date and the
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Purchasers shall pay an aggregate purchase price of $500,000 on such date (the
"Initial Purchase Price"). The second tranche ("Second Tranche") shall be
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completed within thirty days after the Effective Date (as defined in Section
3.1(b)) ("Second Tranche Closing Date") and the Purchasers shall pay an
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aggregate purchase price of $1,000,000 (the "Subsequent Purchase Price").
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(ii) On the Closing Date, the parties shall deliver or shall cause to
be delivered the following: (A) the Company shall deliver to each Purchaser (1)
Debentures representing a portion of the Initial Purchase Price paid by such
Purchaser on the Closing Date, as indicated below such Purchaser's name on the
signature page to this Agreement, registered in the name of such Purchaser, (2)
a Common Stock purchase warrant, in the form of Exhibit D, registered in the
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name of such Purchaser, pursuant to which such Purchaser shall have the right to
acquire 125,000 shares of Common Stock as indicated below such Purchaser's name
on the
signature page to this Agreement (collectively, the "Warrants"), (3) the legal
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opinion of Xxxx X. Xxxxxxxxx, Esq., outside counsel to the Company, in the form
of Exhibit C, (4) an executed Registration Rights Agreement, dated the date
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hereof, among the Company and the Purchasers, in the form of Exhibit B (the
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"Registration Rights Agreement"), and the Transfer Agent Instructions, in the
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form of Exhibit E, delivered to and acknowledged by the Company's transfer agent
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(the "Transfer Agent Instructions") and (5) an executed Security Agreement,
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dated the date hereof, between the Company and the Purchasers, in the Form of
Exhibit F (the "Security Agreement"); and (B) each Purchaser shall deliver (1)
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its portion of the Initial Purchase Price purchase indicated below such
Purchaser's name on the signature page to this Agreement in United States
dollars in immediately available funds by wire transfer to an account designated
in writing by the Company for such purpose, and (2) an executed Registration
Rights Agreement and Security Agreement.
(iii) Within thirty days following the Effective Date, (A) the
Company will, against delivery of the amounts set forth in clause (B) in this
paragraph, deliver to each Purchaser, Debentures representing the portion of the
Subsequent Payment Price indicated below such Purchaser's name on the signature
page of this Agreement (subject to equitable adjustment for stock splits,
recombinations and similar events), registered in the name of such Purchaser,
(B) each Purchaser will deliver to the Company, its portion of the Subsequent
Payment Price as indicated below such Purchaser's name on the signature page to
this Agreement in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such purpose and
(C) the Company will deliver to each Purchaser, Warrants, registered in the name
of such Purchaser, pursuant to which such Purchaser shall have the right to
acquire the number of shares of Common Stock indicated below such Purchaser's
name on the signature page to this Agreement.
Notwithstanding anything to the contrary contained in this Agreement, the
commitment of a Purchaser to acquire the securities described in Section
1.1(a)(iii) above is subject to the satisfaction or waiver by the Purchasers of
each of the following conditions:
(a) Closing of First Tranche. The Closing of the purchase and sale of
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the First Tranche shall have occurred;
(b) Accuracy of the Company's Representations and Warranties. The
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representations and warranties of the Company contained in the Purchase
Agreement shall be true and correct as of the date when made and as of the
Second Tranche Closing Date as though made on and as of the Second Tranche
Closing Date (other than representations and warranties which relate to a
specific date (which shall not include representations and warranties relating
to the "date hereof") which representations and warranties shall be true as of
such specific date);
(c) Performance by the Company. The Company shall have performed,
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satisfied and complied with all covenants, agreements and conditions required by
the Transaction Documents to be performed, satisfied or complied with by the
Company between the Closing Date and the Second Tranche Closing Date and no
Event (as defined in the Registration Rights Agreement) shall have occurred
which has not been cured to the satisfaction of the Purchasers;
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(d) Underlying Shares Registration Statement. The Underlying Shares
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Registration Statement shall have been declared effective under the Securities
Act by the Commission and shall have remained effective at all times, not
subject to any actual or threatened stop order or subject to any actual or
threatened suspension at any time prior to the Second Tranche Closing Date.
(e) No Injunction. Since the Closing Date, no statute, rule,
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regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents or makes impracticable
the transactions contemplated thereby;
(f) Adverse Changes. Since the Closing Date, no event or series of
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events which reasonably would be expected to have or result in a Material
Adverse Effect shall have occurred;
(g) No Suspensions of Trading in Common Stock. The trading in the
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Common Stock shall not have been suspended by the Commission or on the OTC
(except for any suspension of trading of limited duration solely to permit
dissemination of material information regarding the Company) at any time since
the Closing Date;
(h) Listing of Common Stock. The Common Stock shall have been at all
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times since the Closing Date quoted on the OTC;
(i) Purchasers' Beneficial Ownership. The Purchasers shall not
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beneficially own in excess of 9.999% of the outstanding shares of Common Stock;
(j) Performance of Conversion/Exercise Obligations. The Company
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shall have timely complied with its conversion, exercise and delivery
obligations under the First Tranche.
1.2 Certain Defined Terms. For purposes of this Agreement,
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"Conversion Price," "Original Issue Date" and "Trading Day" shall have the
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meanings set forth in the Debentures; "Business Day" shall mean any day except
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Saturday, Sunday and any day which shall be a federal legal holiday in the
United States or Canada or a day on which banking institutions in the State of
New York or the province of British Columbia, Canada are authorized or required
by law or other governmental action to close; "Person" means an individual or
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corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an
agency or subdivision thereof) or other entity of any kind.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
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Company hereby makes the following representations and warranties to the
Purchasers:
(a) Organization and Qualification. The Company is a corporation duly
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incorporated, validly existing and in good standing under the laws of the State
of Nevada with the requisite corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. The
Company has no subsidiaries other than as set forth in Schedule 2.1(a)
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(collectively the "Subsidiaries"). Each of the Subsidiaries is an entity, duly
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incorporated or otherwise organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization (as
applicable), with the requisite power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and the Subsidiaries is duly qualified to do business and is in
good standing as a foreign corporation in each jurisdiction in which the nature
of the business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good standing, as
the case may be, could not, individually or in the aggregate, (x) adversely
affect the legality, validity or enforceability of the Securities (as defined
below) or any of this Agreement, the Registration Rights Agreement, the Security
Agreement, the Transfer Agent Instructions or the Warrants (collectively, the
"Transaction Documents"), (y) have or result in a material adverse effect on the
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results of operations, assets, prospects, or condition (financial or otherwise)
of the Company and the Subsidiaries, taken as a whole, or (z) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (x), (y) or (z), a "Material Adverse
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Effect").
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(b) Authorization; Enforcement. The Company has the requisite
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corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents and the Debentures has been duly executed by the
Company and, when delivered (or filed, as the case may be) in accordance with
the terms hereof, will constitute the valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. Neither
the Company nor any Subsidiary is in violation of any of the provisions of its
respective certificate or articles of incorporation, by-laws or other
organizational or charter documents.
(c) Capitalization. The number of authorized, issued and outstanding
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capital stock of the Company is set forth in Schedule 2.1(c). No shares of
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Common Stock are entitled to preemptive or similar rights, nor is any holder of
the Common Stock entitled to preemptive or similar rights arising out of any
agreement or understanding with the Company by virtue of any of the Transaction
Documents. Except as a result of the purchase and sale of the Debentures and
the Warrants and except as disclosed in Schedule 2.1(c), there are no
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outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating
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to, or securities, rights or obligations convertible into or exchangeable for,
or giving any Person (as defined below) any right to subscribe for or acquire,
any shares of Common Stock, or contracts, commitments, understandings, or
arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of Common Stock, or securities or rights convertible or
exchangeable into shares of Common Stock.
(d) Issuance of the Debentures and the Warrants. The Debentures and
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the Warrants are duly authorized and, when issued and paid for in accordance
with the terms hereof, will be duly and validly issued, fully paid and
nonassessable, free and clear of all liens, encumbrances and rights of first
refusal of any kind (collectively, "Liens"). The Company has on the date hereof
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and will, at all times while the Debentures and the Warrants are outstanding,
maintain an adequate reserve of duly authorized shares of Common Stock, reserved
for issuance to the holders of the Debentures and the Warrants, to enable it to
perform its conversion, exercise and other obligations under this Agreement, the
Debentures and the Warrants. Such number of reserved and available shares of
Common Stock is not less than the sum of (i) 200% of the number of shares of
Common Stock which would be issuable upon conversion in full of the Debentures,
assuming such conversion occurred on the Original Issue Date, the Debentures
remain outstanding for two years and all interest is paid in shares of Common
Stock and (ii) the number of shares of Common Stock issuable upon exercise of
the Warrants (such number of shares of Common Stock as contemplated in clauses
(i)-(ii), the "Initial Minimum"). All such authorized shares of Common Stock
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shall be duly reserved for issuance to the holders of the Debentures and the
Warrants. The shares of Common Stock issuable upon conversion of the Debentures
and upon exercise of the Warrants are collectively referred to herein as the
"Underlying Shares." The Debentures, the Warrants and the Underlying Shares are
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collectively referred to herein as, the "Securities." When issued in accordance
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with the Debentures and the Warrants, the Underlying Shares will be duly
authorized, validly issued, fully paid and nonassessable, free and clear of all
Liens.
(e) No Conflicts. The execution, delivery and performance of the
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Transaction Documents by the Company and the consummation by the Company of the
transactions contemplated thereby do not and will not (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other charter documents (each as amended
through the date hereof), or (ii) subject to obtaining the Required Approvals
(as defined below), 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 (with
or without notice, lapse of time or both) of, any agreement, credit facility,
debt or other instrument (evidencing a Company or Subsidiary debt or otherwise)
or other understanding to which the Company or any Subsidiary is a party or by
which any property or asset of the Company or any Subsidiary is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or governmental
authority to which the Company or a Subsidiary is subject (including federal and
state securities laws and regulations), or by which any property or asset of the
Company is bound or affected; except in the case of each of clauses (ii) and
(iii), as could not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being conducted in
violation of any law, ordinance or regulation
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of any governmental authority, except for violations which, individually or in
the aggregate, could not have or result in a Material Adverse Effect.
(f) Filings, Consents and Approvals. Neither the Company nor any
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Subsidiary is required to obtain any consent, waiver, authorization or order of,
give any notice to, or make any filing or registration with, any court or other
federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required pursuant to Section
3.10, (ii) the filing with the Securities and Exchange Commission (the
"Commission") of a registration statement meeting the requirements set forth in
the Registration Rights Agreement and covering the resale of the Underlying
Shares by the Purchasers (the "Underlying Shares Registration Statement"), (iii)
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applicable Blue Sky filings and (iv) in all other cases where the failure to
obtain such consent, waiver, authorization or order, or to give such notice or
make such filing or registration could not have or result in, individually or in
the aggregate, a Material Adverse Effect (collectively, the "Required
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Approvals").
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(g) Litigation; Proceedings. There is no action, suit, inquiry,
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notice of violation, proceeding or investigation pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of their respective properties before or by any court,
arbitrator, governmental or administrative agency or regulatory authority
(federal, state, county, local or foreign) (collectively, an "Action") which (i)
adversely affects or challenges the legality, validity or enforceability of any
of the Transaction Documents or the Securities or (ii) could, individually or in
the aggregate, have or result in a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any Subsidiary
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(i) is in default under or in violation of (and no event has occurred which has
not been waived which, with notice or lapse of time or both, would result in a
default by the Company or any Subsidiary under), nor has the Company or any
Subsidiary received notice of a claim that it is in default under or that it is
in violation of, any indenture, loan or credit agreement or any other agreement
or instrument to which it is a party or by which it or any of its properties is
bound, (ii) is in violation of any order of any court, arbitrator or
governmental body, or (iii) is in violation of any statute, rule or regulation
of any governmental authority, in each case of clauses (i), (ii) or (iii) above,
except as could not individually or in the aggregate, have or result in a
Material Adverse Effect. The security interests granted to the Purchasers
pursuant to the Security Agreement will convey and grant to the Purchasers a
first priority security interest in all of the Collateral (as such term is
defined in such agreements).
(i) Private Offering. Assuming the accuracy of the representations
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and warranties of the Purchasers set forth in Sections 2.2(b)-(g), the offer,
issuance and sale of the Securities to the Purchasers as contemplated hereby are
exempt from the registration requirements of the Securities Act of 1933, as
amended (the "Securities Act"). Neither the Company nor any Person acting on
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its behalf has taken or is, to the knowledge of the Company, contemplating
taking any action which could subject the offering, issuance or sale of the
Securities to the registration requirements of the Securities Act including
soliciting any offer to buy or sell the Securities by means of any form of
general solicitation or advertising.
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(j) SEC Documents; Financial Statements. The Company has filed all
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reports required to be filed by it under the Exchange Act of 1934, as amended
(the "Exchange Act"), including pursuant to Section 13(a) or 15(d) thereof, for
the two years preceding the date hereof (or such shorter period as the Company
was required by law to file such material) (the foregoing materials being
collectively referred to herein as the "SEC Documents" and, together with the
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Schedules to this Agreement, the "Disclosure Materials") on a timely basis or
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has received a valid extension of such time of filing and has filed any such SEC
Documents prior to the expiration of any such extension. As of their respective
dates, the SEC Documents complied in all material respects with the requirements
of the Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when filed,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All material agreements to which the Company is a party or to which
the property or assets of the Company are subject have been filed as exhibits to
the SEC Documents as required. The financial statements of the Company included
in the SEC Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with respect
thereto as in effect at the time of filing. Such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved ("GAAP"), except as may be
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otherwise specified in such financial statements or the notes thereto, and
fairly present in all material respects the financial position of the Company
and its consolidated subsidiaries as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, immaterial, year-end audit adjustments.
Since May 31, 1999, except as specifically disclosed in the SEC Documents, (a)
there has been no event, occurrence or development that has or that could result
in a Material Adverse Effect, (b) the Company has not incurred any liabilities
(contingent or otherwise) other than (x) liabilities incurred in the ordinary
course of business consistent with past practice and (y) liabilities not
required to be reflected in the Company's financial statements pursuant to GAAP
or required to be disclosed in filings made with the Commission, (c) the Company
has not altered its method of accounting or the identity of its auditors and (d)
the Company has not declared or made any payment or distribution of cash or
other property to its stockholders or officers or directors (other than in
compliance with existing Company stock option plans) with respect to its capital
stock, or purchased, redeemed (or made any agreements to purchase or redeem) any
shares of its capital stock.
(k) Investment Company. The Company is not, and is not an Affiliate
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(as defined in Rule 405 under the Securities Act) of, an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
(l) Certain Fees. No fees or commissions will be payable by the
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Company to any broker, financial advisor or consultant, finder, placement agent,
investment banker, bank or other Person with respect to the transactions
contemplated by this Agreement. The Purchasers shall have no obligation with
respect to any fees or with respect to any claims made by or on behalf of other
Persons for fees of a type contemplated in this Section that may be due in
connection with the transactions contemplated by this Agreement. The Company
shall indemnify
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and hold harmless the Purchasers, their employees, officers, directors, agents,
and partners, and their respective Affiliates, from and against all claims,
losses, damages, costs (including the costs of preparation and attorney's fees)
and expenses suffered in respect of any such claimed or existing fees, as such
fees and expenses are incurred.
(m) Solicitation Materials. Neither the Company nor any Person acting
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on the Company's behalf has solicited any offer to buy or sell the Securities
by means of any form of general solicitation or advertising.
(n) Form S-1 Eligibility. The Company is eligible to register
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securities for resale with the Commission under Form S-1 promulgated under the
Securities Act.
(o) Form S-3 Eligibility. The Company shall use its best efforts to
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become eligible to use Form S-3 promulgated under the Securities Act to register
its securities for resale with the Commission no later than August 7, 2000.
(p) Exclusivity. The Company shall not issue and sell the Debentures
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to any Person other than the Purchasers without the specific prior written
consent of the Purchasers.
(q) Seniority. No indebtedness of the Company is senior to the
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Debentures in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise.
(r) Listing and Maintenance Requirements Compliance. Except as set
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forth in the SEC Documents, the Company has not, in the two years preceding the
date hereof, received notice (written or oral) from the NASDAQ or any other
stock exchange, market or trading facility on which the Common Stock is or has
been listed (or on which it has been quoted) to the effect that the Company is
not in compliance with the listing or maintenance requirements of such exchange
or market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be, in compliance with all such listing and
maintenance requirements.
(s) Patents and Trademarks. The Company and its Subsidiaries have
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rights to use, all patents, patent applications, trademarks, trademark
applications, service marks, trade names, copyrights, licenses and rights which
are necessary or material for use in connection with their respective
businesses, as described in the SEC Documents and which the failure to so have
would have a Material Adverse Effect (collectively, the "Intellectual Property
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Rights"). The Company and its Subsidiaries do not own any Intellectual Property
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Rights (or applications therefor) but have a right to use the Intellectual
Property Rights described in the Services Agreement (attached hereto as Exhibit
S) between Xxxx Xxxxxx and the Company. Neither the Company nor any Subsidiary
has received a written notice that the Intellectual Property Rights used by the
Company or its Subsidiaries violates or infringes upon the rights of any Person.
To the best knowledge of the Company, all such Intellectual Property Rights are
enforceable and there is no existing infringement by another Person of any of
the Intellectual Property Rights.
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(t) Registration Rights; Rights of Participation. Except as set forth
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on Schedule 6(b) to the Registration Rights Agreement, the Company has not
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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 which has not been satisfied. No
Person, has any right of first refusal, preemptive right, right of
participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents.
(u) Regulatory Permits. The Company and its Subsidiaries possess all
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certificates, authorizations and permits issued by the appropriate federal,
state or foreign regulatory authorities necessary to conduct their respective
businesses as described in the SEC Documents, except where the failure to
possess such permits could not, individually or in the aggregate, have or result
in a Material Adverse Effect ("Material Permits"), and neither the Company nor
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any such Subsidiary has received any notice of proceedings relating to the
revocation or modification of any Material Permit.
(v) Title. The Company and the Subsidiaries have good and marketable
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title in fee simple to all real property owned by them which is material to the
business of the Company and its Subsidiaries and good and marketable title in
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, except
for Liens granted to the Purchasers pursuant to the Security Agreement and for
other Liens 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 of which the Company and its Subsidiaries are in compliance
and do not interfere with the use made and proposed to be made of such property
and buildings by the Company and its Subsidiaries.
(w) Absence of Certain Proceedings. Except as described in the SEC
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Reports, (i) there is no Action pending or, to the knowledge of the Company,
threatened against the Company, in any such case wherein an unfavorable
decision, ruling or finding could have or result in a Material Adverse Effect;
(ii) neither the Company nor any Subsidiary, nor any director or officer
thereof, is or has been the subject of any Action involving (A) a claim of
violation of or liability under federal or state securities laws or (B) a claim
of breach of fiduciary duty; (iii) the Company does not have pending before the
Commission any request for confidential treatment of information and the Company
has no knowledge of any expected such request that would be made prior to the
Effectiveness Date (as defined in the Registration Rights Agreement); and (iv)
there has not been, and to the best of the Company's knowledge there is not
pending or contemplated, any investigation by the Commission involving the
Company or any current or former director or officer of the Company.
(x) Labor Relations. No material labor problem exists or, to the
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knowledge of the Company, is imminent with respect to any of the employees of
the Company.
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(y) Disclosure. The Company confirms that neither it nor any
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other Person acting on its behalf has provided any of the Purchasers or its
agents or counsel with any information that constitutes or might constitute
material non-public information. The Company understands and confirms that the
Purchasers shall be relying on the foregoing representations in effecting
transactions in securities of the Company. All disclosure provided to the
Purchasers regarding the Company, its business and the transactions contemplated
hereby, including the Schedules to this Agreement, furnished by or on behalf of
the Company are true and correct and do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(z) Restriction on Modification or Termination of Services Agreement.
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The Company agrees that it will not seek to or permit the modification or
termination of any provision of the Services Agreement, dated November 1, 1996,
between the Company and Xxxx Xxxxxx, until the Company has fully discharged all
it obligations under the Transaction Documents.
2.2 Representations and Warranties of the Purchasers. Each Purchaser
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hereby for itself and for no other Purchaser represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
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organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations thereunder. The purchase by such Purchaser of the Securities
hereunder has been duly authorized by all necessary action on the part of such
Purchaser. Each of this Agreement, the Registration Rights Agreement, the
Security Agreement and the Intellectual Property Security Agreement has been
duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms.
(b) Investment Intent. Such Purchaser is acquiring the Securities as
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principal for its own account for investment purposes only and not with a view
to or for distributing or reselling such Securities or any part thereof, without
prejudice, however, to such Purchaser's right, subject to the provisions of this
Agreement and the Registration Rights Agreement, at all times to sell or
otherwise dispose of all or any part of such Securities pursuant to an effective
registration statement under the Securities Act and in compliance with
applicable federal and state securities laws or under an exemption from such
registration. Nothing contained herein shall be deemed a representation or
warranty by such Purchaser to hold Securities for any amount of time.
(c) Purchaser Status. At the time such Purchaser was offered the
----------------
Debentures and its respective Warrants, it was, and at the date hereof it is,
and at each exercise date under its respective Warrants, it will be, an
"accredited investor" as defined in Rule 501(a) under the
10
Securities Act. Such Purchaser has not been formed solely for the purpose of
acquiring the Securities.
(d) Experience of such Purchaser. Such Purchaser, either alone or
----------------------------
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment.
(e) Ability of such Purchaser to Bear Risk of Investment. Such
----------------------------------------------------
Purchaser is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
(f) Access to Information. Such Purchaser acknowledges that it has
---------------------
reviewed the Disclosure Materials and has been afforded (i) the opportunity to
ask such questions as it has deemed necessary of, and to receive answers from,
representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Company's
financial condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii) the
opportunity to obtain such additional information which the Company possesses or
can acquire without unreasonable effort or expense that is necessary to make an
informed investment decision with respect to the investment and to verify the
accuracy and completeness of the information contained in the Disclosure
Materials. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.
(g) General Solicitation. Such Purchaser is not purchasing the
--------------------
Securities as a result of or subsequent to any advertisement, article, notice or
other communication regarding the Securities published in any newspaper,
magazine or similar media or broadcast over television or radio or presented at
any seminar or any other general solicitation or general advertisement.
(h) Reliance. Such Purchaser understands and acknowledges that (i)
--------
the Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (ii) the availability of such exemption,
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Purchaser hereby consents to such
reliance.
The Company acknowledges and agrees that no Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section 2.2.
11
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions. (a) Securities may only be disposed of
---------------------
pursuant to an effective registration statement under the Securities Act, to the
Company or pursuant to an available exemption from or in a transaction not
subject to the registration requirements of the Securities Act, and in
compliance with any applicable federal and state securities laws. In connection
with any transfer of Securities other than pursuant to an effective registration
statement or to the Company, except as otherwise set forth herein, the Company
may require the transferor thereof to provide to the Company an opinion of
counsel selected by the transferor, the form and substance of which opinion
shall be reasonably satisfactory to the Company, to the effect that such
transfer does not require registration of such transferred securities under the
Securities Act. Notwithstanding the foregoing, the Company, without requiring a
legal opinion as described in the immediately preceding sentence, hereby
consents to and agrees to register on the books of the Company and with any
transfer agent for the securities of the Company any transfer of Securities by a
Purchaser to an Affiliate of such Purchaser or to one or more funds or managed
accounts under common management with such Purchaser, and any transfer among any
such Affiliates or one or more funds or managed accounts, provided that the
transferee certifies to the Company that it is an "accredited investor" as
defined in Rule 501(a) under the Securities Act and that it is acquiring the
Securities solely for investment purposes (subject to the qualifications
hereof). Any such transferee shall agree in writing to be bound by the terms of
this Agreement and shall have the rights of a Purchaser under this Agreement and
the Registration Rights Agreement.
(b) The Purchasers agree to the imprinting, so long as is required by
this Section 3.1(b), of the following legend on the Securities:
NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE [CONVERTIBLE] [EXERCISABLE] HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
Underlying Shares shall not contain the legend set forth above nor any
other legend if the conversion of Debentures and exercise of the Warrants or
other issuances of Underlying Shares as contemplated hereby, by the Debentures
or the Warrants occurs at any time while an Underlying Shares Registration
Statement is effective under the Securities Act or, in the event there is not an
effective Underlying Shares Registration Statement, at such time, in the opinion
of counsel to the Company, such legend is not required under applicable
requirements of
12
the Securities Act (including judicial interpretations and pronouncements issued
by the staff of the Commission). The Company shall cause its counsel to issue
the legal opinion included in the Transfer Agent Instructions to the Company's
transfer agent on the day that the Underlying Shares Registration Statement is
declared effective by the Commission. The Company agrees that, in the event any
Underlying Shares are issued with a legend in accordance with this Section
3.1(b), it will, within five Trading Days after request therefor by a Purchaser,
provide such Purchaser with a certificate or certificates representing such
Underlying Shares, free from such legend at such time as such legend would not
have been required under this Section 3.1(b) had such issuance occurred on the
date of such request. The Company may not make any notation on its records or
give instructions to any transfer agent of the Company which enlarge the
restrictions of transfer set forth in this Section.
3.2 Acknowledgment of Dilution. The Company acknowledges that the
--------------------------
issuance of the Underlying Shares upon (i) conversion of the Debentures in
accordance with the terms of the Debentures, and (ii) exercise of the Warrants
in accordance with their terms, will result in dilution of the outstanding
shares of Common Stock, which dilution may be substantial under certain market
conditions. The Company further acknowledges that its obligation to issue
Underlying Shares upon (x) conversion of the Debentures in accordance with the
terms of the Debentures, and (y) exercise of the Warrants in accordance with
their terms, is unconditional and absolute, subject to the limitations set forth
herein in the Debentures or pursuant to the Warrants, regardless of the effect
of any such dilution.
3.3 Furnishing of Information. As long as the Purchasers own Securities,
-------------------------
the Company covenants to timely file (or obtain extensions in respect thereof
and file within the applicable grace period) all reports required to be filed by
the Company after the date hereof pursuant to Section 13(a) or 15(d) of the
Exchange Act. As long as the Purchasers own Securities, if the Company is not
required to file reports pursuant to such sections, it will prepare and furnish
to the Purchasers and make publicly available in accordance with Rule 144(c)
promulgated under the Securities Act such information as is required for the
Purchasers to sell the Securities under Rule 144 promulgated under the
Securities Act. The Company further covenants that it will take such further
action as any holder of Securities may reasonably request, all to the extent
required from time to time to enable such Person to sell Underlying Shares
without registration under the Securities Act within the limitation of the
exemptions provided by Rule 144 promulgated under the Securities Act, including
the legal opinion referenced above in this Section. Upon the request of any
such Person, the Company shall deliver to such Person a written certification of
a duly authorized officer as to whether it has complied with such requirements.
3.4 Integration. The Company shall not, and shall use its best efforts to
-----------
ensure that, no Affiliate of the Company shall, sell, offer for sale or solicit
offers to buy or otherwise negotiate in respect of any security (as defined in
Section 2 of the Securities Act) that would be integrated with the offer or sale
of the Securities in a manner that would require the registration under the
Securities Act of the sale of the Securities to the Purchasers.
13
3.5 Increase in Authorized Shares. If on any date the Company would be,
-----------------------------
if a notice of conversion or exercise (as the case may be) were to be delivered
on such date, precluded from (a) issuing (a) 200% of the number of Underlying
Shares as would then be issuable upon a conversion in full of the Debentures,
and (b) the number of Underlying Shares issuable upon exercise in full of the
Warrants (the "Current Required Minimum"), in either case, due to the
------------------------
unavailability of a sufficient number of authorized but unissued or reserved
shares of Common Stock, then the Board of Directors of the Company shall
promptly (and in any case, within 30 Business Days from such date) prepare and
mail to the stockholders of the Company proxy materials requesting authorization
to amend the Company's certificate or articles of incorporation to increase the
number of shares of Common Stock which the Company is authorized to issue to at
least such number of shares as reasonably requested by the Purchasers in order
to provide for such number of authorized and unissued shares of Common Stock to
enable the Company to comply with its issuance, conversion exercise and
reservation of shares obligations as set forth in this Agreement, the Debentures
and the Warrants (the sum of (x) the number of shares of Common Stock then
outstanding plus all shares of Common Stock issuable upon exercise of all
outstanding options, warrants and convertible instruments, and (y) the Current
Required Minimum, shall be a reasonable number). In connection therewith, the
Board of Directors shall (a) adopt proper resolutions authorizing such increase,
(b) recommend to and otherwise use its best efforts to promptly and duly obtain
stockholder approval to carry out such resolutions (and hold a special meeting
of the stockholders no later than the earlier to occur of the 60/th/ day after
delivery of the proxy materials relating to such meeting and the 90/th/ day
after request by a holder of Securities to issue the number of Underlying Shares
in accordance with the terms hereof) and (c) within five Business Days of
obtaining such stockholder authorization, file an appropriate amendment to the
Company's certificate or articles of incorporation to evidence such increase.
3.6 Reservation and Listing of Underlying Shares. (a) The Company shall
--------------------------------------------
(i) in the time and manner required by any national securities exchange or
market or trading or quotation facility on which the Common Stock is then
traded, prepare and file with such national securities exchange or market or
quotation facility on which the Common Stock is then listed for trading an
additional shares listing application covering a number of shares of Common
Stock which is not less than the Initial Minimum, (ii) take all steps necessary
to cause such shares of Common Stock to be approved for listing on any such
national securities exchange or market or trading or quotation facility on which
the Common Stock is then listed as soon as possible thereafter, and (iii)
provide to the Purchasers evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon. If the number of Underlying
Shares issuable upon conversion in full of the then outstanding Debentures and
upon exercise of the then unexercised portion of the Warrants exceeds 85% of the
number of Underlying Shares previously listed on account thereof with any such
required exchanges), then the Company shall take the necessary actions to
immediately list a number of Underlying Shares as equals no less than the then
Current Required Minimum.
(b) The Company shall maintain a reserve of shares of Common Stock
for issuance upon conversion of the Debentures in full and upon exercise in full
of the Warrants in accordance with this Agreement, the Debentures and the
Warrants, respectively, in such amount
14
as may be required to fulfill its obligations in full under the Transaction
Documents, which reserve shall equal no less than the then Current Required
Minimum.
3.7 Conversion and Exercise Procedures. The Transfer Agent Instructions,
----------------------------------
Conversion Notice (as defined in the Debentures) and Notice of Exercise under
the Warrants set forth the totality of the procedures with respect to the
conversion of the Debentures and exercise of the Warrants, including the form of
legal opinion, if necessary, that shall be rendered to the Company's transfer
agent and such other information and instructions as may be reasonably necessary
to enable the Purchasers to convert their Debentures and exercise their Warrants
as contemplated in the Debentures and the Warrants (as applicable).
3.8 Conversion and Exercise Obligations of the Company. The Company shall
--------------------------------------------------
honor conversions of the Debentures and exercises of the Warrants and shall
deliver Underlying Shares in accordance with the respective terms, conditions
and time periods set forth in the Debentures and the Warrants.
3.9 Subsequent Financing; Right of First Refusal; Limitation on
-----------------------------------------------------------
Registrations.
-------------
(a) Without the prior written consent of the Purchasers, prior to
the 540th day following the Effective Date (such date will be extended by the
number of days after the Effectiveness Date (as defined in the Registration
Rights Agreement) that an Underlying Shares Registration Statement has not been
declared effective by the Commission and by the number of days after the
Effective Date during which a Purchaser is not permitted or unable to utilize
the prospectus or otherwise to resell Underlying Shares under the Underlying
Shares Registration Statement) (the "Restricted Period"), the Company will not
-----------------
offer, sell, grant any option to purchase, or otherwise dispose of (or announce
any offer, sale, grant or any option to purchase or other disposition) any of
its securities (including the issuance of any debt or other instrument at any
time over the life thereof convertible into or exchangeable for Common Stock) or
any of its Affiliate's securities that may be exchangeable or convertible into
Common Stock, or otherwise enter into any other transaction intended to be
exempt or not subject to registration under the Securities Act (collectively, a
"Subsequent Placement"), unless none of the securities issued or granted (or
--------------------
securities issuable upon conversion or exercise thereof) may be resold or
registered for issuance or resale under the Securities Act until the termination
of the Restricted Period. The restriction contained in the foregoing sentence
shall not apply to (i) issuances of Common Stock pursuant to a Strategic
Transaction (as defined below), (ii) issuances of shares of Common Stock as
payment of the purchase price for an acquisition of assets or stock of an
unaffiliated Person, and (iii) the granting of options or warrants to employees,
officers and directors of the Company, and the issuance of Common Stock upon
exercise of such options or warrants granted under any stock option plan
heretofore or hereinafter duly adopted by the Company ("Option Plan Issuances").
---------------------
A "Strategic Transaction" shall mean a transaction or relationship in which the
---------------------
Company issues shares of Common Stock to a Person which is, itself or through
its subsidiaries, an operating company in a business related to the business of
the Company and in which the Company receives material benefits in addition to
the investment of funds, but shall not include a
15
transaction in which the Company is issuing securities primarily for the purpose
of raising capital or to an entity whose primary business is investing in
securities.
(b) Without the prior written consent of the Purchasers, prior to the
541/th/ day following the Effective Date, the Company shall not, directly or
indirectly enter into a Subsequent Placement, unless: (A) the Company delivers
to each of the Purchasers a written notice (the "Subsequent Placement Notice")
---------------------------
of its intention to effect such Subsequent Placement, which Subsequent Placement
Notice shall describe in reasonable detail the proposed terms of such Subsequent
Placement, the amount of proceeds intended to be raised thereunder, the Person
with whom such Subsequent Placement shall be effected, and attached to which
shall be a term sheet or similar document relating thereto and (B) such
Purchaser shall not have notified the Company by 6:30 p.m. (New York City time)
on the tenth Trading Day after its receipt of the Subsequent Placement Notice of
its willingness to provide (or to cause its sole designee to provide), subject
to completion of mutually acceptable documentation, financing to the Company on
the same terms set forth in the Subsequent Placement Notice. If the Purchasers
shall fail to notify the Company of their intention to enter into such
negotiations within such time period, the Company may effect the Subsequent
Placement substantially upon the terms and to the Persons (or Affiliates of such
Persons) set forth in the Subsequent Placement Notice, provided, that the
--------
Company shall provide the Purchasers with a second Subsequent Placement Notice,
and the Purchasers shall again have the right of first refusal set forth above
in this paragraph (b), if the Subsequent Placement subject to the initial
Subsequent Placement Notice shall not have been consummated for any reason on
the terms set forth in such Subsequent Placement Notice within thirty Trading
Days after the date of the initial Subsequent Placement Notice with the Person
(or an Affiliate of such Person) identified in the Subsequent Placement Notice.
If the Purchasers shall indicate a willingness to provide financing in excess of
the amount set forth in the Subsequent Placement Notice, then each Purchaser
shall be entitled to provide financing pursuant to such Subsequent Placement
Notice up to an amount equal to such Purchaser's pro-rata portion of the
aggregate number of Shares purchased by such Purchaser under this Agreement, but
the Company shall not be required to accept financing from the Purchasers in an
amount in excess of the amount set forth in the Subsequent Placement Notice.
The restrictions of this subsection shall not apply to: (i) a Subsequent
Placement in which the securities (and securities issuable upon conversion or
exercise thereof) shall be restricted from resale and conversion and will not be
registered for issuance or resale for at least 365 days following the issuance
date thereof, (ii) issuances of shares of Common Stock pursuant to a Strategic
Transaction, (iii) issuances of shares of Common Stock as payment of the
purchase price for an acquisition of assets or stock of an unaffiliated Person
and (iv) Option Plan Issuances.
(c) Except for (x) Underlying Shares, (y) other "Registrable
Securities" (as such term is defined in the Registration Rights Agreement) to be
registered, and securities of the Company permitted pursuant to Schedule 6(b) of
the Registration's Rights Agreement to be registered, in the Underlying Shares
Registration Statement in accordance with the Registration Rights Agreement, and
(z) Common Stock permitted to be issued pursuant to paragraph (a)(i)- (iii) of
Section 3.9(a), the Company shall not, for a period of not less than 90 Trading
Days after the date that the Underlying Shares Registration Statement is
declared effective by the Commission, without the prior written consent of the
Purchasers (i) issue or sell any of its or any
16
of its Affiliates' equity or equity-equivalent securities pursuant to Regulation
S promulgated under the Securities Act, or (ii) register any securities of the
Company. Any days that a Purchaser is unable to sell Underlying Shares under the
Underlying Shares Registration Statement shall be added to such 90 Trading Day
period.
3.10 Certain Securities Laws Disclosures; Publicity. The Company shall:
----------------------------------------------
(i) on the Closing Date issue a press release acceptable to the Purchasers
disclosing the transactions contemplated hereby, (ii) file with the Commission a
Report on Form 8-K disclosing the transactions contemplated hereby within ten
Business Days after the Closing Date, and (iii) timely file with the Commission
a Form D promulgated under the Securities Act as required under Regulation D
promulgated under the Securities Act and provide a copy thereof to the
Purchasers promptly after the filing thereof. The Company shall, no less than
two Business Days prior to the filing of any disclosure required by clauses (ii)
and (iii) above, provide a copy thereof to the Purchasers. No such filing or
disclosure may be made that mentions the Purchasers by name without the prior
consent of the Purchasers. The Company and the Purchasers shall consult with
each other in issuing any press releases or otherwise making public statements
or filings and other communications with the Commission or any regulatory
agency or stock market or trading facility with respect to the transactions
contemplated hereby and neither party shall issue any such press release or
otherwise make any such public statement, filings or other communications
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed, except that no prior consent shall be required
if such disclosure is required by law, in which such case the disclosing party
shall provide the other party with prior notice of such public statement, filing
or other communication. Notwithstanding the foregoing, the Company shall not
publicly disclose the names of the Purchasers, or include the names of the
Purchasers in any filing with the Commission, or any regulatory agency, trading
facility or stock market without the prior written consent of the Purchasers,
except to the extent such disclosure (but not any disclosure as to the
controlling Persons thereof) is required by law, in which case the Company shall
provide the Purchasers with prior notice of such disclosure.
3.11 Transfer of Intellectual Property Rights. Except in connection with
----------------------------------------
the sale of all or substantially all of the assets of the Company or licensing
arrangements in the ordinary course of the Company's business, the Company shall
not transfer, sell or otherwise dispose of any Intellectual Property Rights, or
allow any of the Intellectual Property Rights to become subject to any Liens, or
fail to renew such Intellectual Property Rights (if renewable and it would
otherwise lapse if not renewed), without the prior written consent of the
Purchasers.
3.12 Use of Proceeds. The Company shall use the net proceeds from the sale
---------------
of the Securities hereunder for working capital purposes and not for the
satisfaction of any portion of the Company's debt (other than payment of trade
payables in the ordinary course of the Company's business and prior practices),
to redeem any Company equity or equity-equivalent securities or to settle any
outstanding litigation.
3.13 Reimbursement. If any Purchaser, other than by reason of its gross
-------------
negligence or willful misconduct, becomes involved in any capacity in any
action, proceeding or investigation
17
brought by or against any Person, including stockholders of the Company, in
connection with or as a result of the consummation of the transactions
contemplated by Transaction Documents, the Company will reimburse such Purchaser
for its reasonable legal and other expenses (including the cost of any
investigation and preparation) incurred in connection therewith, as such
expenses are incurred. In addition, other than with respect to any matter in
which a Purchaser is a named party, the Company will pay such Purchaser the
charges, as reasonably determined by such Purchaser, for the time of any
officers or employees of such Purchaser devoted to appearing and preparing to
appear as witnesses, assisting in preparation for hearings, trials or pretrial
matters, or otherwise with respect to inquiries, hearings, trials, and other
proceedings relating to the subject matter of this Agreement. The reimbursement
obligations of the Company under this paragraph shall be in addition to any
liability which the Company may otherwise have, shall extend upon the same terms
and conditions to any Affiliates of the Purchasers who are actually named in
such action, proceeding or investigation, and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchasers and any such Affiliate, and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal representatives of the
Company, the Purchasers and any such Affiliate and any such Person. The Company
also agrees that neither the Purchasers nor any such Affiliates, partners,
directors, agents, employees or controlling persons shall have any liability to
the Company or any Person asserting claims on behalf of or in right of the
Company in connection with or as a result of the consummation of the Transaction
Documents except to the extent that any losses, claims, damages, liabilities or
expenses incurred by the Company result from the gross negligence or willful
misconduct of the applicable Purchaser or entity in connection with the
transactions contemplated by this Agreement.
ARTICLE IV
MISCELLANEOUS
4.1 Fees and Expenses. At the Closing, the Company shall reimburse
-----------------
the Purchasers for their legal fees and expenses incurred in connection with the
preparation and negotiation of the Transaction Documents by paying to Xxxxxxxx
Xxxxxxxxx $15,000 for the preparation and negotiation of the Transaction
Documents. The amount contemplated by the immediately preceding sentence shall
be retained by the Purchasers and shall not be delivered to the Company at the
Closing. Other than the amount contemplated in the immediately preceding
sentence, and except as otherwise set forth in the Registration Rights
Agreement, each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred by such
party incident to the negotiation, preparation, execution, delivery and
performance of this Agreement. The Company shall pay all stamp and other taxes
and duties levied in connection with the issuance of the Securities.
4.2 Entire Agreement; Amendments. The Transaction Documents,
----------------------------
together with the Exhibits and Schedules thereto and the Transfer Agent
Instructions contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior
18
agreements and understandings, oral or written, with respect to such matters,
which the parties acknowledge have been merged into such documents, exhibits and
schedules.
4.3 Notices. Any and all notices or other communications or
-------
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (i) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Section prior to 6:30 p.m. (New
York City time) on a Business Day, (ii) the Business Day after the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile telephone number specified in this Agreement later than 6:30 p.m. (New
York City time) on any date and earlier than 11:59 p.m. (New York City time) on
such date, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as follows:
If to the Company: Aquatic Cellulose International Corporation
0000 00/xx/ Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx VIT 5N6
Facsimile No.: (000) 000-0000
Attn: Chief Financial Officer
With copies to: Xxxx X. Xxxxxxxxx, Esq.
00000 Xxxxxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile No.: (000) 000-0000
If to a Purchaser: To the address set forth under such Purchaser's name on
the signature pages hereto.
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
4.4 Amendments; Waivers. No provision of this Agreement may be
-------------------
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any other provision, condition or requirement hereof, nor shall any
delay or omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
4.5 Headings. The headings herein are for convenience only, do not
--------
constitute a part of this Agreement and shall not be deemed to limit or affect
any of the provisions hereof.
19
4.6 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Except as set forth in
Section 3.1(a), the Purchasers may not assign this Agreement or any of the
rights or obligations hereunder without the consent of the Company. This
provision shall not limit any Purchaser's right to transfer securities or
transfer or assign rights under the Registration Rights Agreement.
4.7 No Third-Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person.
4.8 Governing Law. The corporate laws of the State of Nevada shall
-------------
govern all issues concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York, without regard to the principles of conflicts of law thereof. Each party
hereby irrevocably submits to the exclusive jurisdiction of the state and
federal courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to
the enforcement of the any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is improper. Each party hereby irrevocably
waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or
certified mail or overnight delivery (with evidence of delivery) to such party
at the address in effect for notices to it under this Agreement and agrees that
such service shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any way any right
to serve process in any manner permitted by law.
4.9 Survival. The representations, warranties, agreements and
--------
covenants contained herein shall survive the Closing and the delivery and
conversion or exercise (as the case may be) of the Debentures and the Warrants.
4.10 Execution. This Agreement may be executed in two or more
---------
counterparts, all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
4.11 Severability. In case any one or more of the provisions of this
------------
Agreement shall be invalid or unenforceable in any respect, the validity and
enforceability of the remaining terms and provisions of this Agreement shall not
in any way be affecting or impaired thereby and
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the parties will attempt to agree upon a valid and enforceable provision which
shall be a reasonable substitute therefor, and upon so agreeing, shall
incorporate such substitute provision in this Agreement.
4.12 Remedies. In addition to being entitled to exercise all rights
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provided herein or granted by law, including recovery of damages, each of the
Purchasers will be entitled to specific performance of the obligations of the
Company under the Transaction Documents. The Company and each of the Purchasers
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance of
any such obligation the defense that a remedy at law would be adequate.
4.13 Independent Nature of Purchasers' Obligations and Rights. The
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obligations of each Purchaser under any Transaction Document is several and not
joint with the obligations of any other Purchaser and no Purchaser shall be
responsible in any way for the performance of the obligations of any other
Purchaser under any Transaction Document. Nothing contained herein or in any
Transaction Document, and no action taken by any Purchaser pursuant thereto,
shall be deemed to constitute the Purchasers as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Purchasers are in any way acting in concert with respect to such obligations or
the transactions contemplated by the Transaction Document. Each Purchaser shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any proceeding for such purpose.
4.14 Representation By Counsel. Each party hereto represents that it
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has been represented by counsel of its own selection in connection with the
transaction contemplated hereby. Each purchaser is relying solely on its own
due diligence conducted in connection with the contemplated transaction and the
representations and warranties of the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Convertible
Debenture Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
AQUATIC CELLULOSE
INTERNATIONAL CORPORATION
By:_____________________________________
Name:
Title:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOR PURCHASER FOLLOWS]
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AJW PARTNERS, LLC
By: SMS Group, LLC
By:_____________________________________
Name: Xxxxx X. Xxxxxxxx
Title:
Debentures Purchase Price
due on the Closing Date: $250,000
Debentures Purchase Price
due after the Effective Date: $500,000
Number of Shares underlying
Warrant due on the Closing Date $125,000
Number of Shares underlying
Warrant due after the Effective Date $250,000
Address for Notice:
AJW Partners, LLC
000 Xxxxx Xxxxxx
Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
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NEW MILLENIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By:_____________________________________
Name: Xxxxx X. Xxxxxxxx
Title:
Debentures Purchase Price
due on the Closing Date: $250,000
Debentures Purchase Price
due after the Effective Date: $500,000
Number of Shares underlying
Warrant due on the Closing Date 125,000
Number of Shares underlying
Warrant due after the Effective Date 250,000
Address for Notice:
New Millenium Capital Partners II, LLC
000 Xxxxx Xxxxxx
Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxxx
With copies to: Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
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