SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of May 6, 1999, between Interactive
Flight Technologies, Inc., a Delaware corporation with principal executive
offices located at 0000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx X 000, Xxxxxxx, Xxxxxxx
00000 (the "Company"), and the undersigned ("Buyer").
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase from Company, and the Company desires to
issue and sell to the Buyer, upon the terms and subject to the conditions of
this Agreement, (i) Series A 8% Convertible Preferred Stock, $.01 par value (the
"Preferred Stock"), having the rights, preferences and privileges set forth in
the Certificate of Designations, Rights and Preferences attached hereto as Annex
I (the "Certificate of Designations") and warrants (the "Warrants") to purchase
Common Stock (as defined);
WHEREAS, upon the terms and subject to the conditions set forth in the
Certificate of Designations, the Preferred Stock is convertible into shares of
the Company's Class A common stock, $.01 par value ("Common Stock"), or into the
Company's Series B 8% Convertible Preferred Stock, $.01 par value (the "Series B
Preferred Stock"), having the rights, preferences and privileges set forth in
the certificate of designations, rights and preferences attached hereto as Annex
II);
WHEREAS, the Warrants, upon the terms and subject to the conditions in the
Warrants (attached hereto as Annex III), will for a period of three (3) years be
exercisable to purchase 87,500 shares of Common Stock;
NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties
hereto, intending to be legally bound, hereby agree as follows:
I. PURCHASE AND SALE OF PREFERRED SHARES
A. Transaction. Buyer hereby agrees to purchase from the Company, and the
Company has offered and hereby agrees to issue and sell to the Buyer in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended (the "Securities Act"), 3,000 shares of
Preferred Stock, (the "Preferred Shares") and the Warrants.
B. Purchase Price; Form of Payment. The purchase price for the Preferred
Shares and the Warrants to be purchased by Buyer hereunder shall be (i) U.S.
$1,030,000 and (ii) 1,500 shares of Series B Convertible Preferred Stock of The
Network Connection, Inc., ("TNC") including any accrued interest and penalties
thereon and any and all accrued and unpaid dividends thereon (collectively, the
"Purchase Price"). Buyer shall pay the Purchase Price by wire transfer of
immediately available funds to the Company. Simultaneously with the execution of
this Agreement, the Company shall deliver one or more duly authorized, issued
and executed certificates (I/N/O Buyer or, if the Company otherwise has been
notified, I/N/O Buyer's nominee) evidencing the number of Preferred Shares which
the Buyer is purchasing and the Warrants, to the Buyer.
C. Method of Payment. Payment of the Purchase Price shall be made by wire
transfer of immediately available funds to:
Bank Xxx
X.X. Xxx 00
Xxxxxxx, XX 00000-0000
ABA #000000000
Account #00000000
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II. BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO INFORMATION; INDEPENDENT
INVESTIGATION.
Buyer represents and warrants to and covenants and agrees with the Company
as follows:
A. Buyer is purchasing the Preferred Shares, the Warrants, the Common Stock
issuable upon exercise of the Warrants (the "Warrant Shares") and the Common
Stock issuable upon conversion of the Preferred Stock or Series B Preferred
Shares (the "Conversion Shares" and, collectively with the Preferred Shares, the
Warrants and the Warrant Shares, the "Securities") for its own account, for
investment purposes only and not with a view towards or in connection with the
public sale or distribution thereof.
B. Buyer is (i) an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act, (ii) experienced in making
investments of the kind contemplated by this Agreement, (iii) capable, by reason
of its business and financial experience, of evaluating the relative merits and
risks of an investment in the Securities, and (iv) able to afford the loss of
its investment in the Securities.
C. Buyer understands that the Securities are being offered and sold by the
Company in reliance on an exemption from the registration requirements of the
Securities Act and equivalent state securities and "blue sky" laws, and that the
Company is relying upon the accuracy of, and Buyer's compliance with, Buyer's
representations, warranties and covenants set forth in this Agreement to
determine the availability of such exemption and the eligibility of Buyer to
purchase the Securities;
D. Buyer acknowledges that in making its decision to purchase the
Securities it has been given an opportunity to ask questions of and to receive
answers from the Company's executive officers, directors and management
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personnel concerning the terms and conditions of the private placement of the
Securities by the Company.
E. Buyer understands that the Securities have not been approved or
disapproved by the Securities and Exchange Commission (the "Commission") or any
state securities commission and that the foregoing authorities have not reviewed
any documents or instruments in connection with the offer and sale to it of the
Securities and have not confirmed, determined or passed on the adequacy or
accuracy of any such documents or instruments.
F. This Agreement has been duly and validly authorized, executed and
delivered by Buyer and is a valid and binding agreement of Buyer enforceable
against it in accordance with its terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally.
G. Neither Buyer nor its affiliates nor any person acting on its or their
behalf has the intention of entering, or will enter into, prior to the closing,
any put option, short position or other similar instrument or position with
respect to the Common Stock and neither Buyer nor any of its affiliates nor any
person acting on its or their behalf will use at any time shares of Common Stock
acquired pursuant to this Agreement or the Certificate of Designations to settle
any put option, short position or other similar instrument or position that may
have been entered into prior to the execution of this Agreement.
H. Buyer is a corporation organized and existing under the laws of the
State of Israel with its principal place of business located at 00 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxx 0X, Xxxxxxxxx, Xxxxxx.
I. Neither Buyer nor any of its officers or directors, is or has been
subject to, or a respondent in,
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any legal action, proceeding, or investigation, which has resulted in, or which
if still pending could result in, an injunction, cease and desist order, or
stipulation to desist or refrain from any action or practice relating to the
offering or sale of securities in any jurisdiction.
J. Neither Buyer nor any of its officers or directors has ever been
suspended from or expelled from membership in any securities or commodities
exchange or association or had a securities or commodities exchange license or
registration denied, suspended, or revoked.
K. Buyer has received a notice of redemption from TNC dated December 14,
1998 attached hereto as Annex V relating to TNC's Series B Convertible Preferred
Stock. Buyer has not received from TNC the redemption price required to be paid
pursuant to such redemption notice nor has Buyer received any other or further
written notice or communications regarding the redemption of the TNC Series B
Convertible Preferred Stock. Since the date of issuance, Buyer has not received
any dividends from TNC on account of TNC's Series B Convertible Preferred Stock.
III. COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. Capitalization. 1. The authorized capital stock of the Company consists
of 40,000,000 shares of Class A Common Stock, of which 5,317,900 shares are
outstanding on the date hereof, 4,000,000 Shares of Class B Common Stock, of
which 118,519 are outstanding on the date hereof, and 5,000,000 shares of
preferred stock, $.01 per value, of which none are outstanding on the date
hereof. All of the issued and outstanding shares of Common Stock and preferred
stock have been duly authorized and validly issued and are fully paid and
non-assessable. As of the date hereof, the Company has outstanding stock options
and warrants to purchase 2,969,181 shares of Common Stock. The Conversion Shares
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and Warrant Shares have been duly and validly authorized and reserved for
issuance by the Company, and when issued by the Company upon conversion of, or
in lieu of accrued dividends on the Preferred Shares, or upon exercise of the
Warrants will be duly and validly issued, fully paid and non-assessable and will
not subject the holder thereof to personal liability by reason of being such
holder. There are no preemptive, subscription, "call" or other similar rights to
acquire the Common Stock (including the Conversion Shares) that have been issued
or granted to any person.
2. Except as disclosed in the Company's Commission Filings, the Company
does not own or control, directly or indirectly, any interest in any other
corporation, partnership, limited liability company, unincorporated business
organization, association, trust or other business entity.
B. Organization; Reporting Company Status. 1. The Company, is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and is duly qualified as a foreign corporation in all
jurisdictions in which the failure to so qualify would have a material adverse
effect on the business, properties, prospects, condition (financial or
otherwise) or results of operations of the Company or on the consummation of any
of the transactions contemplated by this Agreement (a "Material Adverse
Effect").
2. The Company has registered the Common Stock pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and has
timely filed with the Commission all reports and information required to be
filed by it pursuant to all reporting obligations under Section 13(a) or 15(d),
as applicable, of the Exchange Act for the 12-month period immediately preceding
the date hereof. The Common Stock is listed and traded on the Nasdaq National
Market ("Nasdaq") and the Company has not received any notice regarding, and to
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its knowledge there is no threat, of the termination or discontinuance of the
eligibility of the Common Stock for such listing.
C. Authorized Shares. The Company has duly and validly authorized and
reserved for issuance 1,100,000 shares of Common Stock for the conversion of
3,000 Preferred Shares and 3,000 shares of its Series B Preferred Stock and the
exercise of the Warrants. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock of the issuance of the Preferred
Shares and Warrant Shares upon conversion of the Preferred Stock and exercise of
the Warrants, respectively. The Company further acknowledges that its obligation
to issue Conversion Shares upon conversion of the Preferred Shares and Warrant
Shares upon exercise of the Warrants in accordance with this Agreement, the
Certificate of Designations and the Warrants is absolute and unconditional
regardless of the dilutive effect that such issuance may have on the ownership
interests of other stockholders of the Company and notwithstanding the
commencement of any case under 11 U.S.C. ss.101 et seq. (the "Bankruptcy Code").
In the event the Company is a debtor under the Bankruptcy Code, the Company
hereby waives to the fullest extent permitted any rights to relief it may have
under 11 U.S.C. ss.362 in respect of the conversion of the Preferred Stock and
the exercise of the Warrants. The Company agrees, without cost or expense to the
Buyer, to take or consent to any and all action necessary to effectuate relief
under 11 U.S.C. ss.362.
D. Authority; Validity and Enforceability. The Company has the requisite
corporate power and authority to file and perform its obligations under the
Certificate of Designations and to enter into this Agreement, the Registration
Rights Agreement of even date herewith between the Company and Buyer, a copy of
which is annexed hereto as Annex IV (the "Registration Rights Agreement") and
the Warrants and to perform all of its obligations hereunder and thereunder
(including the issuance, sale and delivery to Buyer of the Securities). The
execution, delivery and performance by the Company of this Agreement, the
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Warrants and the Registration Rights Agreement, and the consummation by the
Company of the transactions contemplated hereby and thereby (including without
limitation the filing of the Certificate of Designations, the issuance of the
Preferred Shares and Warrants and the issuance and reservation for issuance of
the Conversion Shares and Warrant Shares), has been duly authorized by all
necessary corporate action on the part of the Company. Each of this Agreement,
the Warrants and the Registration Rights Agreement has been duly validly
executed and delivered by the Company and the Certificate of Designations has
been duly filed by the Company and each instrument constitutes a valid and
binding obligation of the Company enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally. The Securities have been duly and validly authorized for
issuance by the Company and, when executed and delivered by the Company, will be
valid and binding obligations of the Company enforceable against it in
accordance with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally.
E. Non-contravention. The execution and delivery by the Company of this
Agreement, the Warrants, the Registration Rights Agreement, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated hereby and thereby, do not and will not conflict with or result in
a breach by the Company of any of the terms or provisions of, or constitute a
default (or an event which, with notice, lapse of time or both, would constitute
a default) under (i) the Certificate of Incorporation or by-laws of the Company
or its subsidiaries or (ii) any indenture, mortgage, deed of trust or other
material agreement or instrument to which the Company is a party or by which its
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properties or assets are bound, or any law, rule, regulation, decree, judgment
or order of any court or public or governmental authority having jurisdiction
over the Company or any of the Company's properties or assets, except as to (ii)
above such conflict, breach or default which would not have a Material Adverse
Effect.
F. Approvals. No authorization, approval or consent of any court or public
or governmental authority is required to be obtained by the Company for the
issuance and sale of the Preferred Stock or the Warrants (and the Conversion
Shares and Warrant Shares) to Buyer as contemplated by this Agreement, except
such authorizations, approvals and consents that have been obtained by the
Company prior to the date hereof.
G. Commission Filings. None of the Commission Filings contained at the time
they were filed any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading.
H. Absence of Certain Changes. Since the Balance Sheet Date (as defined in
Section III(L)), there has not occurred any change, event or development in the
business, financial condition, prospects or results of operations of the
Company, and there has not existed any condition having or reasonably likely to
have, a Material Adverse Effect.
I. Full Disclosure. There is no fact known to the Company (other than
general economic or industry conditions known to the public generally) that has
not been fully disclosed in writing to the Buyer that (i) reasonably could be
expected to have a Material Adverse Effect or (ii) reasonably could be expected
to materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement, the Registration Rights Agreement, the
Warrants or the Certificate of Designations.
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J. Absence of Litigation. There is no action, suit, claim, proceeding,
inquiry or investigation pending or, to the Company's knowledge, threatened, by
or before any court or public or governmental authority which, if determined
adversely to the Company, would have a Material Adverse Effect.
K. Absence of Events of Default. No "Event of Default" (as defined in any
agreement or instrument to which the Company is a party) and no event which,
with notice, lapse of time or both, would constitute an Event of Default (as so
defined), has occurred and is continuing, which could have a Material Adverse
Effect.
L. Financial Statements; No Undisclosed Liabilities. The Company has
delivered to Buyer true and complete copies of its audited balance sheet as at
October 31, 1998 and the related audited statements of operations and cash flows
for the fiscal year ended October 31, 1998 including the related notes and
schedules thereto as well as the same financial statements as of and for the
three month period ended January 31, 1999 collectively, the "Financial
Statements"), and all management letters, if any, from the Company's independent
auditors relating to the dates and periods covered by the Financial Statements.
Each of the Financial Statements is complete and correct in all material
respects, has been prepared in accordance with United States General Accepted
Accounting Principles ("GAAP") (subject, in the case of the interim Financial
Statements, to normal year end adjustments and the absence of footnotes) and in
conformity with the practices consistently applied by the Company without
modification of the accounting principles used in the preparation thereof, and
fairly presents, subject to the limitations set forth in the report of the
Company's independent accountants, the financial position, results of operations
and cash flows of the Company as at the dates and for the periods indicated. For
purposes hereof, the audited balance sheet of the Company as at October 31, 1998
is hereinafter referred to as the "Balance Sheet" and October 31, 1998 is
hereinafter referred to as the "Balance Sheet Date". The Company does not have
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any indebtedness, obligations or liabilities of any kind (whether accrued,
absolute, contingent or otherwise, and whether due or to become due) that would
have been required to be reflected in, reserved against or otherwise described
in the Balance Sheet or in the notes thereto in accordance with GAAP, which was
not fully reflected in, reserved against or otherwise described in the Balance
Sheet or the notes thereto or was not incurred in the ordinary course of
business consistent with the Company's past practices since the Balance Sheet
Date.
M. Compliance with Laws; Permits. The Company is in compliance with all
laws, rules, regulations, codes, ordinances and statutes (collectively "Laws")
applicable to it or to the conduct of its business, except for such
non-compliance which would not have a Material Adverse Effect. The Company
possesses all permits, approvals, authorizations, licenses, certificates and
consents from all public and governmental authorities which are necessary to
conduct its respective business, except for those the absence of which would not
have a Material Adverse Effect.
N. Securities Law Matters. Based, in part, upon the representations and
warranties of Buyer set forth in Section II hereof, the offer and sale by the
Company of the Securities is exempt from (i) the registration and prospectus
delivery requirements of the Securities Act and the rules and regulations of the
Commission thereunder and (ii) the registration and/or qualification provisions
of all applicable United States state securities and "blue sky" laws. The
Company shall not directly or indirectly take, and shall not permit any of its
directors, officers or Affiliates directly or indirectly to take, any action
(including, without limitation, any offering or sale to any person or entity of
the Preferred Shares or shares of Common Stock), so as to make unavailable the
exemption from Securities Act registration being relied upon by the Company for
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the offer and sale to Buyer of the Preferred Shares (and the Conversion Shares)
as contemplated by this Agreement. No form of general solicitation or
advertising has been used or authorized by the Company or any of its officers,
directors or Affiliates in connection with the offer or sale of the Preferred
Shares (and the Conversion Shares) as contemplated by this Agreement or any
other agreement to which the Company is a party.
O. Internal Controls and Procedures. The Company maintains accurate books
and records and internal accounting controls.
P. No Misrepresentation. To the best of the Company's knowledge, no
representation or warranty of the Company contained in this Agreement, any
schedule, annex or exhibit hereto or any agreement, instrument or certificate
furnished by the Company to Buyer pursuant to this Agreement, contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein, not
misleading.
Q. Finders Fee. The Company hereby represents and warrants that there are
no finder's or broker's fees for which the Buyer is liable in connection with
the transactions contemplated by this Agreement.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. Restrictive Legend. Buyer acknowledges and agrees that, upon issuance
pursuant to this Agreement, the Securities (and any shares of Common Stock
issued in conversion of the Preferred Shares or exercise of the Warrants) shall
have endorsed thereon a legend in substantially the following form (and a
stop-transfer order may be placed against transfer of the Preferred Shares, the
Warrant Shares and the Conversion Shares):
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"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY
STATE, AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OR SUCH OTHER LAWS."
B. Filings. The Company shall make all necessary SEC and "blue sky" filings
required to be made by the Company in connection with the sale of the Securities
to the Buyer as required by all applicable Laws, and shall provide a copy
thereof to the Buyer promptly after such filing.
C. Reporting Status. So long as the Buyer beneficially owns any of the
Securities, the Company shall use its reasonable commercial efforts to file all
reports required to be filed by it with the Commission pursuant to Section 13 or
15(d) of the Exchange Act.
D. Use of Proceeds. The Company shall use the proceeds from the sale of the
Securities (excluding amounts paid by the Company for legal fees in connection
with such sale) solely for general corporate and working capital purposes.
E. Listing. Except to the extent the Company lists its Common Stock on The
New York Stock Exchange, the Company shall use its reasonable commercial efforts
to maintain its listing of the Common Stock on Nasdaq.
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F. Reserved Conversion Shares. The Company at all times from and after the
date hereof shall have 1,100,000 shares of Common Stock duly and validly
authorized and reserved for issuance to satisfy the conversion (pursuant to the
Certificate of Designations), in full, of the 3,000 Preferred Shares and 3,000
shares of its Series B Preferred Shares and upon exercise of the Warrants. The
Company shall irrevocably instruct its transfer agent to reserve such number of
shares for issuance upon conversion of the Preferred Stock and exercise of the
Warrants.
G. The Company shall not repurchase any of its Common Stock at any time
that such purchases will cause the amount of Common Stock issuable upon
conversion of the Preferred Stock to be in excess of 20% of the amount of Common
Stock outstanding at such time.
H. The Company acknowledges that Buyer has informed the Company that TNC
has failed to honor the redemption notice delivered in connection with TNC's
Series B Convertible Preferred Stock or to pay any dividends on such preferred
stock.
V. TRANSFER AGENT INSTRUCTIONS.
A. The Company undertakes and agrees that no instruction other than the
instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Common Stock pursuant to
an effective Securities Act registration statement will be given to its transfer
agent for the Common Stock and that the Common Stock issuable upon conversion of
the Preferred Shares and exercise of the Warrants otherwise shall be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing contained in this Section V(A) shall affect in any way Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of such Common Stock. If, at any time, Buyer provides the Company with an
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opinion of counsel reasonably satisfactory to the Company that registration of
the resale by Buyer of such Common Stock is not required under the Securities
Act and that the removal of restrictive legends is permitted under applicable
law, the Company shall permit the transfer of such Common Stock and, promptly
instruct the Company's transfer agent to issue one or more certificates for
Common Stock without any restrictive legends endorsed thereon.
B. The Company shall permit Buyer to exercise its right to convert the
Preferred Shares by telecopying an executed and completed Notice of Conversion
to the Company. Each date on which a Notice of Conversion is telecopied to and
received by the Company in accordance with the provisions hereof shall be deemed
a Conversion Date. Within fifteen (15) days after Buyer delivers the Notice of
Conversion to the Company, Buyer shall deliver to the Company the Preferred
Shares being converted. The Company shall transmit the certificates evidencing
the shares of Common Stock issuable upon conversion of any Preferred Shares
(together with certificates evidencing any Preferred Shares not being so
converted) to Buyer via express courier, by electronic transfer or otherwise,
within five (5) Business Days after the later of (i) receipt by the Company of
the Notice of Conversion or (ii) receipt of the Preferred Shares being converted
(the "Delivery Date").
C. The Company shall permit Buyer to exercise its right to purchase shares
of Common Stock pursuant to exercise of the Warrants in accordance with its
applicable terms of the Warrants. The last date that the Company may deliver
shares of Common Stock issuable upon any exercise of Warrants is referred to
herein as the "Warrant Delivery Date."
D. The Company understands that a delay in the issuance of the shares of
Common Stock issuable upon conversion of the Preferred Stock or Series B
Preferred Stock or exercise of the Warrants beyond the applicable Dividend
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Payment Due Date (as defined in the Certificate of Designations), Delivery Date
or Warrant Delivery Date could result in economic loss to Buyer. As compensation
to Buyer for such loss (and not as a penalty), the Company agrees to pay to
Buyer for late issuance of Common Stock issuable in lieu of cash dividends on
the Series B Preferred Shares, upon conversion of the Preferred Stock or Series
B Preferred Stock or exercise of the Warrants in accordance with the following
schedule (where "No. Business Days" is defined as the number of Business Days
beyond ten (10) days from the Dividend Payment Due Date, the Delivery Date or
the Warrant Delivery Date, as applicable):
Compensation For Each
10 Shares of Preferred
Stock Not Converted
Timely or 500 Shares of
Common Stock Issuable In
Lieu of Cash Dividends or
Shares of Common Stock
Issuable Upon Exercise of
Each 1,500 Warrants
No. Business Days Not Issued Timely
----------------- -----------------
1 $25
2 $50
3 $75
4 $100
5 $125
6 $150
7 $175
8 $200
9 $225
10 $250
more than 10 $250 + $100 for each
Business Day Late
beyond 10 days
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The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Common Stock to Buyer, and in addition to any other remedies which may
be available to Buyer, in the event the Company fails for any reason to effect
delivery of such shares of Common Stock within ten (10) Business Days after the
relevant Dividend Payment Due Date, the Delivery Date or the Warrant Delivery
Date, as applicable, Buyer shall be entitled to rescind the relevant Notice of
Conversion by delivering a notice to such effect to the Company whereupon the
Company and Buyer shall each be restored to their respective original positions
immediately prior to delivery of such Notice of Conversion on delivery.
VI. DELIVERY INSTRUCTIONS.
The Securities shall be delivered by the Company to the Company pursuant to
Section I(B) hereof on a "delivery-against-payment basis".
VII. CLOSING DATE.
The date and time of the issuance and sale of the Securities (the "Closing
Date") shall be May 10, 1999 or such other date mutually agreed upon in writing
by the parties hereto. The issuance and sale of the Securities shall occur on
the Closing Date.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The Buyer understands that the Company's obligation to sell the Securities
on the Closing Date to Buyer pursuant to this Agreement is conditioned upon:
A. Delivery by Buyer to the Company of the Purchase Price;
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B. Assignment by Buyer to the Company of all of its rights under the TNC
Series B Convertible Preferred Stock, including without limitation the right of
first refusal set forth in Paragraph 4G of that certain Securities Purchase
Agreement among TNC and Buyer and the registration rights set forth in that
certain Registration Rights Agreement among TNC and Buyer;
C. The accuracy in all material respects on the Closing Date of the
representations and warranties of Buyer contained in this Agreement as if made
on the Closing Date (except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the performance by
Buyer in all material respects on or before the Closing Date of all covenants
and agreements of Buyer required to be performed by it pursuant to this
Agreement on or before the Closing Date;
D. There shall not be in effect any Law or order, ruling, judgment or writ
of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
IX. CONDITIONS TO BUYER'S OBLIGATIONS.
The Company understands that Buyer's obligation to purchase the Securities
on the Closing Date pursuant to this Agreement is conditioned upon:
A. Delivery by the Company to Buyer of evidence that the Certificates of
Designations have been filed and are effective.
B. Delivery by the Company to the Buyer of one or more certificates (I/N/O
Buyer) evidencing the Securities to be purchased by Buyer pursuant to this
Agreement;
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C. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the performance
by the Company in all material respects on or before the Closing Date of all
covenants and agreements of the Company required to be performed by it pursuant
to this Agreement on or before the Closing Date;
D. Buyer having received an opinion of counsel for the Company, dated the
Closing Date, in form, scope and substance reasonably satisfactory to the Buyer,
which shall include customary opinions.
E. There not having occurred (i) any general suspension of trading in, or
limitation on prices listed for, the Common Stock on the Nasdaq, (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, or (iii) in the case of the foregoing existing at
the date of this Agreement, a material acceleration or worsening thereof.
F. There not having occurred any event or development, and there being in
existence no condition, having or which reasonably and forseeably could have a
Material Adverse Effect.
G. The Company shall have delivered to reimbursement of Buyer's
out-of-pocket costs and expenses incurred in connection with the transactions
contemplated by this Agreement (including the fees and disbursements of Buyer's
legal counsel) in the aggregate amount of $50,000.
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H. There shall not be in effect any Law or order, ruling, judgment or writ
of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
I. Delivery of irrevocable instructions to the Company's transfer agent to
reserve 1,100,000 shares of Common Stock for issuance upon conversion of the
Preferred Stock and the Company's Series B Preferred Stock and exercise of the
Warrants.
X. TERMINATION.
A. Termination by Mutual Written Consent. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned, for any reason and at
any time prior to the Closing Date, by the mutual written consent of the Company
and Buyer.
B. Termination by the Company or Buyer. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned by action of the
Company or Buyer if (i) the Closing shall not have occurred at or prior to 5:00
p.m., New York City time, on May 12, 1999; provided, however, that the right to
terminate this Agreement pursuant to this Section X(B)(i) shall not be available
to any party whose failure to fulfill any of its obligations under this
Agreement has been the cause of or resulted in the failure of the Closing to
occur at or before such time and date or (ii) any court or public or
governmental authority shall have issued an order, ruling, judgment or writ, or
there shall be in effect any Law, restraining, enjoining or otherwise
prohibiting the consummation of any of the transactions contemplated by this
Agreement.
C. Termination by Buyer. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by Buyer at any time prior to
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the Closing Date, if (i) the Company shall have failed to comply in any material
respect with any of its covenants or agreements contained in this Agreement,
(ii) there shall have been a breach by the Company with respect to any
representation or warranty made by it in this Agreement (iii) there shall have
occurred any event or development, or there shall be in existence any condition,
having or reasonably and forseeably likely to have a Material Adverse Effect or
(iv) any of the conditions provided in Section IX hereof become incapable of
being satisfied.
D. Termination by the Company. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned by the Company at any time
prior to the Closing Date, if (i) Buyer shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement, (ii) there shall have been a breach by Buyer with respect to any
representation or warranty made by it in this Agreement or (iii) any of the
conditions provided in Section VIII hereof shall become incapable of being
satisfied.
XI. SURVIVAL; INDEMNIFICATION.
A. The representations, warranties and covenants made by each of the
Company and Buyer in this Agreement, the annexes, schedules and exhibits hereto
and in each instrument, agreement and certificate entered into and delivered by
them pursuant to this Agreement, shall survive the Closing and the consummation
of the transactions contemplated hereby for a period of one year. In the event
of a breach or violation of any of such representations, warranties or
covenants, the party to whom such representations, warranties or covenants have
been made shall have all rights and remedies for such breach or violation
available to it under the provisions of this Agreement or otherwise, whether at
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law or in equity, irrespective of any investigation made by or on behalf of such
party on or prior to the Closing Date.
B. The Company hereby agrees to indemnify and hold harmless the Buyer, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Buyer Indemnitees"), from and against any and all losses,
claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses"), and agrees to reimburse the Buyer Indemnitees for all
out-of-pocket expenses (including the fees and expenses of legal counsel), in
each case promptly as incurred by the Buyer Indemnitees and to the extent
arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of the
Company's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this
Agreement; or
2. any failure by the Company to perform in any material respect any
of its covenants, agreements, undertakings or obligations set forth in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company pursuant
to this Agreement.
C. Buyer hereby agrees to indemnify and hold harmless the Company, its
Affiliates and their respective officers, directors, partners and members
(collectively, the "Company Indemnitees"), from and against any and all Losses,
and agrees to reimburse the Company Indemnitees for all out-of-pocket expenses
(including the fees and expenses of legal counsel), in each case promptly as
incurred by the Company Indemnitees and to the extent arising out of or in
connection with:
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1. any misrepresentation, omission of fact, or breach of any of
Buyer's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by Buyer pursuant to this Agreement;
or
2. any failure by Buyer to perform in any material respect any of its
covenants, agreements, undertakings or obligations set forth in this
Agreement or any instrument, certificate or agreement entered into or
delivered by Buyer pursuant to this Agreement.
D. Promptly after receipt by either party hereto seeking indemnification
pursuant to this Section XI (an "Indemnified Party") of written notice of any
investigation, claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section XI is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim the Indemnifying Party shall be entitled to assume the
23
defense thereof. Notwithstanding the assumption of the defense of any Claim by
the Indemnifying Party, the Indemnified Party shall have the right to employ
separate legal counsel and to participate in the defense of such Claim, at the
reasonable cost and expense of the Indemnifying Party unless the Indemnified
Party and the Indemnifying Party reasonably shall have concluded that
representation of the Indemnified Party and the Indemnifying Party by the same
legal counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnifying Party, potentially differing
interests between such parties in the conduct of the defense of such Claim, or
if there may be legal defenses available to the Indemnified Party that are in
addition to or disparate from those available to the Indemnifying Party, or the
Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of legal
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
E. In the event one party hereunder should have a claim for indemnification
that does not involve a claim or demand being asserted by a third party, the
Indemnified Party promptly shall deliver notice of such claim to the
Indemnifying Party. If the Indemnified Party disputes the claim, such dispute
shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
XII. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with the
laws of the State of New York, without regard to the conflicts of law principles
of such state. Each of the parties consents to the jurisdiction of the federal
24
courts whose districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York in connection
with any dispute arising under this Agreement and hereby waives, to the maximum
extent permitted by law, any objection, including any objection based on forum
non conveniens, to the bringing of any such proceeding in such jurisdictions. A
facsimile transmission of this signed Agreement shall be legal and binding on
all parties hereto. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original. The headings of this Agreement are
for convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
XIII. NOTICES. Except as may be otherwise provided herein, any notice or
other communication or delivery required or permitted hereunder shall be in
writing and shall be delivered personally or sent by certified mail, postage
prepaid, or by a nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier service, or,
if mailed, three (3) days after the date of deposit in the United States mails,
as follows:
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(1) if to the Company, to:
Interactive Flight Technologies, Inc.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx X 200
Phoenix, Arizona 86012
Attention: Xxxxx X. Xxxxx
with a copy to:
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000-0000
38th Floor
Attn: Xxxxxxx X. Xxxxx
(2) if to the Buyer, to
THE SHAAR FUND LTD.,
c/o SHAAR ADVISORY SERVICES LTD.
00 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx 0X
Xxxxxxxxx,Xxxxxx
Attention: Xxxxxx Xxxxxxxx
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, P.C.
The Company or the Buyer may change the foregoing address by notice given
pursuant to this Section XIII.
XIV. CONFIDENTIALITY. Each of the Company and Buyer agrees to keep
confidential and not to disclose to or use for the benefit of any third party
the terms of this Agreement or any other information which at any time is
26
communicated by the other party as being confidential without the prior written
approval of the other party; provided, however, that this provision shall not
apply to information which, at the time of disclosure, is already part of the
public domain (except by breach of this Agreement) and information which is
required to be disclosed by law (including, without limitation, pursuant to Item
10 of Rule 601 of Regulation S-K under the Securities Act and the Exchange Act).
XV. ASSIGNMENT. This Agreement shall not be assignable by either of the
parties hereto prior to the Closing without the prior written consent of the
other party, and any attempted assignment contrary to the provisions hereby
shall be null and void; provided, however, that Buyer may assign its rights and
obligations hereunder, in whole or in part, to any affiliate of Buyer who
furnishes to the Company the representations and warranties set forth in Section
II hereof and otherwise agrees to be bound by the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement on the date first above written.
INTERACTIVE FLIGHT TECHNOLOGIES INC.
By: ___________________________
Name:
Title:
THE SHAAR FUND LTD.
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By: ___________________________
Name:
Title:
28
