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Exhibit 10.35
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made and entered into as
of April 10, 1998, by and among Venturi Technology Enterprises, Inc., a Nevada
corporation doing business as Venturi Technologies, Inc. (the "Company"), CDL
Capital Corp., a Nevada corporation ("CDL"), CDL Emerging Growth Equity Fund I,
L.L.C., a Nevada limited liability company (the "Fund"), and Xxxxxxx Xxxxxx and
Xxxx Xxxxxxx, in their capacities, respectively, as stockholders (collectively,
the "Stockholders") and directors (collectively, the "Directors") of the
Company.
RECITALS
A. The Company requires additional capital to finance its business.
B. The Fund is in the business of providing or facilitating financing
for emerging growth companies. CDL is in the business of advising companies in
their business and financial matters and of facilitating the procurement of
needed financing.
C. The Company is authorized to issue 20 million shares of common
stock, $.001 par value per share (the "Common Stock"), of which 4,417,989 shares
have been issued and are outstanding (the "Shares"), and to issue 5 million
shares of preferred stock, $.001 par value per share, of which 64,410 shares,
designated as Series A Preferred Stock, have been issued and are outstanding,
and of which 200,000 shares, designated as Series B Preferred Stock, have been
issued and are outstanding.
D. The Fund is willing to provide financing to the Company upon the
terms and conditions stated in this Agreement. The Company is willing to accept
financing from the Fund upon such terms and conditions, and to act strictly in
compliance herewith.
E. The Stockholders and Directors have authorized the Company to
enter into this Agreement and to operate in strict compliance with its terms and
conditions. In addition, the Stockholders and Directors have agreed to cause the
Company to authorize and issue shares of Series C 6% Cumulative Convertible
Non-Voting Preferred Stock, as hereinafter defined, and to establish the
appropriate voting powers, designations, preferences, limitations, restrictions
and relative rights related thereto.
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AGREEMENT
In consideration of the mutual promises, representations, warranties,
covenants and conditions set forth herein, the parties to this Agreement
mutually agree as follows:
1. Recitals. The facts contained in the foregoing recitals are true,
complete and correct, and the statements made therein accurately reflect the
intentions of the parties hereto. Such recitals are incorporated into this
Agreement by this reference and form an integral part hereof. The parties agree
to any and all terms referred to in such recitals.
2. Purchase and Sale of Shares of Restricted Series C Preferred
Stock. Subject to the terms and conditions of this Agreement, the Company hereby
agrees to authorize and issue to the Fund, the Fund hereby agrees to purchase
from the Company, and the Stockholders and the Directors agree to cause the
Company to authorize and issue to the Fund, One Hundred Twenty-One Thousand Nine
Hundred Fifty-One (121,951) shares of the Company's restricted Series C 6%
Cumulative Convertible Non-Voting Preferred Stock (the "Series C Preferred
Stock") designated by the Directors with the voting powers, designations,
preferences, limitations, restrictions and relative rights stated in the
Unanimous Written Consent of the Board of Directors of the Company attached
hereto as Exhibit A and incorporated herein by this reference (the "Board
Consent"), at a purchase price of $2.05 per share, for a total initial purchase
price of Two Hundred Fifty Thousand dollars ($250,000) (the "Initial Purchase
Price").
3. Voting Powers, Designations, Preferences, Limitations,
Restrictions and Relative Rights of Series C Preferred Stock. The Series C
Preferred Stock will bear a six percent (6%) annual dividend, payable quarterly
in cash or in the equivalent number of shares of restricted Common Stock of the
Company, at the rate of $2.05 per share; and each share of Series C Preferred
Stock will be convertible into shares of restricted Common Stock on a
share-for-share basis, upon demand by the holder. The Directors hereby agree to
execute on the Closing Date, as hereinafter defined, the Board Consent, to
establish the voting powers, designations, preferences, limitations,
restrictions and relative rights incorporated therein for the Series C Preferred
Stock (the "Rights and Preferences") and to authorize the issuance of such
shares, among other things. The parties acknowledge and agree that the Board
Consent shall be controlling in the event of any conflict with this Section 3 as
to the Rights and Preferences of the Series C Preferred Stock.
4. Closing of Purchase of Shares of Series C Preferred Stock Under
Section 2. The closing ("Closing") of the Series C Preferred Stock purchase
transaction described in Section 2 shall occur at a time and place to be
determined by mutual agreement of the Fund and the Company. The Fund shall
deliver the Initial Purchase Price to the Company in cash, by bank check or by
wire transfer on April __, 1998 (the "Closing Date"). The Company shall issue
the Series C Preferred Stock immediately following the filing of the required
Certificate of Designation with the Nevada Secretary of State related to such
preferred stock and immediately shall deliver to the Fund one or more
certificates representing One Hundred Twenty-One Thousand Nine Hundred Fifty-One
(121,951) such shares and all rights appertaining thereto. Any and all actions
contemplated by this Agreement with respect to the purchase transaction
described in Section 2 and that have not been
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completed by the Closing shall be completed by the parties immediately following
the Closing. Time is of the essence of this Agreement, and all such actions
shall be completed not later than ten (10) days following the Closing. Failure
to complete such actions shall entitle any party adversely affected thereby to
rescind the actions of the parties at the Closing and the effectiveness of this
Agreement.
5. Financial Advisory Fee. Upon completion of the Closing of the sale
of shares of the Series C Preferred Stock to the Fund as provided in Section 2,
the Company shall pay to CDL a financial advisory fee in the amount of Twenty
and One-Half Cents ($.205) per share of Series C Preferred Stock so transferred.
6. Non-Accountable, Non-Refundable Selling Expense Allowance. Upon
the Closing of the sale of the shares of the Series C Preferred Stock to the
Fund as provided in Section 2, the Company shall pay to CDL a selling expense
allowance in the amount of three percent (3%) of the Initial Purchase Price, or
Seven Thousand Five Hundred dollars ($7,500), which expense allowance shall be
non-accountable and non-refundable, the purpose of which is to defray in part
the expenses of CDL associated with its acting as financial advisor to the
Company in connection with the transaction that is the subject of the Closing.
7. Fund's Right to Purchase Up To 414,634 Additional Shares of Series
C Preferred Stock. At any time or times until December 31, 1998, the Fund shall
have the right, but no obligation, to purchase from the Company, and to cause
the Company to authorize, as necessary, and to issue to the Fund, from time to
time, upon demand by the Fund, up to Four Hundred Fourteen Thousand Six Hundred
Thirty-Four (414,634) shares of restricted Series C Preferred Stock, in addition
to the shares of restricted Series C Preferred Stock purchased by the Fund under
Section 2. Any and all purchases by the Fund of any or all such additional
414,634 shares of restricted Series C Preferred Stock shall be made upon exactly
the same terms and conditions as those set out in Sections 2 through 6 hereof,
including, without limitation, the requirement of payment by the Company to CDL
of a ten-percent (10%) success fee (see Section 5) and of a three-percent (3%)
non-accountable, non-refundable selling expense allowance (see Section 6).
8. Fund Option. In addition to the rights of the Fund set out
elsewhere in this Agreement, for a period of five (5) years from the Closing
Date the Fund shall have the right to purchase from the Company, and to cause
the Company to authorize, as necessary, and to issue to the Fund, from time to
time, upon demand by the Fund, up to a total of Five Hundred Thirty-Six Thousand
Five Hundred Eighty-Five (536,585) additional shares of the Company's restricted
Series C Preferred Stock, at a purchase price of $2.05 per share (the "Fund
Option"). The total amount paid by the Fund, from time to time, to purchase
Series C Preferred Stock through exercise of the Fund Option shall be referred
to herein as the "Fund Option Purchase Price." The Fund Option shall be subject
to the terms and conditions contained in the Fund Option Agreement attached
hereto as Exhibit B and incorporated herein by this reference. The Company and
the Fund shall enter into the Fund Option Agreement at the Closing.
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9. CDL Common Stock Purchase Warrants. In addition to the rights of
the Fund set out elsewhere in this Agreement, upon the purchase of shares of the
Series C Preferred Stock by the Fund, whether under Section 2 or in accordance
with Section 7 (but not under Section 8), the Company shall issue to CDL a
five-year warrant, exercisable in whole or in part, at any time and from time to
time, to purchase, upon each exercise, one share of restricted Common Stock of
the Company, at $2.05 per share, for every two shares of Series C Preferred
Stock purchased by the Fund under Section 2 or 7 ("CDL Warrants"). If the entire
Fund Option is exercised by the Fund, then the Company shall issue to CDL an
additional five-year warrant, exercisable in whole or in part, at any time and
from time to time, to purchase, upon each exercise, one share of restricted
Common Stock, at $2.05 per share, for every two shares of Series C Preferred
Stock purchased by the Fund under the Fund Option ("Second CDL Warrants"). The
CDL Warrants and Second CDL Warrants shall be substantially in the form attached
hereto as Exhibit C and incorporated herein by this reference.
10. Registration Rights. At any time and every time the Company
registers Shares for sale to the public, it shall give the Fund and CDL advance
written notice of such action and permit the Fund and CDL to register all or any
number of the Shares that each owns, respectively, or that each is entitled to
receive upon conversion of shares of the Series C Preferred Stock or upon
exercise of the Fund Option, of the CDL Warrants or of the Second CDL Warrants.
Such incidental registration rights are referred to herein as the "Piggyback
Registration Rights." Each of the Fund and CDL also shall have the right to
cause Shares that each owns or to which each is entitled, respectively, to
receive, upon conversion of shares of the Series C Preferred Stock, or upon
exercise of the Fund Option, the CDL Warrants or the Second CDL Warrants, to be
registered for sale to the public on two (2) separate occasions (the "Demand
Registration Rights"). The Demand Registration Rights and the Piggyback
Registration Rights are described further in that certain Registration Rights
Agreement between the Company, the Fund and CDL attached hereto as Exhibit D and
incorporated herein by this reference (the "Registration Rights Agreement"). The
Company, the Fund and CDL will enter into the Registration Rights Agreement at
the Closing.
11. Confidentiality. The Company agrees that it shall not disclose, and
shall not include in any public announcement, the name of the Fund as an
investor, unless expressly approved in writing by the Fund or unless required by
applicable law, and then, only to the extent of the legal requirement.
12. Legal Fees. The Company shall pay all legal fees arising as a
result of the transactions contemplated under this Agreement.
13. Representations and Warranties of the Company. Except as otherwise
set forth in this Agreement, the Company hereby represents and warrants to the
Fund and CDL as follows:
a. Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
Nevada, and is in good standing as a domestic corporation under the laws of said
State. The Company has all requisite
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corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as presently conducted and as the Company
contemplates conducting its business.
b. Corporate Power. The Company has all requisite legal and
corporate power and authority to execute and deliver this Agreement, to issue
and sell shares of the Series C Preferred Stock, to issue the Fund Option, the
CDL Warrants and the Second CDL Warrants hereunder, and to carry out and perform
its obligations under this Agreement.
c. Authorization. All corporate action on the part of the Company
and its Stockholders and Directors that is necessary for the authorization,
execution, delivery and performance of this Agreement by the Company, for the
authorization, sale, issuance and delivery of the Series C Preferred Stock
(including, without limitation, any necessary or appropriate amendments to the
Company's Articles of Incorporation), or for the performance of any or all of
the Company's obligations hereunder, has been or will be taken prior to the
Company's execution of this Agreement.
d. Validity of Series C Preferred Stock. The Series C Preferred
Stock, when issued and transferred in compliance with the provisions of this
Agreement, will be duly authorized, validly issued and outstanding, fully paid
and non-assessable shares of the preferred stock of the Company.
14. Representations and Warranties of the Fund and of CDL. The Fund and
CDL hereby represent and warrant to the Company, with respect to the purchase or
prospective purchase of the Series C Preferred Stock, the Fund Option, the CDL
Warrants and the Second CDL Warrants, as the case may be, as follows:
a. Experience. The Fund and CDL have sufficient investment
experience to enable them to evaluate the merits and risks of their investments
in the Company, and they have the capacity to protect their own interests and to
bear the economic risk of their investments in the Company. The Fund and CDL are
aware of the several and various risks presented to a company such as the
Company and to the Company in particular. The Fund and CDL have conducted all of
the due diligence of the Company, its officers, Directors, Stockholders, markets
and prospects that they have deemed necessary in evaluating whether to purchase
the Series C Preferred Stock.
b. Investment. The Fund and CDL are acquiring the Series C
Preferred Stock, the Fund Option, the CDL Warrants and the Second CDL Warrants,
as the case may be, for investment for the Fund's and CDL's own respective
accounts, not as nominees or agents, and not with the view to, or for resale in
connection with, any distribution thereof. The Fund and CDL understand that the
Series C Preferred Stock has not been registered under the Securities Act of
1933, as amended (the "Securities Act"), by reason of a specific exemption from
the registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Fund's and CDL's representations as expressed herein or
otherwise provided to the Company. The Fund and CDL understand,
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acknowledge and agree that similar exemptions from registration are being relied
upon under the blue sky laws of the state in which the Fund and CDL reside.
c. Rule 144. The Fund and CDL acknowledge that the Shares are
"restricted securities" (as defined in the Securities Act) and, therefore, that
they must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is available. The
Fund and CDL are aware of the provisions of Rule 144 promulgated under the
Securities Act, which permits limited resale of shares purchased in a private
placement, subject to the satisfaction of certain conditions, including, in case
a party has held the securities to be sold less than two years, the availability
of certain current public information about the Company, the resale's occurring
not less than one year after a party has purchased and paid for the security to
be sold, the sale's being effected through a "broker's transaction" or in
transactions directly with a "market maker," and the number of shares' being
sold during any three-month period not exceeding specified limitations.
d. Access to Data. The Fund and CDL have discussed the Company's
business, management and financial affairs with the officers, Directors,
employees and Stockholders, and have reviewed the Company's books and records
and obtained such information as they have considered relevant and important in
making a decision to purchase the Shares. The Fund and CDL have also had an
opportunity to ask questions of officers and Directors of the Company, which
questions were answered to the Fund's and CDL's satisfaction. The Fund and CDL
have concluded that they have sufficient information upon which to base a
decision to purchase Shares, Series C Preferred Stock, the Fund Option, the CDL
Warrants and the Second CDL Warrants, as the case may be.
15. Restrictions on Transferability; Compliance with Securities Act.
a. Restrictions on Transferability. The Fund and CDL acknowledge
that the Series C Preferred Stock has not been registered under the Securities
Act or any state blue sky laws, and that the transferability of an interest in
the Series C Preferred Stock is restricted by applicable federal and state
securities laws.
b. Restrictive Legend. Each certificate representing shares of the
Series C Preferred Stock and any other securities issued in respect thereto upon
any stock split, stock dividend, recapitalization, merger, consolidation or
similar event, shall (unless otherwise permitted by the provisions of this
Section or by applicable law) be stamped or otherwise imprinted with a legend in
substantially the following form (in addition to any legend required under
applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE SHARES
MAY BE SOLD OR TRANSFERRED ONLY IF THE SHARES ARE REGISTERED UNDER THE
ACT OR THE COMPANY
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RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO IT THAT AN
EXEMPTION FROM REGISTRATION IS AVAILABLE.
The Company will instruct its transfer agent to remove the
legend set forth above from a stock certificate representing the Series
C Preferred Stock if the Company receives (i) a written representation
from the holder thereof to the effect that such holder has been the
beneficial owner of the securities for at least two years and has not
entered into any short sale or put or other option transaction that
would toll the holding period any time during the preceding two years
and, therefore, that he is free to sell the securities under Rule
144(k), and that all resales will be made by the record holder in
compliance with the Securities Act, or (ii) an opinion of counsel
satisfactory to the Company that the securities may be sold under Rule
144 and that such legend may be removed from the stock certificates.
16. Legal Counsel; Waiver of Conflict of Interest. The parties
have had the opportunity to consider the terms of this Agreement with their
respective legal counsel and have either obtained the advice of legal counsel in
connection with their execution hereof or do hereby expressly waive their right
to seek such legal counsel in connection with this transaction. CDL, the Fund
and the Company recognize that the law firm of Meyer, Hendricks, Xxxxxx & Xxxxx,
P.A. is presently representing them in connection with this Agreement and the
transactions contemplated by this Agreement, and is likely to represent each of
them in the future. As a result, CDL, the Fund and Company waive any and all
conflicts of interest that may have existed, that may exist or that may arise in
the future as a result of such representations.
17. Notices. Any notice required hereunder to be given by any
party shall be in writing and shall be delivered personally or sent by first
class mail or by certified or registered mail, postage prepaid, or by private
courier, or by facsimile to the other party to the address set forth below or to
such other address as that party may designate from time to time according to
this provision. A notice delivered personally shall be effective upon receipt. A
notice sent by facsimile shall be effective 24 hours after the dispatch thereof.
A notice delivered by mail or by private courier shall be effective on the fifth
(5th) day after the day of mailing.
(a) To the Company, the Directors
or the Stockholders: 0000 Xxxxx Xxxxx Xxxxxx
Xxxx, XX 00000
Fax: (000) 000-0000
with a copy to: Xxxxxx X. Xxxxxx, Esq.
Meyer, Hendricks, Xxxxxx & Xxxxx,
P.A.
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
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(b) To the Fund or CDL: CDL Emerging Growth Equity
Fund I, L.L.C./CDL Capital Corp.
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxx, XX 00000
Fax: (000) 000-0000
or to such other addresses as such parties may designate by notice
similarly given.
18. General Provisions.
a. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah applicable to
contracts entered into and to be performed entirely within such State.
b. Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
c. Entire Agreement; Amendment. This Agreement and the agreements
contemplated herein constitute the full and entire understanding and agreement
between the parties with regard to the subject matter hereof and thereof and
supersede all prior understandings and agreements with respect to the subject
matter hereof. No party shall be liable or bound to any other party in any
manner by any warranties, representations or covenants except as specifically
set forth herein or therein. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of such amendment, waiver,
discharge or termination is sought.
d. Survival of Warranties. The warranties, representations and
covenants contained in or made in this Agreement shall survive the execution and
delivery of this Agreement.
e. Expenses. The Company shall pay all costs, fees and expenses
incurred with respect to the negotiation, execution, delivery and performance of
this Agreement.
f. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, enforceable against the
parties actually executing such counterparts, and all of which together shall
constitute one and the same instrument.
g. Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
h. Additional Agreements. This Agreement contemplates the
execution of other agreements, some of which are attached hereto as Exhibits or
are referred to as Exhibits but have not yet been attached. To the extent such
agreements have been completed and executed by the parties thereto, the terms of
such agreements, respectively, shall control the relationships of the parties as
to the specific subject matter they cover. To the extent such agreements have
not been
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completed or executed by the parties, the terms of this Agreement shall control
the relationships of the parties as to the subject matter covered.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
Company: Fund:
Venturi Technology Enterprises, Inc., CDL Emerging Growth Equity Fund I,
a Nevada corporation, doing business L.L.C.
as Venturi Technologies, Inc. By CDL Capital Corp., Manager
By: /s/ Xxxxxxx Xxxxxx By: /s/ Xxxxx X. Xxxxxxx
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Xxxxxxx Xxxxxx Xxxxx X. Xxxxxxx, President
Chairman and Chief Executive Officer
XXXXXXX XXXXXX CDL:
CDL Capital Corp.
By: /s/ Xxxxxxx Xxxxxx By: /s/ Xxxxx X. Xxxxxxx
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Xxxxxxx Xxxxxx, Director and Xxxxx X. Xxxxxxx, President
Stockholder, Venturi Technology
Enterprises, Inc.
XXXX XXXXXXX:
/s/ Xxxx Xxxxxxx
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Xxxx Xxxxxxx, Director and Stockholder,
Venturi Technology Enterprises, Inc.
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Exhibit A
Board Consent
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Exhibit B
Fund Option Agreement
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Exhibit C
Form of CDL Warrants and Second CDL Warrants
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Exhibit D
Registration Rights Agreement
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