THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND
EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER REGULATION D PROMULGATED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "1933 ACT"). THIS SUBSCRIPTION AGREEMENT SHALL NOT
CONSTITUTE AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. THE
SECURITIES ARE "RESTRICTED" AND MAY NOT BE RESOLD OR TRANSFERRED EXCEPT AS
PERMITTED UNDER THE ACT PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
5% CONVERTIBLE DEBENTURE PURCHASE AGREEMENT
HIREL HOLDINGS, INC.
THIS AGREEMENT is made this ___ day of June, 1997, between HIREL
HOLDINGS, INC., NASDAQ Symbol "HIRL" (the "Company"), a Delaware corporation,
with its principle office at 000 Xxxxxxxxx 00xx Xxxxxxx, Xxxxxxx Xxxxx, XX 00000
and __________________________ (the "Purchaser"), with its principle office at
______________________________________________.
IN CONSIDERATION of the mutual covenants contained in this
Agreement, the Company and the Purchaser agree as follows:
Section 1. CERTAIN DEFINITIONS. For purpose of this Agreement:
"Agreement" means this 5% Convertible Debenture Purchase Agreement
including all Exhibits hereto.
"Closing Date" means the date of the delivery of the original
Debentures and original Warrants to the Purchaser against a wire transfer of the
funds to the Company.
"Closing" means the completion of the purchase and sale of the
Debentures and Warrants on the Closing Date.
"Common Stock" means the Common Stock of the Company $.01 par value.
"Conversion Date" means the date on which the Purchaser has
telecopied the Notice of Conversion to the Company.
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"Conversion Price" means an amount equal to the lessor of (a) a
seventy-nine (79%) percent discount from the average closing bid price of the
Common Stock as reported by NASDAQ or on other securities exchanges or markets
on which the Common Stock is listed for the previous five (5) trading days
ending on the day before the Conversion Date, or (b) a $4.50 for the Conversion
Shares issued in the First Conversion and $5.00 for the Conversion Shares issued
in the Second Conversion.
The maximum amount of Conversion Shares that the Purchaser can convert
into shall be 1,041,666. After such amount of shares is reached, the Company
must then repay the remaining balance of the Convertible Debenture by issuing a
four (4) month term note at one hundred twenty (120%) percent of the face amount
of the Debentures.
"Conversion Shares" means the Underlying Common Stock issued upon
the conversion of the Convertible Debenture.
"Convertible Debenture" means the Debenture of the Company
convertible into common stock of the Company as hereinafter provided.
"Debenture" or "Debentures" means the Convertible Debenture or
Convertible Debentures purchased on the Closing Date, as appropriate.
"First Conversion" means the earlier of ninety (90) calendar days
after the Closing Date, or upon the Registration Effective Date, at which time
Purchaser may convert one-half (1/2) of the Purchaser's initial investment,
including any and all interest and liquidated damages, if any.
"Registration Effective Date" means the date upon which the
registration of the Conversion Shares and Shares underlying the Warrants is
approved by the SEC.
"Second Conversion" means the earlier of one hundred twenty (120)
calendar days after the Closing Date, or thirty (30) days from the Registration
Effective Date, Purchaser may convert the remaining portion of its initial
investment, including any and all interest and liquidated damages, if any, can
be converted.
"Warrant" or "Warrants" means the Warrant from the Company purchased on
the Closing Date, as appropriate.
Section 2. AUTHORIZATION AND SALE OF DEBENTURE.
2.1 AGREEMENT TO EXECUTE AND DELIVER THE DEBENTURE AGREEMENT AND
THE DEBENTURE. The Company will borrow __________________________ ($__________)
Dollars from the Purchaser in reliance upon the representations and warranties
2
of the Purchaser contained in this Agreement. The Purchaser will lend such sum
to the Company, in reliance upon the representations and warranties of the
Company contained in this Agreement. Such loan shall occur on the Closing Date
and shall accrue interest from the Closing Date.
2.2 AUTHORIZATION. Subject to the terms and conditions of this
Agreement, the Company has authorized the execution and delivery of one or more
Convertible Debentures in an aggregate principle amount of up to Two Million,
Five Hundred Thousand ($2,500,000) Dollars (the "Principle"), with a maturity
date three (3) years after the date of issuance (the "Maturity Date"). The
Company promises to pay to the Purchaser the Principle, if any remains
unconverted, with interest at five (5%) percent per annum, in cash or shares of
Common Stock at the Conversion Price at the discretion of the Company on the
Maturity Date. Such loan shall occur on the Closing Date and shall accrue
interest from the Closing Date. The form of such Debenture is annexed hereto as
Exhibit A.
2.3 WARRANTS ISSUABLE UPON CLOSING. The Purchaser shall receive a
pro rata portion of warrants to purchase a total of Thirty-Five Thousand, Seven
Hundred Ten (35,710) Shares of the Company's Common Stock, for each Two Million
Five Hundred Thousand (US$2,500,000) Dollars principle amount of Debentures
purchased as per the terms of a separate Stock Purchase Warrant, the form of
which is attached hereto as Exhibit B.
2.4 TIME AND PLACE OF CLOSINGS. The Closings shall be held at the
offices of Xxxxxxx X. Xxxxxxxxx, P.C. ("Escrow Agent"), 00 Xxxxxxxx, 00xx Xx.,
Xxx Xxxx, XX 00000, on the Closing Date.
2.5 PAYMENT AND DELIVERY. At or prior to the Closing, the
following shall occur:
(a) Purchaser shall remit by wire transfer the Purchase Price
to Escrow Agent as per the separate Escrow Agreement (Exhibit C), which shall be
executed and delivered by the parties contemporaneously with this Agreement, as
payment in full for the Debenture.
(b) Company shall deliver o cause to be delivered to Escrow
Agent original Debentures and Warrants, substantially in the form set forth in
Exhibits A and B hereto, bearing the original signatures of an authorized
officer of the Company.
(c) Wire instructions for Xxxxxxx X. Xxxxxxxxx, P.C., as
follows:
Chase Manhattan Bank, N.A.
ABA #000000000
For the Account of
United States Trust Company of New York
Account #000-0-000000
In Favor of
Xxxxxxx X. Xxxxxxxxx, P.C. Attorney Trust Account
Account #59-02347
Section 2.6. CLOSINGS. At the closings, the following shall occur:
(a) The Escrow Agent shall deliver the Purchase Price and
the Debenture in accordance with the terms of the Escrow Agreement.
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(b) The Company shall cause the legal opinion required
pursuant to the terms of Section 3.16 hereof to be executed and delivered to the
Purchaser.
(c) The Company and Purchaser shall execute and deliver the
Registration Rights Agreement in the form of Exhibit D attached hereto.
Section 3. General Representations and Warranties of the Company.
The Company hereby represents and warrants to, and covenants with, the Purchaser
that the following are true and correct as of the date hereof.
3.1 ORGANIZATION; QUALIFICATION. The Company is a corporation duly
organized and validly existing under the laws of Delaware and is in good
standing under such laws. The Company has all requisite corporate power and
authority to own, lease and operate its properties and assets, and to carry on
its business as presently conducted. The Company is qualified to do business as
a foreign corporation in each jurisdiction in which the ownership of its
property or the nature of its business requires such qualification, except where
failure to so qualify would not have a material adverse effect on the Company.
3.2 CAPITALIZATION AND CONVERSION. The authorized capital stock of
the Company consists of 24,000,000 Shares of Common Stock, $.01 par value, and
1,000,000 Shares of Preferred Stock, of which 5,208,750 shares of Common Stock
and no shares of Preferred Stock have been issued. All issued and outstanding
Shares of Common Stock have been duly authorized and validly issued and are
fully paid and nonasessable. As of the Closing Date, the Company had reserved
from its authorized but unissued shares of Common Stock a sufficient number of
shares of Common Stock for issuance upon conversion of the aggregate principle
of the Debenture. Each such conversion shall reduce the principle amount owing
on the Debenture by the amount stated in the Notice of Conversion (Exhibit E)
and will be reflected in a Convertible Debenture Principle Reduction Schedule
signed by an authorized officer of the Company.
3.3 AUTHORIZATION. The Company has all requisite corporate right,
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Company, its directors and shareholders necessary for the authorization, execute
on, delivery and performance of this Agreement and the Debenture by the Company,
the authorization, sale, issuance and delivery of the Conversion Shares and the
performance of the Company's obligations hereunder has been taken. This
Agreement has been duly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to bankruptcy,
insolvency and the relief of debtors and rules of law governing specific
performance, injunctive relief or other equitable remedies, and to limitations
of public policy as they may apply to the indemnification provisions set forth
4
in Section 7.3 of this Agreement. Upon their issuance and delivery pursuant to
this Agreement, the Conversion Shares will be validly issued, fully paid and
nonassessable and will be free of any liens or encumbrances except for those
imposed by or on behalf of the Purchaser, its creditors or agents.
3.4 NO CONFLICT. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination, cancellation
or acceleration of any obligation or to a loss of a material benefit, under, any
provision of the Certificate of Incorporation, and any amendments thereto,
Bylaws and any amendments thereto of the Company or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree statute, law, ordinance, rule or
regulation applicable to the Company, its properties or assets.
3.5 ACCURACY OF REPORTS AND INFORMATION. The Company is in
compliance, to the extent applicable, with all reporting obligations under
either Section 12(b), 12 (g) or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The Company has registered its Common Stock
pursuant to Section 12 of the Exchange Act and the Common Stock is listed and
trades on the NASDAQ National Small Cap Market.
The Company has filed all material required to be filed pursuant to
all reporting obligations, under either Section 13(a) or 15(d) of the Exchange
Act for a period of at least twelve (12) months immediately preceding the offer
and sale of the Debenture (or for such shorter period that the Company has been
required to file such material).
3.6 SEC FILINGS/FULL DISCLOSURE. For a period of at least twelve
(12) months immediately preceding this offer and sale, or such shorter period
that the Company has been required to file such Reports as defined herein, (i)
none of the Company's filings with the Securities and Exchange Commission
contain any untrue statement f a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
in light of the circumstances under which they were made, not misleading, and
(ii) the Company has timely filed all requisite forms, reports and exhibits
thereto with the Securities and Exchange Commission.
There is no fact known to the Company (other than general economic
conditions known to the public generally) that has not been publicly disclosed
by the Company or disclosed in writing to the Purchaser which (i) could
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise) or on earnings, business affairs, properties or assets
of the Company, or (ii) could reasonably be expected to materially and adversely
affect the ability of the Company to perform its obligations pursuant to this
Agreement.
5
3.7 ABSENCE OF UNDISCLOSED LIABILITIES. The Company has no
material liabilities or obligations, absolute or contingent (individually or in
the aggregate), except as set forth in the Reports (as hereinafter defined) or
as incurred in the ordinary course of business after the date of the Reports.
3.8 GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, or the offer, sale or issuance of the
Debenture, or the consummation of any other transaction contemplated hereby,
except the filing with the SEC of a registration statement for the purpose of
registering the Common Stock underlying the Debenture.
3.9 INTELLECTUAL PROPERTY RIGHTS. Except as disclosed in the Form
10-Ks, Form 10-Qs and Form 8-Ks filed by the Company for a period of at least
twelve (12) months immediately preceding this offer, or such shorter period that
the Company has been required to file such Reports as defined herein (the
"Reports"), the Company has sufficient trademarks, trade names, patent rights,
copyrights and licenses to conduct its business as presently conducted. To the
Company's knowledge, neither the Company nor its products is infringing or will
infringe any trademark, trade name, patent right, copyright, license, trade
secret or other similar right of others currently in existence; and there is no
claim being made against the Company regarding any trademark, trade name,
patent, copyright, license, trade secret or other intellectual property right
which could have a material adverse effect on the condition (financial or
otherwise), business, results of operations or prospects of the Company.
3.10 MATERIAL CONTRACTS. Except as set forth in the Reports, the
material agreements to which the Company is a party described in t e Reports are
valid agreements, in full force and effect, the Company is not in material
breach or material default (with or without notice or lapse of time, or both)
under any of such agreements, and, to the Company's knowledge, the other
contracting party or parties thereto are not in material breach or material
default (with or without notice or lapse of time, or both) under any of such
agreements.
3.11 LITIGATION. Except as disclosed in the Reports, there is no
action, proceeding or investigation pending, or to the Company's knowledge
threatened, against the Company which might result, either individually or in
the aggregate, in any material adverse change in the business, prospects,
conditions, affairs or operations of the Company. The Company is not a party to
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company currently intends to initiate which will materially effect the Company.
6
3.12 TITLE TO ASSETS. Except as is required to be set forth in the
Reports, the Company has good and marketable title to all properties and
material assets described in the Reports as owned by it, free and clear of any
pledge, lien, security interest, encumbrance, claim or equitable interest other
than such as are not material to the business of the Company.
3.13 SUBSIDIARIES. Except as disclosed in the Reports and the
financial statements, the Company does not presently own or control, directly or
indirectly, any interest in any other corporation, partnership, association or
other business entity.
3.14 REQUIRED GOVERNMENTAL PERMITS. The Company is in possession of
and operating in material compliance with all authorizations, licenses,
certificates, consents, orders and permits from state, federal and other
regulatory authorities which are material to the conduct of its business, all of
which are valid and in full force and effect.
3.15 LISTING. The Company will maintain the listing of its Common
Stock on the NASDAQ National Small Cap Market or other organized United States
Markets or Quotron System.
3.16 OTHER OUTSTANDING SECURITIES. Except as disclosed in the
Reports, there are no other material outstanding debt or equity securities
presently convertible into Common Stock.
3.17 RIGHT OF FIRST REFUSAL. In the event the Company wishes to
obtain further private financing (debt or equity) within the twelve (12) month
period following the Closing date, the Purchasers shall have the right of first
refusal to participate on a pro rata basis in such offering under the Company's
terms and conditions and shall have three (3) business days to reply in writing
after receipt of such written notice from the Company. In the event such writing
is not received by the Company within this period, this will be deemed a refusal
by the Purchasers.
3.18 LEGAL OPINION. Purchaser shall, upon the purchase of the
Debenture, receive an opinion letter from counsel to the Company, and the
Company represents that it will immediately obtain such an opinion from counsel
to the Company to the effect that:
(i) The Company is duly incorporated and validly existing
under the laws and jurisdiction of its incorporation. The Company and/or its
subsidiaries are duly qualified to do business as a foreign corporation and is
in good standing in all jurisdictions where the Company and/or its subsidiaries
owns or leases properties, maintains employees or conducts business, except for
jurisdictions in which the failure to so qualify would not have a material
adverse effect on the Company, and has all requisite corporate power and
authority to own its properties and conducts its business.
7
(ii) There is no action, proceeding or investigation pending,
or to such counsel's knowledge, threatened against the Company which might
result, either individually or in the aggregate, in any material adverse change
in the business, prospects, conditions, affairs or operations of the Company.
(iii) The Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
(iv) There is no action, suit, proceeding or investigation by
the Company currently pending or which the Company currently intends to
initiate.
(v) All issued and outstanding shares of Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
(vi) The Debentures which shall be issued at the closing are
properly issued under the Company's state of incorporation.
(vii) The Purchase Agreement, the issuance of the Debentures,
Warrants and the issuance of Common Stock upon conversion of the Debentures and
exercise of the Warrants, have been duly approved by all required corporate
action and that all such securities, upon delivery, shall be validly issued and
outstanding, fully paid and nonassessable.
(viii)The issuance of the Debentures will not violate the
applicable listing agreement between the Company and any securities exchange or
market on which the Company's securities are listed.
(ix) Assuming the accuracy of the representations and
warranties of the Company and the Purchaser set forth in the 5% Convertible
Debenture Purchase Agreement, the offer, issuance and sale of the Debentures,
Warrants, Conversion Shares and the Warrant Shares to be issued upon exercise to
the Purchaser pursuant to the 5% Convertible Debenture Purchase Agreement are
exempt from the registration requirements of the Securities Act.
3.19 DILUTION. The Company is aware and acknowledges that
conversion of the Debentures could cause dilution to existing shareholders and
could significantly increase the outstanding number of shares of Common Stock.
8
Section 4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
PURCHASER. The Purchaser represents and warrants to, and covenants with, the
Company that the following are true and correct as of the date hereof and as of
the Closing Date.
4.1 AUTHORITY. The Purchaser has all requisite right, power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. All corporate action on the part of the
Purchaser, its directors, shareholders, members or partners necessary for the
authorization, execution, delivery and performance of this Agreement, and the
purchase of the Debentures and Warrants as well as their respective conversion
and exercise, and the performance of the Purchaser's obligations hereunder, has
been taken. The Purchaser's signatory has all right, power, authority and
capacity to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by the Purchaser and will constitute the legal, valid and binding
obligations of the Purchaser, enforceable in accordance with its terms, subject
to laws of general application relating to bankruptcy, insolvency and the relief
of debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies, and to limitations of public policy as they may apply
to the indemnification provisions set forth in Section 7.3 of this Agreement.
4.2 INVESTMENT EXPERIENCE. Purchaser is an "accredited investor"
as defined in Rule 501(a) under the Securities Act. Purchaser is aware of the
Company's business affairs and financial condition and has had access to and has
acquired sufficient information about the Company, including the Reports, to
reach an informed and knowledgeable decision to acquire
the Debentures and Warrants. Purchaser has such business and financial
experience as is required to give it the capacity to protect its own interests
in connection with the purchase of the Debentures and Warrants.
4.3 INVESTMENT INTENT. Without limiting its ability to resell the
underlying Common Stock pursuant to an effective registration statement,
Purchaser represents that it is purchasing the Debentures and Warrants for its
own account as principle for investment purposes, and not with a view to a
distribution. Purchaser understands that its acquisition of the Debentures and
Warrants have not been registered under the Securities Act or registered or
qualified under any state securities law in reliance on specific exemptions
therefrom, which exemptions may depend upon, among other things, the bona fide
nature of Purchaser's investment intent as expressed herein. Purchaser will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchaser or otherwise acquire or take a pledge
of) any of the Debentures, Warrants or the underlying Common Stock, except in
compliance with the Securities Act and any applicable state securities laws, and
the rules and regulations promulgated thereunder.
4.4 REGISTRATION OR EXEMPTION REQUIREMENTS. Purchaser further
acknowledges and understands that the Debentures, Warrants or the Conversion
Shares may not be resold or otherwise transferred except in a transaction
registered under the Securities Act and any applicable state securities laws or
9
unless an exemption from such registration is available. Purchaser understands
that the Debentures, Warrants and, if converted or exercised as the case may be,
the Conversion Shares and Shares underlying the Warrants will be imprinted with
a legend that prohibits the transfer of such securities unless (i) it is
registered or such registration is not required pursuant to an exemption
therefrom, and (ii) if the transfer is pursuant to an exemption from
registration other than Rule 144 under the Securities Act and an opinion of
counsel reasonably satisfactory to the Company is obtained to the effect that
the transaction is so exempt.
4.5 NO LEGAL, TAX OR INVESTMENT ADVICE. Purchaser understands that
nothing in this Agreement or any other materials presented to Purchaser in
connection with the purchase and sale of the Debentures and Warrants constitutes
legal, tax or investment advice. Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Debentures and the Warrants.
4.6 PURCHASER REVIEW. Purchaser hereby represents and warrants
that the Purchaser has carefully examined the Reports, and the financial
statements contained therein. The Purchaser acknowledges that the Company has
made available to the Purchaser all documents and information that it has
requested relating to the Company and has provided answers to all of its
questions concerning the Company, the Debenture and the Warrants. Nothing stated
in the previous two sentences, however, shall be deemed to affect the
representations and warranties of the Company contained in this Agreement.
4.7 RESTRICTIONS ON CONVERSION OF DEBENTURE. The Purchaser or any
subsequent holder of the Debenture (the "Holder") shall be prohibited from
converting any portion of the Debenture which would result in the Purchaser or
the Holder being deemed the beneficial owner, in accordance with the provisions
of Rule 13d-3 of the Securities Exchange Act of 1934, as amended, of 4.99% or
more of the then issued and outstanding Common Stock of the Company.
4.8 CERTAIN RISKS. The Purchaser recognizes that the purchase of
the Debentures, Warrants and the Conversion Shares and shares underlying the
Warrants involves a high degree of risk in that:
(i) an investment in the Company is highly speculative and only
investors who can afford the loss of their entire investment should consider
investing in the Company and the Debentures, Warrants and the respective
underlying securities;
(ii) a purchaser may not be able to liquidate its investment;
(iii) transferability of the Debentures, Warrants and Conversion
Shares and shares underlying the Warrants is extremely limited;
(iv) in the event of disposition, Purchaser could sustain the loss
of its entire investment;
(v) the Debentures represent non-voting securities, which have the
right to convert into and purchase shares of voting equity securities in a
corporate entity;
10
(vi) no return on investment, whether through distributions,
appreciation, transferability or otherwise, and no performance by, through or of
the Company, has been promised, assured, represented or warranted by the
Company, or by any director, officer, employee, agent or representative thereof;
(vii) while the Common Stock is presently quoted and traded on the
NASDAQ National Small Cap Market and while the Purchasers are beneficiaries of
certain registration rights provided herein, the Debentures, Warrants and the
Conversion Shares and the shares underlying the Warrants:
(a) are not registered under applicable federal or state
securities laws, and thus may not be sold, conveyed, assigned or transferred
unless registered under such laws or unless an exemption from registration is
available under such laws, as more fully described below; and
(b) are not quoted, traded or listed for trading or quotation on
the NASDAQ National Small Cap Market, or any other organized market or quotation
system, and there is therefore no present public or other market for such
Debentures or Warrants, nor can there be any assurance that the Common Stock
will continue to be quoted, traded or listed for trading or quotation on the
NASDAQ National Small Cap Market or on any other organized market or quotation
system.
4.9 NO REGISTRATION, REVIEW OR APPROVAL. The Purchaser acknowledges and
understand that the limited private offering and sale of the Debentures,
Warrants and the Conversion Shares pursuant to this Agreement has not been
reviewed or approved by the SEC or by any state securities commission, authority
or agency, and is not registered under the Act or under the securities or "blue
sky" laws, rules or regulations of any state. The Purchaser acknowledges,
understands and agrees that the Debentures, Warrants and the Conversion Shares
are being offered and sold hereunder pursuant to (i) a private placement
exemption to the registration provisions of the Act pursuant to Section 3(b) or
Section 4(2) of such Act and Regulation D promulgated under such Act, and (ii) a
similar exemption to the registration provisions of applicable state securities
laws.
Section 5. CONDITIONS TO THE PURCHASER'S OBLIGATION TO PURCHASE. The
Company understands that the Purchaser's obligation to purchase the Debenture is
conditioned upon:
(a) Acceptance by Purchaser of this Debenture Purchase
Agreement for the purchase of the Debenture, as evidenced by the execution of
this Agreement by its authorized officers;
(b) Delivery of the Debentures and Warrants into Escrow;
(c) Delivery of legal opinion as required by this Agreement;
(d)Execution and delivery by the Company of the Escrow
Agreement and the Registration Rights Agreement in the form of Exhibits C and D
attached hereto.
Section 6. CONDITIONS TO COMPANY'S OBLIGATION TO SELL. Purchaser
understands that the Company's obligation to sell the Debenture is conditioned
upon:
11
(a)The receipt and acceptance by the Company of this Debenture
Purchase Agreement for the Debenture as evidenced by execution of this Debenture
Purchase Agreement by the President or any Vice President of the Purchaser; and
(b) Delivery into escrow by Purchaser of good funds as payment
in full for the purchase of the Debenture.
(c) Execution and delivery by the Purchaser of the Escrow
Agent and the Registration Rights Agreement in the form of Exhibits C and D.
Section 7. COMPLIANCE WITH THE SECURITIES ACT.
7.1 REGISTRATION RIGHTS AGREEMENT. The parties will enter into a
Registration Rights Agreement, annexed hereto as Exhibit D.
7.2 UNDERWRITER. The Company understands that the Purchaser
disclaims being an "underwriter" (as such term is defined under the Securities
Act and the rules and regulations promulgated thereunder (an "Underwriter"), but
Purchaser being deemed an Underwriter shall not relieve the Company of any
obligation it has hereunder, except as may be required by law.
7.3 INDEMNIFICATION. Each of the Company and the Purchaser agrees
to indemnify the other and to hold the other harmless from and against any and
all losses, damages, liabilities, costs and expenses (including reasonable
attorneys' fees) which the other may sustain or incur in connection with the
breach by the indemnifying party of any representation, warranty or covenant
made by it in this Agreement.
7.4 INFORMATION AVAILABLE. So long as any registration statement
is effective covering the resale of the Common Stock underlying the Debenture,
the Company will furnish to Purchaser:
(a) as soon as possible after available (but in the case of
the Company's Annual Report to Stockholders, within 150 days after the end of
each fiscal year of the Company), one copy of (i) its Annual Report to
Stockholders (which Annual report shall contain financial statements audited in
accordance with generally accepted accounting principles in the United States of
America by a national firm of certified public accountants); (ii) each of its
Quarterly Reports to Stockholders, and its Quarterly Reports on Form 10-Q; and
(iii) a full copy of the registration statement covering the Conversion Shares
(the foregoing, in each case, including exhibits); and
(b) upon the reasonable request of Purchaser, such other
information that is generally available to the public.
7.5 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the SEC which may at any time
permit the sale of the Underlying Shares to the public without registration, the
Company agrees to use its best efforts to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all times
after the effective date on which the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act;
12
(b) use its best efforts to file with the SEC in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act;
(c) to furnish to Purchaser forthwith upon request a written
statement by the Company as to its compliance with the reporting requirements of
said Rule 144, and of the Securities Act and the Exchange Act, a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents of the Company and other information in the possession of or
reasonably obtainable by the Company as Purchaser may reasonably request in
availing itself of any rule or regulation of the SEC allowing Purchaser to sell
any of the Underlying Shares without registration.
7.6 TEMPORARY CESSATION OF OFFERS AND SALES BY PURCHASER. The
Purchaser acknowledges that there may occasionally be times when the Company may
be required to suspend the use of the prospectus forming part of the
Registration Statement until such time as an amendment to the Registration
Statement has been filed by the Company and declared effective by the
Commission, until the prospectus is supplemented or amended to comply with the
Securities Act, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Exchange Act. The Company agrees to
file any necessary amendments, supplements and reports as soon as practicable
under the circumstances. Purchaser hereby covenants that it will not sell any
Common Stock pursuant to said prospectus during a period of not more than 20
days commencing at the time at which the Company gives the Purchaser notice of
the suspension of the use of said prospectus and ending at the time the Company
gives the Purchaser notice that the Purchaser may thereafter effect sales
pursuant to said prospectus, as the same may have been supplemented or amended.
7.7 TRANSFER OF COMMON STOCK AFTER REGISTRATION. Purchaser hereby
covenants with the Company not to make any sale of the Common Stock except
either (i) in accordance with the Registration Statement, in which case
Purchaser covenants to comply with the requirement of delivering a current
prospectus, or (ii) in accordance with Rule 144, in which case Purchaser
covenants to comply with Rule 144.
7.8 TERMINATION OF OBLIGATIONS. The obligations of the Company
pursuant to the Registration Rights Agreement shall cease and terminate upon the
earlier to occur of (i) such time as all of the Common Stock have been re-sold,
or (ii) such time as all of the Common Stock may be re-sold in any three-month
period pursuant to Rule 144 under the Securities Act.
7.9 LEGEND. The certificate or certificates representing the
Debentures, Warrants and, upon conversion, the Conversion Shares shall be
subject to a legend restricting transfer under the Securities Act of 1933, such
legend to be substantially as follows:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
13
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT WHICH, EXCEPT IN THE
CASE OF AN EXEMPTION UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION
SATISFACTORY TO THE COMPANY."
Such securities shall also include any legends required by any applicable state
securities laws.
With respect to the Conversion Shares and the shares underlying the Warrants,
the legend(s) shall be removed and the Company shall issue a replacement
certificate without such legend to the holder of such certificate if such holder
provides to the Company an opinion of counsel reasonably acceptable to the
Company, to the effect that a public sale, transfer or assignment of such stock
may be made without registration.
7.10 PERMISSIVE REDEMPTION. The Company has the right to redeem the
Debentures, in whole or in part, in cash at one hundred twenty (120%) percent of
the outstanding principle amount of the Debenture, for any Debenture for which a
Notice of Conversion has not been sent. Upon notice of its right to redeem the
Debenture the Company shall wire transfer the appropriate amount of funds into
an escrow account mutually agreed upon by both Company and Purchaser within
three (3) business days of such notice. Additionally, if after the passage of
three (3) business days from the receipt by the Purchaser of the notice of the
Company's right to redeem the Debenture, and the time funds are to be received
by the escrow agent, the Company has not deposited into escrow the appropriate
amount of funds to redeem the Debenture, the Company shall pay to the Purchaser
an amount equal to five (5%) percent per month of the outstanding principle
amount on a pro rata basis in cash. After the escrow agent is in receipt of such
funds, he shall notify the Purchaser to surrender the appropriate amount of
Debenture. If after three (3) business days from the date the notice of
redemption is received by the Purchaser the funds have not been received by the
escrow agent, then the Purchaser shall again have the right to convert the
Debenture and the Company shall have the right to redeem the Debenture but only
upon simultaneously sending a notice of redemption to the Purchaser and wire
transferring the appropriate amount of funds.
Section 8. LEGAL FEES AND EXPENSES. Except as provided in the Escrow
Agreement, each of the parties shall pay its own fees and expenses (including
the fees of any attorneys, accountants, appraisers or others engaged by such
party) in connection with this Agreement and the transactions contemplated
hereby.
Section 9. NOTICE OF CONVERSION. Conversion of the Debenture to
Common Stock may be exercised in whole or in part by Purchasers telecopying an
executed and completed Notice of Conversion (in the form annexed hereto as
Exhibit E) to the Company and delivering the original Notice of Conversion and
the certificate representing the Debenture to the Company by express courier
within three (3) business days of exercise. Each date on which a Notice of
Conversion is telecopied to the Company in accordance with the provisions hereof
shall be deemed a Conversion Date. The Company will transmit the certificates
representing the Common Stock issuable upon conversion of all or any part of the
Debenture (together with the certificates representing portions of the Debenture
not so converted) to the Purchaser via express courier within five (5) business
days after the Company has received the original Notice of Conversion and
Debenture certificate being so converted. In addition to any other remedies
14
which may be available to the Purchaser, in the event that the Company fails for
any reason to effect delivery of such shares of Common Stock within such five
(5) business day period, the Purchaser will be entitled to revoke the relevant
Notice of Conversion by delivering by telecopier with an original by overnight
courier a notice to such effect to the Company whereupon the Company and the
Purchaser shall each be restored to their respective positions immediately prior
to the delivery of the Notice of Conversion. Upon receipt of such Notice the
Company shall return by overnight courier the original certificate representing
the Debenture. The Notice of Conversion and certificate representing the portion
of the Debenture converted shall be delivered as follows:
To the Company:
Hirel Holdings, Inc.
000 Xxxxxxxxx 00xx Xxxxxxx
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxxx, CEO
(tele) (000) 000-0000
(fax) (000) 000-0000
or to such other person at such other place as the Company shall designate to
the Purchaser in writing.
In the event that the Common Stock issuable upon conversion of the
Debenture is not delivered within five (5) business days of receipt by the
Company of a valid Conversion Notice and the Debenture to be converted (such
date of receipt referred to as the "Conversion Date"), the Company shall pay to
the Purchaser, by wire transfer, as liquidated damages for such failure and not
as a penalty, for each $100,000 of Debenture sought to be converted, $500 for
each of the first ten (10) days, and $1,000 per day thereafter that the
Conversion Shares are not delivered, which penalty shall run from the sixth
business day after the Conversion Date.
Section 10. NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing, shall be mailed by first class
registered or certified airmail, postage prepaid, and shall be deemed given when
so mailed:
(a) if to the Company, to
Hirel Holdings, Inc.
000 Xxxxxxxxx 00xx Xxxxxxx
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxxx, CEO
(tele) (000) 000-0000
(fax) (000) 000-0000
15
copy to:
Atlas, Xxxxxxxx, Trop & Borkson, P.A.
000 Xxxx Xxx Xxxx Xxxx
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
or to such other person at such other place as the Company shall designate to
the Purchaser in writing;
(b) if to the Purchaser, to
(tele)
(fax)
copy to:
Xxxxxxx X. Xxxxxxxxx, P.C.
00 Xxxxxxxx, 00xx Xx.
Xxx Xxxx, XX 00000
(tele) (000) 000-0000
(fax) (000) 000-0000
or at such other address or addresses as may have been furnished to the Company
in writing; or
(c) if to any transferee or transferees of a Purchaser, at
such address or addresses as shall have been furnished to the Company at the
time of the transfer or transfers, or at such other address or addresses as may
have been furnished by such transferee or transferees to the Company in writing.
Section 11. MISCELLANEOUS.
11.1 ENTIRE AGREEMENT. This Agreement, including all Exhibits
embody the entire agreement and understanding between the parties hereto with
respect to the subject matter hereof and supersedes all prior oral or written
agreements and understandings relating to the subject matter hereof. No
statement, representation, warranty, covenant or agreement or any kind not
expressly set forth in this Agreement shall affect, or be used to interpret,
change or restrict, the express terms and provisions of this Agreement.
11.2 AMENDMENTS. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by the Company and by
Purchaser.
16
11.3 HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
11.4 SEVERABILITY. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
11.5 GOVERNING LAW/JURISDICTION. This Agreement will be construed
and enforced in accordance with and governed by the laws of the State of New
York, except for matters arising under the 1933 Act, without reference to
principles of conflicts of law. Each of the parties consents to the jurisdiction
of the federal district court for the Southern District 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. Each party hereby agrees that if either party to this Agreement
obtains a judgment against it in such a proceeding, the party which obtained
such judgment may enforce same by summary judgment in the courts of any country
having jurisdiction over the party against whom such judgment was obtained, and
each party hereby waives any defenses available to it under local law and agrees
to the enforcement of such a judgment. Each party to this Agreement irrevocably
consents to the service of process in any such proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party
at its address set forth herein. Nothing herein shall affect the right of any
party to serve process in any other manner permitted by law.
11.6 RECOVERY OF ATTORNEY'S FEES. Should any party bring an action
to enforce the terms of this Agreement then, if Purchaser prevails in such
action it should be entitled to recovery of its attorney's fees from the
Company, and if the Company prevails in such action it shall be entitled to
recovery of its attorney's fees from the Purchasers.
11.7 FEES. The Company acknowledges that Purchaser shall have no
responsibility for the payment of any of its fees in connection with this
offering.
11.8 COUNTERPARTS/FACSIMILE. This Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument, and shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other party. In lieu of the original, a facsimile
transmission or copy of the original shall be as effective and enforceable as
the original.
11.9 PUBLICITY. The Purchaser shall not issue any press releases or
otherwise make any public statement with respect to the transactions
contemplated by this Agreement without the prior written consent of the Company,
except as may be required by applicable law or regulation.
11.10 SURVIVAL. The representations and warranties in this Agreement
shall survive Closing.
17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
by their duly authorized representatives the day and year first above written.
HIREL HOLDINGS, INC.
By___________________________
Officer
PURCHASER:
_____________________________
By___________________________
Officer
18
EXHIBIT A
No. __ $_________ USD
HIREL HOLDINGS, INC.
$2,500,000 5% Convertible Debenture
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS.
SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND APPLICABLE STATE
SECURITIES LAWS WHICH, EXCEPT IN THE CASE OF AN EXEMPTION PURSUANT TO RULE 144
UNDER SAID ACT, IS CONFIRMED IN A LEGAL OPINION SATISFACTORY TO THE COMPANY.
THIS DEBENTURE is one of a duly authorized issue of Debentures of HIREL
HOLDINGS, INC., a corporation duly organized and existing under the laws of the
State of Delaware (the "ISSUER") issued June __, 1997, designated as its Five
(5%) Percent Convertible Debenture due June __, 2000, in an aggregate face
amount not exceeding Two Million, Five Hundred Thousand (USD$2,500,000) Dollars,
issuable in One Hundred Thousand ($100,000) Dollars par value face amounts.
FOR VALUE RECEIVED, the ISSUER promises to pay to
the registered holder hereof and its successors and assigns (the "HOLDER"), the
principle sum of:
United States Dollars,
on June __, 2000 (the "Maturity Date"), and to pay interest, as outlined below,
at the rate of 5% per annum, on the principle sum outstanding from time to time
for the term of the Debenture or until the Debenture is completely converted.
Accrual of Interest shall commence on the first business day to occur after the
date hereof and shall continue until payment in full of the principle sum has
been made or duly provided for. The interest so payable will be paid to the
person in whose name this Debenture (or one or more predecessor Debentures) is
registered on the records of the Issuer regarding registration and transfers of
1
the Debenture (the "Debenture Register"), provided, however, that the ISSUER'S
obligation to a transferee of this Debenture arises only if such transfer, sale
or other disposition is made in accordance with the terms and conditions
contained in the 5% Convertible Debenture Purchase Agreement dated as of June
__, 1997 between the ISSUER and HOLDER (the "Agreement"). Except upon an event
of default, the principle of, and interest on, this Debenture are payable only
in cash or Conversion Shares (as defined in this Agreement) at the discretion at
the Company, at the address last appearing on the Debenture register of the
ISSUER as designated in writing by the Holder hereof from time to time. The
ISSUER will pay the principle of and all accrued and unpaid interest due upon
this Debenture on the Maturity Date in cash or Conversion Shares at the
Conversion Price, less any amounts required by law to be deducted or withheld,
to the Holder at the last address on the Debenture Register. Such payment shall
constitute a payment of principle and interest hereunder and shall satisfy and
discharge the liability for principle and interest on the Debenture to the
extent of the sum represented by such check plus any amounts so deducted.
The Debenture is subject to the following additional provisions:
1. The Debenture is exchangeable for like Debentures in equal
aggregate principle amount of authorized denominations, as requested by the
HOLDERS surrendering the same. No service charge will be made for such
registration or transfer or exchange.
2. The ISSUER shall be entitled to withhold from all payments of
principle of, and interest on, this Debenture any amounts required to be
withheld under the applicable provisions of the United States Income Tax or
other applicable laws at the time of such payments.
3. This Debenture has been issued subject to investment
representations of the original HOLDER hereof and may be transferred or
exchanged in the US only in compliance with Securities Act of 1933, as amended
(the "Act") and applicable state securities laws. Prior to the due presentment
for such transfer of this Debenture, the ISSUER and any agent of the ISSUER may
treat the person in whose name this Debenture is duly registered on the ISSUER'S
Debenture Register as the owner hereof for the purpose of receiving payment as
herein provided and all other purposes, whether or not this debenture is
overdue, and neither the ISSUER nor any such agent shall be affected by notice
to the contrary. The transferee shall be bound, as the original HOLDER by the
same representations and terms described herein and under the Agreement.
4. The Holder is entitled, at its option, to convert this
Debenture in accordance with the terms and conditions contained in the 5%
Convertible Debenture Purchase Agreement, dated as of June __, 1997 between the
ISSUER and HOLDER.
No fractional shares or scrip representing fractions of shares will
be issued on conversion, but the number of shares issuable shall be rounded to
the nearest whole share, with the fraction paid in cash at the discretion of the
ISSUER.
2
The Conversion Price shall be equitably adjusted accordingly on a pro rata basis
in the event of the happening of certain events that would affect the Common
Stock or the Convertible Debenture's value including, but not limited to,
forward and reverse splits, dividend payment on shares, subdivision of shares,
combinations, reclassifications, issuance of rights, warrants, options or the
like. An adjustment made pursuant to this section shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such an event.
5. No provision of this Debenture shall alter or impair the
obligation of the ISSUER, which is absolute and unconditional, upon an Event of
Default (as defined below), to pay the principle of, and interest on this
Debenture at the place, time, and rate, and in the coin or currency herein
prescribed.
6. The ISSUER hereby expressly waives demand and presentment for
payment, notice on nonpayment, protest, notice of protest, notice of dishonor,
notice of acceleration or intent to accelerate, and diligence in taking any
action to collect amounts called for hereunder and shall be directly and
primarily liable for the payment of all sums owing and to be owing hereon,
regardless of and without any notice, diligence, act or omission as or with
respect to the collection of any amount called for hereunder.
7. The ISSUER agrees to pay all costs and expenses, including
reasonable attorneys' fees, which may be incurred by the Holder in collecting
any amount due or exercising the conversion rights under this Debenture.
If one or more of the following described "Events of Default" shall
occur,
a. Any of the representations or warranties made by the ISSUER
herein, or in the Agreement shall have been incorrect when
made in any material respect; or
b. The ISSUER shall fail to perform or observe any other
covenant, term, provision, condition, agreement or obligation
of the ISSUER under this Debenture and such failure shall
continued uncured for a period of seven (7) days after notice
from the Holder of such failure; or
c. A trustee, liquidator or receiver shall be appointed for
the ISSUER or for a substantial part of its property or
business without its consent and shall not be discharged
within thirty (30) days after such appointment; or
d. Any governmental agency or any court of competent
jurisdiction at the instance of any governmental agency shall
assume custody or control of the whole or any substantial
portion of the properties or assets of the ISSUER and shall
not be dismissed within thirty (30) calendar days thereafter;
or
3
e. Bankruptcy reorganization, Insolvency or liquidation
proceedings or other proceedings for relief under any
bankruptcy law or any law for the relief or debtors shall be
instituted by or against the ISSUER, and if instituted against
the ISSUER, ISSUER shall by any action or answer approve of,
consent to or acquiesce in any such proceedings or admit the
material allegations of, or default in answering a petition
filed in any such proceeding; or
f. The ISSUER'S Common Stock is delisted from trading on
NASDAQ National Small Cap Market unless it is thereupon
admitted to trading on a national stock exchange.
Then, or at any time thereafter, and in each and every such case, unless
such Event of Default shall have been waived in writing by the HOLDER
(which waiver shall not be deemed to be a waiver of any subsequent
default) at the option of the HOLDER and in the HOLDER'S sole discretion,
the HOLDER may consider this Debenture immediately due and payable,
without presentment, demand protest or notice of any kind, all of which
are hereby expressly waived, anything herein or in any note or other
instruments contained to the contrary notwithstanding, and HOLDER may
immediately, and without expiration of any period of grace, enforce any
and all of the HOLDER'S rights and remedies provided herein or any other
rights or remedies afforded by law.
8. In case any provision of this Debenture is held by a court of
competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby.
9. This Debenture and the Agreement referred to in this Debenture
constitute the full and entire understanding and agreement between the ISSUER
and HOLDER with respect hereof. Neither this Debenture nor any terms hereof may
be amended, waived, discharged or terminated other than by a written instrument
signed by the ISSUER and the HOLDER. Any Capitalized terms shall have the same
meaning as defined in the Agreement. In the event of any inconsistencies between
this Debenture and the Agreement, the Agreement shall control.
10. This Debenture shall be governed by and construed in
accordance with the laws of the State of New York.
11. Notwithstanding anything to the contrary herein contained,
Holder shall be prohibited from converting any portion of the Debenture which
would result in the Holder being deemed the beneficial owner, in accordance with
the provisions of Rule 13d-3 of the Securities Exchange Act of 1934, as amended,
of 4.99% or more of the then issued and outstanding Common Stock of the Company.
4
IN WITNESS WHEREOF, the ISSUER has caused this instrument to be duly executed by
an officer thereunto duly authorized.
HIREL HOLDINGS, INC.
By_______________________________
Name:
Title:
Date:
5
EXHIBIT B
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT") OR ANY STATE SECURITIES LAWS, AND MAY NOT BE SOLD, OFFERED FOR SALE,
ASSIGNED, TRANSFERRED OR OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT TO
THE PROVISIONS OF THE SECURITIES ACT OR AN OPINION OF COUNSEL IS OBTAINED
STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM
SUCH REGISTRATION.
NO. __________ WARRANT TO PURCHASE
________ SHARES OF
COMMON STOCK
WARRANT TO PURCHASE
COMMON STOCK
OF
HIREL HOLDINGS, INC.
This certifies that, for value received,
___________________________________ or its registered assigns (collectively, the
"Holder"), is entitled to purchase from Hirel Holdings, Inc., a Delaware
corporation (the "Company"), subject to the terms and conditions set forth
below, at any time on or after 9:00 A.M., Eastern time, on the Exercise Date (as
defined below) of this Warrant, and before 5:00 P.M., Eastern time, on the
Expiration Date (as defined below), the number of fully paid and nonassessable
shares of common stock, $.01 par value, of the Company ("Common Stock") stated
above at the Purchase Price (as defined below). The Purchase Price and the
number of shares purchasable hereunder are subject to adjustment as provided
below.
ARTICLE I
DEFINITIONS
Section 1.1. (1) The term "Agreement" as used in this Warrant means the
5% Convertible Debenture Purchase Agreement entered into by the parities of
which this Warrant is an Exhibit.
1
(2) The term "Business Day" as used in this Warrant means a day
other than a Saturday, Sunday or other day on which national banking
associations whose principle offices are located in the State of Florida are
authorized by law to remain closed.
(3) The term "Expiration Date" as used in this Warrant means the
date of expiration of the thirty-six (36) month period immediately after the
Exercise Date (as defined in Section 2.1 hereof), or, if that day is not a
Business Day, as defined above, at or before 5:00 P.M., New York City time, on
the next following Business Day.
(4) The terms "Exercise Date" or "Closing Date" as used in this
Warrant means the date of issuance of this Warrant.
(5) The term "Purchase Price" as used in this Warrant means One
Hundred Twenty-Five (125%) percent of the market price (as determined in the
Agreement) per Warrant Share (as defined below), as may be adjusted pursuant to
the terms of Article III hereof.
(6) The term "Warrant" as used in this Warrant means this Warrant
and Warrants of like tenor to purchase up to ________________ Warrant Shares (as
defined below).
(7) The term "Warrant Shares" as used in this Warrant means the
shares of Common Stock or other securities issuable upon exercise of the
Warrants.
ARTICLE II
DURATION AND EXERCISE OF WARRANT
Section 2.1. This Warrant may be exercised at any time after 9:00 A.M.,
Eastern time on the Exercise Date, and before 5:00 P.M., Eastern time, on the
Expiration Date.
Section 2.2. (a) The Holder may exercise this Warrant in whole or in
part (but not in denominations of fewer than 1,000 Warrant Shares except upon an
exercise of the Warrant with respect to the remaining balance of Warrant Shares
purchasable hereunder at the time of exercise) by surrender of this Warrant,
with the Purchase Form (attached hereto) duly executed, to the Company at its
corporate office in Pompano Beach, Florida, together with the applicable
Purchase Price of each Warrant Share being purchased in lawful money of the
United States, or by certified check or official bank check payable in United
States dollars to the order of the Company, subject to compliance with all the
other conditions set forth in this Warrant.
(b) Upon receipt of this Warrant with the Purchase Form duly
executed and accompanied by payment of the aggregate Purchase Price for the
2
shares of Common Stock for which this Warrant is being exercised, the Company
shall cause to be issued certificates for the total number of whole shares (as
provided in Section 3.2) of Common Stock for which this Warrant is being
exercised in such denominations as are required for delivery to the Holder, and
the Company will promptly deliver those certificates to the Holder.
(c) If the Holder exercises this Warrant with respect to fewer
than all the shares of Common Stock that may be purchased by exercise of this
Warrant, the Company will execute a new Warrant for the balance of the shares of
Common Stock that may be purchased by exercise of this Warrant and deliver that
new Warrant to the Holder.
(d) The Company covenants and agrees that it will pay when due any
and all taxes which may be payable in respect of the issue of this Warrant, or
the issue of any Warrant Shares upon the exercise of this Warrant other than
income or similar taxes of any kind imposed upon the Holder of this Warrant. The
Company will not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issuance or delivery of this Warrant or
of Warrant Shares in a name other than that of the Holder at the time of
surrender, and until the payment of any such tax, the Company will not be
required to transfer this Warrant or issue the Warrant Shares which are subject
to the tax.
ARTICLE III
ADJUSTMENT OF PURCHASE PRICE, NUMBER
OF SHARES OR NUMBER OF WARRANTS
Section 3.1. The Purchase Price, the number and type of securities
issuable on exercise of this Warrant and the number of Warrants outstanding are
subject to adjustment from time to time as follows:
(a) If the Company issues any shares of its Common Stock as a
dividend on its Common Stock, the Purchase Price then in effect will be
proportionately reduced at the opening of business on the day following the date
fixed for the determination of shareholders entitled to receive the dividend or
other distribution. For example, if the Company distributes one share of Common
Stock as a dividend on each outstanding share of Common Stock the Purchase Price
would be reduced by 50%. If the Company issues as a dividend on its Common Stock
any securities which are convertible into, or exchangeable for, shares of its
Common Stock, such dividend will be treated as a dividend of the Common Stock
into which the securities may be converted, or for which they may be exchanged,
and the Purchase Price shall be proportionately reduced.
3
(b) If the outstanding shares of Common Stock are subdivided into a
greater number of shares of Common Stock, then the Purchase Price will be
proportionately reduced at the opening of business on the day following the day
when the subdivision becomes effective, and if the outstanding shares of the
Common Stock are combined into a smaller number of shares of Common Stock, the
Purchase Price will be proportionately increased at the opening of business on
the day following the day when the combination becomes effective.
(c) If by reason of a merger, consolidation, reclassification or
similar corporate event, the holders of the Common Stock receive securities or
assets other than Common Stock, upon exercise of this Warrant after that
corporate event, the Holder of this Warrant will be entitled to receive the
securities or assets the Holder would have received if the Holder had exercised
this Warrant immediately before the first such corporate event and not disposed
of the securities or assets received as a result of that or any subsequent
corporate event.
Section 3.2. Upon each adjustment of the applicable Purchase Price
pursuant to Section 3.1 hereof, this Warrant will, after the adjustment,
evidence the right to purchase, at the adjusted Purchase Price, the number of
shares (calculated to the nearest hundredth) obtained by (i) multiplying the
number of shares issuable on exercise of this Warrant immediately prior to the
adjustment by the Purchase Price in effect immediately prior to the adjustment
and (ii) dividing the resulting product by the Purchase Price in effect
immediately after the adjustment. However, the Company will not be required to
issue a fractional share or to make any payment in lieu of issuing a fractional
share.
Section 3.3. Whenever the Purchase Price or the number of shares or
type of securities issuable on exercise of this Warrant is adjusted as provided
in this Article III, the Company will compute the adjusted Purchase Price and
the adjusted number of Warrant Shares and will prepare a certificate signed by
its President or any Vice President, and by its Treasurer or Secretary setting
forth the adjusted Purchase Price and the adjusted number of Warrant Shares and
showing in reasonable detail the facts upon which the adjustments were based and
mail a copy of that certificate to the Holder.
Section 3.4. If at any time when this Warrant is outstanding the
Company:
(a) declares a dividend (or authorizes any other distribution) on
its Common Stock payable otherwise than in cash out of its undistributed net
income;
(b) authorizes the granting to the holders of its Common Stock of
rights to subscribe for or purchase any shares of its capital stock or assets;
4
(c) authorizes a reclassification, split or combination of the
Common Stock, or a consolidation or merger to which the Company is a party or a
sale or transfer of all or substantially all the assets of the Company; or
(d) authorizes a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
the Company will mail written notice of such action to the Holder at least 20
days prior to the record date, or other date, for determining the shareholders
entitled to receive the dividend, distribution or rights, or the securities or
other property deliverable as a result of such action.
Section 3.5. The form of this Warrant need not be changed because of
any change in the Purchase Price or in the number of Warrant Shares, and
Warrants issued after that change may continue to describe the Purchase Price
and the number of Warrant Shares which were described in this Warrant as
initially issued.
Section 3.6. Before taking any action which would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the Common
Stock, the Company will take all corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock at the adjusted
Purchase Price.
ARTICLE IV
OTHER PROVISIONS RELATING TO
RIGHTS OF WARRANT HOLDER
Section 4.1. If this Warrant is duly exercised, the Holder will for all
purposes be deemed to become the holder of record of the Warrant Shares as to
which this Warrant is exercised on, and the certificate for such shares will be
dated the date this Warrant is surrendered for exercise and the Purchase Price
paid in accordance with Section 2.2 hereof, except that if that date is not a
Business Day, the Holder will be deemed to become the record holder of the
Warrant Shares on, and the certificate will be dated the next succeeding
Business Day. The Holder will not be entitled to any rights as a holder of the
Warrant Shares, including the right to vote and to receive dividends, until the
Holder becomes or is deemed to become the holder of such shares pursuant to the
terms hereof.
5
Section 4.2. (a) The Company covenants and agrees that it will at all
times reserve and keep available for the exercise of this Warrant a sufficient
number of authorized but unissued shares of Common Stock to permit the exercise
in full of this Warrant.
(b) Prior to the issuance of any shares of Common Stock upon
exercise of this Warrant, the Company shall use its reasonable best efforts to
cause those shares to be authorized for listing, to the extent not previously
authorized for listing, on any securities exchange or trading system upon which
the Common Stock is then listed.
(c) The Company covenants that all shares of Common Stock issued
upon exercise of this Warrant and against payment of the Purchase Price will be
validly issued, fully paid and nonassessable.
Section 4.3. Notices to the Holder relating to this Warrant will be
effective on the earliest of actual receipt or the third business day after
mailing by first class mail (which shall be certified or registered, return
receipt requested), postage prepaid, addressed to the Warrant Holder at the
address shown on the books of the Company.
Section 4.4. The Holder of this Warrant shall have the right to include
all of the shares of Common Stock underlying this Warrant (the "Registrable
Securities") as part of any registration of securities filed by the Company
(other than in connection with a transaction contemplated by Rule 145(a)
promulgated under the Act or pursuant to Form S-8) and must be notified in
writing of such filing. Holder shall have five (5) business days to notify the
Company in writing as to whether the Company is to include Holder or not include
Holder as part of the registration; PROVIDED, HOWEVER, that if any registration
pursuant to this Section shall be underwritten, in whole or in part, the Company
may require that the Registrable Securities requested for inclusion pursuant to
this Section be included in the underwriting on the same terms and conditions as
the securities otherwise being sold through the underwriters. If in the good
faith judgment of the underwriter evidenced in writing of such offering only a
limited number of Registrable Securities should be included in such offering, or
no such shares should be included, the Holder, and all other selling
stockholders, shall be limited to registering such proportion of their
respective shares as shall equal the proportion that the number of shares of
selling stockholders permitted to be registered by the underwriter in such
offering bears to the total number of all shares then held by all selling
stockholders desiring to participate in such offering. Those Registrable
Securities which are excluded from an underwritten offering pursuant to the
foregoing provisions of this Section (and all other Registrable Securities held
by the selling stockholders) shall be withheld from the market by the Holders
thereof for a period, not to exceed one hundred eighty (180) days, which the
underwriter may reasonably determine is necessary in order to effect such
underwritten offering.
6
ARTICLE V
TREATMENT OF WARRANT HOLDER
Section 5.1. Prior to presentation of this Warrant for registration of
transfer, the Company may treat the Holder for all purposes as the owner of this
Warrant and the Company will not be affected by any notice to the contrary.
ARTICLE VI
COMBINATION, EXCHANGE AND TRANSFER OF WARRANTS
Section 6.1. Any transfer permitted under this Warrant will be made by
surrender of this Warrant to the Company at its principle office with the Form
of Assignment (attached hereto) duly executed and funds sufficient to pay any
transfer tax. In such event the Company will, without charge, execute and
deliver a new Warrant to and in the name of the assignee named in the instrument
of assignment and this Warrant will promptly be canceled, and if the assignor
does not transfer all of its Warrants hereunder, the Company will execute and
deliver a new Warrant to and in the name of the assignor representing the
remaining Warrants held by the assignor.
Section 6.2. This Warrant may be divided or combined with other
Warrants which carry the same rights upon presentation of them at the principle
office of the Company together with a written notice signed by the Holder,
specifying the names and denominations in which new Warrants are to be issued.
Section 6.3. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and, in the case of loss, theft or destruction, of reasonably
satisfactory indemnification, or, in the case of mutilation, upon surrender of
the mutilated Warrant, the Company will execute and deliver a new Warrant
bearing the same terms and date as the lost, stolen or destroyed Warrant, which
will thereupon become void.
ARTICLE VII
REGISTRATION UNDER THE SECURITIES ACT OF 1933
Section 7.1. The Company will file, as soon as practicable but in any
event within 90 days after the Closing Date (the date on which the 90-day period
expires being hereinafter referred to as the "Filing Date"), a shelf
registration statement (the "Registration Statement") on Form S-3 or other
applicable form covering the issuance of the warrants and the shares of Common
Stock issuable upon exercise of the Warrant granted hereunder and thereafter
7
shall use its best efforts to cause the Registration Statement to be declared
effective as soon as practicable following such filing and to maintain such
effectiveness for a period of three (3) years from the Closing Date.
In the event the Registration Statement to be filed by the Company is
not declared effective by the Commission for any reason by the Filing Date, then
the terms of the Agreement shall control.
The Company shall cooperate with the Holder in connection with the
qualification of the Warrant Shares under the securities and Blue Sky laws of
such jurisdictions as the Holder may request; PROVIDED, HOWEVER, that neither
the Company nor its subsidiaries shall be required in connection therewith to
qualify as a foreign corporation where they are not now so qualified.
Section 7.2. With respect to the Registration Statement, all fees,
costs and expenses of and incidental to such registration shall be borne by the
Company. Notwithstanding the foregoing, the fees and expenses of counsel and
accountants for the Holder shall be borne by the Holder.
Section 7.3. (a) To the extent permitted by law, the Company will
indemnify and hold harmless the Holder and each officer, director and agent of
the Holder and each person who controls the Holder within the meaning of the
Securities Act and the Securities Exchange Act of 1934 (the "Exchange Act"),
against any losses, claims, expenses, damages or liabilities (including
reasonable attorneys fees), joint or several, to which the Holder or controlling
person become subject under the Securities Act, insofar as such losses, claims,
expenses, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any prospectus contained therein
which is utilized, or any amendment or supplement thereof, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Holder and each such controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, expense, damage, liability or
action; provided, however, that the Company will not be liable in any such case
if and to the extent that any such loss, claim, expense, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information relating
to the Holder furnished in writing to the Company by the Holder or such
controlling person.
(b) To the extent permitted by law, the Holder will indemnify and
hold harmless the Company and each officer, director and agent of the Company
and each person who controls the Company or underwriter within the meaning of
the Securities Act and the Exchange Act, each officer of the Company who signs
the Registration Statement and each director of the Company, against all losses,
8
claims, expenses, damages or liabilities (including reasonable attorneys' fees),
joint or several, to which the Company or such officer or director or
controlling person become subject under the Securities Act, but only insofar as
such losses, claims, expenses, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact made in reliance on and in conformity with
information relating to the Holder furnished in writing to the Company expressly
for use in the Registration Statement. The Holder's liability shall in no event
exceed the gross proceeds received by the Holder in connection with the sale of
the Warrant and the Warrant Shares.
(c) Promptly after receipt by an indemnified party hereunder of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof; provided, however, that any
failure to give such notice will not waive any rights of the indemnified party
except to the extent the rights of the indemnified party are materially
prejudiced. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 7.3 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation and of liaison with counsel so selected;
provided, however, that (i) if the indemnifying party has failed to assume the
defense and employ counsel or (ii) if the defendants in any such action include
both the indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be reasonable defenses available
to it that are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, then the
indemnified party shall have the right to select separate counsel and to assume
such legal defense and otherwise to participate in the defense of such action,
with the expenses and fees of such separate counsel and other expenses related
to such participation to be reimbursed by the indemnifying party as incurred.
(d) If the indemnification provided for in this Section 7.3 is
unavailable or insufficient to hold harmless an indemnified party in respect of
any losses, claims, expenses, damages or liabilities or actions in respect
thereof, then each indemnifying party shall in lieu of indemnifying such
indemnified party contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, expenses, damages, liabilities or
actions in such proportion as is appropriate to reflect the relative fault of
the Company, on the one hand, and the Holder, on the other, in connection with
9
the statements or omissions which resulted in such losses, claims, expenses,
damages, liabilities or actions as well as any other relevant equitable
considerations, including the failure to give any required notice. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or any affiliate thereof, on the one hand, or the Holder or any affiliate
thereof, on the other, and the parties' relative intent, knowledge, access to
information and opportunity to correct or present such statement or omission.
The Company and the Holder agree that it would not be just and equitable if
contribution pursuant to this Section 7.3(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to above in this Section 7.3(d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, expenses, damages, liabilities or actions in respect thereof referred to
above in this Section 7.3(d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning. of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holder's liability shall in no
event exceed the gross proceeds received by the Holder in connection with the
sale of the Warrant Shares.
ARTICLE VIII
OTHER MATTERS
Section 8.1. (a) This Warrant and any Warrant Shares may not be sold,
transferred, pledged, hypothecated or otherwise disposed of except as follows:
(i) to a person who, in the opinion of counsel to the Company, is a person to
whom this Warrant or the Warrant Shares may legally be transferred without
registration and without the delivery of a current prospectus under the
Securities Act with respect thereto, and then only against receipt of an
agreement of such person to comply with the provisions of this Section 8.1(a)
with respect to any resale or other disposition of such securities; or (ii) to
any person upon delivery of a prospectus then meeting the requirements of the
Securities Act relating to such securities and the offering thereof for such
sale or disposition, and thereafter to all successive assignees.
(b) Unless the Warrant Shares have been registered under the
Securities Act, upon exercise of any of the Warrant and the issuance of any of
the Warrant Shares, all certificates representing Warrant Shares shall bear on
the face thereof substantially the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED OR OTHERWISE
10
DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THAT
ACT OR UNLESS AN OPINION OF COUNSEL TO THE ISSUER IS OBTAINED
STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE
EXEMPTION FROM SUCH REGISTRATION.
Section 8.2. All the covenants and provisions of this Warrant by or for
the benefit of the Company will bind and inure to the benefit of its successors
and assigns.
Section 8.3. All notices and other communications under this Warrant
must be in writing. Any notice or communication to the Company will be effective
upon the earlier of actual receipt or the third business day after mailing by
first class mail (which shall be certified or registered, return receipt
requested), postage prepaid, addressed (until another address is designated by
the Company) as follows:
Hirel Holdings, Inc.
000 Xxxxxxxxx 00xx Xxxxxxx
Xxxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxxxx, CEO
Any notice or demand authorized by this Warrant to be given or made by
the Company to the Holder must be given in accordance with Section 4.3.
Section 8.4. The validity, interpretation and performance of this
Warrant will be governed by the laws of the State of New York. This Warrant
shall be subject to the exclusive jurisdiction of the courts of the State of New
York. The parties agree that any breach of any term or condition of this Warrant
shall be deemed to be a breach occurring in the State of New York by virtue of a
failure to perform an act required to be performed in the State of New York and
irrevocably and expressly agree to submit to the jurisdiction of the courts of
the State of New York for the purpose of resolving any disputes among the
parties relating to this Warrant or the transactions contemplated hereby. The
parties irrevocably waive, to the fullest extent permitted by law, any objection
which they may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Warrant, or any judgment
entered by any court in respect hereof brought in the State of New York, and
further irrevocably waive any claim that any suit, action or proceeding brought
in the State of New York has been brought in an inconvenient forum. Proceeding
arising out of or relating to this Warrant, or any judgment entered by any court
in respect hereof brought in the State of New York, and further irrevocably
waive any claim that any suit, action or proceeding brought in the State of New
York has been brought in an inconvenient forum.
11
Section 8.5. Nothing in this Warrant will give any person, corporation
or other entity other than the Company and the Holder(s) any right or claim
under this Warrant, and all agreements in this Warrant will be for the sole
benefit of the Company, the Holder(s) and their respective successors.
Section 8.6. The Article headings in this Warrant are for convenience
only, are not part of this Warrant and will not affect the interpretation of its
terms.
IN WITNESS WHEREOF, this Warrant has been duly executed by the Company
as of the ____ day of June, 1997.
HIREL HOLDINGS, INC.
By: ___________________________
Name:
Title:
12
PURCHASE FORM
To Be Executed By The Warrant Holder
To Exercise The Warrant In Whole Or In Part:
To: Hirel Holdings, Inc.
The undersigned ( )
Please insert Social Security or other
identifying number of Holder
hereby irrevocably elects to exercise the right of purchase represented by the
within Warrant for, and to purchase thereunder, ___________________ shares of
Common Stock of Hirel Holdings, Inc. in the amount of $__________ The
undersigned requests that certificates for those shares of Common Stock be
issued as follows:
Name:
Address:
Deliver to:
Address:
and that, if the number of shares of Common Stock is not all the shares of
Common Stock purchasable by exercise of the Warrant, that a new Warrant for the
balance of the shares of Common Stock purchasable under the within Warrant be
registered in the name of, and delivered to, the undersigned at the address
stated below:
Address:
Date:
Signature:
13
FORM OF ASSIGNMENT
(To Be Executed Only Upon An Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto
____________________ the right to purchase ________ shares of Common Stock of
Hirel Holdings, Inc. evidenced by the within Warrant.
Signature
Signature Guaranteed:
14
EXHIBIT C
CONVERTIBLE DEBENTURE ESCROW AGREEMENT
THIS AGREEMENT is made as of the ____ day of May, 1997 by and
between HIREL HOLDINGS, INC., with its principle office at 000 Xxxxxxxxx 00xx
Xxxxxxx, Xxxxxxx Xxxxx, XX 00000 (hereinafter the "Company"),
______________________________, with its principle office at
______________________________________________ (hereinafter the "Purchaser") and
XXXXXXX X. XXXXXXXXX, P.C., 00 Xxxxxxxx, 00xx Xx., Xxx Xxxx, XX 00000
(hereinafter the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Purchaser will be purchasing Debentures and Warrants
(the "Securities") from the Company at a purchase price as set forth in a
Convertible Debenture Purchase Agreement (the "Agreement") signed by the Company
and Purchaser; and
WHEREAS, it is intended that the purchase of Securities be
consummated in accordance with the requirements set forth by Regulation D
promulgated under the Securities Act of 1933, as amended; and
WHEREAS, the Company has requested that the Escrow Agent hold the
funds of Purchaser in escrow until the Escrow Agent has received the Securities.
The Escrow Agent will then immediately wire transfer or otherwise deliver at the
Company's discretion immediately available funds to the Company's account and
arrange for delivery of the Securities to Purchaser as per the Purchaser's
instructions.
NOW, THEREFORE, in consideration of the covenants and mutual
promises contained herein and other good and valuable consideration, the receipt
and legal sufficiency of which are hereby acknowledged and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE 1
---------
TERMS OF THE ESCROW
-------------------
1.1 The parties hereby agree to establish an escrow account with
the Escrow Agent whereby the Escrow Agent shall hold the funds for the purchase
of the Securities.
1
1.2 Upon Escrow Agent's receipt of funds into its attorney trustee
account, it shall notify the Company, or the Company's designated attorney or
agent, of the amount of funds it has received into its account.
1.3 The Company, upon receipt of said notice and acceptance of
Convertible Debenture Purchase Agreement, as evidenced by the Company's
execution thereof, shall deliver to the Escrow Agent the Securities being
purchased. Escrow Agent shall then communicate with the Company to confirm the
validity of its issuance.
1.4 Once Escrow Agent confirms the validity of the issuance of the
Securities, he shall immediately wire that amount of funds necessary to purchase
the Securities per the written instructions of the Company. The Company will
furnish Escrow Agent with a "Net Letter" directing payment of legal and Escrow
fees of one (1%) percent of the gross amount to Xxxxxxx X. Xxxxxxxxx, P.C.; and
fees of placement agent X.X. Xxxxxxx Securities in the amount of six (6%)
percent of the gross amount in accordance with an engagement letter between the
Company and X.X. Xxxxxxx Securities, such fee shall be remitted to X.X. Xxxxxxx
Securities in accordance with wire instructions that will be sent to Escrow
Agent from X.X. Xxxxxxx Securities, with the net balance payable to the Company.
Once the funds have been received per the Company's instructions, the Escrow
Agent shall then arrange to have the Securities delivered as per instructions
from the Purchaser.
1.5 This Agreement may be altered or amended only with the consent
of all of the parties hereto. Should the Company or Purchaser attempt to change
this Agreement in a manner which, in the Escrow Agent's discretion, shall be
undesirable, the Escrow Agent may resign as Escrow Agent by notifying the
Company and the Purchaser in writing. In the case of the Escrow Agent's
resignation or removal pursuant to the foregoing, its only duty, until receipt
of notice from the Company and the Purchaser or its agent that a successor
escrow agent shall have been appointed, shall be to hold and preserve the funds.
Upon receipt by the Escrow Agent of said notice from the Company and the
Purchaser of the appointment of a successor escrow agent, the name of a
successor escrow account and a direction to transfer the funds, the Escrow Agent
shall promptly thereafter transfer all of the funds held in escrow to said
successor escrow agent. Immediately after said transfer, the Escrow Agent shall
furnish the Company and the Purchaser with proof of such transfer. The Escrow
Agent is authorized to disregard any notices, requests, instructions or demands
received by it from the Company or the Purchaser after notice of resignation or
removal shall have been given, unless the same shall be the aforementioned
notice from the Company and the Purchaser to transfer the funds to a successor
escrow agent or to return same to the respective parties.
1.6 The Escrow Agent shall be reimbursed by the Company and the
Purchaser for any reasonable expenses incurred in the event there is a conflict
between the parties and the Escrow Agent shall deem it necessary to retain
counsel.
2
1.7 The Escrow Agent shall not be liable for any action taken or
omitted by it in good faith in accordance with the advice of the Escrow Agent's
counsel; and in no event shall the Escrow Agent be liable or responsible except
for the Escrow Agent's own gross negligence or willful misconduct.
1.8 The Company and the Purchaser warrant to and agree with the
Escrow Agent that, unless otherwise expressly set forth in this Agreement:
(i) there is no security interest in the Securities or any
part thereof;
(ii) no financing statement under the Uniform Commercial Code
is on file in any jurisdiction claiming a security interest or in
describing (whether specifically or generally) the Securities or any
part thereof; and
(iii) the Escrow Agent shall have no responsibility at any
time to ascertain whether or not any security interest exists in the
Securities or any part thereof or to file any financing statement
under the Uniform Commercial Code with respect to the Securities or
any part thereof.
1.9 The Escrow Agent has no liability hereunder to either party
other than to hold the funds and to deliver them under the terms hereof. Each
party hereto agrees to indemnify and hold harmless the Escrow Agent from and
with respect to any suits, claims, actions or liabilities arising in any way out
of this transaction including the obligation to defend any legal action brought
which in any way arises out of or is related to this Escrow.
ARTICLE 2
---------
MISCELLANEOUS
-------------
2.1 No waiver or any breach of any covenant or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach
thereof, or of any other covenant or provision herein contained. No extension of
time for performance of any obligation or act shall be deemed any extension of
the time for performance of any other obligation or act.
2.2 All notices or other communications required or permitted
hereunder shall be in writing, and shall be sent by fax, overnight courier,
registered or certified mail, postage prepaid, return receipt requested, and
shall be deemed received upon receipt thereof, as follows:
3
(a) Hirel Holdings, Inc.
000 Xxxxxxxxx 00xx Xxxxxxx
Xxxxxxx Xxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxxxx, CEO
(tele) (000) 000-0000
(fax) (000) 000-0000
copy to:
Atlas, Xxxxxxxx, Trop & Borkson, P.A.
000 Xxxx Xxx Xxxx Xxxx.
Xxxx Xxxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx, Esq.
or to such other person at such other place as the Company shall designate to
the Purchaser in writing;
(b) if to the Purchaser, to
(tele)
(fax)
copy to:
Xxxxxxx X. Xxxxxxxxx, P.C.
00 Xxxxxxxx, 00xx Xx.
Xxx Xxxx, XX 00000
(tele) (000) 000-0000
(fax) (000) 000-0000
2.3 This Agreement shall be binding upon and shall inure to the
benefit of the permitted successors and assigns of the parties hereto.
2.4 This Agreement is the final expression of, and contains the
entire Agreement between, the parties with respect to the subject matter hereof
and supersedes all prior understandings with respect thereto. This Agreement may
not be modified, changed, supplemented or terminated, nor may any obligations
hereunder be waived, except by written instrument signed by the parties to be
charged or by its agent duly authorized in writing or as otherwise expressly
permitted herein.
2.5 Whenever required by the context of this Agreement, the
singular shall include the plural and masculine shall include the feminine. This
Agreement shall not be construed as if it had been prepared by one of the
parties, but rather as if both parties had prepared the same. Unless otherwise
indicated, all references to Articles are to this Agreement.
4
2.6 The Company acknowledges and confirms that it is not being
represented in a legal capacity by Xxxxxxx X. Xxxxxxxxx, P.C. and it has had the
opportunity to consult with its own legal advisors prior to the signing of this
Agreement.
2.7 The parties hereto expressly agree that this Agreement shall
be governed by, interpreted under and construed and enforced in accordance with
the laws of the State of New York. Any action to enforce, existing out of, or
relating in any way to, any provisions of this Agreement shall be brought
through the American Arbitration Association at the designated locale of New
York, New York.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the ____ day of June, 1997.
HIREL HOLDINGS, INC.
By___________________________
Officer
PURCHASER:
By____________________________
Officer
XXXXXXX X. XXXXXXXXX, P.C.,
ESCROW AGENT
By___________________________
Xxxxxxx X. Xxxxxxxxx
5
EXHIBIT D
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT, dated the ____ of June, 1997,
between the person and/or entity whose name and address appears on the signature
page attached hereto (individually a "Holder" or collectively with the holders
of the other Securities issued pursuant to a Convertible Debenture Purchase
Agreement of even date herewith, as defined below, the "Holders") and HIREL
HOLDINGS, INC., a Delaware corporation having its principle place of business at
000 Xxxxxxxxx 00xx Xxxxxxx, Xxxxxxx Xxxxx, XX 00000.
WHEREAS, simultaneously with the execution and delivery of this
Agreement, the Holders are purchasing from the Company, pursuant to a 5%
Convertible Debenture Purchase Agreement dated the date hereof (the
"Agreement"), an aggregate of up to Two Million, Five Hundred Thousand
($2,500,000) Dollars principle amount of Debentures (singularly the "Debenture"
and collectively the "Debentures"); and
WHEREAS, the Debenture is convertible into shares (the "Conversion
Shares") of the Company's Common Stock, par value $.01 per share (the "Common
Stock"); and
WHEREAS, the Company desires to grant to the Holders the
registration rights set forth herein with respect to the Conversion Shares.
NOW, THEREFORE, the parties hereto mutually agree as follows:
Section 1. REGISTRABLE SECURITIES. As used herein the term
"Registrable Security" means each of the Conversion Shares; provided, however,
that with respect to any particular Registrable Security, such security shall
cease to be a Registrable Security when, as of the date of determination, (i) it
has been effectively registered under the Securities Act of 1933, as amended
(the "Securities Act") and disposed of pursuant thereto, (ii) registration under
the Securities Act is no longer required for the immediate public distribution
of such security as a result of the provisions of Rule 144, or (iii) it has
ceased to be outstanding. The term "Registrable Securities" means any and/or all
of the securities falling within the foregoing definition of a "Registrable
Security." In the event of any merger, reorganization, consolidation,
recapitalization or other change in corporate structure affecting the Common
Stock, such adjustment shall be made in the definition of "Registrable Security"
as is appropriate in order to prevent any dilution or enlargement of the rights
granted pursuant to this Section 1.
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Section 2. RESTRICTIONS ON TRANSFER. The Holder acknowledges and
understands that prior to the registration of the Conversion Shares as provided
herein, the Debenture and the Conversion Shares are "restricted securities" as
defined in Rule 144 promulgated under the Act. The Holder understands that no
disposition or transfer of the Debenture or Conversion Shares may be made by
Holder in the absence of (i) an opinion of counsel reasonably satisfactory to
the Company that such transfer may be made or (ii) a registration statement
under the Securities Act is then in effect with respect thereto.
Section 3. REGISTRATION RIGHTS.
(a) The Company shall prepare and file with the Securities and
Exchange Commission ("SEC"), on one occasion, at the sole expense of the Company
(except as provided in Section 3(c) hereof), in respect of all holders of
Registrable Securities, so as to permit a non- underwritten public offering and
sale of the Registrable Securities under the Act. The number of Conversion
Shares to be registered shall be One Million, Seventy-Seven Thousand, Three
Hundred Seventy-Six (1,077,376) Shares.
(b) The Company will maintain any Registration Statement or
post-effective amendment filed under this Section 3 hereof current under the
Securities Act until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to the Registration Statement, (ii) the date
the holders thereof receive an opinion of counsel that the Registrable
Securities may be sold under the provisions of Rule 144 or (iii) the second
anniversary of the effective date of the Registration Statement.
(c) All fees, disbursements and out-of-pocket expenses and costs
incurred by the Company in connection with the preparation and filing of any
Registration Statement under subparagraph 3(a) and in complying with applicable
securities and Blue Sky laws (including, without limitation, all attorneys'
fees) shall be borne by the Company. The Holder shall bear the cost of
underwriting discounts and commissions, if any, applicable to the Registrable
Securities being registered and the fees and expenses of its counsel. The
Company shall use its best efforts to qualify any of the securities for sale in
such states as such Holder reasonably designates and shall furnish
indemnification in the manner provided in Section 6 hereof. However, the Company
shall not be required to qualify in any state which will require an escrow or
other restriction relating to the Company and/or the sellers. The Company at its
expense will supply the Holder with copies of such Registration Statement and
the prospectus or offering circular included therein and other related documents
in such quantities as may be reasonably requested by the Holder.
(d) The Company shall not be required by this Section 3 to include a
Holder's Registrable Securities in any Registration Statement which is to be
filed if, in the opinion of counsel for both the Holder and the Company (or,
should they not agree, in the opinion of another counsel experienced in
securities law matters acceptable to counsel for the Holder and the Company) the
proposed offering or other transfer as to which such registration is requested
is exempt from applicable federal and state securities laws and would result in
all purchasers or transferees obtaining securities which are not "restricted
securities", as defined in Rule 144 under the Securities Act.
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(e) In the event the Registration Statement to be filed by the
Company pursuant to Section 3(a) above is not declared effective by the SEC
within ninety (90) days of the Closing Date, as defined in the Agreement, then
the Company will pay Holder, as liquidated damages for such failure and not as a
penalty, three (3%) percent of one half of the outstanding principle amount of
this Debenture for the first month and one (1%) percent of one half of the
principle amount of the Debenture for each month thereafter until the Company
procures registration of the Common Stock underlying the Debenture (the
"Conversion Shares"), provided, however, that if the registration statement is
filed by July 31, 1997, the liquidated damages shall be two (2%) percent for
each of the first month and one (1%) percent for each month thereafter until
such time as the registration has been deemed effective.
In the event the Registration Statement to be filed by the Company
pursuant to Section 3(a) above is not declared effective by the SEC within one
hundred twenty (120) days of the Closing Date as defined in the Agreement, then
the Company will pay Holder, as liquidated damages from such failure and not as
a penalty, three (3%) percent of the remainder of the outstanding principle
amount of this Debenture for the first month and one (1%) percent of the
outstanding principle amount of this Debenture for each month thereafter until
the Company procures registration of the Conversion Shares.
If the Company does not remit the damages to the Purchaser as set
forth above, the Company will pay the Purchaser reasonable costs of collection,
including attorneys fees, in addition to the liquidated damages. Such payment
shall be made to the Purchaser immediately if the registration of the Conversion
Shares are not effected; provided, however, that the payment of such liquidated
damages shall not relieve the Company from its obligations to register the
Conversion Shares pursuant to this Section. The registration of the Conversion
Shares pursuant to this provision shall not affect or limit Purchaser's other
rights or remedies as set forth in this Agreement. Any payment pursuant to this
Section 3(e) shall be made either in cash or paid in additional shares of Common
Stock in an amount equal to the total amount of the payment due hereunder
divided by the average closing bid price of the Common Stock as reported by
NASDAQ for the five (5) business days ending on the 90th and 120th day after the
Closing Date.
(f) No provision contained herein shall preclude the Company from
selling securities pursuant to any Registration Statement in which it is
required to include Registrable Securities pursuant to this Section 3.
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Section 4. COOPERATION WITH COMPANY. Holders will cooperate with the
Company in all respects in connection with this Agreement, including, timely
supplying all information reasonably requested by the Company and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Registrable Securities.
Section 5. REGISTRATION PROCEDURES. If and whenever the Company is
required by any of the provisions of this Agreement to effect the registration
of any of the Registrable Securities under the Act, the Company shall (except as
otherwise provided in this Agreement), as expeditiously as possible:
(a) prepare and file with the Commission such amendments and
supplements to such registration statement and the Prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Act with respect to the sale or other
disposition of all securities covered by such registration statement whenever
the Holder or Holders of such securities shall desire to sell or otherwise
dispose of the same (including prospectus supplements with respect to the sales
of securities from time to time in connection with a registration statement
pursuant to Rule 415 of the Commission);
(b) furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Act, and such other documents, as such Holder may reasonably request in
order to facilitate the public sale or other disposition of the securities owned
by such Holder;
(c) use its best efforts to register and qualify the securities covered
by such registration statement under such other securities or blue sky laws of
such jurisdictions as the Holder, shall reasonably request, and do any and all
other acts and things which may be necessary or advisable to enable each Holder
to consummate the public sale or other disposition in such jurisdiction of the
securities owned by such Holder, except that the Company shall not for any such
purpose be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein any general
consent to service of process;
(d) use its best efforts to list such securities on NASDAQ or any
securities exchange on which any securities of the Company is then listed, if
the listing of such securities is then permitted under the rules of such
exchange or NASDAQ;
(e) enter into and perform its obligations under an underwriting
agreement, if the offering is an underwritten offering, in usual and customary
form, with the managing underwriter or underwriters of such underwritten
offering;
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(f) notify each Holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto covered
by such registration statement is required to be delivered under the Act, of the
happening of any event of which it has knowledge as a result of which the
prospectus included in such registration statement, as then in effect, includes
an 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 in the light of the circumstances then existing.
Section 6. INDEMNIFICATION.
(a) In the event of the filing of any Registration Statement with
respect to Registrable Securities pursuant to Section 3 hereof, the Company
agrees to indemnify and hold harmless the Holder and each person, if any, who
controls the Holder within the meaning of the Securities Act ("Distributing
Holders") against any losses, claims, damages or liabilities, joint or several
(which shall, for all purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), to which
the Distributing Holders may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any such Registration
Statement, or any related preliminary prospectus, final prospectus, offering
circular, notification or amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such Registration Statement, preliminary prospectus,
final prospectus, offering circular, notification or amendment or supplement
thereto in reliance upon, and in conformity with, written information furnished
to the Company by the Distributing Holders, specifically for use in the
preparation thereof. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each Distributing Holder agrees that it will indemnify and hold
harmless the Company, and each officer, director of the Company or person, if
any, who controls the Company within the meaning of the Securities Act, against
any losses, claims, damages or liabilities (which shall, for all purposes of
this Agreement, include, but not be limited to, all costs of defense and
investigation and all attorneys' fees) to which the Company or any such officer,
director or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses claims, damages or liabilities (or actions in
respect thereof; arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in a Registration Statement
requested by such Distributing Holder, or any related preliminary prospectus,
final prospectus, offering circular, notification or amendment or supplement
5
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the extent
that such untrue statement or alleged untrue statement or omission or alleged
omission was made in such Registration Statement, preliminary prospectus, final
prospectus, offering circular, notification or amendment or supplement thereto
in reliance upon, and in conformity with, written information furnished to the
Company by such Distributing Holder, specifically for use in the preparation
thereof and, provided further, that the indemnity agreement contained in this
Section 6(b) shall not inure to the benefit of the Company with respect to any
person asserting such loss, claim, damage or liability who purchased the
Registrable Securities which are the subject thereof if the Company failed to
send or give (in violation of the Securities Act or the rules and regulations
promulgated thereunder) a copy of the prospectus contained in such Registration
Statement to such person at or prior to the written confirmation to such person
of the sale of such Registrable Securities, where the Company was obligated to
do so under the Securities Act or the rules and regulations promulgated
thereunder. This indemnity agreement will be in addition to any liability which
the Distributing Holders may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 6
of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 6, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve the indemnifying
party from any liability which it may have to any indemnified party otherwise
than as to the particular item as to which indemnification is then being sought
solely pursuant to this Section 6. In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate in,
and, to the extent that it may wish, jointly with any other indemnifying party
similarly notified, assume the defense thereof, subject to the provisions herein
stated and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof other than reasonable costs of investigation, unless the
indemnifying party shall not pursue the action to its final conclusion. The
indemnified party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel reasonably
satisfactory to the indemnified party; provided that if the indemnified party is
the Distributing Holder, the fees and expenses of such counsel shall be at the
expense of the indemnifying party if (i) the employment of such counsel has been
6
specifically authorized in writing by the indemnifying party, or (ii) the named
parties to any such action (including any impleaded parties) include both the
Distributing Holder and the indemnifying party and the Distributing Holder shall
have been advised by such counsel that there may be one or more legal defenses
available to the indemnifying party different from or in conflict with any legal
defenses which may be available to the Distributing Holder (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the Distributing Holder, it being understood,
however, that the indemnifying party shall, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable only for the reasonable fees and expenses of one separate firm of
attorneys for the Distributing Holder, which firm shall be designated in writing
by the Distributing Holder). No settlement of any action against an indemnified
party shall be made without the prior written consent of the indemnified party,
which consent shall not be unreasonably withheld.
Section 7. CONTRIBUTION. In order to provide for just and equitable
contribution under the Securities Act in any case in which (i) the Distributing
Holder makes a claim for indemnification pursuant to Section 6 hereof but is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of the
last right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 6 hereof provide
for indemnification in such case, or (ii) contribution under the Securities Act
may be required on the part of any Distributing Holder, then the Company and the
applicable Distributing Holder shall contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and all attorneys' fees), in either such case (after
contribution from others) on the basis of relative fault as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the applicable
Distributing Holder, on the other hand, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Distributing Holder agree that it
would not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does not take account of the equitable considerations referred to in this
Section 7. The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions in respect thereof) referred
to above in this Section 7 shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
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Section 8. NOTICES. Any notice pursuant to this Agreement by the
Company or by the Holder shall be in writing and shall be deemed to have been
duly given if delivered by (i) hand, (ii) by facsimile and followed by mail
delivery, or (iii) if mailed by certified mail, return receipt requested,
postage prepaid, addressed as follows:
(a) If to the Holder, to its, his or her address set forth on the
signature page of this Agreement, with a copy to the person designated in the
Agreement.
(b) If to the Company, at Hirel Holdings, Inc., 000 Xxxxxxxxx 00xx
Xxxxxxx, Xxxxxxx Xxxxx, XX 00000, (tele) (000) 000-0000, (fax) (000) 000-0000,
and a copy to Atlas, Xxxxxxxx, Trop & Borkson, P.A., 000 Xxxx Xxx Xxxx Xxxx,
Xxxx Xxxxxxxxxx, XX 00000, Attn: Xxxxxxx X. Xxxxxx, Esq., or to such other
address as any such party may designate by notice to the other party. Notices
shall be deemed given at the time they are delivered personally or five (5) days
after they are mailed in the manner set forth above. If notice is delivered by
facsimile to the Company and followed by mail, delivery shall be deemed given
two (2) days after such facsimile is sent.
Section 9. ASSIGNMENT. This Agreement is binding upon and inures to the
benefit of the parties hereto and their respective heirs, successors and
permitted assigns. This Agreement cannot be assigned, amended or modified by the
parties hereto, except by written agreement executed by the parties. If
requested by the Company, the Holder shall have furnished to the Company an
opinion of counsel reasonably satisfactory to the Company to such effect.
Section 10. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 11. HEADINGS. The headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
Section 12. GOVERNING LAW, VENUE. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such State, without regard to
its principles of conflicts of laws. Each of the parties hereto agrees that in
the event of any dispute arising hereunder venue shall be New York, New York and
each party hereby submits to the jurisdiction of the United States Federal Court
in the Southern District of New York.
Section 13. SEVERABILITY. If any provision of this Agreement shall for
any reason be held invalid or unenforceable, such invalidity or unenforceablity
shall not affect any other provision hereof and this Agreement shall be
construed as if such invalid or unenforceable provision had never been contained
herein.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, on the day and year first above written.
HIREL HOLDINGS, INC.
By:__________________________
Name:
Title:
PURCHASER:
By:__________________________
Officer
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EXHIBIT E
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the
5% Convertible Debenture)
The undersigned hereby irrevocably elects to convert the below applicable
portion of Debenture No. ____ into shares of common stock of HIREL HOLDINGS,
INC. (the "Company") according to the conditions hereof, as of the date written
below.
The undersigned represents and warrants that
i) All offers and sales by the undersigned of the shares of Common
Stock issuable to the undersigned upon conversion of the Debenture
shall be made pursuant to an exemption from registration under the
Act, or pursuant to registration of the Common Stock under the
Securities Act of 1933, as amended (the "Securities Act"), subject
to any restrictions on sale or transfer set forth in the 5%
Convertible Debenture Purchase Agreement between the Company and the
original holder of the Certificate submitted herewith for
conversion.
ii) Upon conversion pursuant to this Notice of Conversion, the
undersigned will not own or deemed to beneficially own (within the
meaning of the Securities Exchange Act of 1934) 4.9% or more of the
then issued and outstanding shares of the company.
Date of Conversion Applicable Conversion Price
________________________ ____________________________________
Number of Common Shares upon $ Amount of Conversion
Conversion
________________________ ____________________________________
Signature Name
________________________ ____________________________________
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Address: Delivery of Shares to:
________________________ ____________________________________
________________________ ____________________________________
________________________ ____________________________________
180
6/3/97
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