STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made as of August 11,
2006, by and among Conversion Services International, Inc., a Delaware
corporation (the "Company"), with an address at 000 Xxxxx Xxxx Xxxxxx, Xxxx
Xxxxxxx, Xxx Xxxxxx 00000, and Xxxxxxx X. Xxxxxx, with an address at c/o Taurus
Advisory Group, LLC, 0 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX 00000, (the
"Investor").
RECITALS
WHEREAS, the Investor desires to purchase and acquire, and the Company
desires to issue and sell to the Investor, shares of the Company's Series B
Convertible Preferred Stock (the "Series B Preferred Stock") in the form of the
Certificate of Designations of Preferences, Rights and Limitations of Series B
Convertible Preferred Stock appended hereto as Exhibit A (the "Series B
Certificate of Designations"), and a warrant to purchase Common Stock, and also
issue a warrant to the Xxxxxx Family Trust ("FFT"), the designee of Investor's
counsel, both Warrants in the form attached as Exhibit B hereto (the "Warrant");
and
WHEREAS, the parties hereto desire to enter into this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Sale of Series B Convertible Preferred Stock.
1.1 Sale and Issuance of Series B Convertible Preferred Stock.
Subject to the terms and conditions of this Agreement, the
Investor agrees to purchase at the Closing (as defined below), and the Company
agrees to sell and issue to the Investor at the Closing, 20,000 shares of the
Company's Series B Convertible Preferred Stock (the "Series B Preferred Stock"),
$0.001 par value per share and stated value $100.00 per share, at a purchase
price of $100 per share.
1.2 Warrants.
(a) The Company shall issue to the Investor the Warrant to purchase,
subject to applicable anti-dilution provisions, an aggregate of 1,176,471 shares
of Common Stock at $0.94 cents per share until August 8, 2011, subject to the
compliance with applicable securities laws.
(b) The Company shall issue to FFT the Warrant to purchase, subject
to applicable anti-dilution provisions, an aggregate of 100,000 shares of Common
Stock at $0.94 cents per share until August 8, 2011, subject to the compliance
with applicable securities laws.
1.3 Closing.
(a) The purchase and sale of the Series B Preferred Stock and the
Warrants shall take place at such time and place as shall be mutually agreed
upon between the Investor and the Company (the "Closing").
(b) At the Closing, the Investor shall deliver to the Company the
amount of its investment in immediately available funds by certified check or
wire transfer to an account of the Company designated by the Company or such
other manner reasonably acceptable to the Company.
(c) At the Closing, the Company shall deliver to the Investor a
certificate for the shares of Series B Preferred Stock to be issued to the
Investor in definitive form and duly registered in the name of the Investor, and
the Warrant to purchase 1,176,471 shares of Common Stock as aforesaid, and
deliver to FFT the Warrant to purchase 100,000 shares of Common Stock as
aforesaid.
2. Representations and Warranties of the Company. The Company hereby represents
and warrants to the Investor that:
2.1 Organization; Good Standing; Qualification and Corporate Power.
(a) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company and each of its subsidiaries is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties. True and correct copies of the Company's Certificate of
Incorporation, as amended (the "Certificate of Incorporation") and Bylaws have
been provided to the Investor or made available via the SEC XXXXX website.
(b) The Company has all requisite legal and corporate power and
authority to execute and deliver this Agreement among the Company and the
Investor, to issue and sell the Series B Preferred Stock and the Warrants and to
carry out and perform its obligations under the terms of this Agreement and to
consummate the transactions contemplated hereby and thereby. All necessary
corporate action has been taken by the Company with respect to the execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby and thereby. The Series B Preferred
Stock, when issued in accordance pursuant to the terms of the Agreement, will be
legally issued, fully paid and non assessable and the purchasers thereof will
own the Series B Preferred Stock, free and clear of all liens and encumbrances.
The Warrants, when issued in accordance with the terms of the Agreement, will
constitute the legally binding obligations of the Company in accordance with
their terms.
2.2 Capitalization and Voting Rights. The authorized capital
of the Company consists of:
(a) Common Stock. 100,000,000 shares of common stock, $0.001 par
value per share (the "Common Stock"), of which 51,568,634 shares are issued and
outstanding as of the date hereof.
(b) Preferred Stock. 20,000,000 shares of preferred stock (the
"Preferred Stock"), of which 19,000 shares are issued and outstanding as of the
date hereof as Series B Convertible Preferred Stock.
2.3 Subsidiaries; Interests of the Company. Except as set forth in the SEC
Documents, as defined in Section 2.5 below, the Company does not currently own
or control, directly or indirectly, any interest in any other Person.
2.4 Authorization. This Agreement and all other agreements executed and
delivered by the Company in connection therewith, have been duly authorized,
executed and delivered by the Company and constitute the legal, valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, subject to (i) applicable bankruptcy, insolvency,
reorganization and moratorium laws, (ii) other laws of general application
affecting the enforcement of creditors' rights generally and general principles
of equity, (iii) the discretion of the court before which any proceeding
therefor may be brought, and (iv) as rights to indemnity may be limited by
federal or state securities laws or by public policy.
2.5 SEC Documents. The Company has filed all reports, schedules, forms,
statements and other documents required to be filed by it with the Securities
and Exchange Commission (the "Commission") pursuant to the Securities Act of
1933 (the "Securities Act") and the Securities Exchange Act of 1934 (the
"Exchange Act") (the "SEC Documents"). The SEC Documents have complied in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the Commission
promulgated thereunder applicable to the SEC Documents, and none of the SEC
Documents, at the time they were filed with the Commission, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. As of their
respective dates, to the best of the Company's knowledge during those respective
dates, the financial statements of the Company included in the SEC Documents
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the Commission with
respect thereto. Such financial statements have been prepared in accordance with
accounting principles generally accepted in the United States as in effect from
time to time ("GAAP"), consistently applied, during the periods involved (except
(a) as may be otherwise indicated in such financial statements or the notes
thereto, or (b) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial condition of the Company as of
the respective dates thereof and the results of its operations and cash flows
for the respective periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). Except as set forth in the
SEC Documents, the Company has not received notification from the Commission,
the American Stock Exchange and/or any federal or state securities bureaus that
any investigation (informal or formal), inquiry or claim is pending, threatened
or in process against the Company and/or relating to any of the Company's
securities.
2.6 Governmental Consents. No consent, approval, order, or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement. The Company and each of its subsidiaries has
obtained all federal, state, local and foreign governmental licenses and permits
material to and necessary in the conduct of its business, such licenses and
permits are in full force and effect, no material violations are or have been
recorded in respect of any such licenses or permits, and no proceeding is
pending or threatened to revoke or limit any thereof. There are no consents or
waivers necessary for the consummation of the transactions contemplated by this
Agreement.
2.7 Litigation. Except as set forth in the SEC Documents, (i) there is no
action, suit, proceeding, or investigation pending or currently threatened
against the Company, and (ii) in the Company's reasonable judgment, none of such
disclosures are likely to question the validity of this Agreement, or the right
of the Company to enter into such agreements, or to consummate the transactions
contemplated hereby or thereby, or which might result, either individually or in
the aggregate, in any material adverse change in the assets, condition, affairs,
or property of the Company, financially or otherwise, or any change in the
current equity ownership of the Company, including, without limitation, actions
pending or to the Company's knowledge threatened involving the prior employment
of any of the Company's employees, their use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior
employers.
2.8 Compliance with Other Instruments. The Company is not in violation or
default of any provisions of its Certificate of Incorporation or Bylaws or of
any instrument, judgment, order, writ, decree, or contract to which it is a
party or by which it is bound or, to its knowledge, of any provision of Federal
or state statute, rule or regulation, license, or permit applicable to the
Company, the violation or default of which would have a material adverse effect
on the Company. The execution, delivery, and performance of this Agreement and
the consummation of the transactions contemplated hereby and thereby will not
result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree, or material contract
or an event which results in the creation of any lien, charge, or encumbrance
upon any assets of the Company.
2.9 Finders' Fees. There is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of the
Company who might be entitled to any fee or commission from the Investor upon
consummation of the transactions contemplated by this Agreement.
3. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company that:
3.1 Authorization. The execution, delivery and performance of this
Agreement and any applicable ancillary agreements by the Investor and the
consummation by the Investor of the transactions contemplated hereby and thereby
are within the powers of the Investor and have been duly authorized by all
necessary action on the part of the Investor. This Agreement and any applicable
ancillary agreements constitute valid and binding agreements of the Investor,
enforceable in accordance with their respective terms, subject to (i) applicable
bankruptcy, insolvency, reorganization and moratorium laws, (ii) other laws of
general application affecting the enforcement of creditors' rights generally and
general principles of equity, (iii) the discretion of the court before which any
proceeding therefor may be brought, and (iv) as rights to indemnity may be
limited by federal or state securities laws or by public policy. All action
required for the lawful execution and delivery of this Agreement and any
applicable ancillary agreements has been taken.
3.2 Finders' Fees. There is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of the
Investor who might be entitled to any fee or commission from the Company upon
consummation of the transactions contemplated by this Agreement.
3.3 Purchase Entirely for Own Account. The Series B Preferred Stock to be
received by the Investor pursuant to the terms hereof will be acquired for
investment for the Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof. The Investor has
no current intention of selling, granting any participation in, or otherwise
distributing the shares of Series B Preferred Stock acquired by the Investor
except in compliance with applicable securities laws. The Investor has no
contract, undertaking, agreement or arrangement with any Person to sell or
transfer, or grant any participation to such Person or to any third Person, with
respect to any shares of Series B Preferred Stock to be acquired by the
Investor.
3.4 Investor Address, Access to Information, Experience, Etc.
(a) The address set forth on the signature pages of this Agreement
is the Investor's true and correct business, residence or domicile address. The
Investor has received and read and is familiar with this Agreement. The Investor
has had an opportunity to ask questions of and receive answers from
representatives of the Company concerning the terms and conditions of this
investment. The Investor has substantial experience in evaluating non-liquid
investments such as the Series B Preferred Stock and is capable of evaluating
the merits and risks of an investment in the Company. The Investor is an
"accredited investor" as that term is defined in Rule 501 of Regulation D
promulgated under the Securities Act.
(b) The Investor has been furnished access to the business records
of the Company and such additional information and documents as the Investor has
requested and has been afforded an opportunity to ask questions of, and receive
answers from, representatives of the Company concerning the terms and conditions
of this Agreement, the purchase of the Series B Preferred Stock, the business,
operations, market potential, capitalization, financial condition and prospects
of the Company, and all other matters deemed relevant to the Investor.
(c) The Investor acknowledges that he has had an opportunity to
evaluate all information regarding the Company as it has deemed necessary or
desirable in connection with the transactions contemplated by this Agreement,
has independently evaluated the transactions contemplated by this Agreement and
has reached its own decision to enter into this Agreement. The Investor is an
"accredited" investor, as that term is understood and defined by Regulation D
under the Securities Act of 1933.
3.5 Restricted Securities. The Investor understands that the shares of
Series B Preferred Stock to be acquired by the Investor and the Common Stock
issuable upon conversion of the shares of Series B Preferred Stock and exercise
of the Warrant have not been registered under the Securities Act or the laws of
any state and may not be sold or transferred, or otherwise disposed of, without
registration under the Securities Act and applicable state securities laws, or
pursuant to an exemption therefrom. In the absence of an effective registration
statement or an exemption therefrom covering the shares of Series B Preferred
Stock to be acquired by the Investor and the Common Stock issuable upon
conversion of the shares of Series B Preferred Stock and exercise of the
Warrant, the Investor will not sell or transfer, or otherwise dispose of, the
shares of Series B Preferred Stock to be acquired by the Investor only in a
manner consistent with its representations and agreements set forth herein, the
terms and conditions set forth in the ancillary agreements and any applicable
Federal and state securities laws.
3.6 Legends. It is understood that the certificates evidencing the shares
of Series B Preferred Stock may bear one or all of the following legends:
(a) THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THE SECURITIES
EVIDENCED BY THIS CERTIFICATE, FILED AND MADE EFFECTIVE UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND SUCH APPLICABLE STATE SECURITIES LAWS OR, UNLESS
REASONABLY REQUESTED BY THE COMPANY, THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER
SUCH ACT AND SUCH APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.
(b) Any legend required by the Blue Sky laws of any state.
The legend referred to in clause (a) above shall be removed by the
Company from any certificate at such time as the holder of the securities
represented by the certificate delivers an opinion of counsel reasonably
satisfactory to the Company to the effect that such legend is not required in
order to establish compliance with any provisions of the Securities Act, or at
such time as the holder of such shares satisfies the requirements of Rule 144(k)
or such other substantially similar rule promulgated under the Securities Act
then in effect under the Securities Act; provided, that the Company has received
from the holder a written representation that (i) such holder is not an
affiliate of the Company and has not been an affiliate during the preceding
three (3) months, (ii) such holder has beneficially owned the shares represented
by the certificate for a period of at least two (2) years (or the period of time
then required by Rule 144(k) or such other substantially similar rule
promulgated under the Securities Act then in effect), and (iii) such holder
otherwise satisfies the requirements of Rule 144(k) as then in effect with
respect to such shares.
4. Conditions of the Investor's Obligations at Closing. The obligations of the
Investor under Sections 1.1 and 1.3(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against the Investor unless the Investor
has consented in writing thereto:
4.1 Representations and Warranties. The representations and warranties of
the Company contained in Section 2 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of the Closing.
4.2 Performance. The Company shall have performed and complied with all
agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Filing with the Secretary of the State of Delaware. The Company shall
have filed with the Secretary of the State of Delaware the Series B Certificate
of Designations.
4.4 Share Certificates and Warrant. The Investor shall have received a
certificate or certificates representing such number of Series B Preferred
Shares of his investment and the Warrant with all such certificates and the
Warrant registered in the name of the Investor and FFT shall have received its
Warrant registered in its name.
4.5 Consents and Waivers. The Company shall have obtained any and all
consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement and any ancillary agreements.
4.6 Execution of Registration Rights Agreement. The Company shall have
executed and delivered to the Investor the Registration Rights Agreement in the
form appended hereto as Exhibit C.
5. Conditions of the Company's Obligations at Closing. The obligations of the
Company under Sections 1.1 and 1.2(c) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective unless the Company has consented in
writing thereto:
5.1 Representations and Warranties. The representations and warranties of
the Investor contained in Section 3 shall be true on and as of the Closing with
the same effect as though such representations and warranties had been made on
and as of the date of the Closing.
5.2 Performance. The Investor shall have performed and complied with all
agreements, obligations, and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
6. Covenants of the Company. In addition to the covenants set forth in the
Company's Certificate of Incorporation, the Company agrees that, so long as any
shares of Series B Preferred Stock remain outstanding:
6.1 Maintenance of Existence. The Company shall at all times (a) preserve,
renew and keep in full force and effect its legal existence and rights and
franchises with respect thereto; and (b) maintain in full force and effect all
permits, licenses, trademarks, trade names, approvals, authorizations, leases
and contracts necessary to carry on the business as presently or proposed to be
conducted.
6.2 Payment of Obligations. The Company shall pay and discharge at or
before maturity, all of its material obligations and liabilities, including,
without limitation, tax liabilities, except where the same may be contested in
good faith by appropriate proceedings or as waived, forgiven or modified by the
creditor, and will maintain, in accordance with generally accepted accounting
principles as they then exist, appropriate reserves for the accrual of any of
the same.
6.3 Reservation of Shares. The Company shall at all times duly reserve for
issuance the shares of Common Stock issuable upon conversion or exercise of the
Series B Preferred Stock and the Warrants. The Company shall comply with the
terms and conditions of the Series B Preferred Stock as set forth in the
Company's Certificate of Incorporation including the Series B Certificate of
Designations.
7. Indemnity. The Company shall, with respect to the representations,
warranties, covenants and agreements made by the Company herein indemnify,
defend and hold the Investor and his duly appointed agents (an "Indemnified
Party") harmless from and against all liability, loss or damage, together with
all reasonable costs and expenses related thereto (including legal and
accounting fees and expenses), arising from the untruth, inaccuracy or breach of
any such representations, warranties, covenants or agreements of the Company
contained in this Agreement or the assertion of any claims relating to the
foregoing. Without limiting the generality of the foregoing, each Indemnified
Party shall be deemed to have suffered liability, loss or damage as a result of
the untruth, inaccuracy or breach of any such representations, warranties,
covenants or agreements if such liability, loss or damage shall be suffered by
the Indemnified Party as a result of, or in connection with, such untruth,
inaccuracy or breach or any facts or circumstances constituting such untruth,
inaccuracy or breach. The Company shall indemnify and hold harmless each
Indemnified Party against any losses, claims, damages or liabilities, joint or
several, to which any of the foregoing persons may become subject, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any violations by the Company of the Securities
Act or state securities or "blue sky" laws applicable to the Company relating to
action or inaction required of the Company in connection with the Securities Act
or registration or qualification under such state securities or blue sky laws;
and shall reimburse each such Indemnified Party for any legal or any other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that no indemnification shall be required hereunder for the gross negligence or
willful misconduct of any Indemnified Party or material breach by the Investor
of any of the representations and warrants set forth in Section 3 hereof. In
case any such action is brought against an Indemnified Party, the Company will
be entitled to participate in and assume the defense thereof with counsel
reasonably satisfactory to such Indemnified Party, and after notice from the
Company to such Indemnified Party of its election to assume the defense thereof,
the Company shall be responsible for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof, provided that if
any Indemnified Party shall have reasonably concluded that there may be one or
more legal defenses available to such Indemnified Party that conflict in any
material respect with those available to the Company, or that such claims or
litigation involves or could have an effect upon matters beyond the scope of the
indemnity provided by this Section 7, the Company shall reimburse such
Indemnified Party and shall not have the right to assume the defense of such
action on behalf of such Indemnified party and the Company shall reimburse each
such Indemnified Party and any person controlling such Indemnified Party for
that portion of the reasonable fees and expenses of any counsel retained by the
Indemnified Party. The Company shall not make any settlement of any claims
indemnified against hereunder without the written consent of the Indemnified
Party or Parties, which consent shall not be unreasonably withheld. Any claim
for indemnification under this Section 7 with respect to representations and
warranties must be made not later than the end of the 12-month survival period
set forth in Section 8.1.
8. Miscellaneous.
8.1 Survival of Warranties. The warranties, representations, and covenants
of the Company and the Investor contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing for a
period of 12 months and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of the Investor or the Company.
8.2 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Except as provided under Section 7, neither this
Agreement nor any provision hereof is intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.
8.3 Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Delaware, without regard to principles of conflicts of
laws and rules of such state.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts and by facsimile, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
8.5 Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
8.6 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given (i) upon personal delivery to the party to be notified, (ii) four (4) days
after deposit with the United States Post Office, by registered or certified
mail, postage prepaid, or (iii) one day after deposit with a reputable overnight
courier service and addressed to the party to be notified at the address
indicated for such party in the preamble above.
8.7 Entire Agreement; Amendments and Waivers. This Agreement constitutes
the full and entire understanding and agreement among the parties with regard to
the subjects hereof. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor. Any amendment or waiver
effected in accordance with this Section 8.7 shall be binding upon each holder
of any securities purchased under this Agreement at the time outstanding, each
future holder of all such securities, and the Company.
8.8 Severability. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision was so excluded and shall be enforceable in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement as of the day and year first above written.
CONVERSION SERVICES INTERNATIONAL, INC.
By: /s/ Xxxxx Xxxxxx
--------------------------------------
Name: Xxxxx Xxxxxx
Title: President and Chief Executive
Officer
TAURUS ADVISORY GROUP, LLC,
as agent for Xxxxxxx X. Xxxxxx
By: /s/ Xxxxx Xxxxxxxxxxx
--------------------------------------
Name: Xxxxx Xxxxxxxxxxx
Title: Managing Director
