Execution Copy
SECURITIES PURCHASE AGREEMENT
HEALTHY PLANET PRODUCTS, INC.
September 29, 1997
Mr. Xxxx Xxxxxxxx
2121 Avenue of the Stars
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Dear Xx. Xxxxxxxx:
Healthy Planet Products, Inc., a Delaware corporation (the
"Company") has agreed to sell to you (hereinafter referred to as the
"Purchaser") 300,000 shares (the "Shares") of Common Stock, par value $.01 per
share ("Common Stock"), at a price of $3.25 per share. In connection therewith,
the Company has also agreed to issue to the Purchaser warrants ("Warrants")
exercisable until September 29, 2002 to purchase an aggregate of 300,000 shares
of Common Stock ("Warrant Shares"), one-third of which will be exercisable at an
exercise price of $4.00 per share, one-third of which will be exercisable at an
exercise price of $4.25 per share and one-third of which will be exercisable at
an exercise price of $4.50 per share. The Warrants will be issued pursuant to a
warrant agreement in the form attached hereto as Exhibit A (the "Warrant
Agreement") to be entered into by the Company and the Purchaser concurrently
with the execution of this Agreement and will be evidenced by warrant
certificates in the form of Appendix I to the Warrant Agreement ("Warrant
Certificates"). The Shares and Warrants are hereinafter collectively referred to
herein as the "Securities."
The Securities being sold to the Purchaser in this private
transaction have not been registered under the registration provisions of the
Securities Act of 1933, as amended (the "Act"), and are being offered and sold
by the Company to the Purchaser in reliance upon an exemption from registration
under Sections 4(2) and/or 4(6) of the Act, and Regulation D promulgated
thereunder. The Company and the Purchaser will, concurrently with the execution
of this Agreement and the Warrant Agreement, enter into a Registration Rights
Agreement in the form attached hereto as Exhibit B ("Registration Agreement"),
which will require the Company to effect registration of the Shares and Warrant
Shares in certain circumstances.
Section 1. Issue of Securities
Subject to the terms and conditions hereof and on the basis of
the representations and warranties hereinafter set forth, the Company hereby
agrees to issue and sell to Purchaser, and Purchaser agrees to purchase and
herewith purchases from the Company, the Securities. An aggregate of $975,000
will be payable upon the execution and delivery of this Agreement by wire
transfer or certified or cashier's check in same-day or next day funds as
directed by the Company.
The Company covenants and agrees to promptly deliver to
Purchaser, upon due execution of this Agreement, the Warrant Agreement and
Registration Agreement by the parties and receipt by the Company of the payment
referred to in the preceding paragraph, a Common Stock certificate and Warrant
Certificates representing the number of Shares and Warrants, respectively,
acquired by Purchaser hereunder.
Section 2. Representations and Warranties of the Company.
The Company represents and warrants that:
(A) The Company is a corporation duly organized and validly
existing in good standing under the laws of the State of Delaware, and duly
qualified to do business and in good standing as a foreign corporation in the
State of California and each state in which the nature of its business or
properties requires such qualification (except where failure as to qualify would
not have a material adverse effect on the Company taken as a whole), with full
power and authority, corporate and otherwise, to enter into and perform this
Purchase Agreement, and to execute and deliver the various instruments and
documents provided for herein.
(B) The execution, delivery and performance by the Company of
this Agreement, the Warrant Agreement and Registration Agreement and the making,
execution and delivery by the Company of the instruments contemplated hereby and
thereby, have been duly authorized by all necessary corporate action and will
not violate any provision of law, court order or decree, or of its Certificate
of Incorporation or Bylaws, or result in the breach of, or constitute a default
under, or result in the creation of any lien, charge or encumbrance upon any
property or assets of the Company pursuant to any agreement or instrument to
which it is a party, or by which it or its property may be bound or affected.
Each of this Agreement, the Warrant Agreement and the Registration Agreement is
a valid and binding obligation of the Company, enforceable in accordance with
its terms subject to general principles of equity and bankruptcy and other laws
affecting creditors' rights generally.
(C) Except as set forth in the Company's Form 10-KSB for the
fiscal year ended December 31, 1996, (i) there are no material lawsuits or
proceedings pending, or, to
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the Company's knowledge, threatened against or affecting the Company and (ii)
there are no proceedings before any governmental commission, bureau or other
administrative agency pending, or, to the Company's knowledge, threatened
against the Company.
(D) The authorized capital stock of the Company consists of
12,000,000 shares of Common Stock, $0.01 par value per share, of which 1,827,362
shares are issued and outstanding as of the date hereof, and 750,000 shares of
Preferred Stock, $.10 par value per share, of which 186,341 shares, denominated
as Series D Preferred Stock, are issued and outstanding as of the date hereof. A
total of 779,458 shares of Common Stock are reserved for issuance pursuant to
the exercise of options and warrants and the conversion of convertible
securities issued and outstanding on the date hereof.
(E) The Shares issuable under this Agreement have been duly
authorized and, when issued against payment therefor, will be validly issued,
fully paid and nonassessable. The Warrants issuable pursuant to the Warrant
Agreement have been duly authorized and, when issued and delivered in accordance
with the Warrant Agreement, will be enforceable in accordance with their terms,
subject to general principles of equity and bankruptcy and other laws effecting
creditors rights generally.
(F) Except for any applicable requirements of state securities
laws (as to which no representations or warranties are made), no governmental
permit, consent, approval or authorization is required in connection with (i)
the execution, delivery and performance of this Agreement, the Warrant Agreement
and the Registration Agreement by the Company or (ii) the offer, sale, issuance
and delivery of the Shares and Warrants contemplated hereby by the Company;
provided that, all representations made to the Company by the Purchaser in this
Agreement and in any other document or instrument delivered in connection
herewith are assumed for purposes of this representation and warranty to be
accurate and complete.
(G) To the best knowledge of the Company, none of the
Company's reports and filings with the Securities and Exchange Commission
("SEC") contained a misstatement of a material fact or omitted to state a
material fact necessary to make the statements contained therein, in the light
of the circumstances in which they were made or omitted, not misleading.
(H) The Company Common Stock is traded on The American
Exchange, Inc. ("AMEX"), and the Shares and Warrant Shares are approved for
listing, subject to official notice of issuance. No assurance is made as to any
future AMEX listing of shares of Common Stock.
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Section 3. Purchaser's Representations and Warranties.
As an inducement to the Company to enter into this Securities
Purchase Agreement and sell the Securities to Purchaser, Purchaser represents
and warrants as follows:
(A) Purchaser acknowledges and understands that the offer and
sale of the Securities are intended to be exempt from registration under the
Act, by virtue of Section 4(2) and/or 4(6) of the Act, and Regulation D
promulgated thereunder ("Regulation D") and, in accordance therewith and in
furtherance thereof, Purchaser represents and warrants to and agrees with the
Company that he is an "accredited investor" as that term is defined pursuant to
Rule 501 of Regulation D. Purchaser has completed the Investor Questionnaire in
the form attached hereto as Exhibit C and has delivered it herewith and
represents and warrants that it accurately sets forth his financial condition on
the date hereof. Purchaser has no reason to expect there will be any material
adverse change in his financial condition and will advise the Company of any
such changes occurring prior to the issuance of the Securities to Purchaser
hereunder.
(B) Purchaser has such knowledge and experience in financial
and business matters as is required for evaluating the merits and risks of
making this investment, and Purchaser or his representatives have received such
information requested by him concerning the business, management and financial
affairs of the Company in order to evaluate the merits and risks of making this
investment. Except as specifically set forth herein, no representation or
warranty is made by the Company to induce Purchaser to make this investment, and
any representation or warranty not made herein is specifically disclaimed.
(C) Purchaser is making this investment for his own account
and is purchasing the Securities for investment purposes only and not with a
present view to the resale or other distribution thereof. Purchaser specifically
warrants and represents that the funds utilized for making this investment are
Purchaser's own funds, and Purchaser has no agreement or understanding with any
other person to grant a participation or interest, of whatever nature, kind or
description, in Purchaser's investment. Purchaser further represents and
warrants that he has not paid or agreed to pay any fee, commission or thing of
value to any person in connection with this transaction.
(D) Purchaser acknowledges that he has been advised that the
Securities being purchased by such Purchaser hereunder have not been registered
under the provisions of the Securities Act of 1933, as amended (the "Act"), and
that the Company has represented to such Purchaser that the Securities have been
offered and sold by the Company in reliance upon an exemption from registration
provided in Section 4(2) and/or 4(6) of the Act and Regulation D thereunder.
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(E) In entering into this Agreement and in purchasing the
Securities each Purchaser acknowledges that:
(i) The Shares and Warrants may not be resold by
Purchaser in the absence of registration under the Act or valid exemption from
registration.
(ii) The following legend shall be placed on the
Certificate(s) evidencing the Shares and Warrants:
"THE SHARES [WARRANTS] REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."
(iii) The Company may place a stop transfer order on
its transfer books against the Shares and Warrants (and underlying Warrant
Shares). Such stop order will be removed, and further transfer of the Shares or
Warrant Shares will be permitted upon an effective registration of the Shares
and Warrants solely as provided in the Registration Agreement, or the receipt by
the Company of an opinion of counsel that such further transfer may be effected
pursuant to an applicable exemption from registration.
(iv) The purchase of the Shares and Warrants involves
risks which Purchaser has evaluated, and Purchaser is able to bear the economic
risk of the purchase of such securities.
(F) Purchaser acknowledges receipt of copies of the following
reports filed by the Company with the Securities and Exchange Commission: Form
10-KSB for the year ended December 31, 1996, Forms 10-QSB for the quarters ended
March 31, 1997 and June 30, 1997, Form 8-K dated March 31, 1997 and the Proxy
Statement mailed to the Company's shareholders in connection with the 1997
Annual Meeting of Shareholders (collectively the "Disclosure Documents").
Purchaser has carefully reviewed the Disclosure Documents and acknowledges that
he has relied only on the information set forth therein and in this Agreement in
making a decision to purchase the Securities. Purchaser specifically disclaims
receipt of any other information and material, whether oral or in writing, from
the Company or anyone acting for or on behalf of the Company, and reliance upon
any such unauthorized oral or written information and material is specifically
disclaimed.
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(G) Purchaser understands that all documents, records, and
books pertaining to this investment (including, without limitation, the
Disclosure Documents) have been made available for inspection by him, his
attorney and/or his accountant.
(H) Purchaser has had a reasonable opportunity to ask
questions of and receive answers from a person acting on behalf of the Company
concerning the offering of the Securities and all such questions have been
answered to the full satisfaction of the undersigned.
(I) Purchaser is not purchasing any of the Securities as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or broadcast
over television or radio, any seminar or meeting, or any solicitation of a
subscription by a person not previously known to the undersigned in connection
with investments in securities generally.
(J) Purchaser has reached the age of majority in the state in
which Purchaser resides, has adequate means of providing for Purchaser's current
needs and personal contingencies, is able to bear the substantial economic risks
of an investment in the Securities for an indefinite period of time, has no need
for liquidity in such investment, and Purchaser is prepared to lose his entire
investment in the Securities.
(K) Purchaser's overall commitment to investments that are not
readily marketable is not, and his acquisition of Securities will not cause such
overall commitment to become, disproportionate to his net worth.
(L) Purchaser acknowledges that he has made his own
investigation concerning the business and affairs of the Company and in that
connection, Purchaser acknowledges the previous receipt of the Disclosure
Documents.
(M) Purchaser acknowledges that he has been advised that the
Company has agreed to pay to Starr Securities, Inc. a fee of $48,750 for acting
as its investment banker and advisor in connection with this transaction.
(N) Purchaser acknowledges that the Company has advised him of
the requirements for the filing of Forms 3, 4, and 5 and Schedule 13D under
certain circumstances. Purchaser acknowledges that he has independently
consulted with his own counsel with respect to such filing requirements.
Purchaser covenants and agrees to timely make all filings with the SEC as is or
may be necessary by reason of Purchaser's ownership of securities in the
Company.
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Purchaser is making the foregoing representations and
warranties with the intent that they may be relied upon by the Company in
determining the suitability of the sale of the Securities to Purchaser for
purposes of federal and state securities laws. Purchaser agrees to indemnify and
hold harmless the Company, the officers, directors, and affiliates of the
Company, and each other person, if any, who controls the Company, within the
meaning of Section 15 of the Act, against any and all loss, liability, claim,
damage and all expenses reasonably incurred in investigating, preparing or
defending against any litigation commenced or threatened or any claim whatsoever
arising out of or based upon any false representation or warranty or breach or
failure by the undersigned to comply with any covenant or agreement made by
Purchaser herein or in any other document furnished by Purchaser to any of the
foregoing in connection with this transaction.
Section 5. Election of Purchaser to Company's Board of
Directors.
Concurrent with this investment, the Company cause Purchaser
to be elected to the Company's Board of Directors effective on the date hereof
and to remain as a Director until the earliest of (i) the third anniversary of
the date of this Agreement, (ii) the date on which the currently existing
members of the Board of Directors of the Company no longer constitute a majority
of the Board or (iii) the death of Purchaser. For purposes hereof, the term
"currently existing members of the Board of Directors" will also include any
person not currently on the Board of Directors who is subsequently elected to
the Board as a nominee of the Board of Directors.
Section 6. Binding Effect of Purchase.
Purchaser hereby acknowledges and agrees, subject to any
applicable state securities law, that the purchase hereunder is irrevocable,
that Purchaser is not entitled to cancel, terminate or revoke this Agreement or
any agreements of Purchaser hereunder and that this Agreement and such other
agreements shall survive the death or disability of the Purchaser and shall be
binding upon and inure to the benefit of the parties and their heirs, executors,
administrators, successors, legal representatives, and assigns.
Section 7. Miscellaneous.
(A) No Waiver. Neither this Agreement nor any provisions
hereof shall be waived, modified, discharged, or terminated except by an
instrument in writing signed by the party against whom any such waiver,
modification, discharge, or termination is sought.
(B) Notices. Any notice, demand or other communication which
any party hereto may be required, or may elect, to give to anyone interested
hereunder shall be sufficiently given if (a) deposited, postage prepaid, in a
United States mail box, stamped,
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registered or certified mail, return receipt requested, addressed to such
address as may be listed on the books of the Company or (b) delivered personally
at such address.
(C) Execution. This Agreement may be executed through the use
of separate signature pages or in any number of counterparts, and each of such
counterparts shall, or all purposes, constitute one agreement binding on all
parties, notwithstanding that all parties are not signatories to the same
counterpart.
(D) Entire Agreement. This Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and there are
no representations, covenants or other agreements except as stated or referred
to herein, and any representations or warranties not contained herein are
disclaimed.
(E) Severability. Each provision of this Agreement is intended
to be severable from every other provisions, and the invalidity or illegality of
any portion hereof, shall not affect the validity or legality of the remainder
hereof.
(F) Non-Assignability. This Agreement is not transferable or
assignable by the undersigned except as may be provided herein.
(G) Law Governing. This Agreement shall be governed by and
construed in accordance with the laws of the State of California as applied to
residents of that state executing contracts wholly to be performed in that
state.
Please countersign and return two copies of this Purchase
Agreement, the Warrant Agreement, the Registration Agreement and the completed
Investor Questionnaire. A countersigned copy of this Agreement, Warrant
Agreement and Registration Agreement
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will be returned to you, together with your share certificate and Warrant
Certificate. For the purpose of having the share certificate and Warrant
Certificate prepared, please indicate the exact manner in which the Securities
are to be made out in the space provided for below.
Very truly yours,
HEALTHY PLANET PRODUCTS, INC.
By /s/ Xxxxx Xxxxxx
-------------------------------
Name: Xxxxx Xxxxxx
Title: President
AGREED TO AND ACCEPTED:
/s/ Xxxx Xxxxxxxx
-----------------------------------
Signature of Purchaser
Date Executed: September 29, 1997.
Share and Warrant Certificates to made out as follows:
-----------------------------------
Print Name
-----------------------------------
Social Security Number
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