UNIT PURCHASE AGREEMENT
DATED AS OF JULY 21, 2000
BETWEEN
XXXX.XXX, INC.
AND
THE PURCHASER LISTED ON THE SIGNATURE PAGE HERETO
THE SECURITY OR SECURITIES EVIDENCED HEREBY AND WHICH MAY BE ISSUED
HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES
LAWS, AND MAY NOT BE OFFERED OR SOLD TO ANY PERSON EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. THE PURCHASER HEREOF AGREES THAT: (1) IT
WILL NOT RESELL OR OTHERWISE TRANSFER THE SECURITIES EVIDENCED HEREBY
EXCEPT (A) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (B) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR ANOTHER
THEN AVAILABLE EXEMPTION UNDER THE SECURITIES ACT AND STATE SECURITIES
LAWS, (C) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE
SECURITIES ACT OR ANY APPLICABLE STATE LAWS, OR (D) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER); (2) PRIOR TO ANY SUCH TRANSFER, IT WILL FURNISH TO THE
COMPANY OR THE TRANSFER AGENT FOR THE SECURITIES SUCH CERTIFICATIONS,
LEGAL OPINIONS, AND OTHER INFORMATION AS THE COMPANY OR SUCH TRANSFER
AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR STATE SECURITIES
LAWS; AND (3) IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITIES
EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND.
UNIT PURCHASE AGREEMENT, made to be effective as of July 21,
2000 (this "Agreement"), between XXXX.XXX, INC., a Delaware corporation (the
"Company") and the purchaser whose name is set forth on the signature page
hereto (the "Purchaser").
WHEREAS, the Company is in engaged in the business of
providing wireless Internet access through microwave technology, dial-up
Internet access, web site design, web hosting and a variety of telecommunication
carrier services (the "Business");
WHEREAS, subject to the terms and conditions of this
Agreement, the Company desires to issue and sell to the Purchaser and the
Purchaser desires to purchase up to One Hundred Fifty Thousand (150,000) units
(the "Units"), each consisting of (i) one share of Series B convertible
preferred stock, $.01 par value, having the rights and obligations set forth in
Exhibit A hereto (the "Preferred Stock") and (ii) warrants to purchase ten (10)
shares of Common Stock, $.001 par value of the Company ("Warrants");
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NOW, THEREFORE, as consideration for the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS.
(a) As used in this Agreement, the following defined
terms shall have the meanings indicated below:
"ACTIONS OR PROCEEDINGS" means any action, suit, proceeding,
arbitration or Governmental Authority investigation or audit.
"AFFILIATE" means, as applied to any Person, (i) any other
Person directly or indirectly controlling, controlled by or under common control
with, that Person, (ii) any other Person that owns or controls ten percent (10%)
or more of any class of equity securities (including any equity securities
issuable upon the exercise of any Option) of that Person or any of its
Affiliates, or (iii) any member, director, partner, officer, agent, employee or
relative of such Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled by",
and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through ownership of voting
securities or by contract or otherwise.
"AGREEMENT" means this Unit Purchase Agreement, the Exhibits
and the Disclosure Schedule and the certificates delivered in connection
herewith, as the same may be amended, modified or restated from time to time in
accordance with the terms hereof.
"ASSETS AND PROPERTIES" of any Person means all assets and
properties of every kind, nature, character and description (whether real,
personal or mixed, whether tangible or intangible including the goodwill related
thereto, operated, owned or leased by such Person.
"BENEFIT PLAN" means any bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock purchase,
stock option, stock ownership, stock appreciation rights, phantom stock, leave
of absence, layoff, vacation, day or dependent care, legal services, cafeteria,
life, health, accident, disability, workmen's compensation or other insurance,
severance, separation or other employee benefit plan, practice, policy or
arrangement of any kind, whether written or oral, or whether for the benefit of
a single individual or more than one individual including, but not limited to,
any "employee benefit plan" within the meaning of Section 3(3) of ERISA
established by the Company existing at the Closing Date or prior thereto, to
which the Company contributes or has contributed, or under which any employee,
former employee or director of the Company or any beneficiary thereof is
covered, is eligible for coverage or has benefit rights.
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"BOOKS AND RECORDS" means all files, documents, instruments,
papers, books and records relating to the Business or the Company.
"BUSINESS" has the meaning ascribed to it in the forepart of
this Agreement.
"BUSINESS DAY" means a day other than Saturday, Sunday or any
day on which banks located in the State of New York are authorized or obligated
to close.
"BUSINESS AND/OR CONDITION OF THE COMPANY" means the Business,
condition (financial or otherwise), results of operations, Assets and Properties
of the Company.
"CHARTER" has the meaning ascribed to it in Section 3.1.
"CLAIM NOTICE" means a written notification pursuant to
Section 9.2(a) of a Third Party Claim as to which indemnity under Section 9.1 is
sought by an Indemnified Party, enclosing a copy of all papers served, if any,
on the Indemnified Party.
"CLOSING" has the meaning ascribed to it in Section 2.3.
"CLOSING DATE" has the meaning ascribed to it in Section 2.3.
"CODE" means the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
"COMMON STOCK" means the common stock, $.001 par value, of the
Company.
"COMPANY" has the meaning ascribed to it in the preamble.
"CONTRACT" means any agreement, lease, license, evidence of
Indebtedness, mortgage, indenture, security agreement or other contract or other
commitment (whether written or oral).
"DISCLOSURE SCHEDULE" means the schedules delivered to
Purchaser by or on behalf of the Company, containing all lists, descriptions,
exceptions and other information and materials as are required to be included
therein by the Company pursuant to Article 3 of this Agreement.
"DISPUTE PERIOD" means the period ending thirty (30) calendar
days following receipt by an Indemnifying Party of either a Claim Notice or an
Indemnity Notice.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the rules and regulations promulgated thereunder.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FINANCIAL STATEMENTS" has the meaning ascribed to it in
Section 3.8.
"FINANCIAL STATEMENT DATE" means the date of the balance sheet
contained in the Financial Statements.
"GAAP" means generally accepted accounting principles,
consistently applied throughout the specified period and in all prior comparable
periods.
"GOVERNMENTAL AUTHORITY" means any court, tribunal, authority,
agency, commission, official or other instrumentality of the United States, any
foreign country or any domestic or foreign state, county, city or other
political subdivision, any arbitrator, tribunal or panel of arbitrators and,
shall include, without limitation, any stock exchange, quotation service and the
National Association of Securities Dealers.
"INDEBTEDNESS" means, as to any Person: (i) all obligations,
whether or not contingent, of such Person for borrowed money (including, without
limitation, reimbursement and all other obligations with respect to surety
bonds, letters of credit and bankers' acceptances, whether or not matured),
deferred purchase price of property or services, notes, bonds, debentures or
similar instruments, all obligations of such Person representing the balance of,
all interest rate and currency swaps, caps, collars and similar agreements or
hedging devices under which payments are obligated to be made by such Person,
obligations under conditional sale or other title retention agreement,
obligations of such Person under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, (vii) all indebtedness secured
by any Lien on any Asset or Property owned or held by such Person regardless of
whether the indebtedness secured thereby shall have been assumed by such Person
or is non-recourse to the credit of such Person, and (ii) all Indebtedness of
any other Person referred to in clause (i) above, guaranteed, directly or
indirectly, by such Person.
"INDEMNIFIED PARTY" means any Person claiming indemnification
under any provision of Article IX.
"INDEMNIFYING PARTY" means any Person against whom a claim for
indemnification is being asserted under any provision of Article IX.
"INDEMNITY NOTICE" means a written notification pursuant to
Section 9.2(c) of a claim for indemnity under Article IX by an Indemnified
Party, specifying the nature of and basis for such claim, together with the
amount or, if not then reasonably ascertainable, the estimated amount,
determined in good faith, of such claim.
"INTELLECTUAL PROPERTY" means all patents and patent rights,
trademarks and trademark rights, trade names and trade name rights, service
marks and service xxxx rights, service names and service name rights, brand
names, inventions, processes, formulae, copyrights and copyright rights, trade
dress, business and product names, logos, slogans, trade secrets, industrial
models, processes, designs, methodologies, computer programs (including all
source codes) and related documentation, technical information, manufacturing,
engineering and technical drawings, know-how and all pending applications for
and registrations of patents, trademarks, service marks and copyrights.
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"INITIAL PURCHASE PRICE" has the meaning ascribed to it in
Section 2.3 hereof.
"INITIAL SHARES" has the meaning ascribed to it in Section 2.3
hereof.
"INITIAL WARRANTS" has the meaning ascribed to it in Section
2.4 hereof.
"INITIAL UNITS" has the meaning ascribed to it in Section 2.3
hereof.
"IRS" means the United States Internal Revenue Service.
"LAWS" means all laws, statutes, rules, regulations,
ordinances and other pronouncements having the effect of law of the United
States, any foreign country or any domestic or foreign state, county, city or
other political subdivision or of any Governmental Authority.
"LIABILITIES" means all Indebtedness, obligations and other
liabilities of a Person (whether absolute, accrued, contingent, known or
unknown, fixed or otherwise, or whether due or to become due).
"LIENS" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of any
kind, or any conditional sale Contract, title retention Contract or Contract
committing to grant any of the foregoing.
"LOSS" means any and all damages, fines, fees, penalties,
deficiencies, losses and expenses, including without limitation, interest,
reasonable expenses of investigation, court costs, reasonable fees and expenses
of attorneys, accountants and other experts or other expenses of litigation or
other proceedings or of any claim, default or assessment (such fees and expenses
to include without limitation, all fees and expenses, including, without
limitation fees and expenses of attorneys, incurred in connection with (i) the
investigation or defense of any Third Party Claims or (ii) asserting or
disputing any rights under this Agreement against any party hereto or
otherwise).
"OPTION" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (i) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interest of such Person or (ii) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interest of such Person, including without
limitation any rights to participate in the equity, income or election of
directors, management committee members or officers of such Person.
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"ORDER" means any writ, judgment, decree, injunction or
similar order of any Governmental Authority (in each such case whether
preliminary or final).
"PERMITS" means all licenses, permits, certificates of
authority, authorizations, approvals, registrations, franchises and similar
consents granted or issued by any Governmental Authority.
"PERMITTED LIEN" means (i) any Lien for Taxes, governmental,
charges or levies not yet due or delinquent or being contested in good faith by
appropriate proceedings for which adequate reserves have been established in
accordance with GAAP, (ii) any minor imperfection of title, easements, rights of
way or similar Lien which individually or in the aggregate with other such Liens
does not materially impair the value or marketability of the property subject to
such Lien or interfere with the use of such property in the conduct of the
business of the Company or any Subsidiary and which do not secure obligations
for money borrowed and (iii) Liens imposed by any law, such as mechanic's,
materialman's, landlord's, warehouseman's and carrier's Liens, securing
obligations incurred in the ordinary course of business which are not yet
overdue or which are contested in good faith.
"PERSON" means any individual, corporation, joint stock
corporation, limited liability company or partnership, general partnership,
limited partnership, proprietorship, joint venture, other business organization,
trust, union, association or Governmental Authority.
"PREFERRED STOCK" has the meaning ascribed thereto in the
recitals; PROVIDED, HOWEVER, that such term excludes the Remaining Shares unless
the Remaining Units shall have been purchased at the Subsequent Closing Date.
"PURCHASE PRICE" has the meaning ascribed to it in Section
2.1.
"PURCHASER" has the meaning ascribed thereto in the forepart
of this Agreement.
"QUALIFIED PLAN" means each Benefit Plan which is intended to
qualify under Section 401 of the Code.
"REMAINING PURCHASE PRICE" has the meaning ascribed to it in
Section 2.3 hereof.
"REMAINING SHARES" has the meaning ascribed to it in Section
2.3 hereof.
"REMAINING UNITS" has the meaning ascribed to it in Section
2.3 hereof.
"REMAINING WARRANTS" has the meaning ascribed to in Section
2.4 hereof.
"REPRESENTATIVES" has the meaning ascribed to it in Section
5.1.
"RESOLUTION PERIOD" means the period ending thirty (30)
calendar days following receipt by an Indemnified Party of a Dispute Notice.
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"SEC" means the Securities and Exchange Commission.
"SEC DOCUMENTS" means the documents that the Company has filed
with the SEC under Section 13 or 14(a) of the Exchange Act.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SUBSEQUENT CLOSING DATE" has the meaning ascribed to it in
Section 2.3 of this Agreement.
"SUBSIDIARY" means any Person in which any Person, directly or
indirectly through Subsidiaries or otherwise, beneficially owns more than fifty
percent (50%) of either the equity interests in, or the voting control of, such
Person.
"TAX" or "TAXES" means all federal, state, local or foreign
net or gross income, gross receipts, net proceeds, sales, use, AD VALOREM, value
added, franchise, bank shares, withholding, payroll, employment, excise,
property, alternative or add-on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"TAX RETURNS" means any returns, reports or statements
(including any information returns) required to be filed for purposes of a
particular Tax.
"TAX AUTHORITY" means any governmental agency, board, bureau,
body, department or authority of any United States Federal, state or local
jurisdiction or any foreign jurisdiction, having or purporting to exercise
jurisdiction with respect to any Tax.
"THIRD PARTY CLAIM" has the meaning ascribed to it in Section
9.2(a).
"TRANSACTION DOCUMENTS" means a Warrant Agreement evidencing
the Initial Warrants, the Certificate of Designation or similar charter
amendment required to implement the terms of the Preferred Stock and any
supporting or other agreements to be entered into in connection with the
transactions contemplated by this Agreement, and shall include a Warrant
Agreement evidencing the Remaining Shares if and only if the Remaining Units
shall have been purchased at the Subsequent Closing Date.
"TRANSACTION EXPENSES" means any and all reasonable
out-of-pocket expenses incurred by Purchaser and its Affiliates in connection
with its legal and financial due diligence review of the Business or Condition
of the Company, the negotiation and preparation of this Agreement or the
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby.
"TRANSFER TAXES" means sales, use, transfer, real property
transfer, recording, gains, stock transfer and other similar taxes and fees.
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(b) Unless the context of this Agreement otherwise
requires, (i) words of any gender include each other gender, (ii) words
using the singular or plural number also include the plural or singular
number, respectively, (iii) the terms "hereof," "herein," "hereby" and
derivative or similar words refer to this entire Agreement, (iv) the
terms "Article" or "Section" refer to the specified Article or Section
of this Agreement, and (v) the phrases "ordinary course of business"
and "ordinary course of business consistent with past practice" refer
to the business and practice of the Company or a Subsidiary. All
accounting terms used herein and not expressly defined herein shall
have the meanings given to them under GAAP.
(c) When used herein, the phrase "to the knowledge of
" any Person, "to the best knowledge of " any Person or any similar
phrase, means (i) with respect to any Person who is an individual, the
actual knowledge of such Person, and (ii) with respect to any other
Person, the actual knowledge of the directors, officers, members,
general partners and other similar Person in a similar position or
having similar powers and duties; and, in the case of each of (i) and
(ii), the knowledge of facts that such individuals should have after
reasonable inquiry.
"UNITS" has the meaning ascribed thereto in the recitals.
"WARRANT AGREEMENT" means the Company's Warrant to Purchase
Shares of Common Stock in the form attached hereto as Exhibit B.
"WARRANTS" has the meaning ascribed thereto in the recitals;
PROVIDED, HOWEVER, that the Warrants shall not include the Remaining Warrants
until and unless the Remaining Units shall have been purchased at the Subsequent
Closing Date.
"WARRANT SHARES" means the shares of Common Stock to be issued
upon exercise of the Warrants.
"WARRANT SECURITIES" means the Warrants and the Warrant
Shares.
ARTICLE II
PURCHASE AND SALE OF UNITS; CLOSING
2.1 PURCHASE AND SALE. On the terms and subject to the
conditions of this Agreement, at the Closing and the Subsequent Closing Date,
the Company shall issue and sell to the Purchaser, and Purchaser shall purchase
from the Company, free and clear of all Liens, up to One Hundred Fifty Thousand
(150,000) Units for a purchase price per unit of Ten Dollars ($10) and an
aggregate purchase price (payable in cash in the manner provided in Section 2.2)
equal to One Million Five Hundred Thousand Dollars ($1,500,000) (the "PURCHASE
PRICE").
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2.2 THE SHARES. The Company has authorized and has reserved
and convenants to continue to reserve, free of preemptive rights and other
similar contract rights of stockholders, a sufficient number of its authorized
but unissued shares of its Common Stock, to effect the issuance of its Common
Stock upon conversion of the Preferred Stock and the exercise of the Warrants.
2.3 CLOSINGS. (a) The initial purchase and sale of the Units
hereunder (the "Closing") shall take place simultaneously at the offices of the
Company and at ____________________ on the first Business Day following the date
on which all conditions to the obligations of the parties hereto pursuant to
Article VI and VII have been satisfied or waived, or at such other place or time
as Purchaser and the Company mutually agree (the "Closing Date").
(b) At the Closing, Purchaser shall pay to the
Company One Million Dollars ($1,000,000) (the "INITIAL PURCHASE PRICE") by wire
transfer of immediately available funds to the account specified by the Company
by written notice to Purchaser. Simultaneously, the Company shall issue and
deliver to Purchaser one or more certificates issued in the name of Purchaser or
its designees representing One Hundred Thousand (100,000) shares of Preferred
Stock (the "INITIAL SHARES") included in the One Hundred Thousand Units (the
"INITIAL UNITS") purchased hereunder for the Initial Purchase Price. At the
Closing, there shall also be delivered by the respective parties thereto the
opinions, certificates and other Contracts, documents and instruments to be
delivered under Articles VI and VII.
(c) Subject to the terms and conditions of this
Agreement, Purchaser may purchase the Remaining Units (as defined below) by
paying to the Company Five Hundred Thousand Dollars ($500,000) (the "REMAINING
PURCHASE PRICE") by wire transfer of immediately available funds to the account
specified by the Company by written notice to Purchaser, no later than thirty
(30) days after the date of the Closing (the "Subsequent Closing Date").
Simultaneously, the Company shall issue and deliver to Purchaser one or more
certificates issued in the name of Purchaser or its designees representing Fifty
Thousand (50,000) shares of Preferred Stock (the "REMAINING SHARES") included in
the Fifty Thousand Units (the "REMAINING UNITS") purchased hereunder for the
Remaining Purchase Price. The obligations of the parties to sell and purchase
the Remaining Units at the Subsequent Closing Date shall be subject to the truth
and accuracy of the representations set forth under Article III and Article IV
at the Subsequent Closing Date and the satisfaction of applicable covenants and
agreements set forth under Article V of this Agreement.
2.4 WARRANTS. As part of the Initial Units purchased in
exchange for the Initial Purchase Price, at the Closing, the Company shall issue
and sell to Purchaser, and Purchaser shall purchase from the Company, Warrants
to purchase One Million (1,000,000) shares of Common Stock (the "INITIAL
WARRANTS"). If the Remaining Units are purchased for the Remaining Purchase
Price as set forth in Section 2.3 of this Agreement, at the Subsequent Closing
Date, the Company shall issue and sell to Purchaser, and Purchaser shall
purchase from the Company, Warrants to purchase Five Hundred Thousand (500,000)
shares of Common Stock (the "REMAINING Warrants"). The terms and provisions of
the Initial Warrants and the Remaining Warrants are set forth on Exhibit B
attached hereto.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser that
the statements contained in this Article III are true and correct in all
material respects at the date of this Agreement, and will be true and correct at
the Closing Date (as though made on the Closing Date):
3.1 ORGANIZATION. The Company is a corporation duly
incorporated, validly existing and in good standing under, and by virtue of, the
Laws of the State of Delaware. The Company has all necessary corporate power and
authority to own its Assets and Properties, and to carry on its business as the
Company now conducts such business and presently proposes to conduct such
business. The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which the ownership, use or
leasing of its Assets and Properties, or the conduct or nature of its business,
makes such qualification necessary, except where the failure to be so qualified
or in good standing would not have a material adverse effect on the Company and
its Subsidiaries (considered as a whole). The Company has prior to the execution
of this Agreement delivered to Purchaser true and complete copies of its (i)
certificate of incorporation with all amendments thereto and (ii) by-laws, in
each case as in effect on the date hereof (collectively, the "CHARTER").
3.2 POWER AND AUTHORITY. The Company has the requisite power
and authority to execute and deliver this Agreement and the Transaction
Documents to which it is a party, and to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by the Company of this Agreement and the Transaction
Documents to which it is a party, the performance by the Company of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate action. This Agreement has been duly and validly executed
and delivered by the Company and constitutes, and upon the execution and
delivery by the Company of the Transaction Documents (to which it is a party),
each such Transaction Documents will constitute, the legal, valid and binding
obligation of the Company, in each case enforceable against the Company in
accordance with its terms.
3.3 CAPITALIZATION. (a) At the date hereof, and immediately
prior to the consummation of the transactions contemplated hereby and before
giving effect to such transactions, the authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock, of which 20,880,123 shares of Common Stock are issued and outstanding and
no shares of preferred stock are issued and outstanding. All of the outstanding
shares of capital stock of the Company have been, and upon issuance thereof, the
shares of Preferred Stock purchased hereby will be, duly authorized and validly
issued, fully paid and non assessable. When the Common Stock is issued
underlying the conversion of the Preferred Stock and upon exercise of the
Warrants, such shares will be duly authorized by all necessary corporate action
and validly issued and outstanding, fully paid and non-assessable, and the
holders shall be entitled to all rights accorded to a holder of Common Stock.
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(b) Except as set forth in SECTION 3.3 OF THE
DISCLOSURE SCHEDULE or as contemplated by this Agreement or the Transaction
Documents, (i) there are no preemptive or similar rights or Options with respect
to any share of the capital stock of the Company, or any agreement to which the
Company is a party pursuant to which the Company would be obligated to issue any
such right or Option which, if executed, would require the issuance of any
shares of capital Stock by the Company; and except as contemplated by this
Agreement and the Transaction Documents, and (ii) the Company is not a party to
any agreement, restriction or encumbrance (such as a right of first refusal,
right of first offer, proxy, voting agreement, voting trust, registration rights
agreement, stockholders' agreement, etc.) with respect to the sale or voting of
any shares of capital stock of the Company (whether outstanding or issuable upon
conversion or exercise of outstanding securities). The transactions contemplated
by this Agreement and the Transaction Documents will not cause any anti-dilution
protection provisions given by the Company to any person to become operative.
3.4 SUBSIDIARIES. SECTION 3.4 OF THE DISCLOSURE SCHEDULE
hereto sets forth each Subsidiary of the Company showing the jurisdiction of its
incorporation or organization and showing the percentage of the Company's
ownership of the outstanding stock or other interests of such Subsidiary. All of
the outstanding shares of capital stock of each Subsidiary have been duly
authorized and validly issued, and are fully paid and non-assessable. Except as
disclosed on SECTION 3.4 OF THE DISCLOSURE SCHEDULE there are no outstanding
preemptive, conversion or other rights, options, warrants or agreements granted
or issued by or binding upon any Subsidiary for the purchase or acquisition of
any shares of capital stock of any Subsidiary or any other securities
convertible into, exchangeable for or evidencing the rights to subscribe for any
shares of such capital stock. Neither the Company nor any Subsidiary is subject
to any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of the capital stock of any Subsidiary or any convertible
securities, rights, warrants or options of the type described in the preceding
sentence. Neither the Company nor any Subsidiary is party to, nor has any
knowledge of, any agreement restricting the voting or transfer of any shares of
the capital stock of any Subsidiary.
3.5 NO CONFLICTS. Neither the execution and delivery by the
Company of this Agreement and the Transaction Documents (to which it is a
party), nor the consummation of any transaction or execution of any of the
Transaction Documents, nor the performance by the Company of its obligations
hereunder and thereunder (a) has constituted or results in, or will constitute
or results in, a material default under or breach or violation of any material
term or provision of: (i) the Company's Charter, Bylaws or material Contract or
(ii) any Law or Order applicable to the Company or any of its Assets and
Properties.; or (b) (i) conflict with or result in a material violation or
breach of, or (ii) result in or give to any Person any right or create any
material additional or increased liability of the Company under, or create or
impose any material Lien on, the Company or any of its Assets and Properties
under, any Contract or Permit to which the Company is a party or by which its
Assets and Properties are bound.
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3.6 CONSENTS, APPROVALS AND FILINGS. Other than the filing of
a Certificate of Amendment creating Series B Preferred Stock, no consent,
approval or action of, filing with or notice to any Person or Governmental
Authority on the part of the Company is required in connection with the
execution, delivery and performance of this Agreement and the Transaction
Documents by the Company, or the consummation of the transactions contemplated
hereby or thereby.
3.7 CORPORATE FORMALITIES; BOOKS AND RECORDS. The Company has
complied in all material respects with all corporate formalities required to be
complied with under applicable laws.
3.8 SEC DOCUMENTS, FINANCIAL STATEMENTS. The Company has
provided to the Purchaser prior to the date hereof copies of its annual report
and amendments thereto on Form 10-KSB for the fiscal year ended March 31, 1999,
its quarterly reports and amendments thereto for the fiscal quarters ended June
30, 1999, September 30, 1999, December 31, 1999, and its annual report for the
fiscal year ended March 31, 2000 (all such documents referred to herein as "SEC
Documents"). The Company has not provided to the Purchaser any material
non-public information which, according to applicable law, rule or regulation,
should have been disclosed publicly by the Company but which has not been so
disclosed, other than with respect to the transactions contemplated by this
Agreement. The Financial Statements of the Company contained in the SEC
Documents furnished to the Purchaser comply as to form in all material respects
with applicable accounting requirements and the published rules and regulations
of the SEC or other applicable rules and regulations with respect thereto. Such
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except (i) as may be otherwise
indicated in such Financial Statements or the notes thereto or (ii) as to the
unaudited interim statements), and fairly present in all material respects the
financial position of the Company and its Subsidiaries as of the dates thereof
and the results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).
3.9 ABSENCE OF CERTAIN CHANGES. Since March 31, 2000, through
the Closing, except as set forth in SECTION 3.9 OF THE DISCLOSURE SCHEDULE,
there has not been (a) any event or events which, individually or in the
aggregate, have or could reasonably be expected to have a material adverse
effect on the prospects, Business or Condition of the Company, (b) any
declaration, setting aside or payment of any dividend or other distribution with
respect to capital stock of the Company or any redemption or repurchase of any
shares of its capital stock, (c) any Asset or Property of the Company made
subject to a material Lien, (d) any waiver or grant of any valuable right
(including without limitation any Intellectual Property Rights) or claim of the
Company, or the cancellation, termination as revocable of any such right or
12
claim, (e) any sale, assignment or transfer of any tangible or intangible Assets
or Property of the Company, except in the ordinary course of business, (f) any
material increase in the salaries or other compensation payable to any officer,
director or employee of the Company or any increase in, or addition to, other
benefits to which any officer, director or employee may be entitled (except as
required by the terms of plans as in effect on the date of this Agreement or as
required by law), (g) any incurrence of Indebtedness, (h) any amendment to,
termination or threat of termination of any material right or Contract to which
the Company is a party, (i) any material damage, destruction or loss, whether or
not covered by insurance, adversely affecting Assets or Properties, business or
prospects of the Company, or any deterioration in the condition of the Assets or
Properties of the Company, (j) any change or amendment to the Charter, or (k)
any change on the Company's line of Business.
3.10 NO UNDISCLOSED LIABILITIES. To the Company's knowledge,
the Company and its Subsidiaries have no Liabilities of, relating to or
affecting the Company or its Subsidiaries or any of their Assets and Properties,
except (i) Liabilities reflected or reserved against in the balance sheet which
is part of the Financial Statements, (ii) Liabilities disclosed in SECTION 3.10
OF THE DISCLOSURE SCHEDULE, or (iii) Liabilities incurred in the ordinary course
of business consistent with past practice since the Financial Statement Date and
in accordance with the provisions of this Agreement.
3.11 TAXES. There are no actual or contingent Tax Liabilities
that could have a material adverse effect on the Business or Condition of the
Company and its Subsidiaries. All Taxes which could constitute a Lien on the
Assets and Properties of the Company and its Subsidiaries and which were due and
payable by the Company and its Subsidiaries on or prior to the Closing Date and
all periods beginning and ending prior thereto have been or will be paid by the
Company prior to delinquency. All Tax Returns that have been filed by or with
respect to the Company and its Subsidiaries, or any affiliated, combined,
consolidated, unitary or similar group of which the Company and its Subsidiaries
is or was a member with any Tax Authority correctly and completely reflects the
income, franchise or other Tax liability and all other information required to
be reported thereon. The Company and its Subsidiaries have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid or
due and payable to any employee, creditor, independent contractor or other third
party.
3.12 COMPLIANCE WITH LAWS AND ORDERS. To the Company's
knowledge, the Business of the Company and its Subsidiaries are in compliance
with all applicable Laws and Orders (including, without limitation, ERISA),
except where the failure to comply would not have a material adverse effect on
the Business or Condition of the Company and its Subsidiaries. The Company has
no knowledge that it or its Subsidiaries are not in compliance with any Laws or
Orders where the failure to comply would have a material adverse effect on the
Business or Condition of the Company and its Subsidiaries. The Company has no
reason to believe that any present circumstances are likely to result in
violations of any such Laws or Orders which would, individually or in the
aggregate, have a material adverse effect on the Business or Condition of the
Company and its Subsidiaries.
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3.13 INTELLECTUAL PROPERTY RIGHTS.
(a) Except as disclosed in SECTION 3.13(a) OF THE
DISCLOSURE SCHEDULE, the Company and its Subsidiaries have the right to use all
Intellectual Property necessary or used in the conduct of their business.
(b) The Company and its Subsidiaries have no
knowledge that the Intellectual Property necessary or used by the Company and
its Subsidiaries in the conduct of their business infringes upon the rights of,
or is infringed upon by, any other Person and no claim has been made or, to the
knowledge of the Company and its Subsidiaries, has been threatened to such
effect.
3.14 REAL AND PERSONAL PROPERTY. (a) The Company and its
Subsidiaries are in possession of and have, good and marketable title to, or
have valid leasehold interests in or valid rights under Contract to use, all
material tangible personal and real property used in the conduct of their
business, including all tangible personal or real property reflected on the
balance sheet included in the Financial Statements and tangible personal
property acquired since the Financial Statement Date (if any) other than
property disposed of since such date in the ordinary course of business
consistent with past practice of the Company and its Subsidiaries. All such
tangible personal property is free and clear of all Liens, other than Permitted
Liens, and is adequate and suitable for the conduct by the Company and its
Subsidiaries of the business presently conducted or presently prepared to be
conducted, and is in good working order and condition, ordinary wear and tear
excepted, and its use complies in all material respects with all applicable
Laws.
(b) Each lease for any such real or personal property
is a legal valid and binding agreement, enforceable in accordance with its
terms, of the Company and its Subsidiaries and of each other Person that is a
party thereto and there is not presently, and the Company and its Subsidiaries
have no knowledge of, any default (or any condition or event which, after notice
or laps of time or both, would constitute a default) thereunder.
3.15 CONTRACTS. Except as set forth in the SEC Documents or on
SECTION 3.15 OF THE DISCLOSURE SCHEDULE, neither the Company nor any Subsidiary
is a party to any written or oral contract, instrument, agreement, commitment,
obligation, plan or arrangement, a copy of which would be required to be filed
with the Commission as an exhibit to a registration statement on Form S-1 or
applicable form (collectively, "Material Agreements") if the Company or any
Subsidiary were registering securities under the Securities Act. Except as set
forth on SECTION 3.15 OF THE DISCLOSURE SCHEDULE, the Company and each of its
Subsidiaries has in all material respects performed all the obligations required
to be performed by them to date under the foregoing agreements, have received no
notice of default and, to the best of the Company's knowledge are not in default
under any Material Agreement now in effect, the result of which could cause a
material adverse effect. No written or oral contract, instrument, agreement,
commitment, obligation, plan or arrangement of the Company or of any Subsidiary
limits or shall limit the payment of dividends on the Company's Common Stock or
Preferred Stock.
14
3.16 INSURANCE. The Company and its Subsidiaries have such
insurance policies in place as is customary for similar businesses similar
situated. Each such insurance policy is valid and binding and in full force and
effect, all premiums due thereunder have been paid when due and neither the
Company nor any Subsidiary, nor the Person to whom such policy has been issued
has received any notice of cancellation or termination in respect of any such
policy or is in default thereunder, and neither the Company nor any Subsidiary,
nor any Person to whom such policy has been issued know of any reason or state
of facts that could lead to the cancellation of such policies.
3.17 AFFILIATE TRANSACTIONS. Except as set forth in the SEC
Documents or on SECTION 3.17 OF THE DISCLOSURE SCHEDULE and except as
contemplated by this Agreement and the Transaction Documents, there are no
material Contracts or transactions exceeding $100,000 between the Company or any
Subsidiary by any current or former stockholder or Affiliate of the Company or
any Subsidiary or any Affiliate of any such stockholder or Affiliate.
3.18 EMPLOYEES; LABOR RELATIONS. Except as indicated in the
SEC Documents, the relationship between the employees of the Company and its
Subsidiaries is satisfactory. The Company and its Subsidiaries are not engaged
in any unfair or discriminatory labor practice. Except as indicated in the SEC
Documents, there is no strike, labor dispute, slowdown or stoppage pending or,
to the knowledge of the Company, threatened against the Company and its
Subsidiaries and no union representation question exists with respect to the
employees of the Company and its Subsidiaries and, to the knowledge of the
Company, no union organizing activities are taking place.
3.19 REGISTRATION RIGHTS. The Company is eligible to file a
registration statement on Form S-3 (or another similarly appropriate form)
covering the resale of Common Stock issued upon the conversion of the Preferred
Stock and upon exercise of the Warrants.
3.20 EXEMPTION FROM REGISTRATION; RESTRICTIONS ON OFFER AND
SALE OF SAME OR SIMILAR SECURITIES. Assuming the representations and warranties
of Purchaser set forth in Section 4.3 are true and correct in all material
respects, the offer and sale of the Units made pursuant to this Agreement is
exempt from the registration requirements of the Securities Act. Neither the
Company, its Subsidiaries nor any Person authorized to act on their behalf has,
in connection with the offering of the Units, engaged in (i) any form of general
solicitation or general advertising (as those terms are used within the meaning
of Rule 501(c) under the Securities Act, (ii) any action involving a public
offering within the meaning of the Securities Act, or (iii) any action that
would require the registration under the Securities Act of the offering and sale
of the Units pursuant to this Agreement or that would violate applicable state
securities or "blue sky" laws. The Company has not made, directly or indirectly,
any offer or sale of the Units or of securities of the same or a similar class
as the Units to be purchased pursuant to this Agreement that, if as a result of
the offer and sale of the Units contemplated hereby, could fail to be entitled
to exemption from the registration requirements of the Securities Act. As used
herein, the terms "offer" and "sale" have the meanings specified in Section 2(3)
of the Securities Act.
15
3.21 DISCLOSURE. This Agreement does not, and the documents
and certificates executed by the Company or otherwise furnished by the Company
to Purchaser do not, and at the Closing will not, contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements contained herein or therein, in light of the circumstances under
which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Company
that the statements contained in this Article IV are true and correct at the
date of this Agreement, and will be true and correct at the Closing Date (as
though made at the Closing Date).
4.1 ORGANIZATION; POWER AND AUTHORITY. Such Purchaser is duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of formation. Such Purchaser has the requisite power and authority
to execute and deliver this Agreement, the Certificate of Non-U.S. Person
(defined below) and the Accredited Investor Questionnaire (defined below), and
to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery by such Purchaser of this
Agreement to which it is a party, the performance by such Purchaser of its
obligations hereunder and the consummation of the transactions contemplated
hereby, have been duly and validly authorized by such Purchaser, no other action
on the part of such Purchaser being necessary. This Agreement has been duly and
validly executed and delivered by such Purchaser and constitutes, a legal, valid
and binding obligation of such Purchaser enforceable against such Purchaser in
accordance with its terms
4.2 NO CONFLICTS. The execution, delivery and performance of
this Agreement to which such Purchaser is a party and the consummation by such
Purchaser of the transactions contemplated hereby will not conflict with, or
constitute a default under, any agreement, indenture or instrument to which such
Purchaser is a party, or result in a violation of any order, judgment or decree
of any court or Governmental Authority having jurisdiction over such Purchaser
or any of its properties and no consent, authorization or order of, or filing or
registration with, any court or Governmental Authority is required by such
Purchaser for the execution, delivery and performance of this Agreement.
4.3 INVESTMENT INTENT; CAPACITY TO PROTECT INTEREST. Purchaser
is purchasing the Units solely for Purchaser's own account for investment and
not with a view to or for sale in connection with any distribution of the Units
or any portion or component thereof (including, without limitation, any of the
shares of Common Stock issued upon exercise or conversion of the Warrants or the
Preferred Stock included in the Units), and not with any present intention of
selling, offering to sell, granting any participation in or otherwise disposing
of or distributing the Units or any portion or component thereof in any
transaction except (i) in a transaction exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act") or
16
(ii) pursuant to a registration statement that shall have been declared
effective under the Securities Act (in all cases subject to the conditions and
terms of this Agreement and in compliance with applicable laws). The Purchaser
is experienced in making investments in the unregistered and restricted
securities of developing and emerging growth companies such as the Company. The
Purchaser understands that such investments (including the Purchaser's
investment in the Units) involve a high degree of speculation and risk. The
Purchaser has such knowledge and experience in financial and business matters
that the Purchaser is capable of evaluating the merits and risks of the
investment in the Company represented by the Units and, by reason of Purchaser's
financial and business experience and/or its pre-existing substantive
relationship with the Company, Purchaser has the capacity to protect the
Purchaser's interests in connection with the Units. The Purchaser is financially
able to bear the economic risk of the investment represented by the Units,
including a total loss of such investment. The entire legal and beneficial
interest in the Units is being purchased by Purchaser and shall be held only for
Purchaser's account and neither in whole nor in part for any other entity. By
executing this Agreement, Purchaser further represents that Purchaser does not
have any contract, undertaking, agreement or arrangement with any entity to
sell, transfer or grant any participation to such entity or to any third party,
with respect to any of the Units.
4.4 RELIANCE ON PURCHASER'S REPRESENTATIONS. Purchaser
understands and acknowledges that the sale of the Units under this Agreement
will not be registered under the Securities Act, on the ground that the sale
provided for in this Agreement is exempt from registration under the Securities
Act, and that the Company's reliance on such exemption (or exemptions) is
predicated on the Purchaser's representations that are set forth in this
Agreement, the Certificate of Non-U.S. Person and the "Accredited Investor"
Questionnaire. Purchaser understands that the basis for such exemption may not
be present if, notwithstanding such representations, Purchaser intends to
acquire any of the Units or any portion or component thereof (including, without
limitation, any of the shares of Common Stock issued upon exercise or conversion
of the Warrants or the Preferred Stock included in the Units) for a fixed or
determinable time in the future, or for a market rise, or for sale if the market
does not rise. Purchaser has no such intention and intends to acquire the Units
for the purposes of investment.
4.5 PRINCIPAL ADDRESS; RESIDENCY. Purchaser's principal
business address is as set forth on the signature page of this Agreement.
Purchaser is not a U.S. Person, as such term is defined under Regulations S and
has completed a Certificate of Non-U.S. Person. The Certificate of Non-U.S.
Person is incorporated herein by reference in its entirety and made a part of
this Agreement as if fully set forth herein. Purchaser acknowledges and
understands that, in addition to all other representations set forth in this
Agreement, the Company's reliance on the exemptions described under Section 4.3
of this Agreement is predicated on the representations, warranties and
certification set forth in the Certificate of Non-U.S. Person.
4.6 INFORMATION Concerning THE COMPANY. Without limiting the
terms of the investment representations set forth below, the Purchaser
represents that the Purchaser:
17
(a) has had an opportunity to ask questions and
receive answers from the Company and its officers and directors regarding
matters relevant to the Company and an investment therein (e.g., as represented
by the Units), including, without limitation, (1) the terms and conditions of
the Units, (2) the Company's intended business plan, (3) the Company's
capitalization and charter documents, (4) the status and nature of the Company's
assets, (5) the status and nature of the Company's liabilities (including
amounts and other obligations owed to third parties), (6) the Company's current
third party arrangements, (7) the early-stage, developing and/or emerging nature
of the Company's business, (8) the business prospects and financial affairs of
the Company, (9) the competitive environment that the Company and its proposed
products and services face and (10) the Company's imminent need for substantial
amounts of additional financing;
(b) has further had the opportunity to obtain any and
all information that the Purchaser deemed and deems necessary to evaluate the
Company and the Purchaser's acquisition of the Units, as well as to verify the
accuracy of information otherwise provided to the Purchaser;
(c) received and has reviewed the SEC Documents; and
(d) has otherwise received and reviewed all such
information Purchaser deems necessary and appropriate to evaluate the financial
risks inherent in making, and the merits of, an investment in the Units.
4.7 ACCREDITED INVESTOR; NON-U.S. PERSON. The Purchaser is an
"accredited investor" as that term is defined in Rule 501 promulgated under the
Securities Act. The Purchaser is not a U.S. Person. All statements and
representations made in the "Accredited Investor" Questionnaire and the
Certificate of Non-U.S. Person, in the forms attached hereto as [Exhibit C and
Exhibit D (respectively)], which was or is being furnished concurrently herewith
to the Company by Purchaser, continue to be and are true, accurate and complete
as of the date of this Agreement.
4.8 OFFSHORE TRANSACTION. Purchaser understands and
acknowledges that:
(a) The purchase and sale of the Units under this
Agreement are being offered and sold outside the United States to an entity
located outside the United States, which is not a U.S. Person and which is not
purchasing for the benefit or the account of a U.S. Person (as defined below) (a
"Non-U.S. Person"). Whenever used in this Agreement, the terms "United States"
and "U.S. Person" shall have the meanings given to them under Rule 902(k) and
Rule 902(l) of Regulation S under the Securities Act, a recitation of which is
set forth in the Certificate of Non-U.S. Person.
(b) Neither any offer nor the sale of the Units to
Purchaser under this Agreement was accomplished by means of advertising in any
publication or by means of "directed selling efforts" in the United States, as
such term is defined under Rule 902(c) of Regulation S under the Securities Act.
A recitation of Rule 902(c) is set forth in the Certificate of Non-U.S. Person.
18
(c) Neither the offer nor the sale of the Units was
consummated in the United States.
(d) With respect to the offer and sale of the Units
under this Agreement and at all times contemplated herein, Purchaser was and
continues to remain located outside the United States.
4.9 Restricted Securities. Purchaser understands and
acknowledges that:
(a) The sale of the Units has not been registered
under the Securities Act;
(b) The Units must be held indefinitely unless
subsequently registered under the Securities Act or an exemption from the
registration requirements of the Securities Act is available (such as Rule 144
under the Securities Act);
(c) The Units are "restricted" securities within the
meaning of Rule 144 and will be stamped with the legends specified in Section 8
of this Agreement;
(d) Without limiting the acknowledgment set forth in
subpart (a) of this Section and without limiting any of the other
acknowledgements and representations set forth in Section 4 of this Agreement,
before the expiration of the period commencing on the date of Closing and ending
one year thereafter (the "Restricted Period"): (i) none of the Units nor any
portion or component thereof (and none of the shares of Common Stock issued upon
exercise or conversion of the Warrants or Preferred Stock included in the Units)
may be sold, transferred or assigned, or offered for sale, transfer or
assignment to a U.S. Person or for the account or benefit of a U.S. Person; (ii)
none of the Units nor any portion or component thereof (and none of the shares
of Common Stock issued upon conversion or exercise of the Warrants or Preferred
Stock included in the Units) may be sold, transferred or assigned, or offered
for sale, transfer or assignment, in the United States or in any transaction
consummated in the United States (in whole or in part);
(e) Further, without limiting the acknowledgment set
forth in subpart (a) of this Section, none of the Units nor any portion or
component thereof (and none of the shares of Common Stock issued upon conversion
or exercise of the Warrants or Preferred Stock included in the Units) may be
sold, transferred or assigned, or offered for sale, transfer or assignment,
before the expiration of the Restricted Period unless each of the following
conditions is satisfied: (i) each prospective subsequent purchaser thereof
certifies that such purchaser is not a U.S. Person and is not acquiring such
securities for the account or benefit of any U.S. Person; (ii) each such
prospective subsequent purchaser agrees to resell such securities in accordance
with Regulation S, pursuant to a registration under the Securities Act or
pursuant to an available exemption from registration (other than Regulation S);
and (iii) each certificate evidencing such securities to be transferred contains
a legend to the effect that transfer of such securities is prohibited except in
accordance with Regulation S, which may be in the form set forth elsewhere in
this Agreement;
19
(f) The Company will make a notation in its records
of the aforementioned restrictions on transfer and legends; and
(g) The Company has no obligation to register the
transfer of any of the Units or any portion or component thereof (including,
without limitation, any of the shares of Common Stock issued upon conversion or
exercise of the Preferred Stock and the Warrants included in the Units) and
shall refuse to register any such transfer not in accordance with Regulation S.
4.10 LIMITATIONS ON DISPOSITION. Without in any way limiting
the representations set forth above, Purchaser further agrees that Purchaser
shall in no event make any disposition of all or any portion or component of the
Units unless and until:
(a) There is then in effect a registration statement
under the Securities Act covering such proposed disposition, and such
disposition is made in accordance with such registration statement; (ii) the
resale provisions of Rule 144 are available and the proposed disposition would
comply with the requirements of Regulation S in the opinion of counsel to the
Company; or (iii)(A) Purchaser shall have notified the Company of the
circumstances surrounding the proposed disposition, (B) Purchaser shall have
furnished the Company with an opinion of Purchaser's counsel to the effect that
such disposition will not require registration of any of such securities under
the Securities Act, (C) the proposed disposition would comply with all
applicable requirements of Regulation S, and (D) counsel for the Company shall
have concurred with such opinion of Purchaser's counsel, and the Company shall
have advised Purchaser of such concurrence.
(b) Each transferee of such securities agrees in
writing to be bound by all terms of this Agreement, including, without
limitation, the "lock-up" provisions set forth in this Agreement.
4.11 NO GOVERNMENT RECOMMENDATION OR APPROVAL. Purchaser
understands that no United States federal or state agency, or similar agency of
any other country, has passed on or made any recommendation or endorsement of
the Company, this transaction or the purchase of the Units.
4.12 COMPLIANCE WITH OTHER LAWS. Purchaser has observed the
laws of Purchaser's jurisdiction in connection with any invitation to subscribe
for or purchase the Units or any use of this Agreement, including (i) the legal
requirements within Purchaser's jurisdiction for the purchase of the Units, (ii)
any foreign exchange restriction applicable to such purchase, (iii) any
20
governmental or other consent that may need to be obtained and (iv) the income
tax and other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale or transfer of the Units. Purchaser's subscription and
payment for, and Purchaser's continued beneficial ownership of, the Units will
not violate any applicable securities or other law of Purchaser's jurisdiction.
4.13 RELIANCE ON OWN INVESTIGATION. Purchaser has performed an
independent due diligence review of the Company, its business enterprise and
operations. In connection with its due diligence review of the Company,
Purchaser received and has reviewed the SEC Documents and all other documents
and information that Purchaser considers material and relevant to the purchase
of the Units hereunder. Notwithstanding anything contained in this Agreement to
the contrary and notwithstanding the representations set forth elsewhere under
Section 4 of this Agreement, in making an investment decision with respect to
the Units under this Agreement, Purchaser is relying entirely on its own
investigation and examination of the Company and its business and (other than
the information in the SEC Documents) has not based any investment decision on
statements from the Company or any of its officers, directors, employees, agents
or other representatives.
4.14 LEGENDS. Unless such securities are covered by an
effective registration statement under the Securities Act, Purchaser understands
and agrees that the Company shall cause the legends set forth below or legends
substantially equivalent thereto to be placed on all certificates evidencing the
shares of Preferred Stock included in the Units and the shares of Common Stock
issued upon conversion thereof or upon exercise of the Warrants along with all
other legends that may be required by state or federal securities laws:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE.
THESE SECURITIES ARE BEING OFFERED AND SOLD ONLY PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY
PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ALL
APPLICABLE STATE SECURITIES LAWS (IF ANY).
21
"THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY, BEFORE THE DATE WHICH IS ONE
YEAR AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST
DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER
OF THIS SECURITY, ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) PURSUANT TO OFFERS AND SALES TO NON-U.S. PERSONS
THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT,
SUBJECT TO THE COMPANY'S RIGHT BEFORE ANY OFFER, SALE OR TRANSFER
PURSUANT TO CLAUSE (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATES AND/OR OTHER INFORMATION REASONABLY SATISFACTORY
TO THE COMPANY. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
FURTHER AGREES NOT TO ENGAGE IN HEDGING TRANSACTIONS INVOLVING THESE
SECURITIES UNLESS SUCH TRANSACTIONS MEET THE REQUIREMENTS AND COMPLY
WITH THE SECURITIES ACT."
4.15 STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions set forth in this Agreement, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent, if
any, and that, if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
4.16 REFUSAL TO TRANSFER. The Company shall not be required
(a) to transfer on its books any of such shares of Preferred Stock or Warrant
Shares that have been sold or otherwise transferred in violation of any of the
provisions of this Agreement or (b) to treat as owner of such securities or to
accord the right to vote or pay dividends to any purchaser or other transferee
to whom such securities have been so transferred.
22
ARTICLE V
COVENANTS OF THE COMPANY
5.1 COVENANTS AND AGREEMENTS OF THE COMPANY PRIOR TO CLOSING.
The Company, during the period from the date hereof through the Closing,
covenants and agrees with the Purchaser that, at all times from and after the
date hereof and until the Closing, the Company shall comply with all covenants
and provisions of this Section 5.1, except to the extent Purchaser may otherwise
consent in writing.
(a) COOPERATION. The Company shall take all necessary
or desirable steps and proceed diligently and in good faith and use commercially
reasonable efforts, as promptly as practicable, to obtain all consents,
approvals or actions of, to make all filings with and to give all notices to,
Governmental Authorities or any other Person required of the Company, or of the
Purchaser to consummate the transactions contemplated hereby and by the
Transaction Documents, and the Company shall use commercially reasonable efforts
to promptly effect the transactions contemplated hereby and by the Transaction
Documents. Without limiting the generality of the foregoing, the Company shall
promptly take all necessary action to amend the Charter so as to validly
implement the terms of the Preferred Stock therein.
(b) INVESTIGATION BY PURCHASER. From the date hereof
through the Closing, the Company shall: (i) provide the Purchaser and its
officers, employees, agents, counsel, accountants, financial advisors,
consultants and other representatives (together "Representatives") with full
access, upon reasonable prior notice and during normal business hours, to all
officers, employees, agents and accountants of the Company and its Subsidiaries
and their Assets and Properties and Books and Records, and (ii) furnish
Purchaser and such Representatives with all such information and data concerning
the business and operations of the Company and its Subsidiaries, as the case may
be, as the Purchaser or any of such other Representatives reasonably may request
in connection with such investigation; provided, however, that the Company shall
not be obligated to furnish to Purchaser or any of the Representatives any
confidential or proprietary information relating to the Company or its business.
Nothing contained in this Section 5.1(b) or any other investigation by or
disclosure to the Purchaser shall affect the survival of or modify, limit or
create any exception to the representations, warranties, covenants, agreements
and indemnities of the Company hereunder or the conditions to the obligations of
Purchaser to close as set forth in Article VI hereof.
(c) Conduct of Business. Except for the transactions
contemplated by this Agreement and the Transaction Documents, from the date
hereof through the Closing Date, the Company and its Subsidiaries shall conduct
their business only in the ordinary course consistent with the past practice of
the Company and its Subsidiaries and the terms of this Agreement. Without
limiting the generality of the foregoing, the Company shall:
(i) use commercially reasonable efforts to (A)
preserve intact the present business organization and reputation of the Company
and its Subsidiaries, (B) keep available (subject to dismissals and retirements
in the ordinary course of business consistent with the past practice of the
Company) the services of the present officers, employees and consultants of the
Company and its Subsidiaries, (C) maintain the Intellectual Property, Internet
domain names, Assets and Properties of the Company and its Subsidiaries in good
working order and condition, ordinary wear and tear excepted, (D) maintain the
23
good will of customers, providers and lenders and other Persons with whom the
Company and its Subsidiaries otherwise have significant business relationships
and (E) continue all current sales, marketing and promotional activities
relating to the business and operations of the Company and its Subsidiaries;
(ii) cause the Books and Records of the Company and
its Subsidiaries to be maintained in the usual, regular and ordinary manner and
observe all corporate formalities required by applicable law;
(iii) comply in all material respects with all Laws
and Orders applicable to the business and operations of the Company and its
Subsidiaries (including without limitation those applicable to the Company's
Benefit Plans), and promptly following receipt thereof give Purchaser copies of
any notice received from any Governmental Authority or other Person alleging any
violation of any such Law or Order;
(iv) refrain from: (A) taking any of the actions
listed in Section 3.9 hereof; (B) violating, breaching, or defaulting under, in
any material respect, or taking or failing to take any action that (with or
without notice or lapse of time or both) would constitute a material violation
or breach of, or default under, any term or provision of any material Permit
held or used by the Company or its Subsidiaries or any material Contract
(including without limitation any license agreement) to which the Company or its
Subsidiaries is a party or by which any of their Assets and Properties is bound;
(C) taking or agreeing or committing to take or omitting or agreeing or
committing to omit any action that would make any representation or warranty of
the Company hereunder inaccurate in any material respect; (D) taking any action
or course of action inconsistent with compliance with the covenants and
agreements of the Company herein or which might adversely affect the interests
of Purchaser hereunder; and (E) entering into any agreement to engage in any of
the activities listed in this Section 5.1(c).
(d) NOTICE AND CURE. The Company shall notify
Purchaser promptly in writing of, and contemporaneously shall provide Purchaser
with true and complete copies of any and all information or documents relating
to, and shall use commercially reasonable efforts to cure before the Closing
Date, any event, transaction or circumstance occurring after the date of this
Agreement that causes or shall cause any covenant or agreement of the Company
under this Agreement to be breached or that renders or shall render untrue any
representation or warranty of the Company contained in this Agreement as if the
same were made on or as of the date of such event, transaction or circumstance.
(e) FULFILLMENT OF CONDITIONS. The Company shall take
all steps necessary or desirable and use commercially reasonable efforts to
satisfy each condition to the obligations of Purchaser contained in this
Agreement and shall not take or fail to take any commercially reasonable action
that could reasonably be expected to result in the non-fulfillment of any such
condition.
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5.2 COVENANTS AND AGREEMENTS AFTER CLOSING. The Company,
during the time periods specified below, covenants and agrees with the Purchaser
that the Company shall comply with all covenants and provisions of this Section
5.2, except to the extent Purchaser may otherwise consent in writing.
(a) RESERVATION OF COMMON STOCK. So long as any of
the Preferred Stock or Warrants remains outstanding, the Company shall take all
action necessary to at all times have authorized, and reserved for the purpose
of issuance, no less than 100% of the aggregate number of shares of Common Stock
needed to provide for the issuance of Common Stock upon conversion of the
Preferred Stock and upon exercise of the Warrants.
(b) REGISTRATION. Within 30 days of the date of this
Agreement, the Company shall prepare and file with the SEC a registration
statement on Form S-3 (or another similarly appropriate form) (the "REGISTRATION
STATEMENT") covering the resale of Common Stock issued upon the conversion of
the Initial Shares and upon exercise of the Initial Warrants, and the Company
shall use commercially reasonable efforts to have such Registration Statement
declared effective by the SEC within 90 days after such filing. If the Remaining
Units are purchased at the Subsequent Closing Date, the Company shall amend such
Registration Statement to cover the resale of Common Stock issued upon the
conversion of the Remaining Shares and upon exercise of the Remaining Warrants
before such Registration Statement is declared effective. In addition, the
Company shall file registration statements covering additional shares underlying
the conversion of the Preferred Stock and upon exercise of the Warrants. If the
Company has not filed such Registration Statement with the SEC within thirty
(30) days from the date hereof, the Company shall be required to pay to
Purchaser interest on the Common Stock issued upon the conversion of the Initial
Shares and upon exercise of the Initial Warrants at an annual rate of 35% of the
Initial Purchase Price accruing on a daily basis. The Company shall bear all
expenses and fees incurred in connection with the preparation, filing, and
amendment of the Registration Statement with the SEC. The Purchaser agrees to
cooperate with the Company in the preparation and filing of the Registration
Statement, and in the furnishing of information concerning the Purchaser for
inclusion therein, and in any efforts by the Company to establish that the sale
of the Units to the Purchaser is exempt under the Securities Act.
(c) TRANSFER AGENT INSTRUCTIONS. The Company shall
issue irrevocable instructions to its transfer agent, and any subsequent
transfer agent, to issue certificates, registered in the name of the Purchaser
or its respective nominee(s), for Common Stock issued upon conversion of the
Preferred Stock and upon exercise of the Warrants in such amounts as specified
from time to time by the Purchaser to the Company.
5.3 COVENANTS OF THE PURCHASER AFTER THE CLOSING.
(d) SECURITIES LAW COMPLIANCE. Purchaser shall not
resell or offer to resell any of the Units or any portion or component thereof,
and shall not transfer, assign or offer to transfer or assign any portion of the
Units or any portion or component thereof, except in compliance with all
applicable terms and conditions set forth in this Agreement (including, without
limitation, all applicable terms, conditions and limitations set forth under
25
Section 4 of this Agreement) and the requirements of Regulation S. Purchaser
shall not resell or offer to resell any of the Units or any portion or component
thereof, and shall not transfer, assign or offer to transfer or assign any
portion or component of the Units, in the United States or to any person in the
United States, to any U.S. Person or to others for the benefit or account of any
U.S. Person, at any time before the expiration of the Restricted Period. Without
limiting the application of any of the remaining conditions set forth in this
Section 5.3, Purchaser shall in no case resell or offer to resell any of the
Units or any portion or component thereof, and shall not transfer, assign or
offer to transfer or assign any portion or component of the Units, before
expiration of the Restricted Period, unless each of the following additional
conditions is satisfied: (i) the prospective subsequent purchaser certifies that
such purchaser is not a U.S. Person and is not acquiring such securities for the
account or benefit of any U.S. Person; (ii) the prospective subsequent purchaser
agrees to resell all such securities in accordance with Regulation S, pursuant
to a registration under the Securities Act or pursuant to an available exemption
from registration; and (iii) under the terms of the sale to such prospective
subsequent purchaser, each certificate evidencing all such securities to be
transferred must contain a legend to the effect that transfer of such securities
is prohibited except in accordance with Regulation S, which may be in the form
set forth in this Agreement.
(e) PROHIBITED TRANSACTIONS. Until such time as any
of the shares of Preferred Stock purchased hereunder or any of the Warrants (or
any portion thereof) remains outstanding, Purchaser shall not engage in (nor
commit to engage in) short sales, puts, calls or other hedging transactions that
could be deemed to have an effect on the trading price of the Common Stock.
ARTICLE VI
CONDITIONS TO OBLIGATIONS OF PURCHASER
6.1 CONDITIONS TO CLOSING. The obligations of the Purchaser
hereunder are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in part
by such Purchaser in its sole discretion):
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Company in this Agreement shall be
true and correct in all material respects (if not qualified by materiality) and
in all respects (if qualified by materiality) on and as of the Closing Date as
though such representation or warranty was made on and as of the Closing Date,
and any representation or warranty made as of a specified date earlier than the
Closing Date shall also have been true and correct in all material respects on
and as of such earlier date.
26
(b) PERFORMANCE. The Company shall have performed and
in all material respects complied with each agreement, covenant and obligation
required by this Agreement or any of the Transaction Documents to be so
performed or complied with by the Company at or before the Closing.
(c) NO SUSPENSION, ETC. From the date hereof to the
Closing Date, trading in the Company's Common Stock shall not have been
suspended by the SEC, and, at any time prior to the Closing Date, trading in
securities generally as reported by Bloomberg Financial Markets ("Bloomberg")
shall not have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by Bloomberg, or on the New
York Stock Exchange, nor shall a banking moratorium have been declared either by
the United States, or New York State authorities, nor shall there have occurred
any material outbreak or escalation of hostilities or other national or
international calamity or crisis of such magnitude in its effect on, or any
material adverse change in any financial market which, in each case, in the
judgment of the Purchaser, makes it impracticable or inadvisable to purchase the
Units.
(d) ORDERS AND LAWS. There shall not be in effect on
the Closing Date any Order or Law restraining, enjoining or otherwise
prohibiting or making illegal the consummation of any of the transactions
contemplated by this Agreement or any of the Transaction Documents or which
could reasonably be expected to otherwise result in a material diminution of the
benefits of the transactions contemplated by this Agreement or any of the
Transaction Documents to Purchaser, and there shall not be pending or threatened
on the Closing Date any Action or Proceeding or any other action which could
reasonably be expected to result in the issuance of any such Order or Law.
(e) CONSENTS. All necessary consents (or in lieu
thereof waivers) to the performance by the Purchaser, or the Company, of its
obligations under this Agreement and the Transaction Documents or to the
consummation of the transactions contemplated hereby and thereby to any
Governmental Authority or any other Person and where the failure to obtain any
such consent (or in lieu thereof waiver) could reasonably be expected,
individually or in the aggregate with other such failures, to materially
adversely affect the Purchaser or the Business or Condition of the Company and
its Subsidiaries or otherwise result in a material diminution of the benefits to
such Purchaser of the transactions contemplated by this Agreement and the
Transaction Documents, (i) shall have been obtained, (ii) shall be in form and
substance satisfactory to the Purchaser in its reasonable discretion, (iii)
shall not be subject to the satisfaction of any material condition that has not
been satisfied or waived and (iv) shall be in full force and effect.
(f) OPINION OF COUNSEL. Purchaser shall have received
a customary opinion of counsel to the Company, dated the Closing Date, in form
and substance reasonably satisfactory to Purchaser, including without limitation
as to the due issuance and validity of the Units purchased hereby.
27
(g) GOOD STANDING CERTIFICATES. The Company shall
have delivered to Purchaser (a) certified copy of the Company's Certificate of
Incorporation as amended to effect the transactions contemplated hereby and (b)
current certificates from the Secretary of State or other appropriate official
of the respective jurisdictions of incorporation or organization to the effect
that the Company is in good standing or subsisting in such jurisdiction.
(h) TRANSACTION DOCUMENTS. The Transaction Documents
other than the Warrant Agreement evidencing the Remaining Warrants and such
other documents, at or after the Subsequent Closing Date, in connection with the
purchase of the Remaining Unit shall have been duly executed and delivered by
the respective parties thereto other than Purchaser and shall be in full force
and effect.
(i) RESERVATION OF SHARES. As of the Closing Date,
the Company shall have reserved out of its authorized and unissued Common Stock,
solely for the purpose of effecting the issuance of Common Stock upon conversion
of the Preferred Stock and upon exercise of the Warrants, a number of shares of
Common Stock equal to at least 100% of the reasonably expected number of shares
of Common Stock which would be issuable upon conversion of the Preferred Stock
and upon exercise of the Warrants following the Closing (after giving effect to
the Units to be issued on the Closing Date and assuming all such Units were
fully issuable and exercisable, as applicable, on such date regardless of any
limitation on the timing or amount of such issuances or exercises).
(j) NO ADVERSE CHANGE. There shall have occurred no
material adverse change in the Business or Condition of the Company and its
Subsidiaries since the date of this Agreement and Purchaser shall not have
discovered in its ongoing due diligence of the Company any facts, which alone or
together with all other such facts, has or is reasonably likely to have, a
material adverse effect on the Business or Condition of the Company and its
Subsidiaries.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE COMPANY
7.1 CONDITIONS TO CLOSING. The obligations of the Company
hereunder are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in part
by the Company, as the case may be, in their sole discretion):
(a) REPRESENTATIONS AND WARRANTIES. Each of the
representations and warranties made by the Purchaser in this Agreement,
Certificate of Non U.S. Person and the Accredited Investor Questionnaire shall
be true and correct in all material respects on and as of the Closing Date as
though such representation or warranty was made on and as of the Closing Date.
28
(b) PERFORMANCE. Purchaser shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by Purchaser at
or before the Closing.
(c) ORDERS AND LAWS. There shall not be in effect on
the Closing Date any Orders or Laws that became effective after the date of this
Agreement restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or any of
the Transaction Documents.
(d) TRANSACTION DOCUMENTS. The Transaction Documents
(other than the Warrant Agreement evidencing the Remaining Warrant and such
other documents, if any, to be delivered at or after the Subsequent Closing Date
in connection with the purchase of the Remaining Units) shall have been duly
executed and delivered by the respective parties thereto other the Company and
shall be in full force and effect.
(e) CERTIFICATE OF NON-U.S. PERSON. The Company shall
have received from Purchaser a completed Certificate of Non-U.S. Person in the
form attached to this Agreement as Exhibit C (the "Certificate of Non-U.S.
Person").
(f) INVESTOR QUESTIONNAIRE. The Company shall have
received from Purchaser a completed "Accredited" Investor Questionnaire in the
form attached to this Agreement as Exhibit D (the "Accredited Investor
Questionnaire").
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, WARRANTIES,
COVENANTS AND AGREEMENTS
8.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. (a) Notwithstanding any right of Purchaser (whether or not
exercised) to investigate the affairs of the Company or any right of any party
(whether or not exercised) to investigate the accuracy of the representations
and warranties of another party contained in this Agreement or the waiver of any
condition to Closing, the Company, on the one hand, and Purchaser, on the other
hand, have the right to rely fully upon the representations, warranties,
covenants and agreements of the other contained in this Agreement.
(b) The representations, warranties, covenants and
agreements of the Company contained in this Agreement will survive the Closing
until the second anniversary of the Closing Date; except that any representation
or warranty that would otherwise terminate in accordance with the above will
continue to survive if a Claim Notice or Indemnity Notice (as applicable) shall
have been timely given under Article IX on or prior to such termination date,
until the related claim for indemnification has been satisfied or otherwise
resolved as provided in Article IX, but only with respect to matters described
in such Claim Notice or Indemnity Notice.
29
ARTICLE IX
INDEMNIFICATION
9.1 INDEMNIFICATION. (a) Whether or not the transactions
contemplated by this Agreement are consummated, each of the parties hereto (in
each case, the "Indemnifying Party") shall indemnify the other party hereto and
its Affiliates and each of their respective members, officers, directors,
partners, employees, agents and stockholders in respect of, and hold each of
them harmless from and against, any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject, resulting
from, arising out of or relating to (i) any misrepresentation or breach of
warranty or non-fulfillment of or failure to perform any covenant or agreement
on the part of the Company contained in this Agreement, (ii) the assertion by
any Person not a party to this Agreement of any claim against an Indemnified
Party that the transactions contemplated by this Agreement or the Transaction
Documents violate preexisting understandings or arrangements with the
Indemnifying Party, or (iii) violations of applicable securities laws by the
Indemnifying Party in connection with the offering of the securities to be
purchased pursuant to this Agreement.
(b) The Indemnifying Party shall reimburse each
Indemnified Party (whether or not such Indemnified Party is a party to this
Agreement) for all reasonable expenses (including reasonable counsel fees and
disbursements) incurred by such Indemnified Party in connection with
investigating and preparing or defending any Action or Proceeding referred to
above (whether or not such Indemnified Party is a formal party to any such
Action or Proceeding). The Company and Purchaser agree that if and to the extent
that the indemnification set forth herein is finally determined by a court of
competent jurisdiction to be unenforceable, the Indemnifying Party shall make
the maximum contribution to the payment and satisfaction of the indemnified
Losses as shall be permissible under applicable laws.
9.2 METHOD OF ASSERTING CLAIMS. All claims for indemnification
by any Indemnified Party under Section 9.1 will be asserted and resolved as
follows:
(a) In order for an Indemnified Party to be entitled
to any indemnification provided for under Section 9.1 in respect of, arising out
of or involving a claim or demand made by any Person not a party to this
Agreement against the Indemnified Party (a "THIRD PARTY CLAIM"), the Indemnified
Party must deliver a Claim Notice to the Indemnifying Party within ten (10)
Business Days after receipt by such Indemnified Party of written notice of the
Third Party Claim; PROVIDED, HOWEVER, that failure to give such Claim Notice
shall not affect the indemnification provided hereunder except to the extent the
Indemnifying Party shall have been actually prejudiced as a result of such
failure.
(b) If a Third Party Claim is made against an
Indemnified Party, the Indemnifying Party shall be entitled to participate in
the defense thereof and, if it so chooses, to assume the defense thereof with
counsel selected by the Indemnifying Party, which counsel must be reasonably
satisfactory to the Indemnified Party. Should the Indemnifying Party so elect to
assume the defense of a Third Party Claim, the Indemnifying Party shall not be
30
liable to the Indemnified Party for legal expenses subsequently incurred by the
Indemnified Party in connection with the defense thereof, but shall continue to
pay for any expenses of investigation or any Loss suffered. If the Indemnifying
Party assumes such defense, the Indemnified Party shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Party. If (i) the
Indemnifying Party shall not assume the defense of a Third Party Claim with
counsel satisfactory to the Indemnified Party within ten Business Days of any
Claim Notice, or (ii) legal counsel for the Indemnified Party notifies the
Indemnifying Party that there are or may be legal defenses available to the
Indemnified Party or to other Indemnified Parties which are different from or
additional to those available to the Indemnifying Party, which, if the
Indemnified Party and the Indemnifying Party were to be represented by the same
counsel, would constitute a conflict of interest for such counsel or prejudice
prosecution of the defenses available to such Indemnified Party, or (iii) the
Indemnifying Party shall assume the defense of a Third Party Claim and fail to
diligently prosecute such defense, then in each such case the Indemnified Party,
by notice to the Indemnifying Party, may employ its own counsel and control the
defense of the Third Party Claim and the Indemnifying Party shall be liable for
the reasonable fees, charges and disbursements of counsel employed by the
Indemnified Party; and the Indemnified Party shall be promptly reimbursed for
any such fees, charges and disbursements, as and when incurred. Whether the
Indemnifying Party or the Indemnified Party control the defense of any Third
Party Claim, the parties hereto shall cooperate in the defense thereof. Such
cooperation shall include the retention and provision to the counsel of the
controlling party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material provided
hereunder. The Indemnifying Party shall have the right to settle, compromise or
discharge a Third Party Claim (other than any such Third Party Claim in which
criminal conduct is alleged) without the Indemnified Party's consent if such
settlement, compromise or discharge (i) constitutes a complete and unconditional
discharge and release of the Indemnified Party, and (ii) provides for no relief
other than the payment of monetary damages and such monetary damages are paid in
full by the Indemnifying Party.
(c) In the event any Indemnified Party shall have a
claim under Section 9.1 against any Indemnifying Party that does not involve a
Third Party Claim, the Indemnified Party shall deliver an Indemnity Notice with
reasonable promptness to the Indemnifying Party. The failure by any Indemnified
Party to give the Indemnity Notice shall not impair such party's rights
hereunder except to the extent that an Indemnifying Party demonstrates that it
has been materially prejudiced thereby. If the Indemnifying Party notifies the
Indemnified Party that it does not dispute the claim described in such Indemnity
Notice or fails to notify the Indemnified Party within the Dispute Period
whether the Indemnifying Party disputes the claim described in such Indemnity
Notice, the Loss in the amount specified in the Indemnity Notice will be
conclusively deemed a liability of the Indemnifying Party under Section 9.1 and
the Indemnifying Party shall pay the amount of such Loss to the Indemnified
Party on demand. If the Indemnifying Party has timely disputed its liability
with respect to such claim, the Indemnifying Party and the Indemnified Party
will proceed in good faith to negotiate a resolution of such dispute, and if not
resolved through negotiations within the Resolution Period, such dispute shall
be resolved by litigation in a court of competent jurisdiction.
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ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing:
(a) by mutual written agreement of the Company, on
the one hand, and the Purchaser, on the other hand;
(b) by the Company, on the one hand, or the
Purchaser, on the other hand, in the event (i) of a material breach hereof by
the non-terminating party if such non-terminating party fails to cure such
breach within five (5) Business Days following notification thereof by the
terminating party; or (ii) upon the occurrence of a material adverse change in
the Business and/or Condition of the Company and its Subsidiaries;
(c) at any time after the expiration of 30 days from
the date by which the Closing should have occurred pursuant to the terms of this
Agreement, by the Company, on the one hand, or the Purchaser, on the other hand,
upon notification of the non-terminating party by the terminating party if the
Closing shall not have occurred on or before such date and such failure to
consummate is not caused by a breach of this Agreement by the terminating party.
10.2 EFFECT OF TERMINATION. (a) If this Agreement is validly
terminated pursuant to Section 10.1, this Agreement will forthwith become null
and void, and there will be no liability or obligation on the part of the
Company or Purchaser, except as provided in clause (b) below and except that the
provisions with respect to expenses in Section 11.3 and confidentiality in
Section 11.5 will continue to apply following any such termination.
(b) Notwithstanding any other provision in this
Agreement to the contrary, upon termination of this Agreement pursuant to
Section 10.1(b) or (c), the Company will remain liable to the Purchaser for any
misrepresentation or breach of warranty or non-fulfillment of or failure to
perform any covenant or agreement of the Company existing at the time of such
termination, and Purchaser will remain liable to the Company for any
misrepresentation or breach of warranty or non-fulfillment of or failure to
perform any covenant or agreement of Purchaser existing at the time of such
termination, the Company or Purchaser may seek such remedies, including damages
and reasonable fees of attorneys, against the other with respect to any such
breach as are provided in this Agreement, including, without limitation, its
obligations under Article IX with respect thereto or as are otherwise available
at Law or in equity.
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ARTICLE XI
MISCELLANEOUS
11.1 NOTICES. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only if
delivered personally against written receipt or by facsimile transmission or
mailed by prepaid first class certified mail, return receipt requested, or
mailed by overnight courier prepaid, to the parties at the following addresses
or facsimile numbers:
33
(a) If to the Company, to:
XXXX.xxx, Inc.
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
with a copy to:
Pillsbury Madison & Sutro LLP
000 Xxxx Xxxxxx Xxxxx, 0xx Xxxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxxxxxxxx X. Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) If to the Purchaser, to:
Dominion Fixed Income Plus Fund Limited
Cumberland House
27 Cumberland Street
Nassau, Bahamas
Attn: Xxxxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
with a copy to:
Wuersch & Xxxxxx LLP
00 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Fax No.: (000) 000-0000
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, (iii) if delivered by
mail in the manner described above to the address as provided in this Section,
be deemed given on the earlier of the third Business Day following mailing or
upon receipt and (iv) if delivered by overnight courier to the address as
34
provided in this Section, be deemed given on the earlier of the first Business
Day following the date sent by such overnight courier or upon receipt (in each
case regardless of whether such notice, request or other communication is
received by any other Person to whom a copy of such notice is to be delivered
pursuant to this Section). Any party from time to time may change its address,
facsimile number or other information for the purpose of notices to that party
by giving notice specifying such change to the other party hereto.
11.2 ENTIRE AGREEMENT. This Agreement and the Transaction
Documents supersede all prior discussions and agreements between the parties
with respect to the subject matter hereof and thereof and contain the sole and
entire agreement between the parties hereto with respect to the subject matter
hereof and thereof.
11.3 FEES AND EXPENSES. Except as otherwise expressly provided
in this Agreement (including without limitation as provided in Article IX,
Section 10.2 and this Section 11.3), the Company will pay all costs and expenses
including reasonable legal fees incurred in connection with this Agreement, the
Transaction Documents and the transactions contemplated hereby and thereby
through a $25,000.00 retainer deposited with Purchaser's counsel. At the
Closing, the Company shall promptly reimburse Purchaser for any balance of its
remaining Transaction Expenses through and including the Closing Date and any
such fees incurred thereafter by wire transfer of immediately available funds to
accounts designated by Purchaser.
11.4 PUBLIC ANNOUNCEMENTS. At all times at or before the
Closing, unless required by law or legal process, the Company, on the one hand,
and the Purchaser, on the other hand, will not issue or make any statements or
releases to the public with respect to this Agreement or the transactions
contemplated hereby without the consent of the other. The Company and Purchaser
will also obtain the other party's prior approval of any press release to be
issued immediately following the Closing announcing the consummation of the
transactions contemplated by this Agreement.
11.5 CONFIDENTIALITY. Each party hereto will hold in
confidence from any Person (other than any Affiliate or Representative), unless
compelled to disclose by law or legal process, all documents and information
concerning the other party or any of its Affiliates furnished to it by the other
party in connection with this Agreement or the transactions contemplated hereby,
except to the extent that such documents or information can be shown to have
been (a) previously known to the party receiving such documents or information,
(b) in the public domain (either prior to or after the furnishing of such
documents or information hereunder) through no fault of such receiving party or
(c) later acquired by the receiving party by another source if the receiving
party is not aware that such source is under an obligation to another party
hereto to keep such documents and information confidential. In the event the
transactions contemplated hereby are not consummated, upon the request of the
other party, each party will, and will cause their Affiliates and their
respective representatives to, promptly to deliver or cause to be delivered all
copies of documents and information furnished by the other party in connection
with this Agreement or the transactions contemplated hereby and destroy or cause
to be destroyed all notes, memorandum, summaries, analyses, compilations and
other writings related thereto or based thereon prepared by the party furnished
such documents and information or its representatives.
35
11.6 FURTHER ASSURANCES. At any time or from time to time
after the Closing, each of the parties hereto shall execute and deliver to the
other such other documents and instruments, provide such materials and
information and take such other actions as such other party may reasonably
request to more effectively to vest title to the Units to be purchased hereunder
in Purchaser and to otherwise cause each of the parties hereto to fulfill their
other obligations under this Agreement and the Transaction Documents.
11.7 WAIVER. Any term or condition of this Agreement may be
waived at any time by the party that is entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No waiver
by any party of any term or condition of this Agreement, in any one or more
instances, shall be deemed to be or construed as a waiver of the same or any
other term or condition of this Agreement on any future occasion. All remedies,
either under this Agreement or by Law or otherwise afforded, will be cumulative
and not alternative.
11.8 AMENDMENT. This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on behalf of each
party hereto.
11.9 THIRD PARTY BENEFICIARIES. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto and
their respective successors and assigns, and it is not the intention of the
parties to confer third-party beneficiary rights, and this Agreement does not
confer any such rights, upon any other Person other than any Person entitled to
indemnity under Article IX or payments under Section 11.3.
11.10 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement
nor any right, interest or obligation hereunder may be assigned (by operation of
Law or otherwise) by the Company without the prior written consent of Purchaser
and any attempt to do so will be void AB INITIO. Subject to the preceding
sentence, this Agreement shall bind and inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns.
Purchaser may assign all or a portion of its rights hereunder, provided,
assignee executes an assumption of rights, responsibilities, representations,
warranties and covenants made by the Purchaser hereunder.
11.11 HEADINGS; CONSTRUCTION. The headings used in this
Agreement have been inserted for convenience of reference only and do not define
or limit the provisions hereof. The parties hereto agree that this Agreement is
the product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of CONTRA
PROFERENTUM.
36
11.12 INVALID PROVISIONS. If any provision of this Agreement
is held to be illegal, invalid or unenforceable under any present or future Law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (i) such provision will be
fully severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance here from and (iv) in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically as a part
of this Agreement a legal, valid and enforceable provision as similar in terms
to such illegal, invalid or unenforceable provision as may be possible.
11.13 GOVERNING LAW; JURISDICTION. (a) This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. (b) All disputes arising under this Agreement shall be resolved by
arbitration pursuant to the commercial rules of the American Arbitration
Association then in effect. All disputes shall be arbitrated in New York, New
York. The prevailing party in any such arbitration shall be entitled to recover
its reasonable attorneys' fees and other costs incurred therein.
11.14 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
11.15 CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE
SECURITIES THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION FOR
SUCH SECURITIES BEFORE SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS
SO EXEMPT.
[Signature Page Follows]
37
IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by each party hereto as of the date first above written.
COMPANY:
-------
XXXX.XXX, INC.
By:__________________________________
Name:
Title:
PURCHASER:
---------
DOMINION FIXED INCOME PLUS FUND LIMITED
By: _________________________________
Name:
Title:
38
EXHIBIT A
---------
CERTIFICATE OF DESIGNATION OF SERIES B CONVERTIBLE PREFERRED STOCK
------------------------------------------------------------------
1
EXHIBIT B
---------
WARRANT TO PURCHASE SHARES OF COMMON STOCK OF XXXX.XXX, INC.
------------------------------------------------------------
1
EXHIBIT C
---------
CERTIFICATE OF NON-U.S. PERSON
------------------------------
1
DOMINION FIXED INCOME FUND LIMITED, A __________________
--------------------------------------------------------
Name of Prospective Offeree
CERTIFICATE OF NON-U.S. PERSON
The undersigned, in connection with the possible offer and sale to the
undersigned of securities of XXXX.xxx, Inc., a Delaware corporation (the
"COMPANY"), hereby certifies to the Company and to the Company's legal counsel
as follows:
1. The undersigned is a BONA FIDE __________ of ___________. The
undersigned's principal business address is ____________________,
_______________________, _____________________, ____________________.
2. The undersigned is NOT a "U.S. Person" as defined in Rule 902(k) of
Regulation S ("REGULATION S") promulgated by the United States Securities and
Exchange Commission under the United States Securities Act of 1933, as amended
(the "SECURITIES ACT"). (NOTE: A copy of Rule 902(k) and rule 902(l) of
Regulation S is attached hereto as Annex I.)
3. If the undersigned acquires securities of the Company, the
undersigned is not and will not be acquiring those securities of the Company for
the account or benefit of any U.S. Person as defined in Rule 902(k) of
Regulation S.
4. The undersigned understands that the Company and the Company's legal
counsel are relying on all information contained in this Certificate of Non-U.S.
Person in determining to offer and sell securities of the Company to the
undersigned in a manner exempt from the registration requirements of the
Securities Act.
5. The Company hereby advises the undersigned (a) that securities of
the Company that may be acquired by the undersigned will be issued by the
Company without registration under the Securities Act and applicable state
securities laws in reliance on one or more exemptions from the registration
requirements of the Securities Act and applicable state securities laws and (b)
that those securities of the Company therefore cannot be resold unless they are
registered under the Securities Act and applicable state securities laws or
unless an exemption from the registration requirements of the Securities Act and
applicable state securities laws is available to be relied on with respect to
any contemplated resale. The undersigned understands and the undersigned hereby
acknowledges to have been advised by the Company of all of the foregoing
information set forth in this paragraph.
IN WITNESS WHEREOF, this Certificate of Non-U.S. Person is effective as
of ______________, 2000.
---------------------------------------
Signature
Dominion Fixed Income Plus Fund Limited
---------------------------------------
---------------------------------------
2
ANNEX I TO CERTIFICATE OF NON-U.S. PERSON
Rule 902(c): Directed Selling Efforts.
(1) "Directed selling efforts" means any activity undertaken for the purpose of,
or that could reasonably be expected to have the effect of, conditions the
market in the United States for any of the securities being offered in reliance
on this Regulation S (Rule 901 through Rule 905, and Preliminary Notes). Such
activity includes placing an advertisement in a publication "with a general
circulation in the United States" that refers to the offering of securities
being made in reliance upon this Regulation S.
(2) Publication "with a general circulation in the United States":
(i) Is defined as any publication that is printed primarily for
distribution in the United States, or has had, during the
preceding twelve months, an average circulation in the United
States of 15,000 or more copies per issue; and
(ii) Will encompass on the U.S. edition of any publication printing
a separate U.S. edition if the publication, without
considering its U.S. edition, would not constitute a
publication with a general circulation in the United States.
(3) The following are not "directed selling efforts":
(i) Placing an advertisement required to be published under U.S.
or foreign law, or under rules or regulations of U.S. or
foreign regulatory or self-regulatory authority, provided the
advertisement contains no more information than legally
required and includes a statement to the effect that the
securities have not been registered under the Act and may not
be offered or sold in the United States (or to a U.S. person,
if the advertisement relates to an offering under Category 2
or 3 (paragraph (b)(2) or (b)(3)) in Rule 903) absent
registration or an applicable exemption from the registration
requirements;
(ii) Contact with persons excluded from the definition of "U.S.
person" pursuant to paragraph (k)(2)(vi) of this Rule 902 or
persons holding accounts excluded from the definition of "U.S.
person" pursuant to paragraph (k)(2)(i) of this Rule 902,
solely in their capacities as holders of such accounts;
(iii) A tombstone advertisement in any publication with a general
circulation in the United States, provided:
(A) The publication has less than 20% of its circulation,
calculated by aggregating the circulation of its U.S.
and comparable non-U.S. editions, in the United
States;
(B) Such advertisement contains a legend to the effect
that the securities have not been registered under
the Act and may not be offered or sold in the United
States (or to a U.S. person, if the advertisement
relates to an offering under Category 2 or 3
(paragraph (b)(2) or (b)(3)) in Rule 903) absent
registration or an applicable exemption from the
registration requirements; and
1
(C) Such advertisement contains no more information than:
(1) The issuer's name;
(2) The amount and title of the securities being
sold;
(3) A brief indication of the issuer's general
type of business;
(4) The price of the securities;
(5) The yield of the securities, if debt
securities with a fixed (non-contingent)
interest provision;
(6) The name and address of the person placing
the advertisement, and whether such person
is participating in the distribution;
(7) The names of the managing underwriters;
(8) The dates, if any, upon which the sales
commenced and concluded;
(9) Whether the securities are offered or were
offered by rights issued to security holders
and, if so, the class of securities that are
entitled or were entitled to subscribe, the
subscription ratio, the record date, the
dates (if any) upon which the rights were
issued and expired, and the subscription
price; and
(10) Any legend required by law or any foreign or
U.S. regulatory or self-regulatory
authority;
(iv) BONA FIDE visits to real estate, plants or other facilities
located in the United States and tours thereof conducted for a
prospective investor by an issuer, a distributor, any of their
respective affiliates or a person acting on behalf of any of
the foregoing;
(v) Distribution in the United States of a foreign broker-dealer's
quotations by a third-party system that distributes such
quotations primarily in foreign countries if:
2
(A) Securities transactions cannot be executed between
foreign broker-dealers and persons in the United
States through the system; and
(B) The issuer, distributors, their respective
affiliates, persons acting on behalf of any of the
foregoing, foreign broker-dealers and other
participants in the system do not initiate contacts
with U.S. persons or persons within the United
States, beyond those contacts exempted under Exchange
Act Rule 15a-6; and
(vi) Publication by an issuer of a notice in accordance with Rule
135 or Rule 135c.
(vii) Providing any journalist with access to press conferences held
outside of the United States, to meetings with the issuer or
selling security holder representatives conducted outside the
United States, or to written press-related materials released
outside the United States, at or in which a present or
proposed offering of securities is discussed, if the
requirements of Rule 135e are satisfied.
Rule 902(k): U.S. Person.
(1) "U.S. PERSON" MEANS:
(i) any natural person resident in the United States;
(ii) any partnership or corporation organized or incorporated under
the laws of the United States;
(iii) any estate of which any executor or administrator is a U.S.
person;
(iv) any trust of which any trustee is a U.S. person;
(v) any agency or branch of a foreign entity located in the United
States;
(vi) any non-discretionary account or similar account (other than
an estate or trust) held by a dealer or other fiduciary for
the benefit or account of a U.S. person;
(vii) any discretionary account or similar account (other than an
estate or trust) held by a dealer or other fiduciary
organized, incorporated, or (if an individual) resident in the
United States; and
(viii) any partnership or corporation if:
(A) organized or incorporated under the laws of any
foreign jurisdiction; and
3
(B) formed by a U.S. person principally for the purpose
of investing in securities not registered under the
[Securities] Act, unless it is organized or
incorporated, and owned, by accredited investors (as
defined in Rule 501 (a) under the [Securities] Act)
who are not natural persons, estates or trusts.
(2) Notwithstanding paragraph (o)(1) of this section, any discretionary
account or similar account (other than an estate or trust) held for the
benefit or account of a non-U.S. person by a dealer or other
professional fiduciary organized, incorporated, or (if an individual)
resident in the United States shall not be deemed a "U.S. person."
(3) Notwithstanding paragraph (o)(1) of this section, any estate of which
any professional fiduciary acting as executor or administrator is a
U.S. person shall not be deemed a U.S. person if:
(i) an executor or administrator of the estate who is not a U.S.
person has sole or shared investment discretion with respect
to the assets of the estate; and
(ii) the estate is governed by foreign law.
(4) Notwithstanding paragraph (o)(1) of this section, any trust of which
any professional fiduciary acting as trustee is a U.S. person shall not
be deemed a U.S. person if a trustee who is not a U.S. person has sole
or shared investment discretion with respect to the trust assets, and
no beneficiary of the trust (and no settlor if the trust is revocable)
is a U.S. person.
(5) Notwithstanding paragraph (o)(1) of this section, an employee benefit
plan established and administered in accordance with the law of a
country other than the United States and customary practices and
documentation of such country shall not be deemed a U.S. person.
(6) Notwithstanding paragraph (o)(1) of this section, any agency or branch
of a U.S. person located outside the United States shall not be deemed
a "U.S. person" if:
(i) the agency or branch operates for valid business reasons; and
(ii) the agency or branch is engaged in the business of insurance
or banking and is subject to substantive insurance or banking
regulation, respectively, in the jurisdiction where located.
(7) The International Monetary Fund, the International Bank for
Reconstruction and Development, the Inter-American Development Bank,
the Asian Development Bank, the African Development Bank, the United
Nations, and their agencies, affiliates and pension plans, and any
other similar international organizations, their agencies, affiliates
and pension plans shall not be deemed "U.S. persons."
4
Rule 902(p): United States.
"United States" means the United States of America, its territories and
possessions, any State of the United States, and the District of Columbia.
5
EXHIBIT D
---------
"ACCREDITED INVESTOR" QUESTIONNAIRE
-----------------------------------
1
DOMINION FIXED PLUS FUND LIMITED, A ______________
Name of Prospective Offeree
"ACCREDITED INVESTOR" QUESTIONNAIRE
The undersigned, in connection with the possible offer and sale to the
undersigned of securities of XXXX.xxx, Inc., a Delaware corporation (the
"Company"), hereby represents, warrants and certifies to the Company that the
undersigned is an "accredited investor" as defined in Rule 501 of Regulation D
under the Securities Act of 1933, as amended (the "Securities Act"). All dollar
amounts stated herein are stated in United States Dollars.
The undersigned understands that the Company is relying on all
information contained in this "Accredited Investor" Questionnaire in determining
whether to offer securities of the Company to the undersigned in a manner exempt
from the registration requirements of the Securities Act and applicable state
securities laws.
The undersigned hereby represents, warrants and certifies to the
Company that the undersigned falls within the category marked below. PLEASE
INDICATE EACH CATEGORY OF "ACCREDITED INVESTOR" THAT YOU SATISFY BY PLACING AN
"X" ON THE APPROPRIATE LINE BELOW.
_____ Category 1. A corporation, Massachusetts or similar business
trust, partnership, or an organization described
in Section 501(c)(3) of the Internal Revenue Code
(tax exempt organization), in each case (a) not
formed for the specific purpose of acquiring
securities of the Company and (b) having total
assets in excess of $5,000,000.
_____ Category 2. An entity in which all of the equity owners are
"accredited investors."
The undersigned hereby also represents, warrants and certifies to the
Company that securities of the Company that may be acquired by the undersigned
will be acquired by the undersigned for private investment purposes only and
solely for the undersigned's own account, in the undersigned's own name, and not
with a view to or for sale in connection with any distribution of those
securities.
The Company hereby advises the undersigned (a) that securities of the
Company that may be acquired by the undersigned will be issued by the Company
without registration under the Securities Act and applicable state securities
laws in reliance on one or more exemptions from the registration requirements of
the Securities Act and applicable state securities laws and (b) that those
securities of the Company therefore cannot be resold unless they are registered
under the Securities Act and applicable state securities laws or unless an
exemption from the registration requirements of the Securities Act and
applicable state securities laws is available to be relied on with respect to
any contemplated resale. The undersigned understands and the undersigned hereby
acknowledges to have been advised by the Company of all of the foregoing
information set forth in this paragraph.
IN WITNESS WHEREOF, this "Accredited Investor" Questionnaire is
effective as of ________________________, 2000.
Signature for Entity "Accredited Investor":
_________________________________________________
(Name of Entity)
By: _____________________________________________
_________________________________________________
Type of Entity
_________________________________________________
Printed or Typed Name and Title of Person Signing
EXHIBIT F
DISCLOSURE SCHEDULE
XXXX.XXX, INC.
--------------
SECTION 3.3(a)
--------------
CAPITALIZATION
--------------
Authorized Capital:
Preferred Stock:
Common Stock:
Shares reserved for issuance of outstanding options set forth below.
OUTSTANDING OPTIONS
-------------------
SECTION 3.3(b) AGREEMENTS INVOLVING STOCK
-----------------------------------------
SECTION 3.4 SUBSIDIARIES
------------------------
SECTION 3.7 NO UNDISCLOSED LIABILITIES
--------------------------------------
SECTION 3.9 COMPLIANCE WITH LAWS AND ORDERS
-------------------------------------------
