Exhibit 10.13
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of the 11th day of March
2002, is entered into by and between STRATUS SERVICES GROUP, INC., a Delaware
corporation, with headquarters located at 000 Xxxxx Xxxx, Xxxxx 000, Xxxxxxxxx,
Xxx Xxxxxx 00000 (the "Company"), and the undersigned (the "Buyer").
WITNESSETH:
WHEREAS, the Buyer wishes to purchase from the Company, upon the terms
and subject to the conditions of this Agreement, $300,000 (60,000 shares) of
Series B Preferred Stock, such Preferred Stock having terms substantially as are
set forth in the form of the Certificate of Designation attached hereto as
Exhibit "A" hereof (the "Preferred Stock"); and
WHEREAS, in order to induce the Buyer to purchase the Preferred Stock,
the Company desires to enter into this Agreement and make the representations,
warranties and covenants contained herein.
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE.
a. PURCHASE. The undersigned hereby agrees to purchase from the
Company the Preferred Stock.
b. FORM OF PAYMENT. The Buyer shall pay the $300,000 purchase price
for 60,000 shares of Preferred Stock by wiring immediately
available funds in United States Dollars to the Company.
c. CLOSING. The closing of the transactions described above will
take place on March 11, 2002.
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO INFORMATION;
INDEPENDENT INVESTIGATION.
The Buyer represents and warrants to, and covenants and agrees with,
the Company as follows:
a. The Buyer is purchasing the Preferred Stock for its own account
for investment only and not with a view towards the public sale
or distribution thereof and not with a view to or for sale in
connection with any distribution thereof;
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General
Rules and Regulations under the 1933 Act by reason of Rule
501(a)(3), and (ii) experienced in making investments of the
kind described in this Agreement and the related documents,
(iii) able, by reason of the business and financial experience
of its officers (if an entity) and professional advisors (who
are not affiliated with or compensated in any way by the Company
or any of its affiliates or selling agents), to protect its own
interests in connection with the transactions described in this
Agreement, and the related documents, and (iv) able to afford
the entire loss of its investment in the Preferred Stock;
c. The Buyer understands that the Preferred Stock is being offered
and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state
securities laws and that the Company is relying upon the truth
and accuracy of, and the Buyer's compliance with, the
representations, warranties, agreements, acknowledgements and
understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Preferred Stock;
d. The Buyer and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of
the Company and materials relating to the offer and sale of the
Preferred Stock which have been requested by the Buyer. The
Buyer and its advisors, if any, have been afforded the
opportunity to ask questions of the Company and have received
complete and satisfactory answers to any such inquiries.
e. The Buyer understands that no United States federal or state
agency or any other government or governmental agency has passed
on or made any recommendation or endorsement of the Preferred
Stock;
f. This Agreement has been duly and validly authorized, executed
and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms,
subject as to enforceability to general principles of equity and
to bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors' rights generally.
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3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants to the Buyer that:
a. CONCERNING THE COMMON STOCK. There are no preemptive rights of
any stockholder of the Company, as such, to acquire the
Company's Common Stock. The shares of Common Stock issuable upon
conversion of the Preferred Stock (the "Shares") will be
registered for resale within sixty (60) days from the date
hereof, under a currently effective registration statement filed
under the Securities Act of 1933, as amended (the "1933 Act').
b. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware, and has the requisite corporate power
to own its properties and to carry on its business as now being
conducted. The Company is duly qualified as a foreign
corporation to do business and is in good standing in each
jurisdiction where the nature of the business conducted or
property owned by it makes such qualification necessary other
than those jurisdictions in which the failure to so qualify
would not have a material and adverse effect on the business,
operations, properties, prospects or condition (financial or
otherwise) of the Company. The Company has registered its Common
Stock pursuant to Section 12 of the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the Common Stock is
listed and traded on the OTC Bulletin Board Market.
c. AUTHORIZED SHARES. The Shares of Preferred Stock to be issued
pursuant to this Agreement and the Shares of Common Stock
issuable upon conversion of the Preferred Stock have been duly
authorized and, when issued to Buyer, will be duly and validly
issued, fully paid and non-assessable and will not subject the
holder thereof to personal liability by reason of being such
holder.
d. SECURITIES PURCHASE AGREEMENT. This Agreement and the
transactions contemplated hereby, have been duly and validly
authorized by the Company, this Agreement has been duly executed
and delivered by the Company and this Agreement, when executed
and delivered by the Company, will be, and the Commission Letter
dated of even date herewith, and the
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Preferred Stock are, valid and binding agreements of the Company
enforceable in accordance with their terms, subject as to
enforceability to general principles of equity and to
bankruptcy, insolvency, moratorium, and other similar laws
affecting the enforcement of creditors' rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this Agreement
by the Company, the issuance of the Preferred Stock, and the
consummation by the Company of the other transactions
contemplated by this Agreement do not and will not conflict with
or result in a breach by the Company of any of the terms or
provisions of, or constitute a default under (i) the articles of
incorporation or by-laws of the Company, (ii) any indenture,
mortgage, deed of trust, or other material agreement or
instrument to which the Company is a party or by which it or any
of its properties or assets are bound, (iii) to its knowledge,
any existing applicable law, rule, or regulation or any
applicable decree, judgment, or (iv) to its knowledge, order of
any court, United States federal or state regulatory body,
administrative agency, or other governmental body having
jurisdiction over the Company or any of its properties or
assets, except such conflict, breach or default which would not
have a material adverse effect on the transactions contemplated
herein. The Company is not in violation of any material laws,
governmental orders, rules, regulations or ordinances to which
its property, real, personal, mixed, tangible or intangible, or
its businesses related to such properties, are subject.
f. APPROVALS. No authorization, approval or consent of any court,
governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market is required to be
obtained by the Company for the issuance and sale of the
Preferred Stock to the Buyer as contemplated by this Agreement,
except such authorizations, approvals and consents that have
been obtained.
g. SEC DOCUMENTS, FINANCIAL STATEMENTS. The Company has filed all
reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the
reporting requirements of the Exchange Act, including material
filed pursuant to Section 13(a) or 15(d), in addition to one or
more registration statements and amendments thereto
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heretofore filed by the Company with the SEC under the Act (all
of the foregoing including filings incorporated by reference
therein being referred to herein as the "SEC Documents"). The
Company, through its agent, has delivered to the Buyer true and
complete copies of the SEC Documents (except for exhibits and
incorporated documents). The Company has not provided to the
Buyer any 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.
As of their respective dates, the SEC Documents complied in
all material respects with the requirements of the Act or the
Exchange Act as the case may be and the rules and regulations of
the SEC promulgated thereunder and other federal, state and
local laws, rules and regulations applicable to such SEC
Documents, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the
Company included in the SEC Documents 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
generally accepted accounting principles 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) in the case of unaudited interim statements, to
the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects
the financial position of the Company 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).
h. ABSENCE OF CERTAIN CHANGES. Since September 30, 2001, there has
been no material adverse change and no material adverse
development in the business, properties, operations, financial
condition, or results of operations of the Company, other than
the delisting of the Company's
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Stock from the Nasdaq SmallCap Market as of February 27 2002,
and other than as disclosed in the Company's Form 10-K/A filed
with the Securities and Exchange Commission on March 5, 2002 and
in the Company's Quarterly Report on Form 10-Q for the quarter
ended December 31, 2001.
i. FULL DISCLOSURE. Other than set forth above, there is no fact
known to the Company (other than general economic conditions
known to the public generally) or as disclosed in the documents
referred to in Section 3(g), that has not been disclosed in
writing to the Buyer that (i) would reasonably be expected to
have a material adverse effect on the business or financial
condition of the Company or (ii) would reasonably be expected to
materially and adversely affect the ability of the Company to
perform its obligations pursuant to this Agreement.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. FILINGS. The Company undertakes and agrees to make all necessary
filings in connection with the sale of the Shares to the Buyer
under any United States laws and regulations, or by any domestic
securities exchange or trading market, and to provide a copy
thereof to the Buyer promptly after such filing.
b. REPORTING STATUS. So long as the Buyer beneficially owns any of
the Shares, the Company shall file all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of the 1934
Act, and the Company shall not terminate its status as an issuer
required to file reports under the 1934 Act even if the 1934 Act
or the rules and regulations thereunder would permit such
termination.
c. SHAREHOLDER APPROVAL. If applicable (i.e., if the Company is
reinstated for listing on the Nasdaq SmallCap Market), the
Company agrees to seek shareholder approval in accordance with
Nasdaq's corporate governance rules at a special meeting of its
shareholders or if permitted by Nasdaq, to solicit written
consents to issuance of shares, upon conversion of all of the
Company's Preferred Stock in excess of 19.99% of its outstanding
shares of Common Stock. The Company will use its best efforts to
cause its shareholders, including but not limited to, its
officers, directors and 5% shareholders, to vote in favor of
such proposal.
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5. SECURITIES ACT REGISTRATION.
a. The Company shall use its best efforts to:
i. Prepare and file with the SEC a Form S-1 registration
statement relating to the shares of Company common
stock issuable upon conversion of the Preferred Stock
within thirty (30) days of the date hereof naming the
Buyer as a selling shareholder and keep such
registration statement effective until the Buyer can
sell such shares without registration under Rule
144(k). In the event that the registration statement
is not declared effective within sixty (60) days of
the date hereof, the Company shall pay Pinnacle within
three (3) business days at the end of each month a
cash payment equal to two percent (2%) per month as
liquidated damages and not as a penalty.
ii. Prepare and file with the SEC such amendments and
supplements to such registration statement and the
prospectus used in connection with such registration
statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the
disposition of all securities covered by such
registration statement and notify the holders of the
filing and effectiveness of such Registration
statement and any amendments or supplements;
iii. Furnish to Buyer such numbers of copies of a current
prospectus, including a preliminary prospectus,
conforming with the requirements of the 1933 Act,
copies of the registration statement any amendment or
supplement to any thereof and any documents
incorporated by reference therein, and such other
documents as Buyer may reasonably require in order to
facilitate the disposition of the shares of Common
Stock issuable under the Preferred Stock;
iv. Use its best efforts to register and qualify the
securities covered by such registration statement
under such other securities or "Blue Sky" laws of such
jurisdictions as shall be reasonably requested by
Buyer;
v. Notify Buyer immediately of the happening of any event
as a result of which the prospectus included in such
registration statement, as then in effect, includes an
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untrue statement of material fact or omits to state a
material fact required to be stated therein or
necessary to make the statements therein not
misleading in light of the circumstances then
existing, and use its best efforts to promptly update
and/or correct such prospectus.
b. Upon request of the Company, Buyer will furnish to the Company
in connection with any registration under this Section such
information regarding itself, the securities of the Company held
by it, and the intended method of disposition of such securities
as shall be reasonably required to effect the registration of
the securities held by Buyer.
c. i. To the fullest extent permitted by law, the Company shall
indemnify, defend and hold harmless Buyer and each of its
officers, directors, employees, agents, partners or
controlling persons (within the meaning of the 0000 Xxx)
(each, an "indemnified party") from and against, and shall
reimburse such indemnified party with respect to, any and
all claims, suits, demands, causes of action, losses,
damages, liabilities, costs or expenses ("Liabilities") to
which such indemnified party may become subject under the
1933 Act or otherwise, arising from or relating to (A) any
untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any
prospectus contained therein or any amendment or supplement
thereto, or (B) the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading;
PROVIDED, HOWEVER, that the Company shall not be liable in
any such case to the extent that any such Liability arises
out of or is based upon an untrue statement or omission so
made in strict conformity with information furnished by
such indemnified party in writing specifically for use in
the registration statement.
ii. Buyer agrees to indemnity, defend and hold harmless the
Company, and its officers, directors, employees, agents,
partners, or controlling persons (within the meaning of the
0000 Xxx) (each, an "indemnified party") from and against,
and shall reimburse such indemnified party with respect to,
any and all Liabilities to which such
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indemnified party may become subject under the 1933 Act or
otherwise, arising from or relating to (A) any untrue
statement or alleged untrue statement of any material fact
contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto,
or (B) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
in which they were made, not misleading; PROVIDED, THAT
Buyer will be liable in any such case to the extent and
only to the extent, that any such Liability arises out of
or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such
registration statement, prospectus or amendment or
supplement thereto in reliance upon and in conformity with
written information furnished by Buyer specifically for use
in the preparation thereof, and such Liability may in no
event exceed the value of the Registrable Securities so
registered.
iii. Promptly after receipt by any indemnified party of notice
of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against
another party (the "indemnifying party") hereunder, notify
such party in writing thereof, but the omission so to
notify such party shall not relieve such party from any
Liability which it may have to the indemnified party other
than under this Section and shall only relieve it from any
Liability which it may have to the indemnified party under
this Section if and to the extent an indemnifying party is
materially prejudiced by such omission. In case any such
action shall be brought against any indemnified party and
such indemnified party shall notify an indemnifying party
of the commencement thereof, the indemnifying party shall
be entitled to participate in and, to the extent it shall
wish, to assume and undertake the defense thereof with
counsel reasonably satisfactory to such indemnified party,
and, after notice from the indemnifying party to the
indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall
not be liable to the indemnified party under this Section
for any legal expenses subsequently incurred
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by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation and of
liaison with counsel so selected; PROVIDED, HOWEVER, that
if the defendants in any such action include both parties
and the indemnified party shall have reasonably concluded
that there may be reasonable defenses available to them
which are different from or additional to those available
to the indemnifying party or if the interests of the
indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified
party shall have the right to select a separate counsel and
to assume such legal defenses and otherwise to participate
in the defense of such action, with the reasonable expenses
and fees of one such separate counsel and other reasonable
expenses related to such participation to be reimbursed by
the indemnifying party as incurred.
d. With respect to the above-referenced registration statement, all
fees, costs and expenses of and incidental to such registration,
inclusion and public offering shall be borne by the Company,
except any underwriting discounts and commissions.
e. The rights to cause the Company to register all or any portion
of securities pursuant to this Section 5 may be assigned by
Buyer to a proper transferee or assignee as described herein.
Within a reasonable time after such transfer, the Buyer shall
notify the Company of the name and address of such transferee or
assignee, and the securities with respect to which such
registration rights are being assigned. Such assignment shall be
effective only if, (i) the Buyer agrees in writing with the
transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time
after such transfer or assignment (subject to the purchase price
of the shares being kept confidential by the Buyer and such
transferee or assignee, (ii) the Company is, within a reasonable
time after such transfer or assignment, furnished with written
notice of (A) the name and address of such transferee or
assignee, (B) the securities with respect to which such
registration rights are being assigned, (iii) following such
transfer or assignment, the further disposition of the
securities by the transferee or assignee is restricted under the
1933 Act and applicable state
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securities laws, (iv) at or before the time that the Company
receives the written notice contemplated by clause (ii) of this
sentence the transferee or assignee agrees in writing with the
Company to be bound by all of the provisions contained herein,
(v) such transfer shall have been made in accordance with the
applicable requirements of the purchase agreement covering the
transaction and (vi) such transferee shall be an "accredited
investor", as that term is defined in Rule 501 of Regulation D,
promulgated under the 1933 Act.
6. GOVERNING LAW: MISCELLANEOUS. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York. A
facsimile transmission of this signed Agreement shall be legal and
binding on all parties hereto. This Agreement may be signed in one or
more counterparts, each of which shall be deemed an original. The
headings of this Agreement are for convenience of reference and shall
not form part of, or affect the interpretation of, this Agreement. If
any provision of this Agreement shall be invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall not affect
the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other
jurisdiction. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement. This
Agreement, and the related agreements referred to herein, contain the
entire agreement of the parties with respect to the subject matter
hereto, superceding all prior agreements, understandings or
discussions.
7. NOTICES. Any notice required or permitted hereunder shall be given in
writing (unless otherwise specified herein) and shall be deemed
effectively given, (i) on the date delivered, (a) by personal delivery,
or (b) if advance copy is given by fax, (ii) seven business days after
deposit in the United States Postal Service by regular or certified
mail, or (iii) three business days mailing by international express
courier, with postage and fees prepaid, addressed to each of the other
parties thereunto entitled at the following addresses, or at such other
addresses as a party may designate by ten days advance written notice
to each of the other parties hereto.
COMPANY: STRATUS SERVICES GROUP, INC.
000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Xx. Xxxxxxx Xxxxxxxx
Telecopier No.: (000)000-0000
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BUYER: PINNACLE INVESTMENT PARTNERS, L.P.
000 Xxxx Xxxxxx, 00xx Xxx.
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxx Xxxxxx
Telecopier No.: (000) 000-0000
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors
and permitted assigns.
IN WITNESS WHEREOF, the Company and Buyer have caused this Agreement to
be executed by their duly authorized representatives on the date as first
written above.
STRATUS SERVICES GROUP, INC. PINNACLE INVESTMENT PARTNERS, L.P.
By: PIP Management, Inc., General Partner
By:/s/ Xxxxxxx X. Xxxxxxxx By:/s/Xxxxx Xxxxxx
------------------------ --------------------------------------
Xxxxxxx Xxxxxxxx, CFO Xxxxx Xxxxxx, President
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