SERIES 1 BRIDGE NOTE PURCHASE AGREEMENT
among
CAMBEX CORPORATION
(the "Company")
and
The Persons Listed On The Signature Pages Hereto
(the "Purchasers")
Dated as of January 18, 2000
This Series 1 Bridge Note Purchase Agreement provides
for the offer, sale, issuance, and delivery of up to
$2,000,000 in principal amount of Convertible Series 1
Bridge Financing Notes with attached Repricing Warrants
and accompanying Purchaser Warrants.
TABLE OF CONTENTS
SECTION 1. BRIDGE NOTES. 2
Section 1.1 Authorization, Issuance, and Sale of Notes. 2
Section 1.2 Authorization and Issuance of Warrants. 2
Section 1.3 Form of Payment. 2
Section 1.4 Closing. 3
Section 1.5 Deliveries at Closing. 3
Section 1.6 Deliveries by Guarantors at Closing. 3
SECTION 2. PLEDGED SHARES; APPOINTMENT OF
REPRESENTATIVE. 4
Section 2.1 Pledged Shares. 4
Section 2.2 Appointment of Purchaser Representative. 4
Section 2.3 Assurances. 5
Section 2.4 Default and Acceleration Procedures. 5
Section 2.5 Standard of Care of the Representative. 6
SECTION 3. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY. 7
Section 3.1 Organization and Qualification. 7
Section 3.2Authorization, Enforcement, Compliance with Other Instruments.7
Section 3.3 Capitalization. 9
Section 3.4 Issuance of Securities. 9
Section 3.5 No Conflicts. 9
Section 3.6 SEC Documents; Financial Statements. 10
Section 3.7 Absence of Certain Changes. 11
Section 3.8 Absence of Litigation. 11
Section 3.9 Purchase of Securities. 11
Section 3.10No Undisclosed Events, Liabilities, Developments, or
Circumstances. 11
Section 3.11 No General Solicitation. 11
Section 3.12 No Integrated Offering. 11
Section 3.13 Employee Relations. 12
Section 3.14 Intellectual Property Rights. 12
Section 3.15 Environmental Laws. 12
Section 3.16 Title. 12
Section 3.17 Insurance. 13
Section 3.18 Regulatory Permits. 13
Section 3.19 Internal Accounting Controls. 13
Section 3.20 No Materially Adverse Contracts, Etc. 13
Section 3.21 Tax Status. 13
Section 3.22 Certain Transactions. 14
Section 3.23 Dilutive Effect. 14
Section 3.24 Fees and Rights of First Refusal. 14
Section 3.25 Foreign Corrupt Practices Act. 14
Section 3.26 Disclosure. 14
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE
GUARANTORS. 15
Section 4.1 Organization and Qualification. 15
Section 4.2Authorization, Enforcement, Compliance with Other Instruments.15
SECTION 5. REPRESENTATIONS, WARRANTIES, AND
COVENANTS OF PURCHASERS 15
Section 5.1 Investment Purpose. 16
Section 5.2 Accredited Investor Status. 16
Section 5.3 Reliance on Exemptions. 16
Section 5.4 Information. 16
Section 5.5 No Governmental Review. 16
Section 5.6 Transfer or Resale. 16
Section 5.7 Legends. 17
Section 5.8 Authorization Enforcement. 17
Section 5.9 Residence. 17
Section 5.10 No Scheme to Evade Registration. 17
Section 5.11 Covenant Not to Trade. 18
SECTION 6. CONDITIONS OF INITIAL CLOSING 18
Section 6.1 Transaction Agreements. 18
Section 6.2 Opinion of Counsel. 18
Section 6.3 Representations and Warranties; No Default. 19
Section 6.4 Delivery of Schedules; Due Diligence. 19
Section 6.5 Purchase and Loan Permitted by Applicable Laws. 19
Section 6.6 No Adverse Litigation. 19
Section 6.7 Approvals and Consents. 19
Section 6.8 No Material Adverse Change. 19
Section 6.9 Proceedings. 19
Section 6.10 Clerk Certificate. 20
Section 6.11 Transfer Agent Instructions. 20
SECTION 7. CONDITIONS TO SUBSEQUENT CLOSINGS 20
Section 7.1 Representations and Warranties; No Default. 20
Section 7.2 No Suspensions. 20
Section 7.3 Opinion of Counsel. 20
Section 7.4 Due Diligence. 21
Section 7.5 Shareholder Approval. 21
Section 7.6 No Material Adverse Change. 21
SECTION 8. AFFIRMATIVE COVENANTS 21
Section 8.1 Financial Information. 21
Section 8.2 Form D. 22
Section 8.3 Reporting Status. 22
Section 8.4 Inspection of Property. 22
Section 8.5 Maintenance of Properties; Insurance. 22
Section 8.6 Reserved. 22
Section 8.7 Expenses. 22
Section 8.8Authorized Shares of Common Stock, Reservation of Shares. 23
Section 8.9 Corporate Existence, Etc. 23
Section 8.10 Transfer Agents. 23
Section 8.11 Shareholder Approval; Proxy. 23
Section 8.12 Transfer Agent Instructions. 23
Section 8.13 Payment of Taxes. 24
Section 8.14 Compliance with Laws, Etc. 24
Section 8.15 Use of Proceeds. 24
Section 8.16 Registration Statement. 24
Section 8.17 Listings. 25
Section 8.18 Indemnification. 25
SECTION 9. NEGATIVE COVENANTS 25
Section 9.2 Restrictions on Debt. 26
Section 9.3 Restrictions on Dividends. 26
Section 9.4 Restrictions on Transactions with Affiliates. 27
Section 9.5 Restrictions on Investments. 27
Section 9.6Restrictions on Sale and Lease-Back Transactions. 27
Section 9.7 Restrictions on Sales of Assets. 28
Section 9.8 Restrictions on Subsidiaries. 28
Section 9.9 Change in Business; Operations. 28
Section 9.10 Exceptions With Consent of Purchasers. 28
SECTION 10. MISCELLANEOUS. 28
Section 10.1 Counterparts. 28
Section 10.2 Headings. 28
Section 10.3 Severability. 29
Section 10.4 Entire Agreement. Amendments. 29
Section 10.5 Notices. 29
Section 10.6 Interest. 29
Section 10.7 Successors and Assigns. 30
Section 10.8 No Third Party Beneficiaries. 30
Section 10.9 Publicity. 30
Section 10.10 Further Assurances. 30
Section 10.11 No Strict Construction. 30
Section 10.12 Governing Law. 30
CROSS-REFERENCE TO DEFINED TERMS
Term Page where
defined
1933 ACT 1
1934 ACT 9
ADDITIONAL CLOSING 2
ADDITIONAL CLOSING DATE 2
AGREEMENT 1
BRIDGE NOTES 1
BYLAWS 8
CHANGE IN BUSINESS 26
CHARTER 8
CLERK CERTIFICATE 3
CLOSING 2
CLOSING DATE 2
COMMON STOCK 1
COMPANY 1
COMPLIANCE CERTIFICATE 3
CONSENTS 17
CONVERSION SHARES 1
CYBERFIN 13
DEBT 23
DISCLOSURE 7
ENVIRONMENTAL LAWS 11
ESCROW AGENT 2
ESCROW AGREEMENT 3
EXCESS CASH 25
FINANCIAL STATEMENTS 9
FIRST CLOSING 2
FIRST CLOSING DATE 2
GUARANTOR 13
GUARANTORS 13
GUARANTY 3
INDEMNIFIED LIABILITIES 23
INDEMNITEES 23
KRUY 13
MINIMUM AMOUNT 2
NASD 21
OBLIGATIONS 4
PLEDGE AGREEMENTS 13
PLEDGED SECURITIES 1
PREFERRED STOCK 8
PROPORTIONATE 6
PURCHASE PRICE 2
PURCHASED BRIDGE NOTES 2
PURCHASER 1
REGISTRATION PERIOD 20
REGISTRATION RIGHTS AGREEMENT 1
REGULATION D 1
REPRESENTATIVE 4
REPRICING SHARES 1
REPRICING WARRANT 1
RULE 144 15
SEC DOCUMENTS 9
SECURITIES 7
TRANSACTION AGREEMENTS 7
TRANSFER AGENT INSTRUCTIONS 3
WARRANT SHARES 1
WARRANTS 1
SERIES 1 BRIDGE NOTE PURCHASE AGREEMENT
THIS SERIES 1 BRIDGE NOTE PURCHASE AGREEMENT (the
"Agreement") is made and entered into as of this 18th
day of January, 2000, among CAMBEX CORPORATION, a
Massachusetts corporation (the "Company") and the
persons listed on the Purchaser signature pages
attached hereto (each of whom is individually referred
to as a "Purchaser" and all of whom collectively are
referred to as the "Purchasers").
BACKGROUND
The Company has authorized the issuance, sale, and
delivery of up to $2,000,000 in original principal
amount of the Company's Series 1 Secured Convertible
Bridge Notes, in substantially the form attached hereto
as Exhibit A (the "Bridge Notes"). The Bridge Notes
are convertible into shares of the Company's common
stock, par value $.10 (the "Common Stock"). The Common
Stock issuable upon conversion of the Bridge Notes is
hereinafter referred to as the "Conversion Shares".
The Bridge Notes have attached repricing rights
evidenced by a warrant in substantially the form of
Attachment 1 to the Bridge Notes (the "Repricing
Warrant"), exercisable under certain circumstances for
additional shares of Common Stock (the "Repricing
Shares") at the exercise price of $.10. In connection
with the issuance of the Bridge Notes, the Company has
authorized the issuance of Purchase Warrants, in
substantially the form attached hereto as Exhibit B
(the "Warrants") giving a Purchaser the right to
purchase Common Stock. Each Purchaser will be issued a
Warrant at that Closing exercisable for 15,000 shares
of Common Stock for each $100,000 in principal amount
of Bridge Notes purchased. The shares of Common Stock
issuable upon exercise of the Warrants are hereinafter
referred to as the "Warrant Shares." The proceeds of
the Bridge Notes will be used to provide the Company
with operating capital, repayment of certain limited
existing indebtedness of the Company, and capital
expenditures. The Bridge Notes are generally secured
by 1,709,467 shares of the Company's Common Stock (the
"Pledged Securities") owned or held by certain Company
officers or corporations controlled by them and pledged
as part of their limited guaranty of the Company's
Obligations hereunder. Purchasers wish to purchase,
upon the terms and conditions stated in this Agreement,
up to $2,000,000 in principal amount of the Bridge
Notes, with each Purchaser purchasing Bridge Notes in
the principal amount set forth on such Purchaser's
signature page affixed to this Agreement.
Contemporaneously with the execution and delivery of
this Agreement, the parties hereto are executing and
delivering a Registration Rights Agreement in
substantially the form attached hereto as Exhibit C
(the "Registration Rights Agreement") pursuant to which
the Company has agreed to provide certain registration
rights in respect of the Conversion Shares, the Warrant
Shares, and the Repricing Shares under the Securities
Act of 1933 ("1933 Act") and the rules and regulations
promulgated thereunder, and applicable state securities
laws. The Company and the Purchasers are executing and
delivering this Agreement in reliance upon the
exemption from securities registration pursuant to
Section 4(2) and Regulation D ("Regulation D").
AGREEMENT
For and 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 Company and each Purchaser
hereby agree as follows:
SECTION 1. bridge notes.
Section 1.1 Authorization, Issuance, and Sale of
Notes.
The Company has authorized the sale and issuance, in
accordance with the terms of this Agreement, of up to
$2,000,000 in principal amount of its Bridge Notes at
one or more closings. The Company agrees to issue and
sell to each Purchaser and each Purchaser agrees to
purchase from the Company, at a Closing, a Bridge Note
in the principal amount (the "Purchased Bridge Notes")
set forth adjacent to the caption "Purchased Bridge
Notes" on the signature page to this Agreement of each
Purchaser hereto at a purchase price (the "Purchase
Price") of 100% of the principal amount of Bridge Notes
purchased.
Section 1.2 Authorization and Issuance of Warrants.
The Company has authorized the issuance and
delivery of Warrants exercisable for up to 300,000
shares of Common Stock in connection with the issuance,
sale, and delivery of the Bridge Notes. The Company
agrees to issue and deliver to each Purchaser a Warrant
exercisable in accordance with its terms for 15,000
shares of Common Stock for each $100,000 in principal
amount of the Bridge Notes purchased by such Purchaser.
Section 1.3 Form of Payment.
On or before the Closing Date, each Purchaser shall pay
the Purchase Price for the Purchased Bridge Notes to be
issued and sold to such Purchaser at the Closing, by
wire transfer of immediately available funds to:
Bank: SunTrust Bank, Atlanta
Center: 008
Account No.: 9088000008
ABA Routing No.: 000000000
Attn: Xxxxxxx Xxxxxxx
Re: Cambex Corporation-
Escrow Account
Section 1.4 Closing.
All closings of the purchase and sale of the Purchased
Bridge Notes shall take place at the offices of Xxxxxxx
Law Group LLC, 0000 Xxxxx Xxxx, XX, Xxxxx 000, Xxxxxxx,
Xxxxxxx 00000, within five (5) business days following
the date that $1,000,000 (the "Minimum Amount") is held
by SunTrust Bank, Atlanta (the "Escrow Agent"), subject
to notification of satisfaction (or waiver) of the
conditions to the Closing set forth in Section 5 below
(such closing being called the "First Closing" and such
date and time being called the "First Closing Date").
Following the First Closing, the Company anticipates it
will continue to offer the Bridge Notes until the
offering of the Bridge Notes is terminated or all
$2,000,000 in principal amount is purchased. From time
to time, one or more additional closings may occur at
such time and date as is mutually agreeable between the
Purchasers purchasing Bridge Notes at such closing and
the Company (each such closing being called an
"Additional Closing" and such date and time being
called an "Additional Closing Date," and all of such
closings are hereinafter referred to individually as a
"Closing" and collectively as the "Closings," and each
date on which a Closing shall occur is hereinafter
referred to as a "Closing Date" and collectively as the
"Closing Dates"). Each Closing is expected to take
place by exchange of faxed signature pages with
originals to follow by overnight delivery.
Section 1.5 Deliveries at Closing.
At each Closing the Company shall deliver to the
Purchasers:
(a) the original of this Agreement;
(b) Bridge Notes in definitive form with
attached Repricing Warrants, registered in
the name of each Purchaser, or the designee
of such Purchaser, representing the Purchased
Bridge Notes purchased by such Purchaser;
(c) Warrants in definitive form, registered
in the name of each Purchaser, or the
designee of such Purchaser;
(d) a copy of the Registration Rights
Agreement;
(e) a copy of the Escrow Agreement in
substantially the form of Exhibit D hereto
(the "Escrow Agreement");
(f) a Guaranty Agreement (the "Guaranty")
executed by the Company and the pledgor of
stock representing Pledged Securities as
Guarantor thereunder, and an accompanying
Stock Pledge Agreement executed by pledgor of
stock representing Pledged Securities as
pledgor of certain shares or rights to
acquire shares of Common Stock of the Company
for a particular Closing;
(g) stock certificates or evidence of the
shares in DTC form representing the Pledged
Securities;
(h) a copy of the opinion of counsel to the
Company, in substantially the form of Exhibit
E hereto;
(i) a copy of the Irrevocable Transfer Agent
Instructions, in substantially the form of
Exhibit F hereto, (the "Transfer Agent
Instructions");
(j) the Compliance Certificate of the
Company (the "Compliance Certificate"); and
(k) the Clerk Certificate of the Company
(the "Clerk Certificate").
Section 1.6 Deliveries by Guarantors at Closing.
At the First Closing the Guarantors shall deliver:
(a) to the Purchasers, an executed copy of
each of this Agreement and their respective
Guaranty Agreement and Stock Pledge
Agreement; and
(b) to an escrow agent or a brokerage
designated by Purchasers pursuant to the
Stock Pledge Agreements, original
certificates in the names of the Guarantors
with attached executed stock powers in blank,
or evidence of receipt by such brokerage of
DTC shares of the Company representing the
Collateral Shares registered with the
Company's transfer agent in the name of the
Purchasers.
SECTION 2. pledged shares; appointment of
representative.
The provisions of this Section 2 shall remain in effect
so long as any of the Bridge Notes shall remain
outstanding.
Section 2.1 Pledged Shares.
In order to secure the obligations of the Company due
to the Purchasers (such obligations are sometimes
hereinafter referred to as the "Obligations") under the
Transaction Agreements (as defined below), Guarantors
have pledged pursuant to their respective Guaranty
Agreement and Stock Pledge Agreement, effective at the
First Closing, a continuing first priority interest in
and to the Pledged Shares.
Section 2.2 Appointment of Purchaser Representative.
Each Purchaser hereto hereby irrevocably appoints
SovCap Equity Partners, Ltd., a corporation organized
under the laws of the Bahamas and a First Closing
Purchaser hereunder, to act as the sole and exclusive
agent and representative (the "Representative") of each
such Purchaser to act on behalf of such Purchaser and
in such Purchaser's name, place, and stead, to
(i) exercise all rights of such Purchaser, and
(ii) take all action on behalf of Purchaser that may be
taken by Purchaser with respect to the collateral under
this Agreement, the Bridge Notes, and the other
Transaction Agreements. Without limiting the
generality of the foregoing:
(a) The Representative shall, on behalf of
all Purchasers, send all notices which shall
or may be given by Purchasers, under the
Transaction Agreements, declare Events of
Default under this Agreement, the Bridge
Notes, and the other Transaction Agreements,
accelerate the Bridge Notes, rescind
acceleration of the Bridge Notes, and enforce
the Bridge Notes, this Agreement, and the
other Transaction Agreements. The
Representative reserves the right, in its
sole discretion, in each instance without
prior notice to the Purchasers, (i) to agree
to the modification, waiver, or release of
any of the terms of any of the Transaction
Agreements, including, without limitation,
the waiver or release of any of the
conditions precedent for the purchase and
sale of the Bridge Notes; (ii) to consent to
any action or failure to act by the Company;
and (iii) to exercise or refrain from
exercising any powers, rights, or remedies
that the Purchasers have or may have with
respect to collateral under the Transaction
Agreements; provided however, that the
Representative shall not, without obtaining
the prior written consent of each Purchaser
(which consent shall not be unreasonably
withheld or delayed), exercise any of such
rights so as to knowingly release or waive
any claim against the Company or any other
person who may be liable with respect to the
Bridge Notes if such action would have a
materially adverse effect on the collection
of the indebtedness evidenced by the Bridge
Notes or the enforcement of the Transaction
Agreements.
If any Purchaser shall refuse to consent to
any amendment, modification, waiver, release,
or subordination requiring the written
consent of the Purchasers, the Purchasers who
consent to such amendment, modification,
waiver, release, or subordination may, at
their option, at any time thereafter (but
shall not be obligated to) purchase the
Bridge Note or Bridge Notes held by the non-
consenting Purchaser or Purchasers by paying
to such non-consenting Purchaser or
Purchasers an amount equal to the unpaid
principal and accrued but unpaid interest on
the Bridge Note held by such non-consenting
Purchaser or Purchasers.
(b) The Representative shall collect,
enforce, and bring any action on the
Transaction Agreements and any collateral
granted therein in the name of the
Representative for the benefit of all
Purchasers, in accordance with this Section
2.
Section 2.3 Assurances.
(a) Each Purchaser hereby authorizes third
parties with whom Representative deals in
carrying out the responsibilities of
Representative hereunder, to rely
conclusively on the instructions and
decisions of the Representative as to any
action taken pursuant to and in accordance
with the terms of this Agreement and the
other Transaction Agreements without any
further or additional approval or
authorization from such Purchaser, including
without limitation, the execution and
delivery of any documents or instruments, or
any other actions required to be taken by the
Representative under this Agreement and the
other Transaction Agreements, and no
Purchaser shall have any cause of action
against third parties with whom
Representative deals in carrying out the
responsibilities of Representative hereunder
or under the other Transaction Agreements for
any action taken by such third parties in
reliance upon the instructions or decisions
of the Representative;
(b) All actions, decisions, and instructions
of the Representative shall be conclusive and
binding upon all of the Purchasers, and no
Purchaser shall have any cause of action
against the Representative for any actions
taken, decision made or instruction given by
the Representative under this Agreement,
except for fraud or willful misconduct by
Representative acting in such capacity
hereunder.
Section 2.4 Default and Acceleration Procedures.
(a) Each Purchaser acknowledges and agrees
that its respective rights in, to, and under
the Pledged Shares provided for in the
Guaranty Agreements and Stock Pledge
Agreements are limited to the Pledged Shares
securing the Bridge Notes purchased by each
such Purchaser as granted by the Guarantors
pursuant to the First Closing. Purchasers and
Representative acknowledge and agree that the
Pledged Shares shall secure all Bridge Notes
issued hereunder on a pro-rata basis and upon
a continuing Event of Default Purchasers
shall be entitled to a Proportionate Share in
the event Representative deems it necessary
to take action with respect to the Pledged
Shares.
(b) The Representative shall give all
Purchasers written notice of any Event of
Default under the Bridge Notes, this
Agreement, or the other Transaction
Agreements which, in the judgment of the
Representative, adversely affects the
respective interests of the Purchasers under
any of the Transaction Agreements. In the
event of any Event of Default thereunder, the
Representative shall pursue any remedies
available to Purchasers under the Transaction
Agreements which the Representative in its
sole discretion shall deem advisable, and
Representative may also elect to postpone the
pursuit of remedies if in its sole discretion
and judgment it is appropriate under the
circumstances to do so.
(c) In the event proceedings are instituted
for a sale under power of sale or a judicial
foreclosure of the collateral provided under
the Transaction Agreements, the provisions of
the Massachusetts UCC, absent written
agreement to the contrary, shall govern such
proceedings and the actions taken pursuant
thereto, as among the Representative and the
Purchasers.
(d) In the event the Representative acquires
title to any of the collateral provided under
the Transaction Agreements pursuant to a
foreclosure or conveyance in lieu of
foreclosure, title shall be taken in a form
acceptable to the Representative and shall be
held by or on behalf of the Representative
for the benefit of only the Purchasers
holding Bridge Notes which were secured by
such collateral, in their Proportionate
Share. The Representative shall manage such
collateral in its ordinary course of business
and in accordance with its customary
practices and procedures for as long as such
title is held in whole or in part in the name
of or on behalf of the Representative. The
Representative shall contemporaneously
endeavor to sell such collateral on terms and
conditions reasonably acceptable to the
Representative.
(e) If the Representative receives a payment
after acceleration of the Bridge Notes,
whether pursuant to a demand for payment or
as a result of legal proceedings against the
Company, or from any source whatsoever, such
payment in respect of the specific Bridge
Notes so paid shall be applied in the
following order (unless mandated otherwise by
the Transaction Agreements or validly by the
express terms of such payment):
(1) To the expenses incurred in
effecting such recovery or in enforcing any
right or remedy under the Transaction
Agreements, and any other expenses
theretofore incurred by the Representative
and not previously reimbursed by the Company;
(2) To accrued interest, payable by the
Company, according to Purchaser's
Proportionate Share of such accrued interest
in respect of such Bridge Notes; and
(3) To the unpaid principal of such
Bridge Notes with each Purchaser receiving
such Purchaser's Proportionate Share of such
principal.
(f) The term "Proportionate Share" shall
mean the amount of each Purchaser's Bridge
Note purchased at a specific Closing divided
by the total amount of Bridge Notes issued
under and pursuant to this Agreement.
Section 2.5 Standard of Care of the Representative.
(a) The Representative shall endeavor in
good faith to perform all services and duties
and exercise all powers hereunder
specifically assigned and delegated to the
Representative, and the Representative shall
perform and exercise, and shall have the
right and power to perform and exercise, such
other services and powers as are reasonably
incidental thereto. The Representative shall
not be liable to the Purchasers, however, for
any action or failure to act or any error of
judgment, negligence, mistake, or oversight
by it or any of its agents, officers,
employees, or attorneys, with respect to the
Transaction Agreements, provided the
Representative has acted in good faith and
has not been guilty of willful misconduct or
gross negligence. Without limiting the
generality of the foregoing, the
Representative may consult with counsel or
other advisors selected by it, and the
Representative shall not be liable for any
action taken or omitted to be taken in good
faith by it in accordance with the advice of
such counsel or other advisors. In
performing its obligations hereunder and
under the Transaction Agreements, the
Representative may rely in good faith on
written and telephonic communications
received by the Representative without
investigating the genuineness thereof or the
power and authority of the author of such
communications. Each Purchaser acknowledges
and agrees that the Representative's duties
and obligations under this Agreement are
administrative and ministerial in nature, and
that the Representative has no fiduciary
obligation to the Purchasers.
(b) The Representative does not assume, and
shall not have, any responsibility or
liability, express or implied, for the
adequacy, sufficiency, validity,
collectability, genuineness, or
enforceability of any of the Transaction
Agreements, for the financial condition of
the Company, for compliance by the Company
with the terms and conditions of the
Transaction Agreements, or for the accuracy
of any financial or other information
furnished to the Purchaser by the
Representative or by any other party. The
Representative shall not be required to
ascertain or inquire as to the performance or
observance by the Company of any of the
terms, conditions, provisions, covenants, or
agreements contained in any of the
Transaction Agreements or as to the use of
the proceeds of the offering of the Bridge
Notes or of the existence or possible
existence of any Event of Default thereunder.
(c) The Representative may accept deposits
from, lend money to, and generally engage in
any kind of banking, trust, financial
advisory, or other business with the Company
or any affiliate thereof as if it were not
performing the duties specified herein, and
may accept fees and other consideration from
the Company or affiliate for services in
connection with such services, without having
to account for the same to the Purchasers."
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.
To induce the Purchasers to purchase the Bridge Notes,
the Company represents and warrants to each Purchaser,
except as referenced on Schedule 1 hereto (the
"Disclosure Schedule"), which reference shall set forth
the specific section to which the qualification relates
and the statement which constitutes the qualification,
that:
Section 3.1 Organization and Qualification.
The Company and its subsidiaries are corporations duly
organized, validly existing, and in good standing under
the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power to
own their properties and to carry on their business as
now being conducted. Each of the Company and each
subsidiary is duly qualified as a foreign corporation
to do business and is in good standing in each
jurisdiction in which the nature of the business
conducted by it makes such qualification necessary,
except to the extent that the failure to be so
qualified or be in good standing would not have a
material adverse effect on the Company and its
subsidiaries taken as a whole.
Section 3.2 Authorization, Enforcement, Compliance
with Other Instruments.
(a) The Company has the requisite corporate
power and authority to enter into and perform
each of this Agreement, any and all
amendments thereto, the Bridge Notes, the
Repricing Warrants, the Warrants, the
Registration Rights Agreement, the Escrow
Agreement, the individual guaranties and
stock pledge agreements of each of Xxxxxx
Xxxx and Cyberfin Corp., a Massachusetts
corporation, on behalf of Xxxxx Xxxx, the
Transfer Agent Instructions, the Financing
Statement, and any related agreements
(collectively, the "Transaction Agreements"
and individually a "Transaction Agreement"),
and to issue the Bridge Notes, the Repricing
Warrants, the Warrants, the Conversion
Shares, the Repricing Shares, and the Warrant
Shares in accordance with the terms hereof
and thereof;
(b) the execution and delivery by the
Company of each of the Transaction Agreements
and the consummation by it of the
transactions contemplated thereby, including
without limitation the issuance of the Bridge
Notes, the Warrants, and the Repricing
Warrants, the reservation for issuance and
the issuance of the Conversion Shares
issuable upon conversion of the Bridge Notes
and the reservation for issuance and the
issuance of the Repricing Shares, and the
Warrant Shares, upon exercise of the
Repricing Warrants, and the Warrants (the
Bridge Notes, the Repricing Warrants, the
Warrants, the Conversion Shares, the
Repricing Shares, and the Warrant Shares are
hereinafter collectively, the "Securities")
have been duly authorized by the Company's
Board of Directors and no further consent or
authorization is required by the Company, its
Board of Directors, or its stockholders;
(c) each of the Transaction Agreements have
been duly and validly executed and delivered
by the Company; and
(d) each of the Transaction Agreements
constitutes the valid and binding obligation
of the Company enforceable against the
Company in accordance with its terms, except
as such enforceability may be limited by
general principles of equity or applicable
bankruptcy, insolvency, reorganization,
moratorium, liquidation, or similar laws
relating to, or affecting generally, the
enforcement of creditors' rights and
remedies.
Section 3.3 Capitalization.
Immediately prior to Closing, the authorized capital
stock of the Company consisted of 28,000,000 shares of
capital stock, of which 25,000,000 shares are Common
Stock, par value $.10, of which 9,545,176 shares were
issued and outstanding as of the date of this
Agreement, and 3,000,000 shares of preferred stock
("Preferred Stock"), par value $1.00, none of which are
issued and outstanding. All of such outstanding shares
have been validly issued and are fully paid and
nonassessable. Except as described in Section 3.3 of
the Disclosure Schedule, no shares of Common Stock or
Preferred Stock are subject to preemptive rights or any
other similar rights or any liens or encumbrances
suffered or permitted by the Company. Except as
disclosed in Section 3.3 of the Disclosure Schedule, as
of the effective date of this Agreement, (a) there are
no outstanding options, warrants, scrip, rights to
subscribe to, calls, or commitments of any character
whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of the
Company or any of its subsidiaries, or contracts,
commitments, understandings, or arrangements by which
the Company or any of its subsidiaries is or may become
bound to issue additional shares of capital stock of
the Company or any of its subsidiaries, or options,
warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of
capital stock of the Company or any of its
subsidiaries, (b) there are no outstanding debt
securities, and (c) there are no agreements or
arrangements under which the Company or any of its
subsidiaries is obligated to register the sale of any
of their securities under the 1933 Act (except the
Registration Rights Agreement). There are no
securities or instruments containing anti-dilution or
similar provisions that will be triggered by the
issuance of the Securities in the manner contemplated
by this Agreement. The Company has furnished to the
Purchaser true and correct copies of the Company's
Articles of Organization, as amended (the "Charter")
and the Company's Bylaws, as in effect on the date
hereof (the "Bylaws"), and the terms of all securities
convertible into or exercisable for Common Stock and
the material rights of the holders thereof in respect
thereto.
Section 3.4 Issuance of Securities.
The Bridge Notes have been duly authorized and are
free from all taxes, liens, and charges with respect to
the issue thereof. The Conversion Shares issuable upon
conversion of the Bridge Notes have been duly
authorized and reserved for issuance. The Repricing
Warrants have been duly authorized and are free from
all taxes, liens, and charges with respect to the
issuance thereof. The Repricing Shares issuable upon
exercise of the Repricing Warrants have been duly
authorized and reserved for issuance. The Warrants
have been duly authorized and are free from all taxes,
liens, and charges with respect to the issuance
thereof. The Warrant Shares issuable upon exercise of
the Warrants have been duly authorized and reserved for
issuance. Upon conversion of the Bridge Notes, the
Conversion Shares will, and upon exercise of the
Repricing Warrants, and the Warrants, the Repricing
Shares, and the Warrant Shares will, be duly and
validly issued, fully paid, and nonassessable, and free
from all taxes, liens, and charges, with respect to the
issuance thereof, with the holders being entitled to
all rights accorded to a holder of Common Stock.
Section 3.5 No Conflicts.
Except as disclosed in Section 3.5 of the Disclosure
Schedule, the execution, delivery, and performance of
the Transaction Agreements by the Company, and the
consummation by the Company of the transactions
contemplated thereby, will not (a) result in a
violation of the Charter or the Bylaws of the Company
or (b) conflict with, constitute a default (or an event
which with notice or lapse of time or both would become
a default) under, or give to others any rights of
termination, amendment, acceleration, or cancellation
of, any agreement, indenture, or instrument to which
the Company or any of its subsidiaries is a party, or
result in a violation of any law, rule, regulation,
order, judgment, or decree (including federal and state
securities laws and regulations and the rules and
regulations of the principal market or exchange on
which the Common Stock is traded or listed) applicable
to the Company or any of its subsidiaries or by which
any property or asset of the Company or any of its
subsidiaries is bound or affected. Except as described
in Section 3.5 of the Disclosure Schedule, neither the
Company nor any subsidiary is in violation of any term
of, or in default under, its Charter or the Bylaws or
their organizational charter or Bylaws, respectively,
or any material contract, agreement, mortgage,
indebtedness, indenture, instrument, judgment, decree,
or order or any statute, rule, or regulation applicable
to the Company or its subsidiaries. The business of
the Company and its subsidiaries is not being conducted
in violation of any law, ordinance, or regulation of
any governmental entity. Except as specifically
contemplated by this Agreement and as required under
the 1933 Act and any applicable state securities laws,
the Company is not required to obtain any consent,
authorization, or order of, or make any filing or
registration with, any court or governmental agency in
order for it to execute, deliver, and perform any of
its obligations under or contemplated by the
Transaction Agreements in accordance with the terms
thereof. Except as disclosed in Section 3.5 of the
Disclosure Schedule, all consents, authorizations,
orders, filings, and registrations which the Company is
required to obtain pursuant to the preceding sentence
have been obtained or effected on or prior to the date
hereof. The Company and its subsidiaries are unaware
of any facts or circumstances which might give rise to
any of the foregoing.
Section 3.6 SEC Documents; Financial Statements.
Since November 12, 1999, 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
Securities Exchange Act of 1934, as amended (the "1934
Act") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial
statements and schedules thereto and documents
incorporated by reference therein, being hereinafter
referred to as the "SEC Documents"). The Company has
made available to each Purchaser or its representative
true and complete copies of the SEC Documents. The
Company (i) is a "reporting issuer" as defined in Rule
902(1) of Regulation S and (ii) has a class of
securities registered under Section 12(b) or 12(g) of
the 1934 Act or is required to file reports pursuant to
Section 15(d) of the 1934 Act, and has filed all the
materials required to be filed as reports pursuant to
the Exchange Act for the period the Company was
required by law to file such material. As of their
respective dates, the financial statements of the
Company included in the SEC Documents (the "Financial
Statements") complied as to form in all material
respects with applicable accounting requirements and
the published rules and regulations of the SEC with
respect thereto. Such financial statements have been
prepared in accordance with generally accepted
accounting principles, consistently applied, during the
periods involved (except (a) as may be otherwise
indicated in such financial statements or the notes
thereto, or (b) in the case of unaudited interim
statements, to the extent they may exclude footnotes or
may be condensed or summary statements) and present
fairly, in all material respects, the financial
position of the Company as of the dates thereof, and
the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments). No
other information provided by or on behalf of the
Company to the Purchaser which is not included in the
SEC Documents, including, without limitation,
information referred to in Section 3.5 of this
Agreement, contains any untrue statement of a material
fact or omits to state any material fact necessary in
order to make the statements therein, in the light of
the circumstance under which they are or were made, not
misleading.
Section 3.7 Absence of Certain Changes.
Except as described in Section 3.7 of the Disclosure
Schedule, since the date of the most recent audited
balance sheet included in the SEC Documents, there has
been no material adverse change and no material adverse
development in the business, properties, operations,
financial condition, results of operations, or
prospects of the Company or its subsidiaries. The
Company has not taken any steps, and does not currently
expect to take any steps, to seek protection pursuant
to any bankruptcy law nor does the Company or its
subsidiaries have any knowledge that its creditors
intend to initiate involuntary bankruptcy proceedings.
Section 3.8 Absence of Litigation.
There is no action, suit, proceeding, inquiry, or
investigation before or by any court, public board,
government agency, self-regulatory organization, or
body pending or, to the knowledge of the Company or any
of its subsidiaries, threatened against or affecting
the Company, the Common Stock, or any of the Company's
subsidiaries, wherein an unfavorable decision, ruling
or finding would (a) have a material adverse effect on
the transactions contemplated hereby, (b) adversely
affect the validity or enforceability of, or the
authority or ability of the Company to perform its
obligations under the Transaction Agreements, or (c)
except as expressly set forth in Schedule 3.8 of the
Disclosure Schedule, have a material adverse effect on
the business, operations, properties, financial
condition, or results of operation of the Company and
its subsidiaries taken as a whole.
Section 3.9 Purchase of Securities.
The Company acknowledges and agrees that the Purchaser
is acting solely in the capacity of an arm's length
purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company further
acknowledges that the Purchaser is not acting as a
financial advisor or fiduciary of the Company (or in
any similar capacity) with respect to this Agreement
and the transactions contemplated hereby and any advice
given by the Purchasers or any of their respective
representatives or agents in connection with this
Agreement and the transactions contemplated hereby is
merely incidental to such Purchaser's purchase of the
Securities. The Company further represents to the
Purchaser that the Company's decision to enter into
this Agreement has been based solely on the independent
evaluation by the Company and its representatives.
Section 3.10 No Undisclosed Events, Liabilities,
Developments, or Circumstances.
No event, liability, development, or circumstance has
occurred or exists, or to the knowledge of the Company
is contemplated to occur, with respect to the Company
or its subsidiaries or their respective business,
properties, prospects, operations, or financial
condition, which could be material but which has not
been publicly announced or disclosed in writing to the
Purchaser.
Section 3.11 No General Solicitation.
Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in
any form of general solicitation or general advertising
(within the meaning of Regulation D under the 0000 Xxx)
in connection with the offer or sale of the Bridge
Notes or the Conversion Shares. The Company represents
that it has not offered the Bridge Notes or Conversion
Shares to the Purchaser in the U.S. or, to the best
knowledge of the Company, to any person in the United
States or any U.S. person.
Section 3.12 No Integrated Offering.
Neither the Company, nor any of its affiliates, nor any
person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or
solicited any offers to buy any security, under
circumstances that would require registration of any of
the Securities under the 1933 Act or cause this
offering to be integrated with prior offerings by the
Company for purposes of the 1933 Act or any applicable
stockholder approval provisions.
Section 3.13 Employee Relations.
Neither the Company nor any of its subsidiaries is
involved in any labor dispute nor, to the knowledge of
the Company or any of its subsidiaries, is any such
dispute threatened. None of the Company's or its
subsidiaries' employees is a member of a union and the
Company and its subsidiaries believe that their
relations with their employees are good.
Section 3.14 Intellectual Property Rights.
The Company and its subsidiaries own or possess
adequate rights or licenses to use all trademarks,
trade names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights,
inventions, licenses, approvals, governmental
authorizations, trade secrets, and rights necessary to
conduct their respective businesses as now conducted.
Except as set forth on Section 3.14 of the Disclosure
Schedule, none of the Company's trademarks, trade
names, service marks, service xxxx registrations,
service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government
authorizations, trade secrets, or other intellectual
property rights have expired or terminated, or are
expected to expire or terminate in the near future,
other than those that would not have a material adverse
effect on the Company. The Company and its
subsidiaries do not have any knowledge of any
infringement by the Company or its subsidiaries of the
trademark, trade name rights, patents, patent rights,
copyrights, inventions, licenses, service names,
service marks, service xxxx registrations, trade
secret, or other similar rights of others. Except as
set forth on Section 3.14 of the Disclosure Schedule,
there is no claim, action, or proceeding being made or
brought against, or to the Company's knowledge, being
threatened against, the Company or its subsidiaries
regarding trademark, trade name, patents, patent
rights, invention, copyright, license, service names,
service marks, service xxxx registrations, trade
secret, or other infringement, and the Company and its
subsidiaries are unaware of any facts or circumstances
which might give rise to any of the foregoing. The
Company and its subsidiaries have taken reasonable
security measures to protect the secrecy,
confidentiality, and value of all of their intellectual
properties.
Section 3.15 Environmental Laws.
The Company and its subsidiaries are (a) in compliance
with any and all applicable foreign, federal, state,
and local laws and regulations relating to the
protection of human health and safety, the environment,
or hazardous, toxic substances, wastes, pollutants, or
contaminants ("Environmental Laws"), (b) have received
all permits, licenses, or other approvals required of
them under applicable Environmental Laws to conduct
their respective businesses, and (c) are in compliance
with all terms and conditions of any such permit,
license, or approval.
Section 3.16 Title.
The Company and its subsidiaries have good and
marketable title in fee simple to all real property and
good and marketable title to all personal property
owned by them which is material to the business of the
Company and its subsidiaries, in each case free and
clear of all liens, encumbrances, and defects except as
described in Section 3.16 of the Disclosure Schedule or
as do not materially affect the value of such property
and do not interfere with the use made and proposed to
be made of such property by the Company and its
subsidiaries. Any real property and facilities held
under lease by the Company and its subsidiaries are
held by them under valid, subsisting, and enforceable
leases with such exceptions as are not material, and do
not interfere with the use made and proposed to be made
of such property and buildings by the Company and its
subsidiaries.
Section 3.17 Insurance.
The Company and each of its subsidiaries are
insured by insurers of recognized financial
responsibility against such losses and risks, and in
such amounts, as management of the Company believes to
be prudent and customary in the businesses in which the
Company and its subsidiaries are engaged. Neither the
Company nor any such subsidiary has been refused any
insurance coverage sought or applied for, and neither
the Company nor any such subsidiary has any reason to
believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or
to obtain similar coverage from similar insurers as may
be necessary to continue its business at a cost that
would not materially and adversely affect the
condition, financial, or otherwise, or the earnings,
business, or operations of the Company and its
subsidiaries, taken as a whole.
Section 3.18 Regulatory Permits.
The Company and its subsidiaries possess all
certificates, authorizations, and permits issued by the
appropriate federal, state, or foreign regulatory
authorities necessary to conduct their respective
businesses, except to the extent that the failure to
possess any such certificate, authorization, and permit
would not have a material adverse effect on the Company
and its subsidiaries taken as a whole, and neither the
Company nor any such subsidiary has received any notice
of proceedings relating to the revocation or
modification of any such certificate, authorization, or
permit.
Section 3.19 Internal Accounting Controls.
The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to
provide reasonable assurance that (a) transactions are
executed in accordance with management's general or
specific authorizations, (b) transactions are recorded
as necessary to permit preparation of financial
statements in conformity with generally accepted
accounting principles and to maintain asset
accountability, (c) access to assets is permitted only
in accordance with management's general or specific
authorization, and (d) the recorded accountability for
assets is compared with the existing assets at
reasonable intervals and appropriate action is taken
with respect to any differences.
Section 3.20 No Materially Adverse Contracts, Etc.
Neither the Company nor any of its subsidiaries is
subject to any charter, corporate, or other legal
restriction, or any judgment, decree, order, rule, or
regulation which in the judgment of the Company's
officers has, or to the knowledge of the Company is
expected in the future to have, a material adverse
effect on the business, properties, operations,
financial condition, results of operations, or
prospects of the Company or its subsidiaries. Neither
the Company nor any of its subsidiaries is a party to
any contract or agreement which in the judgment of the
Company's officers has, or to the knowledge of the
Company is expected to have, a material adverse effect
on the business, properties, operations, financial
condition, results of operations, or prospects of the
Company or its subsidiaries.
Section 3.21 Tax Status.
Except as set forth on Section 3.21 of the Disclosure
Schedule, the Company and each of its subsidiaries has
made or filed all federal and state income and all
other tax returns, reports, and declarations required
by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its
subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and
unreported taxes), and has paid all taxes and other
governmental assessments and charges that are material
in amount, shown or determined to be due on such
returns, reports, and declarations, except those being
contested in good faith, and has set aside on its books
amounts deemed reasonably adequate for the payment of
all taxes for periods subsequent to the periods to
which such returns, reports, or declarations apply.
There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Company know of
no basis for any such claim, and except as set forth on
Schedule 3.21, there are no open years, examinations in
progress or claims against it for federal, state or
other taxes (including penalties and interest) for any
period or periods prior to the date hereof.
Section 3.22 Certain Transactions.
Except as set forth on Section 3.22 of the Disclosure
Schedule and in the SEC Documents, and except for arm's
length transactions pursuant to which the Company makes
payments in the ordinary course of business upon terms
no less favorable than the Company could obtain from
third parties and other than the grant of stock options
disclosed on Section 3.3 of the Disclosure Schedule,
none of the officers, directors, or employees of the
Company is presently a party to any transaction with
the Company (other than for services as employees,
officers, and directors), including any contract,
agreement, or other arrangement providing for the
furnishing of services to or by, providing for rental
of real or personal property to or from, or otherwise
requiring payments to or from any officer, director, or
such employee or, to the knowledge of the Company, any
corporation, partnership, trust, or other entity in
which any officer, director, or any such employee has a
substantial interest or is an officer, director,
trustee, or partner.
Section 3.23 Dilutive Effect.
The Company understands and acknowledges that the
number of Conversion Shares issuable upon conversion of
the Bridge Notes will increase in certain
circumstances. The Company further acknowledges that
its obligation to issue Conversion Shares upon
conversion of the Bridge Notes in accordance with this
Agreement and the Bridge Notes is absolute and
unconditional regardless of the dilutive effect that
such issuance may have on the ownership interests of
other stockholders of the Company.
Section 3.24 Fees and Rights of First Refusal.
The Company is not obligated to offer the securities
offered hereunder on a right of first refusal basis or
otherwise to any third parties including, but not
limited to, current or former shareholders of the
Company, underwriters, brokers, agents, or other third
parties.
Section 3.25 Foreign Corrupt Practices Act.
The Company has not made, offered, or agreed to offer
anything of value to any government official, political
party, or candidate for government office nor has it
taken any action which would cause the Company to be in
violation of the Foreign Corrupt Practices Act of 1977.
Section 3.26 Disclosure.
Neither this Agreement nor any Schedule or Exhibit
hereto, contains an untrue statement of a material fact
or omits a material fact necessary to make the
statements contained herein or therein not misleading.
None of the statements, documents, certificates or
other items prepared or supplied by the Company with
respect to the transactions contemplated hereby
contains an untrue statement of a material fact or
omits a material fact necessary to make the statements
contained therein not misleading.
section 4. REPRESENTATIONS AND WARRANTIES OF THE
GUARANTORs.
To induce the Purchasers to purchase the Bridge Notes,
each of Xxxxxx Xxxx ("Xxxx"), an individual resident of
the Commonwealth of Massachusetts and Cyberfin Corp.
("Cyberfin"), a Massuchetts corporation owned and
controlled by Xxxxx Xxxx (each of Kruy and Cyberfin
sometimes referred to as a "Guarantor" and
collectively, the "Guarantors"), the Guarantors
represents and warrants the following:
Section 4.1 Organization and Qualification.
Cyberfin as a Guarantor hereunder is a corporation duly
organized, validly existing, and in good standing under
the laws of Massachusetts, and has the requisite
corporate power to own its properties and to carry on
its business as now being conducted.
Section 4.2 Authorization, Enforcement, Compliance
with Other Instruments.
(a) Each Guarantor has the requisite power
and authority (corporate and otherwise) to
enter into and perform all their respective
obligations under each of this Agreement, the
Guaranty Agreement, the Pledge Agreement, and
any related agreements (collectively, the
"Pledge Agreements");
(b) The execution and delivery by the
Guarantors of the Pledge Agreements and the
consummation by each of them of the
transactions contemplated thereby, including
without limitation the pledge of the
Collateral Shares and their deliver to a
third party designated by Purchaser for
holding, as part of Guarantor's obligations
under the Stock Pledge Agreement, have been
duly authorized by each of Kruy and
Cyberfin's Board of Directors, and no further
authorization, approval, or consent is
required by Kruy or by Cyberfin, its Board of
Directors, or its stockholders;
(c) the Pledge Agreements have been duly and
validly executed and delivered by each of the
Guarantors; and
(d) each of the Pledge Agreements
constitutes the legal, valid, and binding
obligation of each of the Guarantors
enforceable against them in accordance with
their respective terms, except as such
enforceability may be limited by general
principles of equity or applicable
bankruptcy, insolvency, reorganization,
moratorium, liquidation, or similar laws
relating to, or affecting generally, the
enforcement of creditors' rights and
remedies.
SECTION 5. representations, warranties, and covenants
of purchasers
Each Purchaser represents, warrants, and covenants to
the Company, with respect to such Purchaser only that:
Section 5.1 Investment Purpose.
Purchaser is acquiring the Securities for its own
account for investment only and not with a view
towards, or for resale in connection with, the public
sale or distribution thereof, except pursuant to sales
registered or exempted under the 1933 Act; provided
however, that by making the representations herein,
Purchaser does not agree to hold any Securities for any
minimum or other specific term and reserves the right
to dispose of the Securities at any time in accordance
with or pursuant to a registration statement or an
exemption under the 1933 Act.
Section 5.2 Accredited Investor Status.
Purchaser is an "accredited investor" as that term is
defined in Rule 501(a)(3) of Regulation D.
Section 5.3 Reliance on Exemptions.
Purchaser understands that the Securities are 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 in part upon the truth and accuracy
of, and Purchaser's compliance with, the
representations, warranties, agreements,
acknowledgments, and understandings of Purchaser set
forth herein in order to determine the availability of
such exemptions and the eligibility of Purchaser to
acquire such securities.
Section 5.4 Information.
Purchaser 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 Securities, which have been
requested by such Purchaser. Purchaser and its
advisors, if any, have been afforded the opportunity to
ask questions of the Company. Neither such inquiries
nor any other due diligence investigations conducted by
Purchaser or its advisors, if any, or its
representatives shall modify, amend, or affect such
Purchaser's right to rely on the Company's
representations and warranties contained in Section 3
hereof. Purchaser understands that its investment in
the Securities involves a high degree of risk.
Purchaser has sought such accounting, legal, and tax
advice as it has considered necessary to make an
informed investment decision with respect to its
acquisition of the Securities.
Section 5.5 No Governmental Review.
Purchaser 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 Securities, or the fairness or
suitability of the investment in the Securities, nor
have such authorities passed upon or endorsed the
merits of the offering of the Securities.
Section 5.6 Transfer or Resale.
Purchaser understands that except as provided in the
Registration Rights Agreement:
(a) the Securities have not been and are not
being registered under the 1933 Act or any
state securities laws, and may not be offered
for sale, sold, assigned, or transferred
unless;
(i) subsequently registered thereunder;
(ii) Purchaser shall have delivered to
the Company an opinion of counsel, in a
generally acceptable form, to the effect that
such securities to be sold, assigned, or
transferred may be sold, assigned, or
transferred pursuant to an exemption from
such registration; or
(iii) Purchaser provides the Company
with reasonable assurance that such
securities can be sold, assigned, or
transferred pursuant to Rule 144 or
promulgated under the 1933 Act (or a
successor rule thereto);
(b) any sale of such securities made in
reliance on Rule 144 promulgated under the
1933 Act (or a successor rule thereto) ("Rule
144") may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is
not applicable, any resale of such securities
under circumstances in which the seller (or
the person through whom the sale is made) may
be deemed to be an underwriter (as that term
is defined in the 0000 Xxx) may require
compliance with some other exemption under
the 1933 Act or the rules and regulations of
the SEC thereunder; and
(c) neither the Company nor any other person
is under any obligation to register such
securities under the 1933 Act or any state
securities laws or to comply with the terms
and conditions of any exemption thereunder.
Section 5.7 Legends.
Purchaser understands that the certificates or other
instruments representing the Bridge Notes and, until
such time as the sale of the Conversion Shares have
been registered under the 1933 Act as contemplated by
the Registration Rights Agreement, the stock
certificates representing the Conversion Shares shall
bear a restrictive legend in substantially the
following form (and a stop transfer order may be placed
against transfer of such stock certificates):
THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT
AND MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED, OR ASSIGNED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE
SECURITIES UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A
GENERALLY ACCEPTABLE FORM, THAT REGISTRATION
IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE
STATE SECURITIES LAWS OR UNLESS SOLD PURSUANT
TO RULE 144 UNDER SAID ACT.
The legend set forth above shall be removed and the
Company shall issue a certificate without such legend
to the holder of the Bridge Notes and the Conversion
Shares, upon which it is stamped, if, unless otherwise
required by state securities laws, (a) the sale of the
Conversion Shares is registered under the 1933 Act, (b)
in connection with a sale transaction, such holder
provides the Company with an opinion of counsel, in a
generally acceptable form, to the effect that a public
sale, assignment, or transfer of the Bridge Notes and
the Conversion Shares may be made without registration
under the 1933 Act, or (c) such holder provides the
Company with reasonable assurances that the Bridge
Notes and the Conversion Shares can be sold pursuant to
Rule 144 without any restriction as to the number of
securities acquired as of a particular date that can
then be immediately sold.
Section 5.8 Authorization Enforcement.
This Agreement has been duly and validly authorized,
executed, and delivered on behalf of Purchaser and is a
valid and binding agreement of Purchaser enforceable in
accordance with its terms, subject as to enforceability
to general principles of equity and to applicable
bankruptcy, insolvency, reorganization, moratorium,
liquidation, and other similar laws relating to, or
affecting generally, the enforcement of applicable
creditors' rights and remedies.
Section 5.9 Residence.
Purchaser is a resident of that country specified in
its address on the Schedule of Purchaser.
Section 5.10 No Scheme to Evade Registration.
Purchaser represents and warrants to the Company, as to
itself only, that the acquisition of the Securities is
not a transaction (or any element of a series of
transactions) that is part of a plan or scheme by the
Purchaser to evade the registration provisions of the
1933 Act and that
(a) such Purchaser is an "accredited
investor" within the meaning of Rule 501
under the Securities Act;
(b) such Purchaser has sufficient knowledge
and experience to evaluate the risks and
merits of its investment in the Company and
it is able financially to bear the risks
thereof;
(c) such Purchaser has had an opportunity to
ask questions of and receive answers from and
to discuss the Company's business,
management, and financial affairs with the
Company's management;
(d) the Securities are being acquired for
its own account for the purpose of investment
and not with a view to or for sale in
connection with any distribution thereof;
(e) such Purchaser was not offered nor made
aware of the Company's interest in issuing
the Bridge Notes by any means of public
advertisement or solicitation;
(f) in connection with such Purchaser's
purchase of the Securities, it has been
solely responsible for its own (i) due
diligence investigation of the Company and
(ii) investment decision, and has not engaged
or relied upon any agent or "purchaser
representative" to review or analyze the
Company's business and affairs or advise
Purchaser with respect to the merits of the
investment;
(g) such Purchaser has full power and
authority to execute, deliver, and perform
this Agreement; and this Agreement
constitutes the legal, valid, and binding
obligation of such Purchaser, enforceable
against it in accordance with their
respective terms; and
(h) if such Purchaser proposes to sell the
Securities pursuant to Rule 144A under the
Securities Act, it will (A) take reasonable
steps to obtain the information required by
such Rule to establish a reasonable belief
that the prospective purchaser is a
"qualified institutional buyer" as such term
is defined in Rule 144A and (B) advise the
prospective purchaser that the Purchaser is
relying on the exemption from the
registration provisions of the Securities Act
available pursuant to Rule 144A.
Section 5.11 Covenant Not to Trade.
Each Purchaser for itself and on behalf of each
affiliate and associate of such Purchaser covenants and
agrees, not to purchase, sell, make any short sale of,
pledge, grant any option for the purchase or sale of or
otherwise trade any Common Stock prior to the
conversion of the Bridge Notes (other than a purchase
of Common Stock from the Company pursuant to the
exercise of the Repricing Warrant or the Warrant),
without the prior written consent of the Company.
SECTION 6. CONDITIONS OF INITIAL CLOSING
The Purchaser's obligation to purchase and pay for the
Securities is subject to the satisfaction prior to or
at the Closing of the following conditions:
Section 6.1 Transaction Agreements.
The Company shall have delivered to Purchaser the
Transaction Agreements as provided in Section 1.5,
above, executed by all the parties thereto.
Section 6.2 Opinion of Counsel.
Purchaser shall have received from counsel for the
Company, an opinion in substantially the form of
Exhibit E, addressed to Purchaser, dated the Closing
Date. To the extent that the opinion referred to in
the preceding sentence is rendered in reliance upon the
opinion of any other counsel, Purchaser shall have
received a copy of such opinion of such other counsel,
dated the Closing Date and addressed to Purchaser, or a
letter from such other counsel, dated the Closing Date
and addressed to Purchaser, authorizing Purchaser to
rely on such other counsel's opinion.
Section 6.3 Representations and Warranties; No
Default.
The representations and warranties of the Company
contained in this Agreement and those otherwise made in
writing by or on behalf of the Company in connection
with the transactions contemplated by this Agreement
shall be true in all material respects, except to the
extent of changes caused by the transactions
contemplated herein; provided however, that there shall
exist at the time of the Closing and after giving
effect to such transactions no Event of Default (as
defined in Section 10 of the Bridge Notes).
Section 6.4 Delivery of Schedules; Due Diligence.
Purchaser shall have received and in its discretion
shall be satisfied with the Disclosure Schedules and
the results of its due diligence investigations.
Section 6.5 Purchase and Loan Permitted by
Applicable Laws.
The purchase of, and payment for, all the Securities
evidenced by or attendant to the Bridge Notes shall not
violate any applicable domestic law or governmental
regulation (including, without limitation, Section 5 of
the Securities Act) and shall not subject Purchaser to
any tax, penalty, liability, or other onerous condition
under, or pursuant to, any applicable law or
governmental regulation or order.
Section 6.6 No Adverse Litigation.
There shall be no action, suit, investigation, or
proceeding, pending or, to the best of Purchaser's or
the Company's knowledge, threatened, against or
affecting Purchaser, the Company, any of Purchaser's or
the Company's properties or rights, or any of
Purchaser's or the Company's Affiliates, officers, or
directors, by or before any court, arbitrator, or
administrative or governmental body which (i) seeks to
restrain, enjoin, prevent the consummation of, or
otherwise affect the transactions contemplated by this
Agreement or (ii) questions the validity or legality of
any such transactions, or (iii) seeks to recover
damages or obtain other relief in connection with any
such transactions, and, to the best of Purchaser's and
the Company's knowledge, there shall be no valid basis
for any such action, proceeding, or investigation, and
Purchaser shall have received a certificate executed by
the chief executive officer of the Company, dated the
Closing Date, to such effect.
Section 6.7 Approvals and Consents.
The Company shall have duly received all
authorizations, waivers, consents, approvals, licenses,
franchises, permits, and certificates (collectively,
"Consents") by or of all federal, state, and local
governmental authorities and all material consents by
or of all other persons necessary or advisable for the
issuance of the Bridge Notes, all such consents shall
be in full force and effect at the time of Closing, and
Purchaser shall have received a certificate executed by
the chief executive officer of the Company, dated the
Closing Date, to such effect.
Section 6.8 No Material Adverse Change.
Since November 12, 1999, there shall not have been
any material adverse change in the business, condition
(financial or other), assets, properties, operations,
or prospects of the Company, and Purchaser shall have
received a certificate executed by the chief executive
officer of the Company, dated the Closing Date, to such
effect.
Section 6.9 Proceedings.
All proceedings taken or to be taken in connection with
the transactions contemplated hereby, and all documents
incident thereto shall be reasonably satisfactory in
form and substance to Purchaser and Purchasers counsel,
and Purchaser and Purchasers counsel shall have
received all such counterpart originals or certified or
other copies of such documents as the Purchaser or
Purchasers' counsel may reasonably request.
Section 6.10 Clerk Certificate.
Purchaser shall have received a Clerk's Certificate
from the Clerk or an Assistant Clerk of the Company
dated the Closing Date and certifying: (A) that
attached thereto is a true and complete copy of the
Charter as then in effect, certified or bearing
evidence of filing by the Secretary of the Commonwealth
of Massachusetts, and (B) a certificate of said
Secretary of State, dated as of a recent date as to the
due incorporation and good standing of the Company, and
listing all documents of the Company on file with said
Secretary of State; (C) that attached thereto is a true
and complete copy of the Bylaws of the Company as in
effect on the date of such certification; (D) that
attached thereto is a true and complete copy of all
resolutions adopted by the Board of Directors or the
shareholders of the Company authorizing the execution,
delivery, and performance of Transaction Agreements and
the issuance, sale, and delivery of the Securities, and
that all such resolutions are in full force and effect
and are all the resolutions adopted in connection with
the foregoing agreements and the transactions
contemplated thereby; (E) that the Charter has not been
amended since the date of the last amendment referred
to in the certificate delivered pursuant to clause (A)
above; and (F) to the incumbency and specimen signature
of each officer of the Company executing all
Transaction Agreements and any certificate or
instrument furnished pursuant hereto, and a
certification by another officer of the Company as to
the incumbency and signature of the officer signing the
certificate.
Section 6.11 Transfer Agent Instructions.
The Transfer Agent Instructions, in form and substance
satisfactory to the Purchaser, shall have been
delivered to and acknowledged in writing by the
Company's transfer agent.
SECTION 7. CONDITIONS TO SUBSEQUENT CLOSINGS
Section 7.1 Representations and Warranties; No
Default.
The representations and the warranties of the Company
contained in this Agreement and those otherwise made in
writing by or on behalf of the Company in connection
with the transactions contemplated by this Agreement
shall be true in all material respects, except to the
extent of changes caused by the transactions
contemplated herein; provided however, that there shall
exist no Event of Default under this Agreement or any
of the Bridge Notes at the time of the Subsequent
Closing.
Section 7.2 No Suspensions.
There shall be no suspensions of trading in or in
delisting (or pending delisting) of the Common Stock.
Section 7.3 Opinion of Counsel.
Purchaser shall have received from counsel for the
Company, an opinion in substantially the form of
Exhibit E, addressed to Purchaser, dated as of each
Additional Closing Date. To the extent that the
opinion referred to in the preceding sentence is
rendered in reliance upon the opinion of any other
counsel, Purchaser shall have received a copy of such
opinion of such other counsel, dated the Additional
Closing Date and addressed to Purchaser, or a letter
from such other counsel, dated the Additional Closing
Date and addressed to Purchaser, authorizing Purchaser
to rely on such other counsel's opinion.
Section 7.4 Due Diligence.
Purchaser shall be satisfied with the results of
periodic due diligence investigations including without
limitation any supplemental Disclosure Schedules
delivered in connection with an Additional Closing and,
if so requested by the Representative, shall have
received a "comfort" letter from the Company's auditors
with respect to the financial statements filed by the
Company in its quarterly and annual securities filings.
Section 7.5 Shareholder Approval.
Company, if required, must obtain shareholder approval
on placement so as to address the 20% NASD rule.
Section 7.6 No Material Adverse Change.
Since date hereof, there shall not have been any
material adverse change in the business, condition
(financial or other), assets, properties, operations,
or prospects of the Company, and Purchaser.
SECTION 8. AFFIRMATIVE COVENANTS
The Company covenants that from and after the date of
this Agreement through the Closing and thereafter so
long as any of the Bridge Notes remain outstanding:
Section 8.1 Financial Information.
The Company shall furnish to Purchaser:
(a) within five (5) days after the filing
thereof with the SEC, a copy of its Annual
Reports on Form 10-K, its Quarterly Reports
on Form 10-Q, any Current Reports on Form 8-
K, and any registration statements or
amendments filed pursuant to the 1933 Act;
(b) within one (1) day after release
thereof, copies of all press releases issued
by the Company or any of its subsidiaries;
(c) copies of the same notices and other
information given to the stockholders of the
Company generally, contemporaneously with the
giving thereof to the stockholders;
(d) promptly upon any officer of the Company
obtaining knowledge (i) of any condition or
event which constitutes an Event of Default,
(ii) that the holder of any Bridge Notes has
given any notice or taken any other action
with respect to a claimed Event of Default
under this Agreement, (iii) of any condition
or event which, in the opinion of management
of the Company would have a material adverse
effect on the business, condition (financial
or other), assets, properties, operations, or
prospects of the Company, other than
conditions or events applicable to the
economy as a whole, (iv) that any person has
given any notice to the Company or taken any
other action with respect to a claimed Event
of Default, or (v) of the institution of any
litigation involving claims against the
Company, unless such litigation is defended
by the insurance carrier without any
reservation of rights and is reasonably
expected to be fully covered by a
creditworthy insurer, in an amount equal to
or greater than $250,000 with respect to any
single cause of action or of any adverse
determination in any litigation involving a
potential liability to the Company equal to
or greater than $100,000 with respect to any
single cause of action, a certificate
executed by the chief executive officer of
the Company specifying the nature and period
of existence of any such condition or event,
or specifying the notice given or action
taken by such holder or person and the nature
of such claimed Event of Default, event or
condition, and what action the Company has
taken, is taking, or proposes to take with
respect thereto; and
(e) with reasonable promptness, such other
information and data with respect to the
Company as Purchaser may reasonably request.
Section 8.2 Form D.
The Company agrees to file a Form D with respect to the
Securities as required under Regulation D and to
provide a copy thereof to each Purchaser promptly after
such filing. The Company shall, on or before the
Closing Date, take such action as the Company shall
reasonably determine is necessary to qualify the
Securities for, or obtain exemption for the Securities
for, sale to the Purchaser at the Closing pursuant to
this Agreement under applicable securities or "Blue
Sky" laws of the states of the United States, and shall
provide evidence of any such action so taken to the
Purchaser on or prior to the Closing Date.
Section 8.3 Reporting Status.
Until the earlier of (a) the date as of which the
Investors (as that term is defined in the Registration
Rights Agreement) may sell all of the Conversion Shares
without restriction pursuant to Rule l44(k) promulgated
under the 1933 Act (or successor thereto), or (b) the
date on which (i) the Investors shall have sold all the
Conversion Shares and (ii) none of the Bridge Notes is
outstanding (the "Registration Period"), the Company
shall file all reports required to be filed with the
SEC pursuant to 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 otherwise permit
such termination.
Section 8.4 Inspection of Property.
The Company will permit any Person designated by any
Purchaser in writing, at Purchaser's expense, to visit
and inspect any of the properties of the Company, to
examine the books and financial records of the Company
and make copies thereof or extracts therefrom and to
discuss its affairs, finances, and accounts with its
officers and its independent public accountants, all at
reasonable times and upon reasonable prior notice to
the Company.
Section 8.5 Maintenance of Properties; Insurance.
The Company will maintain or cause to be maintained in
good repair, working order, and condition all
properties used or useful in the business of the
Company and from time to time will make or cause to be
made all appropriate repairs, renewals, and
replacements thereof. The Company will maintain or
cause to be maintained, with financially sound and
reputable insurers (or, as to workers' compensation or
similar insurance, in an insurance fund or by self-
insurance authorized by the laws of the jurisdiction in
question), insurance with respect to their respective
properties and businesses against loss or damage of the
kinds customarily insured against by corporations of
established reputation engaged in the same or similar
businesses and similarly situated, of such type and in
such amounts as are customarily carried under similar
circumstances by such other corporations and as are in
good faith believed by the Company to be sufficient to
prevent the Company from becoming a co-insurer within
the terms of the policies in question.
Section 8.6 Reserved.
Section 8.7 Expenses.
The Company and Purchasers shall pay all costs and
expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution, and
delivery of this Agreement, the Bridge Notes, the
Escrow Agreement, the Registration Rights Agreement,
and other documents executed in connection with the
issuance of the Bridge Notes. The costs and expenses
of Sovereign Capital, LLC including the fees and
expenses of Xxxxxxx Law Group, LLC (not to exceed
$20,000 in fees and expenses for both Closings) shall
be paid for by the Company at each Closing, as
indicated on each release notice executed by the
Company and submitted to the Escrow Agent. The fee
limits of counsel to Sovereign Capital Advisors, LLC
cited in this Section 8.7 are subject to the assumption
that two Closings are needed to complete the Offering,
and further subject in all instances to such counsel
providing all transaction documents, agreements,
certificates, and the like necessary for the
transactions contemplated hereunder, and receiving a
reasonable level of comments thereto. However, should
such counsel prepare such documents, agreements, and
certificates for any Additional Closing and
subsequently receive substantial additional comments to
such documents, agreements, and certificates (for
example, as a result of changes requested by or
comments of the Company to any part or structure of the
transactions contemplated hereunder), then such hourly
limits for any given Additional Closing shall not apply
and such counsel shall xxxx and the Company agrees to
pay for all such additional work at such counsel's
normal hourly rates then in effect.
Section 8.8 Authorized Shares of Common Stock,
Reservation of Shares.
The Company shall at all times, so long as any of the
Bridge Notes are outstanding, reserve and keep
available out of its authorized and unissued Common
Stock, solely for the purpose of effecting the
conversion of the Bridge Notes, such number of shares
of Common Stock equal to or greater than 150% of the
number of Conversion Shares issuable upon conversion of
the Bridge Notes which are then outstanding or which
could be issued at any time under this Agreement.
Section 8.9 Corporate Existence, Etc.
The Company will at all times preserve and keep in full
force and effect its corporate existence, and rights,
licenses, and franchises material to its business, and
will qualify to do business as a foreign corporation in
each jurisdiction where the failure to so qualify would
have a material adverse effect on the business,
condition (financial or other), assets, properties, or
operations of the Company, taken as a whole.
Section 8.10 Transfer Agents.
The Company covenants and agrees that, in the event
that the Company's agency relationship with the
transfer agent should be terminated for any reason
prior to a date which is two (2) years after the
Closing Date, the Company shall immediately appoint a
new transfer agent and shall require that the transfer
agent execute and agree to be bound by the terms of the
Irrevocable Instructions to Transfer Agent.
Section 8.11 Shareholder Approval; Proxy.
The Company covenants to submit to its shareholders a
proposal for ratification of the issuance of the Bridge
Notes and the Conversion Shares, if and as required by
the rules of the National Association of Securities
Dealers, Inc. (the "NASD") applicable to the
transaction. All officers and directors will, upon
request of Purchaser, execute a proxy authorizing
Purchaser or any designee of Purchaser to vote all
shares of Common Stock, the voting of which is
controlled by such officer or director, at any meeting
(or any adjournment thereof) at which Shareholder
action is proposed to ratify the issuance of the Bridge
Notes and the Conversion Shares.
Section 8.12 Transfer Agent Instructions.
The Company shall issue Transfer Agent Instructions to
its transfer agent to issue certificates, registered in
the name of the Purchaser or its respective nominee(s),
for the Conversion Shares, the Repricing Shares, and
the Warrant Shares in such amounts as specified from
time to time by the Purchaser to the Company upon
conversion of the Bridge Notes, except as provided in
Section 8.8 herein. Prior to registration of the
Conversion Shares under the 1933 Act, all such
certificates shall bear the restrictive legend
specified in Section 5.7 of this Agreement. The
Company warrants that no instruction other than the
Transfer Agent Instructions referred to in this Section
8.12, and stop transfer instructions to give effect to
Section 5.7 hereof (in the case of the Conversion
Shares, prior to registration of such shares under the
0000 Xxx) will be given by the Company to its transfer
agent and that the Bridge Notes and the Conversion
Shares shall otherwise be freely transferable on the
books and records of the Company as and to the extent
provided in this Agreement and the Registration Rights
Agreement. Nothing in this Section 8.12 shall affect
in any way the Purchaser's obligations and agreement to
comply with all applicable securities laws upon resale
of the Bridge Notes or Conversion Shares. If the
Purchaser provides the Company with an opinion of
counsel, reasonably satisfactory in form, and substance
to the Company, that registration of a resale by the
Purchaser of any of the Bridge Notes or Conversion
Shares is not required under the 1933 Act, the Company
shall permit the transfer, and, in the case of the
Conversion Shares, promptly instruct its transfer agent
to issue one or more certificates in such name and in
such denominations as specified by the Purchaser. The
Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to
the Purchaser by vitiating the intent and purpose of
the transaction contemplated hereby. Accordingly, the
Company acknowledges that the remedy at law for a
breach of its obligations under this Section 8.12 will
be inadequate and agrees, in the event of a breach or
threatened breach by the Company of the provisions of
this Section 8.12, that the Purchaser shall be
entitled, in addition to all other available remedies,
to an injunction restraining any breach and requiring
immediate issuance and transfer, without the necessity
of showing economic loss and without any bond or other
security being required.
Section 8.13 Payment of Taxes.
The Company will pay all taxes, assessments, and other
governmental charges imposed upon it or any of its
properties or assets or in respect of any of its
franchises, business, income, or properties before any
penalty or significant interest accrues thereon, and
all claims (including, without limitation, claims for
labor, services, materials, and supplies) for sums
which have become due and payable and which by law have
or may become a lien upon any of its properties or
assets, provided that no such charge or claim need be
paid if such claim is (i) being contested in good faith
by appropriate proceedings promptly instituted and
diligently conducted, and (ii) the amount of such claim
is accrued on the financial statements of the Company
or other appropriate provision is made as shall be
required by generally accepted accounting principles.
Section 8.14 Compliance with Laws, Etc.
The Company will comply with the requirements of all
applicable laws, rules, regulations, and orders of any
court or other governmental authority (including,
without limitation, those related to environmental or
ERISA compliance), noncompliance with which could
materially adversely affect the business, condition
(financial or other), assets, property, operations, or
prospects of the Company.
Section 8.15 Use of Proceeds.
The Company will use the proceeds from the sale and
issuance of the Bridge Notes as follows: provide the
Company with operating capital, repayment of certain
limited existing indebtedness of the Company, and
capital expenditures.
Section 8.16 Registration Statement.
The Company shall (a) file a Registration Statement,
covering the resale of shares of Common Stock received
upon conversion of the Bridge Notes, the Repricing
Warrants, and the Warrants to permit the holder(s)
thereof to resell from and after the Registration
Deadline (as such term is defined therein) in
accordance with the Registration Rights Agreement, (b)
use its best efforts to have the Registration Statement
declared effective in accordance with the Registration
Rights Agreement, and (c) keep such Registration
Statement current and effective for a period 12 months
from the effective date of such Registration Statement
in accordance with the Registration Rights Agreement.
Section 8.17 Listings.
The Company shall promptly secure the listing of
the Conversion Shares, the Repricing Shares, and the
Warrant Shares upon each national securities exchange
or automated quotation system, if any, upon which
shares of Common Stock are then listed (subject to
official notice of issuance) and shall maintain, so
long as any other shares of Common Stock shall be so
listed, such listings of all Conversion Shares, the
Repricing Shares, and the Warrant Shares from time to
time issuable under the terms of the Bridge Notes, the
Repricing Warrants, the Warrants, and the Registration
Rights Agreement. The Company shall maintain the Common
Stock's authorization for quotation in the over-the-
counter market. The Company shall promptly provide to
Purchaser copies of any notices it receives regarding
the continued eligibility of the Common Stock for
trading in the over-the-counter market.
Section 8.18 Indemnification.
In consideration of the Purchaser's execution and
delivery of this Agreement and acquiring the Securities
hereunder and in addition to all of the Company's other
obligations under this Agreement, the Company shall
defend, protect, indemnify, and hold harmless each
Purchaser and each other holder of the Securities and
each officer, director, employee, and agent of each
Purchaser (including, without limitation, those
retained in connection with the transactions
contemplated by this Agreement) (collectively, the
"Indemnitees") from and against any and all actions,
causes of action, suits, claims, losses, costs,
penalties, fees, liabilities, and damages, and expenses
in connection therewith (irrespective of whether any
such Indemnitee is a party to the action for which
indemnification hereunder is sought), and including
reasonable attorneys' fees and disbursements (the
"Indemnified Liabilities"), incurred by the Indemnitees
or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in any
Transaction Agreement or any other certificate,
instrument, or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement, or
obligation of the Company contained in the Transaction
Agreements, or any other certificate, instrument or
document contemplated hereby or thereby, or (c) any
cause of action, suit, or claim brought or made against
such Indemnitee and arising out of or resulting from
the execution, delivery, performance, or enforcement of
this Agreement or any other instrument, document, or
agreement executed pursuant hereto by any of the
Indemnitees, any transaction financed or to be financed
in whole or in part, directly or indirectly, with the
proceeds of the issuance of the Bridge Notes, or the
status of the Purchaser or holder of the Bridge Notes
or the Conversion Shares, as an investor in the
Company. To the extent that the foregoing undertaking
by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the
payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
SECTION 9. NEGATIVE COVENANTS
The provisions of this Section 9 shall remain in
effect so long as any of the Bridge Notes shall
remain outstanding.
Section 9.1 Definition of Debt. For purposes
of this Agreement, the capitalized term "Debt" of
any Person shall mean:
(a) all indebtedness of such Person for
borrowed money, including without limitation
obligations evidenced by bonds, debentures,
Bridge Notes, or other similar instruments;
(b) all indebtedness of others for borrowed
money guaranteed in any manner by such
Person, or in effect guaranteed by such
Person through an agreement to purchase,
contingent or otherwise;
(c) all accounts payable which, to the
knowledge of such Person, have remained
unpaid for a period of 90 days after the same
become due and payable in accordance with
their respective terms taking into account
any grace period relating to the due date
expressly set forth in the applicable invoice
with respect to the payment of such accounts
payable, except for the trade payables
previously disclosed by the Company that have
remained unpaid for more than ninety days as
of the date of this Agreement that have been
disclosed in the Company's SEC Documents;
(d) all indebtedness secured by any
mortgage, lien, pledge, charge, security
interest or other encumbrance upon or in
property owned by such Person, even though
such Person has not assumed or become liable
for the payment of such indebtedness;
(e) all indebtedness created or arising
under any conditional sale agreement or lease
in the nature thereof (including obligations
as lessee under leases which shall have been
or should be, in accordance with generally
accepted accounting principles, recorded as
capitalized leases) (but excluding operating
leases) or other title retention agreement
with respect to property acquired by such
Person, even though the rights and remedies
of the seller or lender under such agreement
in the event of default are limited to
repossession of such property;
(f) all bankers' acceptances and letters of
credit; and
(g) liabilities in respect of unfunded
vested benefits under Plans covered by Title
IV of ERISA.
Section 9.2 Restrictions on Debt.
The Company will not create, assume, or incur or become
or at any time be liable in respect of, any Debt
without the consent of the Purchasers, except:
(a) the Bridge Notes issued pursuant to this
Agreement;
(b) Debt outstanding on the date hereof to
the extent reflected on the most recent
balance sheet of the Company or incurred in
the ordinary course of business thereafter;
(c) Debt incurred pursuant to the Company's
existing line of credit facility with BA
Associates originated November 9, 1998, under
which the Company may borrow from time to
time up a maximum of $650,000, as referenced
in Section 3.3(b) of the Disclosure Schedule;
(d) Debt incurred in permitted real estate
investments; and
(e) purchase money security interests not to
exceed $250,000 per year.
Notwithstanding the foregoing provisions of this
Section 9.2, the Company will not create, assume, or
incur, or become or at any time be liable in respect
of, any Debt for money borrowed, advances made, or
goods purchased, if the Purchaser, the Person making
such advances, or the vendor of such goods (or any
Person who guarantees or becomes surety for all or any
part of such Debt or acquires any right or incurs any
obligation to become, either immediately or upon the
occurrence of some future contingency, the owner of all
or any part thereof) shall have any right, by reason of
any statute or otherwise, to have any claim in respect
of such Debt first satisfied out of the general assets
of the Company in priority to the claims of its general
creditors.
Section 9.3 Restrictions on Dividends.
The Company will not (a) pay any dividends, in cash or
otherwise, on, (b) make any distributions to holders
of, or (c) purchase, redeem, or otherwise acquire any
of its outstanding Common Stock or Preferred Stock or
set apart assets for a sinking or other analogous fund
for the purchase, redemption, retirement, or other
acquisition of, any shares of its Common Stock or
Preferred Stock; provided however, that the Company
may, so long as at the time of and after giving effect
thereof no Event of Default has occurred and is
continuing: (i) pay dividends on its outstanding
Preferred Stock in accordance with the Charter;
(ii) with prior written approval of each Purchaser,
repurchase shares of its Common Stock issued or to be
issued by the Company upon exercise of stock options
granted to employees and directors of the Company
pursuant to the terms of plans adopted by the Board of
Directors of the Company; and (iii) pay cash in lieu of
fractional shares of its Common Stock on the exercise
of outstanding warrants to purchase its Common Stock,
pursuant to the terms of such warrants.
Section 9.4 Restrictions on Transactions with
Affiliates.
The Company will not make any loans or advances to any
of its officers, directors, shareholders, or
Affiliates, other than expense advances made by the
Company to its officers and employees in the ordinary
course of business. The Company may increase the
salaries executive officer or the remuneration of any
director up to an aggregate maximum in all such
instances of $100,000, and otherwise will not increase
the salary of any executive officer or the remuneration
of any director.
Section 9.5 Restrictions on Investments.
Other than as permitted by this Agreement, the Company
will not purchase or acquire or invest in, or agree to
purchase or acquire or invest in the business,
property, or assets of, or any securities of, any other
company or business, provided however, that the Company
may invest its Excess Cash as defined below in:
(a) securities issued or directly and fully
guaranteed or insured by the United States
government or any agency thereof having
maturities of not more than one year from the
date of acquisition;
(b) certificates of deposit or eurodollar
certificates of deposit, having maturities of
not more than one hundred eighty days from
the date of acquisition, or one year from the
date of acquisition in the case of
certificates of deposit or eurodollar
certificates of deposit being used to secure
the Company's reimbursement obligations under
letters of credit (provided that nothing
contained herein shall be construed to permit
letters of credit not otherwise permitted
under this Agreement);
(c) commercial paper of any Person that is
not a subsidiary or an Affiliate of the
Company, maturing within one hundred eighty
days after the date of acquisition;
(d) bank loan participations; and
(e) money market instruments having
maturities of not more than one hundred
eighty days from the date of acquisition, or
one year from the date of acquisition in the
case of money market instruments being used
to secure the Company's reimbursement
obligations under letters of credit (provided
that nothing contained herein shall be
construed to permit letters of credit not
otherwise permitted under this Agreement);
in all cases of such credit quality as a prudent
business person would invest in. As used in this
Section, "Excess Cash" shall mean that portion of the
proceeds of the Bridge Notes which has not been
invested as described in Section 8.15 hereof.
Section 9.6 Restrictions on Sale and Lease-Back
Transactions.
The Company will not sell or transfer any of its
properties to anyone with the intention of taking back
a lease of the same property or leasing other property
for substantially the same use as the property being
sold or transferred; provided however, that (a) the
Company may continue and extend its existing leasing
arrangements and may lease, under operating leases, any
fixtures, equipment, and real estate that do not
constitute Pledged Assets in the ordinary course of
business of the Company, and (b) the Company may
otherwise make real estate investments but only with
the consent of the Purchasers as provided for herein.
Section 9.7 Restrictions on Sales of Assets.
The Company will not sell, transfer, or dispose of any
property except for sales of obsolete equipment having
a book value at the time of sale of not more than
$100,000 in the aggregate in any fiscal year.
Section 9.8 Restrictions on Subsidiaries.
The Company will not, without the written consent of
Purchaser to organize, or transfer any assets to, any
Subsidiaries, provided that, if consent of the
Purchasers is obtained and any Subsidiaries are
organized, or assets transferred, in compliance with
this Section 9.8, the Company will not permit such
Subsidiaries to enter into any transaction or agreement
which would violate any of the provisions of this
Section 9 if such provisions were applicable to such
Subsidiary.
Section 9.9 Change in Business; Operations.
The Company will not cause or effect any change in or
addition to the primary business of the Company that
has not been approved by Purchaser, such that more than
10% of the gross revenues of the Company are derived
from a business other than the business in which the
Company was engaged on the date hereof as reflected in
the applicable last SEC Document filed prior to the
First Closing ("Change in Business"), except any such
changes approved in advance in writing by the
Representative. The business of the Company and its
subsidiaries shall not be conducted in violation of any
law, ordinance, or regulation of any governmental
entity.
Section 9.10 Exceptions With Consent of Purchasers.
The Company may seek an exception to any prohibited
action under this Section by first, giving written
notice to all Purchasers of Bridge Notes under this
Agreement, along with copies of all documentation
requested by any Purchaser relating to such requested
exception, and second, in the sole discretion of
Purchasers, satisfactorily responding to any Purchaser
inquiries about the requested action. The Company may
undertake any such requested action otherwise
prohibited by this Section 9 only after receiving the
advance written consent of Purchasers representing not
less than two-thirds (2/3) of all amounts due under
Bridge Notes issued hereunder and then outstanding.
SECTION 10. Miscellaneous.
Section 10.1 Counterparts.
This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and
the same agreement and shall become effective when
counterparts have been signed by each party and
delivered to the other party. In the event any
signature page is delivered by facsimile transmission,
the party using such means of delivery shall cause four
(4) additional original executed signature pages to be
physically delivered to the other party within five (5)
days of the execution and delivery hereof.
Section 10.2 Headings.
The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the
interpretation of, this Agreement.
Section 10.3 Severability.
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 in
that jurisdiction or the validity or enforceability of
any provision of this Agreement in any other
jurisdiction.
Section 10.4 Entire Agreement. Amendments.
This Agreement supersedes all other prior oral or
written agreements between the Purchaser, the Company,
their affiliates and persons acting on their behalf
with respect to the matters discussed herein, and this
Agreement and the instruments referenced herein contain
the entire understanding of the parties with respect to
the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the
Company nor any Purchaser makes any representation,
warranty, covenant, or undertaking with respect to such
matters. No provision of this Agreement may be waived
or amended other than by an instrument in writing
signed by the party to be charged with enforcement.
Section 10.5 Notices.
Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of
this Agreement must be in writing and will be deemed to
have been delivered (a) upon receipt, when delivered
personally, (b) upon receipt, when sent by facsimile,
provided a copy is mailed by U.S. certified mail,
return receipt requested, (c) three (3) days after
being sent by U.S. certified mail, return receipt
requested, or (d) one (1) day after deposit with a
nationally recognized overnight delivery service, in
each case properly addressed to the party to receive
the same. The addresses and facsimile numbers for such
communications shall be:
If to the Company:
Cambex Corporation
000 Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxx Xxxx,
Executive Vice President
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx X. Xxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
If to any Purchaser, to its address and facsimile
number on the signature page of such Purchaser hereto,
with copies to such Purchaser's counsel as set forth on
the signature page of such Purchaser hereto. Each
party shall provide five- (5) days prior written notice
to the other party of any change in address or
facsimile number.
Section 10.6 Interest.
In no event shall the amount of interest due or payable
hereunder or under the Bridge Notes exceed the maximum
rate of interest allowed by applicable law, and if any
such payment is inadvertently made by the Company or is
inadvertently received by any holder of Bridge Notes,
then such excess sum shall be credited as a payment of
principal, unless the applicable holder of a Bridge
Notes shall notify the Company in writing that it
elects to have such excess sum returned forthwith. It
is the express intent hereof that the Company not pay
and the holder of the Bridge Notes not receive,
directly or indirectly in any manner whatsoever,
interest in excess of that which may legally be paid by
the Company under applicable law.
Section 10.7 Successors and Assigns.
This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors
and assigns. The Company shall not assign this
Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers.
Any Purchaser may assign its rights hereunder without
the consent of the Company, provided however, that any
such assignment shall not release such Purchaser from
its obligations hereunder unless such obligations are
assumed by such assignee and the Company has consented
to such assignment and assumption.
Section 10.8 No Third Party Beneficiaries.
This Agreement is intended for the benefit of the
parties hereto and their respective permitted
successors and assigns, and is not for the benefit of,
nor may any provision hereof be enforced by, any other
person.
Section 10.9 Publicity.
The Company and Purchasers shall have the right to
approve, before issuance, any press releases or any
other public statements with respect to the
transactions contemplated hereby; provided however,
that the Company shall be entitled, without the prior
approval of Purchasers, to make any press release or
other public disclosure with respect to such
transactions as is required by applicable law and
regulations (although the Purchaser shall be consulted
by the Company in connection with any such press
release or other public disclosure prior to its release
and shall be provided with a copy thereof).
Section 10.10 Further Assurances.
Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and
shall execute and deliver all such other agreements,
certificates, instruments, and documents, as the other
party may reasonably request in order to carry out the
intent and accomplish the purposes of this Agreement
and the consummation of the transactions contemplated
hereby.
Section 10.11 No Strict Construction.
The language used in this Agreement will be deemed to
be the language chosen by the parties to express their
mutual intent, and no rules of strict construction will
be applied against any party.
Section 10.12 Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of
Massachusetts, irrespective of the choice of law
provisions thereof. The parties agree that any action
brought by one party against the other shall be in any
appropriate state court or any federal Court located in
the County where the party against whom the action is
brought is principally located, and both parties agree
that such courts shall have exclusive jurisdiction of
such case or controversy arising under or in connection
with this Agreement and shall be a proper forum in
which to adjudicate such case or controversy. The
parties consent to the jurisdiction of such courts.
IN WITNESS WHEREOF, Purchasers and the Company have
caused this Series 1 Bridge Note Purchase Agreement to
be duly executed as of the date first written above.
[Signatures on the following page]
COMPANY SIGNATURE PAGE
TO
SERIES 1 BRIDGE NOTE PURCHASE AGREEMENT
COMPANY
CAMBEX CORPORATION
By: /s/ Xxxxx Xxxx
Xxxxx Xxxx, Executive Vice President
GUARANTORS SIGNATURE PAGE
TO
SERIES 1 BRIDGE NOTE PURCHASE AGREEMENT
GUARANTORS
CYBERFIN CORP.
By: /s/ Xxxxx Xxxx
Xxxxx Xxxx,
President
/s/ Xxxxxx Xxxx
Xxxxxx Xxxx
PURCHASER SIGNATURE PAGE (ENTITY)
TO
SERIES 1 BRIDGE NOTE PURCHASE AGREEMENT
PURCHASER
Purchaser Name:
SovCap Equity
Partners, Ltd.
By: /s/ Xxxxx X.
Xxxxxx
Name: Xxxxx X.Xxxxxx
Title: Director
Purchaser Name SovCap Equity Partners, Ltd.
Address and
Facsimile Xxxxxx Xxxxxxxxxx Xxxxx
#00 Xxxxxxxxxx Xxxxxx
X.X. Xxx XX - 00000
Nassau, New Providence
000-000-0000
Principal Amount
of Bridge Notes $1,500,000.00 - Cambex Corporation
Purchased
Purchaser's Legal Xxxxxxx Law Group, L.L.C.
Counsel
Address and 0000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
000-000-0000
PURCHASER SIGNATURE PAGE (ENTITY)
TO
SERIES 1 BRIDGE NOTE PURCHASE AGREEMENT
PURCHASER
Purchaser Name:
Correllus
International Ltd.
By: /s/ Xxx Xxxxxxxx
Name: Xxx Xxxxxxxx
Title: Director
Purchaser Name Correllus International Ltd.
Address and
Facsimile Number c/o EIG Corporate Finance Services
Edificio Marina Marbella, 6B
Xxxxxxx Xxxxx Xxxxx 00, 00000 Xxxxxxxx,
Xxxxx
Fax: x00-000-000-000
Principal Amount
of Bridge Notes US$ 250,000.00
Purchased
Purchaser's Legal Per Ronnstrom
Counsel
Address and Xxx 0000
Xxxxxxxxx Xxxxxx
XX-00000 Xxxxxxxxx, Xxxxxx
Fax: x00-0-000-0000
PURCHASER SIGNATURE PAGE (ENTITY)
TO
SERIES 1 BRIDGE NOTE PURCHASE AGREEMENT
PURCHASER
Purchaser Name: Arab
Commerce Bank Ltd.
By: /s/ A. De Nazareth
Name: A. De Nazareth
Title: Co. Secretary
Purchaser Name Arab Commerce Bank Ltd.
Address and
Facsimile Number P.O. Box 309
Grand Cayman
Cayman Islands
0171 437 2413 (London)
Principal Amount
of Bridge Notes US$ 150,000.00
Purchased
Purchaser's Legal
Counsel
Address and
Facsimile Number
PURCHASER SIGNATURE PAGE (ENTITY)
TO
SERIES 1 BRIDGE NOTE PURCHASE AGREEMENT
PURCHASER
Purchaser Name:
SovCap Equity
Partners, Ltd.
By: /s/ Xxxxx X. Xxxxxx
Name: Xxxxx X.Xxxxxx
Title: President
Purchaser Name SovCap Equity Partners, Ltd.
Address and
Facsimile Number Cumberland House
#00 Xxxxxxxxxx Xxxxxx
X.X. Xxx X-00000
Nassau, New Providence, The Bahamas
000-000-0000
Principal Amount
of Bridge Notes $100,000.00
Purchased
Purchaser's Legal
Counsel
Address and
Facsimile Number
