EXHIBIT 10.10
This SECURED CONVERTIBLE DEBENTURE PURCHASE AGREEMENT (this
"Agreement") is dated as of May 8, 2002 among Achievement Tec Holdings, Inc, a
Delaware corporation (the "Company"), and the purchasers identified on the
signature pages hereto (each a "Purchaser" and collectively the "Purchasers").
WHEREAS, the Company, AJW Partners, LLC and New Millennium Capital
Partners II, LLC ("Initial Investors") are parties to that certain Secured
Convertible Debenture Purchase and Exchange Agreement, dated June 29, 2001,
pursuant to which the Company issued and sold an aggregate principal amount of
$500,000 of the Company's 10% Secured Convertible Debentures (the "Initial
Transaction"); and
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to Section 4(2) of the Securities Act of 1933 (the
"Securities Act"), and Rule 506 promulgated there under, the Company desires to
issue and sell to the Purchasers, and the Purchasers, severally and not jointly,
desire to purchase from the Company, an aggregate principal amount of $500,000
of the Company's 10% Secured Convertible Debentures, due May 8, 2003, which
shall be in the form of Exhibit A and which are convertible into shares of the
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Company's common stock, $.001 par value per share.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in
this Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. In addition to the terms defined elsewhere in this
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Agreement: (a) capitalized terms that are not otherwise defined herein that are
defined in the Debentures (as defined herein) shall have the meanings given to
such terms in the Debentures, and (b) the following terms have the meanings
indicated in this Section 1.1:
"Additional Debentures" means 10% Secured Convertible Debentures
issued by the Company to the Purchasers after the Effective Date as set
forth in Section 2.3, in the form of Exhibit A.
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"Affiliate" means any Person that, directly or indirectly
through one or more intermediaries, controls or is controlled by or is
under common control with a Person, as such terms are used in and
construed under Rule 144.
"Closing" means the closing of the purchase and sale of the
Debentures pursuant to Section 2.1.
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"Closing Date" means the date of the Closing.
"Closing Debentures" means 10% Secured Convertible Debentures
issued by the Company to the Purchasers at the Closing, in the form of
Exhibit A.
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"Closing Price" means, for any date, the price determined by the
first of the following clauses that applies: (a) if the Common Stock is
then listed or quoted on an Eligible Market, the closing bid price per
share of the Common Stock for such date (or the nearest preceding date)
on the primary Eligible Market on which the Common Stock is then listed
or quoted; (b) if the Common Stock is not then listed or quoted on an
Eligible Market and if prices for the Common Stock are then quoted on
the OTC Bulletin Board, the closing bid price per share of the Common
Stock for such date (or the nearest preceding date) on the OTC Bulletin
Board; (c) if the Common Stock is not then listed or quoted on the OTC
Bulletin Board and if prices for the Common Stock are then reported in
the "Pink Sheets" published by the National Quotation Bureau
Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the most recent bid price per share of
the Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent
appraiser selected in good faith by the Purchasers.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company, par value
$0.01per share, and any securities into which such common stock may
hereafter be reclassified into.
"Company Counsel" means Xxxxxxxxx X. Xxxxxxx, III, P.C.
"Debentures" means $500,000 in aggregate principal amount of the
Company's 10% Convertible Debentures issued to the Purchasers at the
times set forth herein, in the form of Exhibit A.
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"Effective Date" means the date that an Underlying Shares
Registration Statement is first declared effective by the Commission.
"Eligible Market" means any of the OTC Bulletin Board, New York
Stock Exchange, the American Stock Exchange, the Nasdaq National Market
or the Nasdaq Small Cap Market.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Intellectual Property Security Agreement" means the
Intellectual Property Security Agreement, dated as of the date of this
Agreement, among the Company and the Purchasers, in the form of Exhibit
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C.
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"Losses" means any and all losses, claims, damages, liabilities,
settlement costs and expenses, including without limitation costs of
preparation and reasonable attorneys' fees.
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"Person" means an individual or corporation, partnership, trust,
incorporated or unincorporated association, joint venture, limited
liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
"Proceeding" means an action, claim, suit, investigation or
proceeding (including, without limitation, an investigation or partial
proceeding, such as a deposition).
"Purchaser Counsel" means Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP, counsel to the Purchasers.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of the date of this Agreement, among the Company
and the Purchasers, in the form of Exhibit B.
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"Effectiveness Date" means the date on which an Underlying
Shares Registration Statement is required to become effective pursuant
to the Registration Rights Agreement.
"Rule 144" means Rule 144 promulgated by the Commission pursuant
to the Securities Act, as such Rule may be amended from time to time,
or any similar rule or regulation hereafter adopted by the Commission
having substantially the same effect as such Rule.
"Securities" means the Debentures and the Underlying Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreements" means the Security Agreement, dated as of
the date of this Agreement, among the Company and the Purchasers, in
the form of Exhibit D and the Intellectual Property Security Agreement.
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"Subsidiary" means any subsidiary of the Company that is
required to be listed in Schedule 3.1(a).
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"Trading Market" means the OTC Bulletin Board or any other
national securities exchange, market or trading or quotation facility
on which the Common Stock is then listed or quoted.
"Transaction Documents" means this Agreement, the Debentures,
the Transfer Agent Instructions, the Registration Rights Agreement, the
Security Agreement, the Intellectual Property Security Agreement and
any other documents or agreements executed in connection with the
transactions contemplated hereunder.
"Transfer Agent Instructions" means the Transfer Agent
Instructions, in the form of Exhibit E, executed by the Company and
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delivered to and acknowledged in writing by the Company's transfer
agent.
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"Underlying Shares" means the shares of Common Stock issuable
upon conversion of the Debentures.
"Underlying Shares Registration Statement" means a registration
statement meeting the requirements set forth in the Registration Rights
Agreement and covering the resale of the Underlying Shares by the
Purchasers.
ARTICLE II
PURCHASE AND SALE
2.1 Closing. The Closing shall take place at the offices of
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Purchaser Counsel immediately following the execution hereof, or at such other
location or time as the parties may agree.
2.2 Closing Deliveries.
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(a) At the Closing, the Company shall deliver or cause to be
delivered to each Purchaser the following:
(i) Closing Debentures, registered in the name of such
Purchaser, in the aggregate principal amount indicated below such Purchaser's
name on the signature page to this Agreement for the Closing Debentures;
(ii) this Agreement duly executed by the Company;
(iii) the Security Agreement duly executed by the Company;
(iv) the Intellectual Property Security Agreement duly
executed by the Company
(v) the Registration Rights Agreement duly executed by
the Company
(vi) a legal opinion of Company Counsel in agreed form,
including a UCC opinion as to the perfection under applicable law of the
security interest in the Collateral (as defined in the Security Agreement) after
giving effect to the revised Article 9 of the Uniform Commercial Code ; and
(vii) the Transfer Agent Instructions.
(b) At the Closing, each Purchaser shall deliver or cause to
be delivered to the Company the following:
(i) the principal amount in United States dollars for
the Closing Debentures indicated below such Purchaser's name on the signature
page to this Agreement, in immediately available funds, by wire transfer to an
account designated in writing by the Company for such purpose; and
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(ii) an executed copy of each of this Agreement, the
Security Agreement, the Intellectual Property Security Agreement and the
Registration Rights Agreement.
2.3 Post Closing Funding.
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(a) If each of the conditions set forth in Section 2.3(b) have
been either satisfied by the Company or waived by each Purchaser, then promptly
(not exceeding five days) after the Effective Date: (A) the Company will deliver
to each Purchaser, Additional Debentures, registered in the name of such
Purchaser, in the aggregate principal amount indicated below such Purchaser's
name on the signature page to this Agreement for the Additional Debentures and
(B) each Purchaser will, against delivery of its Additional Debentures, deliver
to the Company, an amount equal to the principal amount for Additional
Debentures indicated below such Purchaser's name on the signature page to this
Agreement in United States dollars in immediately available funds by wire
transfer to an account designated in writing by the Company for such purpose.
The date, if any, on which the deliveries contemplated in this paragraph occurs
is the "Additional Funding Date."
(b) Conditions Precedent to the Purchase of Additional
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Debentures. Notwithstanding anything to the contrary contained in this
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Agreement, the obligation of a Purchaser to purchase the securities described in
Section 2.3(a) above is subject to the satisfaction by the Company of each of
the following conditions:
(i) Accuracy of the Company's Representations and
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Warranties. The representations and warranties of the Company contained in this
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Agreement shall be true and correct as of the date when made and as of the
Additional Funding Date, as though made on and as of the Additional Funding Date
(other than representations and warranties which relate to a specific date
(which shall not include representations and warranties relating to the "date
hereof") which representations and warranties shall be true as of such specific
date).
(ii) Performance by the Company. The Company shall have
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performed, satisfied and complied in all material respects with all covenants,
agreements and conditions required by the Transaction Documents to be performed,
satisfied or complied with by the Company between the Closing Date and the
Additional Funding Date.
(iii) Underlying Shares Registration Statement. The
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Underlying Shares Registration Statement (as defined herein) shall have been
declared effective under the Securities Act by the Commission and shall have
remained effective (and the prospectus therein shall have remained available for
use by the Purchasers to resell Securities there under) at all times, not
subject to any actual or threatened stop order or subject to any actual or
threatened suspension at any time prior to the Additional Funding Date.
(iv) No Injunction. Since the Closing Date, no statute,
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rule, regulation, executive order, decree, ruling or injunction shall have been
enacted, entered, promulgated, amended, modified or endorsed by any court of
governmental authority of competent jurisdiction or governmental authority,
stock market or trading facility which prohibits the consummation of any of the
transactions contemplated by the Transaction Documents.
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(v) Adverse Changes. Since the Closing Date, no event or
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series of events which reasonably would be expected to have or result in a
material adverse effect on the results of operations, assets or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole.
(vi) No Suspensions of Trading in Common Stock. The
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trading in the Common Stock shall not have been suspended by the Commission or
on the OTC Bulletin Board ("OTC") (except for any suspension of trading of
limited duration solely to permit dissemination of material information
regarding the Company) at any time since the Closing Date.
(vii) Listing of Common Stock. The Common Stock shall have
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been at all times since the Closing Date quoted on the OTC.
(viii) Change of Control. No Change of Control in the
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Company shall have occurred (as defined in the Debentures).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of the Company. The Company
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hereby makes the following representations and warranties to the Purchasers on
the Closing Date and on each Additional Funding Date:
(a) Subsidiaries. The Company has no direct or indirect
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subsidiaries other than those listed in Schedule 3.1(a). Except as disclosed in
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Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital
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stock of each Subsidiary free and clear of any lien, charge, security interest,
encumbrance, right of first refusal or other restriction (collectively,
"Liens"), and all the issued and outstanding shares of capital stock of each
Subsidiary are validly issued and are fully paid, non-assessable and free of
preemptive and similar rights. If the Company has no Subsidiaries, then
references in this Agreement to Subsidiaries will be disregarded.
(b) Organization and Qualification. Each of the Company and
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each Subsidiary is an entity duly incorporated or otherwise organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization (as applicable), with the requisite power and
authority to own and use its properties and assets and to carry on its business
as currently conducted. Neither the Company nor any Subsidiary is in violation
of any of the provisions of its respective certificate or articles of
incorporation, bylaws or other organizational or charter documents. Each of the
Company and each Subsidiary is duly qualified to do business and is in good
standing as a foreign corporation or other entity in each jurisdiction in which
the nature of the business conducted or property owned by it makes such
qualification necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the aggregate: (i)
adversely affect the legality, validity or enforceability of any Transaction
Document, (ii) have or result in a material adverse effect on the results of
operations, assets, prospects, business or condition (financial or otherwise) of
the Company and the Subsidiaries, taken as a whole, or (iii) adversely impair
the Company's ability to perform fully on a timely basis its obligations under
any of the Transaction Documents (any of (i), (ii) or (iii), a "Material Adverse
Effect").
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(c) Authorization; Enforcement. The Company has the requisite
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corporate power and authority to enter into and to consummate the transactions
contemplated by each of the Transaction Documents and otherwise to carry out its
obligations there under. The execution and delivery of each of the Transaction
Documents by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company and no further action is required by the Company. Each of
the Transaction Documents has been (or upon delivery will be) duly executed by
the Company and, when delivered in accordance with the terms hereof, will
constitute the valid and binding obligation of the Company enforceable against
the Company in accordance with its terms. Neither the Company nor any Subsidiary
is in violation of any of the provisions of its respective certificate or
articles of incorporation, by-laws or other organizational or charter documents.
(d) No Conflicts. The execution, delivery and performance of
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the Transaction Documents by the Company and the consummation by the Company of
the transactions contemplated thereby do not and will not: (i) conflict with or
violate any provision of the Company's or any Subsidiary's certificate or
articles of incorporation, bylaws or other organizational or charter documents,
or (ii) subject to obtaining the Required Approvals (as defined below), conflict
with, or constitute a default (or an event that 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 (with or without notice, lapse of time
or both) of, any agreement, credit facility, debt or other instrument
(evidencing a Company or Subsidiary debt or otherwise) or other understanding to
which the Company or any Subsidiary is a party or by which any property or asset
of the Company or any Subsidiary is bound or affected, or (iii) result in a
violation of any law, rule, regulation, order, judgment, injunction, decree or
other restriction of any court or governmental authority to which the Company or
a Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii), such
as could not, individually or in the aggregate, have or result in a Material
Adverse Effect.
(e) Filings, Consents and Approvals. Neither the Company nor
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any Subsidiary is required to obtain any consent, waiver, authorization or order
of, give any notice to, or make any filing or registration with, any court or
other federal, state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company of the
Transaction Documents, other than (i) the filings required under Section 4.8,
(ii) the filing with the Commission of the Underlying Shares Registration
Statement, (iii) the application(s) to each applicable Trading Market for the
listing of the Underlying Shares for trading thereon in the time and manner
required thereby and (iv) applicable federal and state securities law filings
(collectively, the "Required Approvals").
(f) Issuance of the Securities. The Securities are duly
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authorized and, when issued and paid for in accordance with the applicable
Transaction Documents, will be duly and validly issued, fully paid and
nonassessable, free and clear of all Liens. The Company has reserved from its
duly authorized capital stock a sufficient number of Underlying Shares to enable
it to comply with its conversion obligations under the Debentures (assuming all
interest there under is accreted to principal).
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(g) Capitalization. The number of shares and type of all
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authorized, issued and outstanding capital stock of the Company is set forth in
Schedule 3.1(g). No securities of the Company are entitled to preemptive or
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similar rights, and no Person has any right of first refusal, preemptive right,
right of participation, or any similar right to participate in the transactions
contemplated by the Transaction Documents. Except as a result of the purchase
and sale of the Securities and except as disclosed in Schedule 3.1(g), there are
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no outstanding options, warrants, script rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities, rights or
obligations convertible into or exchangeable for, or giving any Person any right
to subscribe for or acquire, any shares of Common Stock, or contracts,
commitments, understandings or arrangements by which the Company or any
Subsidiary is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common Stock.
The issuance and sale of the Securities will not obligate the Company to issue
shares of Common Stock or other securities to any Person (other than the
Purchasers and the Initial Investors under the Initial Transaction) and will not
result in a right of any holder of Company securities to adjust the exercise,
conversion, exchange or reset price under such securities.
(h) SEC Reports; Financial Statements. Except as set forth in
---------------------------------
Schedule 3.1(h), the Company has filed all reports required to be filed by it
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under the Securities Act and the Exchange Act, including pursuant to Section
13(a) or 15(d) thereof, for the two years preceding the date hereof (or such
shorter period as the Company was required by law to file such material) (the
foregoing materials being collectively referred to herein as the "SEC Reports"
and, together with the Schedules to this Agreement, the "Disclosure Materials")
on a timely basis or has received a valid extension of such time of filing and
has filed any such SEC Reports prior to the expiration of any such extension,
except as set forth in Schedule 3.1 (h). The Company has delivered to the
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Purchasers a copy of all SEC Reports filed within the 10 days preceding the date
hereof. As of their respective dates, the SEC Reports complied in all material
respects with the requirements of the Securities Act and the Exchange Act and
the rules and regulations of the Commission promulgated there under, and none of
the SEC Reports, when filed, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The financial statements of the Company
included in the SEC Reports comply in all material respects with applicable
accounting requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved ("GAAP"), except as
may be otherwise specified in such financial statements or the notes thereto,
and fairly present in all material respects the financial position of the
Company and its consolidated subsidiaries as of and for the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of unaudited statements, to normal, immaterial, year-end audit
adjustments.
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(i) Material Changes. Since the date of the latest audited
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financial statements included within the SEC Reports, except as specifically
disclosed in the SEC Reports: (i) there has been no event, occurrence or
development that has had or that could result in a Material Adverse Effect, (ii)
the Company has not incurred any liabilities (contingent or otherwise) other
than (A) trade payables and accrued expenses incurred in the ordinary course of
business consistent with past practice and (B) liabilities not required to be
reflected in the Company's financial statements pursuant to GAAP or required to
be disclosed in filings made with the Commission, (iii) the Company has not
altered its method of accounting or the identity of its auditors, (iv) the
Company has not declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements to
purchase or redeem any shares of its capital stock, and (v) the Company has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans.
(j) Litigation. There is no action, suit, inquiry, notice of
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violation, proceeding or investigation pending or, to the knowledge of the
Company, threatened against or affecting the Company, any Subsidiary or any of
their respective properties before or by any court, arbitrator, governmental or
administrative agency or regulatory authority (federal, state, county, local or
foreign) (collectively, an "Action") which: (i) adversely affects or challenges
the legality, validity or enforceability of any of the Transaction Documents or
the Securities or (ii) could, if there were an unfavorable decision,
individually or in the aggregate, have or result in a Material Adverse Effect.
Neither the Company nor any Subsidiary, nor any director or officer thereof, is
or has been the subject of any Action involving a claim of violation of or
liability under federal or state securities laws or a claim of breach of
fiduciary duty. The Company does not have pending before the Commission any
request for confidential treatment of information. There has not been, and to
the knowledge of the Company, there is not pending or contemplated, any
investigation by the Commission involving the Company or any current or former
director or officer of the Company. The Commission has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the Exchange Act or the Securities Act.
(k) Compliance. Neither the Company nor any Subsidiary: (i) is
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in default under or in violation of (and no event has occurred that has not been
waived that, with notice or lapse of time or both, would result in a default by
the Company or any Subsidiary under), nor has the Company or any Subsidiary
received notice of a claim that it is in default under or that it is in
violation of, any indenture, loan or credit agreement or any other agreement or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, except in each case as could not, individually or in the
aggregate, have or result in a Material Adverse Effect.
(l) Labor Relations. No material labor problem exists or, to
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the knowledge of the Company, is imminent with respect to any of the employees
of the Company.
(m) Regulatory Permits. The Company and the Subsidiaries
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possess all certificates, authorizations and permits issued by the appropriate
federal, state, local or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Reports, except where the
failure to possess such permits could not, individually or in the aggregate,
have or result in a Material Adverse Effect ("Material Permits"), and neither
the Company nor any Subsidiary has received any notice of proceedings relating
to the revocation or modification of any Material Permit.
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(n) Title to Assets. The Company and the Subsidiaries have
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good and marketable title in fee simple to all real property owned by them that
is material to the business of the Company and the Subsidiaries and good and
marketable title in all personal property owned by them that is material to the
business of the Company and the Subsidiaries, in each case free and clear of all
Liens, except for certain federal tax Liens as set forth in Schedule 3.1(n)
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hereto, and the Liens granted to the Initial Investors pursuant to the Initial
Transaction and for other Liens as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company and the Subsidiaries. Any real property and
facilities held under lease by the Company and the Subsidiaries are held by them
under valid, subsisting and enforceable leases of which the Company and the
Subsidiaries are in compliance.
(o) Patents and Trademarks. The Company and the Subsidiaries
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have, or have rights to use, all patents, patent applications, trademarks,
trademark applications, service marks, trade names, copyrights, licenses and
other similar rights that are necessary or material for use in connection with
their respective businesses as described in the SEC Reports and which the
failure to so have could have a Material Adverse Effect (collectively, the
"Intellectual Property Rights"). Neither the Company nor any Subsidiary has
received a written notice or otherwise has reason to believe that the
Intellectual Property Rights used by the Company or any Subsidiary violates or
infringes upon the rights of any Person. To the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights.
(p) Insurance. The Company and the Subsidiaries are insured by
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insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which the
Company and the Subsidiaries are engaged. Neither the Company nor any 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
without a significant increase in cost.
(q) Transactions With Affiliates and Employees. Except as set
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forth in SEC Reports filed at least ten days prior to the date hereof, none of
the officers or directors of the Company and, to the knowledge of the Company,
none of the employees of the Company is presently a party to any transaction
with the Company or any Subsidiary (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
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
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(r) Internal Accounting Controls. The Company and the
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Subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that: (i) transactions are executed in accordance
with management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
(s) Solvency. Based on the financial condition of the Company
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as of the Closing Date: (i) the Company's fair saleable value of its assets
exceeds the amount that will be required to be paid on or in respect of the
Company's existing debts and other liabilities (including known contingent
liabilities) as they mature; (ii) the Company's assets do not constitute
unreasonably small capital to carry on its business for the current fiscal year
as now conducted and as proposed to be conducted including its capital needs
taking into account the particular capital requirements of the business
conducted by the Company, and projected capital requirements and capital
availability thereof; and (iii) the current cash flow of the Company, together
with the proceeds the Company would receive, were it to liquidate all of its
assets, after taking into account all anticipated uses of the cash, would be
sufficient to pay all amounts on or in respect of its debt when such amounts are
required to be paid. The Company does not intend to incur debts beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts of cash to be payable on or in respect of its debt).
(t) Certain Fees. No brokerage or finder's fees or commissions
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are or will be payable by the Company to any broker, financial advisor, finder,
placement agent, investment banker, bank or other Person with respect to the
transactions contemplated by this Agreement, and the Company has not taken any
action that would cause any Purchaser to be liable for any such fees or
commissions. The Company agrees that the Purchasers shall have no obligation
with respect to any fees or with respect to any claims made by or on behalf of
any Person for fees of the type contemplated by this Section with the
transactions contemplated by this Agreement.
(u) Private Placement. Assuming the accuracy of the
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representations and warranties of the Purchasers set forth in Sections
3.2(b)-(f), the offer, issuance and sale of the Securities to the Purchasers as
contemplated hereby are exempt from the registration requirements of the
Securities Act.
(v) Listing and Maintenance Requirements. The Company has not,
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in the 12 months preceding the date hereof, received notice from any Trading
Market on which the Common Stock is or has been listed or quoted to the effect
that the Company is not in compliance with the listing or maintenance
requirements of such Trading Market. The Company is, and has no reason to
believe that it will not in the foreseeable future continue to be, in compliance
with all such listing and maintenance requirements. The issuance and sale of the
Securities hereunder does not contravene the rules and regulations of the
Trading Market and no shareholder approval is required for the Company to
fulfill its obligations under the Transaction Documents.
11
(w) Registration Rights. Except as described in Schedule
-------------------- --------
3.1(w), the Company has not granted or agreed to grant to any Person any rights
-----
(including "piggy-back" registration rights) to have any securities of the
Company registered with the Commission or any other governmental authority that
have not been satisfied.
(x) Application of Takeover Protections. The Company and its
------------------------------------
Board of Directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Company's Certificate of Incorporation (or
similar charter documents) or the laws of its state of incorporation that is or
could become applicable to the Purchasers as a result of the Purchasers and the
Company fulfilling their obligations or exercising their rights under the
Transaction Documents, including without limitation as a result of the Company's
issuance of the Securities and the Purchasers' ownership of the Securities.
(y) Seniority. As of the date of this Agreement, no
---------
indebtedness of the Company is senior to the Debentures in right of payment,
whether with respect to interest or upon liquidation or dissolution, or
otherwise, other than indebtedness to the Internal Revenue Service as reflected
on Exhibit 3.1(n) hereto, indebtedness secured by purchase money security
---------------
interests (which is senior only as to underlying assets covered thereby) and
capital lease obligations (which is senior only as to the property covered
thereby).
(z) Disclosure. The Company confirms that neither it nor any
----------
other Person acting on its behalf has provided any of the Purchasers or their
agents or counsel with any information that the Company believes constitutes,
nonpublic information. The Company understands and confirms that the Purchasers
will rely on the foregoing representations in effecting transactions in
securities of the Company. All disclosure provided to the Purchasers regarding
the Company, its business and the transactions contemplated hereby, including
the Schedules to this Agreement, furnished by or on behalf of the Company are
true and correct and do not contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. The Company acknowledges and agrees that no Purchaser makes or has
made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in Section 3.2.
-----------
(aa) Investment Company. The Company is not, and is not an
-------------------
Affiliate of an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
3.2 Representations and Warranties of the Purchasers. Each Purchaser
------------------------------------------------
hereby, for itself and for no other Purchaser, represents and warrants to the
Company as follows:
(a) Organization; Authority. Such Purchaser is an entity duly
------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization with the requisite corporate or partnership
power and authority to enter into and to consummate the transactions
contemplated by the Transaction Documents and otherwise to carry out its
obligations there under. The purchase by such Purchaser of the Securities to be
acquired by it has been duly authorized by all necessary action on the part of
such Purchaser. Each of this Agreement and all applicable Transaction Documents
have been duly executed by such Purchaser, and when delivered by such Purchaser
in accordance with the terms hereof, will constitute the valid and legally
binding obligation of such Purchaser, enforceable against it in accordance with
its terms.
12
(b) Investment Intent. Such Purchaser is acquiring the
-------------------
Securities as principal for its own account for investment purposes only and not
with a view to or for distributing or reselling such Securities or any part
thereof, without prejudice, however, to such Purchaser's right, subject to the
provisions of this Agreement, at all times to sell or otherwise dispose of all
or any part of such Securities pursuant to an effective registration statement
under the Securities Act or under an exemption from such registration and in
compliance with applicable federal and state securities laws. Nothing contained
herein shall be deemed a representation or warranty by such Purchaser to hold
Securities for any period of time. Such Purchaser is acquiring the Securities
hereunder in the ordinary course of its business. Such Purchaser does not have
any agreement or understanding, directly or indirectly, with any Person to
distribute any of the Securities.
(c) Purchaser Status. At the time such Purchaser was offered
-----------------
the Securities, it was, and at the date hereof it is, and on each date on which
it converts any Debentures, it will be an "accredited investor" as defined in
Rule 501(a) under the Securities Act. Such Purchaser has not been formed solely
for the purpose of acquiring the Securities. Such Purchaser is not a registered
broker-dealer under Section 15 of the Exchange Act.
(d) Experience of such Purchaser. Such Purchaser, either alone
----------------------------
or together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Securities, and has so
evaluated the merits and risks of such investment. Such Purchaser is able to
bear the economic risk of an investment in the Securities and, at the present
time, is able to afford a complete loss of such investment.
(e) Access to Information. Such Purchaser acknowledges that it
---------------------
has reviewed the Disclosure Materials and has been afforded: (i) the opportunity
to ask such questions as it has deemed necessary of, and to receive answers
from, representatives of the Company concerning the terms and conditions of the
offering of the Securities and the merits and risks of investing in the
Securities; (ii) access to information about the Company and the Subsidiaries
and their respective financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Purchaser or its representatives or counsel shall modify,
amend or affect such Purchaser's right to rely on the truth, accuracy and
completeness of the Disclosure Materials and the Company's representations and
warranties contained in the Transaction Documents.
(f) General Solicitation. Such Purchaser is not purchasing the
--------------------
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
13
(g) Reliance. Such Purchaser understands and acknowledges
--------
that: (i) the Securities are being offered and sold to it without registration
under the Securities Act in a private placement that is exempt from the
registration provisions of the Securities Act and (ii) the availability of such
exemption depends in part on, and the Company will rely upon the accuracy and
truthfulness of, the foregoing representations and such Purchaser hereby
consents to such reliance.
The Company acknowledges and agrees that no Purchaser makes or has made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section 3.2.
ARTICLE IV
OTHER AGREEMENTS OF THE PARTIES
4.1 Transfer Restrictions.
---------------------
(a) The Securities may only be disposed of by a Purchaser in
compliance with state and federal securities laws. In connection with any
transfer of Securities other than pursuant to an effective registration
statement, to the Company, to an Affiliate of a Purchaser or to a Person managed
or advised by the same Person as manager or adviser to such Purchaser or in
connection with a pledge as contemplated in Section 4.1(b), the Company may
require the transferor thereof to provide to the Company an opinion of counsel
selected by the transferor, the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that such transfer does
not require registration of such transferred Securities under the Securities
Act. As a condition of transfer, any such transferee shall restate the
representations and warranties of such Purchaser under Section 3.2 and agree in
writing to be bound by the terms of this Agreement and shall have the rights of
a Purchaser under this Agreement and the Transaction Documents.
(b) The Purchasers agree to the imprinting, so long as is
required by this Section 4.1(b), of the following legend on any certificate
---------------
evidencing Securities:
THE SECURITIES INTO WHICH THESE SECURITIES ARE [CONVERTIBLE] HAVE NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A
LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE
SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
OR OTHER LOAN SECURED BY SUCH SECURITIES.
14
The Company acknowledges and agrees that a Purchaser may from time to
time pledge pursuant to a bona fide margin agreement or grant a security
interest in some or all of the Securities and, if required under the terms of
such arrangement, such Purchaser may transfer pledged or secured Securities to
the pledgees or secured parties. Such a pledge or transfer would not be subject
to approval of the Company and no legal opinion of the pledgee, secured party or
pledgor shall be required in connection therewith. Further, no notice shall be
required of such pledge. At the appropriate Purchaser's expense, the Company
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including the preparation and filing of any required
prospectus supplement under Rule 424(b)(3) of the Securities Act or other
applicable provision of the Securities Act to appropriately amend the list of
Selling Stockholders there under.
(c) Certificates evidencing Securities shall not contain any legend
(including the legend set forth in Section 4.1(b)): (i) while a registration
statement (including the Underlying Shares Registration Statement) covering the
resale of such security is effective under the Securities Act, or (ii) following
any sale of such Securities pursuant to Rule 144, or (iii) if such Securities
are eligible for sale under Rule 144(k), or (iv) if such legend is not required
under applicable requirements of the Securities Act (including judicial
interpretations and pronouncements issued by the Staff of the Commission). The
Company shall cause its counsel to issue the legal opinion included in the
Transfer Agent Instructions to the Company's transfer agent on the Effective
Date. If all or any portion of a Debenture is converted at a time when there is
an effective registration statement to cover the resale of the Underlying
Shares, such Underlying Shares shall be issued free of all legends. The Company
agrees that following the Effective Date or at such time as such legend is no
longer required under this Section 4.1(c), it will, no later than three Trading
Days following the delivery by a Purchaser to the Company or the Company's
transfer agent of a certificate representing Securities issued with a
restrictive legend, deliver or cause to be delivered to such Purchaser a
certificate representing such Securities that is free from all restrictive and
other legends. The Company may not make any notation on its records or give
instructions to any transfer agent of the Company that enlarge the restrictions
on transfer set forth in this Section.
15
4.2 Acknowledgment of Dilution. The Company acknowledges that the
---------------------------
issuance of the Securities will result in dilution of the outstanding shares of
Common Stock. The Company further acknowledges that its obligations under the
Transaction Documents, including without limitation its obligation to issue the
Underlying Shares pursuant to the Transaction Documents, are unconditional and
absolute and not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any claim that the
Company may have against any Purchaser.
4.3 Furnishing of Information. As long as any Purchaser owns
---------------------------
Securities, the Company covenants to timely file (or obtain extensions in
respect thereof and file within the applicable grace period) all reports
required to be filed by the Company after the date hereof pursuant to the
Exchange Act. Upon the request of any Purchaser, the Company shall deliver to
such Purchaser a written certification of a duly authorized officer as to
whether it has complied with the preceding sentence. As long as any Purchaser
owns Securities, if the Company is not required to file reports pursuant to such
laws, it will prepare and furnish to the Purchasers and make publicly available
in accordance with Rule 144(c) such information as is required for the
Purchasers to sell the Securities under Rule 144.
4.4 Integration. The Company shall not, and shall use its best
-----------
efforts to ensure that no Affiliate of the Company shall, sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security (as
defined in Section 2 of the Securities Act) that would be integrated with the
offer or sale of the Securities in a manner that would require the registration
under the Securities Act of the sale of the Securities to the Purchasers, or
that would be integrated with the offer or sale of the Securities for purposes
of the rules and regulations of any Trading Market.
4.5 Reservation and Listing of Securities. The Company shall
-----------------------------------------
maintain a reserve from its duly authorized shares of Common Stock to comply
with its conversion obligations under the Debentures and pursuant to the
Transaction Documents.
4.6 Conversion Procedures. The forms of Conversion Notice included
----------------------
in the Debentures sets forth the totality of the procedures required in order to
convert the Debentures. No additional legal opinion or other information or
instructions shall be necessary to enable the Purchasers to convert their
Debentures. The Company shall honor conversions of the Debentures and shall
deliver Underlying Shares in accordance with the terms, conditions and time
periods set forth in the Transaction Documents.
4.7 Subsequent Placements.
---------------------
(a) Subject to Section 4.7(c) and (d), from the date hereof
through the 90th Trading Day following the Effective Date, other than to the
Purchasers or the Initial Investors, the Company will not: (i) offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition) any of its or its
Affiliates' equity or equity equivalent securities (including the issuance of
any debt or other instrument at any time over the life thereof convertible into
or exchangeable for Common Stock (any such offer, sale, grant, disposition or
announcement being referred to as a "Subsequent Placement") or (ii) file a
registration statement (other than on a Form S-8 and pursuant to the
Registration Rights Agreement) with the Commission with respect to any
securities of the Company.
16
(b) Subject to Section 4.7(c) and (d), from the date hereof
until the expiration of the 180th Trading Day after the Effective Date, the
Company shall not, directly or indirectly, effect any Subsequent Placement
unless: (i) the Company delivers to each of the Purchasers a written notice (the
"Subsequent Placement Notice") of its intention to effect such Subsequent
Placement, which Subsequent Placement Notice shall describe in reasonable detail
the proposed terms of such Subsequent Placement, the amount of proceeds intended
to be raised there under, the Person with whom such Subsequent Placement shall
be effected, and attached to which shall be a term sheet or similar document
relating thereto and (ii) such Purchaser shall not have notified the Company by
6:30 p.m. (New York City time) on the tenth Trading Day after its receipt of the
Subsequent Placement Notice of its willingness to provide (or to cause its sole
designee to provide), subject to completion of mutually acceptable
documentation, financing to the Company on the same terms set forth in the
Subsequent Placement Notice. If the Purchasers shall fail to notify the Company
of their intention to enter into such negotiations within such time period, the
Company may effect the Subsequent Placement substantially upon the terms and to
the Persons (or Affiliates of such Persons) set forth in the Subsequent
Placement Notice; provided, that the Company shall provide the Purchasers with a
second Subsequent Placement Notice, and the Purchasers shall again have the
right of first refusal set forth above in this paragraph (a), if the Subsequent
Placement subject to the initial Subsequent Placement Notice shall not have been
consummated for any reason on the terms set forth in such Subsequent Placement
Notice within 45 Trading Days after the date of the initial Subsequent Placement
Notice with the Person (or an Affiliate of such Person) identified in the
Subsequent Placement Notice. If the Purchasers shall indicate a willingness to
provide financing in excess of the amount set forth in the Subsequent Placement
Notice, then each Purchaser shall be entitled to provide financing pursuant to
such Subsequent Placement Notice up to an amount equal to such Purchaser's
pro-rata portion of the aggregate number of Shares purchased by such Purchaser
under this Agreement, but the Company shall not be required to accept financing
from the Purchasers in an amount in excess of the amount set forth in the
Subsequent Placement Notice.
(c) The restrictions contained in Section 4.7(a) and (b) shall
not apply to the granting of options to employees, officers and directors of the
Company pursuant to any stock option plan duly adopted by the Company or to the
issuance of Common Stock upon exercise of such options.
(d) The restrictions contained in Section 4.7(a)and (b) shall
be extended for any number of Trading Days during such period in which: (i)
trading in the Common Stock is suspended by any Trading Market, or (ii) the
Underlying Shares Registration Statement is not effective or (iii) the
prospectus included in the Underlying Shares Registration Statement may not be
used by the Purchasers for the resale of Registrable Securities there under.
4.8 Securities Laws Disclosure; Publicity. The Company shall, on the
-------------------------------------
Closing Date, issue a press release reasonably acceptable to the Purchasers
disclosing all material terms of the transactions contemplated hereby. The
Company and the Purchasers shall consult with each other in issuing any press
releases with respect to the transactions contemplated hereby. Notwithstanding
the foregoing, the Company shall not publicly disclose the name of any
Purchaser, or include the name of any Purchaser in any filing with the
Commission or any regulatory agency or Trading Market, without the prior written
consent of such Purchaser, except to the extent such disclosure is required by
law or Trading Market regulations, in which case the Company shall provide the
Purchasers with prior notice of such disclosure.
17
4.9 Non-Public Information. The Company covenants and agrees that
-----------------------
neither it nor any other Person acting on its behalf will provide any Purchaser
or its agents or counsel with any information that the Company believes
constitutes material non-public information, unless prior thereto such Purchaser
shall have executed a written agreement regarding the confidentiality and use of
such information. The Company understands and confirms that each Purchaser shall
be relying on the foregoing representations in effecting transactions in
securities of the Company.
4.10 Use of Proceeds. The Company shall use the net proceeds from the
---------------
sale of the Securities hereunder for working capital purposes and for the
satisfaction of any portion of the Company's debt (including the payment of all
its outstanding debt of approximately $26,000 to Silicon Valley Bank in
accordance with the Payment Request letter dated May 8, 2002, payment of trade
payables and accrued expenses in the ordinary course of the Company's business
and prior practices) but not to redeem any Company equity or equity-equivalent
securities or to settle any outstanding litigation.
4.11 Indemnification of Purchasers. The Company will indemnify and
-------------------------------
hold the Purchasers and their directors, officers, shareholders, partners,
employees and agents (each, a "Purchaser Party") harmless from any and all
losses, liabilities, obligations, claims, contingencies, damages, costs and
expenses, including all judgments, amounts paid in settlements, court costs and
reasonable attorneys' fees and costs of investigation (collectively, "Losses")
that any such Purchaser Party may suffer or incur as a result of or relating to:
(a) any misrepresentation, breach or inaccuracy, or any allegation by a third
party that, if true, would constitute a breach or inaccuracy, of any of the
representations, warranties, covenants or agreements made by the Company in this
Agreement or in the other Transaction Documents; or (b) any cause of action,
suit or claim brought or made against such Purchaser Party and arising solely
out of or solely resulting from the execution, delivery, performance or
enforcement of this Agreement or any of the other Transaction Documents and
without causation by any other activity, obligation, condition or liability
pertaining to such Purchaser and not to the transactions contemplated by this
Agreement. The Company will reimburse such Purchaser for its reasonable legal
and other expenses (including the cost of any investigation, preparation and
travel in connection therewith) incurred in connection therewith, as such
expenses are incurred.
4.12 Shareholders Rights Plan. In the event that a shareholders
--------------------------
rights plan is adopted by the Company, no claim will be made or enforced by the
Company or any other Person that any Purchaser is an "Acquiring Person" under
any such plan or in any way could be deemed to trigger the provisions of such
plan by virtue of receiving Securities under the Transaction Documents.
18
ARTICLE V
MISCELLANEOUS
5.1 Fees and Expenses. The Company has agreed to pay $20,000 to the
-----------------
Purchasers as reimbursement for their legal and other fees and expenses incurred
in connection with the investigation and negotiation of the transaction and the
preparation and negotiation of the Transaction Documents. Accordingly, in lieu
of the foregoing payments, the Company, on the Closing Date, will direct that
the aggregate amount that the Purchasers are to pay for the Debentures at the
Closing, will be reduced by $20,000. Other than as specified above, each party
shall pay the fees and expenses of its advisers, counsel, accountants and other
experts, if any, and all other expenses incurred by such party incident to the
negotiation, preparation, execution, delivery and performance of this Agreement.
The Company shall pay all transfer agent fees, stamp taxes and other taxes and
duties levied in connection with the issuance of any Securities.
5.2 Entire Agreement. The Transaction Documents, together with the
----------------
Exhibits and Schedules thereto, contain the entire understanding of the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules. At or
after the Closing, and without further consideration, the Company will execute
and deliver to the Purchasers such further documents as may be reasonably
requested in order to give practical effect to the intention of the parties
under the Transaction Documents.
5.3 Notices. Any and all notices or other communications or
-------
deliveries required or permitted to be provided hereunder shall be in writing
and shall be deemed given and effective on the earliest of (a) the date of
transmission, if such notice or communication is delivered via facsimile at the
facsimile number specified in this Section prior to 6:30 p.m. (New York City
time) on a Trading Day, (b) the next Trading Day after the date of transmission,
if such notice or communication is delivered via facsimile at the facsimile
number specified in this Section on a day that is not a Trading Day or later
than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day
following the date of mailing, if sent by U.S. nationally recognized overnight
courier service, or (d) upon actual receipt by the party to whom such notice is
required to be given. The addresses for such notices and communications are
those set forth on the signature pages hereof, or such other address as may be
designated in writing hereafter, in the same manner, by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be
--------------------
waived or amended except in a written instrument signed, in the case of an
amendment, by the Company and each of the Purchasers or, in the case of a
waiver, by the party against whom enforcement of any such waiver is sought. No
waiver of any default with respect to any provision, condition or requirement of
this Agreement shall be deemed to be a continuing waiver in the future or a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.
5.5 Construction. The headings herein are for convenience only, do
------------
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof. 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.
19
5.6 Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties and their successors and permitted assigns.
The Company may not assign this Agreement or any rights or obligations hereunder
without the prior written consent of the Purchasers. Any Purchaser may assign
its rights under this Agreement and the Transaction Documents to any Person to
whom such Purchaser assigns or transfers any Securities.
5.7 No Third-Party Beneficiaries. This Agreement is intended for the
----------------------------
benefit of the parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision hereof be enforced
by, any other Person, except as otherwise set forth in Sections 4.11 and 4.12.
5.8 Governing Law; Venue; Waiver of Jury Trial. All questions
-----------------------------------------------
concerning the construction, validity, enforcement and interpretation of this
Agreement shall be governed by and construed and enforced in accordance with the
internal laws of the State of New York, without regard to the principles of
conflicts of law thereof. Each party agrees that all Proceedings concerning the
interpretations, enforcement and defense of the transactions contemplated by
this Agreement (whether brought against a party hereto or its respective
affiliates, directors, officers, shareholders, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York, Borough of Manhattan. Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in the City of
New York, Borough of Manhattan for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein (including with respect to the enforcement of this Agreement), and hereby
irrevocably waives, and agrees not to assert in any Proceeding, any claim that
it is not personally subject to the jurisdiction of any such court, that such
Proceeding is improper. Each party hereto hereby irrevocably waives personal
service of process and consents to process being served in any such Proceeding
by mailing a copy thereof via registered or certified mail or overnight delivery
(with evidence of delivery) to such party at the address in effect for notices
to it under this Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. Each party hereto hereby irrevocably waives, to the fullest
extent permitted by applicable law, any and all right to trial by jury in any
legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby. If either party shall commence a Proceeding to
enforce any provisions of a Transaction Document, then the prevailing party in
such Proceeding shall be reimbursed by the other party for its attorneys fees
and other costs and expenses incurred with the investigation, preparation and
prosecution of such Proceeding.
5.9 Survival. The representations, warranties, agreements and
--------
covenants contained herein shall survive the Closing and the delivery, and
conversion of the Debentures.
5.10 Execution. This Agreement may be executed in two or more
---------
counterparts, all of which when taken together 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, it being understood that both
parties need not sign the same counterpart. In the event that any signature is
delivered by facsimile transmission, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile signature page
were an original thereof.
20
5.11 Severability. If any provision of this Agreement is held to be
------------
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Agreement shall not in any way be
affected or impaired thereby and the parties will attempt to agree upon a valid
and enforceable provision that is a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this Agreement.
5.12 Rescission and Withdrawal Right. Notwithstanding anything to the
-------------------------------
contrary contained in (and without limiting any similar provisions of) the
Transaction Documents, whenever any Purchaser exercises a right, election,
demand or option under a Transaction Document and the Company does not timely
perform its related obligations within the periods therein provided, then such
Purchaser may rescind or withdraw, in its sole discretion from time to time upon
written notice to the Company, any relevant notice, demand or election in whole
or in part without prejudice to its future actions and rights.
5.13 Replacement of Securities. If any certificate or instrument
---------------------------
evidencing any Securities is mutilated, lost, stolen or destroyed, the Company
shall issue or cause to be issued in exchange and substitution for and upon
cancellation thereof, or in lieu of and substitution therefor, a new certificate
or instrument, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction and customary and reasonable
indemnity, if requested. The applicants for a new certificate or instrument
under such circumstances shall also pay any reasonable third-party costs
associated with the issuance of such replacement Securities.
5.14 Remedies. In addition to being entitled to exercise all rights
--------
provided herein or granted by law, including recovery of damages, each of the
Purchasers and the Company will be entitled to specific performance under the
Transaction Documents. The parties agree that monetary damages may not be
adequate compensation for any loss incurred by reason of any breach of
obligations described in the foregoing sentence and hereby agrees to waive in
any action for specific performance of any such obligation the defense that a
remedy at law would be adequate.
5.15 Payment Set Aside. To the extent that the Company makes a
-------------------
payment or payments to any Purchaser pursuant to any Transaction Document or a
Purchaser enforces or exercises its rights there under, and such payment or
payments or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
21
5.17 Independent Nature of Purchasers' Obligations and Rights. The
----------------------------------------------------------
rights and obligations of each Purchaser under any Transaction Document are
several and not joint with the rights and obligations of the other Purchaser and
a Purchaser shall not be responsible in any way for the performance of the
obligations of the other Purchaser under any Transaction Document. Nothing
contained herein or in any Transaction Document, and no action taken by any
Purchaser pursuant thereto shall constitute the Purchasers as a partnership, an
association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert with respect to
such obligations or the transactions contemplated by the Transaction Documents.
Each Purchaser shall be entitled to independently protect and enforce its
rights, including without limitation the rights arising out of this Agreement or
out of the other Transaction Documents, and it shall not be necessary for the
other Purchaser to be joined as an additional party in any proceeding for such
purpose.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOLLOW]
22
IN WITNESS WHEREOF, the parties hereto have caused this Secured
Convertible Debenture Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
ACHIEVEMENT TEC HOLDINGS, INC
By:________________________________________
Name: Xxxxxx Xxxxxx
Title: Chief Executive Officer
Address for Notice:
0000 X. Xxxxxxx 000
Xxxxx 000X
Xxxxx Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Phone No.: (000) 000-0000
Attn: Chief Executive Officer
With a copy to:
Xxxxxxxxx X. Xxxxxxx, III
0000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Phone No.: (000) 000-0000
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES FOR PURCHASERS FOLLOW]
23
IN WITNESS WHEREOF, the parties hereto have caused this Secured
Convertible Debenture Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
AJW PARTNERS, LLC
By: SMS Group, LLC
By:_____________________________________
Name: Xxxxx X. Xxxxxxxx
Title: Manager
Aggregate Purchase Price for Closing Debentures $37,500
Aggregate Purchase Price for Additional Debentures $12,500
Address for Notice:
AJW Partners, LLC
000 Xxxxx Xxxxxx
Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx X. Xxxxxxxx
With a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 or (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
24
IN WITNESS WHEREOF, the parties hereto have caused this Secured
Convertible Debenture Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
NEW MILLENNIUM CAPITAL PARTNERS II, LLC
By: First Street Manager II, LLC
By:_____________________________________
Name: Xxxxx Xxxxxxxx
Title: Manager
Aggregate Purchase Price for Closing Debentures $37,500
Aggregate Purchase Price for Additional Debentures $12,500
Address for Notice:
New Millennium Capital Partners II, LLC
000 Xxxxx Xxxxxx
Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
With a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 or (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
25
IN WITNESS WHEREOF, the parties hereto have caused this Secured
Convertible Debenture Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
PEGASUS CAPITAL PARTNERS, LLC
By:_____________________________________
Name: Xxxxx Xxxxxxxx
Title: Manager
Aggregate Purchase Price for Closing Debentures $112,500
Aggregate Purchase Price for Additional Debentures $87,500
Address for Notice:
Pegasus Capital Partners, LLC
000 Xxxxx Xxxxxx
Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
With a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 or (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
26
IN WITNESS WHEREOF, the parties hereto have caused this Secured
Convertible Debenture Purchase Agreement to be duly executed by their respective
authorized signatories as of the date first indicated above.
AJW/NEW MILLENNIUM OFFSHORE LTD.
By:_____________________________________
Name: Xxxxx Xxxxxxxx
Title: Manager
Aggregate Purchase Price for Closing Debentures $112,500
Aggregate Purchase Price for Additional Debentures $87,500
Address for Notice:
AJW/New Millennium Offshore Ltd.
000 Xxxxx Xxxxxx
Xxxxx X
Xxxxxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
With a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx &
Xxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Facsimile No.: (000) 000-0000 or (000) 000-0000
Attn: Xxxx X. Xxxxx, Esq.
27
Exhibits: Forms
--------
A Debenture
B Registration Rights Agreement
C Intellectual Property Security Agreement
D Security Agreement
E Transfer Agent Instructions
Schedules:
---------
3.1(a) Subsidiaries
3.1(g) Capitalization
3.1(h) SEC Reports
3.1(n) Title to Assets
3.1(w) Registration Rights
28
