EXHIBIT 4.12
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT, dated as of August 31, 2000, is entered into
by and between SINGLEPOINT SYSTEMS CORPORATION, a Minnesota corporation, with
headquarters located at 0000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxx Xxxx, XX 00000 (the
"Company"), and the undersigned (the "Buyer").
W I T N E S S E T H:
WHEREAS, the Company and the Buyer are executing and
delivering this Agreement in accordance with and in reliance upon the exemption
from securities registration afforded, INTER ALIA, by Rule 506 under Regulation
D ("Regulation D") as promulgated by the United States Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the "1933
Act"), and/or Section 4(2) of the 1933 Act;
WHEREAS, in consideration of the foregoing, the Buyer wishes
to purchase, upon the terms and subject to the conditions of this Agreement, 8%
Cumulative Convertible Redeemable Preferred Stock, Series G, $1,000 stated value
(the "Preferred Stock"), of the Company which will be convertible into shares of
Common Stock, no par value, of the Company (the "Common Stock"), together with
the Common Stock Purchase Warrants described herein, upon the terms and subject
to the conditions of such Preferred Stock, and subject to acceptance of this
Agreement by the Company;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. AGREEMENT TO PURCHASE; PURCHASE PRICE.
a. PURCHASE; CERTAIN DEFINITIONS. (i) The Buyer hereby agrees
to purchase from the Company shares of the Preferred Stock in the amount set
forth on the signature page of this Agreement, out of a total offering of
$1,000,000 of such Preferred Stock, and having the terms and conditions set
forth in the Certificate of Designation, attached hereto as ANNEX I (the
"Certificate of Designation"). The purchase price for the Preferred Stock shall
be as set forth on the signature page hereto (the "Purchase Price") and shall be
payable in United States Dollars.
(ii) As used herein, the term "Preferred Stock"
includes all preferred shares, if any, issued as dividends thereon, unless the
context otherwise requires.
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(iii) As used herein, the term "Securities" means the
Preferred Stock and the Common Stock issuable upon conversion of the Preferred
Stock.
b. FORM OF PAYMENT. The Buyer shall pay the purchase price for
the Preferred Stock by delivering immediately available good funds in United
States Dollars to the escrow agent (the "Escrow Agent") identified in the Joint
Escrow Instructions attached hereto as ANNEX II (the "Joint Escrow
Instructions"). No later than the Closing Date (as defined below), the Company
shall deliver one or more certificates representing the Preferred Stock duly
executed on behalf of the Company (collectively, the "Certificate") to the
Escrow Agent. By signing this Agreement, the Buyer and the Company, and subject
to acceptance by the Escrow Agent, each agrees to all of the terms and
conditions of, and becomes a party to, the Joint Escrow Instructions, all of the
provisions of which are incorporated herein by this reference as if set forth in
full.
c. METHOD OF PAYMENT. Payment into escrow of the Purchase
Price for the Preferred Stock shall be made by wire transfer of funds as
instructed in the Joint Escrow Instructions. Not later than 1:00 p.m., PST time,
on the date which is one (1) New York Stock Exchange trading day after the
Company shall have accepted this Agreement and returned a signed counterpart of
this Agreement to the Escrow Agent by facsimile, the Buyer shall deposit with
the Escrow Agent the aggregate purchase price for the Preferred Stock, in
immediately available funds. Time is of the essence with respect to such
payment, and failure by the Buyer to make such payment shall allow the Company
to cancel this Agreement.
d. ESCROW PROPERTY. The Purchase Price and the Certificate
delivered to the Escrow Agent as contemplated by Sections 1(b) and (c) hereof
are referred to as the "Escrow Property."
2. BUYER REPRESENTATIONS, WARRANTIES, ETC.; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
Buyer represents and warrants to, and covenants and agrees
with, the Company as follows:
a. Without limiting Buyer's right to sell the Common Stock
pursuant to the Registration Statement (as that term is defined in the
Registration Rights Agreement defined below), the Buyer is purchasing the
Preferred Stock and will be acquiring the shares of Common Stock issuable upon
conversion of the Preferred Stock (the "Converted Shares") for its own account
for investment, and not with a view towards the public sale or distribution
thereof and not with a view to or for sale in connection with any distribution
thereof.
b. The Buyer is (i) an "accredited investor" as that term is
defined in Rule 501 of the General Rules and Regulations under the 1933 Act by
reason of Rule 501(a)(3), (ii) experienced in making investments of the kind
described in this Agreement and the related
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documents, (iii) able, by reason of the business and financial experience of its
officers (if an entity) and professional advisors (who are not affiliated with
or compensated in any way by the Company or any of its affiliates or selling
agents), to protect its own interests in connection with the transactions
described in this Agreement, and the related documents, and (iv) able to afford
the entire loss of its investment in the Securities.
c. All subsequent offers and sales of the Preferred Stock and
the shares of Common Stock representing the Converted Shares (such Common Stock
sometimes referred to as the "Shares") by the Buyer shall be made pursuant to
registration of the Shares under the 1933 Act or pursuant to an exemption from
registration.
d. The Buyer understands that the Preferred Stock s being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying upon the truth and accuracy of, and the Buyer's compliance
with, the representations, warranties, agreements, acknowledgments and
understandings of the Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of the Buyer to acquire the
Preferred Stock.
e. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Preferred Stock and
the offer of the Shares which have been requested by the Buyer, including ANNEX
V hereto. The Buyer and its advisors, if any, have been afforded the opportunity
to ask questions of the Company and have received complete and satisfactory
answers to any such inquiries. Without limiting the generality of the foregoing,
the Buyer has also had the opportunity to obtain and to review (i) the Company's
annual report on Form 10-KSB for the year ending December 31, 1999, (ii) the
Company's reports on Form 10-QSB for the periods ending March 31, 2000 and June
30, 2000, and (iii) the Company's registration statement on Form SB-2 effective
July 24, 2000 (the "SEC Reports");
f. The Buyer understands that its investment in the Securities
involves a high degree of risk.
g. The Buyer understands that no United States federal or
state agency or any other government or governmental agency has passed on or
made any recommendation or endorsement of the Securities.
h. This Agreement has been duly and validly authorized,
executed and delivered on behalf of the Buyer and is a valid and binding
agreement of the Buyer enforceable in accordance with its terms, subject as to
enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally.
i. Notwithstanding the provisions hereof or of the Preferred
Stock, in no event (except with respect to an automatic conversion of the
Preferred Stock as provided in the
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Certificate of Designation) shall Buyer be entitled to convert any Preferred
Stock to the extent that, after such conversion, the sum of (1) the number of
shares of Common Stock beneficially owned by Buyer and its affiliates (other
than shares of Common Stock which may be deemed beneficially owned through the
ownership of the unconverted portion of the Preferred Stock), and (2) the number
of shares of Common Stock issuable upon the conversion of the Preferred Stock
with respect to which the determination of this proviso is being made, would
result in beneficial ownership by such Buyer and its affiliates of more than
4.99% of the outstanding shares of Common Stock. For purposes of the proviso to
the immediately preceding sentence, beneficial ownership shall be determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act"). Any issuance by the Company to the Buyer in excess of the
limit contained in this Section 3.i. shall be null and void, AB INITIO, and upon
notice of such invalid issuance, the Company shall correct its books and cause
its transfer agent's books to be corrected forthwith to reflect that the Buyer's
ownership of Common Stock is within the limit set forth herein. Buyer shall
immediately deliver any certificates for invalidly issued Common Stock to the
Company's transfer agent. The Company further agrees to (i) immediately reissue
certificates for Common Stock to the extent that a portion of the Common Stock
represented by said certificates have been validly issued and (ii) immediately
reissue all or a portion of those shares which were deemed invalidly issued (at
a price set forth in the original conversion notices applicable to such shares)
upon notice from the Buyer that the reissuance of such shares would not cause
the Buyer to have a beneficial ownership interest in excess of 4.99%. The
Company hereby indemnifies and holds Buyer free and harmless in connection with
any and all liabilities, losses, costs and expenses, including, without
limitation, attorneys' fees and costs arising from or relating to claims made by
any third parties with respect to any and all purported violations by the Buyer
under Sections 13(d) and 16 resulting from a conversion(s) of Preferred Stock,
unless such claim arises from Buyer's default of its obligations hereunder, or
representations or warranties contained herein. Buyer agrees that it shall not
knowingly attempt to convert that number of shares of Common Stock that would
cause it to own beneficially an amount greater than 4.99% of the Common Stock.
j. Buyer represents that it neither is nor will be obligated
for any finders' fee or commission nor is it aware of any such fee or commission
payable in connection with this transaction other than as set forth on the Joint
Escrow Instructions (attached hereto as Annex II). Buyer agrees to indemnify and
to hold harmless the Company from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Buyer or
any of its officers, partners, employees, or representatives is responsible.
3. COMPANY REPRESENTATIONS, ETC.
The Company represents and warrants and hereby covenants and
agrees with Buyer that:
a. CONCERNING THE PREFERRED STOCK AND THE SHARES. The
Preferred Stock has been duly authorized and, when issued, will be duly and
validly issued, fully paid and non-
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assessable and will not subject the holder thereof to personal liability by
reason of being such holder. There are no preemptive rights of any stockholder
of the Company, as such, to acquire the Preferred Stock or the Shares.
b. REPORTING COMPANY STATUS. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in each jurisdiction
where the nature of the business conducted or property owned by it makes such
qualification necessary, other than those jurisdictions in which the failure to
so qualify would not have a material adverse effect on the business, operations
or prospects or condition (financial or otherwise) of the Company and its
subsidiaries, taken as a whole. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act, and the Common Stock is listed and
traded on the OTC Bulletin Board. The Company has received no notice, either
oral or written, with respect to the continued eligibility of the Common Stock
for such listing, and the Company has maintained all requirements for the
continuation of such listing.
c. AUTHORIZED SHARES. The Company has at June 30, 2000,
6,460,662 shares of Common Stock outstanding, and has sufficient authorized and
unissued Shares as may be reasonably necessary to effect the conversion of the
Preferred Stock (assuming all future conversions occurred are based upon an
average 5-day closing bid of the Common Stock, as reported by Bloomberg, LP
which was one-half (1/2) of the closing bid price of the Common Stock on the
Closing Date [the "Closing Date Bid"]) and exercise of the Warrants (as defined
in Section 4.j.) at the Closing Date Bid. The Common Stock has been duly
authorized and, when issued upon conversion of the Preferred Stock in accordance
with its terms, will be duly and validly issued, fully paid and non-assessable
and will not subject the holder thereof to personal liability by reason of being
such holder.
d. SECURITIES PURCHASE AGREEMENT; REGISTRATION RIGHTS
AGREEMENT AND STOCK. This Agreement and the Registration Rights Agreement, the
form of which is attached hereto as ANNEX IV (the "Registration Rights
Agreement"), and the transactions contemplated hereby and thereby, have been
duly and validly authorized by the Company, this Agreement has been duly
executed and delivered by the Company and this Agreement is, and the Preferred
Stock, and the Registration Rights Agreement, when executed and delivered by or
on behalf of the Company, will be, valid and binding agreements of the Company
enforceable in accordance with their respective terms, subject, as to
enforceability, to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
e. NON-CONTRAVENTION. The execution and delivery of this
Agreement and the Registration Rights Agreement by the Company, the issuance of
the Securities, and the consummation by the Company of the other transactions
contemplated by this Agreement, the Registration Rights Agreement, and the
Preferred Stock do not and will not conflict with or
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result in a breach by the Company of any of the terms or provisions of, or
constitute a default under (i) the articles of incorporation or by-laws of the
Company, each as currently in effect, (ii) except as disclosed in ANNEX V, any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which the Company is a party or by which it or any of its properties or assets
are bound, including any listing agreement for the Common Stock (except as
herein set forth), (iii) to its knowledge, any existing applicable law, rule, or
regulation or any applicable decree, judgment, or order of any court, United
States federal or state regulatory body, administrative agency, or other
governmental body having jurisdiction over the Company or any of its properties
or assets, or (iv) any listing agreement for its Common Stock, except such
conflict, breach or default which would not have a material adverse effect on
the transactions contemplated herein.
f. APPROVALS. No authorization, approval or consent of any
court, governmental body, regulatory agency, self-regulatory organization, or
stock exchange or market or the stockholders of the Company is required to be
obtained by the Company for the issuance and sale of the Securities to the Buyer
as contemplated by this Agreement, except such authorizations, approvals and
consents that have been obtained.
g. SEC FILINGS. None of the Company's SEC Reports contained,
at the time they were filed, any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements made therein in light of the circumstances under which they were
made, not misleading, except as corrected by an amended filing made prior to the
date hereof. Except as set forth on ANNEX V hereto, the Company has since June
1997 timely filed all requisite forms, reports and exhibits thereto with the
SEC.,
h. ABSENCE OF CERTAIN CHANGES. Since December 31, 1999, there
has been no material adverse change and no material adverse development in the
business, properties, operations, condition (financial or otherwise), or results
of operations of the Company and its subsidiaries, taken as a whole, except as
disclosed in ANNEX V or in the Company's SEC Reports. Since December 31, 1999,
the Company has not (i) incurred or become subject to any material liabilities
(absolute or contingent) except liabilities incurred in the ordinary course of
business consistent with past practices; (ii) discharged or satisfied any
material lien or encumbrance or paid any material obligation or liability
(absolute or contingent), other than current liabilities paid in the ordinary
course of business consistent with past practices; (iii) declared or made any
payment or distribution of cash or other property to stockholders with respect
to its capital stock, or purchased or redeemed, or made any agreements to
purchase or redeem, any shares of its capital stock; (iv) sold, assigned or
transferred any other tangible assets, or canceled any debts or claims, except
in the ordinary course of business consistent with past practices; (v) suffered
any substantial losses or waived any rights of material value, whether or not in
the ordinary course of business, or suffered the loss of any material amount of
existing business; (vi) made any changes in employee compensation, except in the
ordinary course of business consistent with past practices; or (vii) experienced
any material problems with labor or management in connection with the terms and
conditions of their employment.
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i. FULL DISCLOSURE. There is no fact known to the Company
(other than general economic conditions known to the public generally or as
disclosed in the Company's SEC Reports), that has not been disclosed in writing
to the Buyer that (i) would reasonably be expected to have a material adverse
effect on the business or financial condition of the Company or (ii) would
reasonably be expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement or any of the
agreements contemplated hereby (collectively, including this Agreement, the
"Transaction Agreements").
j. ABSENCE OF LITIGATION. Except as set forth in ANNEX V
hereto, and in the Company's SEC Reports, which the Buyer has reviewed, there is
no action, suit, proceeding, inquiry or investigation before or by any court,
public board or body pending or, to the knowledge of the Company, threatened
against or affecting the Company, wherein an unfavorable decision, ruling or
finding would have a material adverse effect on the properties, business or
financial condition, results of operation or prospects of the Company and its
subsidiaries taken as a whole or the transactions contemplated by any of the
Transaction Agreements or which would adversely affect the validity or
enforceability of, or the authority or ability of the Company to perform its
obligations under, any of the Transaction Agreements.
k. ABSENCE OF EVENTS OF DEFAULT. Except as set forth in ANNEX
V hereto or the Company's SEC Reports, no Event of Default (or its equivalent
term), as defined in the respective agreement to which the Company is a party,
and no event which, with the giving of notice or the passage of time or both,
would become an Event of Default (or its equivalent term) (as so defined in such
agreement), has occurred and is continuing, which would have a material adverse
effect on the Company's financial condition or results of operations.
l. PRIOR ISSUES. Except as set forth in ANNEX V or the
Company's SEC Reports, during the twelve (12) months preceding the date hereof,
the Company has not issued any Common Stock or convertible securities in capital
transactions which have not been fully disclosed in the Company's filings with
the SEC. Except as set forth in ANNEX V, all such issuances (except for
issuances to Buyer) have been fully converted into shares of common stock and
there are no outstanding unconverted debt or convertible securities from those
transactions.
m. NO UNDISCLOSED LIABILITIES OR EVENTS. Except as set forth
in ANNEX V or the Company's SEC Reports, the Company has no liabilities or
obligations other than those disclosed in the Company's SEC Reports or those
incurred in the ordinary course of the Company's business since December 31,
1999, and which, individually or in the aggregate, do not or would not have a
material adverse effect on the properties, business, condition (financial or
otherwise), results of operations or prospects of the Company and its
subsidiaries, taken as a whole. No event or circumstances has occurred or exists
with respect to the Company or its properties, business, condition (financial or
otherwise), results of operations or prospects, which, under applicable law,
rule or regulation, requires public disclosure or announcement prior to the date
hereof by the Company but which has not been so publicly announced or disclosed.
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n. NO DEFAULT. Except as disclosed in ANNEX V or the Company's
SEC Reports, the Company is not in default in the performance or observance of
any material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust or other material instrument or agreement to
which it is a party or by which it or its property is bound.
o. 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 offer or sales of any security or solicited any offers to
buy any security under circumstances that would eliminate the availability of
the exemption from registration under Regulation D or Section 4(2) of the 1933
Act, as applicable in connection with the offer and sale of the Securities as
contemplated hereby.
p. DILUTION. The number of Shares issuable upon conversion of
the Preferred Stock may increase substantially in certain circumstances,
including, but not necessarily limited to, the circumstance wherein the trading
price of the Common Stock declines prior to the conversion of the Preferred
Stock. The Company's executive officers and directors have studied and fully
understand the nature of the Securities being sold hereby and recognize that
they have a potential dilutive effect. The board of directors of the Company has
concluded that, in its good faith business judgment, such issuance is in the
best interests of the Company. The Company specifically acknowledges that its
obligation to issue the Shares upon conversion of the Preferred Stock is binding
upon the Company and enforceable regardless of the dilution such issuance may
have on the ownership interests of other shareholders of the Company.
q. ACKNOWLEDGMENT BY COMPANY. Company represents and warrants
that neither the Buyer, nor any persons or entities representing or purporting
to represent the Buyer have made any representation or warranty which is not
contained expressly in this Agreement or any other agreements referred to
herein. Without limiting the foregoing, Company specifically acknowledges that
the Buyer has made no representations that it is a "long term" investor in the
Company, or that it intends to hold the Preferred Stock or Shares for any period
beyond that which is required under the 1933 Act. Company further acknowledges
that the Buyer may hedge the shares of stock in the Company prior to or after
the conversions of any of the Preferred Stock, provided that such hedging is
done in compliance with the 1933 Act, Securities Exchange Act, any rules
applicable to securities traded on the OTC Bulletin Board and the express terms
of this Agreement, the Certificate of Designation for the Preferred Stock and
the Registration Rights Agreement. Notwithstanding the foregoing, provided that
the Company has not defaulted hereunder or under any other agreement entered
into in connection herewith (including, without limitation, the Registration
Rights Agreement and the Certificate of Designation), the Buyer shall not
"short" (as such term is defined by the Securities Act) shares of Common Stock
(calculated pursuant hereto at the time such shares of Common Stock are shorted)
so that its "short" position in the Common Stock, from time-to-time, is in
excess of twenty percent (20%) of the sum of (i) the aggregate number of shares
of Common Stock the Buyer would receive if all of the shares of Preferred Stock
and all of the Company's Series E Convertible Preferred Stock (then held by the
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Buyer) were converted by Buyer on the day of the "short" sale, plus (ii) the
number of shares of Common Shares held by (or deliverable to) the Buyer on the
day of the "short sale" as a result of prior conversions of the Company's Series
E Preferred and the Preferred Stock.
r. BROKERS FEE. The Company represents that it neither is nor
will be obligated for any finders' fee or commission nor is it aware of any such
fee or commission payable in connection with this transaction other than as set
forth on the Joint Escrow Instructions (attached hereto as ANNEX II). The
Company agrees to indemnify and to hold harmless the Buyer from any liability
for any commission or compensation in the nature of a finders' fee (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, partners, employees, or
representatives is responsible.
4. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
a. TRANSFER RESTRICTIONS. The Buyer acknowledges that (1) the
Preferred Stock has not been and is not being registered under the provisions of
the 1933 Act and, except as provided in the Registration Rights Agreement, the
Shares have not been and are not being registered under the 1933 Act, and may
not be transferred unless (A) subsequently registered thereunder or (B) the
Buyer shall have delivered to the Company an opinion of counsel, reasonably
satisfactory in form, scope and substance to the Company, to the effect that the
Securities to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration; (2) any sale of the Securities made in
reliance on Rule 144 promulgated under the 1933 Act may be made only in
accordance with the terms of said Rule and further, if said Rule 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 used in the 1933 Act, may require compliance with
some other exemption under the 1933 Act or the rules and regulations of the SEC
thereunder; and (3) neither the Company nor any other person is under any
obligation to register the Securities (other than pursuant to the Registration
Rights Agreement) under the 1933 Act or to comply with the terms and conditions
of any exemption thereunder.
b. RESTRICTIVE LEGEND. The Buyer acknowledges and agrees that
the Preferred Stock and, until such time as the Common Stock has been registered
under the 1933 Act as contemplated by the Registration Rights Agreement and sold
pursuant to an effective Registration Statement, certificates and other
instruments representing any of the Securities shall bear a restrictive legend
in substantially the following form (and a stop-transfer order may be placed
against transfer of any such Securities):
THESE SECURITIES (THE "SECURITIES") HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
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STATEMENT FOR THE SECURITIES OR AN OPINION OF
COUNSEL OR OTHER EVIDENCE ACCEPTABLE TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
c. REGISTRATION RIGHTS AGREEMENT. The parties hereto agree to
enter into the Registration Rights Agreement on or before the Closing Date.
d. FILINGS. The Company undertakes and agrees to make all
necessary filings in connection with the sale of the Preferred Stock to the
Buyer under any United States laws and regulations, or by any domestic
securities exchange or trading market, and to provide a copy thereof to the
Buyer promptly after such filing.
e. REPORTING STATUS. So long as the Buyer beneficially owns
any of the Preferred Stock, the Company shall file all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the
Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination.
f. USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Preferred Stock (excluding amounts paid by the Company for legal
fees, finder's fees and escrow agent fees in connection with the sale of the
Preferred Stock) for general capital purposes and, without limiting the
foregoing, shall not, directly or indirectly, use any of such proceeds for
investment in any other affiliate.
g. FUTURE PURCHASES. Intentionally Deleted.
h. CERTAIN AGREEMENTS. (i) The Company covenants and agrees
that it will not, without the prior written consent of the Buyer, enter into any
subsequent or further offer or sale of Common Stock or securities convertible
into Common Stock with any third party until one hundred eighty (180) days after
the Effective Date (as defined below).
(ii) The provisions of subSection (h)(i) will not apply to (w)
Common Stock issued as "restricted stock" as defined in SEC Rule 144, provided
the holder thereof holds such Common Stock for at least one year from the date
of issuance; (x) a secondary public offering of shares of Common Stock at
market; (y) an offering of convertible debentures at market or above; or (z) the
issuance of securities (other than for cash) in connection with a merger,
consolidation, sale of assets, disposition or the exchange of the capital stock
for assets, stock or other joint venture interests; provided, such securities
would not be included in the Registration Statement relating to the Shares and a
registration statement in respect of such stock shall not be filed prior to
sixty (60) days after the Effective Date.
(iii) The term "Effective Date" means the effective date of
the Registration Statement covering the Registrable Securities (as defined in
the Registration Rights Agreement).
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(iv) In the event the Company breaches the provisions of this
Section 4(h), the Conversion Price shall be amended to be the lesser of (I) 70%
of the average of the three (3) lowest closing bid prices (not necessarily
consecutive) during the fifteen (15) day trading period immediately prior to the
Conversion Date, or (II) $1.62, and Buyer may, within thirty (30) days after it
receives written notice of such breach from the Company, deliver a written
notice to the Company requiring it to immediately redeem all outstanding
Preferred Stock for an amount equal to the greater of (x) 125% of (A) the Stated
Value of the then outstanding Preferred Stock, plus (B) all accrued but unpaid
dividends on such Preferred Stock, or (y) "Economic Benefit" of such Preferred
Stock. "ECONOMIC BENEFIT" for purposes of this Section 4.h.(iv) shall mean the
dollar value derived if the converted Preferred Stock were converted into Common
Stock on the date of the redemption notice at the Conversion Price and the
Common Stock was sold on the date of the redemption notice at the closing bid
price of the Common Stock on such date.
i. AVAILABLE SHARES. The Company shall have at all times
authorized and reserved for issuance, free from preemptive rights, shares of
Common Stock equal to two hundred percent (200%) of the number of shares of
Common Stock issuable upon conversion of all of the outstanding Preferred Stock,
and the exercise of the Warrants (as defined below).
j. WARRANTS. The Company agrees to issue to Buyer at the
Closing, transferable divisible warrants with cashless exercise provisions (the
"Warrants") for 62,000 shares of Common Stock. Such Warrants shall bear an
exercise price equal to the Closing Bid price of the Company's common stock on
the Closing Date, and shall be exercisable immediately upon issuance, and for a
period of five (5) years thereafter, in the form annexed hereto as ANNEX VI,
together with piggy-back registration rights, and demand registration rights
under the Registration Rights Agreement.
k. LIMITATION ON ISSUANCE OF SHARES. The Certificate of
Designation for the Preferred Stock shall provide that the Company shall take
all steps reasonably necessary to be in a position to issue shares of Common
Stock on conversion of the Preferred Stock without violating the "Cap
Regulations". If despite taking such steps, the Company is limited in the number
of shares of Common Stock it may issue by the "Cap Regulations," to the extent
that the Company cannot issue such shares of Common Stock, due upon a Notice of
Conversion, without violating the Cap Regulations, the Company shall immediately
notify Buyer the number of shares of the Preferred Stock which are not
convertible as a result of said Cap Regulations (the "Unconverted Preferred
Stock") and within five (5) business days of the applicable Notice of Conversion
redeem the Unconverted Preferred Stock for an amount in cash (the "Redemption
Amount") equal to the greater of (i) 125% of (A) the Stated Value of the
Unconverted Preferred Stock, plus (B) all accrued but unpaid dividends on such
shares or (ii) "Economic Benefit" of such Unconverted Preferred Stock. "ECONOMIC
BENEFIT" for purposes of this Section 4.k. shall mean the dollar value derived
if such Unconverted Preferred Stock were converted into Common Stock at the
price set forth in the Notice of Conversion and the Common Stock was sold on the
date of the Notice of Conversion at the closing bid price of the Common Stock on
the date of the Notice of Conversion. The Certificate of Designation for the
Preferred Stock shall contain provisions substantially consistent with the above
terms, with such additional provisions as may
11
be consented to by the Buyer. The provisions of this section are not intended to
limit the scope of the provisions otherwise included in the Certificate of
Designation.
l. RESTRICTIONS WITH RESPECT TO OPTIONS AND WARRANTS. For a
period of nine months from the Closing Date, the Company shall not: (i) reprice
(or otherwise adjust downward the exercise prices of) any options or warrants
outstanding as of the Closing Date; or (ii) grant options with respect to more
than 250,000 shares of Common Stock under the Company's 1999 Omnibus Stock
Option Plan.
5. TRANSFER AGENT INSTRUCTIONS.
a. Promptly following the delivery by the Buyer of the
aggregate purchase price for the Preferred Stock in accordance with Section 1(c)
hereof, the Company will irrevocably instruct its transfer agent to issue Common
Stock from time to time upon conversion of the Preferred Stock in such amounts
as specified from time to time by the Company to the transfer agent, bearing the
restrictive legend specified in Section 4(b) of this Agreement prior to
registration of the Shares under the 1933 Act, registered in the name of the
Buyer or its nominee and in such denominations to be specified by the Buyer in
connection with each conversion of the Preferred Stock. The Company warrants
that no instruction other than such instructions referred to in this Section 5
and stop transfer instructions to give effect to Section 4(a) hereof prior to
registration and sale of the Shares under the 1933 Act will be given by the
Company to the transfer agent and that the Shares shall otherwise be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement, and applicable
law. Nothing in this Section shall affect in any way the Buyer's obligations and
agreement to comply with all applicable securities laws upon resale of the
Securities. If the Buyer provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of a resale by the
Buyer of any of the Securities in accordance with clause (1)(B) of Section 4(a)
of this Agreement is not required under the 1933 Act, the Company shall (except
as provided in clause (2) of Section 4(a) of this Agreement) permit the transfer
of the Securities and, in the case of the Shares, promptly instruct the
Company's transfer agent to issue one or more certificates for Common Stock
without legend in such name and in such denominations as specified by the Buyer.
b. (i) The Company will permit the Buyer to exercise its right
to convert the Preferred Stock by telecopying an executed and completed Notice
of Conversion (as defined in the Certificate of Designation) to the Company and
delivering within three (3) business days thereafter, the original Notice of
Conversion, together with the original share certificate, by express courier.
(ii) The term "Conversion Date" means, with respect
to any conversion elected by the holder of the Preferred Stock after the
Effective Date, the date specified in the Notice of Conversion, provided the
copy of the Notice of Conversion is telecopied to or otherwise delivered to the
Company in accordance with the provisions hereof so that is received
12
by the Company on or before such specified date. The Conversion Date for any
mandatory conversion at maturity shall be the Maturity Date of the Preferred
Stock.
(iii) The Company shall, at its expense, take all
actions and use all means necessary and diligent to cause its transfer agent to
transmit the certificates representing the Shares issuable upon conversion of
any Preferred Stock (together with Preferred Stock not being so converted) to
the Buyer via express courier, by electronic transfer or otherwise, within three
(3) business days after receipt by the Company of the later of (i) receipt by
the Company of the copy of the original Notice of Conversion and share
certificate, and (ii) the Conversion Date (the "Delivery Date").
c. The Company understands that a delay in the issuance of the
Shares of Common Stock beyond the Delivery Date could result in economic loss to
the Buyer. As compensation to the Buyer for such loss, the Company agrees to pay
late payments to the Buyer in the event that due entirely to the Company's
failure to issue and deliver the Shares upon Conversion in accordance with the
following schedule (where "No. Business Days Late" is defined as the number of
business days beyond three (3) business days from Delivery Date):
Late Payment For Each $10,000
of Preferred Stock Liquidation
No. Business Days Late Amount Being Converted
---------------------- ----------------------
1 $100
2 $200
3 $300
4 $400
5 $500
>5 $500 +$200 for each Business
Day Late beyond 5 days from
The Delivery Date
The Company shall pay any payments incurred under this Section
in immediately available funds upon demand. Nothing herein shall limit the
Buyer's right to pursue actual damages or to cause the Company to redeem the
Preferred Shares as provided below for the Company's actions or inactions
resulting in the transfer agent's failure to issue and deliver the Common Stock
to the Buyer. Furthermore, in addition to any other remedies which may be
available to the Buyer, in the event that the Company fails to deliver such
shares of Common Stock within five (5) business days after the Delivery Date,
the Buyer will be entitled to revoke the relevant Notice of Conversion by
delivering a notice to such effect to the Company whereupon the Company and the
Buyer shall each be restored to their respective positions immediately prior to
delivery of such Notice of Conversion. In the event the Company's actions or
inactions result in the transfer agent's failure to issue and deliver the Common
Stock to the Buyer within ten (10) days after the Delivery Date, Buyer may, at
its option, deliver to the
13
Company a redemption notice requiring the Company (without limiting its other
remedies hereunder) to immediately redeem all outstanding Preferred Stock in
accordance with Section 4.h.(iv) hereof.
d. If, by the relevant Delivery Date, the Company fails for
any reason to deliver the Shares to be issued upon conversion of the Preferred
Stock and after such Delivery Date, the holder of the Preferred Stock being
converted (a "Converting Holder") purchases, in an open market transaction or
otherwise, shares of Common Stock (the "Covering Shares") in order to make
delivery in satisfaction of a sale of Common Stock by the Converting Holder made
after a Conversion Date (the "Sold Shares"), which delivery such Converting
Holder anticipated to make using the Shares to be issued upon such conversion (a
"Buy-In"), the Company shall pay to the Converting Holder, in addition to all
other amounts contemplated in other provisions of the Transaction Agreements,
and not in lieu thereof, the Buy-In Adjustment Amount (as defined below). The
"Buy-In Adjustment Amount" is the amount equal to the excess, if any, of (x) the
Converting Holder's total purchase price (including brokerage commissions, if
any) for the Covering Shares over (y) the net proceeds (after brokerage
commissions, if any) received by the Converting Holder from the sale of the Sold
Shares. The Company shall pay the Buy-In Adjustment Amount to the Buyer in
immediately available funds immediately upon demand by the Converting Holder. By
way of illustration and not in limitation of the foregoing, if the Converting
Holder purchases shares of Common Stock having a total purchase price (including
brokerage commissions) of $11,000 to cover a Buy-In with respect to shares of
Common Stock it sold for net proceeds of $10,000, the Buy-In Adjustment Amount
which Company will be required to pay to the Converting Holder will be $1,000.
The remedies set forth in Sections 5(c) and (d) shall be cumulative.
e. In lieu of delivering physical certificates representing
the unlegended securities issuable upon conversion, provided the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, upon request of the Buyer and its
compliance with the provisions contained in this Section, so long as the
certificates therefor do not bear a legend and the Buyer thereof is not
obligated to return such certificate for the placement of a legend thereon, the
Company shall use its best efforts to cause its transfer agent to electronically
transmit the Common Stock issuable upon conversion to the Buyer by crediting the
account of Buyer's Prime Broker with DTC through its Deposit Withdrawal Agent
Commission system.
f. The original certificate representing the Preferred Stock
shall be delivered by the Buyer to the Company simultaneous with the final
Notice of Conversion.
6. DELIVERY INSTRUCTIONS.
The Preferred Stock shall be delivered by the Company to the
Escrow Agent pursuant to Section 1(b) hereof, on a delivery against payment
basis, no later than on the Closing Date.
14
7. CLOSING DATE.
(i) The closing of the issuance and sale of the Preferred
Stock shall occur on the date (the "Closing Date") which is the first NYSE
trading day after the fulfillment or waiver of all closing conditions pursuant
to Sections 8 and 9 hereof or such other date and time as is mutually agreed
upon by the Company and the Buyer.
(ii) The closing of the purchase and issuance of Preferred
Stock shall occur on the Closing Date, at the offices of the Escrow Agent and
shall take place no later than 12:00 Noon, PST, on such day or such other time
as is mutually agreed upon by the Company and the Buyer.
(iii) Notwithstanding anything to the contrary contained
herein, the Escrow Agent will be authorized to release the Escrow Property (as
defined in the Escrow Agreement) only upon satisfaction of the conditions set
forth in Sections 8 and 9 hereof.
8. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The Buyer understands that the Company's obligation to sell
the Preferred Stock on the Closing Date and to the Buyer pursuant to this
Agreement is conditioned upon:
a. The receipt and acceptance by the Buyer of this Agreement
as evidenced by execution of this Agreement by the Buyer for One Million Dollars
($1,000,000) in principal amount of the Preferred Stock (or such lesser amount
as the Company, in its sole discretion, shall determine on the Closing Date);
b. Delivery by the Buyer to the Escrow Agent of good funds as
payment in full of an amount equal to the Purchase Price for the Preferred Stock
in accordance with Section 1(c) hereof;
c. The accuracy on the Closing Date of the representations and
warranties of the Buyer contained in this Agreement as if made on the Closing
Date, and the performance by the Buyer on or before the Closing Date of all
covenants and agreements of the Buyer required to be performed on or before the
Closing Date;
d. There shall not be in effect any law, rule or regulation
prohibiting or restricting the transactions contemplated hereby, or requiring
any consent or approval which shall not have been obtained.
9. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The Company understands that the Buyer's obligation to
purchase the Preferred Stock on the Closing Date is conditioned upon:
15
a. Acceptance by the Company of this Agreement for the sale of
Preferred Stock, as indicated by execution of this Agreement;
b. Delivery by the Company to the Escrow Agent of the
appropriate Preferred Stock in accordance with this Agreement, together with a
certified copy of the Certificate of Designation for the Preferred Stock;
c. The accuracy in all material respects on the Closing Date
of the representations and warranties of the Company contained in this Agreement
as if made on the Closing Date and the performance by the Company on or before
the Closing Date of all covenants and agreements of the Company required to be
performed on or before the Closing Date and as to Preferred Stock, the
conditions set forth in Section 4g;
d. On the Closing Date, Buyer having received (i) an opinion
of counsel for the Company, dated the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer, to the effect set forth in ANNEX III
attached hereto, (ii) the Registration Rights Agreement annexed hereto as ANNEX
IV and the Warrants;
e. No statute, rule, regulation, executive order, decree,
ruling or injunction shall be enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction which prohibits or
adversely effects any of the transactions contemplated by this Agreement or the
Transaction Documents, and no proceeding or investigation shall have been
commenced or threatened which may have the effect of prohibiting or adversely
effecting any of the transactions contemplated by this Agreement or the
Transaction Documents; and
f. From and after the date hereof to and including the Closing
Date, the trading of the Common Stock shall not have been suspended by the SEC,
or the NASD and trading in securities generally on the New York Stock Exchange,
NASDAQ/Small Cap, or Bulletin Board, as applicable, shall not have been
suspended or limited, nor shall minimum prices been established for securities
traded on NASDAQ/Small Cap or Bulletin Board, as applicable, nor shall there be
any outbreak or escalation of hostilities involving the United States or any
material adverse change in any financial market that in either case in the
reasonable judgment of the Buyer makes it impracticable or inadvisable to
purchase the Preferred Stock.
10. GOVERNING LAW; MISCELLANEOUS.
a. This Agreement and all agreements entered into in
connection herewith shall be governed by and interpreted in accordance with the
laws of the State of California for contracts to be wholly performed in such
state and without giving effect to the principles thereof regarding the conflict
of laws. Any litigation based thereon, or arising out of, under, or in
connection with, this agreement or any course of conduct, course of dealing,
statements (whether oral or written) or actions of the Company or Buyer shall be
brought and maintained exclusively in the state or Federal courts of the State
of California, sitting in the City of Los Angeles. The
16
Company hereby expressly and irrevocably submits to the jurisdiction of the
state and federal Courts of the State of California for the purpose of any such
litigation as set forth above and irrevocably agrees to be bound by any final
judgment rendered thereby in connection with such litigation. The Company
further irrevocably consents to the service of process by registered mail,
postage prepaid, or by personal service within or without the State of
California. The Company hereby expressly and irrevocably waives, to the fullest
extent permitted by law, any objection which it may have or hereafter may have
to the laying of venue of any such litigation brought in any such court referred
to above and any claim that any such litigation has been brought in any
inconvenient forum. To the extent that the Company has or hereafter may acquire
any immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid of
execution or otherwise) with respect to itself or its property, the Company
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement and the related agreements entered into in connection herewith.
b. A facsimile transmission of this signed Agreement shall be
legal and binding on all parties hereto.
c. This Agreement may be signed in one or more counterparts,
each of which shall be deemed an original.
d. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
e. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
f. This Agreement may be amended only by an instrument in
writing signed by the party to be charged with enforcement thereof.
g. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the subject matter
hereof.
h. In the event of any action for breach of or to enforce or
declare rights under any provision of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees and costs, to be paid by the losing
party.
11. NOTICES. Any notice or communication required or permitted
by this Agreement shall be given in writing addressed as follows:
17
COMPANY: Singlepoint Systems Corporation
0000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000-0000
ATTN: CEO
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx LLP
Pillsbury Center South
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxx Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
BUYER: At the address set forth on the signature page of this Agreement.
ESCROW AGENT: Law Offices of Xxxxxxx X. Xxxxxxxxx
0000 Xxxxxxx Xxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier No. (000) 000-0000
All notices shall be served personally by telecopy, by telex, by overnight
express mail service or other overnight courier, or by first class registered or
certified mail, postage prepaid, return receipt requested. If served personally,
or by telecopy, notice shall be deemed delivered upon receipt (provided that if
served by telecopy, sender has written confirmation of delivery); if served by
overnight express mail or overnight courier, notice shall be deemed delivered
forty-eight (48) hours after deposit; and if served by first class mail, notice
shall be deemed delivered seventy-two (72) hours after mailing. Any party may
give written notification to the other parties of any change of address for the
sending of notices, pursuant to any method provided for herein.
12. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The Company's
representations and warranties herein shall survive the execution and delivery
of this Agreement and the delivery of the Preferred Stock and the Purchase
Price, and shall inure to the benefit of the Buyer and its successors and
assigns.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
NUMBER OF SHARES OF PREFERRED STOCK TO BE PURCHASED: 1,000*
AGGREGATE PURCHASE PRICE OF SUCH PREFERRED STOCK: $1,000,000*
*As detailed below
SIGNATURES FOR ENTITIES
IN WITNESS WHEREOF, the undersigned represents that the foregoing
statements are true and correct and that it has caused this Securities Purchase
Agreement to be duly executed on its behalf as of this 31st day of August, 2000.
Printed Name of Buyer
By: See Annexed
-----------
(Signature of Authorized Person)
-------------------------------------
Printed Name and Title
As of the date set forth below, the undersigned hereby accepts this Agreement
and represents that the foregoing statements are true and correct and that it
has caused this Securities Purchase Agreement to be duly executed on its behalf.
SINGLEPOINT SYSTEMS CORPORATION, a Minnesota corporation
By: /s/ Xxxxxxx X. Smart
--------------------------------------------
Name: Xxxxxxx X. Smart
Title: Chief Financial Officer, Treasurer and Secretary
Date:
ANNEX TO SIGNATURE PAGE
AMOUNT SHARES
$1,000,000 1,000 Xxxx, LLC, a Cayman Islands
limited liability company
By:
-----------------------------
Manager
ADDRESS: c/o Thomson Kernaghan & Co.
000 Xxx Xxxxxx, Xxxxx 0000, 10th Fl.
Xxxxxxx, Xxxxxxx X0X 0X0
Telephone No.: (000) 000-0000
Telecopier No.: (000) 000-0000
ANNEX I CERTIFICATE OF DESIGNATION
ANNEX II JOINT ESCROW INSTRUCTIONS
ANNEX III OPINION OF COUNSEL
ANNEX IV REGISTRATION RIGHTS AGREEMENT
ANNEX V COMPANY DISCLOSURE MATERIALS
ANNEX VI COMMON STOCK PURCHASE WARRANT
ANNEX V
COMPANY DISCLOSURE
[TO BE SUPPLIED BY COMPANY]
