EXHIBIT 10.26
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of August 7,
1998, between DYNAMICWEB ENTERPRISES, INC., a New Jersey
corporation with principal executive offices located at
000 Xxxxx 00 Xxxx, Xxxxxxxxx, XX 00000 (the "Company"), and the
undersigned ("Buyer").
WITNESSETH:
WHEREAS, Buyer desires to purchase from Company, and
the Company desires to issue and sell to the Buyer, upon the
terms and subject to the conditions of this Agreement, (i) 875
shares of the Company's Series A 6% Convertible Preferred Stock,
par value $0.001 (collectively, the "Initially Issued Preferred
Shares") and 87,500 Common Stock Purchase Warrants in the form
attached hereto as Exhibit A (collectively, the "Initially Issued
Warrants") on the Initial Funding Date (as defined herein) (the
"First Tranche"); and (ii) 675 shares of the Company's Series A
6% Convertible Preferred Stock, par value $0.001 (collectively,
the "Subsequently Issued Preferred Shares" and together with the
Initially Issued Preferred Shares, collectively referred to as
the "Preferred Shares") and 67,500 Common Stock Purchase Warrants
in the form attached hereto as Exhibit B (collectively, the
"Subsequently Issued Warrants" and together with the Initially
Issued Warrants, collectively referred to as the "Warrants") on
the Second Funding Date (as defined herein) (the "Second
Tranche");
WHEREAS, upon the terms and subject to the
designations, preferences and rights set forth in the Company's
Certificate of Amendment to the Company's Certificate of
Incorporation in the form attached hereto as Exhibit C (the
"Certificate of Amendment"), the Preferred Shares are convertible
into shares of the Company's common stock, par value $0.0001 (the
"Common Stock");
WHEREAS, the Initially Issued Warrants, upon the terms
and subject to the conditions therein, will for a period of three
(3) years from the Initial Funding Date be exercisable to
purchase 87,500 shares of Common Stock, and the Subsequently
Issued Warrants, upon the terms and subject to the conditions
therein, will for a period of three (3) years from the Second
Funding Date be exercisable to purchase 67,500 shares of Common
Stock;
NOW THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
I. PURCHASE AND SALE OF PREFERRED SHARES AND WARRANTS
A. Transaction. Subject to the terms and conditions
contained herein, Buyer hereby agrees to purchase from the
Company, and the Company has offered and hereby agrees to issue
and sell to the Buyer in a transaction exempt from the
registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (the "Securities Act"), the
Preferred Shares and the Warrants.
B. Purchase Price; Form of Payment. The purchase
price for the Initially Issued Preferred Shares and the Initially
Issued Warrants to be purchased in the First Tranche by Buyer
hereunder shall be $875,000 (the "Initial Purchase Price"). If
the Second Funding Requirements (as defined herein) have been
satisfied or performed in full, as the case may be, then within
fifteen (15) business days thereafter, as determined by Buyer,
the Company shall sell and issue to Buyer and Buyer shall
purchase from the Company on the same terms and pursuant to the
same conditions contained herein and in the Subsequently Issued
Warrants, the Subsequently Issued Preferred Shares and the
Subsequently Issued Warrants (the date of the closing of such
purchase, issuance and sale of the Subsequently Issued Preferred
Shares and Subsequently Issued Warrants is referred to herein as
the "Second Funding Date"). The purchase price for the
Subsequently Issued Preferred Shares and the Subsequently Issued
Warrants to be purchased in the Second Tranche on the Second
Funding Date by Buyer hereunder shall be $675,000 (the "Second
Purchase Price").
For purposes of this Agreement, the term "Second
Funding Requirements" means that each of the following conditions
precedent have been satisfied and fulfilled:
(i) the Company has satisfied and performed each
of its obligations and covenants contained herein and in the
other Documents (as defined herein) that are required to be
performed by the Company up to and including the Second
Funding Date;
(ii) each of the conditions precedent set forth
in Article IX hereof shall have been satisfied and fulfilled
in all respects up to and including the Second Funding Date;
(iii) the Company shall have timely filed the
registration statement (the "Registration Statement")
required to be filed by the Company pursuant to Section 2 of
the Registration Rights Agreement (as defined herein);
(iv) the Registration Statement shall have been
timely declared effective by the Securities and Exchange
Commission (the "Commission") as required pursuant to the
terms and conditions of the Documents;
(v) the Registration Statement shall have
remained effective for at least thirty (30) consecutive
trading days from the date such Registration
Statement was initially declared effective by the Commission
(such thirty (30) day period being referred to herein as the
"30 Day Period");
(vi) during the 30 Day Period the average closing
bid price of the Company's Common Stock, par value $0.0001,
as reported on the National Association of Securities
Dealers, Inc. ("NASD") Over the Counter ("OTC") Bulletin
Board Service ("BBS", and together with NASD and OTC, the
"NASD/BBS"), shall have been at least equal to $4.00 per
share (as adjusted for any stock splits or stock dividends
and like events);
(vii) on the last trading day of the 30 Day
Period, the closing bid price for the Company's Common
Stock, par value $0.0001, shall be at least $4.00 per share
(as adjusted for any stock splits or stock dividends and
like events), as reported on the NASD/BBS; and
(viii) during the 30 Day Period the Company's
Common Stock, par value $0.0001, shall have had an average
trading volume (as adjusted for any stock splits or stock
dividends and like events), as reported on the NASD/BBS for
the 30 Day Period of at least 20,000 shares per trading day.
Buyer shall pay the Initial Purchase Price and the
Second Purchase Price by wire transfer of immediately available
funds to the escrow agent (the "Escrow Agent") identified in
those certain Escrow Instructions of even date herewith, a copy
of which is attached hereto as Exhibit D (the "Escrow
Instructions"). Simultaneously against receipt by the Escrow
Agent of the Purchase Price, the Company shall deliver one or
more duly authorized, issued and executed certificates (I/N/O
Buyer or, if the Company otherwise has been notified, I/N/O
Buyer's nominee) evidencing the Preferred Shares and the Warrants
which the Buyer is purchasing in the First Tranche and Second
Tranche, as the case may be, to the Escrow Agent or its
designated depository. By executing and delivering this
Agreement, Buyer and the Company each hereby agrees to observe
the terms and conditions of the Escrow Instructions, all of which
are incorporated herein by reference as if fully set forth
herein.
C. Method of Payment. Payment into escrow of the
Initial Purchase Price and the Second Purchase Price shall be
made by wire transfer of immediately available funds to:
Chase Manhattan Bank
1211 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
For the Account of: Xxxxxxx, Xxxxxxxxx LLP
Attorney Trust Account
Account-# 967-123445
ABA Reference# 000-000-000
Simultaneously with the execution of this Agreement, the Buyer
shall deposit with the Escrow Agent the Initial Purchase Price
and the Company shall deposit with the Escrow Agent the Initially
Issued Preferred Shares and the Initially Issued Warrants
representing the securities to be purchased, issued and sold in
the First Tranche. On the Second Funding Date, the Buyer shall
deposit with the Escrow Agent the Second Purchase Price and the
Company shall deposit with the Escrow Agent the Subsequently
Issued Preferred Shares and the Subsequently Issued Warrants
representing the securities to be purchased, issued and sold in
the Second Tranche.
II. BUYER'S REPRESENTATIONS, WARRANTIES; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
Buyer represents and warrants to and covenants and
agrees with the Company as follows:
A. Buyer is purchasing the Initially Issued Preferred
Shares, the Subsequently Issued Preferred Shares, the Initially
Issued Warrants, the Subsequently Issued Warrants, the Common
Stock issuable upon exercise of the Warrants (the "Warrant
Shares") and the shares of Common Stock issuable upon conversion
of the Preferred Shares (the "Conversion Shares" and,
collectively with the Preferred Shares, the Warrants and the
Warrant Shares, the "Securities") for its own account, for
investment purposes only and not with a view towards or in
connection with the public sale or distribution thereof in
violation of the Securities Act.
B. Buyer is (i) an "accredited investor" within the
meaning of Rule 501 of Regulation D under the Securities Act,
(ii) experienced in making investments of the kind contemplated
by this Agreement, (iii) capable, by reason of its business and
financial experience, of evaluating the relative merits and risks
of an investment in the Securities, and (iv) able to afford the
loss of its investment in the Securities.
C. Buyer understands that the Securities are being
offered and sold by the Company in reliance on an exemption from
the registration requirements of the Securities Act and
equivalent state securities and "blue sky" laws, and that the
Company is relying upon the accuracy of, and Buyer's compliance
with, Buyer's representations, warranties and covenants set forth
in this Agreement to determine the availability of such exemption
and the eligibility of Buyer to purchase the Securities;
D. Buyer has been furnished with or provided access
to all materials relating to the business, financial position and
results of operations of the Company, and all other materials
requested by Buyer to enable it to make an informed
investment decision with respect to the Securities.
E. Buyer acknowledges that it has been furnished with
copies of the Company's Annual Report on Form 10-KSB for the
fiscal year ended September 30, 1997, and all other reports and
documents heretofore filed by the Company with the Commission
pursuant to the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act") since September 30, 1997
(collectively, the "Commission Filings").
F. Buyer acknowledges that in making its decision to
purchase the Securities it has been given an opportunity to ask
questions of and to receive answers from the Company's executive
officers, directors and management personnel concerning the terms
and conditions of the private placement of the Securities by the
Company.
G. Buyer understands that the Securities have not
been approved or disapproved by the Commission or any state
securities commission and that the foregoing authorities have not
reviewed any documents or instruments in connection with the
offer and sale to it of the Securities and have not confirmed or
determined the adequacy or accuracy of any such documents or
instruments.
H. This Agreement has been duly and validly
authorized, executed and delivered by Buyer and is a valid and
binding agreement of Buyer enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally.
I. Neither Buyer nor its affiliates nor any person
acting on its or their behalf has the intention of entering, or
will enter into, at any time prior to the conversion of the
Initially Issued Preferred Stock, Initially Issued Warrants,
Subsequently Issued Preferred Stock or Subsequently Issued
Warrants, any put option, short position or other similar
instrument or position with respect to the Common Stock and
neither Buyer nor any of its affiliates nor any person acting on
its or their behalf will use at any time shares of Common Stock
acquired pursuant to this Agreement to settle any put option,
short position or other similar instrument or position that may
have been entered into prior to the execution of this Agreement.
III. COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer that:
A. Capitalization.
1. The authorized capital stock of the Company
consists of: (i) 50,000,000 shares of Common Stock, of which
2,141,370 shares are issued and outstanding and 66,660
are held in treasury on the date hereof, and (ii) 5,000,000
shares of "blank check" preferred stock, of which no shares are
issued and outstanding on the date hereof. All of the issued and
outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and non-assessable. As of the
date hereof, the Company has outstanding 219,040 stock options
and 125,000 warrants to purchase shares of Common Stock. The
Conversion Shares and Warrant Shares have been duly and validly
authorized and reserved for issuance by the Company, and when
issued by the Company upon conversion of, or in lieu of accrued
dividends on, the Preferred Shares, on exercise of the Warrants
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. There are no preemptive,
subscription, "call" or other similar rights to acquire the
Common Stock (including the Conversion Shares and Warrant Shares)
that have been issued or granted to any person, except as
disclosed on Schedule III.A.1. hereto or otherwise previously
disclosed in writing to Buyer.
2. Except as disclosed on Schedule III.A.2.
hereto, the Company does not own or control, directly or
indirectly, any interest in any other corporation, partnership,
limited liability company, unincorporated business organization,
association, trust or other business entity.
B. Organization; Reporting Company Status.
1. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State
of New Jersey and is duly qualified as a foreign corporation in
all jurisdictions in which the failure to so qualify would have a
material adverse effect on the business, properties, prospects,
condition (financial or otherwise) or results of operations of
the Company or on the consummation of any of the transactions
contemplated by this Agreement (a "Material Adverse Effect").
2. The Company has registered the Common Stock
pursuant to Regulation S of the Exchange Act and has filed with
the Commission all reports and information required to be filed
by it pursuant to all reporting obligations under Section 13(a)
or 15(d), as applicable, of the Exchange Act for the 12-month
period immediately preceding the date hereof. The Common Stock
is listed and traded on the NASD/BBS and the Company has not
received any notice regarding, and to its knowledge there is no
threat, of the termination or discontinuance of the eligibility
of the Common Stock for such listing.
C. Authorized Shares. The Company has duly and
validly authorized and reserved for issuance shares of Common
Stock sufficient in number for the conversion, of the Preferred
Shares (assuming for purposes of this Section III.C. a Conversion
Price (as defined in the Certificate of Amendment to the
Certificate of Incorporation) of $2.00) and the exercise
of the Warrants. The Company understands and acknowledges the
potentially dilutive effect to the Common Stock of the issuance
of the Preferred Shares and Warrant Shares upon conversion of the
Preferred Shares and exercise of the Warrants. The Company
further acknowledges that its obligation to issue Conversion
Shares upon conversion of the Preferred Shares and Warrant Shares
upon exercise of the Warrants in accordance with this Agreement,
the Preferred Shares and the Warrants is absolute and
unconditional regardless of the dilutive effect that such
issuance may have on the ownership interests of other
stockholders of the Company.
D. Authority; Validity and Enforceability. The
Company has the requisite corporate power and authority to file
and perform its obligations under the Certificate of Amendment
and to enter into the Documents (as hereinafter defined), and to
perform all of its obligations hereunder and thereunder
(including the issuance, sale and delivery to Buyer of the
Securities). The execution, delivery and performance by the
Company of the Documents, and the consummation by the Company of
the transactions contemplated hereby and thereby (including,
without limitation, the filing of the Certificate of Amendment
with the New Jersey Secretary of State's office, the issuance of
the Preferred Shares, the Warrants and the issuance and
reservation for issuance of the Conversion Shares and Warrant
Shares), has been duly authorized by all necessary corporate
action on the part of the Company. Each of the Documents has
been duly validly executed and delivered by the Company and the
Certificate of Amendment has been duly filed with the New Jersey
Secretary of State's office by the Company and each instrument
constitutes a valid and binding obligation of the Company
enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors,
rights and remedies generally. The Securities have been duly and
validly authorized for issuance by the Company and, when executed
and delivered by the Company, will be valid and binding
obligations of the Company enforceable against it in accordance
with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar
laws affecting creditors' rights and remedies generally. For
purposes of this Agreement, the term "Documents" means (i) this
Agreement; (ii) the Registration Rights Agreement of even date
herewith between the Company and Buyer, a copy of which is
annexed hereto as Exhibit E (the "Registration Rights
Agreement"); (iii) the Warrants; and (iv) the Escrow
Instructions.
E. Authorization of the Securities. The
authorization, issuance, sale and delivery of the Preferred
Shares and Warrants has been duly authorized by all requisite
corporate action on the part of the Company. As of the Initial
Funding Date, the Initially Issued Preferred Shares and the
Initially Issued Warrants, and the Conversion Shares and
the Warrant Shares upon their issuance in accordance with the
Certificate of Amendment and the Initially Issued Warrants,
respectively, will be validly issued and outstanding, fully paid
and nonassessable, and not subject to any preemptive rights,
rights of first refusal or other similar rights. As of the
Second Funding Date, the Subsequently Issued Preferred Shares and
the Subsequently Issued Warrants, and the Conversion Shares and
the Warrant Shares upon their issuance in accordance with the
Certificate of Amendment and the Initially Issued Warrants,
respectively, will be validly issued and outstanding, fully paid
and nonassessable, and not subject to any preemptive rights,
rights of first refusal or other similar rights.
F. Non-contravention. The execution and delivery by
the Company of the Documents, the issuance of the Securities, and
the consummation by the Company of the other transactions
contemplated hereby and thereby, including, without limitation,
the filing of the Certificate of Amendment with the New Jersey
Secretary of State's office, do not and will not conflict with or
result in a breach by the Company of any of the terms or
provisions of, or constitute a default (or an event which, with
notice, lapse of time or both, would constitute a default) under
(i) the articles of incorporation or by-laws of the Company or
(ii) any indenture, mortgage, deed of trust or other material
agreement or instrument to which the Company is a party or by
which its properties or assets are bound, or any law, rule,
regulation, decree, judgment or order of any court or public or
governmental authority having jurisdiction over the Company or
any of the Company's properties or assets, except as to
(ii) above such conflict, breach or default which would not have
a Material Adverse Effect.
G. Approvals. No authorization, approval or consent
of any court or public or governmental authority is required to
be obtained by the Company for the issuance and sale of the
Preferred Shares (and the Conversion Shares and Warrant Shares)
to Buyer as contemplated by this Agreement, except such
authorizations, approvals and consents that have been obtained by
the Company prior to the date hereof.
H. Commission Filings. None of the Commission
Filings contained at the time they were filed any untrue
statement of a material fact or omitted 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.
I. Absence of Certain Changes. Since the Balance
Sheet Date (as defined in Section III.M.), there has not occurred
any change, event or development in the business, financial
condition, prospects or results of operations of the Company, and
there has not existed any condition having or reasonably likely
to have, a Material Adverse Effect.
J. Full Disclosure. There is no fact known to the
Company (other than general economic or industry conditions known
to the public generally) that has not been fully disclosed in
writing to the Buyer that (i) reasonably could be expected to
have a Material Adverse Effect or (ii) reasonably could be
expected to materially and adversely affect the ability of the
Company to perform its obligations pursuant to this Agreement,
the Certificate of Amendment, the Registration Rights Agreement
or the Escrow Instructions.
K. Absence of Litigation. There is no action, suit,
claim, proceeding, inquiry or investigation pending or, to the
Company's knowledge, threatened, by or before any court or public
or governmental authority which, if determined adversely to the
Company, would have a Material Adverse Effect.
L. Absence of Events of Default. No "Event of
Default" (as defined in any agreement or instrument to which the
Company is a party) and no event which, with notice, lapse of
time or both, would constitute an Event of Default (as so
defined), has occurred and is continuing, which could have a
Material Adverse Effect.
M. Financial Statements; No Undisclosed Liabilities.
The Company has delivered to Buyer true and complete copies of
its audited balance sheet as at September 30, 1997, and the
related audited statements of operations and cash flows for the
fiscal year ended September 30, 1997, including the related notes
and schedules thereto (collectively, the "Financial Statements"),
and all management letters, if any, from the Company's
independent auditors relating to the dates and periods covered by
the Financial Statements. Each of the Financial Statements is
complete and correct in all material respects, has been prepared
in accordance with United States General Accepted Accounting
Principles ("GAAP") (subject, in the case of the interim
Financial Statements, to normal year end adjustments and the
absence of footnotes) and in conformity with the practices
consistently applied by the Company without modification of the
accounting principles used in the preparation thereof, and fairly
presents the financial position, results of operations and cash
flows of the Company as at the dates and for the periods
indicated. For purposes hereof, the audited balance sheet of the
Company as at September __, 1997, is hereinafter referred to as
the "Balance Sheet" and September 30, 1997, is hereinafter
referred to as the "Balance Sheet Date". The Company has no
indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise, and whether due or to
become due) that would have been required to be reflected in,
reserved against or otherwise described in the Balance Sheet or
in the notes thereto in accordance with GAAP, which was not fully
reflected in, reserved against or otherwise described in the
Balance Sheet or the notes thereto or was not incurred in the
ordinary course of business consistent with the Company's past
practices since the Balance Sheet Date.
N. Compliance with Laws; Permits. The Company is in
compliance with all laws, rules, regulations, codes, ordinances
and statutes (collectively "Laws") applicable to it or to the
conduct of its business, except for such noncompliance which
would not have a Material Adverse Effect. The Company possesses
all permits, approvals, authorizations, licenses, certificates
and consents from all public and governmental authorities which
are necessary to conduct its business, except for those the
absence of which would not have a Material Adverse Effect.
O. Related Party Transactions. Except as set forth
on Schedule III.O. hereto, neither the Company nor any of its
officers, directors or "Affiliates" (as such term is defined in
Rule 12b-2 under the Exchange Act) has borrowed any moneys from
or has outstanding any indebtedness or other similar obligations
to the Company. Except as set forth on Schedule III.O. hereto,
neither the Company nor any of its officers, directors or
Affiliates (i) owns any direct or indirect interest constituting
more than a one percent equity (or similar profit participation)
interest in, or controls or is a director, officer, partner,
member or employee of, or consultant to or lender to or borrower
from, or has the right to participate in the profits of, any
person or entity which is (x) a competitor, supplier, customer,
landlord, tenant, creditor or debtor of the Company, (y) engaged
in a business related to the business of the Company, or (z) a
participant in any transaction to which the Company is a party
(other than in the ordinary course of the Company's business) or
(ii) is a party to any contract, agreement, commitment or other
arrangement with the Company.
P. Insurance. The Company maintains insurance
coverage with financially sound and reputable insurers and such
insurance coverage is adequate, consistent with industry
standards and the Company's historical claims experience, and
includes coverage for such things as property and casualty,
general liability, workers' compensation, personal injury and
other similar types of insurance. The Company has not received
notice from, and has no knowledge of any threat by, any insurer
(that has issued any insurance policy to the Company) that such
insurer intends to deny coverage under or cancel, discontinue or
not renew any insurance policy presently in force.
Q. Securities Law Matters. Based, in part, upon the
representations and warranties of Buyer set forth in Section 11
hereof, the offer and sale by the Company of the Securities is
exempt from (i) the registration and prospectus delivery
requirements of the Securities Act and the rules and regulations
of the Commission thereunder and (ii) the registration and/or
qualification provisions of all applicable state securities and
"blue sky" laws. Other than pursuant to an effective
registration statement under the Securities Act, the Company has
not issued, offered or sold the Preferred Shares or any shares of
Common Stock (including for this purpose any securities of the
same or a similar class as the Preferred Shares or Common Stock,
or any securities convertible into or exchangeable or
exercisable for the Preferred Shares or Common Stock or any such
other securities) within the one-year next preceding the date
hereof, except as disclosed on Schedule III.Q. hereto or
otherwise previously disclosed in writing to Buyer, and the
Company shall not directly or indirectly take, and shall not pen-
nit any of its directors, officers or Affiliates directly or
indirectly to take, any action (including, without limitation,
any offering or sale to any person or entity of the Preferred
Shares or shares of Common Stock), so as to make unavailable the
exemption from Securities Act registration being relied upon by
the Company for the offer and sale to Buyer of the Preferred
Shares (and the Conversion Shares) as contemplated by this
Agreement. No form of general solicitation or advertising has
been used or authorized by the Company or any of its officers,
directors or Affiliates in connection with the offer or sale of
the Preferred Shares (and the Conversion Shares) as contemplated
by this Agreement or any other agreement to which the Company is
a party.
R. Environmental Matters.
1. The operations of the Company are in
compliance with all applicable Environmental Laws and all permits
issued pursuant to Environmental Laws or otherwise;
2. the Company has obtained or applied for all
permits required under all applicable Environmental Laws
necessary to operate its business;
3. the Company is not the subject of any
outstanding written order of or agreement with any governmental
authority or person respecting (i) Environmental Laws,
(ii) Remedial Action or (iii) any Release or threatened Release
of Hazardous Materials;
4. the Company has not received, since
September 30, 1997, any written communication alleging that it
may be in violation of any Environmental Law or any permit issued
pursuant to any Environmental Law, or may have any liability
under any Environmental Law;
5. the Company does not have any current
contingent liability in connection with any Release of any
Hazardous Materials into the indoor or outdoor environment
(whether on-site or off-site);
6. except as set forth on Schedule III.R.6
hereto, to the Company's knowledge, there are no investigations
of the business, operations, or currently or previously owned,
operated or leased property of the Company pending or threatened
which could lead to the imposition of any liability pursuant to
any Environmental Law;
7. there is not located at any of the properties
of the Company, any (A) underground storage tanks, (B) asbestos-
containing material or (C) equipment containing polychlorinated
biphenyls; and,
8. the Company has provided to Buyer all
environmentally related audits, studies, reports, analyses, and
results of investigations that have been performed with respect
to the currently or previously owned, leased or operated
properties of the Company.
For purposes of this Section III.R.:
"Environmental Law" means any foreign, federal,
state or local statute, regulation, ordinance, or rule of common
law as now or hereafter in effect in any way relating to the
protection of human health and safety or the environment
including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et
seq.), the Hazardous Materials Transportation Act (49 U.S.C. App.
Section 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.), the Clean Water Act (33 U.S.C. Section 1251 et
seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.), the Toxic
Substances Control Act (15 U.S.C. Section 2601 et seq.), the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. Section 136 et
seq.), and the Occupational Safety and Health Act (29 U.S.C.
Section 651 et seq.), and the regulations promulgated pursuant thereto.
"Hazardous Material" means any substance, material
or waste which is regulated by the United States, Canada or any
of its provinces, or any state or local governmental authority
including, without limitation, petroleum and its by-products,
asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material,"
"restricted hazardous waste," "industrial waste," "solid waste,"
"contaminant," "pollutant," "toxic waste" or "toxic substance"
under any provision of any Environmental Law;
"Release" means any release, spill, filtration,
emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, or leaching into the indoor or outdoor
environment, or into or out of any property;
"Remedial Action" means all actions to (x) clean
up, remove, treat or in any other way address any Hazardous
Material; (y) prevent the Release of any Hazardous Material so it
does not endanger or threaten to endanger public health or
welfare or the indoor or outdoor environment; or (z) perform pre-
remedial studies and investigations or post-remedial monitoring
and care.
S. Labor Matters. The Company is not party to any
labor or collective bargaining agreement and there are no labor
or collective bargaining agreements which pertain to employees of
the Company. No employees of the Company are
represented by any labor organization and none of such employees
has made a pending demand for recognition, and there are no
representation proceedings or petitions seeking a representation
proceeding presently pending or, to the Company's knowledge,
threatened to be brought or filed, with the National Labor
Relations Board or other labor relations tribunal. There is no
organizing activity involving the Company pending or to the
Company's knowledge, threatened by any labor organization or
group of employees of the Company. There are no (i) strikes,
work stoppages, slowdowns, lockouts or arbitrations or
(ii) material grievances or other labor disputes pending or, to
the knowledge of the Company, threatened against or involving the
Company. There are no unfair labor practice charges, grievances
or complaints pending or, to the knowledge of the Company,
threatened by or on behalf of any employee or group of employees
of the Company.
T. ERISA Matters. The Company and its ERISA
Affiliates are in compliance in all material respects with all
provisions of ERISA applicable to it. No Reportable Event has
occurred, been waived or exists as to which the Company or any
ERISA Affiliate was required to file a report with the Pension
Benefits Guaranty Corporation, and the present value of all
liabilities under all Plans (based on those assumptions used to
fund such Plans) did not, as of the most recent annual valuation
date applicable thereto, exceed the value of the assets of all
such Plans in the aggregate. None of the Company or ERISA
Affiliates has incurred any Withdrawal Liability that could
result in a Material Adverse Effect. None of the Company or
ERISA Affiliates has received any notification that any
Multiemployer Plan is in reorganization or has been terminated
within the meaning of Title IV of ERISA, and no Multiemployer
Plan is reasonably expected to be in reorganization or
termination where such reorganization or termination has resulted
or could reasonably be expected to result in increases to the
contributions required to be made to such Plan or otherwise.
For purposes of this Section III.T.:
"ERISA" means the Employee Retirement Income
Security Act of 1974, or any successor statute, together with the
regulations thereunder, as the same may be amended from time to
time.
"ERISA Affiliate" means any trade or business
(whether or not incorporated) that was, is or hereafter may
become, a member of a group of which the Company is a member and
which is treated as a single employer under Section 414 of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code").
"Multiemployer Plan" means a multiemployer plan as
defined in Section 4001(a)(3) of ERISA to which the Company or
any ERISA Affiliate (other than one considered an ERISA Affiliate
only pursuant to subsection (m) or (o) of Section 414 of the
Internal Revenue Code) is making or accruing an obligation to
make contributions, or has within any of the preceding five plan
years made or accrued an obligation to make contributions.
"PBGC" means the Pension Benefit Guaranty
Corporation referred to and defined in ERISA or any successor
thereto.
"Plan" means any pension plan (other than a
Multiemployer Plan) subject to the provision of Title IV of ERISA
or Section 412 of the Internal Revenue Code that is maintained for
employees of the Company or any ERISA Affiliate.
"Reportable Event" means any reportable event as
defined in Section 4043(b) of ERISA or the regulations issued
thereunder with respect to a Plan (other than a Plan maintained
by an ERISA Affiliate that is considered an ERISA Affiliate only
pursuant to subsection (n) or (o) of Section 414 of the Internal
Revenue Code.
"Withdrawal Liability" means liability to a
Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
U. Tax Matters.
1. The Company has filed all Tax Returns which
it is required to file under applicable Laws, except for such Tax
Returns in respect of which the failure to so file does not and
could not have a Material Adverse Effect; all such Tax Returns
are true and accurate in all material respects and have been
prepared in compliance with all applicable Laws; the Company has
paid all Taxes due and owing by it (whether or not such Taxes are
required to be shown on a Tax Return) and have withheld and paid
over to the appropriate taxing authorities all Taxes which it is
required to withhold from amounts paid or owing to any employee,
stockholder, creditor or other third parties; and since the
Balance Sheet Date, the charges, accruals and reserves for Taxes
with respect to the Company (including any provisions for
deferred income taxes) reflected on the books of the Company are
adequate to cover any Tax liabilities of the Company if its
current tax year were treated as ending on the date hereof.
2. No claim has been made by a taxing authority
in a jurisdiction where the Company does not file tax returns
that such corporation is or may be subject to taxation by that
jurisdiction. There are no foreign, federal, state or local tax
audits or administrative or judicial proceedings pending or being
conducted with respect to the Company; no information related to
Tax matters has been requested by any foreign, federal, state or
local taxing authority; and, except as disclosed above, no
written notice indicating an intent to open an audit or other
review has been received by the Company from any
foreign, federal, state or local taxing authority. There are no
material unresolved questions or claims concerning the Company's
Tax liability. The Company (A) has not executed or entered into
a closing agreement pursuant to Section 7121 of the Internal Revenue
Code or any predecessor provision thereof or any similar
provision of state, local or foreign law; or (B) has not agreed
to or is required to make any adjustments pursuant to Section 481(a) of
the Internal Revenue Code or any similar provision of state,
local or foreign law by reason of a change in accounting method
initiated by the Company or any of its subsidiaries or has any
knowledge that the IRS has proposed any such adjustment or change
in accounting method, or has any application pending with any
taxing authority requesting permission for any changes in
accounting methods that relate to the business or operations of
the Company. The Company has not been a United States real
property holding corporation within the meaning of Section 897(c)(2) of
the Internal Revenue Code during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Internal Revenue Code.
3. The Company has not made an election under
Section 341(f) of the Internal Revenue Code. The Company is not liable
for the Taxes of another person that is not a subsidiary of the
Company under (A) Treas. Reg. Section 1.1502-6 (or comparable
provisions of state, local or foreign law), (B) as a transferee
or successor, (C) by contract or indemnity or (D) otherwise. The
Company is not a party to any tax sharing agreement. The Company
has not made any payments, is obligated to make payments or is a
party to an agreement that could obligate it to make any payments
that would not be deductible under Section 280G of the Internal Revenue
Code.
For purposes of this Section III.U.:
"IRS" means the United States Internal Revenue
Service.
"Tax" or "Taxes" means federal, state, county,
local, foreign, or other income, gross receipts, ad valorem,
franchise, profits, sales or use, transfer, registration, excise,
utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including, without limitation,
deficiencies, penalties, additions to tax, and interest
attributable thereto) whether disputed or not.
"Tax Return" means any return, information report
or filing with respect to Taxes, including any schedules attached
thereto and including any amendment thereof.
V. Property. The Company has good and marketable
title to all real and personal property owned by it, free and
clear of all liens, encumbrances and defects except
such as are described on Schedule III.V. hereto or such as do not
materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the
Company; and any real property and buildings held under lease by
the Company are held by it under valid, subsisting and
enforceable leases with such exceptions as are not material and
do not interfere with the use made and proposed to be made of
such property and buildings by the Company.
W. Intellectual Property. The Company owns or
possesses adequate and enforceable rights to use all patents,
patent applications, trademarks, trademark applications, trade
names, service marks, copyrights, copyright applications,
licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information,
systems or procedures) and other similar rights and proprietary
knowledge (collectively, "Intangibles") necessary for the conduct
of its business as now being conducted including, but not limited
to, those described on Schedule III.W. hereto. The Company is
not infringing upon or in conflict with any right of any other
person with respect to any Intangibles. Except as disclosed on
Schedule III.W. hereto, no claims have been asserted by any
person to the ownership or use of any Intangibles and the Company
has no knowledge of any basis for such claim.
X. Internal Controls and Procedures. The Company
maintains accurate books and records and internal accounting
controls which provide reasonable assurance that (i) all
transactions to which the Company is a party or by which its
properties are bound are executed with management's
authorization; (ii) the reported accountability of the Company's
assets is compared with existing assets at regular intervals;
(iii) access to the Company's assets is permitted only in
accordance with management's authorization; and (iv) all
transactions to which the Company is a party or by which its
properties are bound are recorded as necessary to permit
preparation of the financial statements of the Company in
accordance with U.S. generally accepted accounting principles.
Y. Payments and Contributions. Neither the Company
nor any of its directors, officers or, to its knowledge, other
employees has (i) used any Company funds for any unlawful
contribution, endorsement, gift, entertainment or other unlawful
expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or
domestic government official or employee; (iii) violated or is in
violation of any provision of the Foreign Corrupt Practices Act
of 1977, as amended; or (iv) made any bribe, rebate, payoff,
influence payment, kickback or other similar payment to any
person with respect to Company matters.
Z. No Misrepresentation. No representation or
warranty of the Company contained in this Agreement, any
schedule, annex or exhibit hereto or any agreement,
instrument or certificate furnished by the Company to Buyer
pursuant to this Agreement, contains any untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein, not
misleading.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. Restrictive Legend. Buyer acknowledges and agrees
that, upon issuance pursuant to this Agreement, the Securities
(and any shares of Common Stock issued in conversion of the
Preferred Shares or exercise of the Warrants) shall have endorsed
thereon a legend in substantially the following form (and a stop-
transfer order may be placed against transfer of the Preferred
Shares and the Conversion Shares until such legend has been
removed):
"THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR THE SECURITIES
LAWS OF ANY STATE, AND ARE BEING OFFERED AND
SOLD PURSUANT TO AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND SUCH LAWS. THESE SECURITIES MAY NOT
BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT OR SUCH OTHER LAWS."
B. Filings. The Company shall make all necessary
Commission Filings and "blue sky" filings required to be made by
the Company in connection with the sale of the Securities to the
Buyer as required by all applicable Laws, and shall provide a
copy thereof to the Buyer promptly after such filing.
C. Reporting Status. So long as the Buyer
beneficially owns any of the Securities, the Company shall timely
file all reports required to be filed by it with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act.
D. Use of Proceeds. The Company shall use the net
proceeds from the sale of the Securities (excluding amounts paid
by the Company for legal fees and finder's fees in connection
with such sale) solely for general corporate and working capital
purposes.
E. Listing. Except to the extent the Company lists
its Common Stock on The New York Stock Exchange, the Company
shall use its best efforts to maintain its listing of the Common
Stock on NASD/BBS.
F. Reserved Conversion Shares. The Company at all
times from and after the date hereof shall have a sufficient
number of shares of Common Stock duly and validly authorized and
reserved for issuance to satisfy the conversion, in full, of the
1,550 Preferred Shares (assuming for purposes of this
Section IV.F., a Conversion Price (as defined in the Certificate
of Amendment) of $4.50) and upon the exercise of the Warrants.
In the event the Current Market Price (as defined in the
Certificate of Amendment) declines to $2.50, the Company shall,
within 10 days of the occurrence of such event, authorize and
reserve for issuance such additional shares of Common Stock
sufficient in number for the conversion, in full, of the
Preferred Shares, assuming for purposes of this Section IV.F. a
Conversion Price (as defined in the Certificate of Amendment) of
$1.95 per share.
G. Right of First Refusal. If the Company should
propose (the "Proposal") to issue Common Stock or securities
convertible into Common Stock at a price less than the Current
Market Price (as defined in the Certificate of Amendment), or
debt at less than par value or having an effective annual
interest rate in excess of 9.9% (each a "Right of First Refusal
Security" and collectively, the "Right of First Refusal
Securities"), in each case on the date of issuance during the
period ending two years after the Closing Date (the "Right of
First Refusal Period"), the Company shall be obligated to offer
the Buyer on the terms set forth in the Proposal (the "Offer")
and the Buyer shall have the right, but not the obligation, to
accept such Offer on such terms. If during the Fight of First
Refusal Period, the Company provides written notice to the Buyer
that it proposes to issue any Right of First Refusal Securities
on the terms set forth in the Proposal, then the Buyer shall have
ten (10) business days to accept or reject such offer in writing.
if the Company fails to: (i) issue a Proposal during the Right
of First Refusal Period, (ii) offer the Buyer the opportunity to
complete the transaction as set forth in the Proposal, or
(iii) enter into an agreement with the Buyer, at such terms after
the Buyer has accepted the Offer, then the Company shall pay to
the Buyer, as liquidated damages, an amount in total equal to ten
percent (10%) of the amount paid to the Company for the Right of
First Refusal Securities. The foregoing Right of First Refusal
is and shall be senior in right to any other right of first
refusal issued by the Company, except for the right of first
refusal granted by the Company to X.X. Xxxxxx & Co., Inc., which
has an approximate remaining term of eighteen (18) months, to any
other Person (as defined in the Certificate of Amendment)
including, but not limited to, the holders of the Company's
outstanding Series A Shares. Notwithstanding the foregoing, the
Buyer shall have no rights under this Section IV.G. in respect of
Common Stock or any other securities of the Company issuable
(i) upon the exercise or conversion of options, warrants or other
rights to purchase securities of the Company outstanding as of
the date hereof or (ii) to officers, directors or employees of
the Company or any of its subsidiaries.
V. TRANSFER AGENT INSTRUCTIONS.
A. The Company undertakes and agrees that no
instruction other than the instructions referred to in this
Section V and customary stop transfer instructions prior to the
registration and sale of the Common Stock pursuant to an
effective Securities Act registration statement will be given to
its transfer agent for the Common Stock and that the Common Stock
issuable upon conversion of the Preferred Shares and exercise of
the Warrants otherwise shall 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 contained in this Section V.A. shall affect in any way
Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of such Common Stock. If, at any
time, Buyer provides the Company with an opinion of counsel
reasonably satisfactory to the Company that registration of the
resale by Buyer of such Common Stock is not required under the
Securities Act and that the removal of restrictive legends is
permitted under applicable law, the Company shall permit the
transfer of such Common Stock and, promptly instruct the
Company's transfer agent to issue one or more certificates for
Common Stock without any restrictive legends endorsed thereon.
B. The Company shall permit Buyer to exercise its
right to convert the Preferred Shares by telecopying an executed
and completed Notice of Conversion to the Company. Each date on
which a Notice of Conversion is telecopied to and received by the
Company in accordance with the provisions hereof shall be deemed
a Conversion Date. The Company shall transmit the certificates
evidencing the shares of Common Stock issuable upon conversion of
any Preferred Shares (together with certificates evidencing any
Preferred Shares not being so converted) to Buyer via express
courier, by electronic transfer or otherwise, within five
business days after receipt by the Company of the Notice of
Conversion (the "Delivery Date"). Within 30 days after Buyer
delivers the Notice of Conversion to the Company, Buyer shall
deliver to the Company the Preferred Shares being converted.
C. The Company shall permit Buyer to exercise its
right to purchase shares of Common Stock pursuant to exercise of
the Warrants in accordance with its applicable terms of the
Warrants. The last date that the Company may deliver shares of
Common Stock issuable upon any exercise of Warrants is referred
to herein as the "Warrant Delivery Date."
D. The Company understands that a delay in the
issuance of the shares of Common Stock issuable in lieu of cash
dividends on the Preferred Shares, upon the conversion of the
Preferred Shares or exercise of the Warrants beyond the
applicable Dividend Payment Due Date (as defined in the
Certificate of Amendment), Delivery Date or Warrant Delivery Date
could result in economic loss to Buyer. As compensation to Buyer
for such loss (and not as a penalty), the Company agrees to pay
to Buyer for late issuance of Common Stock issuable in
lieu of cash dividends on the Preferred Shares, upon conversion
of the Preferred Shares or exercise of the Warrants in accordance
with the following schedule (where "No. Business Days" is defined
as the number of business days beyond seven (7) days from the
Dividend Payment Due Date (as that term is defined in the
Certificate of Amendment), the Delivery Date on the Warrant
Delivery Date, as applicable):
Compensation For Each 10
Shares of Preferred Shares
Not Converted Timely or
500 Shares of Common Stock
Issuable In Payment of
No. Business Days Dividends Not Issued Timely
1 $ 25
2 $ 50
3 $ 75
4 $100
5 $125
6 $150
7 $175
8 $200
9 $225
10 $250
more than 10 $250 + $100 for each Business
Day Late beyond 10 days
The Company shall pay to Buyer the compensation described above
by the transfer of immediately available funds upon Buyer's
demand. Nothing herein shall limit Buyer's right to pursue
actual damages for the Company's failure to issue and deliver
Common Stock to Buyer, and in addition to any other remedies
which may be available to Buyer, in the event the Company fails
for any reason to effect delivery of such shares of Common Stock
within five business days after the relevant Dividend Payment Due
Date, the Delivery Date or the Warrant Delivery Date, as
applicable, Buyer shall be entitled to rescind the relevant
Notice of Conversion or exercise of Warrants by delivering a
notice to such effect to the Company whereupon the Company and
Buyer shall each be restored to their respective original
positions immediately prior to delivery of such Notice of
Conversion on delivery.
VI. DELIVERY INSTRUCTIONS.
The Securities shall be delivered by the Company to the
Escrow Agent pursuant to Section I.B. hereof on a "delivery-
against-payment basis" at the closing of the First Tranche and
the Second Tranche.
VII. FUNDING DATES.
The date and time of the issuance and sale of the
Initially Issued Preferred Shares and the Initially Issued
Warrants in the First Tranche (the "Initial Funding Date", and
together with the Second Funding Date, the "Closing Dates") shall
be the date hereof or such other as shall be mutually agreed upon
in writing. The issuance and sale of the Initially Issued
Preferred Shares and the Initially Issued Warrants in the First
Tranche and the Subsequently Issued Preferred Shares and the
Subsequently Issued Warrants in the Second Tranche shall occur on
their respective Closing Dates, at the offices of the Escrow
Agent. Notwithstanding anything to the contrary contained
herein, the Escrow Agent shall not be authorized to release to
the Company the Initial Purchase Price or the Second Purchase
Price and to Buyer the certificate(s) (I/N/O Buyer) evidencing
the Initially Issued Preferred Shares and the Initially Issued
Warrants in the First Tranche and the Subsequently Issued
Preferred Shares and the Subsequently Issued Warrants in the
Second Tranche, respectively, being purchased by Buyer unless the
conditions set forth in VIII.C. and IX.G hereof have been
satisfied.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The Buyer understands that the Company's obligation to
sell the Securities on the Closing Dates to Buyer pursuant to
this Agreement is conditioned upon:
A. Delivery by Buyer to the Escrow Agent of the
Initial Purchase Price on the Initial Funding Date and the Second
Purchase Price on the Second Funding Date, respectively.
B. The accuracy in all material respects on the
Closing Dates of the representations and warranties of Buyer
contained in this Agreement as if made on the Closing Dates
(except for representations and warranties which, by their
express terms, speak as of and relate to a specified date, in
which case such accuracy shall be measured as of such specified
date) and the performance by Buyer in all material respects on or
before the Closing Dates of all covenants and agreements of Buyer
required to be performed by it pursuant to this Agreement on or
before the Closing Dates;
C. There shall not be in effect any Law or order,
ruling, judgment or writ of any court or public or governmental
authority restraining, enjoining or otherwise
prohibiting any of the transactions contemplated by this
Agreement.
IX. CONDITIONS TO BUYER'S OBLIGATIONS.
The Company understands that Buyer's obligation to
purchase the Securities on the Closing Dates pursuant to this
Agreement is conditioned upon:
A. Delivery by the Company to the Escrow Agent on the
Initial Funding Date and on the Second Funding Date of one or
more certificates (I/N/O Buyer) evidencing the Securities to be
purchased by Buyer pursuant to this Agreement on the Initial
Funding Date and the Second Funding Date, respectively;
B. The accuracy in all respects on the Closing Dates
of the representations and warranties of the Company contained in
this Agreement as if made on the Closing Dates (except for
representations and warranties which, by their express terms,
speak as of and relate to a specified date, in which case such
accuracy shall be measured as of such specified date) and the
performance by the Company in all respects on or before the
Closing Dates of all covenants and agreements of the Company
required to be performed by it pursuant to this Agreement on or
before the Closing Dates;
C. Buyer having received an opinion of counsel for
the Company, dated the Closing Dates, in form, scope and
substance satisfactory to the Buyer.
D. There not having occurred (i) any general
suspension of trading in, or limitation on prices listed for, the
Common Stock on NASD/BBS, (ii) the declaration of a banking
moratorium or any suspension of payments in respect of banks in
the United States, (iii) the commencement of a war, armed
hostilities or other international or national calamity directly
or indirectly involving the United States or any of its
territories, protectorates or possessions, or (iv) in the case of
the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof.
E. There not having occurred any event or
development, and there being in existence no condition, having or
which reasonably and foreseeably could have a Material Adverse
Effect.
F. The Company shall have delivered to Buyer (as
provided in the Escrow Instructions) reimbursement of Buyer's
out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by this Agreement (including the fees
and disbursements of Buyer's legal counsel up to a maximum of
$30,000 plus disbursements).
G. There shall not be in effect any Law or order,
ruling, judgment or writ of any court or public or governmental
authority restraining, enjoining or otherwise prohibiting any of
the transactions contemplated by this Agreement.
H. Solely with respect to the closing date occurring
on the Second Funding Date, the Company shall have satisfied or
performed all of the Second Funding Requirements and all other
conditions set forth in Section I.B. hereof.
X. TERMINATION.
A. Termination by Mutual Written Consent. This
Agreement may be terminated and the transactions contemplated
hereby may be abandoned, for any reason and at any time prior to
the Closing Dates, by the mutual written consent of the Company
and Buyer.
B. Termination by the Company or Buyer. This
Agreement may be terminated and the transactions contemplated
hereby may be abandoned by action of the Company or Buyer if
(i) the Initial Funding Date shall not have occurred at or prior
to 5:00 p.m., New York City time, on August 14, 1998; provided,
however, that the right to terminate this Agreement pursuant to
this Section X.B.(i) shall not be available to any party whose
failure to fulfill any of its obligations under this Agreement
has been the cause of or resulted in the failure of the Initial
Funding Date to occur at or before such time and date or (ii) any
court or public or governmental authority shall have issued an
order, ruling, judgment or writ, or there shall be in effect any
Law, restraining, enjoining or otherwise prohibiting the
consummation of any of the transactions contemplated by this
Agreement.
C. Termination by Buyer. This Agreement may be
terminated and the transactions contemplated hereby may be
abandoned by Buyer at any time prior to the Initial Funding Date
or the Second Funding Date, if (i) the Company shall have failed
to comply with any of its covenants or agreements contained in
this Agreement, (ii) there shall have been a breach by the
Company with respect to any representation or warranty made by it
in this Agreement, or (iii) there shall have occurred any event
or development, or there shall be in existence any condition,
having or reasonably and foreseeably likely to have a Material
Adverse Effect.
D. Termination by the Company. This Agreement may be
terminated and the transactions contemplated hereby may be
abandoned by the Company at any time prior to the Closing Dates,
if (i) Buyer shall have failed to comply with any of its
covenants or agreements contained in this Agreement or (ii) there
shall have been a breach by Buyer with respect to any
representation or warranty made by it in this Agreement.
XI. SURVIVAL; INDEMNIFICATION.
A. The representations, warranties and covenants made
by each of the Company and Buyer in this Agreement, the annexes,
schedules and exhibits hereto and in each instrument, agreement
and certificate entered into and delivered by them pursuant to
this Agreement, shall survive the Closing Dates and the
consummation of the transactions contemplated hereby. In the
event of a breach or violation of any of such representations,
warranties or covenants, the party to whom such representations,
warranties or covenants have been made shall have all rights and
remedies for such breach or violation available to it under the
provisions of this Agreement or otherwise, whether at law or in
equity, irrespective of any investigation made by or on behalf of
such party on or prior to the Closing Dates.
B. The Company hereby agrees to indemnify and hold
harmless the Buyer, its Affiliates and their respective officers,
directors, partners and members (collectively, the "Buyer
Indemnitees"), from and against any and all losses, claims,
damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses"), and agrees to reimburse the Buyer
Indemnitees for all out-of-pocket expenses (including the fees
and expenses of legal counsel), in each case promptly as incurred
by the Buyer Indemnitees and to the extent arising out of or in
connection with:
1. any misrepresentation, omission of fact or
breach of any of the Company's representations or warranties
contained in this Agreement or the other Documents, or the
annexes, schedules or exhibits hereto or thereto or any
instrument, agreement or certificate entered into or
delivered by the Company pursuant to this Agreement or the
other Documents; or
2. any failure by the Company to perform any of
its covenants, agreements, undertakings or obligations set
forth in this Agreement or the other Documents, or the
annexes, schedules or exhibits hereto or thereto or any
instrument, agreement or certificate entered into or
delivered by the Company pursuant to this Agreement or the
other Documents.
C. Buyer hereby agrees to indemnify and hold harmless
the Company, its Affiliates and their respective officers,
directors, partners and members (collectively, the "Company
Indemnitees"), from and against any and all Losses, and agrees to
reimburse the Company Indemnitees for all out-of-pocket expenses
(including the fees and expenses of legal counsel), in each case
promptly as incurred by the Company Indemnitees and to the extent
arising out of or in connection with:
1. any misrepresentation, omission of fact, or
breach of any of Buyer's representations or warranties
contained in this Agreement or the other
Documents, or the annexes, schedules or exhibits hereto or
thereto or any instrument, agreement or certificate entered
into or delivered by Buyer pursuant to this Agreement or the
other Documents; or
2. any failure by Buyer to perform in any
material respect any of its covenants, agreements,
undertakings or obligations set forth in this Agreement or
the other Documents or any instrument, certificate or
agreement entered into or delivered by Buyer pursuant to
this Agreement or the other Documents.
D. Promptly after receipt by either party hereto
seeking indemnification pursuant to this Section XI (an
"Indemnified Party") of written notice of any investigation,
claim, proceeding or other action in respect of which
indemnification is being sought (each, a "Claim"), the
Indemnified Party promptly shall notify the party against whom
indemnification pursuant to this Section XI is being sought (the
"Indemnifying Party") of the commencement thereof, but the
omission to so notify the Indemnifying Party shall not relieve it
from any liability that it otherwise may have to the Indemnified
Party, except to the extent that the Indemnifying Party is
materially prejudiced and forfeits substantive rights and
defenses by reason of such failure. In connection with any Claim
as to which both the Indemnifying Party and the Indemnified Party
are parties, the Indemnifying Party shall be entitled to assume
the defense thereof. Notwithstanding the assumption of the
defense of any Claim by the Indemnifying Party, the Indemnified
Party shall have the right to employ separate legal counsel and
to participate in the defense of such Claim, and the Indemnifying
Party shall bear the reasonable fees, out-of-pocket costs and
expenses of such separate legal counsel to the Indemnified Party
if (and only if): (x) the Indemnifying Party shall have agreed
to pay such fees, out-of-pocket costs and expenses, (y) the
Indemnified Party and the Indemnifying Party reasonably shall
have concluded that representation of the Indemnified Part), and
the Indemnifying Party by the same legal counsel would not be
appropriate due to actual or, as reasonably determined by legal
counsel to the Indemnified Party, potentially differing interests
between such parties in the conduct of the defense of such Claim,
or if there may be legal defenses available to the Indemnified
Party that are in addition to or disparate from those available
to the Indemnifying Party, or (z) the Indemnifying Party shall
have failed to employ legal counsel reasonably satisfactory to
the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified
Party employs separate legal counsel in circumstances other than
as described in clauses (x), (y) or (z) above, the fees, costs
and expenses of such legal counsel shall be borne exclusively by
the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the
same jurisdiction, be liable for the fees and expenses of more
than one firm of legal counsel for the Indemnified
Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent
of the Indemnified Party (which consent shall not unreasonably be
withheld), settle or compromise any Claim or consent to the entry
of any judgment that does not include an unconditional release of
the Indemnified Party from all liabilities with respect to such
Claim or judgment.
E. In the event one party hereunder should have a
claim for indemnification that does not involve a claim or demand
being asserted by a third party, the Indemnified Party promptly
shall deliver notice of such claim to the Indemnifying Party. If
the Indemnified Party disputes the claim, such dispute shall be
resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in
accordance with the procedures and rules of the American
Arbitration Association. Judgment upon any award rendered by any
arbitrators may be entered in any court having competent
jurisdiction thereof.
XII. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in
accordance with the laws of the State of New York, without regard
to the conflicts of law principles of such state. Each of the
parties consents to the jurisdiction of the federal courts whose
districts encompass any part of the City of New York or the state
courts of the State of New York sitting in the City of New York
in connection with any dispute arising under this Agreement and
hereby waives, to the maximum extent permitted by law, any
objection, including any objection based on forum non conveniens,
to the bringing of any such proceeding in such jurisdictions. A
facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed
in one or more counterparts, each of which shall be deemed an
original. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the
interpretation of, this Agreement. if any provision of this
Agreement shall be invalid or unenforceable in any jurisdiction,
such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other
jurisdiction. This Agreement may be amended only by an
instrument in writing signed by the party to be charged with
enforcement. This Agreement supersedes all prior agreements and
understandings among the parties hereto with respect to the
subject matter hereof.
XIII. NOTICES.
Except as may be otherwise provided herein, any notice
or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally
or sent by certified mail, postage prepaid, or by a
nationally recognized overnight courier service, and shall be
deemed given when so delivered personally or by overnight courier
service, or, if mailed, three (3) days after the date of deposit
in the United States mails, as follows:
(1) if to the Company, to:
DYNAMICWEB ENTERPRISES, INC.
000 Xxxxx 00 Xxxx
Xxxxxxxx X, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxxxxx, Xx.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxxxx & Xxx
One Glenhardie Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxx, XX 00000-0000
Attention: Xxxxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(2) if to the Buyer, to
THE SHAAR FUND LTD.,
c/o SHAAR ADVISORY SERVICES LTD.
00 Xxxx Xxxxxx Xxxxxx, Xxxxxxxxx 0X
Xxxxxxxxx, Xxxxxx
Attention: Xxxxxx Xxxxxxxx
with a copy to:
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(3) if to the Escrow Agent, to:
Xxxxxxx, Xxxxxxxxx LLP
0 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
The Company, the Buyer or the Escrow Agent may change the
foregoing address by notice given pursuant to this Section XIII.
XIV. CONFIDENTIALITY.
Each of the Company and Buyer agrees to keep
confidential and not to disclose to or use for the benefit of any
third party the terms of this Agreement or any other information
which at any time is communicated by the other party as being
confidential without the prior written approval of the other
party; provided, however, that this provision shall not apply to
information which, at the time of disclosure, is already part of
the public domain (except by breach of this Agreement) and
information which is required to be disclosed by law (including,
without limitation, pursuant to Item 10 of Rule 601 of
Regulation S-K under the Securities Act and the Exchange Act).
XV. ASSIGNMENT.
This Agreement shall not be assignable by either of the
parties hereto prior to the Closing without the prior written
consent of the other party, and any attempted assignment contrary
to the provisions hereby shall be null and void; provided,
however, that Buyer may assign its rights and obligations
hereunder, in whole or in part, to any affiliate of Buyer who
furnishes to the Company the representations and warranties set
forth in Section II hereof and otherwise agrees to be bound by
the terms of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly
executed and delivered this Agreement on the date first written
above.
THE COMPANY:
DYNAMICWEB ENTERPRISES, INC.
By/s/Xxxxxx X. Xxxxxxxxxx, Xx.
Name: Xxxxxx X. Xxxxxxxxxx, Xx.
Title: Chief Executive Officer
BUYER:
THE SHAAR FUND LTD.
By: INTERCARRIBBEAN SERVICES, INC.
By/s/ Xxxxxx Xxxxxxxx
Name: Xxxxxx Xxxxxxxx
PAGE 28
EXHIBIT A
Common Stock Purchase Warrant No. 1
PAGE 29
EXHIBIT B
Common Stock Purchase Warrant No. 2
PAGE 30
EXHIBIT C
Certificate of Amendment
PAGE 31
EXHIBIT D
Escrow Instructions
PAGE 32
EXHIBIT E
Registration Rights Agreement
PAGE 33
Schedule III.A.2
Subsidiaries
PAGE 34
Schedule III.C.
Authorized Shares
PAGE 35
Schedule III.O.
Related Party Transactions
PAGE 36
Schedule III.Q.
Securities Law Matters
PAGE 37
Schedule III.R.6.
Environmental Matter
PAGE 38
Schedule III.V.
Property
PAGE 39
Schedule III.W.
Intellectual Property
