EXHIBIT 10.3
SECURITIES SUBSCRIPTION AGREEMENT
THIS SECURITIES SUBSCRIPTION AGREEMENT, dated as of April 12, 2001
("Agreement"), is executed in reliance upon the exemption from registration
afforded by Rule 504 promulgated under Regulation D by the Securities and
Exchange Commission ("SEC"), under the Securities Act of 1933, as amended.
Capitalized terms used herein and not defined shall have the meanings given to
them in Rule 504 and Regulation D.
This Agreement has been executed by the undersigned buyers ("Buyer"),
to purchase the amounts set forth on Schedule A hereto, in connection with the
private placement of 8% Series A Senior Subordinated Convertible Debentures of
Connecticut Acquisition Corp. No. 1, a corporation organized under the laws of
Nevada, with executive offices located at 000 Xxxx Xxxxxx, Xxxxxxxxxx,
Xxxxxxxxxxx 00000 ("Seller"). Buyer hereby represents and warrants to, and
agrees with Seller:
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED
WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM
REGISTRATION PROVIDED BY SECTION 3(B) OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE
"1933 ACT"), AND RULE 504 OF REGULATION D PROMULGATED THEREUNDER.
THIS INFORMATION IS DISTRIBUTED PURSUANT TO AN EXEMPTION FOR SMALL
OFFERINGS UNDER THE RULES OF THE O SECURITIES DIVISION. THE SECURITIES
DIVISION HAS NEITHER REVIEWED OR APPROVED ITS FORM OR CONTENT. THE
SECURITIES DESCRIBED MAY ONLY BE PURCHASED BY "ACCREDITED INVESTORS" AS
DEFINED BY RULE 504 OF SEC REGULATION D AND THE RULES OF THE COLORADO
SECURITIES DIVISION.
1. Agreement to Subscribe; Purchase Price.
(a) Subscription. The undersigned Buyer hereby subscribes for and
agrees to purchase the Seller's 8% Series A Senior Subordinated Convertible
Redeemable Debentures substantially in the form of the Debenture attached as
Exhibit A hereto and having an aggregate original principal face amount of One
Million United States dollars $1,000,000 (singly, a "Debenture," and
collectively, the "Debentures"), at an aggregate purchase price of 90% of the
face amount of such Debentures as set forth in subsection (b) herein.
(b) Payment. The Purchase Price for the Debentures shall be Nine
Hundred Thousand United States Dollars (U.S. $900,000) ("Purchase Price"), which
shall be payable at closing, pursuant to Section 1(c) herein and in accordance
with the terms and conditions of Section 11 below.
(c) Closing. Subject to the satisfaction of the conditions set forth in
Sections 7, 8 and 11 below, the Closing of the transactions contemplated by this
Agreement shall take place ("Closing Date") when (i) Seller delivers the
Debentures to the Buyer, (ii) Seller delivers all accompanying transaction
documents including appropriate resolutions of its Board of Directors, and (iii)
Buyer pays $180,000 towards the Purchase Price for the Debentures ("Initial
Purchase Price").
2. Buyer Representations and Covenants; Access to Information.
In connection with the purchase and sale of the Debentures, Buyer
represents and warrants to, and covenants and agrees with Seller as follows:
(a) Buyer is not, and on the closing date will not be, an affiliate of
Seller;
(b) Buyer is an "accredited investor" as defined in Rule 501 of
Regulation D promulgated under the 1933 Act, and is purchasing the Shares for
its own account and Buyer is qualified to purchase the Shares under the laws of
the State of Colorado;
(c) All offers and sales of any of the Debentures by Buyer shall be
made in compliance with any applicable securities laws of any applicable
jurisdiction and in accordance with Rule 504, as applicable, of Regulation D or
pursuant to registration of securities under the 1933 Act or pursuant to an
exemption from registration;
(d) Buyer understands that the Debentures are not registered under the
1933 Act and are being offered and sold to it in reliance on specific exemptions
from the registration requirements of Federal and State securities laws, and
that Seller is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of Buyer set forth
herein in order to determine the applicability of such exemptions and the
suitability of Buyer and any purchaser from Buyer to acquire the Debentures;
(e) Buyer shall comply with Rule 504 promulgated under Regulation D;
(f) Buyer has the full right, power and authority to enter into this
Agreement and to consummate the transaction contemplated herein. This Agreement
has been duly authorized, validly executed and delivered on behalf of Buyer and
is a valid and binding agreement in accordance with its terms, subject to
general principles of equity and to bankruptcy or other laws affecting the
enforcement of creditors' rights generally;
(g) The execution and delivery of this Agreement and the consummation
of the purchase of the Debentures and the transactions contemplated by this
Agreement do not and will not conflict with or result in a breach by Buyer of
any of the terms or provisions of, or constitute a default under, the articles
of incorporation or by-laws (or similar constitutive documents) of Buyer or any
indenture, mortgage, deed of trust, or other material agreement or instrument to
which Buyer is a party or by which it or any of its properties or assets are
bound, or any existing applicable law, rule or regulation of the United States
or any State thereof or any applicable decree, judgment or order of any Federal
or State court, Federal or State regulatory body, administrative agency or other
United States governmental body having jurisdiction over buyer or any of its
properties or assets;
(h) All invitations, offers and sales of or in respect of, any of the
Debentures, by Buyer and any distribution by Buyer of any documents relating to
any invitation, offer or sale by it of any of the Debentures will be in
compliance with applicable laws and regulations, will be made in such a manner
that no prospectus need be filed and no other filing need be made by Seller with
any regulatory authority or stock exchange in any country or any political
sub-division of any country, and Buyer will make no misrepresentations nor
omissions of material fact in the invitation, offer or resale of the Debentures;
(i) The Buyer (or others for whom it is contracting hereunder) has been
advised to consult its own legal and tax advisors with respect to applicable
resale restrictions and applicable tax considerations and it (or others for whom
it is contracting hereunder) is solely responsible (and the Seller is not in any
way responsible) for compliance with applicable resale restrictions and
applicable tax legislation;
(j) Buyer understands that no Federal or State or foreign government
agency has passed on or made any recommendation or endorsement of the
Debentures;
(k) Buyer has had an opportunity to receive and review all material
information and financial data and to discuss with the officers of Seller, all
matters relating to the securities, financial condition, operations and
prospects of Seller and any questions raised by Buyer have been answered to
Buyer's satisfaction.
(l) Buyer acknowledges that the purchase of the Debentures involve a
high degree of risk. Buyer has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of
purchasing the Debentures. Buyer understands that the Debentures are not being
registered under the 1933 Act, or under any state securities laws, and
therefore, Buyer must bear the economic risk of this investment for an
indefinite period of time;
(m) Buyer is not a "10-percent Shareholder" (as defined in Section
871(h)(3)(B) of the U.S. Internal Revenue Code) of Seller; and
(n) Buyer acknowledges and agrees that the transactions contemplated by
this Agreement have taken place solely and exclusively within the State of
Colorado.
3. Seller Representations and Covenants.
(a) Seller is a corporation duly organized and validly existing under
the laws of the State of Nevada and is in good standing under such laws with its
principal executive office located in the State of Connecticut. The Seller has
all requisite corporate power and authority to own, lease and operate its
properties and assets, and to carry on its business as presently conducted. The
Seller is qualified to do business as a foreign corporation in each jurisdiction
in which the ownership of its property or the nature of its business requires
such qualification, except where failure to so qualify would not have a material
adverse effect on the Seller.
(b) There are 20,000,000 shares of Seller's common stock, $.001 par
value per share ("Common Stock") authorized and 10 outstanding as of April 1,
2001. All issued and outstanding shares of Common Stock have been authorized and
validly issued and are fully paid and non-assessable.
(c) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or to a loss of a material benefit, under, any provision of
the Articles of Incorporation, and any amendments thereto, By-Laws, Stockholders
Agreements and any amendments thereto of the Seller or any material mortgage,
indenture, lease or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law ordinance, rule or
regulation applicable to the Seller, its properties or assets. There is no
action, suit or proceeding pending, or to the knowledge of the Seller,
threatened against the Seller, before any court or arbitrator or any government
body, agency or official, which would have a material adverse affect on Seller's
operations or financial condition.
(d) The Seller is not subject to the reporting requirements of Sections
13 or 15(d) of the Securities and Exchange Act, is not an investment company or
a developmental stage company that either has no specific business plan or no
purpose. The Debentures and common stock issued upon conversion ("Shares") when
issued, will be issued in compliance with all applicable U.S. federal and state
securities laws. The Seller understands and acknowledges that, in certain,
circumstances, the issuance of the Shares could dilute the ownership interests
of other stockholders of the Seller. The execution and delivery by the Seller of
this Agreement and the issuance of the Shares will not contravene or constitute
a default under any provision of applicable law or regulation. The Seller is in
compliance with and conforms to all statutes, laws, ordinances, rules,
regulations, orders, restrictions and all other legal requirements of any
domestic or foreign government or any instrumentality thereof having
jurisdiction over the conduct of its businesses or the ownership of its
properties.
(e) There is no fact known to the Seller that has not been publicly
disclosed by the Seller or disclosed in writing to the Buyer which could
reasonably be expected to have a material adverse effect on the condition
(financial or otherwise) or in the earnings, business affairs, properties or
assets of the Seller, or could reasonably be expected to materially and
adversely affect the ability of the Seller to perform its obligations pursuant
to this Agreement. The information furnished by the Seller to Buyer for purposes
of or in connection with this Agreement or any transaction contemplated hereby,
does not contain any untrue statement of material fact or omit to state a
material fact necessary in order to make the statements contained therein, in
light of the circumstances under which they are made, not misleading.
(f) No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the Seller
is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the Debentures or Common Stock, or
the consummation of any other transaction contemplated hereby, except the filing
with the SEC of Form D.
(g) There is no action, proceeding or investigation pending, or to the
Seller's knowledge, threatened, against the Seller which might result, either
individually or in the aggregate, in any material adverse change in the
business, prospects, conditions, affairs or operations of the Seller. The Seller
is not a party to or subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality. There
is no action, suit proceeding or investigation by the Seller currently pending
or which the Seller intends to initiate. The SEC has not issued any order
suspending trading in the Seller's Common Stock and the Seller is not under
investigation by the SEC or the National Association of Securities Dealers, and
there are no proceedings pending or threatened before either regulatory body.
(h) There are no other material outstanding debt or equity securities
presently convertible into Common Stock.
(i) The Seller has not sold any securities within the 12 month period
prior to the date the Common Stock was first offered in reliance on any
exemption under Section 3(b) of the 1933 Act, Regulation D or its rules or in
violation of Section 5(a) of the 1933 Act.
(j) The issuance, sale and delivery of the Debentures have been duly
authorized by all required corporate action on the part of the Seller, and when
issued, sold and delivered in accordance with the terms hereof and thereof for
the consideration expressed herein and therein, will be duly and validly issued,
fully paid and non-assessable. The Common Stock issuable upon conversion of the
Debentures has been duly and validly reserved for issuance and upon issuance in
accordance with the terms of the Debentures, shall be duly and validly issued,
fully paid, and non-assessable There are no pre-emptive rights of any
shareholder of Seller.
(k) This Agreement has been duly authorized, validly executed and
delivered on behalf of Seller and is a valid and binding agreement in accordance
with its terms, subject to general principles of equity and to bankruptcy or
other laws affecting the enforcement of creditors' rights generally. The Seller
has all requisite right, power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. All corporate
action on the part of the Seller, its directors and shareholders necessary for
the authorization, execution, delivery and performance of this Agreement and the
Debentures has been taken. Upon their issuance to the Buyer, the Debentures will
be validly issued and nonassessable, and will be free of any liens or
encumbrances.
(l) Seller acknowledges and agrees that the transactions contemplated
by this the Agreement have taken place solely and exclusively within the State
of Colorado.
4. Exemption; Reliance on Representations. Buyer understands that the
offer and sale of the Securities are not being registered under the 1933 Act.
Seller and Buyer are relying on the rules governing offers and sales made
pursuant to Rule 504 promulgated under Regulation D. The offer and sale of the
Shares are made solely within the State and jurisdiction of Colorado.
5. Transfer Agent Instructions.
(a) Debentures. Upon the conversion of the Debentures, the Buyer or
holder shall give a notice of conversion to the Seller and the Seller shall
instruct its transfer agent to issue one or more Certificates representing that
number of shares of Common Stock into which the Debentures are convertible in
accordance with the provisions regarding conversion set forth in Exhibit A. The
Seller shall act as Debenture Registrar and shall maintain an appropriate ledger
containing the necessary information with respect to each Debenture.
(b) Common Stock to be Issued Without Restrictive Legend. Upon the
conversion of any Debenture, Seller shall instruct Seller's transfer agent to
issue Stock Certificates up to the total of the "Conversion Amount" (as defined
in the Debentures) and any "Interest Shares" (as defined in the Debentures)
without restrictive legend in the name of the Buyer (or its nominee) and in such
denominations to be specified at conversion representing the number of shares of
Common Stock issuable upon such conversion, as applicable. The Common Stock
shall be immediately freely transferable on the books and records of Seller.
Seller shall also instruct its attorney to issue and render any legal opinion
which is required at any time by Seller's transfer agent to permit Seller's
transfer agent to issue any and all Stock Certificates without a restrictive
legend as required by this Agreement.
6. Registration. If upon conversion of the Debentures effected by the
Buyer pursuant to the terms of this Agreement or payment of interest pursuant to
the Debentures the Seller fails to issue certificates for shares of Common Stock
issuable upon such conversion ("Underlying Shares") or the Interest Shares, as
defined in Section 4(b) of the Debentures, to the Buyer bearing no restrictive
legend for any reason, then the Seller shall be required, at the request of the
Buyer and at the Seller's expense, to effect the registration of the Underlying
Shares and/or Interest Shares issuable upon conversion of the Debentures and
payment of interest under the Act and relevant Blue Sky laws as promptly as is
practicable. The Seller and the Buyer shall cooperate in good faith in
connection with the furnishings of information required for such registration
and the taking of such other actions as may be legally or commercially necessary
in order to effect such registration. The Seller shall file such a registration
statement within 30 days of Buyer's demand and shall use its good faith diligent
efforts to cause such registration statement to become effective as soon as
practicable thereafter. Such good faith diligent efforts shall include, but not
be limited to, promptly responding to all comments received from the staff of
the SEC, providing Buyer's counsel with a contemporaneous copy of all written
communications from and to the staff of the SEC with respect to such
registration statement and promptly preparing and filing amendments to such
registration statement which are responsive to the comments received from the
staff of the SEC. Once declared effective by the SEC, the Seller shall cause
such registration statement to remain effective until the earlier of (i) the
sale by the Buyer of all Underlying Shares registered or (ii) 120 days after the
effective date of such registration statement. In the event the Seller
undertakes to file a Registration Statement on in connection with the Common
Stock, upon the effectiveness of such Registration, Buyer shall have the option
to sell the Common Stock pursuant thereto.
7. Delivery Instructions. The Debentures being purchased hereunder
shall be delivered to the Buyer, and the Purchase Price, shall be delivered to
the Seller.
8. Conditions To Seller's Obligation To Sell. Seller's obligation to
sell the Debentures is conditioned upon:
(a) The receipt and acceptance by Seller of this Agreement as executed
by Buyer.
(b) All of the representations and warranties of the Buyer contained in
this Agreement shall be true and correct on the Closing Date with the same force
and effect as if made on and as of the Closing Date. The Buyer shall have
performed or complied with all agreements and satisfied all conditions on its
part to be performed, complied with or satisfied at or prior to the Closing
Date.
(c) No order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Act shall have
been issued, and no proceedings for that purpose shall have been commenced or
shall be pending or, to the knowledge of the Seller, be contemplated. No stop
order suspending the sale of the Debentures or Common Stock shall have been
issued, and no proceedings for that purpose shall have been commenced or shall
be pending or, to the knowledge of the Seller, be contemplated.
9. Conditions To Buyer's Obligation To Purchase. Buyer's obligation to
purchase the Debentures is conditioned upon:
(a) The confirmation of receipt and acceptance by Seller of this
Agreement as evidenced by execution of this Agreement of the duly authorized
officer of Seller.
(b) Delivery of the Debentures to the Buyer.
10. No Shareholder Approval and No Dilution.
(a) Seller hereby agrees that from the Closing Date until the issuance
of Common Stock upon the conversion of the Debentures, Seller will not take any
action which would require Seller to seek shareholder approval of such issuance
unless such shareholder approval is required by law or regulatory body
(including but not limited to the NASDAQ Stock Market, Inc.) as a result of the
issuance of the Debentures or Common Stock hereunder.
(b) Provided the Debentures, or any Seller Debentures from a series
which predate the Debentures remain outstanding and unpaid, or if there is any
portion of any such Debentures which have not been converted into the Seller's
Common Stock, then the Seller shall not split nor reverse split the Common
Stock, nor consolidate the outstanding number of shares of Common Stock into a
small number of shares, nor otherwise take any action, directly or indirectly,
which would have a material adverse effect on the value of the Debentures or the
trading price of the Common Stock.
(c) Upon (i) a transfer of all or substantially all of the assets of
the Seller to any person in a single transaction or series of related
transactions, or (ii) a consolidation, merger or amalgamation of the Seller with
or into another person or entity in which the Seller is not the surviving entity
(other than a merger which is effected solely to change the jurisdiction of
incorporation of the Company and results in a reclassification, conversion or
exchange of outstanding shares of Common Stock solely into shares of Common
Stock) (each of items (i) and (ii) being referred to as a "Sale Event"), then,
in each case, the Seller shall, upon request of any Holder, redeem the Debenture
registered in the name of such Holder in cash for 130% of the principal amount,
plus accrued but unpaid interest through the date of redemption, or at the
election of the Holder, such Holder may convert the unpaid principal amount of
such Debenture (together with the amount of accrued but unpaid interest) into
shares of Common Stock of the surviving entity at the Conversion Price as set
forth in the Debentures.
(d) In case of any reclassification, capital reorganization or other
change or exchange of outstanding shares of the Common Stock, or in case of any
consolidation or merger of the Seller with or into another corporation (other
than a consolidation or merger in which the Seller is the continuing corporation
and which does not result in any reclassification, capital reorganization or
other change of outstanding shares of Common Stock), the Seller shall cause
effective provision to be made so that the Purchaser or Holder of the Debenture,
as the case may be, shall have the right thereafter, by exercising the
Debenture, to purchase the kind and number of shares of stock or other
securities or property (including cash) receivable upon such reclassification,
capital reorganization or other change, consolidation or merger by a holder of
the number of shares of Common Stock that could have been purchased upon
exercise of the Debenture and at the same Conversion Price, as defined in the
Debentures, immediately prior to such reclassification, capital reorganization
or other change, consolidation or merger. The foregoing provisions shall
similarly apply to successive reclassifications, capital reorganizations and
other changes of outstanding shares of Common Stock and to successive
consolidations or mergers. If the consideration received by the holders of
Common Stock is other than cash, the value shall be as determined by the Board
of Directors of the Seller or successor person or entity acting in good faith.
11. Payment of the Debentures, Conversions, Security and Demand.
(a) Security Resolution. If Seller shall become a publicly traded
company by merger or acquisition in which Seller shall cease to exist and
another corporation shall survive the merger, or Seller shall exchange its
shares with a publicly traded corporation which shall own more than 50% of the
issued and outstanding shares of Seller (collectively in either the case of
merger or exchange of shares "Seller Parent"), then Seller shall assign the
Debentures to the Seller Parent and deliver to the Buyer a resolution in the
form annexed hereto as Exhibit B ("Resolution"), instructing the Seller Parent
transfer agent ("Transfer Agent") to issue to Buyer shares of the Seller Parent
common stock registered in the name of the Buyer, without restrictive legend as
provided in Section 5(b) of this Agreement, in an amount equal up to $1,000,000,
or at some lesser amount as the Escrow Agent, in his sole discretion may direct
the transfer agent, at a price per share which is 70% of the lowest closing bid
price of the Seller Parent's common stock as reported on the OTC Electronic
Bulletin Board ("OTCBB") or any exchange in which the Seller Parent's shares are
traded for any trading day on which a Notice of Conversion is received by the
Company, provided such Notice of Conversion is delivered by fax to the Company
between the hours of 4 P.M. Eastern Standard or Daylight Savings Time and 7 P.M.
Eastern Standard or Daylight Savings Time, or for any of the 3 consecutive
trading days immediately preceding the date of receipt by the Company of each
Notice of Conversion ("Conversion Shares") and providing that the Seller Parent
shall not change its transfer agent from the Transfer Agent once established,
without the express written consent and directive of the Buyer. Seller shall
also deliver to the Buyer along with the Resolution, the Irrevocable
Instructions, in the form annexed hereto as Exhibit C, signed by the Seller
Parent and the Seller Parent's transfer agent. Delivery of the Resolution to the
Transfer Agent and the issuance of shares by the Transfer Agent in accordance
with the Resolution shall not preclude the Buyer from exercising any and all
other remedies available to the Buyer against the Seller Parent and Seller for a
breach of this Agreement or the Debentures.
(b) Conversions and Demand. As provided in paragraph 4 of the
Debentures, Buyer may give Notice of Conversion of the Debentures to Seller or
the Seller Parent, as the case may be, by facsimile to the number set forth in
Section 12(h) below. Conversion of Debentures may take place at any time until
the Maturity Date of the Debentures, as defined in the Debentures. As provided
in paragraph 4 of the Debentures, within 5 business days of receipt of the
Notice of Conversion, Seller or the Seller Parent, as the case may be, shall
deliver to the Buyer, or to an account designated by Buyer in the Notice of
Conversion, certificates representing the shares of common stock to which the
Buyer shall be entitled by reason of the conversion ("Certificates"). Provided
that (i) there is no Event of Default, as defined in the Debentures or this
Agreement, (ii) the Seller Parent has assumed all of the obligations of the
Agreement and the Debentures by virtue of a merger with or acquisition of Seller
("Assumption") and the publicly traded stock of the Seller Parent trades on the
Over the Counter Electronic Bulletin Board, (iii) the representations and
warranties contained in this Agreement shall be true and correct on the date of
the First Demand, as to Seller or Seller Parent, as the case may be, except for
the number of issued and outstanding shares if such shares have been increased
through a conversion of the Debentures, and (iv) Buyer has converted a sum equal
to the Initial Purchase Price of the Debentures into the common stock of the
Seller or the Seller Parent, as the case may be, Seller Parent may demand that
Buyer pay the Seller Parent $180,000 towards the purchase price of the
Debentures ("First Demand"). Upon payment of the First Demand, provided that (x)
there is no Event of Default, as defined in the Debentures or this Agreement,
and (y) for any of the 3 trading days preceding any Demand, the lowest closing
bid price of Seller Parent's common stock, as reported on OTCBB or any other
exchange on which such shares trade, has not fallen below $.01 per share ("Floor
Price"), and (z) Buyer has converted all amounts paid towards the Purchase Price
of the Debentures into the common stock of the Seller Parent, then Seller Parent
may demand that Buyer pay the Seller Parent additional installments of the
Debenture of $180,000 each provided also that at least 30 business days from the
date of the First Demand or any Additional Demands as the case may be, has
elapsed ("Additional Demands"). When Buyer has paid a total of $900,000 to the
Seller and/or Seller Parent in the aggregate, such payments shall constitute
full and complete payment of the Debenture and complete satisfaction of Buyer's
obligations under the Debentures and this Agreement. Nothing in this Section
11(b) shall preclude Buyer from making discretionary payments of the purchase
price of the Debentures earlier than required under the First Demand and the
Additional Demands. (The First Demand and Additional Demands are sometimes
referred to herein singularly as a "Demand").
(d) Conversion Limit. Notwithstanding the conversion rights under the
Debentures, unless the Buyer delivers a waiver in accordance with the
immediately following sentence, in no event shall the Buyer be entitled to
convert any portion of the Debentures, in excess of that portion of the
Debentures upon conversion, as applicable, of which the sum of (i) the number of
shares of Common Stock beneficially owned by the 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 Debentures and (ii) the number of
shares of Common Stock issuable upon the conversion of the portion of the
Debentures with respect to which this determination is being made, would result
in beneficial ownership by the Buyer and its Affiliates of more than 4.999% of
the then issued and outstanding shares of Common Stock. For purposes of this
Section 11(d), beneficial ownership shall be determined in accordance with Rule
13d-3 of the Exchange Act and Regulations 13 D-G thereunder, except as otherwise
provided in this Section 11(d). The foregoing limitation shall not apply and
shall be of no further force or effect (i) immediately preceding and upon the
occurrence of any voluntary or mandatory redemption or repayment transaction
described herein or in the Debentures (ii) on the Maturity Date or (iii)
following the occurrence of any Event of Default which is not cured within the
greater of the applicable time period specified in either (A) such written
notice of Buyer or (B) Section 8 of the Debentures.
(e) Liquidated Damages. If Seller or the Seller Parent fails to timely
deliver Certificates, as provided in Section 11(c) above, then Seller or the
Seller Parent, as the case may be, shall pay Buyer $150 per day for each day
late in delivering Certificates up to and including the 10th late day, and $500
per day for each day late in delivering the Certificates after the 10th late day
("Liquidated Damages"). Any Liquidated Damages incurred by Seller or the Seller
Parent, as the case may be, shall be payable immediately and in cash upon demand
in writing made by Buyer, or their agent, to Seller or the Seller Parent, as the
case may be. However, such Liquidated Damages may be deducted from any amounts
owed to Seller or the Seller Parent, as the case may be, by the Buyer pursuant
to this Section 11. Notwithstanding anything contained in this Agreement to the
contrary, including but not limited to the provisions of Section 6 regarding the
registration of restricted Conversion Shares, Seller or the Seller Parent, as
the case may be, shall be required to pay the Liquidated Damages set forth in
this Section 11(d).
(f) Bankruptcy. In the event any proceeding under the Bankruptcy Laws
of the United States or any proceedings under any state laws for the protection
of debtors or creditors, are filed, voluntarily or involuntarily, by or on
behalf of Seller or the Seller Parent, as the case may be, then Seller or the
Seller Parent, as the case may be, shall continue to honor all Notices of
Conversion given by Buyer and Buyer shall not be required to honor any Demand
made by Seller, the Seller Parent or the trustee in bankruptcy, as the case may
be.
12. Miscellaneous.
(a) Entire Agreement. This Agreement together with the Debentures,
constitutes the entire agreement between the parties, and neither party shall be
liable or bound to the other in any manner by any warranties, representations or
covenants except as specifically set forth herein. Any previous agreement among
the parties related to the transactions described herein is superseded hereby.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the restrictive successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
(b) Independent Contractor. Buyer is an independent contractor and is
not the agent of Seller. Buyer is not authorized to bind Seller or to make any
representation or warranties on behalf of Seller.
(c) Survival. All representations and warranties contained in this
Agreement by Seller and Buyer shall survive the closing of the transactions
contemplated by this Agreement.
(d) Governing Law. This Agreement shall be construed in accordance with
the laws of Colorado applicable to contracts made and wholly to be performed
within the State of Colorado and shall be binding upon the successors and
assigns of each party hereto. Buyer and Seller hereby mutually waive trial by
jury and consent to exclusive jurisdiction and venue in the courts of the State
of Colorado. At Buyer's election, any dispute between the parties may be
arbitrated rather than litigated in the courts, before the arbitration board of
the American Arbitration Association in Denver and pursuant to its rules. Upon
demand made by the Buyer to the Seller, Seller agrees to submit to and
participate in such arbitration. This Agreement may be executed in counterparts,
and the facsimile transmission of an executed counterpart to this Agreement
shall be effective as an original.
(e) Seller Indemnification. Seller agrees to indemnify and hold Buyer
harmless from any and all claims, damages and liabilities arising from Seller's
breach of its representations and/or covenants set forth herein.
(f) Buyer Indemnification. Buyer agrees to indemnify and hold Seller
harmless from any and all claims, damages and liabilities arising from Buyer's
breach of its representations and warranties set forth in this Agreement.
(g) Form D. Seller shall filed a Form D with the Commission and all
filings required by the Colorado Securities Division upon the Closing of this
transaction.
(h) Notices. All notices, requests, consents and other communications
hereunder shall be in writing, shall be delivered by hand or sent by Fedex for
next day delivery. Each such notice or other communication shall for all
purposes of this Escrow Agreement be treated as effective or having been given
when delivered, if delivered personally, or, if sent by overnight express mail
service, 1 day after the same has been deposited with the Fedex. All such
notices must also be sent by facsimile on the same day to the parties as
follows:
If to Seller: Connecticut Acquisition Corp. No. 1
000 Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxxx 00000
If to Buyer: Carlsbad Capital, LLC
0000 Xxxxx Xxxxxxx Xxxxxxxxx
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Louvre Investors, LLC
0000 Xxxxx Xxxxxxx Xxxxxxxxx #X
Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000
Yellow Stream Company, LLC
0000 Xxxx 00xx Xxxxxx #000
Xxxxxxxxxxx, Xxxxxxxx 00000
(i) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
(j) Buyer Fees. The legal and unaccountable fees of the Buyer in
connection with the preparation of the transaction documents and sale of the
Debentures shall be $30,000 ("Fees") which shall be payable as follows: $6,000
upon the execution of this Escrow Agreement, and $3,000 upon the payment of each
of the Additional Demands. The Fees shall be deducted from the purchase price
proceeds of the Debentures.
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IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date first set forth above.
Official Signatory of Seller:
CONNECTICUT ACQUISITION CORP. NO. 1
By:/s/Connecticut Acquisition Corp. No. 1
--------------------------------------
Title: President
Accepted this 12th day of April, 2001
Official Signatory of Buyer:
LOUVRE INVESTORS LLC
By:/s/ Louvre Investors LLC
--------------------------------------
YELLOW STREAM COMPANY LLC
By:/s/ Yellow Stream Company LLC
--------------------------------------
CARLSBAD CAPITAL LLC
By:/s/ Carlsbad Capital LLC
--------------------------------------
