Exhibit 6.3
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as
of June 17, 1998, among BOULDER CAPITAL OPPORTUNITIES III, INC.,
a corporation organized under the laws of the State of Colorado
(the "Company"), SONIC JET PERFORMANCE, LLC, a limited liability
company organized under the laws of the State of California
("SJP") and the purchasers (the "Purchaser") set forth on the
execution page hereof (the "Execution Pages").
WHEREAS:
A. The Company, SJP and Purchaser are executing and
delivering this Agreement in connection with the reliance by the
Company and the Purchaser upon the exemption from securities
registration afforded by the provisions of Regulation D
("Regulation D"), as promulgated by the United States Securities
and Exchange Commission (the "SEC") under the Securities Act of
1933, as amended (the "Securities Act").
B. The Company and SJP have executed and entered into that
certain Share Exchange Agreement, dated June 15, 1998 (the "Share
Exchange Agreement"), whereby the Company will acquire
substantially all of the assets and liabilities of SJP in
exchange for common stock of the Company (the "Transaction").
After completion of the Transaction the Company will change its
name to "Sonic JET Performance, Inc."
C. The Company desires to sell, and Purchaser desires to
purchase, upon the terms and conditions stated in this Agreement,
1,600 shares of the Company's Series A Convertible Preferred
Stock, no par value (the "Preferred Shares"), convertible into
shares of the Company's common stock, no par value (the "Common
Stock"). The rights, preferences and privileges of the Preferred
Shares, including the terms upon which such Preferred Shares are
convertible into shares of Common Stock, are set forth in the
form of Certificate of Designations, Preferences and Rights
attached hereto as Exhibit A (the "Certificate of Designation").
The shares of Common Stock issuable upon conversion of the
Preferred Shares or otherwise pursuant to the Certificate of
Designation are referred to herein as the "Conversion Shares".
The Preferred Shares, and the Conversion Shares are collectively
referred to herein as the "Securities" and each of them may
individually be referred to herein as a "Security."
D. Contemporaneous with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a
Registration Rights Agreement, in the form attached hereto as
Exhibit B (the "Registration Rights Agreement"), pursuant to
which the Company has agreed to provide certain registration
rights under the Securities Act and the rules and regulations
promulgated thereunder, and applicable state securities laws.
NOW, THEREFORE, the Company, SJP and the Purchaser hereby
agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
(a) Purchase of Preferred Shares. On the Closing Date (as
defined below), subject to the satisfaction (or waiver) of the
conditions set forth in Section 7 and Section 8 below, the
Company shall issue and sell to Purchaser, and Purchaser shall
purchase from the Company, the Preferred Shares. The purchase
price (the "Purchase Price") shall be One Million Five Hundred
Thousand Dollars ($1,500,000.00) for the Preferred Shares.
(b) Form of Payment. On the Closing Date, Purchaser shall
pay the aggregate Purchase Price by wire transfer to the Company,
in accordance with the Company's written wiring instructions,
against delivery of duly executed certificates representing the
Preferred Shares being purchased by Purchaser and the Company
shall deliver such certificates against delivery of such
aggregate Purchase Price.
(c) Closing Date. Subject to the satisfaction (or waiver)
of the conditions thereto set forth in Section 7 and Section 8
below, the date and time of the issuance and sale of the
Preferred Shares pursuant to this Agreement (the "Closing") shall
be 12:00 noon, New York City time, on June 19, 1998, subject to a
two business day grace period at either party's option, but in
any event not later than June 26, 1998, or such other time as may
be mutually agreed upon by the Company and the Purchaser (the
"Closing Date"). The Closing shall occur at the offices of
Klehr, Harrison, Xxxxxx, Xxxxxxxxx & Xxxxxx, LLP, 0000 Xxxxxx
Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000.
2. PURCHASER'S REPRESENTATIONS AND WARRANTIES
Purchaser represents and warrants to the Company as follows:
(a) Purchase for Own Account, Etc. Purchaser is purchasing
the Preferred Shares for Purchaser's own account and not with a
present view towards the public sale or distribution thereof,
except pursuant to sales that are exempt from the registration
requirements of the Securities Act and/or sales registered under
the Securities Act. Purchaser understands that Purchaser must
bear the economic risk of this investment indefinitely, unless
the Securities are registered pursuant to the Securities Act and
any applicable state securities or blue sky laws or an exemption
from such registration is available, and that the Company has no
present intention of registering the resale of any such
Securities other than as contemplated by the Registration Rights
Agreement. Notwithstanding anything in this Section 2(a) to the
contrary, by making the representations herein, the Purchaser
does not agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities
at any time in accordance with or pursuant to a registration
statement or an exemption from the registration requirements
under the Securities Act.
(b) Accredited Investor Status. Purchaser is an
"Accredited Investor" as that term is defined in Rule 501(a) of
Regulation D.
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(c) Reliance on Exemptions. Purchaser understands that the
Preferred Shares are being offered and sold to Purchaser in
reliance upon specific exemptions from the registration
requirements of United States federal and state securities laws
and that the Company is relying upon the truth and accuracy of,
and Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of Purchaser set
forth herein in order to determine the availability of such
exemptions and the eligibility of Purchaser to acquire the
Preferred Shares.
(d) Information. Purchaser and its counsel, if any, have
been furnished all materials relating to the business, finances
and operations of the Company and SJP and materials relating to
the offer and sale of the Preferred Shares which have been
specifically requested by Purchaser or its counsel. Purchaser
and its counsel have been afforded the opportunity to ask
questions of the Company and SJP. Neither such inquiries nor any
other investigation conducted by Purchaser or its counsel or any
of its representatives shall modify, amend or affect Purchaser's
right to rely on the Company's or SJP's representations and
warranties contained in Section 3 and Section 4 below. Purchaser
understands that Purchaser's investment in the Preferred Shares
involves a high degree of risk.
(e) Governmental Review. Purchaser understands that no
United States federal or state agency or any other government or
governmental agency has passed upon or made any recommendation or
endorsement of the Preferred Shares.
(f) Transfer or Resale. Purchaser understands that (i)
except as provided in the Registration Rights Agreement, the sale
or resale of the Preferred Shares and the Conversion Shares have
not been and are not being registered under the Securities Act or
any state securities laws, and the Preferred Shares and the
Conversion Shares may not be transferred unless (a) the resale of
the Preferred Shares or the Conversion Shares, as applicable, has
been registered thereunder; or (b) Purchaser shall have delivered
to the Company an opinion of counsel (which opinion shall be in
form, substance and scope customary for opinions of counsel in
comparable transactions) to the effect that the Preferred Shares
or Conversion Shares to be sold or transferred may be sold or
transferred pursuant to an exemption from such registration; or
(c) the Preferred Shares or the Conversion Shares, as applicable,
are sold under Rule 144 promulgated under the Securities Act (or
a successor rule) ("Rule 144"); or (d) the Preferred Shares or
the Conversion Shares, as applicable, are sold or transferred to
an affiliate of Purchaser who agrees to sell or otherwise
transfer the Preferred Shares or the Conversion Shares, as
applicable, only in accordance with the provisions of this
Section 2(f) and who is an Accredited Investor; and (ii) neither
the Company nor any other person is under any obligation to
register such Preferred Shares or the Conversion Shares under the
Securities Act or any state securities laws (other than pursuant
to the Registration Rights Agreement). Notwithstanding the
foregoing or anything else contained herein to the contrary, the
Preferred Shares or the Conversion Shares may be pledged as
collateral in connection with a bona fide margin account or other
lending arrangement.
(g) Legends. Purchaser understands that the certificates
for the Preferred Shares and, until such time as the Conversion
Shares have been registered under the Securities Act (including
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registration pursuant to Rule 416 thereunder) as contemplated by
the Registration Rights Agreement or otherwise may be sold by
Purchaser under Rule 144, the certificates for the Conversion
Shares may bear a restrictive legend in substantially the
following form:
The securities represented by this certificate have
not been registered under the Securities Act of
1933, as amended, or the securities laws of
any state of the United States. The securities
represented hereby may not be offered, sold or
transferred in the absence of an effective
registration statement for the securities under
applicable securities laws unless offered, sold
or transferred under an available exemption from
the registration requirements of those laws.
The legend set forth above shall be removed and the Company shall
issue a certificate without such legend to the holder of any Security upon which
it is stamped if, unless otherwise required by state securities laws, (a) the
sale of such Security is registered under the Securities Act (including
registration pursuant to Rule 416 thereunder) as contemplated by the
Registration Rights Agreement; (b) such holder provides the Company with an
opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions, to the effect that a public sale or
transfer of such Security may be made without registration under the Securities
Act; or (c) such holder provides the Company with reasonable assurances that
such Security can be sold under Rule 144. Purchaser agrees to sell all
Securities, including those represented by a certificate(s) from which the
legend has been removed, pursuant to an effective registration statement or
under an exemption from the registration requirements of the Securities Act.
In the event the above legend is removed from any Security and thereafter
the effectiveness of a registration statement covering such Security is
suspended or the Company determines that a supplement or amendment thereto
is required by applicable securities laws, then upon reasonable advance
notice to Purchaser the Company may require that the above legend be placed
on any such Security that cannot then be sold pursuant to an effective
registration statement or under Rule 144 and Purchaser shall cooperate in the
replacement of such legend. Such legend shall thereafter be removed when
such Security may again be sold pursuant to an effective registration
statement or under Rule 144.
(h) Authorization; Enforcement. This Agreement and the Registration
Rights Agreement have been duly and validly authorized, executed and
delivered on behalf of Purchaser and are valid and binding agreements of
Purchaser enforceable against Purchaser in accordance with their terms.
(i) Residency. Purchaser is a resident of the jurisdiction set forth
under Purchaser's name on the Execution Page hereto executed by Purchaser.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to Purchaser as follows:
(a) Organization and Qualification. The Company and each of its
subsidiaries is a corporation duly organized and existing in good standing
under the laws of the jurisdiction in which it is incorporated, and has the
requisite corporate power to own its properties and to carry on its business
as now being conducted. The Company and each of its subsidiaries is duly
qualified as a foreign corporation to do business and is in good standing
in every jurisdiction in which its ownership of property or the nature of
the business conducted by it makes such qualification necessary and where
the failure so to qualify would have a Material Adverse Effect. "Material
Adverse Effect" means any material adverse effect on (i) the Securities,
(ii) the ability of the Company or SJP to perform its obligations hereunder
or under the Certificate of Designation or the Registration Rights Agreement,
(iii) the ability of the Company or SJP to consummate the Transaction or
(iv) the business, operations, properties, prospects or financial condition
of the Company or SJP and their subsidiaries, taken as a respective whole.
(b) Authorization; Enforcement. (i) The Company has the requisite
corporate power and authority to enter into and perform its obligations
under this Agreement and the Registration Rights Agreement, to issue and sell
the Preferred Shares in accordance with the terms hereof, to issue the
Conversion Shares upon conversion of the Preferred Shares in accordance
with the terms of the Certificate of Designation; (ii) the execution, delivery
and performance of this Agreement and the Registration Rights Agreement by
the Company and the consummation by it of the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the
Preferred Shares and the issuance and reservation for issuance of the
Conversion Shares) have been duly authorized by the Company's Board of
Directors and no further consent or authorization of the Company, its Board of
Directors, any committee of the Board of Directors or the Company's
shareholders is required, and (iii) this Agreement constitutes, and, upon
execution and delivery by the Company of the Registration Rights Agreement,
such agreements will constitute, valid and binding obligations of
the Company enforceable against the Company in accordance with their terms.
(c) Stockholder Authorization. The Company believes that neither the
execution, delivery or performance of this Agreement or the Registration
Rights Agreement by the Company nor the consummation by it of the
transactions contemplated hereby or thereby (including, without limitation,
the Transaction, the issuance of the Preferred Shares or the issuance,
reservation for issuance or listing of the Conversion Shares) requires any
consent, approval or authorization of the Company's stockholders.
(d) Capitalization. The capitalization of the Company as of the
date hereof and the pro forma capitalization of the Company assuming the
consummation of the Transaction, including the authorized capital stock, the
number of shares issued and outstanding, the number of shares issuable
and reserved for issuance pursuant to the Company's stock option plans, the
number of shares issuable and reserved for issuance pursuant to
securities (other than the Preferred Shares)
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exercisable or exchangeable for, or convertible into, any shares of
capital stock is set forth on Schedule 3(d). All of such outstanding
shares of capital stock have been, or upon issuance in accordance with the
terms of any such warrants, options or preferred stock, will be, validly
issued, fully paid and non-assessable. No shares of capital stock of the
Company (including the Preferred Shares, the Conversion Shares) are subject
to preemptive rights or any other similar rights of the stockholders of the
Company or any liens or encumbrances. Except for the Securities and as set
forth on Schedule 3(d), as of the date of this Agreement, (i) there are
no outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or
rights convertible into or exercisable or exchangeable for, any shares of
capital stock of the Company or any of its subsidiaries, or arrangements
by which the Company or any of its subsidiaries is or may become bound to
issue additional shares of capital stock of the Company or any of its
subsidiaries, and (ii) there are no agreements or arrangements under which
the Company or any of its subsidiaries is obligated to register the sale of
any of its or their securities under the Securities Act (except the
Registration Rights Agreement). Except as set forth on Schedule 3(d), (i)
there are no securities or instruments containing anti-dilution or similar
provisions that will be triggered by the issuance of the Securities in
accordance with the terms of this Agreement, the Certificate of Designation,
(ii) there are no outstanding securities or instruments of the Company
or any ofits subsidiaries which contain any redemption or similar provisions,
and there are no contracts, commitments, understandings or arrangements
by which the Company or any of its subsidiaries is or may become bound to
redeem a security of the Company or any of its subsidiaries, and (iii) the
Company does not have any stock appreciation rights or "phantom stock" plans
or agreements or any similar plan or agreement. The Company has furnished to
the Purchaser true and correct copies of the Company's Certificate of
Incorporation as in effect on the date hereof ("Certificate of
Incorporation"), the Company's By-laws as in effect on the date hereof
(the "By-laws"), and all other instruments and agreements governing
securities convertible into or exercisable or exchangeable for capital stock
of the Company. The Certificate of Designation, in the form attached
hereto, will be duly filed prior to Closing with the Secretary of State of
the State of Colorado and, upon the issuance of the Preferred Shares
in accordance with the terms hereof, each Purchaser shall be entitled to the
rights set forth therein.
(e) Issuance of Shares. The Preferred Shares are duly authorized
and, upon issuance in accordance with the terms of this Agreement, will be
validly issued, fully paid and non assessable, and free from all taxes,
liens, claims and encumbrances and will not be subject to preemptive rights
or other similar rights of stockholders of the Company and will not impose
personal liability on the holders thereof. The Conversion Shares are duly
authorized and, in accordance with the Certificate of Designation reserved
for issuance, and, upon conversion of the Preferred Shares in accordance with
the terms thereof, will be validly issued, fully paid and non-assessable, and
free from all taxes, liens, claims and encumbrances and will not be subject
to preemptive rights or other similar rights of stockholders of the Company
and will not impose personal liability upon the holder thereof.
(f) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement by the Company, the
performance by the Company of its obligations under the Certificate of
Designation, and the consummation by the Company of the transactions
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contemplated hereby and thereby (including, without limitation, the
Transaction, the issuance and reservation for issuance, as applicable, of the
Preferred Shares and Conversion Shares) will not (i) result in a violation
of the Certificate of Incorporation or By-laws or (ii) conflict with, or
constitute a default (or an event which, with notice or lapse of time or
both, would become a default) under, or give to others any rights of
termination, amendment (including, without limitation, the triggering of
any anti-dilution provisions), acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule,
regulation, order, judgment or decree (including federal and state securities
laws and regulations and rules or regulations of any self-regulatory
organizations to which either the Company or its securities are subject)
applicable to the Company or any of its subsidiaries or by which any
property or asset of the Company or any of its subsidiaries is bound or
affected (except, with respect to clause (ii), for such conflicts,
defaults, terminations, amendments, accelerations, cancellations and
violations that would not, individually or in the aggregate, have a Material
Adverse Effect). Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation, By-laws or other
organizational documents and neither the Company nor any of its subsidiaries
is in default (and no event has occurred which, with notice or lapse of
time or both, would put the Company or any of its subsidiaries in default)
under, nor has there occurred any event giving others (with notice or lapse
of time or both) any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company
or any of its subsidiaries is a party, except for actual or possible
violations, defaults or rights that would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of the Company
and its subsidiaries are not being conducted, and shall not be conducted so
long as Purchaser owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations the sanctions for which either singly or in the aggregate would
not have a Material Adverse Effect. Except as specifically contemplated by
this Agreement and the Registration Rights Agreement, the Company is not
required to obtain any consent, approval, authorization or order of, or make
any filing or registration with, any court or governmental agency or any
regulatory or self regulatory agency in order for it to execute, deliver or
perform any of its obligations under this Agreement or the Registration
Rights Agreement or to perform its obligations under the Certificate of
Designation, in each case in accordance with the terms hereof or thereof.
(g) SEC Documents, Financial Statements. Since December 31, 1994,
the Company has timely filed (within applicable extension periods) all
reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (all of
the foregoing and all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the "SEC Documents"). The Company has
delivered to the Purchaser true and complete copies of the SEC Documents. As
of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act or the Securities Act, as
the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to the SEC Documents, and none of the SEC Documents, at
the time they were filed with the SEC, contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
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therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
statements made in any such SEC Documents is, or has been, required to be
amended or updated under applicable law (except for such statements as have
been amended or updated in subsequent filings made prior to the date hereof).
As of their respective dates, the financial statements of the Company
included in the SEC Documents complied as to form in all material respects
with applicable accounting requirements and the published rules and
regulations of the SEC applicable with respect thereto. Such financial
statements have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP"), consistently applied, during the periods
involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto, or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed
or summary statements) and fairly present in all material respects the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operations and cash flows for the periods then ended (subject, in the case
of unaudited statements, to immaterial year-end audit adjustments). Except
as set forth in the financial statements of the Company included in the SEC
Documents filed prior to the date hereof, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to the date of such financial statements, (ii)
liabilities not required by GAAP to be disclosed on a balance sheet prepared in
accordance with GAAP, and (iii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under GAAP to
be reflected in such financial statements, which liabilities and obligations
referred to in clauses (i), (ii) and (iii), individually or in the aggregate,
are not material to the financial condition or operating results of the
Company. Neither the Company nor any of its subsidiaries or any of their
officers, directors, employees or agents have provided the Purchaser with any
material, nonpublic information.
(h) Absence of Certain Changes. Since December 31, 1997, there has
been no material adverse change and no material adverse development in the
business, properties, operations, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, except as
disclosed in Schedule 3(h) or in the SEC Documents filed prior to the date
hereof.
(i) Absence of Litigation. Except as set forth on Schedule 3(i) and as
expressly disclosed in the SEC Documents filed prior to the date hereof,
there is no action, suit, proceeding, inquiry or investigation before or by
any court, public board, government agency, self-regulatory organization or
body pending or, to the knowledge of the Company or any of its subsidiaries,
threatened against or affecting the Company, any of its subsidiaries, or
any of their respective directors or officers in their capacities as such.
There are no facts which, if known by a potential claimant or governmental
authority, could give rise to a claim or proceeding which, if asserted or
conducted with results unfavorable to the Company or any of its subsidiaries,
could reasonably be expected to have a Material Adverse Effect.
(j) Intellectual Property. Each of the Company and its subsidiaries
owns or is licensed to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, permits, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
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systems or procedures) and other similar rights and proprietary knowledge
(collectively, "Intangibles") necessary for the conduct of its business as
now being conducted and as described in the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 1997. To the best knowledge of
the Company, neither the Company nor any subsidiary of the Company infringes
or is in conflict with any right of any other person with respect to any
Intangibles which, individually or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse
Effect. Neither the Company nor any of its subsidiaries has received written
notice of any pending conflict with or infringement upon such third party
Intangibles, which alleged pending conflict or alleged infringement, if
adversely determined, would result in a Material Adverse Effect. Except as
disclosed in the SEC Documents filed prior to the date hereof, the
termination of the Company's ownership of, or right to use, any single
Intangible would not result in a Material Adverse Effect on the Company.
Neither the Company nor any of its subsidiaries has entered into any consent
agreement, indemnification agreement, forbearance to xxx or settlement
agreement with respect to the validity of the Company's or its subsidiaries'
ownership or right to use its Intangibles and, to the best knowledge of the
Company, there is no reasonable basis for any such claim to be successful.
The Intangibles are valid and enforceable and no registration relating
thereto has lapsed, expired or been abandoned or canceled or is the subject
of cancellation or other adversarial proceedings, and all applications
therefor are pending and in good standing. The Company and its subsidiaries
have complied, in all material respects, with their respective contractual
obligations relating to the protection of the Intangibles used pursuant to
licenses. To the best knowledge of the Company, no person is infringing on or
violating the Intangibles owned or used by the Company or its subsidiaries.
(k) Foreign Corrupt Practices. Neither the Company, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of the Company or any subsidiary has, in the course of his
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful payment
to any foreign or domestic government official or employee from corporate
funds; violated or is in violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
(l) Disclosure. All information relating to or concerning the Company
set forthin this Agreement or provided to the Purchasers pursuant to Section
2(d) hereof or otherwise in connection with the transactions contemplated
hereby is true and correct in all material respects and the Company has
not omitted to state any material fact necessary in order to make the
statements made herein or therein, in light of the circumstances under which
they were made, not misleading. No event or circumstance has occurred or
exists with respect to the Company or its subsidiaries or their respective
businesses, properties, prospects, operations or financial conditions, which
has not been publicly disclosed but, under applicable law, rule or
regulation, would be required to be disclosed by the Company in a
registration statement filed on the date hereof by the Company under the
Securities Act with respect to the primary issuance of the Company's securities.
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(m) Acknowledgment Regarding Purchaser's Purchase of the Preferred
Shares. The Company acknowledges and agrees that the Purchaser is not acting
as a financial advisor or fiduciary of the Company (or in any similar capacity)
with respect to this Agreement or the transactions contemplated hereby, the
relationship between the Company and the Purchaser is "arms length" and any
statement made by Purchaser or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby is not
advice or a recommendation and is merely incidental to Purchaser's purchase
of the Preferred Shares and has not been relied upon by the Company, its
officers or its directors in any way. The Company further acknowledges that
the Company's decision to enter into this Agreement has been based solely on
an independent evaluation by the Company and its representatives.
(n) Form SB-2 Eligibility. The Company is currently eligible to
register the resale of its Common Stock on a registration statement on Form
SB-2 under the Securities Act. There exist no facts or circumstances that
would prohibit or delay the preparation and filing of a registration
statement on Form SB-2 with respect to the Registrable Securities (as
defined in the Registration Rights Agreement).
(o) No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated
hereby (if any) nor any person acting for the Company, or any such
distributor, has conducted any "general solicitation," as such term is
defined in Regulation D, with respect to any of the Securities being offered
hereby.
(p) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers
to buy any security under circumstances that would require registration of
the Securities being offered hereby under the Securities Act or cause this
offering of Securities to be integrated with any prior offering of securities
of the Company for purposes of the Securities Act or any applicable
stockholder approval provisions.
(q) No Brokers. Except for a consulting fee payable to CDC Consulting,
Inc. In the amount of 400,000 shares of Common Stock, the Company has taken
no action which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by any Purchaser relating to
this Agreement or the transactions contemplated hereby.
(r) Acknowledgment of Dilution. The number of Conversion Shares
issuable upon conversion of the Preferred Shares may increase in certain
circumstances, including if the trading price of the Common Stock declines.
The Company's executive officers have studied and fully understand the nature
of the Securities being sold hereunder. The Company acknowledges that its
obligation to issue Conversion Shares upon conversion of the Preferred Shares
in accordance with the Certificate of Designation is absolute and
unconditional, regardless of the dilution that such issuance may have on the
ownership interests of other stockholders. Taking the foregoing into account,
the Company's Board of Directors has determined in its good faith business
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judgment that the issuance of the Preferred Shares hereunder and the
consummation of the other transactions contemplated hereby are in the best
interests of the Company and its stockholders.
(s) Title. The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and merchantable title to
all personal property owned by them that is material to the business of the
Company and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 3(s) or
such as do not materially affect the value of such property and do not
materially interfere with the use made and proposed to be made of such property
by the Company and its subsidiaries. Any real property and facilities held
under lease by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material
and do not materially interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries.
(t) Tax Status. Except as set forth on Schedule 3(t), the Company and
each of its subsidiaries has made or filed all foreign, federal, state and
local income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and only to the extent
that the Company and each of its subsidiaries has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes) and has paid all taxes and other governmental assessments and charges
that are material in amount, shown or determined to be due on such returns,
reports and declarations, except those being contested in good faith and has
set aside on its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. Except as set forth on Schedule 3(t), there are no
unpaid taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company know of no basis for any
such claim. The Company has not executed a waiver with respect to any
statute of limitations relating to the assessment or collection of any
federal, state or local tax. Except as set forth on Schedule 3(t), none of
the Company's tax returns is presently being audited by any taxing authority.
(u) Environmental Laws. The Company and each of its subsidiaries
(i) are in compliance with any and all applicable foreign, federal, state
and local laws and regulations relating to the protection of human health
and safety, the environment or hazardous or toxic substances or wastes,
pollutants or contaminants ("Environmental Laws"), (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are in
compliance with all terms and conditions of any such permit, license or
approval.
(v) Regulatory Permits. The Company and each of its subsidiaries
possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities necessary to
conduct their respective businesses, and neither the Company nor any such
subsidiary has received any notice of proceedings relating to the revocation
or modification of any such certificate, authorization or permit.
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(w) No Other Agreements. The Company has not, directly or indirectly,
made any agreements with Purchaser relating to the terms or conditions of the
transactions contemplated by this Agreement, the Certificate of Designation
and the RegistrationRights Agreement except as set forth in such documents.
(x) Eligibility for Sale Under Rule 144. The Company's Common Stock
is eligible for resale under Rule 144 promulgated under the Securities Act of
1933, as amended, without regard to the status of any holder of such Common
Stock as an affiliate of the Company or any applicable holding period
thereunder. Upon consummation of the Transaction, Kapher Trust will not be
an affiliate of the Company. For the purposes of this Section 3(x), the
term "affiliate" shall be defined as set forth in section (a)(1) of Rule 144
promulgated under the Securities Act ("Rule 144").
4. REPRESENTATIONS AND WARRANTIES OF SJP.
SJP represents and warrants to each Purchaser as follows:
(a) Organization and Qualification. SJP and each of its subsidiaries
is a corporation duly organized and existing in good standing under the laws of
the jurisdiction in which it is incorporated, and has the requisite corporate
power to own its properties and to carry on its business as now being
conducted. SJP and each of its subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every jurisdiction in
which its ownership of property or the nature of the business conducted by it
makes such qualification necessary and where the failure so to qualify would
have a Material Adverse Effect.
(b) Authorization; Enforcement. (i) SJP has the requisite corporate
power and authority to enter into and perform its obligations under this
Agreement; (ii) the execution, delivery and performance of this Agreement by
SJP and the consummation by it of the transactions contemplated hereby
(including, without limitation, the Transaction) have been duly authorized by
SJP's Board of Directors and no further consent or authorization of SJP, its
Board of Directors, any committee of the Board of Directors or SJP's
shareholders is required; and (iii) this Agreement constitutes valid and
binding obligations of SJP enforceable against SJP in accordance with their
terms.
(c) Stockholder Authorization. Neither the execution, delivery
or performance of this Agreement by SJP nor the consummation by it of
the transactions contemplated hereby (including, without limitation,
the Transaction) requires any consent, approval or authorization of SJP's
stockholders.
(d) Capitalization. The capitalization of SJP as of the date
hereof, including the authorized capital stock, the number of shares
issued and outstanding, the number of shares issuable and reserved for
issuance pursuant to SJP's stock option plans, the number of shares
issuable and reserved for issuance pursuant to securities exercisable or
exchangeable for, or convertible into, any shares of capital stock is
set forth on Schedule 4(d). All of such outstanding shares of capital
stock have been, or upon issuance in accordance with the terms of
any such warrants, options or preferred stock, will be, validly issued,
fully paid and non-assessable. No shares of capital stock of SJP
are subject to preemptive rights or any other similar rights of the
stockholders of SJP or any liens or encumbrances. Except for the Securities
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and as set forth on Schedule 4(d), as of the date of this Agreement,
(i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating
to, or securities or rights convertible into or exercisable or
exchangeable for, any shares of capital stock of SJP or any of
its subsidiaries, or arrangements by which SJP or any of its subsidiaries
is or may become bound to issue additional shares of capital stock of
SJP or any of its subsidiaries, and (ii) there are no agreements or
arrangements under which SJP or any of its subsidiaries is obligated
to register the sale of any of its or their securities under the
Securities Act. Except as set forth on Schedule 4(d), (i)there are no
securities or instruments containing anti-dilution or similar provisions
that will be triggered by the execution of this Agreement, (ii) there
are no outstanding securities or instruments of SJP or any of its
subsidiaries which contain any redemption or similar provisions, and
there are no contracts, commitments, understandings or arrangements
by which SJP or any of its subsidiaries is or may become bound to redeem a
security of SJP or any of its subsidiaries, and (iii) SJP does not have
any stock appreciation rights or "phantom stock" plans or agreements or
any similar plan or agreement. SJP has furnished to the Purchaser
true and correct copies of SJP's Certificate of Incorporation as in
effect on the date hereof ("Certificate of Incorporation"), SJP's
By-laws as in effect on the date hereof (the "By-laws"), and all other
instruments and agreements governing securities convertible into or
exercisable or exchangeable for capital stock of SJP.
(e) No Conflicts. The execution, delivery and performance of this
Agreement by SJP and the consummation by SJP of the transactions
contemplated hereby and thereby (including, without limitation, the
Transaction) will not (i) result in a violation of the Certificate of
Incorporation or By-laws or (ii) conflict with, or constitute a
default (or an event which, with notice or lapse of time or both, would
become a default) under, or give to others any rights of termination,
amendment (including, without limitation, the triggering of any
anti-dilution provisions), acceleration or cancellation of, any
agreement, indenture or instrument to which SJP or any of its subsidiaries
is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and rules or regulations of any self- regulatory organizations
to which either SJP or its securities are subject) applicable to SJP or any
of its subsidiaries or by which any property or asset of SJP or any of
its subsidiaries is bound or affected (except, with respect to clause
(ii), for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations that would not, individually
or in the aggregate, have a Material Adverse Effect). Neither SJP nor any
of its subsidiaries is in violation of its Certificate of Incorporation,
By-laws or other organizational documents and neither SJP nor any of its
subsidiaries is in default (and no event has occurred which, with notice
or lapse of time or both, would put SJP or any of its subsidiaries in default)
under, nor has there occurred any event giving others (with notice or
lapse of time or both) any rights of termination, amendment, acceleration
or cancellation of, any agreement, indenture or instrument to which
SJP or any of its subsidiaries is a party, except for actual or possible
violations, defaults or rights that would not, individually or in the
aggregate, have a Material Adverse Effect. The businesses of SJP and its
subsidiaries are not being conducted, and shall not be conducted so
long as Purchaser owns any of the Securities, in violation of any law,
ordinance or regulation of any governmental entity, except for possible
violations the sanctions for which either singly or in the aggregate
would not have a Material Adverse Effect. Except as specifically
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contemplated by this Agreement and the Registration Rights Agreement,
SJP is not required to obtain any consent, approval, authorization or order
of, or make any filing or registration with, any court or governmental
agency or any regulatory or self regulatory agency in order for it to
execute, deliver or perform any of its obligations under this Agreement
or the Registration Rights Agreement in accordance with the terms hereof
or thereof.
(f) Absence of Certain Changes. Since December 31, 1997, there has
been no material adverse change and no material adverse development in the
business, properties, operations, prospects, financial condition or results
of operations of SJP and its subsidiaries, taken as a whole, except as
disclosed in Schedule 4(f) or in the Disclosure Materials (as defined below).
(g) Absence of Litigation. Except as set forth on Schedule 4(g) and
as expressly disclosed in the Disclosure Materials (as defined below) filed
prior to the date hereof, there is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of SJP
or any of its subsidiaries, threatened against or affecting SJP, any of its
subsidiaries, or any of their respective directors or officers in
their capacities as such. There are no facts which, if known by a potential
claimant or governmental authority, could give rise to a claim or
proceeding which, if asserted or conducted with results unfavorable
to SJP or any of its subsidiaries, could reasonably be expected to have
a Material Adverse Effect.
(h) Intellectual Property. Each of SJP and its subsidiaries
owns or is licensed to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, permits, 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 and as described in the Disclosure Materials (as
defined below). To the best knowledge of SJP, neither SJP nor any
subsidiary of SJP infringes or is in conflict with any right of any other
person with respect to any Intangibles which, individually or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect. Neither SJP nor any of its
subsidiaries has received written notice of any pending conflict with or
infringement upon such third party Intangibles, which alleged pending
conflict or alleged infringement, if adversely determined, would result
in a Material Adverse Effect. Except as disclosed in the Disclosure
Materials (as defined below), the termination of SJP's ownership of, or
right to use, any single Intangible would not result in a Material Adverse
Effect on SJP. Neither SJP nor any of its subsidiaries has entered into
any consent agreement, indemnification agreement, forbearance to xxx or
settlement agreement with respect to the validity of SJP's or its
subsidiaries' ownership or right to use its Intangibles and, to the best
knowledge of SJP, there is no reasonable basis for any such claim to be
successful. The Intangibles are valid and enforceable and no registration
relating thereto has lapsed, expired or been abandoned or canceled or is
the subject of cancellation or other adversarial proceedings, and all
applications therefor are pending and in good standing. SJP and its
subsidiaries have complied, in all material respects, with their respective
contractual obligations relating to the protection of the Intangibles
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used pursuant to licenses. To the best knowledge of SJP, no person
is infringing on or violating the Intangibles owned or used by SJP or its
subsidiaries.
(i) Foreign Corrupt Practices. Neither SJP, nor any of its
subsidiaries, nor any director, officer, agent, employee or other person
acting on behalf of SJP or any subsidiary has, in the course of his
actions for, or on behalf of, SJP, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977; or made any bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
(j) Disclosure. All information relating to or concerning SJP set
forth in this Agreement or provided to the Purchasers pursuant to Section
2(d) hereof or otherwise in connection with the transactions contemplated
hereby is true and correct in all material respects and SJP has not omitted to
state any material fact necessary in order to make the statements made
herein or therein, in light of the circumstances under which they were
made, not misleading. No event or circumstance has occurred or exists
with respect to SJP or its subsidiaries or their respective businesses,
properties, prospects, operations or financial conditions, which has not
been publicly disclosed but, under applicable law, rule or regulation,
would be required to be disclosed by SJP in a registration statement filed
on the date hereof by SJP under the Securities Act with respect to the
primary issuance of SJP's securities.
(k) Acknowledgment Regarding Purchaser's Purchase of the Preferred
Shares. SJP acknowledges and agrees that the Purchaser is not acting as a
financial advisor or fiduciary of SJP (or in any similar capacity) with
respect to this Agreement or the transactions contemplated hereby, the
relationship between SJP and the Purchaser is "arms-length" and any
statement made by any Purchaser or any of its representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
not advice or a recommendation and is merely incidental to Purchaser's
purchase of the Preferred Shares and has not been relied upon by SJP, its
officers or its directors in any way. SJP further acknowledges that SJP's
decision to enter into this Agreement has been based solely on an
independent evaluation by SJP and its representatives.
(l) No Brokers. Except for a consulting fee payable to CDC Consulting,
Inc. In the amount of 400,000 shares of Common Stock, SJP has taken no
action which would give rise to any claim by any person for brokerage
commissions, finder's fees or similar payments by any Purchaser
relating to this Agreement or the transactions contemplated hereby.
(m) Title. SJP and its subsidiaries have good and marketable
title in fee simple to all real property and good and merchantable title to
all personal property owned by them that is material to the business of SJP
and its subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as are described in Schedule 4(m)
or such as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property by SJP and its subsidiaries. Any real property and facilities held
-15-
under lease by SJP and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not material
and do not materially interfere with the use made and proposed to be made
of such property and buildings by SJP and its subsidiaries.
(n) Tax Status. Except as set forth on Schedule 4(n), SJP and each
of its subsidiaries has made or filed all foreign, federal, state and
local income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject (unless and only to the extent
that SJP and each of its subsidiaries has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported taxes) and
has paid all taxes and other governmental assessments and charges that are
material in amount, shown or determined to be due on such returns, reports
and declarations, except those being contested in good faith and has set
aside on its books provisions reasonably adequate for the payment of all
taxes for periods subsequent to the periods to which such returns,
reports or declarations apply. Except as set forth on Schedule 4(n), there
are no unpaid taxes in any material amount claimed to be due by the taxing
authority of any jurisdiction, and the officers of SJP know of no basis
for any such claim. SJP has not executed a waiver with respect to any
statute of limitations relating to the assessment or collection of any
federal, state or local tax. Except as set forth on Schedule 4(n), none of
SJP's tax returns is presently being audited by any taxing authority.
(o) Environmental Laws. SJP and each of its subsidiaries (i) are
in compliance with any and all Environmental Laws, (ii) have received all
permits, licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license or
approval.
(p) Regulatory Permits. SJP and each of its subsidiaries possess
all certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither SJP nor any such subsidiary has received
any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
(q) No Other Agreements. SJP has not, directly or indirectly,
made any agreements with Purchaser relating to the terms or conditions of the
transactions contemplated by this Agreement, the Certificate of
Designation and the Registration Rights Agreement except as set forth in
such documents.
(r) Disclosure Materials. The financial statements of SJP dated
December 31, 1997 and any other financial statements delivered by SJP
to the Purchasers (the "Financial Statements" and, together with the
Schedules to this Agreement and other documents and information furnished
by or on behalf of SJP at any time prior to the Closing, the "Disclosure
Materials") comply in all material respects with applicable accounting
requirements. Such Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved, except as may be otherwise specified in such
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Financial Statements or the notes thereto, and fairly present in all material
respects the financial position of SJP as of and for the dates thereof and
the results of operations and cash flows for the periods then ended,
subject, in the case of unaudited statements, to normal year-end audit
adjustments. There are not liabilities, contingent or otherwise, of SJP
involving material amounts not disclosed in said Financial Statements.
The Disclosure Materials do not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since
December 31, 1997 there has been no event, occurrence or development that
has had or that could have or result in a Material Adverse Effect.
5. COVENANTS.
(a) Best Efforts. The parties shall use their best efforts timely to
satisfy each of the conditions described in Section 7 and Section 8 of this
Agreement.
(b) Form D: Blue Sky Laws. The Company shall file with the SEC a
Form D with respect to the Securities as required under Regulation D and to
provide a copy thereof to each Purchaser promptly after such filing. The
Company shall, on or before the Closing Date, take such action as the Company
shall reasonably determine is necessary to qualify the Securities for sale
to the Purchaser pursuant to this Agreement under applicable securities or
"blue sky" laws of the states of the United States or obtain exemption
therefrom, and shall provide evidence of any such action so taken to the
Purchasers on or prior to the Closing Date.
(c) Reporting Status. So long as any Purchaser beneficially
owns any of the Securities, the Company shall timely file all reports
required to be filed with the SEC pursuant to the Exchange Act, and the
Company shall not terminate its status as an issuer required to file reports
under the Exchange Act even if the Exchange Act or the rules and regulations
thereunder would permit such termination. In addition, the Company shall
take all actions necessary to continue to be eligible to register the
resale of its Common Stock on a registration statement on Form SB2 under the
Securities Act.
(d) Use of Proceeds. The Company shall use the proceeds from the
sale of the Preferred Shares as set forth in Schedule 5(d).
(e) Expenses. Except as otherwise provided herein and in Section 5 of
the Registration Rights Agreement, each party hereto shall be responsible for
its own expenses incurred in connection with the negotiation, preparation,
execution, delivery and performance of this Agreement and the other
agreements to be executed in connection herewith.
(f) Financial Information. The Company shall send the following
reports to Purchaser until Purchaser transfers, assigns or sells all of
its Securities: (i) within 10 days after the filing with the SEC, a copy
of its Annual Report on Form 10-KSB, its Quarterly Reports on Form 10-QSB,
its proxy statements and any Current Reports on Form 8-K; (ii) within
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one day after release, copies of all press releases issued by the Company
or any of its subsidiaries; and (iii) copies of any notices and other
information made available or given to shareholders of the Company generally,
contemporaneously with making available or giving thereof to such
shareholders.
(g) Reservation of Shares. The Company shall at all times have
authorized and reserved for the purpose of issuance a sufficient number of
shares of Common Stock to provide for the full conversion of the
outstanding Preferred Shares and issuance of the Conversion Shares in
connection therewith, subject to and as otherwise required by the
Certificate of Designation, as applicable.
(h) Listing. The Company shall promptly secure the listing of the
Conversion Shares upon the American Stock Exchange ("AMEX"), the New York
Stock Exchange ("NYSE"), the Nasdaq National Market ("NNM"), the Nasdaq
SmallCap Market ("SmallCap") or in the over-the-counter market on the
electronic bulletin board (the "Bulletin Board") and will comply in all
respects with the reporting, filing and other obligations under the
Listing Standards, Policies and Requirements of the AMEX and the bylaws or
rules of the NYSE and the National Association of Securities Dealers, Inc.,
as applicable and shall maintain, so long as Purchaser (or any of their
affiliates) own any Securities, such listing of all Conversion Shares from
time to time issuable upon conversion of the Preferred Shares, as applicable.
The Company shall promptly provide to each holder of Preferred Shares copies
of any notices it receives regarding the continued eligibility of the
Common Stock for trading on any securities exchange or automated quotation
system on which securities of the same class or series issued by the Company
are then listed or quoted, if any.
(i) Corporate Existence. So long as a Purchaser beneficially
owns any Securities, the Company shall maintain its corporate existence, and
in the event of a merger, consolidation or sale of all or substantially all
of the Company's assets, the Company shall ensure that the surviving or
successor entity in such transaction (i) assumes the Company's obligations
hereunder and under the Certificate of Designation (except as otherwise
provided therein) and the agreements and instruments entered into in
connection herewith regardless of whether or not the Company would have had a
sufficient number of shares of Common Stock authorized and available for
issuance in order to effect the conversion of all Preferred Shares
outstanding as of the date of such transaction and (ii) is a publicly traded
corporation whose common stock is listed for trading on the AMEX, NYSE,
NNM, SmallCap or the Bulletin Board. Notwithstanding the foregoing, the
Company covenants and agrees that it will not engage in any merger,
consolidation or sale of all or substantially all of its assets at any time
prior to the effectiveness of the registration statement required to be
filed pursuant to the Registration Rights Agreement without (A) providing
Purchaser with written notice of such transaction at least 60 days
prior to the consummation of such transaction, (B) obtaining the
written consent of the Purchaser on or before the 10th day after the
delivery of such notice by the Company, and (C) publicly announcing
such transaction.
(j) No Integrated Offerings. The Company shall not make any offers
or sales of any security (other than the Securities) under circumstances
that would require registration of the Securities being offered or sold
hereunder under the Securities Act or cause the offering of the Securities
-18-
to be integrated with any other offering of securities by the Company for
purposes of any stockholder approval provision applicable to the Company
or its securities.
(k) Legal Compliance. The Company shall conduct its business and
the business of its subsidiaries in compliance with all laws, ordinances or
regulations of governmental entities applicable to such businesses, except
where the failure to do so would not have a Material Adverse Effect.
(l) Filing of Form 8-K. On or before the first (1st) business day
following the Closing Date, the Company shall file a Current Report on Form
8-K with the SEC describing the terms of the transactions contemplated by
this Agreement, the Certificate of Designation and the Registration Rights
Agreement in the form required by the Exchange Act.
(m) Capital and Surplus; Special Reserves. The amount to be
represented in the capital account for the Series A Preferred Stock at all
times for each outstanding share of Series A Preferred Stock shall be
an amount equal to the Redemption Amount therefor.
(n) Additional Equity Capital; Right of First Offer. The Company and
SJP agree that during the period beginning on the date hereof and ending
on the date which is 180 days following the Closing Date (the "Lock-Up
Period"), the Company will not obtain additional financing in which any
equity or equity- linked securities are issued (including any debt
financing with an equity component) ("Future Offerings") without first
obtaining the written consent of the Purchaser. In addition, during the
period beginning on the date hereof and ending 180 days following the
expiration of the Lock-Up Period, the Company will not conduct a future
offering unless it shall have first delivered to Purchaser, at least ten
(10) business days prior to the closing of such Future Offering, written
notice describing the proposed Future Offering, including the terms and
conditions thereof, and providing Purchaser and its affiliates an option
during the ten (10) business day period following delivery of such
notice to purchase all of the securities being offered in the Future
Offering on the same terms as contemplated by such Future Offering
(the limitation referred to in this Section 5(n) is referred to as the
"Capital Raising Limitation"). The Capital Raising Limitation shall not apply
to any transaction involving issuances of securities as consideration in
a merger, consolidation or acquisition of assets, or in connection with any
strategic partnership or joint venture (the primary purpose of which is
not to raise equity capital), or as consideration for the acquisition of a
business, product or license by the Company. The Capital Raising Limitation
also shall not apply to (i) the issuance of securities pursuant to an
underwritten public offering, (ii) the issuance of securities upon
exercise or conversion of the Company's options, warrants or other
convertible securities outstanding as of the date hereof or (iii) the grant
of additional options or warrants, or the issuance of additional securities,
under any duly authorized Company stock option or restricted stock plan for
the benefit of the Company's employees or directors.
(o) The Company shall have filed, within ten (10) days of the Closing
hereunder, a complete application on Form 211 with the National Association
of Securities Dealers seeking approval for the quotation of the Company's
Common Stock in the over
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the counter market on the Electronic Bulletin Board by the National
Association of Securities Dealers, Inc.
6. TRANSFER AGENT INSTRUCTIONS.
(a) The Company shall instruct its transfer agent to issue
certificates, registered in the name of each Purchaser or its nominee,
for the Conversion Shares in such amounts as specified from time to time by
such Purchaser to the Company upon conversion of the Preferred Shares, as
applicable.
(b) The Company warrants that no instruction other than such
instructions referred to in this Section 6, and stop transfer instructions
to give effect to Section 2(f) hereof in the case of the transfer of the
Conversion Shares prior to registration of the Conversion Shares under the
Securities Act or without an exemption therefrom, will be given by the
Company to its transfer agent and that the Securities shall otherwise be
freely transferable on the books and records of the Company as and to the
extent provided in this Agreement and the Registration Rights Agreement.
Nothing in this Section shall affect in any way each Purchaser's
obligations and agreement set forth in Section 2(g) hereof to resell the
Securities pursuant to an effective registration statement or under an
exemption from the registration requirements of applicable securities law.
(c) If a Purchaser provides the Company and the transfer agent with
an opinion of counsel, which opinion of counsel shall be in form, substance and
scope customary for opinions of counsel in comparable transactions, to the
effect that the Preferred Shares to be sold or transferred may be sold
or transferred pursuant to an exemption from registration, or a
Purchaser provides the Company with reasonable assurances that such
Preferred Shares may be sold under Rule 144, the Company shall permit the
transfer and, in the case of the Conversion Shares, promptly instruct its
transfer agent to issue one or more certificates in such name and in such
denominations as specified by Purchaser.
7. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
The obligation of the Company hereunder to issue and sell the
Preferred Shares to Purchaser at the Closing is subject to the satisfaction,
at or before the Closing, of each of the following conditions, provided that
such conditions are for the Company's sole benefit and may be waived by the
Company at any time in its sole discretion by providing prior written
notice to each Purchaser.
(a) The Purchaser shall have executed this Agreement and the
Registration Rights Agreement, and delivered executed copies to the Company.
(b) The Purchaser shall have delivered the Purchase Price for the
Preferred Shares in accordance with Section 1(b) above.
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(c) The representations and warranties of the Purchaser shall be
true and correct as of the date when made and as of the date and time of such
closing as though made at that time (except for representations and
warranties that relate to a different date, which shall be true and
correct as of such date), and the Purchaser shall have performed, satisfied
and complied in all material respects with the covenants, agreements and
conditions required by this Agreement to be performed, satisfied or complied
with by the Purchaser at or prior to the Closing Date.
(d) No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having authority over
the matters contemplated hereby that prohibits the consummation of any of the
transactions contemplated by this Agreement.
8. CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE.
The obligation of Purchaser hereunder to purchase the Preferred
Shares to be purchased by it at the Closing and the payment of the Purchase
Price is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that such conditions are for
Purchaser's sole benefit and may be waived by Purchaser at any time in
such Purchaser's sole discretion:
(a) The Company and SJP shall have executed this Agreement and the
Company shall have executed the Registration Rights Agreement, and
each shall have delivered executed copies to Purchaser.
(b) The Certificate of Designation shall have been accepted for filing
with the Secretary of State of the State of Colorado and a copy thereof
certified by the Secretary of State of the State of Colorado shall have
been delivered to Purchaser.
(c) The Company shall have delivered to Purchaser duly executed
certificates (each in such denominations as Purchaser shall request)
representing the Preferred Shares being so purchased by Purchaser in
accordance with Section 1(b) above.
(d) The Common Stock shall be authorized for quotation and listed on
the AMEX, the NYSE, the NNM, the SmallCap or the Bulletin Board and
trading in the Common Stock (or the AMEX, the NYSE, the NNM, the SmallCap
generally or the Bulletin Board) shall not have been suspended by the SEC, the
AMEX, the NYSE, the NNM, the SmallCap or the Bulletin Board, as applicable,
and the Conversion Shares shall be listed on the AMEX, the NYSE, the NNM,
the SmallCap or the Bulletin Board, as applicable.
(e) The representations and warranties of the Company and SJP shall be
true and correct as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties
that relate to a different date, which shall be true and correct as of such
date) and the Company and SJP shall have performed, satisfied and complied
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with the covenants, agreements and conditions required by this Agreement
to be performed, satisfied or complied with by the Company or SJP, as
applicable at or prior to the Closing Date. Such Purchaser shall have
received certificates, executed by the Chief Executive Officer of the
Company and of SJP, dated as of the Closing Date to the foregoing effect
and as to such other matters as Purchaser may reasonably request.
(f) No litigation, statute, rule, regulation, executive order,
decree, ruling, injunction, action or proceeding shall have been
enacted, entered, promulgated or endorsed by any court or governmental
authority of competent jurisdiction or any self regulatory organization
having authority over the matters contemplated hereby that questions the
validity of, or challenges or prohibits the consummation of, any of the
transactions contemplated by this Agreement.
(g) Purchaser shall have received an opinions of the Company's dated
as of the Closing Date, in form, scope and substance reasonably
satisfactory to the Purchaser and in substantially the form of Exhibit C
attached hereto. Purchaser shall be entitled to receive, and rely upon, an
opinion of SJP's counsel, dated as of the closing of the Transaction, in
form, scope and substance reasonably satisfactory to the Purchaser in
connection with the consummation of the Transaction.
(h) The Company shall have delivered evidence reasonably
satisfactory to the Purchaser that the Company's transfer agent has agreed to
act in accordance with irrevocable instructions in the form attached hereto
as Exhibit D.
(i) There shall have been no material adverse changes and no material
adverse developments in the business, properties, operations, prospects,
financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, or SJP and its subsidiaries, taken as a
whole, since the date hereof, and no information, of which the
Purchasers are not currently aware, shall come to the attention of the
Purchaser that is materially adverse to the Company or SJP.
(j) The Board of Directors of the Company and the Board of Directors
of SJP shall have adopted resolutions consistent with Section 3(b) (ii) and
Section 4(b)(ii) above, respectively, and in a form reasonably acceptable to
such Purchaser.
(k) The Company and SJP shall have delivered to Purchaser
certificates evidencing the incorporation and good standing of the Company
and each of its subsidiaries and of SJP and each of its subsidiaries in such
corporation's state of incorporation issued by the Secretary of State of
such state of incorporation as of a date within ten days of the Closing Date.
(l) The Company and SJP shall have delivered to Purchaser certified
copies of their respective Articles of Incorporation as certified by the
Secretary of State of their respective states of incorporation within
ten days of the Closing Date.
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(m) The Company and SJP shall have delivered to Purchaser secretary's
certificates, dated as of the Closing Date, as to (i) the resolutions
described in Section 7(j), (ii) their respective Certificates of
Incorporation and (iii) their respective Bylaws, each as in effect at
the Closing.
(n) SJP shall have obtained and delivered to Purchaser written
evidence of the consent of each member of SJP to the Transaction, and the
Transaction shall have been consummated in accordance with the Share
Exchange Agreement. The Purchaser and its counsel shall have the right to
review and approve, in their sole and absolute discretion, all documentation
and matters related thereto. SJP and the Company shall have delivered to the
Purchaser copies of an executed Xxxx of Sale and an executed Assumption
Agreement, or similar documents evidencing the consummation of the
Transaction.
(o) All of the "CONDITIONS TO PURCHASER'S OBLIGATION TO PURCHASE"
set forth in Section 8 that certain Securities Purchase Agreement, dated as
of June 17, 1998, among the Purchaser and Kapher Trust shall have been
satisfied.
(p) The Company shall have cancelled or retired to treasury at least
400,000 shares of Common Stock as set forth on Schedule 3(d) hereto.
9. GOVERNING LAW; MISCELLANEOUS.
(a) Governing Law; Jurisdiction. This Agreement shall be governed by
and construed in accordance with the laws of the State of Colorado
applicable to contracts made and to be performed in the State of Colorado.
The Company and SJP irrevocably consent to the jurisdiction of the
United States federal courts and the state courts located in the State of
Colorado in any suit or proceeding based on or arising under this Agreement
and irrevocably agree that all claims in respect of such suit or
proceeding may be determined in such courts. The Company and SJP
irrevocably waive the defense of an inconvenient forum to the maintenance of
such suit or proceeding. The Company and SJP further agree that service of
process mailed by first class mail shall be deemed in every respect
effective service of process in any such suit or proceeding. Nothing
herein shall affect the right of Purchaser to serve process in any other
manner permitted by law. The Company and SJP agree that a final non-
appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any
other lawful manner.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. This Agreement, once executed by a party,
may be delivered to the other parties hereto by facsimile transmission of
a copy of this Agreement bearing the signature of the party so delivering
this Agreement.
(c) Headings. The headings of this Agreement are for convenience
of reference and shall not form part of, or affect the interpretation of,
this Agreement.
(d) Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this
Agreement or the validity or enforceability of this Agreement in
any other jurisdiction.
-23-
(e) Entire Agreement; Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the Purchasers, the
Company, SJP, their affiliates and persons acting on their behalf with
respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company, SJP nor
Purchaser makes any representation, warranty, covenant or undertaking with
respect to such matters. No provision of this Agreement may be waived other
than by an instrument in writing signed by the party to be charged with
enforcement and no provision of this Agreement may be amended other than by an
instrument in writing signed by the Company, SJP and Purchaser.
(f) Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier or by
confirmed facsimile, and shall be effective upon receipt or refusal of
receipt, if delivered personally or by courier or confirmed facsimile, in
each case addressed to a party. The addresses for such communications
shall be:
If to the Company:
BOULDER CAPITAL OPPORTUNITIES III, INC.
0000 Xxxx Xxxxx
0000 Xxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Facsimile:
Attn: Xxxxxx Xxxxxxxx
with a copy simultaneously transmitted by like means to:
Xxxxxxx X. Xxxxxxx, Esquire
00000 X. 00xx Xxxxxx, #000
Xxxxx Xxxxx, XX 00000
Facsimile: (000) 000-0000
If to SJP:
SONIC JET PERFORMANCE, LLC
00000 Xxxxxxxx Xxxx
Xxxxxxxxxx Xxxxx, XX 00000
Facsimile:
Attn: Xxxxxx Xxxxxxxxx
-24-
with a copy simultaneously transmitted by like means to:
Law Offices of Xxxxxxxx X. Xxxxxxx
0000 Xxxx 00xx Xxxxxx
Xxxxx Xxx, XX 00000-0000
Facsimile:(000) 000-0000
Attn: Xxxxxxxxxxx X. Xxxxxx, X.X.
If to Purchaser, to such address set forth under Purchaser's name on the
Execution Page hereto executed by Purchaser.
Each party shall provide notice to the other parties of any change in
address.
(g) Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and assigns,
including, but not limited to, the corporation which is the surviving
entity in the Transaction. Except as provided herein or therein, neither
the Company, SJP nor any Purchaser shall assign this Agreement or the
Registration Rights Agreement or any rights or obligations hereunder
or thereunder. Notwithstanding the foregoing, Purchaser may assign its rights
hereunder to any of its "affiliates" (as that term is defined under the
Exchange Act) who are Accredited Investors without the consent of the
Company (provided such assignees agree to be bound by all of the terms and
conditions hereof), or to any other person or entity with the consent of the
Company, which consent shall not be unreasonably withheld. This provision
shall not limit Purchaser's right to transfer the Securities pursuant to the
terms of the Certificate of Designation and this Agreement or to assign such
Purchaser's rights hereunder or thereunder to any such transferee.
(h) Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
(i) Survival. The representations, warranties, agreements and covenants
of the Company and SJP set forth in Sections 3, 4, 5, 6 and 9 hereof shall
survive the Closing notwithstanding any investigation conducted by or on
behalf of Purchaser. None of the representations and warranties made by the
Company or SJP, as applicable, herein shall act as a waiver of any
rights or remedies Purchaser may have under applicable federal or state
securities laws. The Company and/or SJP, as applicable, shall indemnify and
hold harmless Purchaser and each Purchaser's officers, directors,
employees, partners, members, agents and affiliates for all losses or damages
arising as a result of or related to any breach or alleged breach by
the Company and/or SJP, as applicable, of any of its representations or
covenants set forth herein, including advancement of reasonable expenses as
they are incurred.
-25-
(j) Publicity. The Company and each Purchaser shall have the right
to review before issuance any press releases, SEC filings, filings
with the AMEX, NYSE, the NNM, the SmallCap or the Bulletin Board, as
applicable, or any other public statements with respect to the transactions
contemplated hereby; provided, however, that the Company shall be entitled,
without the prior review of the Purchasers, to make any press release, SEC
filings or filings with the AMEX, NYSE, the NNM, the SmallCap or the
Bulletin Board, as applicable, with respect to such transactions as is
required by applicable law and regulations (although the Purchaser shall
be consulted by the Company in connection with any such press release and
filing prior to its release and shall be provided with a copy thereof).
(k) Further Assurances. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall
execute and deliver all such other agreements, certificates, instruments and
documents, as the other party may reasonably request in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(l) Termination. In the event that the Closing shall not have
occurred on or before June __, 1998, unless the parties agree otherwise,
this Agreement shall terminate at the close of business on such date.
Notwithstanding any termination of this Agreement, any party not in
breach of this Agreement shall preserve all rights and remedies it may
have against another party hereto for a breach of this Agreement prior to
or relating to the termination hereof.
(m) Joint Participation in Drafting. Each party to this Agreement
has participated in the negotiation and drafting of this Agreement, the
Certificate of Designation and the Registration Rights Agreement. As
such, the language used herein and therein shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and
no rule of strict construction will be applied against any party to
this Agreement.
(n) Equitable Relief. The Company and SJP, respectively,
acknowledge that a breach by it of its obligations hereunder will cause
irreparable harm to Purchaser by vitiating the intent and purpose of
the transactions contemplated hereby. Accordingly, the Company and SJP,
respectively, acknowledge that the remedy at law for a breach of its obligations
hereunder (including, but not limited to, its obligations pursuant to Section
6 hereof) will be inadequate and agree, in the event of a breach or
threatened breach by the Company or by SJP of the provisions of this
Agreement (including, but not limited to, its obligations pursuant to
Section 5 hereof), that Purchaser shall be entitled, in addition to all
other available remedies, to an injunction restraining any breach and
requiring immediate issuance and transfer of the Securities, without the
necessity of showing economic loss and without any bond or other
security being required.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned Purchaser and the Company have
caused this Agreement to be duly executed as of the date first above written.
BOULDER CAPITAL OPPORTUNITIES, INC.
By:/s/Xxxxxx Xxxxxxxx
Name: Xxxxxx Xxxxxxxx
Title: President
SONIC JET PERFORMANCE, LLC.
By:
Name:
Title:
PURCHASER:
JNC STRATEGIC FUND LTD.
By:
Name:
Title:
RESIDENCE: Cayman Islands
ADDRESS: x/x Xxxxxxx Xxxxxxx (Xxxxxx) Ltd.
Xxxxxxxx Xxxxx
00 Xxxx Xxxxxx
Xxxxxxxx XX00
Xxxxxxx
Telecopy: (000) 000-0000
Attention: Xxxxxx Xxxxx
with copies of all notices to:
Encore Capital
Management, L.L.C.
00000 Xxxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxx, XX 00000
Telecopy: (000) 000-0000)
Attn: Xxxx X. Xxxx
