SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
October 31, 2000, by and among Telenetics Corporation, Inc., a California
corporation, with headquarters located at 00000 Xxxxxx Xxxxx, Xxxx Xxxxxx,
Xxxxxxxxxx 00000 (the "Company"), and the Buyers listed on Schedule I attached
hereto(individually, a "Buyer" or collectively "Buyers" ).
WITNESSETH:
WHEREAS, the Company and the Buyer(s) are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D ("Regulation D") as promulgated by
the U.S. Securities and Exchange Commission (the "SEC") under the Securities Act
of 1933, as amended (the "1933 Act");
WHEREAS, The Company has authorized the following new series of its
Preferred Stock, no par value (the "Preferred Stock"): the Company's Series A
Convertible Preferred Stock (the "Series A Preferred Shares"), which shall be
convertible into shares of the Company's Common Stock, no par value (the "Common
Stock") (as converted, the "Conversion Shares"), in accordance with the terms of
the Company's Certificate of Determination of Rights, Preferences and Privileges
of the Series A Preferred Shares, substantially in the form attached hereto as
Exhibit "A" (the "Certificate of Determination");
WHEREAS, the parties desire that, upon the terms and subject to the
conditions contained herein, the Company shall issue and sell to the Buyer(s),
as provided herein, and the Buyer(s) shall purchase up to 200 shares of Series A
Preferred Stock, for a total purchase price of Two Million Dollars ($2,000,000)
(the "Purchase Price") in the respective amounts set forth opposite each
Buyer(s) name on Schedule I ( the "Subscription Amount"); and
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, the parties hereto are executing and delivering a Registration Rights
Agreement substantially 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 1933 Act and the rules and
regulations promulgated there under, and applicable state securities laws; and
WHEREAS, the Series A Preferred Shares are being offered through May
Xxxxx Group, Inc. (the "Placement Agents"), as the Company's exclusive placement
agents for the offering and
WHEREAS, the aggregate proceeds of the sale of the Series A Preferred
Shares Series A Preferred Shares contemplated hereby shall be held in escrow
pursuant to the terms of an escrow agreement substantially in the form attached
hereto as Exhibit C.
NOW, THEREFORE, in consideration of the mutual covenants and other
agreements contained in this Agreement the Company and the Buyer(s)hereby agree
as follows:
1. PURCHASE AND SALE OF SERIES A PREFERRED SHARES.
(a) PURCHASE OF THE SERIES A PREFERRED SHARES. Subject to the
satisfaction (or waiver) of the terms and conditions of this Agreement,
the Company shall issue and sell to the Buyer(s) and the Buyer(s) shall
purchase from the Company up to 200 shares of Series A Preferred
Shares, in amounts corresponding with the Subscription Amount set forth
opposite each Buyer's name on Schedule I hereto for a purchase price of
$10,000 per share (the "PURCHASE PRICE").
Upon execution hereof by a Buyer, the Buyer shall wire
transfer the Subscription Amount set forth opposite his name on
Schedule I in same-day funds, which Subscription Amount shall be held
in escrow pursuant to the terms of the Escrow Agreement (as hereinafter
defined) and disbursed in accordance therewith. Notwithstanding the
foregoing, a Buyer may withdraw his Subscription Amount and terminate
this Agreement as to such Buyer at any time after the execution hereof
and prior to Closing (as hereinafter defined).
(b) CLOSING DATE. The closing of the purchase and sale of the
Series A Preferred Shares (the "Closing") shall take place at 10:00
a.m. Eastern Daylight Time on the fifth business day ("Closing Date")
following the date hereof, subject to notification of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6 and 7
below (or such later date as is mutually agreed to by the Company and
the Buyers). The Closing shall occur on the Closing Date at the offices
of Xxxxxx Xxxxxxxx LLP 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0, Xxxxx, XX 00000
(or such other place as is mutually agreed to by the Company and the
Buyers).
(c) ESCROW ARRANGEMENTS; FORM OF PAYMENT. Upon execution
hereof by Buyer(s) and pending Closing, the aggregate proceeds of the
sale of the Series A Preferred Shares to Buyer(s) pursuant hereto, less
the fees and expenses of the Placement Agents, shall be deposited in a
non-interest bearing escrow account with First Union National Bank, as
escrow agent ("Escrow Agent"), pursuant to the terms of an escrow
agreement between the Company, the Placement Agents and the Escrow
Agent in the form attached hereto as Exhibit C (the "Escrow
Agreement"). Subject to the satisfaction of the terms and conditions of
this Agreement, on the Closing Date, (i) the Escrow Agent shall deliver
to the Company in accordance with the terms of the Escrow Agreement
such aggregate gross proceeds for the Series A Preferred Shares to be
issued and sold to such Buyer(s) at the Closing, by wire transfer of
immediately available funds in accordance with the Company's written
wire instructions, and (ii) the Company shall deliver to each Buyer the
Series A Preferred Shares which such Buyer(s) is purchasing in amounts
indicated opposite such Buyer's name on Schedule I.
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2. BUYER'S REPRESENTATIONS AND WARRANTEES.
Each Buyer represents and warrants, severally and not jointly,
that as of the date hereof:
(a) INVESTMENT PURPOSE. Each Buyer is acquiring the Series A
Preferred Shares and, upon conversion of Series A Preferred Shares, the
Buyer will acquire the Conversion Shares then issuable, for its own
account for investment only and not with a view towards, or for resale
in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the 1933 Act; provided,
however, that by making the representations herein, such Buyer reserves
the right to dispose of Conversion Shares at any time in accordance
with or pursuant to an effective registration statement covering such
Conversion Shares or an available exemption under the 1933 Act.
(b) ACCREDITED BUYER STATUS. Each Buyer is an "accredited
Buyer" as that term is defined in Rule 501(a)(3) of Regulation D.
(c) RELIANCE ON EXEMPTIONS. Each Buyer understands that the
Series A Preferred Shares and the Conversion Shares are being offered
and sold to it in reliance on specific exemptions from the registration
requirements of United States Federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and
such Buyer's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of such Buyer set forth
herein in order to determine the availability of such exemptions and
the eligibility of such Buyer to acquire such securities.
(d) INFORMATION. Such Buyer and its advisors (and his or, its
counsel), if any, have been furnished with all materials relating to
the business, finances and operations of the Company and information he
deems material to making an informed investment decision regarding his
purchase of the Series A Preferred Shares and the Conversion Shares,
which have been requested by such Buyer. Such Buyer and its advisors,
if any, have been afforded the opportunity to ask questions of the
Company and its management. Neither such inquiries nor any other due
diligence investigations conducted by such Buyer or its advisors, if
any, or its representatives shall modify, amend or affect such Buyer's
right to rely on the Company's representations and warranties contained
in Section 3 below. Such Buyer understands that its investment in the
Series A Preferred Shares and the Conversion Shares involves a high
degree of risk. Buyer is in a position regarding the Company, which,
based upon employment, family relationship or economic bargaining
power, enabled and enables Buyer to obtain information from the Company
in order to evaluate the merits and risks of this investment. Such
Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with
respect to its acquisition of the Series A Preferred Shares and the
Conversion Shares.
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(e) NO GOVERNMENTAL REVIEW. Such Buyer understands that no
United States Federal or state agency or any other government or
governmental agency has passed on or made any recommendation or
endorsement of the Series A Preferred Shares or the Conversion Shares,
or the fairness or suitability of the investment in the Series A
Preferred Shares or the Conversion Shares, nor have such authorities
passed upon or endorsed the merits of the offering of the Series A
Preferred Shares or the Conversion Shares.
(f) TRANSFER OR RESALE. Such Buyer understands that except as
provided in the Registration Rights Agreement: (i) the Series A
Preferred Shares, the Conversion Shares and the Warrants have not been
and are not being registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered there under, or (B) such Buyer shall
have delivered to the Company an opinion of counsel, in form and
substance acceptable to the Company, to the effect that such securities
to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration
requirements; (ii) any sale of such securities made in reliance on Rule
144 under the 1933 Act (or a successor rule thereto) ("Rule 144") may
be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of such securities under
circumstances in which the seller (or the person through whom the sale
is made) may be deemed to be an underwriter (as that term is defined in
the 0000 Xxx) may require compliance with some other exemption under
the 1933 Act or the rules and regulations of the SEC there under; and
(iii) neither the Company nor any other person is under any obligation
to register such securities under the 1933 Act or any state securities
laws or to comply with the terms and conditions of any exemption there
under. The Company reserves the right to place stop transfer
instructions against the shares and certificates for the Conversion
Shares and Warrant Shares.
(g) LEGENDS. Such Buyer understands that the certificates,
Warrants or other instruments representing the stock certificates
representing the Series A Preferred Shares and the Conversion Shares
shall bear a restrictive legend in substantially the following form
(and a stop transfer order may be placed against transfer of such stock
certificates):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TOWARD RESALE AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR
ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES
LAWS, OR AN OPINION OF COUNSEL, IN A FORM AND
SUBSTANCE ACCEPTABLE TO THE COMPANY, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR
APPLICABLE STATE SECURITIES LAWS.
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The legend set forth above shall be removed and the Company shall issue
a certificate without such legend to the holder of the Series A
Preferred Shares or the Conversion Shares upon which it is stamped, if,
unless otherwise required by state securities laws, (i) in connection
with a sale transaction, provided the Series A Preferred Shares or the
Conversion Shares, as applicable, are registered under the 1933 Act or
(ii) in connection with a sale transaction, such holder provides the
Company with an opinion of counsel, in form and substance acceptable to
the Company and its counsel, to the effect that a public sale,
assignment or transfer of the Conversion Shares may be made without
registration under the 1933 Act.
(h) AUTHORIZATION, ENFORCEMENT. This Agreement has been duly
and validly authorized, executed and delivered on behalf of such Buyer
and is a valid and binding agreement of such Buyer enforceable in
accordance with its terms, except as such enforceability may be limited
by general principles of equity and to applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation and other similar
laws relating to, or affecting generally, the enforcement of applicable
creditors' rights and remedies.
(i) RECEIPT OF DOCUMENTS. Such Buyer and his or its counsel
has received and read in their entirety: (i) this Agreement and each
representation, warranty and covenant set forth herein, the
Registration Rights Agreement, and the Escrow Agreement; (ii) all due
diligence and other information necessary to verify the accuracy and
completeness in all material respects of such representations,
warranties and covenants; (iii) the Company's Form 10-Q for the fiscal
quarter ended June 30, 2000; and (v) answers to all questions the Buyer
submitted to the Company regarding an investment in the Company; and
the Buyer has relied on the information contained therein and has not
been furnished any other documents, literature, memorandum or
prospectus.
(j) DUE FORMATION OF CORPORATE AND OTHER BUYERS. If the
Buyer(s) is a corporation, trust, partnership or other entity that is
not an individual person, it has been formed and validly exists and has
not been organized for the specific purpose of purchasing the Series A
Preferred Shares and is not prohibited from doing so.
(k) DUE AUTHORIZATION OF FIDUCIARY BUYERS. If the Buyer(s) is
purchasing the in a fiduciary capacity for another person or entity,
including without limitation a corporation, partnership, trust or any
other entity, the Buyer(s) has been duly authorized and empowered to
execute this Agreement and such other person fulfills all the
requirements for purchase of the Series A Preferred Shares and agrees
to be bound by the obligations, representations, warranties, and
covenants contained herein. Upon request of the Company, the Buyer(s)
will provide true, complete and current copies of all relevant
documents creating the Buyers, authorizing its investment in the
Company and/or evidencing the satisfaction of the foregoing.
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(l) FURTHER REPRESENTATIONS BY FOREIGN BUYERS. If Buyer(s) is
not a U.S. Person (as defined), such Buyer hereby represents that such
Buyer(s) is satisfied as to full observance of the laws of such Buyer's
jurisdiction in connection with any invitation to subscribe for the
securities or any use of this Agreement, including: (i) the legal
requirements of such Buyer's jurisdiction for the purchase of the
securities, (ii) any foreign exchange restrictions applicable to such
purchase, (iii) any governmental or other consents that may need to be
obtained, and (iv) the income tax and other tax consequences, if any,
which may be relevant to the purchase, holding, redemption, sale, or
transfer of the securities. Such Buyer's subscription and payment for,
and such Buyer's continued beneficial ownership of, the securities will
not violate any applicable securities or other laws of such Buyer's
jurisdiction. The term "U.S. Person" as used herein shall mean any
person who is a citizen or resident of the United States, or any state,
territory or possession thereof, including but not limited to any
estate of any such person, or any corporation, partnership, trust or
other entity created or existing under the laws thereof, or any entity
controlled or owned by any of the foregoing.
(m) NO LEGAL ADVICE FROM THE COMPANY. The Buyer(s) acknowledge
that it had the opportunity to review this Agreement and the
transactions contemplated by this Agreement with his or its own legal
counsel and investment and tax advisors. The Buyer is relying solely on
such counsel and advisors and not on any statements or representations
of the Company or any of its representatives or agents for legal, tax
or investment advice with respect to this investment, the transactions
contemplated by this Agreement or the securities laws of any
jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to each of the Buyer (s) that
except as otherwise specified in the Company's filings with the SEC or
in this Agreement, as of the date hereof:
(a) ORGANIZATION AND QUALIFICATION. The Company and its
subsidiaries are corporations duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are
incorporated, and have the requisite corporate power to own their
properties and to carry on their business as now being conducted. Each
of the Company and its subsidiaries is duly qualified as a foreign
corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted by it makes
such qualification necessary, except to the extent that the failure to
be so qualified or be in good standing would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(b) AUTHORIZATION, ENFORCEMENT, COMPLIANCE WITH OTHER
INSTRUMENTS. (i) The Company has the requisite corporate power and
authority to enter into and perform this Agreement, the Registration
Rights Agreement and any related agreements, and to issue the Series A
Preferred Shares and the Conversion Shares, the Warrants (as defined
herein below), or shares of Common Stock issuable upon exercise of the
Warrants (the "Warrant Shares") in accordance with the terms hereof and
thereof, (ii) the execution and delivery of this Agreement, the
Registration Rights Agreement and any related agreements by the Company
and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation the issuance of the Series A
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Preferred Shares, the Conversion Shares and the Warrants and the
reservation for issuance and the issuance of the Conversion Shares and
the Warrant Shares issuable upon conversion or exercise thereof, have
been duly authorized by the Company's Board of Directors and no further
consent or authorization is required by the Company, its Board of
Directors or its shareholders, (iii) this Agreement and the
Registration Rights Agreement and any related agreements have been duly
executed and delivered by the Company, (iv) this Agreement, the
Registration Rights Agreement and any related agreements constitute the
valid and binding obligations of the Company enforceable against the
Company in accordance with their terms, except as such enforceability
may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally, the enforcement of
creditors' rights and remedies, and (v) prior to the Closing Date, the
Certificate of Determination will have been filed with the Secretary of
State of the State of California and will be in full force and effect,
enforceable against the Company in accordance with its terms.
(c) CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Company consists of 25,000,000 shares of Common
Stock, no par value, and 5,000,000 shares of Preferred Stock, no par
value, of which as of October 31, 2000, 16,058,813 shares of Common
Stock and no shares of Preferred Stock were issued and outstanding. All
of such outstanding shares have been validly issued and are fully paid
and nonassessable. Except as disclosed in Schedule 3(c), no shares of
Common Stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the
Company. Except as disclosed in Schedule 3(c), 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, any
shares of capital stock of the Company or any of its subsidiaries, or
contracts, commitments, understandings 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 or options, warrants, scrip, rights to subscribe to, calls
or commitments of any character whatsoever relating to, or securities
or rights convertible into, any shares of capital stock of the Company
or any of its subsidiaries, (ii) there are no outstanding debt
securities and (iii) there are no agreements or arrangements under
which the Company or any of its subsidiaries is obligated to register
the sale of any of their securities under the 1933 Act (except pursuant
to the Registration Rights Agreements). There are no securities or
instruments containing anti-dilution or similar provisions that will be
triggered by the issuance of the Series A Preferred Shares or the
Conversion Shares, as described in this Agreement. The Company has
furnished to the Buyer true and correct copies of the Company's
Articles of Incorporation, as amended and as in effect on the date
hereof (the "Articles of Incorporation"), and the Company's By-laws, as
in effect on the date hereof (the "By-laws"), and the terms of all
securities convertible into or exercisable for Common Stock and the
material rights of the holders thereof in respect thereto other than
stock options issued to employees and consultants.
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(d) ISSUANCE OF SECURITIES. The Series A Preferred Shares are
duly authorized and, upon issuance in accordance with the terms hereof,
shall be duly issued, fully paid and nonassessable, are free from all
taxes, liens and charges with respect to the issue thereof. The
Conversion Shares issuable upon conversion of the Series A Preferred
Shares have been duly authorized and reserved for issuance. Upon
conversion or exercise in accordance with the Certificate of
Determination or the terms of the Warrants and receipt of payment
therefore (in the case of the Warrant Shares), the Conversion Shares
and the Warrant Shares will be duly issued, fully paid and
nonassessable.
(e) NO CONFLICTS. Except as disclosed in Schedule 3(e), the
execution, delivery and performance of this Agreement by the Company
and the consummation by the Company of the transactions contemplated
hereby will not (i) result in a material violation of the Articles of
Incorporation, any Certificate of Determination of any outstanding
series of preferred stock of the Company 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, acceleration or cancellation of, any
material agreement, indenture or instrument to which the Company or any
of its subsidiaries is a party, or result in a material violation of
any law, rule, regulation, order, judgment or decree (including federal
and state securities laws and regulations and the rules and regulations
of The Nasdaq Stock Market Inc.'s National Market on which the Common
Stock is quoted) 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 as disclosed in Schedule
3(e), neither the Company nor its subsidiaries is in violation of any
term of or in default under its Articles of Incorporation or By-laws or
their organizational charter or by-laws, respectively, or any material
contract, agreement, mortgage, indebtedness, indenture, instrument,
judgment, decree or order or any statute, rule or regulation applicable
to the Company or its subsidiaries. The business of the Company and its
subsidiaries is not being conducted, and shall not be conducted in
violation of any material law, ordinance, regulation of any
governmental entity. Except as specifically contemplated by this
Agreement and as required under the 1933 Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any
court or governmental agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by this Agreement
or the Registration Rights Agreement in accordance with the terms
hereof or thereof. Except as disclosed in Schedule 3(e), all consents,
authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof. The Company and
its subsidiaries are unaware of any facts or circumstance, which might
give rise to any of the foregoing.
(f) SEC DOCUMENTS: FINANCIAL STATEMENTS. The Company has filed
all reports, schedules, forms, statements and other documents required
to be filed by it with the SEC under of the Securities Exchange Act of
1934, as amended (the "1934 Act") (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial
statements and schedules thereto and documents incorporated by
8
reference therein, being hereinafter referred to as the "SEC
Documents"). The Company has delivered to the Buyers or their
representatives, or made available through the SEC's website at
xxxx://xxx.xxx.xxx., true and complete copies of the SEC Documents. As
of their respective dates, the financial statements of the Company
disclosed in the SEC Documents (the "Financial Statements") complied as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, 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 un-audited interim statements, to the extent they may
exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the financial position of the Company
as of the dates thereof and the results of its operations and cash
flows for the periods then ended (subject, in the case of un-audited
statements, to normal year-end audit adjustments). No other information
provided by or on behalf of the Company to the Buyer which is not
included in the SEC Documents, including, without limitation,
information referred to in Section 2(d) and (i) of this Agreement,
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(g) 10(B)-5. As of the date filed, the SEC Documents do not
include any untrue statements of material fact, nor do they omit to
state any material fact required to be stated therein necessary to make
the statements made, in light of the circumstances under which they
were made, not misleading.
(h) ABSENCE OF CERTAIN CHANGES. Since September 6, 2000 except
as disclosed in Schedules to this Agreement and the SEC Documents,
there has been no material adverse change and no material adverse
development in the business, properties, operations, financial
condition, results of operations or prospects of the Company or its
subsidiaries. The Company has not taken any steps, and does not
currently expect to take any steps, to seek protection pursuant to any
bankruptcy law nor does the Company or its subsidiaries have any
knowledge or reason to believe that its creditors intend to initiate
involuntary bankruptcy proceedings.
(i) ABSENCE OF LITIGATION. Except as disclosed on Schedule
3(i) to this Agreement there is no action, suit, proceeding, inquiry or
investigation before or by any court, public board, government agency,
self-regulatory organization or body pending against or affecting the
Company, the Common Stock or any of the Company's subsidiaries, wherein
an unfavorable decision, ruling or finding would (i) have a material
adverse effect on the transactions contemplated hereby (ii) adversely
affect the validity or enforceability of, or the authority or ability
of the Company to perform its obligations under, this Agreement or any
of the documents contemplated herein, or (iii) except as expressly
disclosed in the SEC Documents, have a material adverse effect on the
business, operations, properties, financial condition or results of
operation of the Company and its subsidiaries taken as a whole.
9
(j) ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE SERIES A
PREFERRED SHARES. The Company acknowledges and agrees that the Buyer(s)
is acting solely in the capacity of an arm's length purchaser with
respect to this Agreement and the transactions contemplated hereby. The
Company further acknowledges that the Buyer(s) is not acting as a
financial advisor or fiduciary of the Company (or in any similar
capacity) with respect to this Agreement and the transactions
contemplated hereby and any advice given by the Buyer(s) or any of
their respective representatives or agents in connection with this
Agreement and the transactions contemplated hereby is merely incidental
to such Buyer's purchase of the Series A Preferred Shares or the
Conversion Shares. The Company further represents to the Buyer that the
Company's decision to enter into this Agreement has been based solely
on the independent evaluation by the Company and its representatives.
(k) EMPLOYEE RELATIONS. Neither the Company nor any of its
subsidiaries is involved in any labor dispute nor, to the knowledge of
the Company or any of its subsidiaries, is any such dispute threatened.
None of the Company's or its subsidiaries' employees is a member of a
union and the Company and its subsidiaries believe that their relations
with their employees are good.
(l) INTELLECTUAL PROPERTY RIGHTS. Except as set forth on
Schedule 3(l) attached hereto, the Company and its subsidiaries own or
possess adequate rights or licenses to use all trademarks, trade names,
service marks, service xxxx registrations, service names, patents,
patent rights, copyrights, inventions, licenses, approvals,
governmental authorizations, trade secrets and rights necessary to
conduct their respective businesses as now conducted. Except as
disclosed in Schedules to this Agreement and the SEC Documents , the
Company and its subsidiaries do not have any knowledge of any
infringement by the Company or its subsidiaries of trademark, trade
name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret
or other similar rights of others, and, to the knowledge of the
Company, there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the
Company or its subsidiaries regarding trademark, trade name, patents,
patent rights, invention, copyright, license, service names, service
marks, service xxxx registrations, trade secret or other infringement;
and the Company and its subsidiaries are unaware of any facts or
circumstances which might give rise to any of the foregoing.
(m) ENVIRONMENTAL LAWS. The Company and its subsidiaries are
(i) 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 material permits, licenses or other approvals required of
them under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all material terms and
conditions of any such permit, license or approval.
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(n) TITLE. The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and
marketable title to all personal property owned by them which 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(n), are disclosed in the SEC Documents
or such as do not materially affect the value of such property and do
not interfere with the use made and proposed to be made of such
property by the Company and 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 interfere with the use made
and proposed to be made of such property and buildings by the Company
and its subsidiaries.
(o) INSURANCE. The Company and each of its subsidiaries are
insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as management of the Company
believes to be prudent and customary in the businesses in which the
Company and its subsidiaries are engaged. Neither the Company nor any
such subsidiary has been refused any insurance coverage sought or
applied for and neither the Company nor any such subsidiary has any
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect
the condition, financial or otherwise, or the earnings, business or
operations of the Company and its subsidiaries, taken as a whole.
(p) REGULATORY PERMITS. Except as disclosed in Schedules to
this Agreement, the Company and its subsidiaries possess or have
applied for 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.
(q) INTERNAL ACCOUNTING CONTROLS. The Company and each of its
subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability,
and (iii) the recorded amounts for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(r) NO MATERIAL ADVERSE BREACHES, ETC. Except as set forth in
the SEC Documents, neither the Company nor any of its subsidiaries is
subject to any charter, corporate or other legal restriction, or any
judgment, decree, order, rule or regulation which in the judgment of
the Company's officers has or is expected in the future to have a
material adverse effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company
or its subsidiaries. Neither the Company nor any of its subsidiaries is
11
in breach of any material contract or agreement which breach, in the
judgment of the Company's officers, has or is expected to have a
material adverse effect on the business, properties, operations,
financial condition, results of operations or prospects of the Company
or its subsidiaries.
(s) TAX STATUS. Except as set forth on Schedule 3(s) hereto,
the Company and each of its subsidiaries has made or filed all federal
and state income and all other tax returns, reports and declarations
required by any jurisdiction to which it is subject and (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) 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 provision reasonably adequate for the payment of all taxes for
periods subsequent to the periods to which such returns, reports or
declarations apply. 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.
(t) CERTAIN TRANSACTIONS. Except as set forth in the SEC
Documents and except for arm's length transactions pursuant to which
the Company makes payments in the ordinary course of business upon
terms no less favorable than the Company could obtain from third
parties and other than the grant of stock options disclosed on Schedule
3(c), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services
to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or
such employee or, to the knowledge of the Company, any corporation,
partnership, trust or other entity in which any officer, director, or
any such employee has a substantial interest or is an officer,
director, trustee or partner.
(u) FEES AND RIGHTS OF FIRST REFUSAL. The Company is not
obligated to offer the securities offered hereunder on a right of first
refusal basis or otherwise to any third parties including, but not
limited to, current or former shareholders of the Company,
underwriters, brokers, agents or other third parties.
4. COVENANTS.
(a) BEST EFFORTS. Each party shall use its best efforts timely
to satisfy each of the conditions to be satisfied by it as provided in
Sections 6 and 7 of this Agreement.
12
(b) FORM D. The Company agrees to file a Form D with respect
to the Conversion Shares as required under Regulation D and to provide
a copy thereof to each Buyer 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 Conversion
Shares for, or obtain on exemption for the Conversion Shares for, sale
to the Buyers at the Closing pursuant to this Agreement under
applicable securities or "Blue Sky" laws of the states of the United
States, and shall provide evidence of any such action so taken to the
Buyers on or prior to the Closing Date.
(c) REPORTING STATUS. Until the earlier of (i) the date as of
which the Buyer(s) may sell all of the Conversion Shares and the
Warrant Shares without restriction pursuant to Rule 144(k) promulgated
under the 1933 Act (or successor thereto), or (ii) the date on which
(A) the Buyer(s) shall have sold all the Conversion Shares and (B) none
of the Series A Preferred Shares or the Warrants are outstanding (the
"Registration Period"), the Company shall file in a timely manner all
reports required to be filed with the SEC pursuant to the 1934 Act and
the regulations of the SEC there under, and the Company shall not
terminate its status as an issuer required to file reports under the
1934 Act even if the 1934 Act or the rules and regulations there under
would otherwise permit such termination.
(d) USE OF PROCEEDS. The Company will use the proceeds from
the sale of the Series A Preferred Shares for acquisitions and general
corporate purposes.
(e) RESERVATION OF SHARES. The Company shall take all action
reasonably necessary to at all times have authorized, and reserved for
the purpose of issuance, such number of shares of Common Stock as shall
be necessary to effect the issuance of the Conversion Shares and the
Warrant Shares. If at any time the Company does not have available such
shares of Common Stock as shall from time to time be sufficient to
effect the conversion of all of the Conversion Shares and the exercise
of the Warrant Shares the Company shall call and hold a special meeting
within one hundred and twenty days (120) of such occurrence, for the
sole purpose of increasing the number of shares authorized. The
Company's management shall recommend to the shareholders to vote in
favor of increasing the number of shares of Common Stock authorized.
Management shall also vote all of its shares in favor of increasing the
number of shares of Common Stock authorized.
(f) LISTINGS OR QUOTATION. The Company shall promptly secure
the listing or quotation of the Conversion Shares upon each national
securities exchange, automated quotation system or over-the-counter
bulletin board or other market, if any, upon which shares of Common
Stock are then listed or quoted (subject to official notice of
issuance) and shall use it best efforts to maintain, so long as any
other shares of Common Stock shall be so listed, such listing of all
Conversion Shares from time to time issuable under the terms of this
Agreement. The Company shall maintain the Common Stock's authorization
for quotation in the over-the counter market.
13
(g) EXPENSES. Each of the Company and the Buyer(s) shall pay
all costs and expenses incurred by such party in connection with the
negotiation, investigation, preparation, execution and delivery of this
Agreement and the Registration Rights Agreement; provided, however,
that the legal fees and expenses incurred by the Placement Agent in
connection with the Offering (as defined in that certain Placement
Agent Agreement, dated of even date herewith, between the Company and
the Placement Agent), up to a maximum of $20,000 shall be paid for by
the Company at Closing in accordance with the terms of the Placement
Agency Agreement between the Company and the Placement Agent, dated
simultaneously herewith.
(h) CORPORATE EXISTENCE. So long as any of the Series A
Preferred Shares remain outstanding, the Company shall not directly or
indirectly consummate any merger, reorganization, restructuring,
consolidation, sale of all or substantially all of the Company's assets
or any similar transaction or related transactions (each such
transaction, a "Sale of the Company") unless, prior to the consummation
of a Sale of the Company, the Company makes appropriate provision to
insure that, upon the consummation of such Sale of the Company, each of
the holders of the Series A Preferred Shares will thereafter have the
right to acquire and receive such shares of stock, securities or assets
as may be issued or payable with respect to or in exchange for the
number of shares of Common Stock immediately theretofore acquirable and
receivable upon the conversion of such holder's Series A Preferred
Shares had such Sale of the Company not taken place. In any such case,
the Company will make appropriate provision with respect to such
holders' rights and interests to insure that the provisions of this
Section 4(h) will thereafter be applicable to the Series A Preferred
Shares.
(i) TRANSACTIONS WITH AFFILIATES. Unless the approval of a
majority of the independent members of the Company's Board of Directors
is obtained, so long as any Series A Preferred Shares are outstanding,
the Company shall not, and shall cause each of its subsidiaries not to,
enter into, amend, modify or supplement, or permit any subsidiary to
enter into, amend, modify or supplement any agreement, transaction,
commitment, or arrangement with any of its or any subsidiary's
officers, directors, person who were officers or directors at any time
during the previous two years, stockholders who beneficially own 5% or
more of the Common Stock, or affiliates, or with any individual related
by blood, marriage, or adoption to any such individual or with any
entity in which any such entity or individual owns a 5% or more
beneficial interest (each a "Related Party"), except for (a) customary
employment arrangements and benefit programs on reasonable terms, (b)
any investment in an affiliate of the Company, (c) any agreement,
transaction, commitment, or arrangement on an arms-length basis on
terms no less favorable than terms which would have been obtainable
from a person other than such Related Party, (d) any agreement
transaction, commitment, or arrangement which is approved by a majority
of the disinterested directors of the Company or purposes hereof, any
director who is also an officer of the Company or any subsidiary of the
Company shall not be a disinterested director with respect to any such
agreement, transaction, commitment, or arrangement. "Affiliate" for
purposes hereof means, with respect to any person or entity, another
person or entity that, directly or indirectly, (i) has a 5% or more
equity interest in that person or entity, (ii) has 10% or more common
ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity.
"Control" or "controls" for purposes hereof means that a person or
entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.
14
(j) LOCK UP PERIOD. On the date hereof, the Company shall
obtain from Xxxxxxx Armani and Xxxxx Xxxxxxxx, a lock-up agreement, in
the form annexed hereto as Schedule 4(j) agreeing to only sell in
compliance with the volume limitation of Rule 144.
(k) WARRANT ISSUANCES. Subject to the satisfaction of the
terms and condition of this Agreement, May Xxxxx Group, Inc., as the
Placement Agent will receive on the Closing Date warrants ("Convertible
Warrants") to purchase 500,000 shares of Common Stock (the "Convertible
Warrant Shares") at an exercise price of Three Dollars ($3.00) per
share. The Warrants shall be exercisable for a period of five (5) years
from the date of issuance and shall be substantially in the form of the
form of Warrant hereto as Exhibit D.
(l) TRANSFER AGENT. The Company covenants and agrees that, in
the event that the Company's agency relationship with the transfer
agent should be terminated for any reason prior to a date which is two
(2) years after the Closing Date, the Company shall immediately appoint
a new transfer agent and shall require that the transfer agent execute
and agree to be bound by the terms of the Irrevocable Instructions to
Transfer Agent.
5. TRANSFER AGENT INSTRUCTIONS.
The Company will act as its own transfer agent with respect to
the Series A Preferred Shares. Upon conversion of the Series A
Preferred Shares or the exercise of the Warrants, the Company shall
issue irrevocable instructions to its transfer agent, in the form
attached hereto as Exhibit E, to issue certificates, registered in the
name of the Buyer(s) or its respective nominee(s), for the Conversion
Shares and the Warrant Shares representing the shares of Common Stock
issuable upon such conversion or exercise and payment therefore (the
"Irrevocable Transfer Agent Instructions"). Prior to registration of
the Conversion Shares and the Warrant Shares under the 1933 Act, all
such certificates shall bear the restrictive legend specified in
Section 2(g) of this Agreement. The Company warrants that no
instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, and stop transfer instructions to give
effect to Section 2(f) hereof (in the case of the Conversion Shares or
the Warrant Shares, prior to registration of such shares under the 0000
Xxx) will be given by the Company to its transfer agent and that the
Conversion Shares or the Warrant Shares 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 5 shall affect in any way the
Buyer's obligations and agreement to comply with all applicable
securities laws upon resale of Conversion Shares or the Warrant Shares.
If the Buyer(s) or Warrant holder provides the Company with an opinion
of counsel, in form and substance acceptable to the Company, that
registration of a resale by the Buyer(s) of any of the Conversion
Shares, or the Warrant Shares is not required under the 1933 Act, the
Company shall permit the transfer, and, in the case of the Conversion
15
Shares or the Warrant Shares, promptly instruct its transfer agent to
issue one or more certificates in such name and in such denominations
as specified by the Buyer. The Company acknowledges that a breach by it
of its obligations hereunder will cause irreparable harm to the Buyer
by vitiating the intent and purpose of the transaction contemplated
hereby. Accordingly, the Company acknowledges that the remedy at law
for a breach of its obligations under this Section 5 will be inadequate
and agrees, in the event of a breach or threatened breach by the
Company of the provisions of this Section 5, that the Buyer(s) shall be
entitled, in addition to all other available remedies, to an injunction
restraining any breach and requiring immediate issuance and transfer,
without the necessity of showing economic loss and without any bond or
other security being required.
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL.
----------------------------------------------
The obligation of the Company hereunder to issue and sell the
Series A Preferred Shares to the Buyer(s) at the Closing is subject to
the satisfaction, at or before the Closing Date, of each of the
following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in
its sole discretion:
(a) Each Buyer shall have executed this Agreement and the
Registration Rights Agreement and delivered the same to the Company.
(b) The Certificate of Determination shall have been filed
with the Secretary of State of the State of California.
(c) The Buyer(s) shall have delivered to the Escrow Agent the
Purchase Price for the Series A Preferred Shares in respective amounts
as set forth next to each Buyer as outlined on Schedule I attached
hereto and the Escrow Agent shall have delivered such funds to the
Company by wire transfer of immediately available U.S. funds pursuant
to the wire instructions provided by the Company.
(d) The representations and warranties of the Buyer(s) shall
be true and correct in all material respects as of the date when made
and as of the Closing Date as though made at that time (except for
representations and warranties that speak as of a specific date), and
the Buyer(s) 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 Buyer(s) at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer(s) hereunder to purchase the
Series A Preferred Shares at the Closing is subject to the
satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for the Buyer's sole
benefit and may be waived by the Buyer(s) at any time in its sole
discretion:
16
(a) The Company shall have executed this Agreement and the
Registration Rights Agreement, and delivered the same to the Buyer(s).
(b) The Common Stock shall be authorized for quotation on The
Nasdaq SmallCap Market or OTC Bulletin Board, trading in the Common
Stock shall not have been suspended for any reason and all of the
Conversion Shares issuable upon conversion of the Series A Preferred
Shares shall be approved for listing or quotation on The Nasdaq
SmallCap Market.
(c) The representations and warranties of the Company shall be
true and correct in all material respects (except to the extent that
any of such representations and warranties is already qualified as to
materiality in Section 3 above, in which case such representations and
warranties shall be true and correct without further qualification) as
of the date when made and as of the Closing Date as though made at that
time (except for representations and warranties that speak as of a
specific date) and the Company 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 Company at or prior to the Closing Date. The Buyer
shall have received a certificate, executed by an executive officer of
the Company, dated as of the Closing Date, to the foregoing effect and
as to such other matters as may be reasonably requested by the Buyer
including, without limitation an update as of the Closing Date
regarding the representation contained in Section 3(c) above.
(d) The Buyer shall have received the opinion of the Company's
counsel dated as of the Closing Date, in form, scope and substance
reasonably satisfactory to the Buyer and in substantially the form of
Exhibit "F" attached hereto.
(e) The Company shall have executed and delivered to the
Buyer(s) the certificates for the Series A Preferred Shares in the
respective amounts set forth opposite each Buyer(s) name on Schedule I.
(f) As of the Closing Date, the Company shall have reserved
out of its authorized and unissued Common Stock, solely for the purpose
of effecting the conversion of the Series A Preferred Shares and
permitting the exercise of the Warrants, such shares of Common Stock to
effect the conversion of all of the Conversion Shares and the exercise
of all the Warrants then outstanding.
(g) The Board of Directors of the Company shall have adopted
the resolutions in substantially the form of Exhibit "G" attached
hereto.
17
8. INDEMNIFICATION.
(a) In consideration of the Buyer's execution and delivery of
this Agreement and acquiring of the Series A Preferred Shares and the
Conversion Shares hereunder, and in addition to all of the Company's
other obligations under this Agreement, the Company shall defend,
protect, indemnify and hold harmless the Buyer(s) and each other holder
of the Series A Preferred Shares and the Conversion Shares, and all of
their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions
contemplated by this Agreement) (collectively, the " Buyer
Indemnitees") from and against any and all actions, causes of action,
suits, claims, losses, costs, penalties, fees, liabilities and damages,
and expenses in connection therewith (irrespective of whether any such
Buyer Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and
disbursements (the "Indemnified Liabilities"), incurred by the Buyer
Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any misrepresentation or breach of any representation
or warranty made by the Company in this Agreement or the Registration
Rights Agreement or any other certificate, instrument or document
contemplated hereby or thereby, (b) any breach of any covenant,
agreement or obligation of the Company contained in this Agreement, the
Certificate of Determination, or the Registration Rights Agreement or
any other certificate, instrument or document contemplated hereby or
thereby, or (c) any cause of action, suit or claim brought or made
against such Buyer Indemnitees and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or
any other instrument, document or agreement executed pursuant hereto by
any of the Buyer Indemnitees, any transaction financed or to be
financed in whole or in part, directly or indirectly, with the proceeds
of the issuance of the Series A Preferred Shares or the status of the
Buyer or holder of the Series A Preferred Shares, the Conversion
Shares, as a Buyer in the Company. To the extent that the foregoing
undertaking by the Company may be unenforceable for any reason, the
Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
(b) In consideration of the Company's execution and delivery
of this Agreement, and in addition to all of the Buyer's other
obligations under this Agreement, the Buyer shall defend, protect,
indemnify and hold harmless the Company and all of its officers,
directors, employees and agents (including, without limitation, those
retained in connection with the transactions contemplated by this
Agreement) (collectively, the "Company Indemnitees") from and against
any and all Indemnified Liabilities incurred by the Company Indemnitees
or any of them as a result of, or arising out of, or relating to (a)
any misrepresentation or breach of any representation or warranty made
by the Buyer(s) in this Agreement, instrument or document contemplated
hereby or thereby executed by the Buyer, (b) any breach of any
covenant, agreement or obligation of the Buyer(s) contained in this
Agreement, the Registration Rights Agreement or any other certificate,
instrument or document contemplated hereby or thereby executed by the
Buyer(s), or (c) any cause of action, suit or claim brought or made
against such Company Indemnitees based on material misrepresentations
or due to a material breach and arising out of or resulting from the
execution, delivery, performance or enforcement of this Agreement or
any other instrument, document or agreement executed pursuant hereto by
any of the Company Indemnities. To the extent that the foregoing
undertaking by the Buyer(s) may be unenforceable for any reason, the
Buyer(s) shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities, which is
permissible under applicable law.
18
9. GOVERNING LAW: MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of New York
without regard to the principles of conflict of laws. The parties
further agree that any action between them shall be heard in New York
City, New York, and expressly consent to the jurisdiction and venue of
the Supreme Court of New York and the United States District Court for
the Southern District of New York for the adjudication of any civil
action asserted pursuant to this Section.
(b) COUNTERPARTS. This Agreement may be executed in two or
more identical 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. In the
event any signature page is delivered by facsimile transmission, the
party using such means of delivery shall cause four (4) additional
original executed signature pages to be physically delivered to the
other party within five (5) days of the execution and delivery hereof
(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 in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other
jurisdiction.
(e) ENTIRE AGREEMENT, AMENDMENTS. This Agreement supersedes
all other prior oral or written agreements between the Buyer(s), the
Company, their affiliates and persons acting on their behalf with
respect to the matters discussed herein, and this Agreement and the
Schedules and Exhibits attached hereto, and the instruments referenced
herein contain the entire understanding of the parties with respect to
the matters covered herein and therein and, except as specifically set
forth herein or therein, neither the Company nor any Buyer makes any
representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived or amended other
than by an instrument in writing signed by the party to be charged with
enforcement.
(f) NOTICES. Any notices, consents, waivers, or other
communications required or permitted to be given under the terms of
this Agreement must be in writing and will be deemed to have been
delivered (i) upon receipt, when delivered personally; (ii) upon
receipt, when sent by facsimile (provided confirmation of receipt is
received by the sending party); (iii) three (3) days after being sent
by U.S. certified mail, return receipt requested, or (iv) one (1) day
after deposit with a nationally recognized overnight delivery service,
in each case properly addressed to the party to receive the same. The
addresses and facsimile numbers for such communications shall be:
19
If to the Company, to:
TELENETICS CORPORATION.
00000 Xxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Attention:
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
With a copy to:
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxxxxxxx
Xxxxx 0000
Xxxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Transfer Agent, to:
__________________________________
__________________________________
__________________________________
Telephone:
Facsimile:
If to the Buyer(s), to its address and facsimile number on
Schedule I, with copies to the Buyer's counsel as set forth on Schedule
I. Each party shall provide five (5) days' prior written notice to the
other party of any change in address or facsimile number.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their respective
successors and assigns. Neither the Company nor any Buyer shall assign
this Agreement or any rights or obligations hereunder without the prior
written consent of the other party hereto.
(h) NO 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.
20
(i) SURVIVAL. Unless this Agreement is terminated under
Section 9(l), the representations and warranties of the Buyer(s)
contained in Section 2, the agreements and covenants set forth in
Sections 4, 5 and 9, and the indemnification provisions set forth in
Section 8, shall survive the Closing for a period of one (1) year
following the date on which the Series A Preferred Shares are converted
in full. The representations and warranties set forth in Section 3
shall survive for a period of one (1) year from the date of closing.
The Buyer(s) shall be responsible only for its own representations,
warranties, agreements and covenants hereunder.
(j) PUBLICITY. The Company and the Buyer(s) shall have the
right to approve, before issuance, any press release or any other
public statement with respect to the transactions contemplated hereby
made by any party; provided, however, that the Company shall be
entitled, without the prior approval of the Buyer(s), to issue any
press release or other public disclosure with respect to such
transactions required under applicable securities or other laws or
regulations (the Buyer(s) shall be consulted by the Company in
connection with any such press release or other public disclosure prior
to its release and Buyer(s) shall be provided with a copy thereof upon
release 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.
(1) TERMINATION. In the event that the Closing shall not have
occurred with respect to the Buyers on or before ten (10) business days
from the date hereof due to the Company's or the Buyer's failure to
satisfy the conditions set forth in Sections 6 and 7 above (and the
non-breaching party's failure to waive such unsatisfied condition(s)),
the non-breaching party shall have the option to terminate this
Agreement with respect to such breaching party at the close of business
on such date without liability of any party to any other party;
provided, however, that if this Agreement is terminated pursuant to
this Section 9(l), the Company acknowledges that it shall remain
obligated to pay the Placement Agent for its legal fees as described in
Section 4(g) above.
(m) FINDER. The Company acknowledges that it has engaged May
Xxxxx Group, Inc., as placement agent in connection with the sale of
the Series A Preferred Shares. The Company shall be responsible for the
payment of any placement agent fees, as specified in the Placement
Agency Agreement dated October 31, 2000, (which includes cash and
warrants to May Xxxxx Group, Inc., to purchase Common Stock) relating
to or arising out of the transactions contemplated hereby and from the
proceeds thereof.
(n) NO STRICT CONSTRUCTION. The language used in this
Agreement will be deemed to be the language chosen by the parties to
express their mutual intent, and no rules of strict construction will
be applied against any party.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK.]
21
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------- ---------------------------------
Name: Name: Xxxxx X. Xxxxxx
Title: Title: President
INVESTOR
By:
---------------------------------
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
/s/ Xxxxx X. Xxxxxx
/s/ Xxxxx X. Xxxxxx
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
By: /s/ Xxxxxxx Xxxxx
---------------------------------
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
/s/ Xxxxxx Xxxxxxx
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
/s/ Xxxxxx Xxxxxxxxx
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
/s/ Xxxxx X. Xxxxx
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
By: /s/ Xxxxx Xxxxxxx
---------------------------------
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
By: /s/ Xxxxxxx Xxxxxx
---------------------------------
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
/s/ Xxxxxxx X. Xxxxxx
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
/s/ Xxxxx Xxxxxx
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
By: /s/ Xxxxxx Xxxxxx
---------------------------------
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------- ---------------------------------
Name: Name: Xxxxx X. Xxxxxx
Title: Title: President
INVESTOR
By: /s/ Xxxx XxXxxxxx
---------------------------------
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------- ---------------------------------
Name: Name: Xxxxx X. Xxxxxx
Title: Title: President
INVESTOR
By: /s/ Xxx Xxxx Shan
---------------------------------
Name: Xxx Xxxx Shan
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------- ---------------------------------
Name: Name: Xxxxx X. Xxxxxx
Title: Title: President
INVESTOR
By: /s/ Xxxxx Che Xxx Xxxx
---------------------------------
Name: Xxxxx Che Xxx Xxxx
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------- ---------------------------------
Name: Name: Xxxxx X. Xxxxxx
Title: Title: President
INVESTOR
By: /s/ Xxxx Xxxxx Lai
---------------------------------
Name: Xxxx Xxxxx Xxx
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------- ---------------------------------
Name: Name: Xxxxx X. Xxxxxx
Title: Title: President
INVESTOR
By: /s/ Xxx X. Xxx
---------------------------------
Name: Xxx X. Xxx
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------- ---------------------------------
Name: Name: Xxxxx X. Xxxxxx
Title: Title: President
INVESTOR
By: /s/ illegible signature
---------------------------------
Keyway Holding Co.
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
/s/ Xxxxxx Koto
---------------------------------
/s/ Xxxxxx Koto
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
By: /s/ Xxx Xxxxxxxx
---------------------------------
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------- ---------------------------------
Name: Name: Xxxxx X. Xxxxxx
Title: Title: President
INVESTOR
By: /s/ Sui Wa Xxxx
---------------------------------
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By:
----------------------------- ---------------------------------
Name: Name:
Title: Title:
INVESTOR
By: /s/ Xxxxx Xxxxxx
---------------------------------
22
IN WITNESS WHEREOF, the Buyer(s) and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
ATTEST: TELENETICS CORPORATION
By: /s/ Xxxxx X. Xxxxxx
----------------------------- ---------------------------------
Name: Name: Xxxxx X. Xxxxxx
Title: Title: President
INVESTOR
By: /s/ Xxxxxx Xxxxx
---------------------------------
22
