EXHIBIT 99.9
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of February 20,
---------
1998, by and between Interactive Entertainment Limited, a Bermuda exempted
company (the "Company"), and Palisades Holdings, Inc., a California corporation
-------
(the "Purchaser").
---------
The Company wishes to sell to the Purchaser, and the Purchaser wishes to
buy, on the terms and subject to the conditions set forth in this Agreement, (i)
shares (the "Preferred Shares") of the Company's Series B Convertible Preferred
----------------
Stock of the Company's Class B Preferred Stock (the "Preferred Stock") in the
---------------
amount set forth below the Purchaser's name on the signature pages hereof, and
(ii) a Warrant in the form of Exhibit A hereto (the "Warrant") entitling the
--------- -------
holder thereof to purchase the number of shares (the "Warrant Shares") of Common
--------------
Stock (as defined below) set forth next to the Purchaser's name on the signature
pages hereof. The Preferred Shares are convertible into shares (the "Conversion
----------
Shares") of the Company's Common Shares (the "Common Stock") pursuant to the
------ ------------
terms approved by the Board of Directors of the Company and attached hereto as
Exhibit B (the "Authorized Terms"). The Preferred Shares, the Warrant, the
--------- ----------------
Conversion Shares, the Warrant Shares and the Dividend Payment Shares (as
defined in the Authorized Terms) are collectively referred to herein as the
"Securities."
-----------
The Company has agreed to effect the registration of the Conversion Shares,
the Warrant Shares and the Dividend Payment Shares under the Securities Act of
1933, as amended (the "Securities Act"), pursuant to a Registration Rights
---------------
Agreement of even date herewith by and between the Company and the Purchaser
(the "Registration Rights Agreement"). The sale of the Preferred Shares and the
-----------------------------
Warrants by the Company to the Purchaser will be effected in reliance upon the
exemption from securities registration afforded by the provisions of Regulation
D ("Regulation D"), as promulgated by the Securities and Exchange Commission
------------
(the "Commission") under the Securities Act.
----------
The Company and the Purchaser hereby agree as follows:
1. PURCHASE AND SALE OF PREFERRED SHARES.
-------------------------------------
1.1 Agreement to Purchase and Sell. Upon the terms and subject to the
------------------------------
satisfaction or waiver of the conditions set forth herein, the Company agrees to
sell, and the Purchaser agrees to purchase, (i) the number of Preferred Shares
set forth below the Purchaser's name on the signature pages hereof, and (ii) a
Warrant entitling the holder thereof to purchase the number of Warrant Shares
set forth below the Purchaser's name on the signature pages hereof, at a
purchase price for such Preferred Shares and Warrant equal to one thousand
dollars ($1,000) times the number of Preferred Shares purchased by the Purchaser
-----
(the "Purchase Price").
--------------
1.2 Closing. Subject to the satisfaction or waiver of the conditions set
-------
forth herein, the closing of the purchase and sale of the Preferred Shares and
the Warrant (the "Closing") will be deemed to occur when this Agreement and the
-------
other Transaction Documents (as defined below) have been executed and delivered
by the Company and the Purchaser, and full payment of the Purchase Price has
been made by the Purchaser by wire transfer of immediately available funds
against delivery by the Company of duly executed
certificates representing the Preferred Shares and the Warrant purchased by the
Purchaser hereunder. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".
------------
1.3 Certain Definitions. When used herein, (i) "business day" shall mean
------------------- ------------
any day on which the New York Stock Exchange and commercial banks in the city of
New York and the city of Vancouver, British Columbia are open for business, (ii)
an "affiliate" of a party shall mean any person or entity controlling,
---------
controlled by or under common control with that party, and (iii) "control" shall
-------
mean, with respect to an entity, the ability to direct the business, operations
or management of such entity, whether through an equity interest therein or
otherwise.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
-----------------------------------------------
The Purchaser hereby makes the following representations and warranties to
the Company and agrees with the Company that, as of the date of this Agreement
and as of, with respect to the Closing and the Closing Date:
2.1 Authorization; Enforceability. The Purchaser is duly and validly
-----------------------------
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization with full power and authority
to purchase the Preferred Shares and the Warrant and to execute and deliver this
Agreement. This Agreement constitutes the Purchaser's valid and legally binding
obligation, enforceable in accordance with its terms, except as such enforcement
may be limited by, (i) applicable bankruptcy, insolvency, reorganization or
other laws of general application relating to or affecting the enforcement of
creditors' rights generally, and (ii) general principles of equity.
2.2 Accredited Investor; Investment Intent. The Purchaser is an
--------------------------------------
accredited investor as that term is defined in Rule 501 of Regulation D, and is
acquiring the Preferred Shares and the Warrant solely for its own account for
investment purposes as a principal and not with a view to the public resale or
distribution of all or any part thereof, except pursuant to sales that are
exempt from the registration requirements of the Securities Act and/or sales
registered under the Securities Act. The Purchaser understands that the
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 laws or an exemption from such registration is available, and
that the Company has no present intention of registering such securities other
than as contemplated by the Registration Rights Agreement; provided, however,
that in making such representation, such Purchaser does not agree to hold the
Securities for any minimum or specific term and reserves the right to sell,
transfer or otherwise dispose of the Securities at any time in accordance with
the provisions of this Agreement and with Federal and state securities laws
applicable to such sale, transfer or disposition.
2.3 Reliance on Exemptions. The Purchaser understands that the Preferred
----------------------
Shares and Warrant are being offered and sold to the Purchaser in reliance upon
specific exemptions from the registration requirements of Federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Purchaser's compliance with, the representations, warranties,
agreements, acknowledgments and understandings of the Purchaser set forth herein
in order to determine the availability of such exemptions and the eligibility of
the Purchaser to acquire the Preferred Shares and Warrant.
2
2.4 Information. The Company has provided the Purchaser with all
-----------
information regarding the business, operations and financial condition of the
Company which has been specifically requested by the Purchaser, and has granted
to the Purchaser the opportunity to ask questions of and receive answers which
it believes to be complete and satisfactory from representatives of the Company,
its officers, directors, employees and agents concerning the Company and
materials relating to the terms and conditions of the purchase and sale of the
Preferred Shares and the Warrant hereunder. Neither such information nor any
other investigation conducted by the Purchaser or any of its representatives
shall modify, amend or otherwise alter the Purchaser's right to rely on the
Company's representations and warranties contained in this Agreement. The
Purchaser has no actual knowledge that any of the Company's representations or
warranties contained in this Agreement are untrue.
2.5 Governmental Review. The Purchaser understands that no Federal or
-------------------
state agency has passed upon or made any recommendations or endorsement of the
Securities.
2.6 Limitations on Disposition. The Purchaser acknowledges that, (i)
--------------------------
except as provided in the Registration Rights Agreement, the Securities have not
been and are not being registered under the Securities Act and may not be
transferred or resold without registration under the Securities Act or unless
pursuant to an exemption therefrom, (ii) any sale of such Securities made in
reliance on Rule 144 under the Securities Act (or a successor rule) ("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 without registration under
the Securities Act under circumstances in which the seller may be deemed to be
an underwriter (as the term is defined in the Securities Act) may require
compliance with some other exemption under the Securities Act or the rules and
regulations of the Commission thereunder, and (iii) neither the Company nor any
other person is under any obligation to register such Securities under the
Securities Act or any state securities laws or to comply with the terms and
conditions of any exemption thereunder (in each case, other than pursuant to
this Agreement or the Registration Rights Agreement).
2.7 Legend. The Purchaser understands that the certificates representing
------
the Securities will bear at issuance 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 (the
"Securities Act"), or the securities laws of any state of the United
States, and may not be offered, sold or transferred unless a
registration statement under the Securities Act and applicable state
securities laws shall have become effective with regard thereto, or an
exemption from registration under the Securities Act and applicable
state securities laws is available in connection with such offer, sale
or transfer. Such securities are issued subject to the provisions of,
(i) the Authorized Terms adopted by the Board of Directors of
Interactive Entertainment Limited (the "Company"), as amended, (ii) a
Securities Purchase Agreement, dated February 20, 1998, by and between
the Company and the purchaser named therein, and (iii) a Registration
Rights Agreement, dated February 20, 1998, by and between the Company
and such purchaser."
Notwithstanding the foregoing, it is agreed that, as long as the
resale of the Conversion Shares, the Warrant Shares or the Dividend Payment
Shares, as the case may be, is registered pursuant to an effective registration
statement or such shares are eligible for resale under Rule 144(k) under the
3
Securities Act, such shares shall be issued without any legend or other
restrictive language. The legend set forth above shall be removed and the
Company shall issue a new certificate without such legend to the holder of any
Security upon which it is stamped if, (i) the resale of such Security is
registered under the Securities Act, (ii) such holder provides the Company with
an opinion of counsel, in form, substance and scope customary for opinions of
counsel in comparable transactions (the cost of which shall be borne by such
holder) to the effect that such Security can be sold publicly without
registration under the Securities Act, (iii) such holder provides the Company
with an opinion of counsel reasonably satisfactory to the Company that such
Security can be sold pursuant to Rule 144 without any restriction as to the
number of shares of or represented by such Security that can then be immediately
resold, or (iv) such Security has been sold pursuant to Rule 144.
2.8 Residency. The Purchaser is a resident of the jurisdiction set forth
---------
under the Purchaser's name on the signature page hereto.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
The Company hereby makes the following representations and warranties to
the Purchaser and agrees with the Purchaser that, as of the date of this
Agreement and as of, with respect to the Closing and the Closing Date:
3.1 Organization Good Standing and Qualification. Each of the Company and
--------------------------------------------
its subsidiaries is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite corporate power and authority to carry on its business as now
conducted. Each of the Company and its subsidiaries is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on the consolidated
business or financial condition of the Company and its subsidiaries taken as a
whole. The term "subsidiaries" shall mean entities in which the Company has an
equity interest of 50% or greater.
3.2 Authorization; Consents. The Company has the requisite corporate
-----------------------
power and authority to enter into and perform its obligations under, (i) this
Agreement, (ii) the Registration Rights Agreement, and (iii) all other
agreements, documents, certificates or other instruments delivered by the
Company at the Closing (the instruments described in (i), (ii) and (iii) being
collectively referred to herein as the "Transaction Documents"), to execute and
---------------------
perform its obligations under the Authorized Terms, to execute and perform its
obligations under the Warrant, to issue and sell the Preferred Shares and the
Warrant to the Purchaser in accordance with the terms hereof, to issue the
Conversion Shares upon conversion of the Preferred Shares in accordance with the
Authorized Terms, to issue the Warrant Shares upon exercise of the Warrant and
to issue the Dividend Payment Shares in accordance with the Authorized Terms.
All corporate action on the part of the Company by its officers, directors and
shareholders necessary for, (A) the authorization, execution and delivery of,
and the performance by the Company of its obligations under, the Transaction
Documents, (B) the authorization, execution and filing of, and the performance
by the Company of its obligations under the Authorized Terms, and (C) the
authorization and execution, and the performance by the Company of its
obligations under, the Warrant have been taken, and no further consent or
authorization of the Company, its Board of Directors, its shareholders, any
governmental agency or organization, or any other person or entity is required.
4
3.3 Enforcement. The Transaction Documents, the Authorized Terms and the
-----------
Warrant constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except as such
enforcement may be limited by, (i) applicable bankruptcy, insolvency,
reorganization or other laws of general application relating to or affecting the
enforcement of creditors' rights generally, (ii) general principles of equity,
and (iii) Federal or state securities laws as to rights to indemnity and
contribution under this Agreement or the Registration Rights Agreement.
3.4 Disclosure Documents; Material Agreements; Other Information. The
------------------------------------------------------------
Company has filed with the Commission, (i) the Company's Annual Report on Form
20-F for the year ended February 28, 1997, (ii) a Transition Report on Form 10-
Q/A for the four months ended June 30, 1997, (iii) a Quarterly Report on Form
10-Q for the three months ended September 30, 1997, (iv) all Current Reports on
Form 8-K required to be filed with the Commission since June 17, 1997, and (v)
the Company's definitive Proxy Statement for its 1997 Annual General Meeting of
Shareholders (the "Disclosure Documents"). The Company is not aware of any
--------------------
event occurring on or prior to the Closing Date, (other than developments
regarding Sky Games/TM/ software) that would require the filing of, or with
respect to which the Company intends to file, a Form 8-K after the Closing Date.
Each Disclosure Document, as of the date of the filing thereof with the
Commission, conformed in all material respects to the requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act "), and the rules
-------------
and regulations thereunder and, as of the date of such filing, such Disclosure
Document did not contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Except as described on Schedule 3.4 hereto, all material agreements
------------
required to be filed as exhibits to the Disclosure Documents have been filed as
required; neither the Company nor any of its subsidiaries is in breach of any
agreement where such breach is reasonably likely to have a material adverse
effect on the consolidated business or financial condition of the Company and
its subsidiaries taken as a whole. The information described in Section 2.4
above does not contain an untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading and does not include any material, non-public information. Except as
set forth in the Disclosure Documents or any schedule or exhibit attached
hereto, the Company has no liabilities, contingent or otherwise, other than
liabilities incurred in the ordinary course of business which, under generally
accepted accounting principles, are not required to be reflected in such
financial statements and which, individually or in the aggregate, are not
material to the consolidated business or financial condition of the Company and
its subsidiaries taken as a whole. As of their respective dates, the financial
statements of the Company included in the Disclosure Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission with respect thereto. Such
financial statements have been prepared in accordance with generally accepted
accounting principles consistently applied at the times and during the periods
involved (except, (A) as may be otherwise indicated in such financial statements
or the notes thereto, or (B) in the case of unaudited 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 unaudited statements, to normal
year-end adjustments and final review by the Company's independent auditors);
provided, however, that the Company's Annual Report on Form 20-F for the year
ended February 28, 1997, is intended to be amended by the filing of a Form 20-
F/A to reflect a change in the reconciliation of Canadian GAAP to U.S. GAAP
relating to, (i) the reclassification of the preference shares held by B/E
Aerospace, Inc. in the amount of $2.6 million as debt as of February 28, 1997,
5
and (ii) an incremental expense of $703,000 related to the issuance of options
to non-related parties; provided, further, that the Company's Transition Report
on Form 10-Q for the four months ended June 30, 1997 has been amended by the
filing of a Form 10-Q/A to reflect changes in the accounting treatment of
certain transactions reflected in the financial statements contained therein.
3.5 Capitalization. The capitalization of the Company as of January 31,
--------------
1998, 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 Stock and the Warrant)
exercisable for, or convertible into or exchangeable for any shares of Common
Stock and the number of shares initially to be reserved for issuance upon
conversion of the Preferred Shares and exercise of the Warrant in full is set
forth on Schedule 3.5 hereto. All of such outstanding shares of capital stock
------------
have been, or upon issuance will be, validly issued, fully paid and non-
assessable. No shares of the capital stock of the Company are subject to
preemptive rights or any other similar rights of the shareholders of the Company
or any liens or encumbrances created by or through the Company, other than those
preemptive rights created in favor of Xxxxxx'x Interactive Investment Company
("HIIC") and its affiliates, pursuant to that certain Registration and
Preemptive Rights Agreement dated June 17, 1997, between the Company and HIIC
("Xxxxxx'x Preemptive Rights") and subject to the provisions of the Company's
Bye-laws. Except as disclosed on Schedule 3.5., or as contemplated herein, as
-------------
of the date of this Agreement and as of the Closing Date, 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.
3.6 Valid Issuance.
--------------
3.6.1 The Preferred Shares are duly authorized and, when issued, sold
and delivered in accordance with the terms hereof, (i) will be duly and validly
issued, fully paid and nonassessable, free and clear of any taxes, liens,
claims, preemptive or similar rights (except as set forth herein) or
encumbrances imposed by or through the Company, (ii) based in part upon the
representations of the Purchaser in this Agreement, will be issued, sold and
delivered in compliance with all applicable Federal and state securities laws,
and (iii) will be entitled to all of the rights, preferences and privileges set
forth in the Authorized Terms. The Conversion Shares are duly authorized and
reserved for issuance and, upon conversion of the Preferred Shares in accordance
with the terms of the Authorized Terms, will be duly and validly issued, fully
paid and nonassessable, free and clear of any taxes, liens, claims, preemptive
or similar rights or encumbrances imposed by or through the Company. The
Dividend Payment Shares are duly authorized and will be, upon the issuance
thereof, duly and validly issued, fully paid and nonassessable, free and clear
of any taxes, liens, claims, preemptive or similar rights or encumbrances
imposed by or through the Company, subject to the provisions of the Company's
Bye-laws.
3.6.2 The Warrant is duly authorized and, when issued, sold and
delivered in accordance with the terms hereof, (i) will be duly and validly
issued, fully paid and nonassessable, free and clear of any taxes, liens,
claims, preemptive or similar rights or encumbrances imposed by or through the
Company, and (ii) based in part upon the representations of such Purchaser in
this Agreement, will be issued, sold and
6
delivered in compliance with all applicable Federal and state securities laws.
The Warrant Shares are duly authorized and reserved for issuance and, upon
exercise of the Warrant in accordance with the terms thereof, will be duly and
validly issued, fully paid and nonassessable, free and clear of any taxes,
liens, claims, preemptive or similar rights or encumbrances imposed by or
through the Company subject to the provisions of the Company's Bye-laws.
3.7 No Conflict with Other Instruments. Neither the Company nor any of
----------------------------------
its subsidiaries is in violation of any provisions of its charter, bye-laws or
other organizational documents or any other governing document as amended and in
effect on and as of the date hereof or in default (and no event has occurred
which, with notice or lapse of time or both, would constitute a default) under
any provision of any instrument or contract to which it is a party or by which
it is bound which would reasonably be expected to have a material adverse effect
on the consolidated business or financial condition of the Company and its
subsidiaries taken as a whole, or of any provision of any Federal or state
judgment, writ, decree, order, statute, rule or governmental regulation
applicable to the Company, which would have a material adverse effect on the
consolidated business or financial condition of the Company and its subsidiaries
taken as a whole. The, (i) execution, delivery and performance of this
Agreement, the Warrant and the other Transaction Documents, (ii) approval of the
Approved Terms by the Board of Directors, and (iii) consummation 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 and the Dividend Payment Shares) will not result in any
such violation or be in conflict with or constitute, with or without the passage
of time and giving of notice, either a default under any such provision,
instrument or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company or of any of its
subsidiaries, or the triggering of any anti-dilution rights on the part of
holders of the Company's securities.
3.8 Financial Condition; Taxes; Litigation.
--------------------------------------
3.8.1 The Company's financial condition is, in all material respects,
as described in the Disclosure Documents, except for changes in the ordinary
course of business and normal year-end adjustments that are not, in the
aggregate, materially adverse to the consolidated business or financial
condition of the Company and its subsidiaries taken as a whole. Except as
otherwise described in the Disclosure Documents, as of the date hereof and as of
the Closing Date, there has been no material adverse change to the Company's
business, operations, properties, financial condition or results of operations
since the date of the Company's most recent audited financial statements
contained in the Disclosure Documents.
3.8.2 The Company has filed all tax returns required to be filed by
it and paid all taxes which are due, except for taxes which it reasonably
disputes or which could not reasonably be expected to have a material adverse
effect on the consolidated business or financial condition of the Company and
its subsidiaries taken as a whole.
3.8.3 Except as set forth in Schedule 3.8.3, each of the Company and
--------------
its subsidiaries is not the subject of any pending or, to the Company's
knowledge, threatened inquiry, investigation or administrative or legal
proceeding by the Internal Revenue Service, the taxing authorities of any state
or local jurisdiction, the Commission or any state securities commission or
other governmental or regulatory entity
7
which would reasonably be expected to have a material adverse effect on the
consolidated business or financial condition of the Company and its subsidiaries
taken as a whole.
3.8.4 Except as set forth in Schedule 3.8.4, there is no material
--------------
claim, litigation or administrative proceeding pending, or, to the Company's
knowledge, threatened, against the Company or any of its subsidiaries, or
against any officer, director or employee of the Company or any such subsidiary
in connection with such person's employment therewith. Neither the Company nor
any of its subsidiaries is a party to or subject to the provisions of, any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality which would reasonably be expected to have a material adverse
effect on the consolidated business or financial condition of the Company and
its subsidiaries taken as a whole.
3.9 Reporting Company; Form S-3. The Company is subject to the reporting
---------------------------
requirements of the Exchange Act, has a class of securities registered under
Section 12 of the Exchange Act, and has filed all reports required thereby. The
Company is eligible to register for resale shares of its Common Stock on a
registration statement on Form S-3 under the Securities Act.
3.10 Acknowledgment of Dilution. The Company acknowledges that the
--------------------------
issuance of, (i) the Conversion Shares upon conversion of the Preferred Shares
in accordance with the terms of the Authorized Terms, (ii) the Warrant Shares
upon exercise of the Warrant, and (iii) the Dividend Payment Shares in
accordance with the terms of the Authorized Terms may result in dilution of the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. The Company further acknowledges that its obligation,
(A) to issue Conversion Shares upon conversion of the Preferred Shares in
accordance with the terms of the Authorized Terms, (B) to issue Warrant Shares
upon exercise of the Warrant, and (C) to issue Dividend Payment Shares in
accordance with the terms of the Authorized Terms is unconditional and absolute
regardless of the effect of any such dilution.
3.11 Intellectual Property. The Company and its subsidiaries own, possess
---------------------
or can acquire on reasonable terms adequate trademarks, trade names and other
rights to inventions, know-how, patents, copyrights, confidential information
and other intellectual property rights necessary to conduct the business now
operated by them, or presently employed by them, and have not received any
notice of infringement of or conflict with asserted rights of others with
respect to any such rights that, if determined adversely to the Company or any
of its subsidiaries, would individually or in the aggregate have a material
adverse effect on the consolidated business or financial condition of the
Company and its subsidiaries taken as a whole.
3.12 Registration Rights; Rights of Participation. Except as described on
--------------------------------------------
Schedule 3.12 hereto, (i) the Company has not granted or agreed to grant to any
--------------
person or entity any rights (including "piggy-back" registration rights) to have
any securities of the Company registered with the Commission or any other
governmental authority which has not been satisfied, and (ii) no person or
entity, including, but not limited to, current or former shareholders of the
Company, underwriters, brokers, agents or other third parties, has any right of
first refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement or any other
Transaction Document which has not been waived.
3.13 Trading on Nasdaq. The Common Stock is authorized for quotation on
-----------------
the Nasdaq SmallCap Market, and trading in the Common Stock on Nasdaq is not
suspended as of the date hereof. The Company is not in violation of any
designation criteria of the Nasdaq SmallCap Market, and does not
8
reasonably anticipate that the Common Stock will be delisted by the Nasdaq
SmallCap market for the foreseeable future.
3.14 Fees. Except as described on Schedule 3.14 hereto, the Company is not
---- -------------
obligated to pay any brokerage commissions, finder's fees or similar payment,
cost or related expenditure to any underwriter, broker, agent or similar
representative in connection with the transactions contemplated hereby.
3.15 Foreign Corrupt Practices. To the knowledge of the Company, 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,
(i) used any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expenses relating to political activity, (ii) made any direct
or indirect unlawful payment to any foreign or domestic government official or
employee, or (iii) violated in a material aspect any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or made any unlawful bribe, rebate,
payoff, influence payment, kickback or other payment to any foreign or domestic
government official or employee.
3.16 Other Issuances of Securities. Except as set forth on Schedule 3.16
----------------------------- -------------
hereto, the Company has not issued (and will not issue) any shares of Common
Stock or shares of any series of preferred stock or other securities or
instruments convertible into, exchangeable for or otherwise entitling the holder
thereof to acquire shares of Common Stock which would be integrated with the
sale of the Preferred Shares to the Purchaser, or the issuance of the Conversion
Shares upon conversion thereof, for purposes of determining whether shareholder
approval is required under the designation criteria of the Nasdaq SmallCap
Market.
3.17 Regulatory Permits. The Company and 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.
4. COVENANTS OF THE COMPANY.
------------------------
4.1 Corporate Existence. The Company shall, so long as the Purchaser or
-------------------
any affiliate of the Purchaser beneficially owns any Securities (but in no event
shall such obligation continue for longer than three (3) years from the Closing
Date or until Purchaser no longer owns any Securities purchased hereunder),
maintain its corporate existence in good standing and shall pay all taxes owed
by it when due except for taxes which the Company reasonably disputes or as to
which the failure to pay could not reasonably be expected to have a material
adverse effect on the consolidated business or financial condition of the
Company.
4.2 Provision of Information. The Company shall upon written request
------------------------
provide the Purchaser with copies of its annual reports on Form l0-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and proxy statements and other
materials sent to shareholders, in each such case promptly after the filing
thereof with the Commission, until the conversion or redemption of all of the
Preferred Shares and exercise of the Warrant held by the Purchaser.
4.3 Reporting Status. As long as the Purchaser or any affiliate of the
----------------
Purchaser beneficially owns any Securities and until the date on which any of
the foregoing may be sold to the public pursuant to
9
Rule 144(k) (or any successor rule or regulation), (i) the Company shall file
with the Commission all reports required to be so filed pursuant to the Exchange
Act, and (ii) the Company shall not terminate its status as an issuer required
by the Exchange Act to file reports thereunder even if the Exchange Act or the
rules or regulations thereunder would permit such termination (other than a
termination resulting from the sale, conveyance or disposition of all or
substantially all of the assets of the Company, the effectuation of a
transaction or series of transactions, in which more than 50% of the voting
power of the Company is disposed of, or the consolidation, merger or other
business combination of the Company with or into any other entity, immediately
following which the prior shareholders of the Company fail to own, directly or
indirectly, at least fifty percent (50%) of the surviving entity).
4.4 Authorization of Common Stock. The Company shall at all times have
-----------------------------
authorized for issuance, free from any preemptive rights, solely for the purpose
of effecting conversions of the Preferred Shares hereunder and the exercise of
the Warrant, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all of the Preferred Shares and
the exercise of the Warrant in full (the "Reserved Amount"). As of the Closing
Date, the Reserved Amount shall be equal to no less than 200 % of the number of
shares of Common Stock issuable upon conversion of all of the Preferred Shares
to be issued at, or which are otherwise outstanding on, the Closing Date and
exercise of the Warrant in full. If at any time the Reserved Amount is less
than 150% of the number of shares of Common Stock issuable upon conversion of
all of the Preferred Shares then outstanding and exercise of the Warrant in
full, the Company shall take action as soon as practicable thereafter (including
seeking shareholder authorization for additional shares of Common Stock) to
increase the Reserved Amount to no less than 200% of the number of shares of
Common Stock into which such outstanding Preferred Shares are then convertible
and such Warrant is exercisable. The Company shall not reduce the number of
shares reserved for issuance hereunder without the written consent of the
holders of two-thirds of the Preferred Shares then outstanding.
4.5 Use of Proceeds. The Company shall use the proceeds from the sale of
---------------
the Preferred Shares and the Warrant for general corporate purposes and shall
not use such proceeds to make a loan to or an investment in any other
corporation, partnership or other entity, including a loan, other than in
connection with an employee benefit plan or a de minimus payroll advance, to
any employee, officer or director of the Company, and such proceeds shall not be
used by any such employee, officer or director for any purpose that is not
directly related to the business or operations of the Company.
4.6 Quotation on Nasdaq. The Company shall, (i) promptly following the
-------------------
Closing, secure the designation and quotation of the Conversion Shares and the
Warrant Shares on the Nasdaq SmallCap Market, (ii) prior to the issuance
thereof, secure the designation and quotation of the Dividend Payment Shares on
the Nasdaq SmallCap Market, and (iii) use its reasonable best efforts to
maintain the designation and quotation, or listing, of the Common Stock on the
Nasdaq SmallCap Market, Nasdaq National Market, the New York Stock Exchange or
the American Stock Exchange; provided, however, that any failure to maintain
such designation, quotation or listing which is cured within five (5) business
days shall not be deemed a breach of this Agreement.
4.7 Use of Purchaser Name. The Company shall not use, directly or
---------------------
indirectly, the Purchaser's name in any advertisement, announcement, press
release or other similar communication unless it has received the prior consent
of the Purchaser for the specific use contemplated or as otherwise required by
applicable law or regulation.
10
4.8 Company's Instructions to Transfer Agent. On or prior to the
----------------------------------------
Closing, the Company shall execute and deliver irrevocable instructions to its
transfer agent (the "Transfer Agent"), (i) to issue certificates representing
--------------
Conversion Shares upon conversion of the Preferred Shares in accordance with the
terms of the Authorized Terms and receipt of a valid Conversion Notice (as
defined in the Authorized Terms) from the Purchaser, in the amount specified in
such Conversion Notice in the name of the Purchaser or its nominee, (ii) to
issue certificates representing Warrant Shares upon exercise of the Warrant in
accordance with its terms upon receipt of a valid Exercise Notice (as defined in
the Warrant) from the Purchaser, in the amount specified in such Exercise Notice
in the name of the Purchaser or its nominee, (iii) to issue certificates
representing the Dividend Payment Shares upon the issuance thereof in accordance
with the Authorized Terms, and (iv) to deliver such certificates to such
Purchaser no later than the close of business on the later to occur of (A) the
third (3rd) business day following the related Conversion Date or the Dividend
Payment Date (each as defined in the Authorized Terms) or Exercise Date (as
defined in the Warrant), as the case may be and (B) in the case of conversion of
Preferred Shares or exercise of the Warrant, the first business day following
the date of delivery to the Company or the Transfer Agent of the original
certificates, duly endorsed, representing the shares of Preferred Stock being
converted or the Warrant being exercised, as the case may be. The Company
represents to and agrees with the Purchaser that it will not give any
instruction to the Transfer Agent that will conflict with the foregoing
instruction or otherwise restrict the Purchaser's right to convert the Preferred
Shares or exercise the Warrant or issuance of the Dividend Payment Shares, and
as long as the Transfer Agent is a participant in the Depository Trust Company
("DTC") Fast Automated Securities Transfer program, and such Purchaser has not
informed the Company that it wishes to receive physical certificates, the
transfer agent may effect delivery of Conversion Shares, Warrant Shares or
Dividend Payment Shares, as the case may be, by crediting the account of such
Purchaser or its nominee at DTC for the number of shares for which delivery is
required hereunder within the time frame specified above for delivery of
certificates. The Company represents to and agrees with the Purchaser that it
will not give any instruction to the Transfer Agent that will conflict with the
foregoing instruction or otherwise restrict such Purchaser's rights to convert
the Preferred Shares or exercise the Warrant or to receive Conversion Shares or
Dividend Payment Shares in accordance with the terms of the Authorized Terms or
to receive Warrant Shares in accordance with the terms of the Warrant. In the
event that the Company's relationship with the Transfer Agent should be
terminated for any reason, the Transfer Agent shall continue acting as transfer
agent pursuant to the terms hereof until such time that a successor transfer
agent is appointed by the Company and agrees to be bound by the terms hereof.
4.9 Capital Raising Limitations. The Company will not, prior to June 17,
---------------------------
1998 (the "Limitation Period"), offer for sale or sell, (i) Common Stock (A) at
-----------------
an issuance price of greater than a fifteen percent (15%) discount to the market
price of the Common Stock at the time of such issuance or with warrants
exercisable for more than twenty percent (20%) of the Common Stock purchased or
(B) for an aggregate purchase price in excess of five million dollars
($5,000,000), or (ii) any security convertible into, or exercisable or
exchangeable for, Common Stock (other than the sale of Preferred Stock for an
aggregate purchase price of up to two million dollars ($2,000,000))
(collectively, the "Capital Raising Limitations"). The Capital Raising
---------------------------
Limitations shall not apply to any transaction involving issuances of securities
as consideration in a merger, consolidation, acquisition or sale of assets (in
each case, the primary purpose of which is not to raise equity capital) or
pursuant to a strategic partnership or joint venture which is formed for a bona
fide commercial purpose, or as consideration for the acquisition of a business,
product or license by the Company or in connection with the exercise of options
by employees, directors or consultants. The Capital Raising Limitations also
shall not apply to, (i) the issuance of Common Stock in a transaction
11
pursuant to a public offering (other than an offering conducted pursuant to Rule
415 under the Securities Act), (ii) issuances of securities to the Company's or
its affiliates' employees, directors or consultants (or pursuant to options or
rights granted to persons who were employees, directors or consultants of the
Company or its affiliates as of the date of the grant) pursuant to a stock
purchase or option plan adopted by the Company, (iii) issuances of securities in
connection with an acquisition by the Company or its affiliates of the assets or
capital stock of a third party, (iv) issuances of securities pursuant to a stock
split, dividend, etc., (v) issuances of securities upon the conversion of any
preference shares into Common Stock, or (vi) issuances of securities to any
lender in connection with the extension, renewal, modification or renegotiation
of any credit or indebtedness to the Company or its affiliates.
4.10 Right of First Offer. Prior to any offer or sale by the Company of
--------------------
Common Stock (or any securities convertible into or exchangeable for Common
Stock) during the one hundred eighty (180) day period following the Limitation
Period, the Company must first deliver to the Purchaser written notice
describing the proposed issuance, including the terms and conditions thereof,
and provide the Purchaser with an option during the five (5) business day period
following delivery of such notice to the Purchaser to purchase up to its
proportionate share (based on the number of shares of Preferred Shares purchased
by the Purchaser hereunder relative to the number of shares of Series A and
Series B Preferred Stock then outstanding) of the securities being offered on
the same terms as contemplated by such issuance. The foregoing right of first
offer shall not apply to, (i) the issuance of Common Stock in a transaction
pursuant to a public offering (other than an offering conducted pursuant to Rule
415 under the Securities Act), (ii) issuances of securities to the Company's or
its affiliates' employees, directors or consultants (or pursuant to options or
rights granted to persons who were employees, directors or consultants of the
Company or its affiliates as of the date of the grant) pursuant to a stock
purchase or option plan adopted by the Company, (iii) issuances of securities in
connection with an acquisition by Company or its affiliates of the assets or
capital stock of a third party, (iv) issuances of securities pursuant to a stock
split, dividend, etc., (v) issuances of securities upon the conversion of any
preference shares into Common Stock, or (vi) issuances of securities to any
lender in connection with the extension, renewal, modification or renegotiation
of any credit or indebtedness to the Company or its affiliates.
4.11 Debt Covenant. The Company shall refrain during the period ending on
-------------
the later of June 17, 1998 or the forty-fifth (45th) day following the Effective
Date (as such term is defined in the Registration Rights Agreement), from
incurring, assuming or guaranteeing any indebtedness. Following such period and
until December 17, 1998, in the event that the Company incurs, assumes or
guarantees any indebtedness in excess of one million five hundred thousand
dollars ($1,500,000), individually or in the aggregate, without the prior
written consent of the holders of two-thirds (2/3) of the Series A and Series B
Preferred Shares then outstanding the Conversion Percentage (as defined in the
Authorized Terms) of the Preferred Shares shall be eighty-five percent (85%).
In the event the Company exceeds the foregoing limitations without the requisite
approval, the Company shall give the Purchaser written notice of such event
within five (5) business days of date the limitation was exceeded.
5. COVENANTS OF THE PURCHASER
--------------------------
Prohibition of Short Position. The Purchaser acknowledges and agrees that
-----------------------------
it, (i) will not make any short sales prior to the Effective Date ( as defined
in the Registration Rights Agreement), and (ii) does not intend to and that it
shall not, so long as the Purchaser or any affiliate of the Purchaser
beneficially owns any
12
shares of the Preferred Stock, establish an aggregate short position with
respect to the Common Stock exceeding twenty percent (20%) of the number of
shares of Common Stock into which the shares of Preferred Stock then held by the
Purchaser are convertible at the Fixed Conversion Price (as defined in the
Authorized Terms); provided, however, that the foregoing shall not apply to the
extent that the average Closing Bid Price (as defined in the Authorized Terms)
in the immediately preceding five (5) Trading Days (as defined in the Authorized
Terms) exceeds the Fixed Conversion Price (as defined in the Authorized Terms)
and provided further that notwithstanding the foregoing, in no event shall the
Purchaser be required to close out or reduce any portion of a short position
established in compliance with the terms of this Section 5. For purposes of this
Section 5, a short sale shall not include any sale of Common Stock made within
three (3) business days prior to the delivery of a Conversion Notice (in the
case of Preferred Shares) or an Exercise Notice (in the case of the Warrant) to
the Company in accordance with the Authorized Terms.
6. CONDITIONS TO CLOSING.
---------------------
6.1 Conditions to Purchaser's Obligation at Closing. The Purchaser's
-----------------------------------------------
obligation at the Closing, including without limitation its obligation to
purchase the Preferred Shares and the Warrant, are conditioned upon the
fulfillment of each of the following events:
6.1.1 the representations and warranties of the Company set forth in
this Agreement shall be true and correct in all material
respects as of the Closing Date as if made on such date;
6.1.2 the Company shall have complied with or performed all of the
agreements, obligations and conditions set forth in this
Agreement that are required to be complied with or performed by
the Company on or before the Closing;
6.1.3 the Company shall have delivered to the Purchaser a
certificate, signed by an officer of the Company, certifying
that the conditions specified in Sections 6.1.1 and 6.1.2 above
have been fulfilled as of the Closing;
6.1.4 the Board of Directors of the Company shall have passed a
resolution designating the rights attaching to the Preferred
Shares and shall have furnished such Purchaser with a certified
copy thereof;
6.1.5 [intentionally deleted]
6.1.6 the Company shall have delivered to such Purchaser an opinion
of counsel for the Company, dated as of the applicable Closing
Date, in form and substance reasonably acceptable to such
Purchaser;
6.1.7 the Company shall have executed and delivered the Registration
Rights Agreement;
6.1.8 the Common Stock shall on the Closing Date be designated for
quotation and actively traded on the Nasdaq SmallCap Market;
13
6.1.9 there shall have been no material adverse changes in the
Company's consolidated business or financial condition since
the date of the Company's most recent audited financial
statements contained in the Disclosure Documents;
6.1.10 the Company shall have authorized for issuance 200% of the
aggregate number of shares of Common Stock issuable upon, (i)
conversion of all of the Preferred Shares to be issued at the
Closing, (ii) exercise of the Warrant in full, and (iii) the
conversion of such Preferred Shares and exercise of the Warrant
then outstanding, such number, in the case of a conversion, to
be determined using the Conversion Price (as defined in the
Authorized Terms) in effect on the applicable Closing Date;
6.1.11 the Company shall have delivered to the Purchaser a copy of
HIIC's written waiver of Xxxxxx'x Preemptive Rights with
respect to the Securities; and
6.1.12 the Company shall have made available for inspection by the
Purchaser the certificates representing the Preferred Shares
and Warrant being purchased by such Purchaser hereunder.
6.2 Conditions to Company's Obligations at Closing. The Company's
----------------------------------------------
obligations at the Closing are conditioned upon the fulfillment of each of the
following events:
6.2.1 the representations and warranties of the Purchaser shall be
true and correct in all material respects as of the Closing
Date as if made on such date;
6.2.2 the Purchaser shall have complied with and performed all of the
agreements, obligations and conditions set forth in this
Agreement that are required to be complied with or performed by
the Purchaser on or before the Closing;
6.2.3 the Purchaser shall have executed the signature page to this
Agreement and the Registration Rights Agreement and delivered
the same to the Company;
6.2.4 the Purchaser shall have wired to an escrow agent mutually
agreed upon by the Purchaser and the Company the Purchase Price
of the Preferred Stock and the Warrant; and
6.2.5 no statute, rule, regulation, executive order, decree, ruling
or injunction shall have been enacted, promulgated or endorsed
by any court or governmental authority of competent
jurisdiction or any self-regulatory organization having
authority over the matters contemplated hereby which restricts
or prohibits the consummation of any of the transactions
contemplated by this Agreement.
14
7. INDEMNIFICATION.
---------------
The Company agrees to indemnify and hold harmless the Purchaser and its
officers, directors, employees and agents, and each person who controls the
Purchaser within the meaning of the Securities Act or the Exchange Act (each, a
"Purchaser Indemnified Party") against any losses, claims, damages, liabilities
---------------------------
or reasonable out-of-pocket expenses (including the reasonable fees and
disbursements of counsel) as incurred, joint or several, to which it, they or
any of them, may become subject and not otherwise reimbursed, arising out of
the breach by the Company of any of its representations, warranties or covenants
made herein.
The Purchaser agrees to indemnify and hold harmless the Company and its
officers, directors, employees and agents, and each person who controls the
Company within the meaning of the Securities Act or the Exchange Act (each, a
"Company Indemnified Party") (a Purchaser Indemnified Party and a Company
--------------------------
Indemnified Party are each hereinafter referred to as an "Indemnified Party")
-----------------
against any losses, claims, damages, liabilities or expenses (including the fees
and disbursements of counsel) as incurred, joint or several, to which it, they
or any of them, may become subject and not otherwise reimbursed, arising out of
the breach by the Purchaser of any of its representations, warranties or
covenants made herein.
Promptly after receipt by an Indemnified Party of notice of the
commencement of any action by a third party pursuant to which indemnification
may be sought hereunder, such Indemnified Party will, if a claim in respect
thereof is to be made against the other party (the "Indemnifying Party"),
------------------
deliver to the Indemnifying Party a written notice of the commencement thereof
and the Indemnifying Party shall have the right to participate in and to assume
the defense thereof with counsel reasonably selected by the Indemnifying Party;
provided, however, that an Indemnified Party shall have the right to retain its
own counsel, with the reasonably incurred fees and expenses of such counsel to
be paid by the Indemnifying Party, if representation of such Indemnified Party
by the counsel retained by the Indemnifying Party would be inappropriate due to
actual or potential conflicts of interest under applicable standards of
professional conduct between such Indemnified Party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the Indemnifying Party within a reasonable time of the commencement of
any such action will not relieve the Indemnifying Party of any of its
obligations hereunder with respect to such action except to the extent such
failure is prejudicial to the Indemnifying Party's ability to defend any such
action.
No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, effect any settlement of pending or threatened action in
respect of which an Indemnified Party is or could have been a party and
indemnity could have been sought hereunder by such Indemnified Party unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on any claims that are the subject matter of such action. An
Indemnifying Party will not be liable for any settlement of any action or claim
effected without its written consent.
Any implication herein to the contrary notwithstanding, (i) any Indemnified
Party shall not be entitled to recover under Section 7 hereof until the total
amount for which such Indemnified Party would recover under Section 7 hereof
exceeds $3,000, and then only for the excess over $3,000, and (ii) the maximum
aggregate amount that any Indemnified Party shall be entitled to recover under
Section 7 hereof shall not exceed $300,000.
15
8. MISCELLANEOUS.
-------------
8.1 Survival; Severability. The representations, warranties, covenants
----------------------
and indemnities made by the parties herein shall survive the Closing
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision; provided that in such case the parties shall
negotiate in good faith to replace such provision with a new provision which is
not illegal, unenforceable or void, as long as such new provision does not
materially change the economic benefits of this Agreement to the parties.
8.2 Successors and Assigns. The terms and conditions of this Agreement
----------------------
shall inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties. Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement. The Purchaser may assign its rights hereunder, in connection
with any private sale or transfer of the Preferred Shares or the Warrant in
accordance with the terms hereof, as long as, as a condition precedent to such
transfer, the transferee executes an acknowledgment agreeing to be bound by the
applicable provisions of this Agreement, in which case the term "Purchaser"
shall be deemed to refer to such transferee as though such transferee were an
original signatory hereto; provided that no such transfer or assignment shall
--------
relieve any Purchaser of its obligations hereunder.
8.3 No Reliance; Representations by Purchaser. The Purchaser acknowledges
-----------------------------------------
that, (i) it has such knowledge in business and financial matters as to be fully
capable of evaluating this Agreement, the other Transaction Documents and the
transactions contemplated hereby and thereby, (ii) it is not relying on any
advice or representation of the other party in connection with entering into
this Agreement, the other Transaction Documents or such transactions (other than
the representations made in this Agreement or the other Transaction Documents),
(iii) it has not received from such party any assurance or guarantee as to the
merits (whether legal, regulatory, tax, financial or otherwise) of entering into
this Agreement or the other Transaction Documents or the performance of its
obligations hereunder and thereunder, and (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting advisors
to the extent that it has deemed necessary, and has entered into this Agreement
and the other Transaction Documents based on its own independent judgment and on
the advice of its advisors as it has deemed necessary, and not on any view
(whether written or oral) expressed by such party.
8.4 Injunctive Relief. The Company acknowledges that a breach by it of
-----------------
its obligations hereunder may cause irreparable harm to the Purchaser and that
the remedy or remedies at law for any such breach may be inadequate and agrees,
in the event of any such breach, in addition to all other available remedies, to
such Purchaser's ability to seek an injunction restraining any breach and
requiring immediate and specific performance of such obligations.
8.5 Governing Law; Jurisdiction. This Agreement shall be governed by and
---------------------------
construed under the laws of the State of New York without regard to the conflict
of laws provisions thereof. Each party hereby irrevocably submits to the non-
exclusive jurisdiction of the state and federal courts sitting in the City
16
of New York, borough of Manhattan, for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.
8.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
8.7 Headings. The headings used in this Agreement are used for
--------
convenience only and are not to be considered in construing or interpreting this
Agreement.
8.8 Notices. Any notice, demand or request required or permitted to be
-------
given by any party to any other party pursuant to the terms of this Agreement
shall be in writing and shall be deemed given, (i) when delivered personally or
by verifiable facsimile transmission (with an original to follow) on or before
5:00 p.m., eastern time, on a business day or, if such day is not a business
day, on the next succeeding business day, (ii) on the next business day after
timely delivery to a nationally-recognized overnight courier and (iii) on the
third business day after deposit in the U.S. mail (certified or registered mail,
return receipt requested, postage prepaid), addressed to the parties as follows:
If to the Company:
Interactive Entertainment Limited
000 Xxxxxxxxx Xxxx
Xxxxx X-000
Xxxxxxx, Xxxxxxxxx 00000
Attn.: Xxxxx X. Xxxx
Fax: (000) 000-0000
With a copy to:
Altheimer & Xxxx
00 Xxxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. XxXxxx
Fax: (000) 000-0000
17
and if to the Purchaser, to such address for such Purchaser as shall appear on
the signature page hereof or as shall be designated by the Purchaser in writing
to the Company.
8.9 Expenses. Except as otherwise specified herein, the Company and each
--------
Purchaser shall pay all costs and expenses that it incurs in connection with the
negotiation, execution, delivery and performance of this Agreement; provided
that the Company shall reimburse the Purchaser for their reasonable out-of-
pocket expenses, including legal expenses, not to exceed one thousand dollars
($1,000), in the aggregate, at Closing.
8.10 Entire Agreement; Amendments. This Agreement and the other
----------------------------
Transaction Documents constitute the entire agreement between the parties with
regard to the subject matter hereof and thereof, superseding all prior
agreements or understandings, whether written or oral, between or among the
parties. Except as expressly provided herein, neither this Agreement nor any
term hereof may be amended except pursuant to a written instrument executed by
the Company and the holders of at least two-thirds (2/3) of the Preferred Shares
then outstanding, and no provision hereof may be waived other than by a written
instrument signed by the party against whom enforcement of any such waiver is
sought.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
18
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first-above written.
INTERACTIVE ENTERTAINMENT LIMITED
By: /s/ Xxxxx Xxxx
------------------------------------
Name: Xxxxx Xxxx
Title: Chief Financial Officer
PURCHASER NAME: PALISADES HOLDINGS, INC.
By: /s/ Xxxx Xxxxxxxxx
------------------------------------
Name: Xxxx Xxxxxxxxx
Title: President
ADDRESS:
000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 000
----------------------------------
Xxxxxxx Xxxxx, XX 00000
----------------------------------
Tel: 000-000-0000
--------------------------------
Fax: 000-000-0000
--------------------------------
Number of Shares of Series B Convertible Preferred Stock to be Purchased: 300
Number of Shares of Common Stock to be
Represented by the Warrant to be Purchased: 18,515
