SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "Agreement") is made as of
August _____, 2000, by and between CYNET, Inc., a corporation incorporated
under the laws of the State of Texas, U.S.A., with headquarters located at
00000 Xxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 (the "Company") and the
purchaser named on the signature page hereof (the "Buyer").
RECITALS:
A. The Company and the Buyer are executing and delivering this
Agreement in reliance upon the exemption from securities registration
afforded by the provisions of Regulation D ("Regulation D") as promulgated by
the United States Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "1933 Act"), and Section 4(2) under
the 1933 Act;
B. The Buyer desires to purchase from the Company, and the Company
desires to sell to the Buyer, for the amounts and upon the terms and
conditions stated in this Agreement, in a closing (the "Closing") as herein
described, shares of the Company's Class A Common Stock, no par value per
share (the "Common Stock") as listed and described in Recital B(i)
immediately below, and certain warrants as listed and described in Recital
B(ii) below.
(i) At the "Closing", 1,801,802 shares of the Common
Stock at a per share price of $1.11.
(ii) At the Closing, as additional consideration for
Buyer's purchase of the Common Stock, a warrant (the
"Warrants") to purchase 270,270 shares of Common
Stock at a purchase price per share equal to $1.21
per share. The Warrants shall be substantially in the
form attached hereto as Exhibit A.
The Common Stock received upon exercise of the Warrants shall be referred to as
the "Warrant Shares." The Common Stock being purchased by the Buyer hereunder,
the Warrants and the Warrant Shares may be collectively referred to herein as
the "Securities."
C. Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering a Registration Rights Agreement
(the "Registration Rights Agreement") substantially in the form of Exhibit B
attached hereto pursuant to which the Company has agreed to provide certain
registration rights with respect to certain of the Securities under the 1933 Act
and the rules and regulations promulgated thereunder, and applicable state
securities laws.
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AGREEMENTS
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the parties, the Company and the Buyer hereby
agree as follows:
1. PURCHASE AND SALE OF SECURITIES.
a. PURCHASE. At the Closing, the Buyer shall purchase from the Company,
and the Company shall sell to the Buyer, the Common Stock and Warrants referred
to in Recitals B(i) and B(ii) above. The aggregate purchase price (the "Purchase
Price") for the Common Stock and the Warrants purchased by the Buyer shall be
$2,000,000, $1,000,000 of which shall be payable by wire transfer of immediately
available funds pursuant to the wire instructions provided by the Company (the
"Company Payment"), $356,698.98 of which shall be payable by wire transfer to
Digital Consulting & Software Services for equipment previously delivered to the
Company (the "VAR Payment"), and $643,300.13 of which shall be payable in the
form of an Equipment Credit, a form of which is attached hereto as Exhibit D
(the "Equipment Credit").
b. THE CLOSING. Subject to the terms of this Agreement, the date of the
Closing (the "Closing Date") shall be August 8, 2000. The Purchase Price for the
Common Stock and Warrants being purchased at the Closing shall be delivered to
the Company on or before the Closing Date. On or before the Closing Date, the
Company shall deliver to the Buyer the original certificates representing the
Common Stock, along with the Warrants at the Closing, duly issued, authorized
and executed by the authorized officers on behalf of the Company and any other
deliveries to be made on or prior to the Closing pursuant to Section 7 hereof.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer understands, agrees with, and represents and warrants to the
Company with respect to its purchase hereunder, that:
a. INVESTMENT PURPOSES; COMPLIANCE WITH 1933 ACT. The Buyer is
purchasing the Securities for its own account for investment only and not with a
view towards, or in connection with, the public sale or distribution thereof,
except pursuant to sales registered under or exempt from the 1933 Act and
applicable state securities laws. The Buyer agrees to offer, sell or otherwise
transfer the Securities only (i) in accordance with the terms of this Agreement
and the Warrants, as applicable, and (ii) pursuant to registration under the
1933 Act or to an exemption from registration under the 1933 Act and any other
applicable securities laws. The Buyer does not by its representations contained
in this Section 2(a) agree to hold the Securities for any minimum or other
specific term and reserves the right to dispose of the Securities at any time
pursuant to a registration statement or in accordance with an exemption from
registration under the 1933 Act, in all cases in accordance with applicable
state and federal securities laws. The Buyer understands that it shall be a
condition to the issuance of the Warrant Shares that the Warrant Shares be and
are subject to the representations set forth in this Section 2(a).
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b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor" as
that term is defined in Rule 501 (a) of Regulation D. The Buyer has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of an investment made pursuant to this
Agreement. The Buyer is aware that it may be required to bear the economic risk
of an investment made pursuant to this Agreement for an indefinite period of
time, and is able to bear such risk for an indefinite period.
c. RELIANCE ON EXEMPTIONS. The Buyer understands the Securities are
being offered and sold to it in reliance on specific exemptions from the
registration requirements of the applicable United States federal and state
securities laws and that the Company is relying upon the truth and accuracy of,
and the Buyer's compliance with, the representations, warranties,
acknowledgments, understandings, agreements and covenants of the Buyer set forth
herein in order to determine the availability of such exemptions and the
eligibility of the Buyer to acquire the Securities.
d. INFORMATION. The Buyer and its advisors, if any, have been furnished
with all materials relating to the business, finances and operations of the
Company and materials relating to the offer and sale of the Securities that have
been requested by the Buyer. The Buyer and its advisors, if any, have been
afforded the opportunity to ask all such questions of the Company as they have
in their discretion deemed advisable. The Buyer understands that its investment
in the Securities involves a high degree of risk. The Buyer has sought such
accounting, legal and tax advice as it has considered necessary to an informed
investment decision with respect to the investment made pursuant to this
Agreement.
e. NO GOVERNMENT REVIEW. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
approved or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities, nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. TRANSFER OR RESALE. The Buyer understands that: (i) except as
provided in the Registration Rights Agreement, the Securities 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 either (a)
subsequently registered thereunder or (b) the Buyer shall have delivered to the
Company an opinion by counsel reasonably satisfactory to the Company, in form,
scope and substance reasonably satisfactory to the Company, to the effect that
the securities to be sold, assigned or transferred may be sold, assigned or
transferred pursuant to an exemption from such registration, (ii) any sale of
such securities made in reliance on Rule 144 (as hereafter defined) 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 though 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 thereunder and applicable state securities laws, and
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(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 thereunder (in each case,
other than pursuant to this Agreement or the Registration Rights Agreement).
g. LEGEND. The Buyer understands that until such time as the shares of
Common Stock to be purchased by the Buyer hereunder and the Warrant Shares
(collectively, the "Registrable Securities"), have been registered under the
1933 Act as contemplated by the Registration Rights Agreement or otherwise may
be sold by the Buyer pursuant to Rule 144 (as amended, or any applicable rule
which operates to replace said Rule) promulgated under the 1933 Act ("Rule
144"), the warrant certificate(s) and the stock certificate(s) representing the
Registrable Securities will bear a restrictive legend (the "Legend") in
substantially the following form:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (i) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (ii) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.
The Legend shall be removed and the Company will issue Common Stock
certificates without the Legend to the holder of the Registrable Securities upon
which the Legend is stamped, in accordance with Section 5(b).
h. AUTHORIZATION; ENFORCEMENT. This Agreement, the Registration Rights
Agreement and the Warrants have been duly and validly authorized, executed and
delivered by the Buyer and are each and collectively valid and binding
agreements of the Buyer enforceable in accordance with their terms, subject as
to enforceability to general principles of equity and to bankruptcy, insolvency,
moratorium, and other similar laws affecting the enforcement of creditors'
rights generally.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company understands, agrees with, and represents and warrants to
the Buyer that:
a. ORGANIZATION AND QUALIFICATION. Each of the Company and its
subsidiaries are duly duly incorporated (corporation and/or limited liability
company) and existing in good standing under the laws of the State of Texas,
except as would not have a Material Adverse
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Effect (as defined below), and has the requisite corporate power to own its
properties and to carry on its business as now being conducted. The Company 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 and where the failure so to qualify would have a
Material Adverse Effect. "Material Adverse Effect" means any effect or change
that would be material in impact or amount to the Company (together with its
subsidiaries) on the operations, properties, assets, business, or financial
condition. The Company has shareholder approval to reorganize and/or change its
state of incorporation to Delaware. The Common Stock is eligible to trade and is
listed for trading on the OTC Bulletin Board Market. The Company has received no
notice, either written or oral, with respect to the continued eligibility of the
Common Stock for such listing, and the Company has maintained all requirements
for the continuation of such listing, and the Company does not reasonably
anticipate, based upon conditions currently existing and reasonably forecasted
that the Common Stock will be delisted from the OTC Bulletin Board Market for
the reasonably foreseeable future. The Company has complied with all
requirements of the National Association of Securities Dealers and the OTC
Bulletin Board Market with respect to the issuance of the Securities.
b. AUTHORIZATION; ENFORCEMENT. (i) The Company has the requisite
corporate power and authority to enter into and perform this Agreement, the
Warrants and the Registration Rights Agreement, and to issue and sell the
Securities in accordance with the terms hereof, (ii) the execution, delivery and
performance of the Company's obligations under this Agreement, the Warrants and
the Registration Rights Agreement by the Company and the consummation by it of
the transactions contemplated hereby and thereby have been duly authorized by
the Company's Board of Directors and no further consent or authorization of the
Company, its Board of Directors, or its shareholders is required, (iii) this
Agreement, the Registration Rights Agreement and the Warrants, on the Closing
Date, the Common Stock and Warrants sold at the Closing, have been duly and
validly authorized, executed and delivered by the Company, and (iv) this
Agreement, the Common Stock (when issued), the Warrants (when issued), and the
Registration Rights Agreement constitute the valid and binding obligations of
the Company enforceable against the Company in accordance with their respective
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws relating to,
or affecting, generally, the enforcement of creditors' rights and remedies or by
other equitable principles of general application. The Company (and its legal
counsel) has examined this Agreement and is satisfied in its sole discretion
that, assuming the accuracy of the representations of the Buyer contained in
Section 2 of this Agreement, this Agreement and the accompanying Exhibits,
Schedules and the Addenda, if any, are in accordance with Regulation D and the
1933 Act and are effective to accomplish the purposes set forth herein and
therein.
c. CAPITALIZATION. As of July 31, 2000, the authorized common stock of
the Company consisted of the following: (i) 120,000,000 shares of common stock,
of which 100,000,000 were designated Class A Common Stock, 26,111,813 of which
are issued and outstanding, and 20,000,000 are designated Class B Common Stock,
2,255,452 shares are issued and outstanding; and (ii) 10,000,000 shares of blank
check Preferred Stock, of which (A) 3,600,000 were
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designated Series A Preferred Stock, none of which are issued and outstanding,
(B) 2,000,000 were designated Series B Preferred Stock, none of which are issued
and outstanding, (C) 1,600,000 were designated Series C Preferred Stock, none of
which are issued and outstanding, (D) 4,000,000 were designated Series D
Preferred Stock, 3,331,200 shares are issued and outstanding and convertible,
into 3,701,333 shares of Common Stock, (E) 1,635 were designated Series E
Preferred Stock, 1,601 shares are issued and outstanding and convertible, into
an 2,181,199 shares of Common Stock, (F) 2,185 of Series D Preferred Stock,
2,149 shares are issued and outstanding and convertible, into an 2,300,857
shares of Common Stock. All of the issued and outstanding shares of the
Company's capital stock have been validly issued and are fully paid and
nonassessable. No shares of Common Stock are subject to preemptive rights or any
other similar rights except the Preferred Stock rights disclosed in Schedule
3(c) and the Company has not attached any liens or encumbrances on any such
shares. Except for the above-referenced preferred stock and as disclosed in
Schedule 3(c), as of the effective 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 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, (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 its or their
securities under the 1933 Act (except as provided herein, in Schedule 3(c) and
in the Registration Rights Agreement). If requested by the Buyer, the Company
has furnished to the Buyer, and the Buyer acknowledges receipt of same by its
signature hereafter, true and correct copies of the Company's Articles of
Incorporation, as amended, as in effect on the date hereof, including the
Statement of the Powers, Designations, Preferences and Rights for each of the
outstanding series of the Company's preferred stock ("Articles of
Incorporation"), and the Company's Bylaws, as in effect on the date hereof (the
"Bylaws").
d. ISSUANCE OF SECURITIES. The Registrable Securities are all duly
authorized and reserved for issuance, and in all cases upon issuance shall be
validly issued, fully paid and non-assessable, free from all taxes, liens and
charges with respect to the issue thereof, and will not be subject to preemptive
rights or other similar rights of stockholders shareholders of the Company. The
sale of the Common Stock and the Warrants is not, and the issuance of the Common
Stock, Warrants and the Warrant Shares, when issued upon exercise of the
Warrants, will not be, subject to any preemptive right or right of first refusal
that has not been properly waived or complied with. Assuming the correctness of
the representations made by the Buyer in Section 2, the issuance of the Common
Stock, the Warrants and the Warrant Shares, when issued upon exercise of the
Warrants, will comply with applicable exemptions from (i) the registration and
prospectus delivery requirements of the 1933 Act, and (ii) the registration and
qualification requirements of all applicable securities laws of the states of
the United States. Neither the Company nor any authorized agent acting on its
behalf will take any action hereafter that would cause the loss of such
exemptions.
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e. ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE SECURITIES. The
Company acknowledges and agrees that the Buyer is not acting as financial
advisor to or fiduciary of the Company (or in any similar capacity with respect
to this Agreement or the transactions contemplated hereby), that this Agreement
and the transactions contemplated hereby, and the relationship between the Buyer
and the Company, are and will be considered "arms-length" notwithstanding any
other or prior agreements or nexus between the Buyer and the Company, whether or
not disclosed, and that any statement made by the Buyer, or any of its
representatives or agents, in connection with this Agreement and the
transactions contemplated hereby is not advice or a recommendation, is merely
incidental to the Buyer's purchase of the Securities and has not been relied
upon in any way by the Company, its officers or directors. The Company further
represents to the Buyer that the Company's decision to enter into this Agreement
and the transactions contemplated hereby have been based solely upon an
independent evaluation by the Company, its officers and directors.
f. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances which would prevent the parties hereto from
consummating the transactions contemplated hereby pursuant to an exemption from
registration under the 1933 Act and specifically in accordance with the
provisions of Regulation D. The transactions contemplated hereby are exempt from
the registration requirements of the 1933 Act, assuming the accuracy of the
representations and warranties contained herein of the Buyer.
g. NO CONFLICTS. The execution, delivery and performance of this
Agreement, the Registration Rights Agreement and the Warrants by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby will not (i) result in a violation of the Articles of Incorporation or
Bylaws 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
agreement, indenture or instrument to which the Company or any of its
subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations) 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 for such conflicts, defaults, terminations, amendments,
accelerations, cancellations and violations as would not, individually or in the
aggregate, have a Material Adverse Effect). Except as set forth in Schedule 3(g)
(attached if applicable), neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or other organizational documents,
and neither the Company nor any of its/subsidiaries is in default (and no event
has occurred which, with notice or lapse of time or both, would put the Company
or any of its subsidiaries in default) under, nor has there occurred any event
giving others (with notice or lapse of time or both) any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument to which the Company or any of its subsidiaries is a party, except
for possible defaults or rights as would not, in the aggregate or individually,
have a Material Adverse Effect. The business of the Company and its subsidiaries
is not being conducted, and shall not be conducted so long as the Buyer owns
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any of the Securities, in violation of any law, ordinance or regulation of any
governmental entity, except for possible violations which neither singly or in
the aggregate would have a Material Adverse Effect. Except as specifically
contemplated by this Agreement and as required under the 1933 Act and any
applicable state securities laws (any of which exceptions are set forth in
Schedule 3(g)), 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 (except for such consents, authorizations or orders as would not have a
Material Adverse Effect) in order for it to execute, deliver or perform any of
its obligations under this Agreement, the Warrants or the Registration Rights
Agreement in accordance with the terms hereof and thereof, or to perform its
obligations with respect to the Warrants exactly as described in the Warrants
(once issued).
h. SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as disclosed on
Schedule 3(h) hereof (attached if applicable), since at least December 6, 1999,
the Company has timely filed all reports, schedules, forms, statements and other
documents to be filed by it with the SEC pursuant to the reporting requirements
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
reference therein, being hereinafter referred to as the "SEC Documents"). The
Company has delivered to the Buyer as requested by the Buyer true and complete
copies of the SEC Documents, except for such exhibits, schedules and
incorporated documents. As of their respective dates, the SEC Documents complied
in all material respects with the requirements of the 1934 Act and the rules and
regulations of the SEC promulgated thereunder applicable to the SEC Documents,
and none of the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. As of their respective dates, the financial statements of the
Company included in the SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC 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 unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements or are otherwise subject to
normal year-end adjustments) 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 audit adjustments). No other
information provided by or on behalf of the Company to the Buyer (including the
information referred to in Section 2(d) 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 circumstance under
which they are or were made, not misleading. Except as set forth in the
financial statements of the Company included in the SEC Documents, the Company
has no material liabilities, contingent or otherwise (to the best of the
knowledge of the Company's Chief Executive Officer, President or any other
senior level officer of the Company after due inquiry of appropriate personnel
(the "Company's Knowledge")), other than (i) liabilities incurred in the
ordinary course of business
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subsequent to the date of such financial statements and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in such
financial statements, in each case of clause (i) and (ii) next above which,
individually or in the aggregate, are not material to the financial condition,
business, operations, properties, operating results or prospects of the Company.
The SEC Documents contain a complete and accurate list of all written and oral
contracts, agreements, leases or other instruments to which the Company or any
subsidiary is a party or by which the Company or any subsidiary is subject which
are required by the rules and regulations promulgated by the SEC to be so listed
(each a "Contract"). None of the Company, its subsidiaries or, to the best of
the Company's Knowledge, any of the other parties thereto, is in breach or
violation of any Contract which breach or violation would, or with the lapse of
time, the giving of notice, or both, have a Material Adverse Effect.
i. ABSENCE OF CERTAIN CHANGES. Except as disclosed in the SEC
Documents, since at least December 31, 1999, there has been no Material Adverse
Effect. The Company has not taken any steps, and does not currently have any
reasonable expectation of taking any steps, to seek protection pursuant to any
bankruptcy law nor does the Company have any knowledge that its creditors intend
to initiate involuntary bankruptcy proceedings. The Company shall, at least
until Buyer no longer holds any of the Securities, maintain its corporate
existence in good standing and shall pay all taxes when due except for taxes it
reasonably disputes.
j. ABSENCE OF LITIGATION. Except as set forth on Schedule
3(j), there is no action, suit, proceeding or investigation pending or currently
threatened against the Company (or, to the Knowledge of the Company, threatened
against or affecting any of the officers, directors or employees of the Company
with respect to their businesses or proposed business activities) that questions
the validity of this Agreement, the Rights Agreement, the Warrant or the right
of the Company to enter into such agreements or to consummate the transactions
contemplated hereby and thereby, or that might result in a Material Adverse
Effect or any change in the current equity ownership of the Company nor is the
Company aware that there is any basis for the foregoing. The foregoing includes,
without limitation, actions, suits, proceedings or investigations pending or
threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. The Company has not received any opinion or memorandum or legal
advice from its legal counsel to the effect that it is exposed, from a legal
standpoint, to any liability or disadvantage which may be material to its
business. There is no action, suit, proceeding or investigation by the Company
currently pending or that the Company intends to initiate.
k. FOREIGN CORRUPT PRACTICES. Neither the Company nor any of its
subsidiaries, nor to the Company's Knowledge, any officer, director or other
person acting on behalf of the
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Company or any subsidiary has, in the course of his actions for or on behalf of
the Company, used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity, made any
direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful payment
to any foreign or domestic government official or employee.
l. BROKERS; NO GENERAL SOLICITATION. The Company has taken no action
that would give rise to any claim by any person for brokerage commissions,
finder's fees or similar payments relating to this Agreement and the
transactions contemplated hereby. The Company and the Buyer both acknowledge
that no other broker or finder was involved with respect to the transactions
contemplated hereby. Neither the Company nor any distributor participating on
the Company's behalf in the transactions contemplated hereby nor any person
acting for the Company, or any such distributor, has conducted any "general
solicitation," as described in Rule 502(c) under Regulation D, with respect to
the Securities being offered hereby.
m. ELIGIBILITY TO FILE REGISTRATION STATEMENT. The Company is currently
eligible to file a registration statement with the SEC either on Form SB-1 or
Form SB-2 under the 1933 Act.
n. NON-DISCLOSURE OF NON-PUBLIC INFORMATION. (a) The Company shall in
no event disclose material, non-public information to the Buyer, advisors to or
representatives of the Buyer unless prior to or contemporaneously with such
disclosure of information the Company marks such information as "non-public
information - confidential" and provides the Buyer, such advisors and
representatives with the opportunity to accept or refuse to accept such
non-public information for review. The Company may, as a condition to disclosing
any non-public information hereunder, require the Buyer, its advisors and
representatives to enter into a confidentiality agreement in form reasonably
satisfactory to the Company and the Buyer.
(b) Nothing herein shall require the Company to disclose
non-public information to the Buyer, its advisors or representatives, and the
Company represents that it does not disseminate material non-public information
to investors who purchase stock in the Company in a public offering, to money
managers or to securities analysts; provided, however, that notwithstanding
anything herein to the contrary, the Company will, as hereinabove provided,
immediately notify the advisors and representatives of the Buyer and, if any,
underwriters, of any event or the existence of any circumstance (without any
obligation to disclose the specific event or circumstance) of which it becomes
aware, constituting non-public information (whether or not requested of the
Company specifically or generally during the course of due diligence by such
persons or entities), which, if not disclosed in the prospectus included in the
registration statement to be filed pursuant to the Registration Rights
Agreement, would cause such prospectus to include a material misstatement or to
omit a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. Nothing herein shall be construed to mean that such persons or
entities
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other than the Buyer (without the written consent of the Buyer prior to
disclosure of such information) may not obtain non-public information in the
course of conducting due diligence in accordance with the terms of this
Agreement and nothing herein shall prevent any such persons or entities from
notifying the Company of their opinion that, based upon such due diligence by
such persons or entities, that the registration statement contains an untrue
statement of a material fact or omits a material fact required to be stated in
such registration statement or necessary to make the statements contained
therein, in light of the circumstances in which they were made, not misleading.
o. INVENTION ASSIGNMENT AND CONFIDENTIALITY AGREEMENT. Each employee
and consultant or independent contractor of the Company or any of its
subsidiaries whose duties principally include the development of products or
Intellectual Property (as defined below), and each former employee and
consultant or independent contractor whose duties principally included the
development of products or Intellectual Property, has entered into and executed
an invention assignment and confidentiality agreement or an employment or
consulting agreement containing terms with respect to invention assignments and
confidentiality. No current employee, officer or consultant of the Company has
excluded works or inventions made prior to his or her employment with the
Company from his or her assignment of inventions pursuant to such employee,
officer or consultant's agreement regarding confidential information and
invention assignment, except where such exclusion could not reasonably be
expected to have a Material Adverse Effect. The Company has taken reasonable
security measures to maintain the confidentiality of the Company's proprietary
information.
p. INTELLECTUAL PROPERTY.
(i) OWNERSHIP OR RIGHT TO USE. The Company or one of its
subsidiaries has sole title to and owns, or is licensed or otherwise possesses
legally enforceable rights to use, or reasonably expects that it will be able to
obtain licenses or legally enforceable rights to use, all patents or patent
applications, software, know-how, registered or unregistered trademarks and
service marks and any applications therefor, registered or unregistered
copyrights and trade names and any applications therefor, trade secrets or other
confidential or proprietary information ("Intellectual Property") necessary to
enable the Company and its subsidiaries to carry on their respective businesses
as currently conducted or as proposed to be conducted, except where the failure
to own or have rights to use such Intellectual Property could not reasonably be
expected to have a Material Adverse Effect.
(ii) LICENSES; OTHER AGREEMENTS. Except as disclosed in
Schedule 3(q), neither the Company nor any of its subsidiaries is currently
subject (whether as licensor or licensee) to any exclusive licenses (whether
such exclusivity is temporary or permanent) to any material portion of the
Intellectual Property utilized by the Company or any of its subsidiaries. There
is not outstanding any license or agreement of any kind relating to the license
by the Company of any Intellectual Property owned by the Company or any of its
subsidiaries, except for agreements with customers of the Company or any such
subsidiary entered into in the ordinary course of business. Neither the Company
nor any of its subsidiaries is obligated to pay
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any royalties or other payments to third parties with respect to the marketing,
sale, distribution, manufacture, license or use of any Intellectual Property
(other than off-the-shelf commercial applications), except as it may be so
obligated in the ordinary course of its business.
(iii) NO INFRINGEMENT. To the Knowledge of the Company,
neither the Company nor any of its subsidiaries has interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property right of a third party, and the Company and its subsidiaries have not
received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim
that the Company or any of its subsidiaries must license or refrain from using
any intellectual property rights of any third party) which, if the subject of
any unfavorable decision, ruling or finding would, individually or in the
aggregate, be reasonably likely to have Material Adverse Effect.
q. TITLE TO PROPERTY AND ASSETS. The properties and assets owned by the
Company and each of its subsidiaries are owned by the Company or such subsidiary
free and clear of all mortgages, deeds of trusts, liens, charges, encumbrances
and security interests, except for statutory liens for the payment of current
taxes that are not yet delinquent and liens, encumbrances and security interests
that arise in the ordinary course of business and could not reasonably be
expected to have a Material Adverse Effect. With respect to the property and
assets it leases, each of the Company and its subsidiaries is in compliance with
such leases, except for any such noncompliance that, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
r. TAX MATTERS.
(i) To the Knowledge of the Company, there have been no
examinations or audits of any of the Company's tax returns or reports by any
Governmental Entity having jurisdiction over the Company. To the Knowledge of
the Company, each of the Company and its subsidiaries has filed all federal,
state, county and local tax returns required to have been filed by them and paid
all taxes shown to be due on such returns. There are in effect no waivers of
applicable statutes of limitations with respect to taxes for any year.
(ii) The Company has not elected pursuant to the Internal
Revenue Code of 1986, as amended (the "Code"), to be treated as an "S"
corporation or a collapsible corporation pursuant to Section 1362(a) or Section
341(f) of the Code, respectively, nor to the Company's knowledge has it made any
other elections pursuant to the code (other than elections which relate solely
to matters of accounting, depreciation or amortization) which would have a
Material Adverse Effect.
s. ERISA. The Company does not sponsor or participate in any employee
benefit plan subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), except as disclosed on Section 3(u). The Company is not
required to contribute to any "multi-
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employer plan" as defined in ERISA, Section 3(37), nor has the Company ever
contributed to or withdrawn from such a multi-employer plan.
t. EMPLOYMENT MATTERS. There are no complaints pending or, to the
Company's knowledge, threatened before any Governmental Entity alleging unfair
labor practices or unlawful discrimination or, to the Company's knowledge, is
there any basis for any such claim. There are no existing or, to the Company's
knowledge, threatened labor strikes, disputes, grievances, controversies or
other labor troubles affecting the Company which could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect. The Company
is not a party to any collective bargaining agreement with any labor union.
u. ENVIRONMENTAL. The Company, the operation of its business and any
real property that the Company owns or has owned, leases or has leased or
otherwise occupies or uses or has occupied or used (the "Premises") are, to the
Company's knowledge, in compliance with all applicable Environmental Laws (as
defined below) and orders or directives of any governmental authorities having
jurisdiction under such Environmental Laws, except where the failure to comply
could not reasonably be expected to have a Material Adverse Effect. The Company
has not received any citation, directive, letter or other communication, written
or oral, or any notice of any proceeding, claim or lawsuit, from any person
arising out of the ownership or occupation of the Premises, or the conduct of
its operations, and the Company is not aware of any basis therefor. To the
Knowledge of the Company, no material expenditures are or will be required in
order to comply with any Environmental Laws. For purposes of this Agreement, the
term "Environmental Laws" shall mean any Federal, state, local or foreign law,
ordinance, rule, regulation, permit and authorization pertaining to the
protection of human health or the environment.
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.
b. SECURITIES LAWS. The Company agrees to timely file a Form D (and any
equivalent form required by applicable state law) with respect to the Securities
if and as required under Regulation D and applicable state securities laws and
to provide a copy thereof to the Buyer promptly after such filing. The Company
shall, on or before the Closing Date, take such action as is necessary to sell
the Securities being sold to the Buyer on each such date under applicable
securities laws of the United States and the relevant state(s), and shall if
specifically so requested provide evidence of any such action so taken to the
Buyer on or prior to the Closing Date.
c. REPORTING STATUS. So long as the Buyer beneficially owns any of the
Securities, the Company shall file all reports required to be filed with the SEC
pursuant to the 1934 Act, and
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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 hereunder
would permit such termination.
d. USE OF PROCEEDS. The Company will use the proceeds from the sale of
the Securities for operating capital and capital expansion.
e. FINANCIAL INFORMATION. Until such time as the Buyer no longer
beneficially owns Securities, the Company agrees to send the following reports
to the Buyer: (i) after filing with the SEC, a copy of each of its Annual
Reports, its Quarterly Reports, and any reports filed on Form 8-K; and (ii) as
soon as reasonably practicable after release thereof, copies of all press
releases issued by the Company or any of its subsidiaries.
f. RESERVATION OF SHARES. The Company shall at all times have
authorized, and reserved for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the Warrant Shares. Prior to exercise of
the Warrants, the Company shall not reduce the number of shares of Common Stock
reserved for issuance hereunder without the written consent of the Buyer except
for a reduction proportionate to a reverse stock split effected for a business
purpose other than affecting the requirements of this Section, which reverse
stock split affects all shares of Common Stock equally.
g. INTENTIONAL ACTS OR OMISSIONS. Neither party shall intentionally
perform any act that if performed, or omit to perform any act that if omitted to
be performed, would prevent or excuse the performance of this Agreement or any
of the transactions contemplated hereby.
h. EXPENSES. The Company agrees to pay to or at the direction of the
Buyer the sum of $5,000 at the Closing as reimbursement for the attorney's fees
and expenses of the Buyer incurred by it in connection with the transactions
contemplated by this Agreement.
i. INDEMNIFICATION FOR BREACHES OF CERTAIN REPRESENTATIONS.
(i) The Company agrees to indemnify Buyer from any dilution in
Buyer's percentage ownership interest of the Common Stock arising from a breach
of the representations and warranties in Section 3(c). As soon as practicable,
but in no event later than three (3) business days, following the issuance of
any securities of the Company that result in a breach of Section 3(c) (a
"Dilutive Issuance"), the Company shall notify the Buyer of such Dilutive
Issuance and shall promptly thereafter issue to the Buyer a number of shares of
Common Stock (the "Additional Shares") such that, following the issuance of the
Additional Shares, the Buyer's ownership interest in the Company shall be equal
to the Buyer's ownership interest prior to the Dilutive Issuance. Any Additional
Shares, if issued, shall not require the payment of any additional consideration
by the Buyer and shall be validly issued and fully paid and non-assessable
shares of Common Stock. Any Additional Shares issued pursuant to this
sub-
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paragraph shall be subject to the restrictions set forth in Article 5 of this
Agreement and shall be "Registrable Securities" for purposes of the Registration
Rights Agreement.
(ii) The Company further agrees to indemnify the Buyer against,
and hold harmless from and against, any and all claims, losses, damages,
liabilities, judgments, fines, penalties, assessments (including, without
limitation, any diminution in value of the Securities) and expenses (including,
without limitation, reasonable attorneys' fees) (collectively, "Damages")
suffered or incurred by Buyer or to which the Buyer may otherwise become subject
and which arise from or as a result of (a) any action, suit, proceeding, inquiry
or investigation described in Schedule 3(j), or (b) a breach of the
representations and warranties in Section 3(c). In the event that the Buyer
shall have incurred any Damages, the Buyer shall deliver to the Company written
notice (1) stating that the Buyer has paid Damages, (2) specifying in reasonable
detail the individual items of Damages included in the amount so stated, and (3)
indicating that the Buyer is entitled to indemnification from the Company. As
soon as practicable, but in no event later than five (5) business days,
thereafter, the Company shall deliver payment for such Damages to the Buyer at
the address set forth in Section 8(g) hereof.
j. RESTRICTION ON BELOW MARKET ISSUANCE OF SECURITIES. Until the date
which is twelve (12) months from the Closing Date , the Company shall not issue
or agree to issue (other than (i) to the Buyer pursuant to the transactions
contemplated herein, (ii) pursuant to any employee stock option plan or employee
stock purchase plan of the Company established during the term of this
restriction for a legitimate business purpose and not to avoid the restrictions
imposed in this Section 4(m), (iii) pursuant to any existing security, option,
warrant, scrip, call or commitment or right in each case as disclosed on
Schedule 3(c) hereof, or (iv) with the consent of the Buyer , not to be
unreasonably withheld) any equity securities of the Company (or any security
convertible into or exercisable or exchangeable, directly or indirectly, for
equity securities of the Company) or debt securities of the Company if such
securities are issued at a price (or provide for a conversion, exercise or
exchange price) which is less than the current market price for the Common Stock
on the date of issuance (in the case of Common Stock) or the date of conversion,
exercise or exchange (in the case of securities convertible into or exercisable
or exchangeable, directly or indirectly, for Common Stock). In the event the
Company seeks to offer such securities as permitted in subsection 4(m)(iv) of
this Section, the Company shall first offer to the Buyer, pro rata, the
opportunity to purchase such securities on the same terms and conditions as
proposed by the Company (the "First Offer"). The Buyer shall have ten (10) days
to advise the Company in writing that it accepts its pro rata share of the First
Offer. If the Buyer does not so advise the Company, the Company shall be free,
for a period of sixty (60) days, to issue such securities as proposed to such
other party, after which sixty (60) day period the restrictions contained in
this Section 4(m) shall apply as if the Buyer had not given its consent and the
First Offer had not been made to the Buyer.
5. LEGEND AND TRANSFER INSTRUCTIONS.
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a. TRANSFER AGENT INSTRUCTIONS. The Company shall instruct its transfer
agent to issue certificates, registered in the name of the Buyer or its
permitted nominee, for the Warrant Shares in accordance with the terms of the
applicable Warrants and in such amounts as are set forth in the Warrants upon
exercise of the Warrants. All such certificates shall bear the restrictive
legend specified in Section 2(g) of this Agreement only to the extent required
by applicable law and as specified in this Agreement and the Exhibits and
Addenda hereto, and with consideration to Section 4(h) hereof. The Company
warrants that no instruction other than such instructions referred to in this
Section 5, and stop transfer instructions to give effect to Section 2(f) hereof
in the case of the Warrant Shares prior to the registration of same under the
1933 Act, will be given by the Company to its transfer agent and the Warrant
Shares shall otherwise be freely transferable on the books and records of the
Company as and to the extent permitted by applicable law and provided by this
Agreement, the Warrants and the Registration Rights Agreement. Nothing in this
Section shall affect in any way the Buyer's obligations and agreement to comply
with all applicable securities laws upon resale of the Warrant Shares. If the
Buyer (x) provides the Company with an opinion of counsel reasonably
satisfactory to Company that registration by the Buyer of the Warrants and/or
the Warrant Shares is not required under the 1933 Act and that resale is
otherwise permitted under applicable securities laws, or (y) transfers
Securities to an affiliate which is an accredited investor (in accordance with
the provisions of this Agreement) or in compliance with Rule 144, then in either
instance the Company shall permit the said transfer, and if applicable promptly
(and in all events within two (2) trading days) instruct its transfer agent to
issue one or more certificates in such name and in such denominations as
specified by the Buyer.
b. REMOVAL OF LEGENDS. The Legend shall be removed and the Company
shall issue a certificate without such Legend to the holder of any Security upon
which it is stamped, and a certificate for a security shall be originally issued
without the Legend, if, unless otherwise required by state securities laws, (x)
the resale of such Security is registered under the 1933 Act, or (y) such holder
provides the Company with an opinion by counsel reasonably satisfactory to the
Company, that is in form, substance and scope reasonably satisfactory to the
Company, to the effect that a public sale or transfer of such Security may be
made without registration under the 1933 Act or (z) such holder provides the
Company with assurances reasonably satisfactory to the Company and its counsel,
that such Security can be sold pursuant to Rule 144. The Buyer agrees that its
sale of all Securities, including those represented by a certificate(s) from
which the Legend has been removed, or which were originally issued without the
Legend, shall be made only pursuant to an effective registration statement (and
to deliver a prospectus in connection with such sale) or in compliance with an
exemption from the registration requirements of the 1933 Act. In the event the
Legend is removed from any Security or any Security is issued without the Legend
and thereafter the effectiveness of a registration statement covering the sales
of such Security is suspended or the Company determines that a supplement or
amendment thereto is required by applicable securities laws, then upon
reasonable advance notice to the holder of such Security, the Company shall be
entitled to require that the Legend be placed upon any such Security which
cannot then be sold pursuant to an effective registration statement or Rule 144
or with respect to which the opinion referred to in clause (y) next above has
not been rendered, which Legend shall be removed when such Security may be sold
pursuant to an
-16-
effective registration statement or Rule 144 (or such holder provides the
opinion with respect thereto described in clause (y) next above.
c. INJUNCTIVE RELIEF FOR BREACH. The Company acknowledges that a breach
of its obligations under Sections 5(a) and 5(b) above will cause irreparable
harm to the Buyer by vitiating the intent and purpose of the transactions
contemplated hereby. Accordingly the Company agrees that the remedy at law for a
breach of its obligations under such Sections would be inadequate and agrees, in
the event of a breach or threatened breach by the Company of the provisions of
such Sections, the Buyer shall be entitled, in addition to all other remedies at
law or in equity, 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 sell Common Stock and
Warrants at the Closing is subject to the satisfaction, on 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. The parties shall have executed this Agreement and the Registration
Rights Agreement, and the parties shall have delivered the respective documents
or signature pages thereof to the other party.
b. The Buyer shall have delivered to the Company the Equipment Credit
and the Company Payment less any amounts deducted in accordance with Section
4(h) hereof.
c. The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date 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 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 at or prior to the Closing Date.
d. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
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7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE.
The obligation of the Buyer to purchase Common Stock and Warrants is
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, provided that these conditions are for the sole benefit of
the Buyer and may be waived by the Buyer at any time in its sole discretion:
a. The parties shall have executed this Agreement and the Registration
Rights Agreement, the parties shall have delivered the respective documents or
signature pages thereof to each other.
b. The representations and warranties of the Company shall be true and
correct in all material respects as of the date made and as of 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 may in its sole discretion
require a certificate, executed by the Chief 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.
c. The Company shall have issued and have duly executed by the
authorized officers of the Company, and delivered to the Buyer, the Common Stock
certificate(s) and Warrants being sold at the Closing.
d. The Common Stock and Warrant Shares shall be authorized for
quotation on the OTC BULLETIN BOARD MARKET (or another national securities
exchange or market) and trading in the Common Stock on such market shall not
have been suspended by the SEC, the NASD or any other relevant regulatory
agency.
e. No statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or endorsed by any
court or governmental authority of competent jurisdiction or any self regulatory
organization having authority over the matters contemplated hereby which
restricts or prohibits the consummation of any of the transactions contemplated
herein.
f. The Buyer shall have received the opinion of Company counsel, dated
as of the Closing Date, substantially in the form attached hereto as Exhibit C.
g. The Company shall have performed and complied with all agreements
and conditions contained in this Agreement required to be performed or complied
with by the Company prior to or at the Closing.
-18-
(h) The Company shall have received the waivers of certain holders of
registration rights necessary to effect the transactions contemplated by the
Registration Rights Agreement.
8. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of Delaware without regard to the
principles of conflict of laws. In the event of any litigation regarding the
interpretation or application of this Agreement, the parties irrevocably consent
to jurisdiction in any of the state or federal courts located in the City of
Houston, State of Texas and waive their rights to object to venue in any such
court, regardless of the convenience or inconvenience thereof to any party.
Service of process in any civil action relating to or arising out of this
Agreement (including also all Exhibits or Addenda hereto) or the transaction(s)
contemplated herein may be accomplished in any manner provided by law. The
parties hereto agree that a final, non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.
b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, including counterparts transmitted by facsimile, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each party and signature pages from such
counterparts have been delivered to the other party.
c. HEADINGS; GENDER, ETC. The headings of this Agreement are for
convenience of reference and shall not form a part of, or affect the
interpretation of this Agreement. As used herein, the masculine shall refer to
the feminine and neuter, the feminine to the masculine and neuter, and the
neuter to the masculine and feminine, as the context may require. As used
herein, unless the context clearly requires otherwise, the words "herein,"
"hereunder" and "hereby," shall refer to this entire Agreement and not only to
the Section or paragraph in which such word appears. If any date specified
herein falls upon a Saturday, Sunday or public or legal holidays, the date shall
be construed to mean the next business day following such Saturday, Sunday or
public or legal holiday. For purposes of this Agreement, a "business day" is any
day other than a Saturday, Sunday or public or legal holiday.
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 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 the Buyer makes any representation,
warranty, covenant or undertaking with respect to such matters.
-19-
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 required or permitted to be given under the
terms of this Agreement shall be sent by U. S. Mail or delivered personally or
by courier or via facsimile (if via facsimile, to be followed within three (3)
business days by an original of the notice document via U.S. Mail or courier)
and shall be effective five (5) days after being placed in the mail, if mailed,
certified or registered, return receipt requested, or upon receipt, if delivered
personally or by courier or by facsimile, in each case properly addressed to the
party to receive the same. The addresses for such communications shall be:
If to the Company: CYNET, Inc.
00000 Xxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Telephone: 281.897.8317 ext. 332
Facsimile: 281.894.7952
Attention: Xx. Xxxxxx Xxxxx, General Counsel
If to the Buyer, at the address on the signature page of this Agreement. Each
party shall provide written notice to the other party of any change in address.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns.
Neither the Company nor the Buyer shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other (which
consent shall not be unreasonably withheld), and in any event any assignee of
the Buyer shall be an accredited investor (as defined in Regulation D), in the
written opinion of counsel who is reasonably satisfactory to the Company and in
form, substance and scope reasonably satisfactory to the Company.
Notwithstanding the foregoing, if applicable, any of the entities constituting
the Buyer (if greater than one (1) entity) may assign its rights hereunder to
any of its "affiliates," as that term is defined under the 1934 Act, without the
consent of the Company; provided, however, that any such assignment shall not
release such assigning entity from its obligations hereunder unless such
obligations are assumed by such affiliate and the Company has prior to such
assignment and assumption consented in writing to the same; and no such
assignment shall be made unless it is made in accordance with any applicable
securities laws of any applicable jurisdiction. Any request for an assignment
made hereunder by the Buyer shall be accompanied by a legal opinion in form,
substance and scope reasonably satisfactory to the Company, that such assignment
is proper under applicable law. Notwithstanding anything herein to the contrary,
Buyer may pledge the Securities as collateral for a bona fide loan pursuant to a
security agreement with a third party lender, and such pledge shall not be
considered an assignment in violation of this Agreement so long as it is made in
compliance with all applicable law.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto, any other buyer who execute an Agreement of like
tenor with this Agreement, and
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their respective permitted successors and assigns, and is not for the benefit
of, nor may any provision hereof be enforced by, any other person.
i. SURVIVAL. Unless this Agreement is terminated under Section 8(1),
the representations and warranties of the Company and the Buyer contained in
Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5 and
8 shall survive the Closing of the purchase and sale of Securities purchased and
sold hereby.
j. PUBLICITY. The Company and the Buyer shall have the right to review
before issuance by the other, any press releases or any other public statements
with respect to the transactions contemplated hereby; provided, however, either
party shall be entitled, without prior consultation with or approval of the
other, to make any press release or other public disclosure with respect to such
transactions as is required by applicable law and regulations.
k. FURTHER ASSURANCE. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
l. TERMINATION. Neither party may unilaterally terminate this Agreement
after the Closing for any reason other than a material breach of this Agreement
by the non- breaching party. Such termination shall not be the sole remedy for a
breach of this Agreement by the non-breaching party, and each party shall retain
all of its rights hereunder at law or in equity. Notwithstanding anything herein
to the contrary, a party whose breach of a covenant or representation and
warranty or failure to satisfy a condition prevented the Closing shall not be
entitled to terminate this Agreement.
m. REMEDIES. No provision of this Agreement providing for any specific
remedy to a party shall be construed to limit such party to the specific remedy
described, and any other remedy that would otherwise be available to such party
at law or in equity shall be so available. Nothing in this Agreement shall limit
any rights a party may have with any applicable federal or state securities laws
with respect to the transactions contemplated hereby.
IN WITNESS WHEREOF, the Buyer and the Company have caused this
Securities Purchase Agreement to be duly executed as of the date first written
above.
[SIGNATURE PAGE FOLLOWS]
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List of Exhibits
Exhibit A Warrant to Purchase Common Stock
Exhibit B Registration Rights Agreement
Exhibit C Opinion of Counsel for the Company
Exhibit D Equipment Credit
[SIGNATURE PAGE TO SECURITIES PURCHASE AGREEMENT DATED
AS OF AUGUST 8, 2000]
COMPANY:
CYNET, INC.
By: /s/ Xxxxxxx X. Xxxxx, Xx.
-----------------------------------------
Xx. Xxxxxxx X. Xxxxx, Xx., Chairman
BUYER:
CPQ HOLDINGS, INC.
By: /s/
-----------------------------------------
Name & Title:
BUYER'S ADDRESS:
CPQ Holdings, Inc.
c/o Compaq Computer Corporation
00000 Xxxxx Xxxxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: General Counsel
(Office of the Corporate Secretary)
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